<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 11, 1997
REGISTRATION NO. 333-18089
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 2
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
FIRST SECURITY(-REGISTERED TRADEMARK-) AUTO GRANTOR TRUST 1997-A
(Issuer with respect to the Certificates)
FIRST SECURITY BANK,(-REGISTERED TRADEMARK-) N.A.
(Originator of the Trust described herein)
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UNITED STATES OF AMERICA 6025 87-0131890
(State or other jurisdiction of (Primary Standard Industrial (IRS Employer Identification No.)
incorporation or organization) Classification Code No.)
</TABLE>
------------------------------
FIRST SECURITY BANK, N.A.
79 SOUTH MAIN STREET
SALT LAKE CITY, UTAH 84111
(801) 246-6000
(Address, including zip code, and telephone number, including area code, of the
Registrant's principal executive office)
------------------------------
SCOTT C. ULBRICH
EXECUTIVE VICE PRESIDENT AND CASHIER
FIRST SECURITY BANK, N.A.
79 SOUTH MAIN STREET
SALT LAKE CITY, UTAH 84111
(801) 246-5706
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------------
COPIES TO:
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A.R. THORUP KENNETH P. MORRISON
RAY, QUINNEY & NEBEKER KIRKLAND & ELLIS
79 SOUTH MAIN STREET, 400 DESERT BUILDING 200 EAST RANDOLPH DRIVE
SALT LAKE CITY, UTAH 84145-0385 CHICAGO, ILLINOIS 60601
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: AS SOON AS
PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box: / /
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering: / /
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: / /
------------------------
CALCULATION OF REGISTRATION FEE
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<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED(1) PER UNIT(1) PRICE(1) REGISTRATION FEE
<S> <C> <C> <C> <C>
% Asset Backed Certificates, Class A........... $955,000 100% $955,000 $289.40*
% Asset Backed Certificates, Class B........... $45,000 100% $45,000 $13.64*
Total....................................... $1,000,000 $1,000,000 $303.04*
</TABLE>
(1) Estimated solely for the purpose of calculating registration fee.
* Fee previously paid
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE>
Subject to Completion: March 11, 1997
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS 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.
<PAGE>
Prospectus
[LOGO]
$[1,000,000.00]
First Security-Registered Trademark- Auto Grantor Trust 1997-A
$[955,000.00] % ASSET BACKED CERTIFICATES, CLASS A
$[45,000.00] % ASSET BACKED CERTIFICATES, CLASS B
First Security Bank,-Registered Trademark- N.A.
SELLER AND SERVICER
The % Asset Backed Certificates, Class A (the "Class A Certificates") and the
% Asset Backed Certificates, Class B (the "Class B Certificates" together with
the Class A Certificates, the "Certificates") offered hereby evidence undivided
interests in the First Security Auto Grantor Trust 1997-A (the "Trust") created
pursuant to a Pooling and Servicing Agreement (the "Agreement") among First
Security Bank, N.A., as seller (the "Seller" and the "Bank") and as servicer
(the "Servicer"), and Bankers Trust Company, a New York banking corporation, as
trustee (the "Trustee"). The property of the Trust will include a pool of fixed
rate simple interest retail motor vehicle installment sale contracts and
installment loans directly or indirectly originated by the Seller (collectively,
the "Receivables"), certain monies received under the Receivables after February
25, 1997 (the "Cutoff Date"), perfected security interests in the new and used
automobiles and light trucks financed thereby, certain rights of the Trust under
the Pooling and Servicing Agreement and the Yield Supplement Agreement, certain
amounts from time to time on deposit in certain accounts maintained by the
Trustee for the benefit of Certificateholders and the Seller's rights to
payments under agreements with dealers of Financed Vehicles and insurance
policies relating to the Receivables, as more fully described under "The Trust
Property" herein. The aggregate principal balance of the Receivables on the
Cutoff Date was $300,071,473.85.
Principal and interest at the Class A Pass-Through Rate of % per annum will be
distributed on the 15th day of each month (or the next following business day),
beginning April 15, 1997 (each, a "Distribution Date"). Principal and interest
at the Class B Pass-Through Rate of % per annum will be distributed on each
Distribution Date. The final scheduled Distribution Date is August 15, 2003 (the
"Final Scheduled Distribution Date"). Distributions of interest and principal on
the Class B Certificates will be subordinated in priority of payment to the
payment of interest and principal on the Class A Certificates to the extent
described herein.
The Certificates will be represented initially by global certificates registered
in the name of Cede & Co., as nominee of The Depository Trust Company ("DTC").
The interests of beneficial owners of the Certificates will be represented by
book entries on the records of DTC and participating members thereof. Definitive
Certificates will be available only under the limited circumstances described
herein.
Prospective investors should consider the factors set forth under "Risk Factors"
on pages 10 through 14 herein.
THE CERTIFICATES REPRESENT BENEFICIAL INTERESTS IN THE TRUST ONLY AND DO NOT
REPRESENT INTERESTS IN OR OBLIGATIONS OF THE SELLER, FIRST SECURITY CORPORATION
OR ANY AFFILIATE THEREOF. NEITHER THE CERTIFICATES NOR THE RECEIVABLES ARE
INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENTAL AGENCY OR INSTRUMENTALITY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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Price to Underwriting Proceeds to the
Public (1) Discount (2) Seller (1)(3)
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Per Class A Certificate % % %
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Per Class B Certificate % % %
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Total $ $ $
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</TABLE>
(1) Plus accrued interest, if any, calculated from March 15, 1997.
(2) The underwriting discount only applies to $ aggregate principal
amount of the Class A Certificates and $ aggregate principal amount
of the Class B Certificates that are offered by J.P. Morgan Securities Inc.
and First Chicago Capital Markets, Inc.
(3) Before deducting expenses payable by the Seller, estimated to be $ .
The Certificates are offered subject to receipt and acceptance by the
Underwriters and the Capital Markets Division of First Security Bank, N.A., to
prior sale and to the right of the Underwriters and First Security Bank, N.A. to
reject any order in whole or in part and to withdraw, cancel or modify the offer
without notice. It is expected that delivery of the Certificates will be made in
book-entry form through the facilities of DTC on or about , 1997.
J.P. Morgan & Co. First Chicago Capital Markets, Inc. First Security
Bank-Registered Trademark-
The date of this Prospectus is , 1997.
<PAGE>
No dealer, salesman or other person has been authorized to give any information
or to make any representation not contained in this Prospectus and, if given or
made, such information or representation must not be relied upon as having been
authorized by the Seller or the Underwriters. This Prospectus does not
constitute an offer to sell or a solicitation of an offer to buy any of the
securities offered hereby in any jurisdiction to any person to whom it is
unlawful to make such offer or solicitation in such jurisdiction. Neither the
delivery of this Prospectus nor any sale made hereunder, shall, under any
circumstances, create any implication that the information herein is correct as
of any time subsequent to the date hereof or that there has been no change in
the affairs of the Seller or the Trust since such date.
Until , 1997 (90 days after the date of this Prospectus), all dealers
effecting transactions in the Certificates, whether or not participating in this
distribution, may be required to deliver a Prospectus. This is in addition to
the obligation of dealers to deliver a Prospectus when acting as underwriters
and with respect to their unsold allotments or subscriptions.
Table of Contents
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Page
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Reports to Certificateholders...................... 3
Available Information.............................. 3
Prospectus Summary................................. 4
Risk Factors....................................... 10
Formation of the Trust............................. 14
The Trust Property................................. 14
The Motor Vehicle Loan Portfolio................... 15
The Receivables.................................... 18
Yield Considerations............................... 21
Pool Factors and Other Information................. 21
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Page
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Use of Proceeds.................................... 22
The Bank........................................... 22
The Certificates................................... 22
Certain Legal Aspects of the Receivables........... 40
Federal Income Tax Consequences.................... 44
ERISA Considerations............................... 51
Underwriting....................................... 54
Legal Matters...................................... 54
Index of Principal Terms........................... 55
</TABLE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVERALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PLACE OF THE CERTIFICATES AT
LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
2
<PAGE>
Reports to Certificateholders
Unless and until Definitive Certificates are issued, unaudited monthly and
annual reports concerning the Receivables and the Trust will be prepared by the
Servicer and sent by the Trustee, on behalf of the Trust, only to Cede & Co. as
nominee of DTC, the registered holder of the Class A Certificates and the Class
B Certificates, pursuant to the Agreement. Such reports will not contain audited
financial statements with respect to the Trust. Owners of beneficial interests
in the Certificates may obtain these reports by a request in writing to the
Trustee. The Seller does not intend to send any of its financial reports to
Certificateholders or Certificate Owners. See "The Certificates--Book Entry
Registration" and "--Statements to Certificateholders."
Available Information
The Seller has filed with the Securities and Exchange Commission (the
"Commission"), on behalf of the Trust, a Registration Statement under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to the
Certificates offered pursuant to this Prospectus. For further information,
reference is made to such Registration Statement, and the exhibits thereto,
which are available for inspection without charge at the public reference
facilities of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549,
as well as the Regional Offices of the Commission at 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661, and 7 World Trade Center, Suite 1300, New
York, New York 10048. Copies of such information can be obtained from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates. The Commission maintains a Web site that contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the Commission at the following
address: http://www.sec.gov. The Servicer, on behalf of the Trust, will also
file or cause to be filed with the Commission such periodic reports as may be
required under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and the rules and regulations of the Commission thereunder.
3
<PAGE>
Prospectus Summary
THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE DETAILED
INFORMATION APPEARING ELSEWHERE IN THIS PROSPECTUS. CERTAIN CAPITALIZED TERMS
USED IN THIS SUMMARY ARE DEFINED ELSEWHERE IN THIS PROSPECTUS. SEE THE INDEX OF
PRINCIPAL TERMS, BEGINNING ON PAGE 55, FOR THE LOCATION HEREIN OF THE
DEFINITIONS OF CAPITALIZED TERMS.
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Issuer....................... First Security Auto Grantor Trust 1997-A (the "Trust")
Seller and Servicer.......... First Security Bank, N.A. (the "Seller" and the "Servicer"
in its capacity as such; and otherwise sometimes referred to
herein as the "Bank").
Securities Offered........... % Asset Backed Certificates, Class A (the "Class A
Certificates").
% Asset Backed Certificates, Class B (the "Class B
Certificates" together with the Class A Certificates, the
"Certificates").
The Certificates will be offered for purchase in
denominations of $1,000 and integral multiples thereof. See
"The Certificates--General."
Trust Assets................. The property of the Trust (the "Trust Property") will
include (i) a pool of fixed rate retail motor vehicle
installment sale contracts and installment loans originated
by the Seller that provide for the allocation of payments
between principal and interest according to the simple
interest method (collectively, the "Receivables"), (ii) all
monies received under the Receivables after the close of
business of the Servicer on February 25, 1997 (the "Cutoff
Date"), (iii) security interests in the new and used
automobiles and light trucks financed thereby (collectively,
the "Financed Vehicles"), (iv) certain rights of the Trust
under the Yield Supplement Agreement as described below, (v)
the Seller's rights (if any) to receive proceeds from claims
under certain insurance policies relating to the Financed
Vehicles or the obligors under the Receivables (each, an
"Obligor"), (vi) certain of the Seller's rights relating to
the Receivables under agreements between the Seller and the
motor vehicle dealers ("Dealers") that sold the Financed
Vehicles and any assignments and other documents related
thereto (collectively, the "Dealer Agreements") and under
the documents and instruments contained in the Receivable
Files, (vii) all rights of the Trust under the Pooling and
Servicing Agreement with respect to the Trust (the
"Agreement") between the Bank, as Seller and Servicer, and
the Trustee, (viii) certain amounts from time to time on
deposit in the Certificate Account, the Class A Distribution
Account and the Class B Distribution Account and (ix) all
proceeds of the foregoing within the meaning of the UCC. The
Reserve Account and the Yield Supplement Account, and any
amounts therein, will not be property of the Trust, but will
be pledged to and held by the Collateral Agent, as secured
party for the benefit of the Certificateholders.
Certificates................. The Class A Certificates will be issued in an initial
principal amount equal to $ (the "Original Class A
Certificate Balance"), and the Class B Certificates will be
issued in an initial principal amount equal to $ (the
"Original Class B Certificate Balance" and, together with
the Original Class A Certificate Balance, the "Original
Certificate Balance"). The Original Class A Certificate
Balance will equal approximately [95.50]% of the aggregate
outstanding principal balance of the Receivables determined
in accordance with the Agreement (the "Pool Balance") as of
the Cutoff Date
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4
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<TABLE>
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(the "Original Pool Balance"). The Original Class B
Certificate Balance will equal approximately [4.50]% of the
Original Pool Balance.
Registration of
Certificates............... The Class A Certificates and the Class B Certificates will
each be represented initially by global certificates
registered in the name of the Certificateholders, initially
Cede & Co. ("Cede"), as nominee of The Depository Trust
Company ("DTC"). No person acquiring a beneficial ownership
interest in the Certificates (a "Certificate Owner") will be
entitled to receive a Definitive Certificate representing
such person's interest in the Trust except in certain
limited circumstances. Under the terms of the Agreement,
Certificate Owners will not be recognized as
Certificateholders and will be permitted to exercise the
rights of the Certificateholders only indirectly through
DTC. See "Risk Factors--The Certificates" and "The
Certificates."
Class A Pass-Through Rate.... % per annum, calculated on the basis of a 360-day year
consisting of twelve 30-day months (the "Class A
Pass-Through Rate").
Class B Pass Through Rate.... % per annum, calculated on the basis of a 360-day year
consisting of twelve 30-day months (the "Class B
Pass-Through Rate" and, together with the Class A
Pass-Through Rate, the "Pass-Through Rates").
Distribution Date............ The 15th day of each month (or, if such day is not a
business day, the next succeeding business day) (each, a
"Distribution Date"), beginning April 15, 1997.
Interest..................... On each Distribution Date, interest at the Class A
Pass-Through Rate on the Class A Certificate Balance and
interest at the Class B Pass-Through Rate on the Class B
Certificate Balance, in each case as of the immediately
preceding Distribution Date (after giving effect to any
payments of principal made on such Distribution Date) will
be distributed to the registered holders of the Class A
Certificates ("Class A Certificateholders") and the
registered holders of the Class B Certificates ("Class B
Certificateholders" and, together with the Class A
Certificateholders, the "Certificateholders"), initially,
Cede as nominee of DTC, as of the day immediately preceding
such Distribution Date (or, if Definitive Certificates are
issued, the last day of the related Collection Period) (the
"Record Date") to the extent that sufficient funds are on
deposit for such Distribution Date in the Certificate
Account or available in the Reserve Account to make such
distribution. A "Collection Period" means a period during
the term of the Agreement from and including the 26th day of
a calendar month to and including the 25th day of the
succeeding calendar month (or, in the case of the initial
Collection Period, the period from but not including the
Cutoff Date to and including March 25, 1997). See "The
Certificates--Distributions on Certificates" and "--Reserve
Account." The rights of Class B Certificateholders to
receive payments of interest will be subordinated to the
rights of the Class A Certificateholders to receive payments
of interest to the extent described herein. See "Risk
Factors-- Limited Assets; Subordination."
Principal.................... On each Distribution Date, as described more fully herein,
all payments of principal on the Receivables received by the
Servicer during the related Collection Period, plus all
Liquidation Proceeds, to the extent allocable to principal
will be distributed by the Trustee PRO RATA to the Class A
Certificateholders and to the Class B Certificate holders of
record on the related Record Date to the extent that
sufficient funds are on deposit in the
</TABLE>
5
<PAGE>
<TABLE>
<S> <C>
Certificate Account or available in the Reserve Account to
make such distribution. See "The Certificates--Distributions
on Certificates" and "--Reserve Account." The rights of the
Class B Certificateholders to receive payments of principal
will be subordinated to the rights of the Class A
Certificateholders to receive payments of interest and
principal to the extent described herein.
Servicing Fees............... On each Distribution Date, the Servicer will receive a fee
for servicing the Receivables, equal to the product of (i)
one-twelfth of the Basic Servicing Fee Rate (as defined
below), multiplied by (ii) the Pool Balance as of the first
day of the related Collection Period (the "Basic Servicing
Fee"). In addition, the Servicer will be entitled to retain
any late fees, prepayment charges (other than Deferral Fees)
and other fees and charges collected during such Collection
Period on the Receivables it services, plus any interest
earned during the Collection Period on the amounts deposited
by it in the Accounts (as such terms are defined below) (the
"Supplemental Servicing Fee"). The "Basic Servicing Fee
Rate" will equal 1.0% per annum. See "The
Certificates--Servicing Compensation."
Subordination of Class B
Certificates............... Distributions of interest and principal on the Class B
Certificates will be subordinated in priority of payment to
distributions of interest and principal due on the Class A
Certificates in the event of defaults on the Receivables to
the extent described herein. The Class B Certificateholders
will not receive any distributions of interest with respect
to a Collection Period until the full amount of interest on
the Class A Certificates relating to such Collection Period
has been deposited in the Class A Distribution Account. The
Class B Certificateholders will not receive any
distributions of principal with respect to such Collection
Period until the full amount of interest on and principal of
the Class A Certificates relating to such Collection Period
has been deposited in the Class A Distribution Account. See
"Risk Factors--Limited Assets; Subordination."
Advances..................... On each Deposit Date, the Servicer shall, subject to the
following, make a payment (an "Advance") with respect to
each Receivable serviced by it (other than a Defaulted
Receivable) equal to the excess, if any, of (x) the product
of the principal balance of such Receivable as of the first
day of the related Collection Period and one-twelfth of its
Contract Rate (calculated on the basis of a 360-day year
comprised of twelve 30-day months), over (y) the interest
actually received by the Servicer with respect to such
Receivable from the Obligor or from payments of the Purchase
Amount, Liquidation Proceeds or Recoveries (in each case for
the related Collection Period and to the extent allocable to
interest) during or with respect to such Collection Period.
The Servicer may elect not to make an Advance of interest
due and unpaid with respect to a Receivable to the extent
that the Servicer, in its sole discretion, determines that
such Advance is not recoverable from subsequent payments on
such Receivable or from funds in the Reserve Account. See
"The Certificates--Advances."
Yield Supplement Agreement... The Seller will enter into a yield supplement agreement with
the Trust (the "Yield Supplement Agreement") which will
provide funds to supplement the interest collections on
Receivables that have Contract Rates that are below the
Class A Pass-Through Rate or the Class B Pass-Through Rate,
plus the
</TABLE>
6
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<TABLE>
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Basic Servicing Fee Rate, as described below. The Yield
Supplement Agreement will, with respect to each Receivable,
provide for payment by the Seller on or prior to the
business day preceding each Distribution Date (such date,
the "Deposit Date") of an amount (if positive) calculated by
the Servicer equal to one-twelfth of the difference between
(i) the sum of interest on the Class A Percentage of such
Receivable's principal balance as of the first day of the
related Collection Period at a rate equal to the sum of the
Class A Pass-Through Rate and the Basic Servicing Fee Rate
and interest on the Class B Percentage of such Receivable's
principal balance as of the first day of the related
Collection Period at a rate equal to the sum of the Class B
Pass-Through Rate and the Basic Servicing Fee Rate and (ii)
interest at the Contract Rate on such Receivable's principal
balance as of the first day of the related Collection Period
(in the aggregate for all Receivables with respect to any
Deposit Date, the "Yield Supplement Amount"). The Seller's
obligations under the Yield Supplement Agreement will be
secured by funds on deposit in an account to be maintained
by the Seller in the name of the Collateral Agent (the
"Yield Supplement Account"). The amount on deposit in the
Yield Supplement Account and available on any Distribution
Date will be equal to at least the sum of all projected
Yield Supplement Amounts for all future Distribution Dates,
assuming that future scheduled payments on the Receivables
are made on their scheduled due dates; provided that if on
any date the Seller shall fail to pay the amount payable
under the Yield Supplement Agreement in accordance with the
terms thereof, then, in such event, the Specified Yield
Supplement Balance shall not thereafter be reduced (the
"Specified Yield Supplement Balance"). The amount required
to be deposited by the Seller into the Yield Supplement
Account on or prior to the Closing Date will be $
(the "Yield Supplement Initial Deposit").
Reserve Account.............. A reserve account (the "Reserve Account") will be
established and maintained by the Seller, in the name of,
and under the control of, the Collateral Agent with an
initial deposit of cash or certain investments having an
aggregate value of at least $ (the "Reserve Account
Initial Deposit"). In addition, on each Distribution Date,
any amounts on deposit in the Certificate Account with
respect to the related Collection Period after payments to
the Certificateholders and the Servicer have been made will
be deposited into the Reserve Account until the amount of
the Reserve Account is equal to the Specified Reserve
Account Balance. The Reserve Account provides credit
enhancement and liquidity to the Certificateholders that
will be available in the event that, as a result of defaults
or delinquencies, Collections on the Receivables are
insufficient to make the distributions on the Certificates.
On or prior to each Deposit Date, the Collateral Agent will
withdraw funds from the Reserve Account, to the extent of
the funds therein (net of investment earnings), (i) to the
extent required to reimburse the Servicer for Advances
previously made and not reimbursed ("Outstanding Advances")
to the extent provided in the Agreement and (ii) to the
extent (x) the sum of the amounts required to be distributed
to Certificateholders and the Servicer on the related
Distribution Date exceeds (y) the amount on deposit in the
Certificate Account as of the last day of the related
Collection Period (net of investment income). If the amount
in the Reserve Account is reduced to zero,
Certificateholders will bear directly the credit and other
risks associated with
</TABLE>
7
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<TABLE>
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ownership of the Receivables, including the risk that the
Trust may not have a perfected security interest in the
Financed Vehicles. See "Risk Factors," "The
Certificates--Reserve Account," "Certain Legal Aspects of
the Receivables."
Specified Reserve Account
Balance.................... On any Distribution Date, the Specified Reserve Account
Balance will equal [4.50]% ([9.00]% under certain
circumstances described herein) of the Pool Balance as of
the last day of the related Collection Period, but in any
event not less than the lesser of (i) $ and (ii) the
sum of the Pool Balance and an amount sufficient to pay
interest on (a) the Class A Percentage of such Pool Balance
at a rate equal to the sum of the Class A Pass-Through Rate
and the Basic Servicing Fee Rate through the Final Scheduled
Distribution Date and (b) the Class B Percentage of such
Pool Balance at a rate equal to the sum of the Class B
Pass-Through Rate and the Basic Servicing Fee Rate through
the Final Scheduled Distribution Date. The Specified Reserve
Account Balance may be reduced to a lesser amount as
determined by the Seller, provided that such reduction does
not adversely affect the ratings of the Certificates by the
Rating Agencies. Amounts in the Reserve Account on any
Distribution Date (after giving effect to all distributions
made on that date) in excess of the Specified Reserve
Account Balance for such Distribution Date will be paid to
the Seller.
Optional Purchase............ If the Pool Balance as of the last day of a Collection
Period has declined to 10% or less of the Original Pool
Balance, the Servicer may purchase all remaining Trust
Property on any Distribution Date occurring in a subsequent
Collection Period at a purchase price equal to the aggregate
of the Purchase Amounts of the remaining Receivables (other
than Defaulted Receivables). See "The
Certificates--Termination."
Trustee...................... Bankers Trust Company (the "Trustee").
Collateral Agent............. Bankers Trust Company (the "Collateral Agent").
Tax Status................... In the opinion of Kirkland & Ellis, special tax counsel to
the Seller, the Trust will be classified for Federal income
tax purposes as a grantor trust and not as an association
taxable as a corporation. Certificate Owners must report
their respective allocable shares of income earned on Trust
assets and, subject to certain limitations applicable to
individuals, estates and trusts, may deduct their respective
allocable shares of reasonable servicing and other fees. See
"Federal Income Tax Consequences."
Prepayment Considerations.... The weighted average life of the Certificates may be reduced
by full or partial prepayments on the Receivables. The
Receivables are prepayable at any time. Prepayments may also
result from liquidations due to default, the receipt of
monthly installments earlier than the scheduled due dates
for such installments, the receipt of proceeds from credit
life, disability, theft or physical damage insurance,
repurchases by the Seller as result of certain uncured
breaches of the warranties made by it in the Agreement with
respect to the Receivables, purchases by the Servicer as a
result of certain uncured breaches of the covenants made by
it in the Agreement with respect to the Receivables, or the
Servicer exercising its optional purchase right. The rate of
prepayments on the Receivables may be influenced by a
variety of economic, social, and other factors, including
Obligor refinancings resulting from
</TABLE>
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<TABLE>
<S> <C>
decreases in interest rates and the fact that the Obligor
may not sell or transfer the Financed Vehicle securing a
Receivable without the consent of the Seller. No prediction
can be made as to the actual prepayment rates which will be
experienced on the Receivables. If prepayments were to occur
after a decline in interest rates, investors seeking to
reinvest their distributed funds might be required to invest
at a return lower than the applicable Pass-Through Rate.
Certificate Owners will bear all reinvestment risk resulting
from prepayment of the Receivables. See "Risk
Factors--Prepayment Considerations" and "The
Receivables--Maturity and Prepayment Assumptions."
Rating....................... It is a condition to the issuance of the Certificates that
the Class A Certificates be rated in the "AAA" category or
its equivalent, and the Class B Certificates be rated at
least in the "A" category or its equivalent, in each case by
at least one nationally recognized rating agency (a "Rating
Agency"). A security rating is not a recommendation to buy,
sell or hold securities and may be revised or withdrawn at
any time by the assigning Rating Agency. The ratings on the
Certificates do not address the timing of distributions of
principal on the Certificates prior to the Final Scheduled
Distribution Date.
ERISA Considerations......... The Class A Certificates may be purchased by employee
benefit plans that are subject to the Employee Retirement
Income Security Act of 1974, as amended, upon satisfaction
of certain conditions described herein. Because the Class B
Certificates are subordinated to the Class A Certificates,
employee benefit plans subject to ERISA will not be eligible
to purchase Class B Certificates. Any benefit plan fiduciary
considering a purchase of Certificates should, among other
things, consult with experienced legal counsel in
determining whether all required conditions have been
satisfied. See "ERISA Considerations."
Risk Factors................. Prospective investors should consider the factors set forth
under "Risk Factors."
</TABLE>
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Risk Factors
IN ADDITION TO THE OTHER INFORMATION CONTAINED IN THIS PROSPECTUS, PROSPECTIVE
INVESTORS SHOULD CONSIDER CAREFULLY THE FOLLOWING RISK FACTORS BEFORE INVESTING
IN THE CERTIFICATES.
Limited Liquidity
There is currently no secondary market for the Class A Certificates or the Class
B Certificates. The Underwriters expect, but are not obligated, to make a market
in the Certificates. There is no assurance that any such market will develop or,
if one does develop, that it will provide liquidity of investment or will
continue for the life of the Class A Certificates or the Class B Certificates,
as the case may be.
Possible Subordination of Security Interests
The Seller will cause financing statements to be filed with the appropriate
governmental authorities to perfect the interest of the Trust in its purchase of
the Receivables in accordance with the requirements of the Uniform Commercial
Code in effect in the States of Utah and Idaho (the "UCC"), and the Trustee will
appoint First Security Service Company, an affiliate of the Servicer, to hold
the Receivables and Receivable Files as custodian for the Trustee following the
sale and assignment of the Receivables to the Trust. Although the Receivable
Files will not be segregated, stamped or otherwise marked to so indicate, the
Servicer and First Security Service Company will note in their computer records
that the Receivables have been sold to the Trust. If, through inadvertence or
otherwise, another party purchases (or takes a security interest in) the
Receivables for new value in the ordinary course of business and takes
possession of the Receivables without actual knowledge of the Trust's interest,
such purchaser (or secured party) will acquire an interest in the Receivables
superior to the interest of the Trust.
The Seller will assign its security interests in the Financed Vehicles along
with the sale and assignment of the Receivables to the Trustee. The certificates
of title or ownership will not be endorsed or otherwise amended to identify the
Trust as the new secured party. In Utah, Idaho and most other states, in the
absence of fraud or forgery by the vehicle owner or of fraud, forgery,
negligence or error by the Bank or administrative error by state or local
agencies, the notation of the Bank's lien on the certificates of title or
ownership and/or possession of such certificates with such notation will be
sufficient to perfect the security interest of the Trust in the Financed Vehicle
which will protect the Trust against the rights of subsequent purchasers of a
Financed Vehicle or subsequent lenders who take a security interest in a
Financed Vehicle. There exists a risk, however, in the remaining states that by
not identifying the Trust or Trustee as the new secured party on the certificate
of title that the security interest of the Trust or Trustee may not be
perfected. In the event the Trust has failed to obtain or maintain a perfected
security interest in a Financed Vehicle, its security interest would be
subordinate to, among others, a bankruptcy trustee of the Obligor, a subsequent
purchaser of the Financed Vehicle or a holder of a perfected security interest.
See "Certain Legal Aspects of the Receivables."
Effects of Bankruptcy and Insolvency
The Bank intends that the transfer of the Receivables by it under the Agreement
constitute a sale. In the event that the Bank were to become insolvent, the
Financial Institutions Reform, Recovery and Enforcement Act of 1989 ("FIRREA")
sets forth certain powers that the Federal Deposit Insurance Corporation (the
"FDIC") could exercise if it were appointed as receiver of the Bank. Subject to
clarification by FDIC regulations or interpretations, it would appear from the
positions taken by the FDIC before and after the passage of FIRREA that the
FDIC, in its capacity as receiver for the Bank, would not interfere with the
timely transfer to the Trust of payments collected on the Receivables. If the
transfer to the Trust were to be characterized as a loan secured by a pledge of
Receivables, to the extent that the Bank would be deemed to have granted a
security interest in the Receivables to the Trust, and that interest had been
validly perfected before the Bank's insolvency and had not been taken in
contemplation of insolvency, that security interest should not be subject to
avoidance, and payments to the Trust with respect to the Receivables should not
be subject to recovery by the FDIC as receiver of the Bank. If, however, the
FDIC were to assert a contrary position, such as by requiring the Trustee to
establish its right to those payments by submitting to
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and completing the administrative claims procedure established under FIRREA,
delays in payments on the Certificates and possible reductions in the amount of
those payments could occur. Alternatively, in such circumstances, the FDIC might
have the right to repay the Certificates for an amount which may be greater or
less than the principal balance thereof and which would shorten their weighted
average life. See "Certain Legal Aspects of the Receivables."
Enforceability of Rights Under the Receivables
Numerous Federal and state consumer protection laws and related regulations
impose substantial and detailed requirements upon lenders and services involved
in consumer finance. These requirements impose specific statutory liabilities
upon creditors who fail to comply with their provisions where applicable. In
most cases, this liability could affect the ability of an assignee, such as the
Trustee, to enforce secured loans such as the Receivables. If, as of the Cutoff
Date, an Obligor had a claim against the Trust for violation of any law and such
claim materially and adversely affects the Trust's interest in a Receivable,
such violation would create an obligation of the Seller to repurchase the
Receivable unless the breach was cured. See "Certain Legal Aspects of the
Receivables--Consumer Protection Laws."
Effects of Prepayments
The weighted average life of the Certificates may be reduced by full or partial
prepayments on the Receivables. The Receivables are prepayable at any time.
Prepayments may also result from liquidation due to default, the receipt of
monthly installments earlier than the scheduled due dates for such installments,
the receipt of proceeds from credit life, disability, theft or physical damage
insurance, repurchases by the Seller as a result of certain uncured breaches of
the warranties made by it in the Agreement with respect to the Receivables,
purchases by the Servicer as a result of certain uncured breaches of the
covenants made by it in the Agreement with respect to the Receivables, or the
Servicer exercising its optional purchase right. The rate of prepayment on the
Receivables may be influenced by a variety of economic, social, and other
factors, including decreases in interest rates and the fact that the Obligor may
not sell or transfer the Financed Vehicle securing a Receivable without the
consent of the Seller. No prediction can be made as to the actual prepayment
rates which will be experienced on the Receivables. If prepayments were to occur
after a decline in interest rates, investors seeking to reinvest their funds
might be required to invest at a return lower than the applicable Pass-Through
Rate. Certificate Owners will bear all reinvestment risk resulting from
prepayment of the Receivables. See "The Receivables--Maturity and Prepayment
Assumptions."
Limited Reliance on the Seller, the Servicer and their Affiliates
None of the Seller, the Servicer or their affiliates is generally obligated to
make any payments in respect of the Certificates or the Receivables. However, in
connection with the sale of Receivables by the Seller to the Trust, the Seller
will make representations and warranties with respect to the characteristics of
such Receivables and, in certain circumstances, the Seller may be required to
repurchase Receivables with respect to which such representations and warranties
have been breached. See "The Certificates--Mandatory Repurchase of the
Receivables." In addition, under certain circumstances, the Servicer may be
required to purchase Receivables. See "The Certificates--Servicing Procedures."
If collections on any Receivable were reduced as a result of any matter giving
rise to a repurchase or purchase obligation on the part of the Seller or the
Servicer, respectively, and the Seller or the Servicer failed for any reason to
perform in accordance with that obligation, then delays in payments on the
Certificates and possible reductions in the amount of those payments could
occur. Moreover, if the Bank were to cease acting as the Servicer, delays in
processing payments on the Receivables and information in respect thereof could
occur and result in delays in payments to the Certificateholders.
The Bank's parent, First Security Corporation, is subject to the information
requirements of the Exchange Act and in accordance therewith files reports and
other information with the Commission. For further information regarding First
Security Corporation, reference is made to such reports and other information,
which are available at the addresses specified under "Available Information."
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<PAGE>
Extensions and Deferrals of Payments on Receivables
The Bank may, on a case-by-case basis, permit extensions with respect to the due
dates of the Receivables in the discretion of a senior credit officer other than
the origination officer. In addition to such extensions, the Servicer has
historically offered payment deferrals to a broader population of qualifying
applicants in June and in December. All Obligors that meet the Bank's
eligibility requirements will be given the opportunity to take advantage of such
payment deferrals. Any such deferrals or extensions may extend the maturity of
the applicable Receivable and increase the weighted average life of the
Receivables and any fees associated therewith will increase the principal
balance of the related Receivable. Any reinvestment risks resulting from
extensions and deferrals of payments on Receivables will be borne entirely by
the Certificate Owners. However, if any payment deferral results in the final
scheduled payment on the applicable Receivable falling after the Final Scheduled
Distribution Date, the Servicer will be required to purchase the Receivable from
the Trust. See "The Certificates--Credit Deferrals and Optional Payment
Deferrals."
Geographic Concentration
Economic conditions in states where Obligors reside may affect the delinquency,
loan loss and repossession experience of the Trust with respect to the
Receivables. As of the Cutoff Date, the mailing addresses of Obligors with
respect to 34.28% and 28.06% by principal balance of the Receivables were
located in Utah and Idaho, respectively. Due to the concentration of Obligors in
Utah and Idaho, adverse economic conditions in one or both of these states may
have a disproportionate impact on the performance of the Receivables. Economic
factors such as unemployment, interest rates, the rate of inflation and consumer
perceptions may affect the rate of prepayment and defaults on the Receivables.
See "The Receivables--Certain Characteristics."
Limited Assets of the Trust
The Trust does not have, nor is it permitted or expected to have access to, any
significant assets or sources of funds other than the Receivables and the right
to receive payments under certain circumstances from the Reserve Account or
pursuant to the Yield Supplement Agreement. The Certificates represent interests
solely in the Trust and neither the Class A Certificates nor the Class B
Certificates will be insured or guaranteed by First Security Corporation, the
Seller, the Servicer, the Trustee, or any other person or entity. Consequently,
Certificateholders must rely for payment upon collections on the Receivables,
the Yield Supplement Agreement and, if and to the extent available, amounts on
deposit in the Reserve Account. Amounts on deposit in the Reserve Account are
limited in amount and will be reduced as the Pool Balance declines.
Amounts on deposit in the Reserve Account will be available on any Distribution
Date first to cover shortfalls in reimbursement of Outstanding Advances and
payment of Basic Servicing Fees to the Servicer, then shortfalls in
distributions of interest on the Class A Certificates and then shortfalls in
distributions of interest on the Class B Certificates. After distributions of
interest on the Certificates have been made, the remaining amounts on deposit in
the Reserve Account will be available first to cover shortfalls in distributions
of principal on the Class A Certificates and then shortfalls in distributions of
principal on the Class B Certificates. If the Reserve Account is exhausted (and
not replenished), the Trust will depend solely on payments on the Receivables to
make distributions on the Certificates, and Certificateholders will bear,
without any additional credit enhancement (except with respect to the Yield
Supplement Agreement and to the extent that the Reserve Account is replenished
from Collections on Receivables), the risk of delinquency, loan losses and
repossessions with respect to the Receivables. There can be no assurance that
the future delinquency, loan loss and repossession experience of the Trust with
respect to the Receivables will be better or worse than that set forth herein
with respect to the total portfolio of Motor Vehicle Loans currently and
historically owned and serviced by the Bank. See "The Motor Vehicle Loan
Portfolio--Delinquency and Loss Experience," "The Certificates--Reserve Account"
and "--Distributions on Certificates."
Subordination of the Class B Certificates
Distributions of interest and principal on the Class B Certificates will be
subordinated in priority of payment to interest due on the Class A Certificates.
The Class B Certificateholders will not receive any distributions of interest
12
<PAGE>
with respect to a Collection Period until the full amount of interest on the
Class A Certificates relating to such Collection Period has been deposited in
the Class A Distribution Account. Distributions of principal on the Class B
Certificates will be subordinated in priority of payment to interest and
principal due on the Class A Certificates. Class B Certificateholders will not
receive any distributions of principal with respect to such Collection Period
until the full amount of interest on and principal of the Class A Certificates
relating to such Collection Period has been deposited in the Class A
Distribution Account. However, distributions of interest on the Class B
Certificates, to the extent of collections on the Receivables allocable to
interest and the amounts on deposit in the Reserve Account available after the
payment of interest on the Class A Certificates has been made, will not be
subordinated to the payment of principal on the Class A Certificates. See "The
Certificates--Distributions on Certificates."
Risk of Commingling of Collections by the Servicer
The Servicer will deposit all payments on Receivables (other than late fees,
prepayment charges and certain other amounts payable to the Servicer under the
Agreement which are not required to be deposited into the Certificate Account)
into the Certificate Account not later than two business days after receipt
thereof. However, if conditions satisfactory to the Rating Agencies have been
met, the Servicer will no longer be required to make such payments within two
business days, but instead will be permitted to make such payments for a
Collection Period into the Certificate Account not later than the opening of
business (New York time) on the related Deposit Date. The Servicer intends to
satisfy such conditions and make deposits only on Deposit Dates for the related
Collection Period. Pending deposit into the Certificate Account, collections may
be invested by the Servicer at its own risk and for its own benefit and will not
be segregated from funds of the Servicer. If the Servicer were unable to remit
such funds, the Certificateholders might incur a loss. In order to satisfy the
requirements described above, the Servicer may, upon confirmation by the Rating
Agencies that the rating of the Class A Certificates and Class B Certificates
would not be lowered as a result, obtain a letter of credit or other security
for the benefit of the Trust to secure timely remittances of collections on the
related Receivables (other than with respect to Advances) and payment of the
aggregate Purchase Amount with respect to Receivables purchased by the Servicer.
Federal Income Taxation; Subordination of Class B Certificate Owners
It is expected that, for Federal income tax purposes, amounts otherwise payable
to the Class B Certificate Owners that are paid to the Class A Certificate
Owners pursuant to the subordination provisions described above under "--Limited
Assets; Subordination" will be deemed to have been received by the Class B
Certificate Owners and then paid by them to the Class A Certificate Owners
pursuant to a guaranty. See "Federal Income Tax Consequences-- Class B
Certificate Owners."
If the Class B Certificate Owners received distributions of less than their
share of the Trust's receipts of principal or interest (the "Shortfall Amount")
because of the subordination of the Class B Certificates, Class B Certificate
Owners would probably be treated for Federal income tax purposes as if they had
(i) received as distributions their full share of such receipts, (ii) paid over
to the Class A Certificate Owners an amount equal to such Shortfall Amount, and
(iii) retained the right to reimbursement of such amounts to the extent of
future Collections otherwise available for deposit in the Reserve Account.
Under this analysis, (i) Class B Certificate Owners would be required to accrue
as current income any interest or OID income of the Trust that was a component
of the Shortfall Amount, even though such amount was in fact paid to the Class A
Certificate Owners, (ii) a loss would only be allowed to the Class B Certificate
Owners when their right to receive reimbursement of such Shortfall Amount became
worthless (i.e., when it becomes clear that such amount will not be available
from any source to reimburse such loss), and (iii) reimbursement of such
Shortfall Amount prior to such a claim of worthlessness would not be taxable
income to Class B Certificate Owners because such amount was previously included
in income. Those results should not significantly affect the inclusion of income
for Class B Certificate Owners on the accrual method of accounting, but could
accelerate inclusion of income to Class B Certificate Owners on the cash method
of accounting by, in effect, placing them on the accrual method. Moreover, the
character and timing of loss deductions is unclear.
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Rating
It is a condition to the issuance of the Certificates that the Class A
Certificates be rated in the "AAA" category or its equivalent, and the Class B
Certificates be rated at least in the "A" category or its equivalent, in each
case by at least one Rating Agency. A security rating is not a recommendation to
buy, sell or hold securities and may be revised or withdrawn at any time by the
assigning Rating Agency. In addition, the ratings on the Certificates do not
address the timing of distributions of principal on the Certificates prior to
the Final Scheduled Distribution Date.
Absence of Definitive Certificates
The Class A Certificates and the Class B Certificates will each be represented
initially by global certificates registered in the name of Cede, as nominee of
DTC. No Certificate Owner will be entitled to receive a Definitive Certificate
representing such person's interest in the Trust except in certain limited
circumstances. Under the terms of the Agreement, Certificate Owners will not be
recognized as Certificateholders, and will be permitted to exercise the rights
of the Certificateholders only indirectly through DTC. See "The Certificates."
Formation of the Trust
The Seller will establish the Trust by selling and assigning the Receivables and
certain other Trust Property to the Trust in exchange for the Certificates.
Prior to such sale and assignment, the Trust will have no assets or obligations
or any operating history. The Trust will not engage in any activity other than
acquiring and holding the Trust Property, issuing the Certificates and
distributing payments on the Certificates.
The Servicer will service the Receivables, either directly or through
subservicers, and will be paid the Basic Servicing Fee out of collections from
the Receivables, prior to distributions to the Certificateholders. Certain other
expenses of the Trust will be paid by the Servicer or by the Seller as provided
in the Agreement. See "The Certificates--Servicing Procedures," "--Servicing
Compensation" and "--Distributions on Certificates."
The Servicer will appoint an affiliate, First Security Service Company, to hold
the Receivables and Receivable Files as custodian for the Trustee. Although the
Receivables will not be marked or stamped to indicate that they have been sold
to the Trust, and the certificates of title for the Financed Vehicles will not
be endorsed or otherwise amended to identify the Trust as the new secured party,
the Servicer and First Security Service Company will indicate in their computer
records that the Receivables have been sold to the Trust. Under such
circumstances and in certain jurisdictions, the Trust's interest in the
Receivables and the Financed Vehicles may be subordinate to certain third
parties. See "Certain Legal Aspects of the Receivables."
The Trust will not acquire any assets other than the Trust Property, and it is
not anticipated that the Trust will have any need for additional capital
resources. Because the Trust will have no operating history upon its
establishment and will not engage in any activity other than acquiring and
holding the Trust Property, issuing the Certificates and distributing payments
on the Certificates, no historical or pro forma financial statements or ratios
of earnings to fixed charges with respect to the Trust have been included
herein.
The Trust Property
Each Certificate will represent a fractional undivided interest in the Trust.
The Trust Property will include (i) the Receivables, (ii) all monies received
under the Receivables after the Cutoff Date, (iii) certain amounts from time to
time on deposit in the Certificate Account, the Class A Distribution Account and
the Class B Distribution Account, (iv) security interests in the Financed
Vehicles, (v) certain rights of the Trust under the Yield Supplement Agreement,
(vi) the Seller's rights (if any) to receive proceeds from claims on credit
life, disability, theft and physical damage insurance policies covering the
Financed Vehicles or the Obligors, (vii) the Seller's right to all documents and
information contained in the Receivable Files, (viii) the rights of the Trust
under the Agreement, (ix) certain of the Seller's rights relating to the
Receivables under the Dealer Agreements and (x) all proceeds (within the meaning
of the UCC) of the foregoing. The Reserve Account and the Yield Supplement
Account, and any amounts therein, will not be property of the Trust, but will be
pledged to and held by the Collateral Agent, as secured party for the benefit of
the Certificateholders.
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The Motor Vehicle Loan Portfolio
General
The Bank originates retail motor vehicle installment sale contracts and
installment loans secured by new and used automobiles and light-duty trucks
manufactured by a number of automobile manufacturers through Dealers and
branches of the Bank ("Motor Vehicle Loans"). Approximately 93.69% of the Motor
Vehicle Loans to be transferred to the Trust were made to borrowers through
Dealers which have a relationship with the Bank. Applications for such loans are
made by borrowers through the Dealers. As of December 31, 1996, no more than 3%
of the Motor Vehicle Loans made through Dealers were made by a single Dealer or
affiliated group of Dealers. All applications are reviewed by the Bank in
accordance with its established underwriting procedures. The remaining 6.31% of
the Motor Vehicle Loans to be transferred to the Trust were made directly by the
Bank to borrowers.
Origination of Receivables
Since September 30, 1996, the Bank's direct loans are referred to, and approved
at, the Direct Loan Center located in Boise. Prior to this date, direct loans
for the State of Utah were approved at a Direct Loan Center in Salt Lake City
and the direct loans for the State of Idaho were approved at a Direct Loan
Center in Boise.
Applications for credit which originate with Dealers are sent via fax to the
Application Processing Center in Boise. These applications are data-entered and
transmitted through the Application Processing System to Regional Dealer
Services Centers located in Salt Lake City, Utah and Boise and Lewiston, Idaho.
These centers are responsible for all credit analysis and credit decisions on
indirect loan requests.
Since September 30, 1996, bank wide consumer loan collections have been
performed by the Consumer Collection Center located in Salt Lake City. Prior to
this date, collection activities for Utah were performed in Salt Lake City and
collections for Idaho were handled in Boise.
The Consumer Loan Servicing Center of First Security, located in Boise, reviews
and tracks all loan documentation, stores and maintains all loan files, follows
up on lien perfection, processes payments, reconciles accounting records and
provides for internal and external reporting for all of the Bank's direct and
indirect consumer lending business. In addition, this department provides
central processing of dealer flooring, including processing of manufacturer's
drafts and flooring requests for the Regional Dealer Services Centers and
processing of flooring billing and payments.
Credit administration is provided by the Small Business and Consumer Loan
Administration department located in Boise. This department provides policy and
functional guidance for all areas of consumer lending.
Underwriting
The Bank uses the applicant's creditworthiness as the basic criterion in
purchasing a retail installment sale contract from a Dealer and in making an
installment loan. The Bank evaluates creditworthiness using a combination of
empirical and judgmental factors including the applicant's credit payment
history, income relative to debt service on all debt, employment history,
stability of residency, credit references, and character. The Bank gathers such
information from the applicant's credit application, which is reviewed for
completeness and compliance with the Bank's underwriting guidelines. In
addition, the Bank obtains information from credit reports from major credit
reporting agencies summarizing the applicant's credit history and paying habits,
including such items as open accounts, delinquent payments, bankruptcies,
repossessions, lawsuits and judgments. The Bank's analysts generally verify the
applicant's employment or, where appropriate, check directly with the
applicant's creditors. Such information is evaluated by the Bank's experienced
credit officers as a package in conjunction with the Bank's underwriting
guidelines and extensive historical data. No one factor is determinative to the
motor vehicle finance specialists analysis. The Bank's underwriting guidelines
proscribe generally acceptable parameters with respect to the empirical and
judgmental factors examined, however, such parameters are guidelines that are
intended to provide a basis for lending decisions and are not meant to supercede
the credit judgment of the motor vehicle finance specialist. Deviations from the
guidelines must be approved by a lending officer with appropriate authority. As
a result, certain
15
<PAGE>
contracts may not comply with all of the Bank's guidelines. However, any
Receivables sold by the Bank to the Trust which were the subject of special
financing or other promotional programs were approved by the Bank in accordance
with its normal and customary underwriting practices and procedures for all
Motor Vehicle Loans. While no specific loan-to-value ratios are adhered to, the
amount financed by the Bank under a retail installment sale contract generally
will not exceed, for new vehicles, the Dealer wholesale price of the Financed
Vehicle, plus sales tax, license fees, title fees, service and warranty
contracts, and premiums for credit life and credit accident and health insurance
obtained in connection with the vehicle or the financing. In the case of used
vehicles, the amount financed will generally not exceed the wholesale value of
the Financed Vehicle (as determined according to industry standards and price
quotations), plus sales tax, license fees, title fees, and premiums for credit
life and credit accident and health insurance obtained in connection with the
vehicle or the financing. The Bank has established internal control procedures
and performs periodic audits to ensure compliance with the underwriting
guidelines and its established policies and procedures for Motor Vehicle Loans
originated directly by the Bank as well as those originated through Dealers.
Dealers from which the Bank purchases retail installment sale contracts have
been selected by the Bank based on the Dealer's financial and operating history,
and have made representations and warranties to the Bank with respect to the
contracts and the security interests in the Financed Vehicles relating thereto,
which representations and warranties do not relate to the creditworthiness of
the applicant or the collectibility of the loans. In addition, as to Receivables
representing approximately 1.07% of the Original Pool Balance, there is recourse
to a Dealer ("direct recourse") if an applicant defaults under a Receivable,
subject to certain conditions to be fulfilled by the Bank seeking the recourse.
Upon breach of any representation or warranty made by such a Dealer with respect
to a retail installment sale contract, the Bank has a right of recourse against
such Dealer to require it to repurchase such contract. Generally, in determining
whether to exercise such right or any right of direct recourse, the Bank
considers the prior performance of the Dealers and other business and commercial
considerations. The Bank, as Servicer, is obligated to enforce such rights with
respect to Dealer Agreements relating to the Receivables in accordance with such
customary practices, and the right to any proceeds received upon such
enforcement will be conveyed to the Trust under the Agreement.
The Bank may, on a case-by-case basis, permit extensions with respect to the due
dates of the Receivables or payment deferrals in the discretion of a senior
credit officer other than the origination officer. In addition to such
extensions, the Bank has historically offered payment deferrals to a broader
population of qualifying applicants in June and in December. All Obligors that
meet the Bank's eligibility requirements will be given the opportunity to take
advantage of such payment deferrals. Any such deferrals or extensions may extend
the maturity of the applicable Receivable and increase the weighted average life
of the Receivables and any fees associated therewith will increase the principal
balance of the related Receivable.
Servicing and Collections
Collection activities with respect to delinquent contracts are performed by the
Bank's collection personnel. Under current practices, collection personnel
generally initiate contact, by mail, with obligors whose contracts have become
more than 10 days delinquent. In the event that such contact fails to resolve
the delinquency, the collection personnel contact the obligor by telephone
generally after the contract becomes 15 days delinquent. Generally, after a
contract continues delinquent for 90 days, the vehicle is repossessed; however,
under certain circumstances, the vehicle may be repossessed immediately after a
contract has become delinquent. After repossession, the Bank is required to give
reasonable notice of any proposed sale of the vehicle, and the Bank's practice
is generally to give the obligor 10 days' notice. Losses may occur in connection
with delinquent contracts and can arise in several ways, including inability to
locate the vehicle to be repossessed. The Bank recognizes losses on Receivables
at the time it deems such Receivables to be uncollectible, which is generally at
the time it has exhausted all of its non-legal remedies, generally no later than
the 120th day of delinquency. The servicing and charge-off policies and
collection practices of the Bank may change over time in accordance with the
Bank's business judgment. Upon repossession and disposition of the vehicle, any
deficiency remaining will be pursued to the extent deemed practical.
16
<PAGE>
Physical Damage Insurance
The Bank requires that an Obligor provide an insurance policy covering collision
and comprehensive insurance. The deductibles are a maximum of $1,000 each for
the collision insurance and the comprehensive insurance. The Bank uses an
automatic insurance tracking system. If after 42 days the Bank has not received
evidence of the proper insurance, a notice is sent to the Obligor. After giving
the Obligor another 28 days to purchase the required insurance, the Bank force
places "collateral protection insurance" policies on the Financed Vehicle. If
the principal balance of a Receivable is less than $2,000, the Bank does not
force place insurance. An amount equal to the premium to cover the policy is
added to the loan, and monthly payments are adjusted to pay for the insurance
premium over a nine-month period. Such additional principal and any interest
thereon will not be included in the Trust Property. Virtually all of such force
placed insurance policies are written for one year and then re-issued for
subsequent years if necessary. Insurance is written through Balboa Life and
Casualty Company. Balboa Life and Casualty Company also provides the Bank with
an errors and omissions policy for insurance follow-ups.
Delinquency and Loss Experience
The tables set forth below indicate the delinquency and credit loss/repossession
experience for each of the last five calendar years of the Bank's entire
portfolio of Motor Vehicle Loans. The tables include both Motor Vehicle Loans
originated directly by the Bank and through Dealers in a relative proportion
substantially similar to the Motor Vehicle Loans to be transferred to the Trust.
Fluctuations in delinquencies, repossessions and charge-offs generally follow
trends in the overall economic environment and may be affected by such factors
as increased competition for obligors, rising consumer debt burden per household
and increases in personal bankruptcies. Although delinquencies, repossessions
and charge-offs have been rising, the Bank believes that these numbers continue
to be commensurate with industry experience. The Bank believes that the increase
in delinquencies in 1996 was due primarily to the merger in September 1996 of
the Bank's Utah and Idaho collection departments and some associated turnover in
personnel which resulted in a lack of continuity in the collections function.
The Bank believes that most of the merger related issues have since been
resolved. No assurance can be made, however, that the delinquency and loss
experience for the Motor Vehicle Loans in the future will be similar to the
historical experience set forth below.
Delinquency Experience
<TABLE>
<CAPTION>
As of December 31,
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1996 1995 1994 1993
---------------------- ---------------------- ---------------------- ----------------------
<CAPTION>
(Dollars in Number Number Number Number
Thousands) of Loans Amount of Loans Amount of Loans Amount of Loans Amount
- ------------------------------ ----------- --------- ----------- --------- ----------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Portfolio at Period End....... 186,063 $$1,888,980 169,273 $1,637,857 197,996 $1,885,492 159,870 $1,409,188
Delinquency(1)
30-59 Days.................... 3,183 30,284 2,691 23,440 2,345 20,775 1,458 11,722
60-89 Days.................... 1,148 10,897 517 5,018 603 5,838 337 2,702
90 Days or More............... 576 5,767 246 2,382 273 2,595 153 1,306
Total Delinquencies........... 4,907 $ 46,948 3,454 $ 30,840 3,221 $ 29,208 1,948 $ 15,730
Total Delinquencies as
Percentage of the
Portfolio................... 2.64% 2.49% 2.04% 1.88% 1.63% 1.55% 1.22% 1.12%
<CAPTION>
<S> <C> <C>
1992
----------------------
(Dollars in Number
Thousands) of Loans Amount
- ------------------------------ ----------- ---------
<S> <C> <C>
Portfolio at Period End....... 130,180 $1,035,480
Delinquency(1)
30-59 Days.................... 1,227 8,398
60-89 Days.................... 283 2,171
90 Days or More............... 123 976
Total Delinquencies........... 1,633 $ 11,545
Total Delinquencies as
Percentage of the
Portfolio................... 1.25% 1.11%
</TABLE>
- ------------------------
(1) The period of delinquency is based on the number of days payments are
contractually past due for all Motor Vehicle Loans other than Motor Vehicle
Loans previously charged off.
17
<PAGE>
Credit Loss/Repossession Experience
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
(Dollars in Thousands) 1996 1995 1994 1993 1992
- --------------------------------------------- ----------- ----------- ----------- ----------- -----------
Portfolio at Period End...................... 1,888,980 $ 1,637,857 $ 1,885,492 $ 1,409,188 $ 1,035,480
Average Month-end Portfolio.................. 1,753,324 $ 1,745,369 $ 1,650,636 $ 1,221,927 $ 914,093
Average Number of Loans Outstanding During
the Period................................. 176,850 182,716 179,061 145,683 119,669
Number of Repossessions During the Period.... 4,189 4,156 3,528 2,583 2,125
Number of Repossessions as a Percentage of
Average Number of Loans Outstanding........ 2.37% 2.27% 1.97% 1.77% 1.78%
Gross Charge-offs(1)......................... 28,629 $ 24,593 $ 17,657 $ 11,676 $ 9,918
Recoveries on Loans Previously Charged
Off(2)..................................... 11,031 $ 10,866 $ 8,301 $ 6,538 $ 4,665
Net Charge-offs(3)........................... 17,598 $ 13,727 $ 9,355 $ 5,138 $ 5,253
Net Charge-offs as a Percentage of Portfolio
at Period End.............................. .93% 0.84% 0.50% 0.36% 0.51%
Net Charge-offs as a Percentage of Average
Month-end Portfolio........................ 1.00% 0.79% 0.57% 0.42% 0.57%
</TABLE>
- ------------------------
(1) Gross Charge-offs are generally stated net of liquidation proceeds.
(2) Recoveries on Loans Previously Charged Off generally include amounts
received with respect to loans previously charged off, other than
liquidation proceeds, net of collection expenses. A portion of recoveries
has resulted from certain collection and recovery efforts used by the Bank
with respect to defaulted receivables acquired by the Bank from other
institutions as a result of mergers. Such defaulted receivables are not
being transferred to the Trust and such reported recoveries may not be
indicative of future results.
(3) Net Charge-offs equal Gross Charge-offs minus Recoveries on Loans Previously
Charged Off.
The Receivables
Selection Criteria
Approximately 93.69% of the Motor Vehicle Loans were originated by the Seller
through Dealers in the ordinary course of the Seller's business and in
accordance with Seller's underwriting standards; the remainder of the Motor
Vehicle Loans were made directly by the Seller to the Obligors in accordance
with the Seller's underwriting standards. The Seller will warrant in the
Agreement that all the Receivables have the following individual
characteristics, among others: (i) the obligation of the related Obligor under
each Receivable is secured by a security interest in either a new or used
automobile or light truck; (ii) each Receivable has a contractual interest rate
("Contract Rate") of at least 6% and not more than 14%; (iii) each Receivable
had a remaining maturity, as of the Cutoff Date, of not less than 6 months and
not more than 60 months; (iv) each Receivable had a remaining principal balance
of not less than $100 and not more than $77,000 as of the Cutoff Date; (v) no
Receivable was more than 30 days past due as of the Cutoff Date; (vi) no
Financed Vehicle had been repossessed as of the Cutoff Date; (vii) each
Receivable is a Simple Interest Receivable; (viii) the Dealer of the Financed
Vehicle, if any, has no participation in, or other right to receive, any
proceeds of the Receivable and (ix) each Receivable was originated on or after
December 15, 1990. No procedures adverse to Certificateholders were used by the
Seller in selecting the Receivables to be transferred to the Trust on the
Closing Date. All terms of the retail motor vehicle installment sale contracts
constituting the Receivables which are material to the Certificateholders are
described in this Prospectus.
18
<PAGE>
Certain Characteristics
The Receivables had the following characteristics in the aggregate as of the
Cutoff Date: (i) approximately 33.29% of the Original Pool Balance was
attributable to loans for purchases of new Financed Vehicles and approximately
66.71% of the Original Pool Balance was attributable to loans for purchases of
used Financed Vehicles; (ii) the weighted average Contract Rate of the
Receivables was 10.009%; (iii) there are 31,361 Receivables being conveyed by
the Seller to the Trust; (iv) the average principal balance of a Receivable, as
of the Cutoff Date, was $9,568.30; and (v) the weighted average original term
and weighted average remaining term of the Receivables were 59.487 months and
44.864 months, respectively.
The composition and distribution by Contract Rate of the Receivables as of the
Cutoff Date are set forth in the following tables:
Composition of the Receivables
<TABLE>
<CAPTION>
Weighted
Average Weighted
Contract Rate Number of Average Weighted Average
of Aggregate Receivables Principal Average Original
Receivables Principal Balance in Pool Balance Remaining Term Term
- ------------- ----------------- ----------- ---------- --------------- ------------
<S> <C> <C> <C> <C> <C>
10.009% $ 300,071,473.85 31,361 $ 9,568.30 44.864 mos. 59.487 mos.
</TABLE>
Distribution by Contract Rate of the Receivables
<TABLE>
<CAPTION>
Aggregate Percent of
Contract Number of Principal Original Pool
Rate Range Receivables Balance Balance(1)
- -------------------- ----------- ----------------- -------------
<S> <C> <C> <C>
6.00-6.99.......... 732 $ 4,864,293.45 2.33%
7.00-7.99.......... 2,342 20,073,747.86 7.47
8.00-8.99.......... 5,639 58,520,996.87 17.98
9.00-9.99.......... 8,096 86,891,346.68 25.82
10.00-10.99......... 6,418 62,855,472.26 20.46
11.00-11.99......... 3,687 32,863,319.77 11.76
12.00-12.99......... 2,727 21,739,924.25 8.70
13.00-13.99......... 1,531 11,017,210.65 4.88
14.00-14.99......... 189 1,245,162.06 0.60
----------- ----------------- ------
Total........... 31,361 $ 300,071,473.85 100.00%
----------- ----------------- ------
----------- ----------------- ------
</TABLE>
- ------------------------
(1) Percentages do not add to 100.00% because of rounding.
19
<PAGE>
The following table sets forth the percentage of the Original Pool Balance in
the states with the largest concentration of Receivables based on the billing
addresses of the Obligors. No other state accounts for more than 1.0% of the
Original Pool Balance.
<TABLE>
<CAPTION>
Percentage of
State Original Pool Balance
- ------------------------------------------------------------------------- ---------------------
<S> <C>
Utah .................................................................... 34.28
Idaho.................................................................... 28.06
Washington .............................................................. 10.92
Nevada................................................................... 9.44
Oregon................................................................... 9.13
Montana.................................................................. 3.28
Wyoming.................................................................. 1.52
</TABLE>
Payments on the Receivables
The entire Original Pool Balance is attributable to Receivables that provide for
the allocation of payments according to the "Simple Interest" method (each a
"Simple Interest Receivable"). A Simple Interest Receivable provides for the
amortization of the amount financed under the Receivable over a series of fixed
level monthly payments (except that the last such payment may be different).
However, each monthly payment consists of an installment of interest which is
calculated on the basis of the outstanding principal balance of the Receivable
multiplied by the stated Contract Rate and further multiplied by the period
elapsed (as a fraction of a calendar year) since the preceding payment of
interest was made. As payments are received under a Simple Interest Receivable
the amount received is applied first to interest accrued and unpaid to the date
of payment and the balance is applied to reduce the unpaid principal balance.
Accordingly, if an Obligor pays a fixed monthly installment before its schedule
date, the portion of the payment allocable to interest for the period since the
preceding payment was made will be less than it would have been had the payment
been made as scheduled, and the portion of the payment applied to reduce the
unpaid principal balance will be correspondingly greater, thereby having the
effect of a prepayment. Conversely, if an Obligor pays a fixed monthly
installment after its scheduled due date, the portion of the payment allocable
to interest for the period since the preceding payment was made will be greater
than it would have been had the payment been made as scheduled, and the portion
of the payment applied to reduce the unpaid principal balance will be
correspondingly less. In either case, the Obligor pays a fixed monthly
installment until the final scheduled payment date, at which time the amount of
the final installment is increased or decreased as necessary to repay the then
outstanding principal balance.
The Receivables are prepayable at any time. Prepayments may also result from
liquidations due to default, the receipt of monthly installments earlier than
the scheduled due dates for such installments, the receipt of proceeds from
credit life, disability, theft or physical damage insurance, repurchases by the
Seller as a result of certain uncured breaches of the warranties made by it in
the Agreement with respect to the Receivables, purchases by the Servicer as a
result of certain uncured breaches of the covenants made by it in the Agreement
with respect to the Receivables, or the Servicer exercising its option to
purchase all of the remaining Receivables. Prepayments on the Receivables may be
influenced by a variety of economic, social, and other factors, including
decreases in interest rates and the fact that an Obligor may not sell or
transfer the Financed Vehicle securing a Receivable without the consent of the
Seller.
Maturity and Prepayment Assumptions
Full or partial prepayments on the Receivables will have the effect of reducing
the weighted average life of the Certificates, while delinquencies by Obligors
under the Receivables, as well as extensions and deferrals on the Receivables,
will have the effect of increasing the weighted average life of the
Certificates. The Receivables may be prepaid at any time and mandatory
prepayments of a Receivable may result from, among other things, the sale,
insured loss or other disposition of the Financed Vehicle or the Receivable
becoming a Defaulted Receivable. No assurance can be given as to the level or
timing of prepayments. If prepayments were to occur after a decline in interest
rates, investors seeking to reinvest their funds might be required to invest at
a return lower than the
20
<PAGE>
applicable Pass-Through Rate. Certificate Owners will bear all reinvestment risk
resulting from prepayment of the Receivables.
The rate of prepayments on the Receivables may be influenced by a variety of
economic, social and other factors, including the fact that an Obligor may not
sell or transfer a Financed Vehicle without the consent of the Servicer. The
Servicer believes that the actual rate of prepayments will result in a
substantially shorter weighted average life than the scheduled weighted average
life of the Receivables. Any reinvestment risks resulting from a faster or
slower incidence of prepayment of Receivables will be borne by the
Certificateholders. See also "The Certificates--Termination" regarding the
Servicer's option to purchase all of the Receivables as of the last day of any
Collection Period in which the Pool Balance of the Trust as a percentage of the
Original Pool Balance is 10% or less.
The Bank maintains certain records of the historical prepayment experience of
its portfolio of indirect Motor Vehicle Loans. The Bank does not believe that
such records are adequate to provide meaningful information with respect to the
Receivables. In any event, no assurance can be given that prepayments on the
Receivables would conform to any historical experience, and no prediction can be
made as to the actual prepayment experience to be expected with respect to the
Receivables.
Yield Considerations
On each Distribution Date, interest on the Certificates will be distributed at
the applicable Pass-Through Rate on the Class A Certificate Balance and the
Class B Certificate Balance as of the immediately preceding Distribution Date
(after giving effect to all payments made on such preceding Distribution Date).
In the event of a principal prepayment on a Receivable during a Collection
Period, Certificateholders will receive their PRO RATA share of interest for the
full Collection Period with respect to the unpaid principal balance of such
Receivable as of the first day of such Collection Period to the extent that
amounts on deposit in the Certificate Account and in the Reserve Account are
available for such purpose. The Receivables are Simple Interest Receivables and,
to the extent that payments of the fixed monthly installments thereunder are
received prior to the scheduled due dates for such installments, the portions of
such installments allocable to interest will be less than they would be if the
payments were received as scheduled. If the Reserve Account is exhausted, the
amount of interest distributed to the Class B Certificateholders and, in certain
circumstances, the Class A Certificateholders, may be less than that described
above. See "The Certificates-- Distributions on Certificates."
Although the Receivables have different Contract Rates, disproportionate rates
of prepayments between Receivables with Contract Rates greater than or less than
a rate equal to the sum of the applicable Pass-Through Rate and the Basic
Servicing Fee Rate will generally not affect the yield to Certificateholders
because the Seller has entered into the Yield Supplement Agreement with the
Trust. However, higher rates of prepayments of Receivables with higher Contract
Rates will decrease the amount available to cover delinquencies and defaults on
the Receivables. See "The Certificates--Distributions on Certificates."
Pool Factors and Other Information
The "Class A Pool Factor" and the "Class B Pool Factor" will each be a
seven-digit decimal that the Servicer will compute each month indicating the
remaining Class A Certificate Balance and Class B Certificate Balance,
respectively, as of the close of business of the Servicer on the Distribution
Date, as a fraction of the respective initial outstanding principal balance of
the Class A Certificates and the Class B Certificates. The Class A Pool Factor
and the Class B Pool Factor will each be 1.0000000 as of the date of the initial
issuance of the Certificates (the "Closing Date"), and thereafter will decline
to reflect reductions in the outstanding principal balance of the Class A
Certificates and Class B Certificates.
A Class A Certificateholder's portion of the aggregate outstanding principal
balance of the Class A Certificates is the product of (i) the original
denomination of the holder's Class A Certificate and (ii) the Class A Pool
Factor. A Class B Certificateholder's portion of the aggregate outstanding
principal balance of the Class B Certificates is the product of (i) the original
denomination of the holder's Class B Certificate and (ii) the Class B Pool
Factor.
21
<PAGE>
Pursuant to the Agreement, the Certificateholders will receive from the Trustee
monthly reports concerning the payments received on the Receivables, the Pool
Balance, the Class A Pool Factor and the Class B Pool Factor, and various other
items of information. Certificateholders of record during any calendar year will
be furnished information by the Trustee for tax reporting purposes not later
than the latest date permitted by law. See "The Certificates-- Statements to
Certificateholders."
Use of Proceeds
The Seller will receive the Certificates in exchange for the contribution to the
Trust of the Receivables and the other Trust Property. The net proceeds to be
received by the Seller from the sale of the Certificates will be added to its
general corporate funds and will be used for general corporate purposes.
The Bank
The Bank is a subsidiary of First Security Corporation, a Delaware multi-state
financial services corporation based in Salt Lake City, Utah. First Security
Corporation is the oldest continuously operating multi-state bank holding
company in the United States. The Bank is a major participant in the motor
vehicle financing and dealer flooring markets in Utah and Idaho, as well as in
all facets of consumer and commercial lending.
The Certificates
The Certificates will be issued pursuant to the Agreement. Copies of the
Agreement may be obtained by the Certificateholders upon written request to the
Bank at 79 South Main Street, Salt Lake City, Utah 84111. The following summary
does not purport to be complete and is subject to, and qualified in its entirety
by reference to, the Agreement.
General
The Certificates will evidence interests in the Trust created pursuant to the
Agreement. The Class A Certificates will evidence in the aggregate an undivided
ownership interest of approximately [95.5%] (the "Class A Percentage") in the
Trust and the Class B Certificates will evidence in the aggregate an undivided
ownership interest of approximately [4.5%] (the "Class B Percentage") in the
Trust. On each Distribution Date, the Trustee will distribute to
Certificateholders of record on the related Record Date all payments of
principal on the Receivables received by the Servicer during the related
Collection Period, plus interest at the applicable Pass-Through Rate on the
Class A Certificate Balance and the Class B Certificate Balance as of the
immediately preceding Distribution Date (after giving effect to all payments
made on such Distribution Date), to the extent that sufficient funds are on
deposit in the Certificate Account or available in the Reserve Account to make
such distribution. See "--Distributions on Certificates" and "--Reserve
Account." Principal and interest to be distributed to Certificateholders may be
provided by payments made by or on behalf of Obligors, the payment of Purchase
Amounts by the Seller or the Servicer, draws from the Reserve Account, payments
pursuant to the Yield Supplement Agreement, repossession of, or other
enforcement measures taken with respect to, Financed Vehicles after default by
Obligors and the realization of net Liquidation Proceeds with respect thereto,
or Recoveries (if any) of deficiencies from Obligors after repossession and sale
of Financed Vehicles. See "--Sale and Assignment of the Receivables" and
"--Servicing Procedures." In the event that, on any Distribution Date, funds
available from the foregoing sources are insufficient to provide for such
distributions, any shortfall will be payable on the subsequent Distribution
Date, to the extent funds are available therefor.
The Certificates will be offered for purchase in denominations of $1,000 and
integral multiples thereof and will be represented initially by global
certificates registered in the name of Cede, as nominee of DTC. No Certificate
Owner will be entitled to receive a Definitive Certificate representing such
person's interest in the Trust unless Definitive Certificates are issued under
the limited circumstances described herein. Unless and until Definitive
Certificates are issued, all references to actions by Certificateholders shall
refer to actions taken by DTC upon instructions from its
22
<PAGE>
Direct Participants and all references to distributions, notices, reports and
statements to Certificateholders shall refer to distributions, notices, reports
and statements to DTC. See "--Definitive Certificates."
Book Entry Registration
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 Section 17A of the Exchange Act. DTC was created
to hold securities for its participating organizations ("Direct Participants")
and to facilitate the clearance and settlement of securities transactions
between Direct Participants through electronic book-entries, thereby eliminating
the need for physical movement of certificates. Direct Participants include
securities brokers and dealers, banks, trust companies and clearing
corporations, and may include certain 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
Direct Participant, either directly or indirectly ("Indirect Participants").
Certificate Owners that are not Direct Participants or Indirect Participants but
desire to purchase, sell or otherwise transfer ownership of, or other interests
in, Certificates may do so only through Direct Participants or Indirect
Participants. In addition, Certificate Owners will receive all distributions of
principal and interest from the Trustee through Direct Participants or Indirect
Participants. Under a book-entry format, Certificate Owners may experience some
delay in their receipt of payments, as such payments will be forwarded by the
Trustee to Cede as nominee of DTC. DTC will forward such payments to its Direct
Participants which thereafter will forward them to Indirect Participants or
Certificate Owners. It is anticipated that the only "Certificateholder" will be
Cede as nominee of DTC. Certificate Owners will not be recognized by the Trustee
as Certificateholders, as such term is used in the Agreement, and Certificate
Owners will be permitted to exercise the rights of Certificateholders only
indirectly through DTC and its Direct Participants and Indirect Participants.
Under the rules, regulations and procedures creating and affecting DTC and its
operations (the "Rules"), DTC will be required to make book-entry transfers of
Certificates among Direct Participants and to receive and transmit distributions
of principal of, and interest on, the Certificates. Direct Participants and
Indirect Participants with which Certificate Owners have accounts with respect
to the Certificates similarly are required to make book-entry transfers and
receive and transmit such payments on behalf of their respective Certificate
Owners.
Because DTC can only act on behalf of Direct Participants, who in turn act on
behalf of Indirect Participants, and on behalf of certain banks, trust companies
and other persons approved by it, the ability of a Certificate Owner to pledge
Certificates to persons or entities that do not participate in the DTC system,
or to otherwise act with respect to such Certificates, may be limited due to the
absence of physical certificates for such Certificates.
DTC has advised the Seller that it will take any action permitted to be taken by
a Certificateholder under the Agreement only at the direction of one or more
Direct Participants to whose accounts with DTC the Certificates are credited.
Additionally, DTC has advised the Seller that to the extent that the Agreement
requires that any action may be taken only by holders of Class A Certificates or
Class B Certificates representing specified percentages of the aggregate
outstanding principal amount thereof, DTC will take such action only at the
direction of and on behalf of Direct Participants whose holdings include
undivided interests that satisfy such specified percentages. DTC may take
conflicting actions with respect to other undivided interests to the extent that
such actions are taken on behalf of Direct Participants whose holdings include
such undivided interests.
Definitive Certificates
The Certificates will be issued in fully registered, certificated form
("Definitive Certificates") to Certificate Owners or their nominees, rather than
to DTC or its nominee, only if (i) the Seller advises the Trustee in writing
that DTC is no longer willing or able to discharge properly its responsibilities
as depository with respect to the Certificates and the Trustee or the Seller is
unable to locate a qualified successor, (ii) the Seller, at its option, elects
to terminate the book-entry system through DTC or (iii) after the occurrence of
an Event of Servicing Termination, with respect to the Class A Certificates,
Class A Certificate Owners representing in the aggregate not less than a
majority of the aggregate
23
<PAGE>
outstanding principal balance of the Class A Certificates or, with respect to
the Class B Certificates, Class B Certificate Owners representing in the
aggregate not less than a majority of the aggregate outstanding principal
balance of the Class B Certificates, advise the Trustee and DTC through Direct
Participants in writing that the continuation of a book-entry system through DTC
(or successor thereto) is no longer in the Class A Certificate Owners' or the
Class B Certificate Owners', as the case may be, best interests.
Upon the occurrence of any event described in the immediately preceding
paragraph, DTC is required to notify all Direct Participants of the availability
through DTC of Definitive Certificates. Upon surrender by DTC to the Trustee of
the global certificates representing the Certificates and receipt by the Trustee
of instructions for re-registration, the Trustee will reissue the Certificates
as Definitive Certificates and thereafter the Trustee will recognize the holders
of such Definitive Certificates as Certificateholders under the Agreement
("Holders").
Distributions of principal of, and interest on, the Definitive Certificates will
be made by the Trustee directly to Holders in accordance with the procedures set
forth herein and in the Agreement. Distributions of principal and interest on
each Distribution Date will be made to Holders in whose names the Definitive
Certificates were registered at the close of business of the Trustee on the
related Record Date. Such distributions will be made by check mailed to the
address of such Holder as it appears on the register maintained by the Trustee.
The final payment on any Definitive Certificate, however, will be made only upon
presentation and surrender of such Definitive Certificate at the office or
agency specified in the notice of final distribution mailed to Holders.
Definitive Certificates will be transferable and exchangeable subject to such
reasonable regulations as the Trustee may prescribe. No service charge will be
imposed for any registration of transfer or exchange, but the Trustee may
require payment of a sum sufficient to cover any tax or other government charge
imposed in connection therewith.
Sale and Assignment of the Receivables
On the Closing Date, the Seller will sell and assign to the Trust, without
recourse, the Seller's entire interest in the Receivables and the proceeds
thereof, including its security interests in the Financed Vehicles. Each
Receivable conveyed by the Seller to the Trust will be identified in a schedule
incorporated by reference into the Agreement (the "Schedule of Receivables").
The Trustee will, concurrently with such sale and assignment, execute,
authenticate and deliver the global certificates representing the Certificates
to the Seller, to be delivered by, or on behalf of, the Seller to DTC.
The Seller will warrant in the Agreement as to each Receivable conveyed by it to
the Trust that, among other things, as of the Closing Date (unless otherwise
indicated): (i) the Receivable has been fully and properly executed by the
parties thereto and (a) has been originated by the Seller or has been originated
by a Dealer for the retail sale of a Motor Vehicle in the ordinary course of
such Dealer's business and has been purchased by the Seller in the ordinary
course of the Seller's business and has been validly assigned by such Dealer to
the Seller, (b) is secured by a valid, subsisting and enforceable security
interest in favor of the Seller in the Financed Vehicle (subject to
administrative delays and clerical errors on the part of the applicable
government agency) prior in right to the security interest of any other
creditor, which security interest is assignable together with such Receivable,
and has been so assigned, by the Seller to the Trustee, (c) contains customary
and enforceable provisions such that the rights and remedies of the holder
thereof are adequate for realization against the collateral of the benefits of
the security, (d) provided, at origination, for level monthly payments (although
the amount of the first and last payments may be different), which fully
amortize the initial principal balance of the Receivable over the original term
and (e) provides for a payment that will fully pay the principal balance of such
Receivable as of the first day of the Collection Period in which the Receivable
is prepaid, together with interest accrued at least to the date of prepayment at
the related Contract Rate; (ii) the information set forth in the Schedule of
Receivables was true and correct as of the close of business of the Seller on
the Cutoff Date; (iii) the Receivable complied at the time it was originated or
made, and will comply as of the Closing Date, in all material respects with all
requirements of applicable Federal, state and local laws, and regulations
thereunder; (iv) the Receivable constitutes the genuine, legal, valid and
binding payment obligation in writing of the Obligor, enforceable in all
material respects by the holder thereof in accordance with its terms, and the
Receivable is not subject to any right of rescission, setoff, counterclaim or
defense, including the defense of usury, and
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the operation of any of the terms of the Receivable, or the exercise of any
right thereunder, will not render the Receivable unenforceable in whole or in
part or subject to any right of rescission, setoff, counterclaim or defense,
including the defense of usury, and the Seller has no notice that any right of
rescission, setoff, counterclaim or defense has been asserted with respect
thereto; (v) the Seller has taken no action which would have the effect of
releasing the related Financed Vehicle from the lien granted by the Receivable
in whole or in part; (vi) no material provision of the Receivable has been
amended, waived, altered or modified in any respect, except such waivers as
would be permitted under the Agreement, and no amendment, waiver, alteration or
modification causes such Receivable not to conform to the other representations
or warranties contained in this paragraph; (vii) the Seller has not received
notice of any liens or claims, including liens for work, labor, materials or
unpaid state or Federal taxes relating to the Financed Vehicle securing the
Receivable, that are or may be prior to or equal to the lien granted by the
Receivable; (viii) except for payment delinquencies continuing for a period of
not more than 30 days as of the Cutoff Date, no default, breach, violation or
event permitting acceleration under the terms of the Receivable exists and no
continuing condition that with notice or lapse of time, or both, would
constitute a default, breach, violation or event permitting acceleration under
the terms of the Receivable has arisen; (ix) if the principal balance of a
Receivable exceeds $2,000, the Financed Vehicle securing such Receivable is
insured under an insurance policy covering theft and physical damage, the
premiums for which have been paid in full, and such insurance policy in full
force and effect, (x) the Receivable has not been sold, assigned, pledged or
otherwise conveyed by the Seller to any person other than the Trust, and,
immediately prior to the transfer and assignment herein contemplated, the Seller
had good and marketable title to the Receivable free and clear of any
encumbrance, equity, lien, pledge, charge, claim, security interest or other
right or interest of any other person and had full right and power to transfer
and assign the Receivable to the Trust and immediately upon the transfer and
assignment of the Receivable to the Trust, the Trust will have good and
marketable title to the Receivable, free and clear of any encumbrance, equity,
lien, pledge, charge, claim, security interest or other right or interest of any
other person and, if such transfer to the Trust is deemed to be a transfer for
security, the Trust's interest in the Receivable resulting from the transfer has
been perfected under the UCC; (xi) the Seller has duly fulfilled all obligations
on its part to be fulfilled under, or in connection with, the Receivable and
(xii) there is only one original executed Receivable, and immediately prior to
the Closing Date, the Seller will have possession of such original executed
Receivable.
The Seller also will warrant in the Agreement that: (i) the Original Pool
Balance was $300,071,473.85; (ii) as of the Cutoff Date, the Receivables had the
individual characteristics described herein under "The Receivables--Selection
Criteria;" (iii) as of the Cutoff Date, the Receivables had the characteristics
described herein under "The Receivables--Certain Characteristics;" (iv) by the
Closing Date, the Seller will have caused the portions of the Seller's
electronic master record of retail motor vehicle loans relating to the
Receivables to be 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 Agreement; and (v) the Seller has not taken any action to
convey any right to any person that would result in such person having a right
to payments received under the related theft and physical damage insurance
policies or Dealer Agreements or to payments due under such Receivables that is
senior to or equal with that of the Trust.
To assure uniform quality in servicing the Receivables and to reduce
administrative costs, the Trustee will appoint the Servicer and the Servicer
will appoint First Security Service Company, an affiliate of the Servicer, as
initial custodian of the Receivables. First Security Service Company, in its
capacity as custodian with respect to the Receivables, will hold such
Receivables and the motor vehicle certificates of title relating thereto (each,
a "Receivable File") on behalf of the Trustee for the benefit of
Certificateholders. The Receivables will not be stamped or otherwise marked to
reflect the sale and assignment of the Receivables to the Trust and will not be
segregated from other receivables held by First Security Service Company, on
behalf of the Servicer. Documents related to the Receivables that are not
included in the original Receivable Files will be maintained by First Security
Service Company, on behalf of the Servicer, in a computer imaging system (but
not in original form). The Seller's and First Security Service Company's
accounting records and computer systems will reflect the sale and assignment of
the Receivables to the Trust, and UCC financing statements with respect to such
sale and assignment will be filed. See "Formation of the Trust" and "Certain
Legal Aspects of the Receivables."
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Mandatory Repurchase of Receivables
In the event of a breach or failure to be true of any warranty described in
"--Sale and Assignment of the Receivables" by the Seller with respect to the
Receivables, which breach or failure materially and adversely affects the
interests of the Trust and the Certificateholders in a Receivable (it being
understood that any such breach or failure with respect to certain
representations and warranties which does not affect the ability of the Trust to
receive and retain payment in full on the Receivable will not be deemed to have
such a material and adverse effect), the Seller, unless such breach or failure
has been cured by the last day of the Collection Period which includes the 60th
day after the date on which the Seller becomes aware of, or receives written
notice from the Trustee or the Servicer of, such breach or failure, will be
required to repurchase the Receivable from the Trustee, without recourse,
representation or warranty, other than that the Trustee has not imposed any
liens on such Receivable to be repurchased, for the Purchase Amount. In
addition, if any payment deferral or credit extension permitted by the Servicer
results in the term of a Receivable extending beyond the last day of the
Collection Period immediately preceding the Final Scheduled Distribution Date,
the Servicer is required to purchase the Receivable for the Purchase Amount. See
"--Credit Deferrals and Optional Payment Deferrals." The Purchase Amount is
payable on the Deposit Date related to such Collection Period. The repurchase
obligation will constitute the sole remedy available to the Certificateholders,
the Trustee or the Trust against the Seller for any such uncured breach or
failure, except with respect to certain indemnities of the Seller under the
Agreement related thereto.
The "Purchase Amount" of any Receivable means, with respect to any Deposit Date,
an amount equal to the sum of (i) the outstanding principal balance of such
Receivable as of the last day of the related Collection Period and (ii) an
amount equal to the amount of accrued and unpaid interest on such principal
balance at the related Contract Rate through the last day of such related
Collection Period, in each case after giving effect to Collections on such
Receivable in such Collection Period.
Credit Deferrals and Optional Payment Deferrals
Other than as described below, the Servicer will not be allowed to increase or
decrease the amount or number of payments under a Receivable or the Contract
Rate of a Receivable, or extend, rewrite or otherwise modify the payment terms
of a Receivable, release collateral securing a Receivable, or otherwise modify
or waive any material term of a Receivable. Notwithstanding the foregoing, the
Servicer will be allowed to grant to an Obligor one or more payment deferrals
(each, a "Credit Deferral") if (i) the Servicer determines that, absent such
deferral, a payment default by the Obligor is reasonably foreseeable, (ii) the
Servicer would grant such Credit Deferral if the Receivable were serviced by it
for its own account and in accordance with its customary standards, (iii) the
cumulative extensions with respect to any Receivable would not cause the term of
such Receivable to extend beyond the last day of the Collection Period
immediately preceding the Final Scheduled Distribution Date, (iv) such
extensions in the aggregate would not exceed two months for each twelve months
of the original term of the Receivable and (v) interest would continue to accrue
on the outstanding principal balance of the Receivable during the term of such
Credit Deferral. In the event that the Servicer fails to comply with the
provisions of the preceding sentence, the Servicer will be required to purchase
the Receivable or Receivables affected thereby, for the Purchase Amount. The
Servicer will receive a fee in connection with the grant of Credit Deferrals,
which fee is then added to the principal balance of the related Receivable.
The Servicer will be allowed to grant non-credit related extensions of any
regularly scheduled payment due under a Receivable (each, an "Optional Payment
Deferral") to Obligors satisfying the following conditions: (i) at the time of
the extension, the Receivable is not the subject of two Optional Payment
Deferrals in the related fiscal year of the Trust; (ii) the Receivable is (x)
not the subject of any Credit Deferral within 90 days of the related Optional
Payment Deferral, or (y) not the subject of more than two Credit Deferrals since
its date of origination; (iii) the Receivable has been more than 30 days past
due no more than once; (iv) at the time of the Optional Payment Deferral, the
Receivable is not 15 days or more delinquent; (v) at the time of the Optional
Payment Deferral, the remaining term of the Receivable is greater than 20%, but
not more than 95%, of the original specified term of the Receivable; and (vi) in
the reasonable judgment of the Servicer, the Receivable is not likely to become
a Defaulted Receivable following the Optional Payment Deferral. If, as an
inadvertent result of any Optional Payment Deferral, the extension
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breached any of the terms of the preceding criteria (i) through (vi) or caused
the term of the Receivable to extend beyond the last day of the Collection
Period immediately preceding the Final Scheduled Distribution Date, then the
Servicer will be obligated to purchase the Receivable for the Purchase Amount.
The Servicer will receive a fee in connection with the grant of Optional Payment
Deferrals, which fee is then added to the principal balance of the related
Receivable.
Accounts
The Trustee will establish one or more segregated accounts (collectively, the
"Certificate Account"), in the name of the Trustee on behalf of the Trust and
for the benefit of the Certificateholders, into which all payments made on or
with respect to the Receivables will be deposited. The Trustee will also
establish a segregated account (the "Class A Distribution Account") in the name
of the Trustee on behalf of the Trust and for the benefit of the Class A
Certificateholders, and a segregated account (the "Class B Distribution
Account") in the name of the Trustee on behalf of the Trust and for the benefit
of the Class B Certificateholders, from which all distributions with respect to
the Class A Certificates and the Class B Certificates, respectively, will be
made. The Certificate Account, the Class A Distribution Account and the Class B
Distribution Account are collectively referred to as the "Account," and such
Accounts shall initially be established at Bankers Trust Company.
Each Account will be at all times an Eligible Deposit Account. If Accounts held
by the Trustee in its own trust department cease to be Eligible Deposit
Accounts, the Trustee will be required to transfer such Accounts to an Eligible
Bank or otherwise cause such Accounts to again become Eligible Deposit Accounts.
"Eligible Deposit Account" means either (a) a segregated account with an
Eligible Bank or (b) a segregated trust account with the trust department of a
depository institution organized under the laws of the United States of America
or any one of the states thereof or the District of Columbia (or any domestic
branch of a foreign bank), having trust powers and acting as trustee for funds
deposited in such account, so long as the long-term unsecured debt of such
depository institution shall have a credit rating from each Rating Agency in one
of its generic rating categories which signifies investment grade.
"Eligible Bank" means any institution with trust powers (which may be the Bank
or the Trustee), organized under the laws of the United States of America or any
one of the states thereof or the District of Columbia (or any domestic branch of
a foreign bank) which has a combined capital and surplus in excess of
$50,000,000, the deposits of which are insured to the full extent permitted by
law by the Federal Deposit Insurance Corporation (the "FDIC"), which is subject
to supervision and examination by Federal or state banking authorities and which
has (i) a rating of at least P-1 from Moody's Investors Service, Inc ("Moody's")
and A-l+ from Standard & Poor's Ratings Service, a Division of the McGraw Hill
Companies ("S&P") with respect to short-term deposits obligations, or (ii) a
rating of A2 or higher from Moody's and A from S&P with respect to long-term
unsecured debt obligations.
The Accounts may be maintained with the Bank, or any affiliate of the Bank, if
the Bank or such affiliate, as the case may be, and the Accounts meet the
eligibility criteria described in the preceding paragraphs.
Funds in the Accounts will be invested as provided in the Agreement in Eligible
Investments. "Eligible Investments" are generally limited to investments
acceptable to the Rating Agencies as being consistent with the rating of the
Certificates and may include, if otherwise eligible, debt securities of the
Trustee, the Bank or any of their affiliates and mutual funds for which the
Trustee, the Bank or any of their affiliates is an investment manager or
investment advisor. Investments of amounts on deposit in the Accounts with
respect to any Collection Period or Distribution Date are limited to obligations
or securities that mature not later than the related Deposit Date. However, to
the extent permitted by each Rating Agency, funds on deposit in the Reserve
Account may be invested in securities that will not mature prior to the date of
the next distribution with respect to the Certificates. Any earnings (net of
losses and investment expenses) on amounts on deposit in the Accounts will be
paid to the Seller and will not be available to Certificateholders.
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Collections on the Receivables
The Servicer will deposit all payments on Receivables (other than late fees,
prepayment charges and certain other amounts payable to the Servicer under the
Agreement, which are not required to be deposited into the Certificate Account)
into the Certificate Account not later than two business days after receipt
thereof. However, if conditions satisfactory to the Rating Agencies have been
met, the Servicer will no longer be required to make such payments within two
business days, but instead will be permitted to make such payments for a
Collection Period into the Certificate Account not later than the close of
business (New York time) on the related Deposit Date. Notwithstanding that
payments received in respect of the Receivables by the Servicer may not be
required to be segregated from the Servicer's own funds, the Agreement requires
the Servicer to deposit into the Certificate Account the full amount of all
payments received from Obligors during the related Collection Period and
consequently the Servicer, not the Certificateholders, will bear the risk of
loss on all amounts received with respect to the Receivables prior to their
deposit into the Certificate Account.
The Seller and the Servicer will also deposit into the Certificate Account on or
before the next Deposit Date the Purchase Amount of each Receivable to be
repurchased or purchased by them pursuant to an obligation that arose during the
related Collection Period. The Servicer will be entitled to retain, or to be
reimbursed from, amounts otherwise payable into, or on deposit in, the
Certificate Account but later determined to have resulted from mistaken deposits
or postings or checks returned for insufficient funds.
As an administrative convenience, so long as no Event of Servicing Termination
has occurred, the Servicer will be permitted to make deposits for a Collection
Period net of distributions to be made to it with respect to such Collection
Period. The Servicer will account to the Trustee and to the Certificateholders,
however, as if all such deposits and distributions were made individually.
Servicing Procedures
The Servicer will make reasonable efforts to collect all payments due with
respect to the Receivables in a manner consistent with the Agreement and will
exercise the degree of skill and care that the Servicer exercises with respect
to similar motor vehicle loans serviced by the Servicer for itself or others and
that are consistent with prudent industry standards. The Servicer is permitted
to delegate (i) any and all of its servicing duties to any of its affiliates or
(ii) specific duties to subcontractors who are in the business of performing
such duties; PROVIDED, HOWEVER the Servicer will remain obligated and liable to
the Trustee and the Certificateholders for servicing and administering the
Receivables in accordance with the Agreement as if the Servicer alone were
servicing the Receivables. References herein to actions required or permitted to
be taken, or restrictions on actions to be taken, by the Servicer include such
actions by a subservicer. References herein to amounts received by the Servicer
include amounts received by a subservicer.
The Servicer will covenant in the Agreement that: (A) the Servicer will not
release the Financed Vehicle from the security interest granted by the related
Receivable in whole or in part, except upon payment in full of the Receivable or
as otherwise contemplated by the Agreement; (B) the Servicer will not impair in
any material respect the rights of the Certificateholders in the Receivables,
the Dealer Agreement or the physical damage insurance policies; and (C) except
in the case of certain extensions, amendments or modifications explicitly
permitted by the Agreement, the Servicer will not (i) amend or modify the
principal balance or Contract Rate of any Receivable or (ii) amend, waive or
otherwise modify any material term of a Receivable.
In the event of a breach by the Servicer of any covenant described above that
materially and adversely affects the interests of the Trust and the
Certificateholders in a Receivable, the Servicer, unless such breach has been
cured by the last day of the Collection Period which includes the 60th day after
the date on which the Servicer becomes aware of, or receives written notice of
such breach from the Trustee or the Seller, will be required to purchase the
Receivable from the Trustee, without recourse, representation or warranty, other
than that the Trustee has not imposed any liens on such Receivable to be
repurchased, for the Purchase Amount on the Deposit Date related to such
Collection Period or earlier under certain circumstances. In addition, if any
payment deferral or credit extension permitted by the Servicer results in the
term of a Receivable extending beyond the last day of the Collection Period
immediately preceding the Final Scheduled Distribution Date, the Servicer will
be required to purchase the Receivable
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for the Purchase Amount. Such purchase will occur as of the last day of the
related Collection Period. The purchase obligation will constitute the sole
remedy available to the Certificateholders, the Trust or the Trustee against the
Servicer for any such uncured breach, except with respect to certain indemnities
of the Servicer under the Agreement related thereto.
The Agreement will also generally require the Servicer to charge off a
Receivable as a Defaulted Receivable in accordance with its customary servicing
procedures and shall use its best efforts to repossess and liquidate the
Financed Vehicle as soon as feasible and to follow such of its normal collection
practices and procedures as it deems necessary or advisable, and that are
consistent with the standard of care required by the Agreement, to realize upon
any Receivable. The Servicer may sell the Financed Vehicle securing such
Receivable at judicial sale or take any other action permitted by applicable
law. See "Certain Legal Aspects of the Receivables."
The Agreement will provide that the Servicer will defend and indemnify the
Trust, the Collateral Agent and the Certificateholders against 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 (i) the use, ownership or operations by the Servicer or any
affiliate thereof of any Financed Vehicle or (ii) the willful misfeasance,
negligence or bad faith of the Servicer in the performance of its duties under
the Agreement. The Servicer's obligations to indemnify the Trust, the Collateral
Agent and the Certificateholders for the Servicer's actions or omissions will
survive the removal of the Servicer or the Trust, but will not apply to any
action or omission of a successor servicer.
Servicing Compensation
On each Distribution Date, to the extent of Interest Collections, the Servicer
will receive a fee for servicing the Receivables equal to one-twelfth of the
Basic Servicing Fee Rate multiplied by the Pool Balance as of the first day of
the related Collection Period (the "Basic Servicing Fee"). If it is acceptable
to each Rating Agency without a reduction in the rating of the Certificates, the
Basic Servicing Fee in respect of a Collection Period (together with any portion
of the Basic Servicing Fee that remains unpaid from prior Distribution Dates) at
the option of the Servicer may be paid at or as soon as possible after the
beginning of such Collection Period out of the first collections of interest
received on the Receivables for such Collection Period. The Basic Servicing Fee
Rate will equal 1.0% per annum. In addition, the Servicer will be entitled to
retain any late fees, prepayment charges (other than Deferral Fees) and other
fees and charges collected during the related Collection Period, plus any
interest earned during the Collection Period on deposits in the Accounts (the
"Supplemental Servicing Fee").
The Basic Servicing Fee and Supplemental Servicing Fee will compensate the
Servicer for performing the functions of a third party servicer of Motor Vehicle
Loans and for administering the Receivables on behalf of the Certificateholders,
including collecting payments, accounting for collections, furnishing monthly
and annual statements to the Trustee with respect to distributions, responding
to inquiries of Obligors, investigating delinquencies and providing collection
and repossession services in cases of Obligor default. The Basic Servicing Fee
and Supplemental Servicing Fee will provide further compensation for certain
taxes, accounting fees, outside auditor fees and processing costs, and other
costs incurred by the Servicer under the Agreement in connection with
administering and servicing the Receivables.
Advances
On each Deposit Date, the Servicer shall, subject to the following, make a
payment with respect to each Receivable serviced by it (other than a Defaulted
Receivable) equal to the excess, if any, of (x) the product of the principal
balance of such Receivable as of the first day of the related Collection Period
and one-twelfth of its Contract Rate (calculated on the basis of a 360-day year
comprised of twelve 30-day months), over (y) Interest Collections actually
received by the Servicer as of the last day of such Collection Period with
respect to such Receivable. The Servicer may elect not to make any Advance of
due and unpaid interest with respect to a Receivable to the extent that the
Servicer, in its sole discretion, determines that such Advance is not
recoverable from subsequent payments on such Receivable or from funds in the
Reserve Account.
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On each Distribution Date, prior to making any distribution to the
Certificateholders, the Servicer shall be reimbursed for all Outstanding
Advances with respect to prior Distribution Dates, to the extent of the Interest
Collections for such Distribution Date and, to the extent such Interest
Collections are insufficient, to the extent of the funds in the Reserve Account.
If it is acceptable to each Rating Agency without reduction in the rating of the
Certificates, the Outstanding Advances at the option the Servicer may be paid at
or as soon as possible after the beginning of the related Collection Period out
of the first collections of interest received on the Receivables for such
Collection Period.
The Servicer will deposit all Advances into the Certificate Account on the
Deposit Date.
Yield Supplement Agreement
Simultaneously with the sale and assignment of the Receivables by the Seller,
the Trust and the Seller will enter into the Yield Supplement Agreement. The
Yield Supplement Agreement will, with respect to each Receivable, provide for
the payment by the Servicer on or prior to each Deposit Date of an amount (if
positive) calculated by the Servicer equal to one-twelfth of the excess of (i)
the sum of the amount of interest that would accrue on the Class A Percentage of
such Receivable's principal balance as of the first day of the related
Collection Period at a rate equal to the sum of the Class A Pass-Through Rate
and the Basic Servicing Fee Rate and the amount of interest that would accrue on
the Class B Percentage of such Receivable's principal balance as of the first
day of the related Collection Period at a rate equal to the sum of the Class B
Pass-Through Rate and the Basic Servicing Fee Rate over (ii) interest at the
Contract Rate on such Receivable's principal balance as of the first day of the
related Collection Period.
The Seller's obligations under the Yield Supplement Agreement will be secured by
funds on deposit in an Eligible Deposit Account to be maintained by the Seller
in the name of the Collateral Agent for the benefit of the Certificateholders
(the "Yield Supplement Account"). The amount required to be deposited by the
Seller into such Yield Supplement Account on the Closing Date will be equal to
the Yield Supplement Initial Deposit, and the amount on deposit in the Yield
Supplement Account and available on any Distribution Date will be the Specified
Yield Supplement Balance.
The Yield Supplement Account will be an Eligible Deposit Account which the
Seller shall establish and maintain in the name of, and under the control of,
the Collateral Agent. Funds on deposit in the Yield Supplement Account will be
invested in Eligible Investments selected by the Seller; PROVIDED that, if
permitted by the Rating Agencies, funds on deposit in the Yield Supplement
Account may be invested in Eligible Investments that mature later than the next
Deposit Date. The Yield Supplement Account and any amounts therein shall not be
property of the Trust, but will be pledged to and held for the benefit of the
Collateral Agent, as secured party for the benefit of the Certificateholders.
The Yield Supplement Account shall initially be maintained at Bankers Trust
Company.
Amounts on deposit in the Yield Supplement Account will be released to the
Seller on each Distribution Date to the extent the amount on deposit in the
Yield Supplement Account exceeds the Specified Yield Supplement Balance. The
Collateral Agent also shall cause all investment earnings attributable to the
Yield Supplement Account to be distributed on each Distribution Date to the
Seller. Upon any distribution to the Seller of amounts from the Yield Supplement
Account, the Certificateholders will not have any rights in, or claims to, such
amounts.
Reserve Account
The Reserve Account will be created with an initial deposit of cash or Eligible
Investments having a value of at least the Reserve Account Initial Deposit. In
addition, on each Distribution Date, any amounts on deposit in the Certificate
Account with respect to the related Collection Period after payments to the
Certificateholders and the Servicer have been made will be deposited into the
Reserve Account until the amount of the Reserve Account is equal to the
Specified Reserve Account Balance.
The Reserve Account will be an Eligible Deposit Account which the Seller shall
establish and maintain in the name of, and under the control of, the Collateral
Agent. Funds on deposit in the Reserve Account will be invested in Eligible
Investments selected by the Seller; PROVIDED that, if permitted by the Rating
Agencies, funds on deposit in the Reserve
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Account may be invested in Eligible Investments that mature later than the next
Deposit Date. The Reserve Account and any amounts therein will not be property
of the Trust, but will be pledged to and held by the Collateral Agent, as
secured party for the benefit of the Certificateholders.
On each Distribution Date, the amount available in the Reserve Account (the
"Available Reserve Amount") will equal the lesser of (i) the amount on deposit
in the Reserve Account (net of investment earnings) and (ii) the Specified
Reserve Account Balance.
On or prior to each Deposit Date, the Collateral Agent will withdraw funds from
the Reserve Account (i) to the extent required to make reimbursements of
Outstanding Advances of interest accrued on Defaulted Receivables to the extent
not recovered from Liquidation Proceeds (after application of Interest
Collections) and (ii) to the extent (x) the sum of the amounts required to be
distributed to Certificateholders and the accrued and unpaid Basic Servicing
Fees payable to the Servicer on such Distribution Date exceeds (y) the amount on
deposit in the Certificate Account as of the last day of the related Collection
Period (net of investment income). Such deficiencies in the Certificate Account
may result from, among other things, Receivables becoming Defaulted Receivables
or the failure by the Servicer to make any remittance required to be made under
the Agreement. The aggregate amount to be withdrawn from the Reserve Account on
any Deposit Date will not exceed the Available Reserve Amount with respect to
the related Distribution Date. The Collateral Agent will deposit the proceeds of
such withdrawal into the Certificate Account on or before the Distribution Date
with respect to which such withdrawal was made.
The Specified Reserve Account Balance on any Distribution Date will equal
[4.50]% of the Pool Balance as of the last day of the related Collection Period,
but in any event will not be less than the lesser of (i) $ and (ii) the
sum of such Pool Balance plus an amount sufficient to pay interest on (a) the
Class A Percentage of such Pool Balance at a rate equal to the sum of the Class
A Pass-Through Rate and the Basic Servicing Fee Rate through the Final Scheduled
Distribution Date and (b) the Class B Percentage of such Pool Balance at a rate
equal to the sum of the Class B Pass-Through Rate and the Basic Servicing Fee
Rate through the Final Scheduled Distribution Date; PROVIDED that the Specified
Reserve Account Balance will be calculated using a percentage of [9.00]% for any
Distribution Date (beginning , 1997) on which the Average Net Loss Ratio
exceeds % or the Average Delinquency Ratio exceeds %.
"Aggregate Net Losses" means, for any Collection Period, the aggregate
amount allocable to principal of all Receivables newly designated during
such Collection Period as Defaulted Receivables minus all Liquidation
Proceeds to the extent allocable to principal collected during such
Collection Period with respect to all Defaulted Receivables (whether or not
newly designated as such).
"Average Delinquency Ratio" means, as of any Distribution Date, the average
of the Delinquency Ratios for the preceding three Collection Periods.
"Average Net Loss Ratio" means, as of any Distribution Date, the average of
the Net Loss Ratios for the preceding three Collection Periods.
"Defaulted Receivable" means, with respect to any Collection Period, a
Receivable (other than a Purchased Receivable) which the Servicer, on behalf
of the Trust, has determined to charge off during such Collection Period in
accordance with its customary servicing practices; PROVIDED, HOWEVER, that
any Receivable which the Seller or the Servicer is obligated to repurchase
or purchase shall be deemed not to be a Defaulted Receivable during a
Collection Period unless the Seller or the Servicer fails to deposit the
Purchase Amount on the related Deposit Date when due unless such Receivable
is otherwise repurchased or purchased on or prior to the last day of the
Collection Period in which such Receivable is determined to be a Defaulted
Receivable.
"Delinquency Ratio" means, for any Collection Period, the ratio, expressed
as a percentage, of (i) the principal amount of all outstanding Receivables
(other than Purchased Receivables and Defaulted Receivables) which are 60 or
more days delinquent as of the last day of such Collection Period,
determined in accordance with the Servicer's customary practices, divided by
(ii) the Pool Balance as of the last day of such Collection Period.
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"Liquidation Proceeds" means, with respect to any Distribution Date and a
Receivable that became a Defaulted Receivable during the related Collection
Period, (i) insurance proceeds received during such Collection Period by the
Servicer, with respect to insurance policies relating to the Financed
Vehicles or the Obligors, (ii) amounts received by the Servicer during such
Collection Period from a Dealer in connection with such Defaulted Receivable
pursuant to the exercise of rights under a Dealer Agreement, and (iii) the
monies collected by the Servicer (from whatever source, including proceeds
of a sale of a Financed Vehicle or deficiency balance recovered after the
charge-off of the related Receivable) during such Collection Period on such
Defaulted Receivable net of any expenses incurred by the Servicer in
connection with the collection of such Receivable and the disposition of the
Financed Vehicle and any payments required by law to be remitted to the
Obligor, but, in any event, not less than zero. Liquidation Proceeds shall
be applied first to accrued and unpaid interest on the Receivable and then
to the principal balance thereof.
"Net Loss Ratio" means, for any Collection Period, an amount, expressed as a
percentage, equal to (i) the Aggregate Net Losses minus Recoveries for such
Collection Period, divided by (ii) the average of the Pool Balances on each
of the first day of such Collection Period and the last day of such
Collection Period.
"Recoveries" means, with respect to any Distribution Date, all monies
received by the Servicer with respect to any Defaulted Receivable during the
related Collection Period if such Collection Period follows the Collection
Period in which such Receivable became a Defaulted Receivable, net of the
sum of (i) any expenses incurred by the Servicer in connection with the
collection of such Receivable and the disposition of the Financed Vehicle
(to the extent not previously reimbursed) and (ii) any payments required by
law to be remitted to the Obligor, but, in any event, not less than zero.
The Specified Reserve Account Balance may be reduced to a lesser amount as
determined by the Seller, PROVIDED that such reduction does not adversely affect
the ratings of the Certificates by the Rating Agencies. Amounts on deposit in
the Reserve Account will be released to the Seller on each Distribution Date to
the extent that the amount on deposit in the Reserve Account would exceed the
Specified Reserve Account Balance. The Collateral Agent will cause all
investment earnings attributable to the Reserve Account to be distributed on
each Distribution Date to the Seller. Upon any distribution to the Seller of
amounts from the Reserve Account, the Certificateholders will not have any
rights in, or claims to, such amounts.
In the event that the funds in the Reserve Account are reduced to zero, the
Certificateholders will bear directly the credit and other risks associated with
ownership of the Receivables, including the risk that the Trust may not have a
perfected security interest in the Financed Vehicles. In such a case, the amount
available for distribution may be less than that described below, and the
Certificateholders may experience delays or suffer losses as a result, among
other things, of defaults or delinquencies by the Obligors or previous
extensions made by the Servicer.
Distributions on Certificates
DEPOSITS TO CERTIFICATE ACCOUNT. On or before the tenth calendar day of each
month (the "Determination Date"), the Servicer will provide the Trustee and the
Collateral Agent with a certificate (the "Servicer's Certificate") containing
certain information with respect to the related Collection Period, including the
amount of aggregate collections on the Receivables during such Collection
Period, the aggregate amount of Receivables which became Defaulted Receivables
during such Collection Period, the Yield Supplement Amount, the aggregate
Purchase Amounts of Receivables to be repurchased by the Seller or to be
purchased by the Servicer on the related Deposit Date and the aggregate amount
to be withdrawn from the Reserve Account.
On or before each Deposit Date, (a) the Servicer will cause all Collections and
Liquidation Proceeds and Recoveries to be deposited into the Certificate Account
and will deposit into the Certificate Account all Purchase Amounts of
Receivables to be purchased by the Servicer on such Deposit Date, (b) the Seller
will deposit into the Certificate Account all Purchase Amounts of Receivables to
be repurchased by the Seller on such Deposit Date, (c) the Collateral Agent will
make any required withdrawals for the related Distribution Date from the Reserve
Account and deposit such amounts into the Certificate Account, (d) the Servicer
will deposit all Advances for the related Distribution Date
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into the Certificate Account and (e) the Seller (or, if the Seller fails to do
so, the Collateral Agent) will deposit the Yield Supplement Amount for such
Distribution Date into the Certificate Account.
"Available Interest" means, with respect to any Distribution Date, the
excess of (a) the sum of (i) Interest Collections for such Distribution
Date, (ii) the Yield Supplement Amount for such Distribution Date and (iii)
all Advances made by the Servicer with respect to such Distribution Date,
over (b) the amount of Outstanding Advances to be reimbursed on or with
respect to such Distribution Date.
"Available Principal" means, with respect to any Distribution Date, the sum
of the following amounts with respect to the related Collection Period: (i)
that portion of all Collections allocable to principal in accordance with
the terms of the Receivables and the Servicer's customary servicing
procedures; (ii) to the extent attributable to principal, the Purchase
Amount received with respect to each Receivable repurchased by the Seller or
purchased by the Servicer under an obligation which arose during the related
Collection Period; and (iii) all Liquidation Proceeds, to the extent
allocable to principal. "Available Principal" on any Distribution Date shall
exclude all payments and proceeds of any Receivables the Purchase Amount of
which has been distributed on a prior Distribution Date.
"Collections" means all collections on the Receivables.
"Interest Collections" means, for any Distribution Date, the sum of the
following amounts for the related Collection Period: (i) that portion of the
Collections on the Receivables received during the related Collection Period
that is allocable to interest in accordance with the terms of the
Receivables and the Servicer's customary procedures, (ii) all Liquidation
Proceeds, to the extent allocable to interest, (iii) to the extent allocable
to interest, all Recoveries and (iv) to the extent attributable to interest,
the Purchase Amount of all Receivables that are repurchased by the Seller or
purchased by the Servicer as of any day in the related Collection Period.
"Interest Collections" for any Distribution Date shall exclude all payments
and proceeds of any Receivables the Purchase Amount of which has been
distributed on a prior Distribution Date.
"Purchased Receivable" means, at any time, a Receivable as to which payment
of the Purchase Amount has previously been made by the Seller or the
Servicer pursuant to the Agreement.
DEPOSITS TO THE DISTRIBUTION ACCOUNTS. On each Distribution Date, after making
reimbursements of Outstanding Advances to the Servicer, the Trustee will make
the following deposits and distributions, to the extent of Available Interest
and any Available Reserve Amount remaining after such reimbursements (and, in
the case of shortfalls occurring under clause (ii) below in the Class A Interest
Distribution, the Class B Percentage of Available Principal to the extent of
such shortfalls), in the following priority, all in accordance with the
direction contained in the Servicer's Certificate:
(i) to the Servicer, any unpaid Basic Servicing Fee for the related
Collection Period and all unpaid Basic Servicing Fees from prior Collection
Periods, but only from Interest Collections and Available Reserve Amount;
(ii) to the Class A Distribution Account, the Class A Interest Distribution
for such Distribution Date; and
(iii) to the Class B Distribution Account, the Class B Interest Distribution
for such Distribution Date.
On each Distribution Date, the Trustee will make the following deposits and
distributions, to the extent of the portion of Available Principal, Available
Interest and Available Reserve Amount remaining after the application of clauses
(i), (ii) and (iii) above, in the following priority:
(iv) to the Class A Distribution Account, the Class A Principal Distribution
for such Distribution Date;
(v) to the Class B Distribution Account, the Class B Principal Distribution
for such Distribution Date;
(vi) to the Collateral Agent for deposit in the Reserve Account, any amounts
remaining, until the amount on deposit in the Reserve Account equals the
Specified Reserve Account Balance; and
(vii) to the Collateral Agent for distribution to the Seller, any amounts
remaining.
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On each Distribution Date, all amounts on deposit in the Class A Distribution
Account will be distributed to the Class A Certificateholders by the Trustee,
all amounts on deposit in the Class B Distribution Account will be distributed
to the Class B Certificateholders by the Trustee and all amounts on deposit in
the Reserve Account in excess of the Specified Reserve Account Balance will be
distributed to the Seller by the Collateral Agent; PROVIDED HOWEVER that upon
distribution with respect to the Class A Certificates of an amount, together
with all prior distributions with respect to the Class A Certificates, equal to
the Original Class A Certificate Balance, the Class A Certificateholders shall
have no right to any additional distribution and the Trustee shall make no
distributions with respect to the Class A Certificates and upon distribution
with respect to the Class B Certificates of an amount, together with all prior
distributions with respect to the Class B Certificates, equal to the Original
Class B Certificate Balance, the Class B Certificateholders shall have no right
to any additional distribution and the Trustee shall make no distributions with
respect to the Class B Certificates.
"Class A Certificate Balance" at any time, equals the Original Class A
Certificate Balance, as reduced by all amounts allocable to principal on the
Class A Certificates distributed to Class A Certificateholders prior to such
time.
"Class A Interest Carryover Shortfall" means, (i) with respect to the
initial Distribution Date, zero, and (ii) with respect to any other
Distribution Date, the excess of Class A Monthly Interest for the preceding
Distribution Date and any outstanding Class A Interest Carryover Shortfall
on such preceding Distribution Date, over the amount in respect of interest
that is actually deposited in the Class A Distribution Account on such
preceding Distribution Date, plus 30 days of interest on such excess, to the
extent permitted by law, at the Class A Pass-Through Rate.
"Class A Interest Distribution" means, with respect to any Distribution
Date, the sum of Class A Monthly Interest for such Distribution Date and the
Class A Interest Carryover Shortfall for such Distribution Date.
"Class A Monthly Interest" means, with respect to any Distribution Date,
one-twelfth of the Class A Pass-Through Rate multiplied by the Class A
Certificate Balance as of the preceding Distribution Date (after giving
effect to any distributions made on such Distribution Date) or, in the case
of the first Distribution Date, as of March 15, 1997.
"Class A Monthly Principal" means, with respect to any Distribution Date,
the Class A Percentage of Available Principal for such Distribution Date
plus the Class A Percentage of Realized Losses with respect to the related
Collection Period.
"Class A Principal Carryover Shortfall" means, (i) with respect to the
initial Distribution Date, zero and (ii) with respect to any other
Distribution Date, the excess of Class A Monthly Principal for such
Distribution Date and any outstanding Class A Principal Carryover Shortfall
from the preceding Distribution Date over the amount in respect of principal
that is actually deposited in the Class A Distribution Account on such
Distribution Date.
"Class A Principal Distribution" means, with respect to the initial
Distribution Date, the Class A Monthly Principal for such Distribution Date
and, in the case of any Distribution Date other than the initial
Distribution Date, the sum of the Class A Monthly Principal for such
Distribution Date and the Class A Principal Carryover Shortfall as of the
close of the preceding Distribution Date. In addition, on the Final
Scheduled Distribution Date, the Class A Principal Distribution shall
include the lesser of (i) the Class A Percentage of any scheduled payment of
principal due and remaining unpaid on each Receivable as of the related
Distribution Date and (ii) the amount that is necessary (after giving effect
to the other amounts described above to be distributed to the Class A
Certificateholders on such Distribution Date and allocable to principal) to
reduce the Class A Certificate Balance to zero, subject to the availability
of funds therefor.
"Class B Certificate Balance" at any time, equals the Original Class B
Certificate Balance, as reduced by all amounts allocable to principal on the
Class B Certificates distributed to Class B Certificateholders prior to such
time.
"Class B Interest Carryover Shortfall" means, (i) with respect to the
initial Distribution Date, zero, and (ii) with respect to any other
Distribution Date, the excess of Class B Monthly Interest for the preceding
Distribution Date and any outstanding Class B Interest Carryover Shortfall
on such preceding Distribution Date, over the
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amount in respect of interest that is actually deposited in the Class B
Distribution Account on such preceding Distribution Date, plus 30 days of
interest on such excess, to the extent permitted by law, at the Class B
Pass-Through Rate.
"Class B Interest Distribution" means, with respect to any Distribution
Date, the sum of Class B Monthly Interest for such Distribution Date and the
Class B Interest Carryover Shortfall for such Distribution Date.
"Class B Monthly Interest" means, with respect to any Distribution Date,
one-twelfth of the Class B Pass-Through Rate multiplied by the Class B
Certificate Balance as of the preceding Distribution Date (after giving
effect to any distributions made on such Distribution Date) or, in the case
of the first Distribution Date, as of the Closing Date.
"Class B Monthly Principal" means, with respect to any Distribution Date,
the Class B Percentage of Available Principal for such Distribution Date
plus the Class B Percentage of Realized Losses with respect to the related
Collection Period.
"Class B Principal Carryover Shortfall" means, (i) with respect to the
initial Distribution Date, zero and (ii) with respect to any other
Distribution Date, the excess of Class B Monthly Principal for such
Distribution Date and any outstanding Class B Principal Carryover Shortfall
from the preceding Distribution Date over the amount in respect of principal
that is actually deposited in the Class B Distribution Account on such
Distribution Date.
"Class B Principal Distribution" means, with respect to the initial
Distribution Date, the Class B Monthly Principal for such Distribution Date
and, in the case of any Distribution Date other than the initial
Distribution Date, the sum of Class B Monthly Principal for such
Distribution Date and the Class B Principal Carryover Shortfall as of the
close of the preceding Distribution Date. In addition, on the Final
Scheduled Distribution Date, the Class B Principal Distribution will include
the lesser of (i) the Class B Percentage of any scheduled payment of
principal due and remaining unpaid on each Receivable as of the related
Distribution Date and (ii) the amount that is necessary (after giving effect
to the other amounts described above to be distributed to the Class B
Certificateholders on such Distribution Date and allocable to principal) to
reduce the Class B Certificate Balance to zero, subject to the availability
of funds therefor.
"Realized Losses" means, with respect to any Distribution Date and a
Receivable that became a Defaulted Receivable during the related Collection
Period, the excess of (i) the aggregate principal balance of such Receivable
as of the first day of the related Collection Period over (ii) Liquidation
Proceeds received with respect to such Receivable during such Collection
Period, to the extent allocable to principal.
The following chart sets forth an example of the application of the foregoing
provisions to a hypothetical monthly distribution:
<TABLE>
<S> <C>
February 26-March COLLECTION PERIOD. The Servicer receives monthly payments, prepayments,
25 and other proceeds in respect of the Receivables.
April 10 DETERMINATION DATE. On or before this date, the Servicer delivers to the
Trustee the Servicer's Certificate, which notifies the Trustee of the
amounts required to be distributed and the amounts available for
distribution on the next Distribution Date.
April 14 RECORD DATE. Distributions on the next Distribution Date are made to
Certificateholders of record at the close of business of the Trustee on
this date (or, if Definitive Certificates are issued, the Record Date
will be March 25).
April 15 DEPOSIT DATE. All Collections, Advances and any Yield Supplement Amount
relating to the related Collection Period are required to be deposited
into the Certificate Account on or before this date. The Trustee
withdraws funds from the Reserve Account to the extent necessary.
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
April 15 DISTRIBUTION DATE. The Trustee distributes to Certificateholders amounts
payable in respect of the Certificates, pays the Basic Servicing Fee and
reimburses Outstanding Advances to the Servicer, deposits any excess
funds to the Reserve Account and, if the Reserve Account is equal to the
Specified Reserve Account Balance, pays any remaining funds to the
Seller.
</TABLE>
Statements to Certificateholders
On each Distribution Date, the Trustee will include with the distribution to
each Class A Certificateholder and Class B Certificateholder a statement setting
forth the following information for the related Collection Period:
(i) the amount of the distribution allocable to principal on the Class A
Certificates and the Class B Certificates;
(ii) the amount of the distribution allocable to interest on the Class A
Certificates and the Class B Certificates;
(iii) the Yield Supplement Amount;
(iv) the amount of the Basic Servicing Fee paid to the Servicer with respect
to the related Collection Period;
(v) the Class A Certificate Balance, the Class A Pool Factor, the Class B
Certificate Balance and the Class B Pool Factor as of such Distribution
Date, after giving effect to payments allocated to principal reported under
clause (i) above;
(vi) the Pool Balance as of the close of business of the Servicer on the
last day of the related Collection Period;
(vii) the amount of the aggregate Realized Losses, if any, for such
Collection Period;
(viii) the amount of the aggregate Defaulted Receivables, if any, for such
Collection Period;
(ix) the amount otherwise distributable to the Class B Certificateholders
that is distributed to the Class A Certificateholders for the related
Collection Period;
(x) the aggregate Purchase Amount of Receivables repurchased by the Seller
or purchased by the Servicer;
(xi) the amount of Advances made in respect of such Collection Period and
the amount of unreimbursed Advances on such Distribution Date;
(xii) the balance of the Reserve Account on such Distribution Date, after
giving effect to changes therein on such Distribution Date;
(xiii) the excess, if any, of the Class A Certificate Balance over the Pool
Balance and the excess, if any, of the Class B Certificate Balance over the
amount by which the Pool Balance exceeds the Class A Certificate Balance;
and
(xiv) the aggregate outstanding balances of the Receivables which were
delinquent 30-59 days, 60-89 days, 90-119 days and 120 or more days,
respectively, as of the close of business on the last day of the related
Collection Period.
Each amount set forth pursuant to clauses (i) through (iv) above will be
expressed in the aggregate and as a dollar amount per $1,000 of original
denomination of the Certificates.
Within a reasonable period of time after the end of each calendar year, but not
later than the latest date permitted by law, the Trustee will furnish to each
person who at any time during such calendar year was a Certificateholder a
statement containing the sum of the amounts described in the clauses (i) and
(ii) above and such other information as is available to the Servicer as the
Servicer deems necessary or desirable to enable Certificateholders to prepare
their Federal income tax returns. See "Federal Income Tax Consequences."
Evidence as to Compliance
The Agreement will provide that a firm of independent certified public
accountants, who may provide audit and other services to the Servicer, will
furnish to the Trustee, on or before March 15 of each year, beginning March 15,
1998, a report of examination to the effect that such firm has examined the
motor vehicle loan servicing functions of
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<PAGE>
the Servicer over the previous calendar year (or shorter period in the case of
the first such report) and that such examination (i) included tests relating to
motor vehicle loans serviced and such other auditing procedures as such firm
considered necessary under the circumstances and (ii) except as described in
such report, disclosed no exceptions or errors in the records relating to motor
vehicle loans serviced that, in such firm's opinion, requires such firm to
report.
The Agreement will also provide for delivery to the Trustee, on or before March
31 of each year, beginning March 31, 1998, of a certificate signed by an officer
of the Servicer stating that, to the best of such officer's knowledge, the
Servicer has fulfilled its obligations under the Agreement for the previous
calendar year (or shorter period in the case of the first such certificate) or,
if there has been a default in the fulfillment of any such obligation,
describing each such default.
Certificateholders and Certificate Owners may obtain copies of such statements
and certificates by written request addressed to the Trustee. See "--The
Trustee."
Certain Matters Regarding the Servicer
The Agreement will provide that the Servicer may not resign from its obligations
and duties as Servicer thereunder, except upon a determination that the
Servicer's performance of such duties is no longer permissible under applicable
law. No such resignation will become effective until the Trustee or a successor
servicer has assumed the Servicer's servicing obligations and duties under the
Agreement.
Any corporation or other entity into which the Servicer may be merged or
consolidated, or that may result from any merger, conversion or consolidation to
which the Servicer is a party, or any entity that may succeed by purchase and
assumption to all or substantially all the business of the Servicer, where the
Servicer is not the surviving entity and where such corporation or other entity
assumes the obligations of the Servicer under the Agreement, will be the
successor to the Servicer under the Agreement.
The Agreement will provide that the Servicer will be liable only to the extent
of the obligations specifically undertaken by it under the Agreement and will
have no other obligations or liabilities thereunder.
The Agreement will also provide that the Servicer will not be under any
obligation to appear in, prosecute, or defend any legal action that is not
incidental to the Servicer's servicing responsibilities under the Agreement and
that, in its opinion, may cause it to incur any expense or liability. The
Servicer may, however, at its expense undertake any reasonable action that it
may deem necessary or desirable in respect of the Agreement and the rights and
duties of the parties thereto and the interests of the Certificateholders
thereunder.
Events of Servicing Termination
The following events will constitute "Events of Servicing Termination" under the
Agreement: (i) any failure by the Servicer to deliver to the Trustee the
Servicer's Certificate for any Collection Period (which failure continues beyond
the earlier of three business days from the date the Servicer's Certificate was
due to be delivered and the related Deposit Date), (ii) any failure by the
Servicer to deliver to the Accounts any required payment or deposit, which
failure continues unremedied for five business days following the due date (or,
in the case of a payment or deposit to be made not later than a Deposit Date
related to a Distribution Date, the failure to make such payment or deposit by
such Distribution Date), (iii) any failure by the Servicer duly to observe or
perform in any material respect any other covenant or agreement in the
Certificates and the Agreement, which failure materially and adversely affects
the rights of Certificateholders (which determination shall be made without
regard to whether funds are available to the Certificateholders pursuant to the
Reserve Account) and which continues unremedied for 90 days after written notice
of such failure is given to the Servicer or the Seller by the Trustee or to the
Servicer and Trustee by the holders of Certificates evidencing not less than a
majority of the aggregate outstanding principal balance of the Class A
Certificates and the Class B Certificates taken together as a single class, (iv)
certain events of bankruptcy, receivership, insolvency or similar proceedings
and certain actions by the Servicer indicating its insolvency pursuant to
bankruptcy, receivership, conservatorship, insolvency or similar proceedings or
its inability to pay its obligations and (v) the failure by the Servicer to be
an Eligible Servicer.
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The holders of Certificates evidencing not less than a majority of the aggregate
outstanding principal balance of the Class A Certificates and the Class B
Certificates taken together as a single class may waive any Event of Servicing
Termination, except an event resulting from the failure to make any required
deposit or payment to an Account.
If an Event of Servicing Termination occurs, the Trustee will have no obligation
to notify Certificateholders of such event prior to the end of any cure period
described above.
Rights upon an Event of Servicing Termination
As long as an Event of Servicing Termination remains unremedied, the Trustee or
the holders of Certificates evidencing not less than a majority of the aggregate
outstanding principal balance of the Class A Certificates and the Class B
Certificates taken together as a single class may terminate the Servicer's
rights and obligations under the Agreement, whereupon the Trustee will succeed
to all the responsibilities, duties and liabilities of the Servicer under the
Agreement. Thereafter, the Trustee will be entitled to the same Basic Servicing
Fee and Supplemental Servicing Fee otherwise payable to the Servicer. The
Trustee may appoint, or petition a court of competent jurisdiction for the
appointment of, an Eligible Servicer to act as successor to the outgoing
Servicer under the Agreement. In no event may the servicing compensation to be
paid to such successor be greater than the Basic Servicing Fees payable to the
outgoing Servicer under the Agreement. In the event of the bankruptcy or
insolvency of the Servicer, the bankruptcy trustee or the Servicer, as
debtor-in-possession, may have the power to prevent a termination of the
Servicer's rights and obligations under the Agreement. The Bank will be entitled
to receive all accrued and unpaid Basic Servicing Fees and Supplemental
Servicing Fees through and including, and to be reimbursed for all Outstanding
Advances as of, the effective date of its termination as the Servicer.
"Eligible Servicer" means (a) any affiliate of the Seller, (b) Bankers Trust
Company or (c) any person which, at the time of its appointment as Servicer, (i)
has a net worth of not less than $50,000,000, (ii) is servicing a portfolio of
motor vehicle retail installment sale contracts and/or motor vehicle loans,
(iii) is legally qualified, and has the capacity, to service the Receivables,
(iv) has demonstrated the ability to service a portfolio of motor vehicle loans
similar to the Receivables professionally and completely in accordance with
standards of skill and care that are consistent with prudent industry standards,
and (v) 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 Agreement or obtains rights to use, or develops at its own expense,
software which is adequate to perform its duties and responsibilities under the
Agreement.
Amendment
The Agreement may be amended by the Seller, the Servicer and the Trustee,
without the consent of the Certificateholders, to add any provisions to or
change in any manner or eliminate any of the provisions of the Agreement or
modify the rights of the Certificateholders; PROVIDED, HOWEVER, that such action
will not, in the opinion of counsel (which may be an employee of the Seller, the
Servicer or any of their affiliates) reasonably satisfactory in form to the
Trustee, materially and adversely affect the interests of any Certificateholder
or cause the Trust to be classified for Federal income tax purposes as an
association taxable as a corporation. The Agreement also may be amended by the
Seller, the Servicer and the Trustee with the consent of the holders of
Certificates evidencing not less than a majority of the aggregate outstanding
principal balance of the Class A Certificates and the Class B Certificates taken
together as a single class, for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of the Agreement or
of modifying the rights of the Certificateholders. However, no such amendment
may (i) increase or reduce in any manner the amount of, or accelerate or delay
the timing of, or change the allocation or priority of, Collections or
distributions that are required to be made on any Certificate, without the
consent of all adversely affected Certificateholders, (ii) reduce the percentage
of the aggregate outstanding principal balance of the Certificates, the holders
of which are required to consent to any such amendment, without the consent of
all Certificateholders, (iii) materially and adversely affect the interests of
either the Class A Certificateholders or the Class B Certificateholders without
the consent of the holders of Class A Certificates or Class B Certificates, as
the case may be, evidencing not less than a majority of the aggregate
outstanding principal balance of the Class A Certificates or the Class B
Certificates, as the case may be, (iv) adversely affect the rating of the Class
A Certificates or the
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<PAGE>
Class B Certificates by any Rating Agency without the consent of holders of
Class A Certificates or Class B Certificates, as the case may be, evidencing not
less than two-thirds of the aggregate outstanding principal balance of the Class
A Certificates or the Class B Certificates, as the case may be or (v) cause the
Trust to be taxable as a corporation.
List of Certificateholders
If Definitive Certificates have been issued, the Trustee, upon written request
of the holders of Class A Certificates or Class B Certificates evidencing not
less than 25% of the aggregate outstanding principal balance of either the Class
A Certificates or the Class B Certificates, as the case may be, will afford such
Class A Certificateholders or Class B Certificateholders access during business
hours to the most current list of Certificateholders for purposes of
communicating with other Certificateholders with respect to their rights under
the Agreement. Prior to such time, neither the Trustee nor DTC will have an
obligation to maintain, or provide Certificate Owners with access to, a list of
Certificate Owners. Definitive Certificates will be issued only in the limited
circumstances described above in "--Definitive Certificates."
The Agreement will not provide for holding any annual or other meetings of
Certificateholders.
Termination
The Trust, and the respective obligations and responsibilities of the Seller,
the Servicer and the Trustee under the Agreement will, except with respect to
certain reporting requirements, terminate upon the earliest of (i) the
Distribution Date next succeeding the Servicer's purchase of the remaining Trust
Property, as described below, (ii) payment to Certificateholders, the Trustee
and the Collateral Agent of all amounts required to be paid to them pursuant to
the Agreement and (iii) the Distribution Date next succeeding the month which is
six months after the maturity or liquidation of the last Receivable held in the
Trust and the disposition of any amounts received upon liquidation of any
property remaining in the Trust in accordance with the terms and priorities set
forth in the Agreement.
In order to avoid excessive administration expense, the Servicer will be
permitted, at its option, in the event that the Pool Balance as of the last day
of a Collection Period has declined to 10% or less of the Original Pool Balance,
to purchase from the Trust, on any Distribution Date occurring in a subsequent
Collection Period, all remaining Trust Property at a purchase price equal to the
aggregate of the Purchase Amounts of the remaining Receivables. The exercise of
this right may effect an early retirement of the Certificates.
The Trustee will give written notice of termination of the Trust to each
Certificateholder of record. The final distribution to any Certificateholder
will be made only upon surrender and cancellation of such holder's Certificate
(whether a Definitive Certificate or the physical certificate representing the
Certificates) at the office or agency of the Trustee specified in the notice of
termination. Any funds remaining in the Trust after setting aside all funds
required to be distributed to Certificateholders, will be distributed to the
Seller or as otherwise provided in the Agreement.
The Trustee
Bankers Trust Company, a New York banking corporation, will be the Trustee. The
Trustee, in its individual capacity or otherwise, and any of its affiliates, may
hold Certificates in their own names or as pledgee. In addition, for the purpose
of meeting the legal requirements of certain jurisdictions, the Servicer and the
Trustee, acting jointly (or in some instances, the Trustee, acting alone), will
have the power to appoint co-trustees or separate trustees of all or any part of
the Trust. In the event of such appointment, all rights, powers, duties, and
obligations conferred or imposed upon the Trustee by the Agreement will be
conferred or imposed upon the Trustee and such co-trustee or separate trustee
jointly, or, in any jurisdiction where the Trustee is incompetent or unqualified
to perform certain acts, singly upon such co-trustee or separate trustee who
shall exercise and perform such rights, powers, duties and obligations solely at
the direction of the Trustee. The Agreement will provide that the Servicer will
pay the Trustee's reasonable fees and expenses.
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The Trustee may resign at any time, in which event the Servicer will be
obligated to appoint a successor trustee. The Servicer may also remove the
Trustee if the Trustee ceases to be eligible to serve, becomes legally unable to
act, is adjudged bankrupt, insolvent or is placed in receivership or similar
proceedings. In such circumstances, the Servicer will be obligated to appoint a
successor trustee. Any resignation or removal of the Trustee and appointment of
a successor trustee will not become effective until acceptance of the
appointment by the successor Trustee. Upon removal or termination of the Trustee
for any reason, the Collateral Agent will also be removed or terminated, and the
successor Trustee shall also become the successor Collateral Agent.
The Trustee's Corporate Trust Office is located at Bankers Trust Company,
Corporate Trust and Agency Group-Structured Finance, Four Albany Street, 10th
Floor, New York, New York 10006. The Seller, the Servicer and their respective
affiliates may have other banking relationships with the Trustee and its
affiliates in the ordinary course of their business.
Duties of the Trustee
The Trustee will make no representations as to the validity or sufficiency of
the Agreement, the Certificates (other than the execution and authentication of
the Certificates), the Receivables, or any related documents, and will not be
accountable for the use or application by the Seller or the Servicer of any
funds paid to the Seller or the Servicer in respect of the Certificates or the
Receivables or for any monies prior to the time such monies are deposited into
the Certificate Account. The Trustee will not independently verify the
Receivables.
If no Event of Servicing Termination has occurred and is continuing, the Trustee
will be required to perform only those duties specifically required of it under
the Agreement. Generally, those duties are limited to the receipt of the various
certificates, reports or other instruments required to be furnished by the
Servicer to the Trustee under the Agreement, in which case the Trustee will only
be required to examine such instruments to determine whether they conform to the
requirements of the Agreement.
The Trustee will be under no obligation to exercise any of the rights or powers
vested in it by the Agreement or to institute, conduct or defend any litigation
thereunder or in relation thereto at the request, order, or direction of any of
the Certificateholders, unless such Certificateholders have offered the Trustee
security or indemnity satisfactory to it against the costs, expenses and
liabilities which may be incurred therein or thereby. No Certificateholder will
have any right under the Agreement to institute any proceeding with respect to
the Agreement, unless such holder has given the Trustee written notice of
default and unless holders of the Certificates evidencing not less than a
majority of the aggregate outstanding principal balance of the Class A
Certificates and the Class B Certificates, taken together as a single class,
shall have made a written request to the Trustee to institute such proceeding in
its own name as Trustee thereunder and have offered to the Trustee reasonable
indemnity, and the Trustee for 30 days has neglected or refused to institute any
such proceeding.
Certain Legal Aspects of the Receivables
Rights in the Receivables
The Receivables are "chattel paper" as defined in Article 9 of the UCC. Article
9 of the UCC specifically states that with respect to a sale of chattel paper,
the provisions of Article 9 apply. In that connection and to avail the Trust of
the benefits and protections afforded by the UCC to a purchaser of chattel paper
against other competing claimants, actions prescribed by the UCC will be taken
to "perfect" the interests of the Trust in the Receivables. First, the Seller
will cause appropriate financing statements to be filed with the appropriate
governmental authorities in the states of Utah and Idaho. Second, following the
sale and assignment of the Receivables to the Trust, pursuant to the Agreement,
an affiliate of the Servicer, First Security Service Company, will be appointed
by the Trustee to have physical possession of the Receivables and the Receivable
Files as custodian for the Trustee. The Receivables will not be stamped, or
otherwise marked to indicate that they have been sold to the Trust; however, the
Servicer and First Security Service Company will indicate in their computer
records that the Receivables have been sold to the Trust and both will have
notice of the interest of the Trust in the Receivables. If, through inadvertence
or otherwise, another party purchases (or takes a security interest in) the
Receivables for new value in the ordinary course of
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business and somehow manages to take possession of the Receivables without
actual knowledge of the Trust's interests, such purchaser (or secured party)
will acquire an interest in the Receivables superior to the interest of the
Trust. Under the Agreement, in addition to the obligation to provide for
perfection as above-described, the Seller is also obligated to assure that the
interest of the Trust in the Receivables is perfected in such a manner as to
affect the highest priority afforded by the UCC to such interests.
Security Interests in the Financed Vehicles
Generally, retail motor vehicle installment sale contracts and installment loans
such as the Receivables evidence loans to obligors to finance the purchase of
such motor vehicles. The loan documents also constitute personal property
security agreements and include grants of security interests in the vehicles
under the UCC. Perfection of security interests in motor vehicles is generally
governed by the motor vehicle registration laws of the state in which the
vehicle is located. In Utah, Idaho and most other states, a security interest in
the vehicle is perfected by notation of the secured party's lien on the
vehicle's certificate of title.
The Bank's practice is to take such action as is required in accordance with its
normal and customary servicing practices and procedures to perfect its security
interest in a Financed Vehicle under the laws of the jurisdiction in which the
Financed Vehicle is registered. If the Bank, because of clerical error or
otherwise, has failed to take such action with respect to a Financed Vehicle, it
will not have a perfected security interest in the Financed Vehicle and its
security interest may be subordinate to the interests of, among others,
subsequent purchasers of the Financed Vehicle that give value without notice of
the Bank's security interest and to whom a certificate of title is issued in
such purchaser's name, holders of perfected security interests in the Financed
Vehicle, and the trustee in bankruptcy of the Obligor. The Bank's security
interest may also be subordinate to such third parties in the event of fraud or
forgery by the Obligor or administrative error by state recording officials or
in the circumstances noted below. As described more fully below, the Bank will
warrant in the Agreement that it has an enforceable first priority perfected
security interest with respect to each Financed Vehicle and will be required to
repurchase the related Receivable in the event of an uncured breach of such
warranty.
Pursuant to the Agreement, the Seller will assign its security interests in the
Financed Vehicles, along with the sale and assignment of the Receivables, to the
Trustee. The certificates of title will not be endorsed or otherwise amended to
identify the Trust or Trustee as the new secured party, however, because of the
administrative burden and expense involved.
In Utah, Idaho and most other states, an assignment of a security interest in a
Financed Vehicle along with the applicable Receivable is effective without
amendment of any lien noted on a vehicle's certificate of title or ownership,
and the assignee succeeds thereby to the assignor's rights as secured party. In
Utah, Idaho and most other states, in the absence of fraud or forgery by the
vehicle owner or of fraud, forgery, negligence or error by the Bank or
administrative error by state or local agencies, the notation of the Bank's lien
on the certificates of title or ownership and/or possession of such certificates
with such notation will be sufficient to protect the Trust against the rights of
subsequent purchasers of a Financed Vehicle or subsequent lenders who take a
security interest in a Financed Vehicle. There exists a risk, however, in not
identifying the Trust or Trustee as the new secured party on the certificate of
title that the security interest of the Trust or the Trustee may not be
enforceable. In the event the Trust has failed to obtain or maintain a perfected
security interest in a Financed Vehicle, its security interest would be
subordinate to, among others, a bankruptcy trustee of the Obligor, a subsequent
purchaser of the Financed Vehicle or a holder of a perfected security interest.
Further, with respect to any Financed Vehicle under the laws of Utah and Idaho,
if for any reason, there was a failure to file registration and title
application papers (with respect to lien notation) with the department of motor
vehicles within 30 days after such papers were executed, subsequent purchasers
and lien or security interest claimants whose interests are perfected before the
filing of such papers, would have prior claims to the Financed Vehicles.
The Seller will warrant in the Agreement as to each Receivable conveyed by it to
the Trust that, on the Closing Date, it has a valid, subsisting, and enforceable
first priority perfected security interest in the Financed Vehicle securing the
Receivable (subject to administrative delays and clerical errors on the part of
the applicable government agency) and
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such security interest will be assigned by the Seller to the Trust or Trustee.
In the event of an uncured breach of such warranty, the Seller will be required
to repurchase such Receivable for its Purchase Amount. The repurchase obligation
will constitute the sole remedy available to the Trust or Trustee and the
Certificateholders for such breach. The Seller's warranties with respect to
perfection and enforceability of a security interest in a Financed Vehicle will
not cover statutory or other liens arising after the Closing Date by operation
of law which have priority over such security interest. Accordingly, any such
lien would not by itself give rise to a repurchase obligation on the part of the
Seller.
In the event that an Obligor moves to a state other than the state in which the
Financed Vehicle is registered, under the laws of Utah, Idaho and most states, a
perfected security interest in a motor vehicle continues for four months after
such relocation and thereafter, in most instances, until the Obligor
re-registers the motor vehicle in the new state, but in any event not beyond the
surrender of the certificate. A majority of states require surrender of a
certificate of title to reregister a motor vehicle, and many require that notice
of such surrender be given to each secured party noticed on the certificate of
title. In those states that require a secured party to take possession of a
certificate of title to perfect a security interest, the secured party would
likely learn of the re-registration through the request from the Obligor to
surrender possession of the certificate of title. In those states that require a
secured party to note its lien on a certificate of title to perfect a security
interest but do not require possession of the certificate of title, the secured
party would likely learn of the re-registration through the notice from the
state department of motor vehicles that the certificate of title had been
surrendered. The requirements that a certificate of title be surrendered and
that notices of such surrender be given to each secured party also apply to
re-registrations effected following a sale of motor vehicle. The Seller would
therefore have the opportunity to re-perfect its security interest in a Financed
Vehicle in the state of re-registration following relocation of the Obligor and
would be able to require satisfaction of the related Receivable following a sale
of the Financed Vehicle. In states that do not require a certificate of title
for registration of a motor vehicles, re-registration could defeat perfection.
In the ordinary course of servicing Motor Vehicle Loans, the Servicer takes
steps to effect re-perfection upon receipt of notice of re-registration or
information from the Obligor of a relocation. However, there is a risk that an
Obligor could relocate without notification to the Seller, then file a false
affidavit with the new state to cause a new certificate of title to be issued
without notation of the Seller's lien.
Under the laws of Utah, Idaho and many other states, certain possessory liens
for repairs performed on or storage of a motor vehicle and liens for unpaid
taxes may take priority over a perfected security interest in the motor vehicle.
The Code also grants priority to certain Federal tax liens over the lien of a
secured party. The laws of certain states and Federal law permit the
confiscation of motor vehicles under certain circumstances if used in unlawful
activities, which may result in a loss of a secured party's perfected security
interest in the confiscated motor vehicle. The Seller will warrant in the
Agreement that, as of the Closing Date, the Seller has not taken any action
which would have a material and adverse effect on the interests of the Trust and
the Certificateholders, and the Seller will be required to repurchase the
Receivable secured by the Financed Vehicle involved. This repurchase obligation
will constitute the sole remedy available to the Trust and the
Certificateholders for such breach. Any liens for repairs or taxes arising at
any time after the Closing Date during the term of a Receivable would not give
rise to a repurchase obligation on the part of the Seller.
Repossession
In the event of a default by an Obligor, the holder of a Receivable has all the
remedies of a secured party under the UCC, except where specifically limited by
other state laws or by contract. The remedies of a secured party under the UCC
include the right to repossession by means of self-help, unless such means would
constitute a breach of the peace. Self-help repossession is the method employed
by the Bank in most cases, and is accomplished simply by taking possession of
the Financed Vehicle. Generally, where the Obligor objects or raises a defense
to repossession, a court order must be obtained from the appropriate state court
and the Financed Vehicle must then be repossessed in accordance with that order.
In the event of a default by an Obligor, the laws of many jurisdictions (but not
Utah and Idaho) require that the Obligor be notified of the default and be given
a time period within which he may cure the
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default prior to repossession, except such notice need not be given in emergency
situations pursuant to an order from the appropriate state court.
Notice of Sale; Redemption Rights
The UCC and other state laws require the secured party to provide an Obligor
with reasonable notice of the date, time and place of any public sale and/or the
date after which any private sale of the collateral may be held. The Obligor
generally has the right to redeem the collateral prior to actual sale by paying
the secured party the unpaid principal balance of the obligation plus accrued
and unpaid interest and, in most cases, reasonable expenses for repossessing,
holding and preparing the collateral for disposition and arranging for its sale
plus, in some jurisdictions, reasonable attorneys' fees. In some states (but not
Utah and Idaho), the Obligor has the right, prior to actual sale, to
reinstatement of the original loan terms and to return of the collateral by
payment of delinquent installments of the unpaid balance.
Deficiency Judgments and Excess Proceeds
The proceeds of resale of Financed Vehicles generally will be applied first to
the expenses of repossession and resale and then to the satisfaction of the
indebtedness on the related Receivable. While some states impose prohibitions or
limitations on deficiency judgments if the net proceeds from resale do not cover
the full amount of the indebtedness, a deficiency judgment can be sought in
Utah, Idaho and those states that do not prohibit or limit such judgments
(assuming proper notice of sale has been given and the sale has been conducted
in a commercially reasonable manner and otherwise in compliance with applicable
UCC provisions). Any such deficiency judgment would be a personal judgment
against the Obligor for the shortfall, however, and a defaulting Obligor may
have very little capital or sources of income available following repossession.
Therefore, in many cases, it may not be useful to seek a deficiency judgment or,
if one is obtained, it may be settled at a significant discount or not paid at
all.
Occasionally, after resale of a repossessed motor vehicle and payment of all
expenses and indebtedness, there is a surplus of funds. In that case, the UCC
requires the secured party to remit the surplus to any other holder of a lien
with respect to the Financed Vehicle or, if no such lienholder exists or funds
remain after paying such other lienholders, to the Obligor.
Consumer Protection Laws
Numerous Federal and state consumer protection laws and related regulations
impose substantial and detailed requirements upon lenders and servicers involved
in consumer finance. These laws include the Truth In Lending Act, the Equal
Credit Opportunity Act, the Federal Trade Commission Act, the Fair Credit
Billing Act, the Fair Credit Reporting Act, the Fair Debt Collection Practices
Act, the Magnuson-Moss Warranty Act, the Federal Reserve Board's Regulations B,
Z, and AA, and other similar acts and regulations, state adoptions of the
National Consumer Act and of the Uniform Consumer Credit Code and other similar
laws. Also, state laws impose other restrictions on consumer transactions, may
require contract disclosures in addition to those required under Federal law and
may limit the remedies available in the event of default by an Obligor. These
requirements impose specific statutory liabilities upon creditors who fail to
comply with their provisions where applicable. In most cases, this liability
could affect the ability of an assignee, such as the Trustee, to enforce secured
loans such as the Receivables.
The FTC's holder-in-due-course rule (the "FTC Rule") has the effect of
subjecting a seller of motor vehicles (and certain related lenders and their
assignees) in a consumer credit transaction and any assignee of the seller to
all claims and defenses which the purchaser could assert against the seller.
Liability under the FTC Rule is limited to the amounts paid by the purchaser
under the contract, and the holder of the contract may also be unable to collect
any balance remaining due thereunder from the purchaser. The FTC Rule is
generally duplicated by state statutes or the common law in certain states.
Although the Bank is not a seller of motor vehicles and is not subject to the
jurisdiction of the FTC, the loan agreements evidencing the Receivables contain
provisions which contractually apply the FTC Rule. Accordingly, the Bank, and
the Trustee as holder of the Receivables, will be subject to claims or defenses,
if any, that the purchaser of a Financed Vehicle may assert against the seller
of such vehicle. In Utah and
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Idaho, such claims and defenses could also arise under state "lemon laws,"
statutes governing the sale of "salvage" vehicles, and other consumer protection
laws. Other examples of such claims include, but are not limited to, breach of
implied UCC warranties and fraud.
Under the motor vehicle dealer licensing laws of most states, sellers of motor
vehicles are required to be licensed to sell such vehicles at retail sale. In
addition, with respect to used motor vehicles, the FTC's Rule on Sale of Used
Vehicles requires that all sellers of used motor vehicles prepare, complete and
display a "Buyer's Guide" which explains the warranty coverage of such vehicles.
Federal Odometer Regulations promulgated under the Motor Vehicle Information and
Cost Savings Act require that all sellers of used motor vehicles furnish a
written statement signed by the seller certifying the accuracy of the odometer
reading. If a seller is not properly licensed or if either a Buyer's Guide or
Odometer Disclosure Statement was not properly provided to the purchaser of a
Financed Vehicle, such purchaser may be able to assert a claim against the
seller of such vehicle. Although the Bank is not a seller of motor vehicles and
is not subject to those laws, a violation thereof may form the basis for a claim
or defense against the Bank or the Trustee as holder of the Receivables.
Courts have applied general equitable principles to secured parties pursuing
repossession or litigation involving deficiency balances. These equitable
principles may have the effect of relieving an Obligor from some or all of the
legal consequences of a default.
The Seller will warrant in the Agreement as to each Receivable conveyed by it to
the Trust that such Receivable complied at the time it was originated and as of
the Closing Date in all material respects with all requirements of applicable
law. If, as of the Cutoff Date, an Obligor had a claim against the Trust for
violation of any law and such claim materially and adversely affects the Trust's
interest in a Receivable, such violation would create an obligation of the
Seller to repurchase the Receivable unless the breach was cured. This repurchase
obligation will constitute the sole remedy of the Trustee and the
Certificateholders against the Seller in respect of any such uncured breach,
except with respect to the Seller's indemnity obligations under the Agreement
with respect thereto. See "The Certificates-- Sale and Assignment of the
Receivables."
Other Limitations
In addition to the laws limiting or prohibiting deficiency judgments, numerous
other statutory provisions, including Federal bankruptcy laws and related state
laws, may interfere with or affect the ability of a lender to realize upon
collateral or enforce a deficiency judgment. For example, in a Chapter 13
proceeding under the United States Bankruptcy Code, a court may prevent a lender
from repossessing a motor vehicle and, as part of the rehabilitation plan,
reduce the amount of the secured indebtedness to the market value of such
vehicle at the time of bankruptcy (as determined by the court), leaving the
party providing financing as a general unsecured creditor for the remainder of
the indebtedness. A bankruptcy court may also reduce the monthly payments due
under a contract or change the rate of interest and time of repayment of the
indebtedness.
The Seller intends that the transfer of the Receivables under the Agreement
constitute a sale. FIRREA sets forth certain powers that the FDIC could exercise
if it were appointed as receiver for the Seller. Subject to clarification by
FDIC regulations or interpretations, it would appear from the positions taken by
the FDIC before and after the passage of FIRREA that the FDIC in its capacity as
receiver for the Seller would not interfere with the timely transfer to the
Trust of payments collected on the Receivables. To the extent that the Seller is
deemed to have granted a security interest in the Receivables to the Trust, and
that interest was validly perfected before the Seller's insolvency and was not
taken in contemplation of insolvency, that security interest should not be
subject to avoidance and payments to the Trust with respect to the Receivables
should not be subject to recovery by the FDIC as receiver. If, however, the FDIC
were to assert a contrary position, such as by requiring the Trustee to
establish its right to those payments by submitting to and completing the
administrative claims procedure established under FIRREA, delays in
distributions on the Certificates and possible reductions in the amount of those
payments could occur. Alternatively, in such circumstances, the FDIC might have
the right to repay the Certificates for an amount which may be greater or less
than the principal balance therof and which would shorten their weighted average
life.
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Federal Income Tax Consequences
The following is a summary of the material anticipated Federal income tax
consequences of the purchase, ownership, and disposition of Certificates. This
summary is based upon laws, regulations, rulings, and decisions currently in
effect, all of which are subject to change. The discussion does not deal with
all Federal tax consequences applicable to all categories of investors, some of
which may be subject to special rules. In addition, this summary is generally
limited to investors who will hold the Certificates as "capital assets"
(generally, property held for investment) within the meaning of Section 1221 of
the Internal Revenue Code of 1986, as amended (the "Code"). Consequences to
individual investors of investment in the Certificates will vary according to
circumstances; accordingly, investors should consult their own tax advisors to
determine the Federal, state, local, and other tax consequences of the purchase,
ownership, and disposition of the Certificates. Prospective investors should
note that no rulings have been or will be sought from the Internal Revenue
Service (the "IRS") with respect to any of the Federal income tax consequences
discussed below, and no assurance can be given that the IRS will not take
contrary positions.
Tax Status of the Trust
In the opinion of Kirkland & Ellis, special tax counsel to the Seller, the Trust
will be classified as a grantor trust and not as an association taxable as a
corporation for Federal income tax purposes. Accordingly, each Certificate Owner
will be subject to Federal income taxation as if it owned directly its interest
in each asset owned by the Trust and paid directly its share of reasonable
expenses paid by the Trust.
Treatment of Certificate Owners' Interest in Trust Assets
Each Certificate Owner could be considered to own either (i) an undivided
interest in a single debt obligation held by the Trust and having a principal
amount equal to the total stated principal amount of the Receivables and an
interest rate equal to the applicable Pass-Through Rate, or (ii) an interest in
each of the Receivables and in the Yield Supplement Agreement and any other
Trust Assets. The Agreement will express the intent of the Seller to sell, and
the Certificateholders to purchase, the Receivables (other than the Retained
Yield) and the Seller, the Certificateholders, and each Certificate Owner, by
accepting a beneficial interest in a Certificate, will agree to treat the
Certificates as ownership interests in the Receivables.
TREATMENT AS DEBT OBLIGATION. If a Certificate Owner were considered to own an
undivided interest in a single debt obligation, rather than reporting its share
of the interest accrued on each Receivable it would, in general, be required to
include in income interest accrued or received on the Class A Certificate
Balance or the Class B Certificate Balance, as the case may be, at the
applicable Pass-Through Rate in accordance with its usual method of accounting.
The Certificates would be subject to the original issue discount ("OID") rules,
generally in the manner discussed below with respect to Stripped Receivables.
However, in determining whether such OID is DE MINIMIS, the weighted average
life of the Certificates would be determined using a reasonable assumption
regarding anticipated prepayments (a "Prepayment Assumption"). OID includible in
income for any accrual period (generally, the period between Distribution Dates)
would generally be calculated using a Prepayment Assumption and an anticipated
yield established as of the date of initial sale of the Certificates, and would
increase or decrease to reflect prepayments at a faster or slower rate than
anticipated. The Certificates would also be subject to the market discount
provisions of the Code to the extent that a Certificate Owner purchased such
Certificates at a discount from the initial issue price (as adjusted to reflect
prior accruals of OID).
INCOME ON RECEIVABLES. The remainder of the discussion herein assumes that a
Certificate Owner will be treated as owning an interest in each Receivable (and
the proceeds thereof) and an interest in the Yield Supplement Agreement.
For Federal income tax purposes, the Seller will be treated as having retained a
fixed portion of the interest due on each Receivable having an annual percentage
rate in excess of the sum of the applicable Pass-Through Rate and the Basic
Servicing Fee Rate (each, a "Stripped Receivable") equal to the difference
between (x) the annual percentage rate of the Receivable and (y) the sum of the
applicable Pass-Through Rate and the Basic Servicing Fee Rate (the
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"Retained Yield"). The Retained Yield will be treated as "stripped coupons"
within the meaning of Section 1286 of the Code, and the Stripped Receivables
will be treated as "stripped bonds." Accordingly, each Certificate Owner will be
treated as owning its PRO RATA percentage interest in (i) payments received
under the Yield Supplement Agreement, and (ii) the principal of, and interest
payable on, each Receivable (minus the Retained Yield on the Stripped
Receivables).
Those Receivables that bear interest at a rate which is less than or equal to
the sum of the applicable Pass-Through Rate and the Basic Servicing Fee Rate
(the "Supplemented Receivables") will not be treated as Stripped Receivables.
Instead, Yield Supplement Amounts will be payable to eliminate the difference
between the actual yield on each Supplemented Receivable and the yield such
Receivable would have had if its interest rate had equaled the sum of the
applicable Pass-Through Rate and the Basic Servicing Fee Rate. See "--Yield
Supplement Amounts."
Each Certificate Owner would be required to report on its Federal income tax
return its share of the gross income of the Trust, including interest and
certain other charges accrued on the Receivables and any gain upon collection or
disposition of the Receivables (but not including any portion of the Retained
Yield). Such gross income attributable to interest on the Receivables would
exceed the Class A Pass-Through Rate by an amount equal to the Class A
Certificate Owner's share of the expenses of the Trust for the period during
which it owns a Class A Certificate. The Class A Certificate Owner would be
entitled to deduct its share of expenses of the Trust to the extent described
below. Any amounts received by a Class A Certificate Owner from the Reserve
Account or from the subordination of the Class B Certificates will be treated
for Federal income tax purposes as having the same characteristics as the
payments they replace.
A Class A Certificate Owner would report its share of the income of the Trust
including interest and certain other charges accrued on the Receivables, OID and
market discount, payments received under the Yield Supplement Agreement (to the
extent treated as income) and investment earnings on funds held pending
distribution, under its usual method of accounting. Accordingly, interest,
excluding OID or market discount, would be includible in a Certificate Owner's
gross income when it accrues on the Receivables, or, in the case of Certificate
Owners who are cash basis taxpayers, when received by the Servicer on behalf of
Certificate Owners. Because (i) interest accrues on the Receivables over
differing monthly periods and is paid in arrears and (ii) interest collected on
a Receivable generally is paid to Certificateholders in the following month, the
amount of interest accruing to a Certificate Owner during any calendar month
will not equal the interest distributed in that month. The actual amount of
discount on a Receivable would be includible in income as principal payments are
received on the Receivables.
For administrative convenience, the Servicer intends to report the total amount
of income with respect to the Class A Certificates on an aggregate basis (as
though all of the Receivables and the Yield Supplement Agreement were a single
obligation), rather than on an asset-by-asset basis. The amount and, in some
instances, character, of the income reported to a Certificate Owner may differ
under this method for a particular period from that which would be reported if
income were reported on a precise asset-by-asset basis. Accordingly, the IRS
could require that a Certificate Owner calculate its income either (i) on an
asset-by-asset basis, accounting separately for each Receivable and the Yield
Supplement Agreement, or (ii) aggregating all Stripped Receivables under the
aggregation rule described below and accounting for the remaining Receivables
and the Yield Supplement Agreement on an asset-by-asset basis. See "--Discount
and Premium --Original Issue Discount on Stripped Receivables." In computing its
income on an asset-by-asset basis, a Certificate Owner would allocate its tax
basis among the Receivables and its interest in the Yield Supplement Agreement
in proportion to their fair market values. Because the annual percentage rates
of the Receivables vary widely, the allocation of basis and computation of
income on an asset-by-asset basis could have a more significant effect on the
income of a Certificate Owner than it would if the Receivables had more uniform
characteristics.
The remainder of the disclosure generally describes the Code provisions
governing reporting of income on the Receivables and the Yield Supplement
Agreement on a separate asset basis.
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Discount and Premium
In determining whether a Certificate Owner has purchased its interest in the
Receivables (or any Receivable) at a discount and whether such Receivables (or
any Receivable) have OID or, in the case of Supplemented Receivables, market
discount, a portion of the purchase price of a Certificate should be allocated
to the Certificate Owner's undivided interest in accrued but unpaid interest,
amounts collected at the time of purchase but not distributed, and rights to
receive Yield Supplement Amounts. As a result, the portion of the purchase price
allocable to a Certificate Owner's undivided interest in the Receivables (or any
Receivable) (the "Purchase Price") will be decreased and the potential OID
and/or market discount on the Receivables (or any Receivable) could be
increased.
ORIGINAL ISSUE DISCOUNT ON STRIPPED RECEIVABLES. Because the Stripped
Receivables represent stripped bonds, they will be subject to the OID rules of
the Code. Accordingly, the tax treatment of a Certificate Owner will depend in
part upon whether the amount of OID on a Stripped Receivable is less than a
statutorily defined DE MINIMIS amount.
In general, under Treasury Regulations issued under Section 1286 of the Code
(the "Section 1286 Regulations"), the amount of OID on a receivable treated as a
"stripped bond" will be DE MINIMIS if it is less than 1/4 of one percent for
each full year of weighted average life remaining after the purchase date until
the maturity of the Receivable, although it is not clear whether expected
prepayments are taken into account. Under the Section 1286 Regulations, it
appears that the portion of the interest on each Receivable payable to the
Certificate Owners may be treated as "qualified stated interest." As a result,
the amount of OID on a Stripped Receivable will equal the amount by which the
Purchase Price of a Stripped Receivable is less than the portion of the
remaining principal balance of the Receivable allocable to the interest
acquired.
If the amount of OID is DE MINIMIS under the rule set forth above, a Stripped
Receivable would not be treated as having OID. The actual amount of discount on
a Stripped Receivable would be includible in income as principal payments are
received on the Receivable, in the proportion that each principal payment bears
to the total principal amount of the Receivable.
If the OID on a Receivable is not treated as being DE MINIMIS, in addition to
the amounts described above, a Certificate Owner will be required to include in
income any OID as it accrues on a daily basis, regardless of when cash payments
are received, using a method reflecting a constant yield on the Receivable (or
Receivables). It is possible that the IRS could require use of a prepayment
assumption in computing the yield of a Receivable. Accrued OID would increase a
Class A Certificate Owner's tax basis in the Class A Certificate (and the
applicable Receivables). Distributions of principal and other items attributable
to accrued OID (other than payments of interest on the Receivables at the sum of
the Class A Pass-Through Rate and the Basic Servicing Fee Rate) would reduce a
Class A Certificate Owner's tax basis. If a Receivable is deemed to be acquired
by a Certificate Owner at a significant discount, such treatment could
accelerate the accrual of income by a Certificate Owner.
The Trustee intends to account for OID, if any, reportable by Certificateholders
by reference to the price paid for a Certificate by an initial purchaser,
although the amount of OID will differ for subsequent purchasers. Such
subsequent purchasers should consult their tax advisers regarding the proper
calculation of OID on the interest in Receivables represented by a Certificate.
The Trustee will calculate OID, if any, on all of the Receivables (including
both Stripped Receivables and Supplemented Receivables) on an aggregate basis
and without the use of a prepayment assumption. Regulations issued under the OID
provisions of the Code (the "OID Regulations") suggest that all payments on the
Stripped Receivables allocable to the Certificates may be aggregated in
determining whether the Stripped Receivables will be treated as having OID,
although the regulation does not include the Supplemented Receivables, since
they are not "stripped bonds." Separate accounting for the Stripped Receivables
and the Receivables that are not stripped would reduce the possibility that the
Stripped Receivables would be treated as issued with OID; however, as discussed
below, the Supplemented Receivables would be treated as having imputed interest,
market discount, or both. In addition, it is not clear whether use of a
prepayment assumption is required in computing OID. If the IRS were to require
that OID be computed on a Receivable-by-Receivable basis, or that a prepayment
assumption be used, the character and
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timing of a Certificate Owner's income could be adversely affected. Because
under the stripped bond rules, each sale of a Certificate results in a
recalculation of OID, a Certificate Owner technically will not be subject to the
market discount provisions of the Code with respect to Stripped Receivables.
In the event that a Receivable is treated as purchased at a premium (I.E., its
Purchase Price exceeds the portion of the remaining principal balance of such
Receivable allocable to the Certificate Owner), such premium will be amortizable
by the Certificate Owner as an offset to interest income (with a corresponding
reduction in the Certificate Owner's basis) under a constant yield method over
the term of the Receivable if an election under Section 171 of the Code is made
with respect to the interests in the Receivables represented by the Certificates
or was previously in effect. Any such election will also apply to all debt
instruments held by the Certificate Owner during the year in which the election
is made and all debt instruments acquired thereafter.
A Certificate Owner will be entitled to deduct, consistent with its method of
accounting, its PRO RATA share of reasonable servicing fees and other fees paid
or incurred by the Trust as provided in Section 163 or 212 of the Code. If a
Certificate Owner is an individual, estate or trust, the deduction for such
holder's share of such fees will be allowed only to the extent that all of such
holder's miscellaneous itemized deductions, including such holder's share of
such fees, exceed 2% of such holder's adjusted gross income. In addition, in the
case of Certificate Owners who are individuals, certain otherwise allowable
itemized deductions will be reduced, but not by more than 80%, by an amount
equal to 3% of such holder's adjusted gross income in excess of a statutorily
defined threshold ($121,200 in the case of a married couple filing jointly for
the taxable year beginning in 1997). Because the Servicer will not report to
Certificate Owners the amount of income or deductions attributable to interest
earned on Collections, such a holder may effectively underreport its net taxable
income.
SUPPLEMENTED RECEIVABLES. The Supplemented Receivables will not be treated as
stripped bonds. A portion of the Certificate Owner's purchase price for a
Certificate would be allocated to each Supplemented Receivable, based on its
fair market values relative to the other assets of the Trust.
Some or all of the Supplemented Receivables may have imputed interest and/or
market discount. If, as is likely, a Supplemented Receivable did not have
"adequate stated interest" (as defined in the Code) when originated, then such
Receivable has "imputed interest." Under the imputed interest rules of the Code,
the "total unstated interest" on any Receivable as of its origination would
equal the excess of (a) the sum of all principal payments due more than six
months after such Receivable's date of origination over (b) the sum of the
discounted present values of such principal payments and all interest payments
due under such Receivable. The discount rate to be used in computing the present
values is the "applicable federal rate" for the period during which the
Receivable was originated. A portion of the Receivable's stated principal amount
equal to such total unstated interest would be recharacterized as interest, and
the Receivable's principal amount would be correspondingly reduced, thus
increasing the total amount of income to be realized with respect to the
Receivable. The total unstated interest would be included in gross income over
the term of the Receivable using a constant yield-to-maturity method. It is not
clear whether imputed interest may be reduced to the extent that a Receivable
having imputed interest is subsequently sold for a price in excess of the
imputed principal amount. It would appear reasonable to reduce the amount of
imputed interest to the extent that such a purchase price reflects a movement of
market interest rates since the origination of the Receivable.
To the extent that the portion of the purchase price allocated to a Certificate
Owner's undivided interest in a Supplemented Receivable is less than the "stated
redemption price at maturity" (or possibly the imputed principal amount, in the
case of a Receivable with imputed interest) such Receivable will have market
discount. The allocation of a portion of the purchase price of a Certificate to
the rights to payments under the Yield Supplement Agreement, accrued interest
and/or amounts collected and undistributed as of the date such Certificate was
purchased may cause or increase the amount of market discount.
It is not clear whether the stated redemption price at maturity should be
determined by excluding imputed interest under Section 483 of the Code, thereby
avoiding duplicative amounts of market discount and imputed interest or whether
the imputed interest is also recharacterized as market discount.
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In general, under the market discount provisions of the Code, principal payments
received by the Trust and all or a portion of the gain recognized upon a sale or
other disposition of a Receivable or upon the sale or other disposition of a
Certificate by a Certificate Owner will be treated as ordinary income to the
extent of accrued market discount. Any payment received by a Certificate Owner
upon a sale or other disposition of a Certificate in an amount in excess of
accrued market discount will be treated as capital gain, assuming the
Certificate Owner held such Certificate as a capital asset. In addition, a
portion of the interest deductions of the Certificate Owner attributable to any
indebtedness treated as incurred or continued to purchase or carry a Receivable
may have to be deferred, unless a Certificate Owner makes an election to include
market discount in income currently as it accrues, which election would apply to
all debt instruments acquired by the taxpayer on or after the first day of the
first taxable year to which such election applies. Taxpayers may, in general,
elect to accrue market discount either (i) under a constant yield-to-maturity
method or (ii) in the proportion that the stated interest paid on the obligation
for the current period bears to the total remaining interest on the obligation.
The manner in which the imputed interest rules interact with the market discount
rules is unclear. The effect of a discount sale of a debt instrument that did
not have adequate stated interest when originated may be to create overlapping
amounts of imputed interest and market discount. It is unclear whether a
purchaser of a debt instrument, such as a Supplemented Receivable, which has
imputed interest and market discount should continue to report the imputed
interest using the rules of Section 483 of the Code and the regulations
thereunder (with a corresponding reduction in the amount of market discount) or
whether all or a portion of such imputed interest is instead converted into
market discount.
Class B Certificate Owners
IN GENERAL. Except as described below, it is believed that the Class B
Certificate Owners will be subject to tax in the same manner as Class A
Certificate Owners. However, no Federal income tax authorities address the
precise method of taxation of an instrument such as the Class B Certificates. In
the absence of applicable authorities, the Trustee intends to report income to
Class B Certificate Owners in the manner described below.
Each Class B Certificate Owner will be treated as owning (i) the Class B
Percentage of the principal on each Receivable plus (ii) a proportionate portion
of the interest on each Receivable (not including the Retained Yield). Income
will be reported to a Class B Certificate Owner based on the assumption that all
amounts payable to the Class B Certificate Owners are taxable under the coupon
stripping provisions of the Code and treated as a single obligation. In applying
those provisions, the Trustee will take the position that a Class B Certificate
Owner's entire share of the interest on a Receivable will qualify as "qualified
stated interest." Thus, except to the extent modified by the effects of
subordination of the Class B Certificates, as described below, income will be
reported to Class B Certificate Owners in the manner described above for the
Class A Certificate Owners.
EFFECT OF SUBORDINATION. If the Class B Certificate Owners received
distributions of less than their share of the Trust's receipts of principal or
interest (the "Shortfall Amount") because of the subordination of the Class B
Certificates, Class B Certificate Owners would probably be treated for Federal
income tax purposes as if they had (1) received as distributions their full
share of such receipts, (2) paid over to the Class A Certificate Owners an
amount equal to such Shortfall Amount, and (3) retained the right to
reimbursement of such amounts to the extent of future Collections otherwise
available for deposit in the Reserve Account.
Under this analysis, (1) Class B Certificate Owners would be required to accrue
as current income any interest or OID income of the Trust that was a component
of the Shortfall Amount, even though such amount was in fact paid to the Class A
Certificate Owners, (2) a loss would only be allowed to the Class B Certificate
Owners when their right to receive reimbursement of such Shortfall Amount became
worthless (I.E., when it becomes clear that the amount will not be available
from any source to reimburse such loss), and (3) reimbursement of such Shortfall
Amount prior to such a claim of worthlessness would not be taxable income to
Class B Certificate Owners because such amount was previously included in
income. Those results should not significantly affect the inclusion of income
for Class B Certificate Owners on the accrual method of accounting, but could
accelerate inclusion of income to
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Class B Certificate Owners on the cash method of accounting by, in effect,
placing them on the accrual method. Moreover, the character and timing of loss
deductions is unclear.
Yield Supplement Amounts
The proper Federal income tax characterization of the Yield Supplement Amounts
is not clear. Moreover, the sum of the income and deductions properly reportable
by a Certificate Owner in any taxable year may not equal the amounts that would
be reportable if a Certificate Owner held instead of an interest in the
Receivables and in the Yield Supplement Agreement either (i) a debt instrument
bearing interest at the applicable Pass-Through Rate or (ii) an interest in a
trust holding Receivables each of which bears interest at a rate at least equal
to the sum of the Pass-Through Rate plus the Basic Servicing Fee Rate.
It is likely that the right to receive Yield Supplement Amounts will be treated
as a separate asset purchased by each Certificate Owner, in which case a portion
of each Certificate Owner's purchase price or other tax basis in the Certificate
equal to the fair market value of the right to receive Yield Supplement Amounts
should be allocated to the right to receive payments of Yield Supplement
Amounts. See "--Discount and Premium--Original Issue Discount on Stripped
Receivables." The right to receive Yield Supplement Amounts may be treated as a
loan made by a Certificate Owner to the Seller in an amount equal to the present
value, discounted at a rate equal to the sum of the applicable Pass-Through Rate
and the Servicing Fee Rate, of the projected Yield Supplement Amounts. In that
event, a portion of the Yield Supplement Amounts generally representing a yield
equal to the applicable Pass-Through Rate plus the Basic Servicing Fee Rate on
such discounted value should be treated as interest includible in income as
accrued or received, and the remainder should be treated as a return of the
principal amount of the deemed loan. Alternatively, it is possible that the
entire amount of each Yield Supplement Amount should be included in income as
accrued or received, in which event a Certificate Owner should also be entitled
to amortize the portion of its purchase price allocable to its right to receive
Yield Supplement Amounts. The method of calculating such amortization is
unclear, and could result in the inclusion of greater amounts of income than a
Certificate Owner's actual yield on a Receivable.
Alternatively, it is possible that the Yield Supplement Amounts could be treated
as payments adjusting the purchase price of the Supplemented Receivables, rather
than as a separate asset. In that event, a Certificate Owner could be treated as
having purchased each Supplemented Receivable at a discount (which may consist
of imputed interest, market discount, or both) that, combined with the actual
coupon rate of such Receivable, produces a yield equal to the sum of the
applicable Pass-Through Rate and the Basic Servicing Fee Rate. See "--Discount
and Premium."
It is not clear whether, and to what extent, the amounts includible in income or
amortizable under any of these methods would be adjusted to take account of
prepayments on the Receivables. Moreover, it is possible that the IRS might
contend that none of the above methods is appropriate, and that income with
respect to the Yield Supplement Agreement should be reported by a Certificate
Owner in some other manner. In addition, to the extent that the amounts payable
pursuant to the Yield Supplement Agreement decline during any period by reason
of prepayments on the related Receivables, it is possible that a portion of the
amount amortizable by the Certificate Owner during such period would be treated
as a capital loss (which would not offset ordinary income), rather than as an
ordinary deduction. It is expected that the annual statement furnished to
Certificateholders will report the net income derived from the Yield Supplement
Agreement using a method that causes the total income attributable to a
Certificate to equal income at the applicable Pass-Through Rate on the Class A
Percentage or Class B Percentage of the Pool Balance. Certificate Owners are
advised to consult their tax advisors regarding the appropriate method of
accounting for income attributable to the Yield Supplement Agreement.
Sale of a Certificate
If a Certificate is sold, gain or loss will be recognized equal to the
difference between the amount realized on the sale and the Certificate Owner's
adjusted basis in the Receivables and any other assets held by the Trust. A
Certificate Owner's adjusted basis will equal the Certificate Owner's cost for
the Certificate, increased by any discount previously included in income, and
decreased by any deduction previously allowed for accrued premium and by the
amount of
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principal payments previously received on the Receivables. Any gain or loss not
attributable to accrued interest will be capital gain or loss if the Certificate
was held as a capital asset.
Foreign Certificate Owners
Interest attributable to Receivables which is payable to a foreign Certificate
Owner will generally not be subject to the normal 30% withholding tax imposed
with respect to such payments, PROVIDED that such Certificate Owner is not
engaged in a trade or business in the United States and that such Certificate
Owner fulfills certain certification requirements. Under such certification
requirements, the Certificate Owner must certify, under penalties of perjury,
that it is not a "United States person" and it is the beneficial owner of the
Certificates, and must provide its name and address. For this purpose, "United
States person" means a citizen or resident of the United States, a corporation,
partnership, or other entity created or organized in or under the laws of the
United States or any political subdivision thereof, or an estate or trust the
income of which is includible in gross income for United States Federal income
tax purposes, regardless of its source.
It is not clear whether amounts received by Certificate Owners that are
attributable to payments of Yield Supplement Amounts received on the Yield
Supplement Agreement would be subject to withholding tax. Accordingly, a
prospective investor in Certificates who is not a United States person should
assume that tax will be withheld from such payments at a rate of 30% (or such
lower rate as may be provided in an applicable tax treaty). As a result, a
Certificate may not be a suitable investment for a non-United States person.
Backup Withholding
Payments made on the Certificates and proceeds from the sale of Certificates
will not be subject to a "backup" withholding tax of 31% unless, in general, the
Certificate Owner fails to comply with certain reporting procedures and is not
an exempt recipient under applicable provisions of the Code.
ERISA Considerations
The Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and
the Code impose certain requirements on employee benefit plans and certain other
retirement plans and arrangements, including individual retirement accounts and
annuities, Keogh plans and collective investment funds and separate accounts in
which such plans, accounts or arrangements are invested that are subject to
ERISA and the Code (all of which are hereinafter referred to as a "Plan") and on
persons who are fiduciaries with respect to such Plans. Moreover, based on the
reasoning of the United States Supreme Court in JOHN HANCOCK LIFE INS. CO. V.
HARRIS TRUST AND SAV. BANK, 510 U.S. 86 (1993), an insurance company's general
account may be deemed to include assets of the Plans investing in the general
account (E.G., through the purchase of an annuity contract), and the insurance
company might be treated as a fiduciary with respect to such plans by virtue of
such investment. In accordance with ERISA's general fiduciary standards, before
investing in a Certificate, a Plan fiduciary should determine whether such an
investment is permitted under the governing Plan instruments and is appropriate
for the Plan in view of its overall investment policy and the composition and
diversification of its portfolio. Other provisions of ERISA and the Code
prohibit certain transactions involving the assets of a Plan and persons who
have certain specified relationships to the Plan ("parties in interest" within
the meaning of ERISA or "disqualified persons" within the meaning of the Code).
Thus, a Plan fiduciary considering an investment in Certificates should also
consider whether such an investment might constitute or give rise to a
prohibited transaction under ERISA or the Code.
An investment in Certificates by a Plan might result in the assets of the Trust
being deemed to constitute Plan assets, which in turn might mean that certain
aspects of such investment, including the operation of the Trust, might be
prohibited transactions under ERISA and the Code. There may also be an improper
delegation of the responsibility to manage Plan assets if Plans that purchase
the Certificates are deemed to own an interest in the underlying assets of the
Trust. Neither ERISA nor the Code defines the term "plan assets." Under Section
2510.3-101 of the United States Department of Labor ("DOL") regulations (the
"Regulation"), a Plan's assets may include an interest in the
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underlying assets of an entity (such as a trust) for certain purposes, including
the prohibited transaction provisions of ERISA and the Code, if the Plan
acquires an "equity interest" in such entity.
The DOL has issued an individual exemption, Prohibited Transaction Exemption
90-23, to J.P. Morgan Securities Inc. (the "Exemption"). The Exemption generally
exempts from the application of the prohibited transaction provisions of Section
406 of ERISA and the excise taxes imposed on such prohibited transactions
pursuant to Section 4975(a) and (b) of the Code and Section 502(i) of ERISA
certain transactions relating to the initial purchase, holding and subsequent
resale by Plans of certificates in pass-through trusts that consist of certain
receivables, loans and other obligations that meet the conditions and
requirements set forth in the Exemption. The receivables covered by the
Exemption include motor vehicle installment obligations such as the Receivables.
The Exemption will apply to the acquisition, holding and resale of the Class A
Certificates by a Plan from J.P. Morgan Securities Inc., provided that specified
conditions (certain of which are described below) are met. The Seller believes
that the Exemption will apply to the acquisition and holding of the Class A
Certificates by a Plan and that all conditions of the Exemption other than those
within the control of the investors have been or will be met.
The Exemption sets forth six general conditions that must be satisfied for a
transaction involving the acquisition of the Class A Certificates by a Plan to
be eligible for the exemptive relief thereunder:
(1) the acquisition of the Class A Certificates by a Plan is on terms
(including the price for the Class A Certificates) that are at least as
favorable to the Plan as they would be in an arm's-length transaction with
an unrelated party;
(2) the rights and interests evidenced by the Class A Certificates acquired
by a Plan are not subordinated to the rights and interests evidenced by
other certificates of the Trust;
(3) the Class A Certificates acquired by the Plan have received a rating at
the time of such acquisition that is in one of the three highest generic
rating categories from any one of four rating entities, including S&P and
Moody's;
(4) the Trustee is not an affiliate of any other member of the "Restricted
Group," which consists of the Underwriters, the Seller, the Trustee and any
Obligor with respect to the Receivables included in the Trust constituting
more than 5% of the aggregate unamortized principal balance of the assets of
the Trust as of the date of initial issuance of the Class A Certificates,
and any affiliate of such parties;
(5) the sum of all payments made to and retained by J.P. Morgan Securities
Inc. in connection with the distribution or placement of the Class A
Certificates represents not more than reasonable compensation for
underwriting or placing the Class A Certificates. The sum of all payments
made to and retained by the Seller pursuant to the sale of the Receivables
to the Trust represents not more than the fair market value of such
Receivables. The sum of all payments made to and retained by the Servicer
represents not more than reasonable compensation for the Servicer's services
under the Agreement and reimbursement of the Servicer's reasonable expenses
in connection therewith; and
(6) the Plan investing in the Class A Certificates must be an "accredited
investor" as defined in Rule 501(a)(1) of Regulation D of the Commission
under the Securities Act.
Because the rights and interests evidenced by the Class A Certificates acquired
by a Plan are not subordinated to the rights and interests evidenced by other
certificates of the Trust, the second general condition set forth above is
satisfied. It is a condition of the issuance of the Class A Certificates that
they be rated in the highest rating category by any one of the rating entities,
including S&P and Moody's. A fiduciary of a Plan contemplating purchasing a
Class A Certificate must make its own determination that at the time of such
acquisition, the Class A Certificates continue to satisfy the third general
condition set forth above. The Seller and the Servicer expect that the fourth
general condition set forth above will be satisfied with respect to the Class A
Certificates. A fiduciary of a Plan contemplating purchasing a Class A
Certificate must make its own determination that the first, fifth and sixth
general conditions set forth above will be satisfied with respect to the Class A
Certificates.
In addition the Trust must satisfy the following requirements:
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(a) the corpus of the Trust must consist solely of assets of the type which
have been included in other investment pools,
(b) certificates in such other investment pools must have been rated in one
of the three highest generic rating categories of S&P, Moody's, Duff &
Phelps Credit Rating Co. or Fitch Investors Service, Inc. for at least one
year prior to the Plan's acquisition of Class A Certificates, and
(c) certificates evidencing interests in such other investments pools must
have been purchased by investors other than Plans for at least one year
prior to any Plan's acquisition of Class A Certificates.
If the general conditions of the Exemption are satisfied, the Exemption may
provide relief from the restrictions imposed by Section 406(a) and 407(a) of
ERISA as well as the excise taxes imposed by Section 4975(a) and (b) of the Code
by reason of Section 4975(c)(1)(A) through (D) of the Code, in connection with
the direct or indirect sale, exchange, transfer or holding of the Class A
Certificates by a Plan. However, no exemption is provided from the restrictions
of Sections 406(a)(1)(E), 406(a)(2) and 407 of ERISA for the acquisition or
holding of a Class A Certificate on behalf of an Excluded Plan by any person who
has discretionary authority or renders investment advice with respect to the
assets of such Excluded Plan. For purposes of the Class A Certificates, an
"Excluded Plan" is a Plan sponsored by any member of the Restricted Group.
If certain specific conditions of the Exemption are also satisfied, the
Exemption may provide relief from the restrictions imposed by Sections 406(b)(1)
and (b)(2) and 407(a) of ERISA and the taxes imposed by Section 4975(a) and (b)
of the Code by reason of Section 4975(c)(1)(E) of the Code in connection with
the direct or indirect sale, exchange, transfer or holding of Class A
Certificates in the initial issuance of Class A Certificates between the Seller
or J.P. Morgan Securities Inc. and a Plan other than an Excluded Plan when the
person who has discretionary authority or renders investment advice with respect
to the investment of Plan assets in the Class A Certificates is (a) an Obligor
with respect to 5% or less of the fair market value of the Receivables or (b) an
affiliate of such person.
The Exemption also applies to transactions in connection with the servicing,
management and operation of the Trust, provided that, in addition to the general
requirements described above, (a) such transactions are carried out in
accordance with the terms of a binding pooling and servicing agreement and (b)
the pooling and servicing agreement is provided to, or described in all material
respects in the prospectus provided to, investing Plans before their purchase of
Class A Certificates issued by the Trust. The Agreement is a pooling and
servicing agreement as defined in the Exemption. All transactions relating to
the servicing, management and operations of the Trust will be carried out in
accordance with the Agreement. See "The Certificates."
The Exemption also may provide relief from the restriction imposed by Sections
406(a) and 407(a) of ERISA and the taxes imposed by Section 4975(c)(1)(A)
through (D) of the Code if such restrictions are deemed to otherwise apply
merely because a person is deemed to be a party in interest or a disqualified
person with respect to an investing Plan by virtue of providing services to a
Plan (or by virtue of having certain specified relationships to such a person)
solely as a result of such Plan's ownership of Class A Certificates.
Any Plan fiduciary considering whether to purchase a Class A Certificate on
behalf of a Plan should consult with its counsel regarding the applicability of
the Exemption and other applicable issues and whether the Class A Certificates
are an appropriate investment for a Plan under ERISA and the Code.
Because the Class B Certificates are subordinate interests, the Exemption will
not be available for Class B Certificates. Accordingly, no Plan will be eligible
to purchase or otherwise hold Class B Certificates and no beneficial interest
therein may be sold or otherwise transferred to a Plan.
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Underwriting
Subject to the terms and conditions set forth in the underwriting agreement
relating to the Certificates (the "Underwriting Agreement"), the Seller has
agreed to sell to J.P. Morgan Securities Inc. and First Chicago Capital Markets,
Inc. (the "Underwriters"), and the Underwriters have agreed to purchase, the
principal amount of the Class A Certificates and the Class B Certificates set
forth opposite their names:
<TABLE>
<CAPTION>
Principal Amount Principal Amount
of Class A of Class B
Underwriters Certificates Certificates
- ------------------------------------------------------------------------ ------------------- -------------------
<S> <C> <C>
J.P. Morgan Securities Inc.............................................. $ $
First Chicago Capital Markets, Inc......................................
------- -------
Total............................................................... $ $
------- -------
------- -------
</TABLE>
In addition, the Capital Markets Division of First Security Bank, N.A., as
selling agent, will directly offer $ aggregate principal amount of the
Class A Certificates and $ aggregate principle amount of the Class B
Certificates.
The Underwriting Agreement provides that the obligations of the Underwriters are
subject to certain conditions precedent and that the Underwriters will be
obligated to purchase all the Certificates offered hereby if any of the
Certificates are purchased. The Seller has been advised by the Underwriters that
the Underwriters propose initially to offer the Certificates to the public at
the prices set forth herein and to certain dealers at such prices less a
concession not in excess of % of the Class A Certificate denominations or %
of the Class B Certificate denominations, and that the Underwriters may allow,
and such dealers may reallow, a discount not in excess of % of the Class A
Certificate denominations or % of the Class B Certificate denominations to
certain other dealers. After the initial public offering, the public offering
price, concessions, and discounts to dealers may be changed by the Underwriters.
In addition, the Seller has an arrangement with the Capital Markets Division of
First Security Bank, N.A. under which it may act as a selling agent for the
Class A Certificates and Class B Certificates at the same prices, concessions
and discounts to dealers applicable to the Underwriters.
The Seller has agreed to indemnify the Underwriters against certain civil
liabilities, including liabilities under the Securities Act, or to contribute to
payments which the Underwriters may be required to make in respect thereof. The
Seller has also agreed to reimburse the Underwriters for certain of their
expenses.
In the ordinary course of its business, the Underwriters and their affiliates
have engaged and may engage in investment banking and/or commercial banking
transaction with the Seller and its affiliates.
Legal Matters
Certain legal matters will be passed upon for the Seller by Ray, Quinney &
Nebeker, Salt Lake City, Utah and for the Underwriters by Kirkland & Ellis.
Certain federal income tax and other matters will be passed upon for the Seller
by Kirkland & Ellis. Certain state tax and other matters will be passed upon for
the Seller by Moffatt, Thomas, Barrett, Rock & Fields. Alonzo W. Watson, a
shareholder and director of Ray, Quinney & Nebeker, is also an officer of First
Security Corporation. A daughter of the chief executive officer of First
Security Corporation is a shareholder and director of Ray, Quinney & Nebeker.
54
<PAGE>
Index of Principal Terms
<TABLE>
<S> <C>
Accounts............................................................................ 26
Advance............................................................................. 6
Advances............................................................................ 29
Aggregate Net losses................................................................ 30
Agreement........................................................................... 1, 4
Available Interest.................................................................. 32
Available Principal................................................................. 32
Available Reserve Amount............................................................ 30
Average Delinquency Ratio........................................................... 30
Average Net Loss Ratio.............................................................. 30
Bank................................................................................ 1, 4
Basic Servicing Fee................................................................. 6, 31
Basic Servicing Fee Rate............................................................ 6
Cede................................................................................ 5
Certificate Account................................................................. 26
Certificate Owner................................................................... 5
Certificateholders.................................................................. 5
Certificates........................................................................ 1, 4
Class A Certificate Balance......................................................... 33
Class A Certificateholders.......................................................... 5
Class A Certificates................................................................ 1, 4
Class A Distribution Account........................................................ 26
Class A Interest Carryover Shortfall................................................ 33
Class A Interest Distribution....................................................... 33
Class A Monthly Interest............................................................ 33
Class A Monthly Principal........................................................... 33
Class A Pass-Through Rate........................................................... 5
Class A Percentage.................................................................. 22
Class A Pool Factor................................................................. 21
Class A Principal Carryover Shortfall............................................... 33
Class A Principal Distribution...................................................... 33
Class B Certificate Balance......................................................... 34
Class B Certificateholders.......................................................... 5
Class B Certificates................................................................ 1, 4
Class B Distribution Account........................................................ 26
Class B Interest Carryover Shortfall................................................ 34
Class B Interest Distribution....................................................... 34
Class B Monthly Interest............................................................ 34
Class B Monthly Principal........................................................... 34
Class B Pass-Through Rate........................................................... 5
Class B Percentage.................................................................. 22
Class B Pool Factor................................................................. 21
Class B Principal Carryover Shortfall............................................... 34
Class B Principal Distribution...................................................... 34
Closing Date........................................................................ 21
Code................................................................................ 44
Collateral Agent.................................................................... 7, 8
</TABLE>
55
<PAGE>
<TABLE>
<S> <C>
Collection Period................................................................... 5
Collections......................................................................... 32
Commission.......................................................................... 3
Contract Rate....................................................................... 18
Credit Deferral..................................................................... 26
Cutoff Date......................................................................... 1, 4
Dealer Agreements................................................................... 4
Dealers............................................................................. 4
Defaulted Receivable................................................................ 30
Definitive Certificates............................................................. 23, 38
Delinquency Ratio................................................................... 31
Deposit Date........................................................................ 7
Determination Date.................................................................. 31
Direct Participants................................................................. 23
Direct Recourse..................................................................... 16
Distribution Date................................................................... 1, 5
DOL................................................................................. 51
DTC................................................................................. 1, 5
Eligible Bank....................................................................... 26
Eligible Deposit Account............................................................ 26
Eligible Investments................................................................ 27
Eligible Servicer................................................................... 37
ERISA............................................................................... 50
Events of Servicing Termination..................................................... 37
Exchange Act........................................................................ 3
Excluded Plan....................................................................... 52
Exemption........................................................................... 51
FDIC................................................................................ 10, 26
Final Scheduled Distribution Date................................................... 1
Financed Vehicles................................................................... 4
FIRREA.............................................................................. 10
FTC Rule............................................................................ 43
Holders............................................................................. 24
Indirect Participants............................................................... 23
Interest Collections................................................................ 32
IRS................................................................................. 44
Liquidation Proceeds................................................................ 31
Moody's............................................................................. 26
Motor Vehicle Loans................................................................. 15
Net Loss Ratio...................................................................... 31
Obligor............................................................................. 4
OID................................................................................. 44
OID Regulations..................................................................... 47
Optional Payment Deferral........................................................... 26
Original Certificate Balance........................................................ 4
Original Class A Certificate Balance................................................ 4
Original Class B Certificate Balance................................................ 4
Original Pool Balance............................................................... 5
Outstanding Advances................................................................ 7
Pass-Through Rates.................................................................. 5
Plan................................................................................ 50
</TABLE>
56
<PAGE>
<TABLE>
<S> <C>
Pool Balance........................................................................ 4
Prepayment Assumption............................................................... 45
Purchase Amount..................................................................... 26
Purchase Price...................................................................... 46
Purchased Receivable................................................................ 32
Rating Agency....................................................................... 9
Realized Losses..................................................................... 34
Receivable File..................................................................... 25
Receivables......................................................................... 1, 4
Record Date......................................................................... 5
Recoveries.......................................................................... 31
Regulation.......................................................................... 51
Reserve Account..................................................................... 7
Reserve Account Initial Deposit..................................................... 7
Restricted Group.................................................................... 51
Retained Yield...................................................................... 45
Rules............................................................................... 23
S&P................................................................................. 26
Schedule of Receivables............................................................. 24
Section 1286 Regulations............................................................ 46
Securities Act...................................................................... 3
Seller.............................................................................. 1, 4
Servicer............................................................................ 1, 4
Servicer's Certificate.............................................................. 31
Shortfall Amount.................................................................... 13, 48
Simple Interest..................................................................... 20
Simple Interest Receivable.......................................................... 20
Specified Reserve Account Balance................................................... 7
Specified Yield Supplement Balance.................................................. 7
Stripped Receivable................................................................. 45
Supplemental Servicing Fee.......................................................... 6, 28
Supplemented Receivables............................................................ 45
Trust............................................................................... 1, 4
Trust Property...................................................................... 4
Trustee............................................................................. 1, 8
UCC................................................................................. 10
Underwriters........................................................................ 53
Underwriting Agreement.............................................................. 53
United States person................................................................ 50
Yield Supplement Account............................................................ 7, 29
Yield Supplement Agreement.......................................................... 6
Yield Supplement Amount............................................................. 7
Yield Supplement Initial Deposit.................................................... 7
</TABLE>
57
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
<TABLE>
<S> <C>
SEC Registration Fee.................................. $ *
Printing and Engraving................................ *
Trustee's Fee......................................... *
Legal Fees and Expenses............................... *
Blue Sky Fees and Expenses............................ *
Accountant's Fees and Expenses........................ *
Rating Agency Fees.................................... *
Miscellaneous Fees and Expenses....................... *
--------------------
Total Expenses.................................... $ *
--------------------
--------------------
</TABLE>
- ------------------------
* To be completed by amendment.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits.
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
- ----------- ------------------------------------------------------------------------------------------------------
<C> <C> <S>
1.1 -- Form of Underwriting Agreement
3.1** -- Articles of Association, as amended, of First Security Bank, N.A.
3.2** -- Bylaws, as amended, of First Security Bank, N.A.
4.1 -- Form of Pooling and Servicing Agreement, including the form of % Asset
Backed Certificate, Class A and the form of % Asset Backed
Certificate, Class B as exhibits thereto
4.2 -- Form of Yield Supplement Agreement
5.1 -- Opinion of Kirkland & Ellis re: Legality
8.1 -- Opinion of Kirkland & Ellis re: Tax Consequences
24.1 -- Consent of Kirkland & Ellis (contained in Exhibits 5.1 and 8.1)
24.2** -- Consent of Ray, Quinney & Nebeker
24.3* -- Consent of Moffatt, Thomas, Barrett, Rock & Fields
25.1** -- Powers of Attorney of directors and officers of First Security Bank, N.A.
(included on the signature pages to the Registration Statement).
</TABLE>
- ------------------------
* To be filed by amendment.
** Previously filed.
(b) Financial Statement Schedules.
Not applicable.
II-1
<PAGE>
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby agrees:
(a) To provide to the Underwriters, at the closing specified in the
Underwriting Agreement, Certificates in such denominations and registered in
such names as required by the Underwriters to permit prompt delivery to each
purchaser.
(b) That, insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the provisions described under Item 14
above, or otherwise, the Registrant has been advised that in the opinion of
the Commission such indemnification is against public policy as expressed in
the Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment
by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by the
final adjudication of such issue.
(c) That, for purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a
form of prospectus filed as part of this Registration Statement in reliance
upon Rule 430A and contained in a form of prospectus filed by the Registrant
pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall
be deemed to be part of this Registration Statement as of the time it was
declared effective.
(d) That, for the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new Registration Statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 2 to the Registration Statement to be signed
on its behalf by the undersigned thereto duly authorized, in Salt Lake City,
State of Utah, on March 11, 1997.
FIRST SECURITY BANK, N.A.
as originator of the Trust, Registrant
By: /s/ SCOTT C. ULBRICH
-----------------------------------------
Scott C. Ulbrich
EXECUTIVE VICE PRESIDENT
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 2 to the Registration Statement has been signed by the following persons in
the capacities and on the date indicated.
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------
Chairman and Chief
* Executive Officer
- ------------------------------ (Principal Executive March 11, 1997
L. Scott Nelson Officer) and Director
Executive Vice President
* and Cashier (Principal
- ------------------------------ Financial and Accounting March 11, 1997
Scott C. Ulbrich Officer)
* Director
- ------------------------------ March 11, 1997
Spencer F. Eccles
* Director
- ------------------------------ March 11, 1997
Morgan J. Evans
* Director
- ------------------------------ March 11, 1997
J. Patrick McMurray
* Director
- ------------------------------ March 11, 1997
Michael P. Caughlin
* Director
- ------------------------------ March 11, 1997
Mark D. Howell
* Director
- ------------------------------ March 11, 1997
Brad D. Hardy
*By /s/ A. ROBERT THORUP
---------------------------
A. Robert Thorup,
Attorney-in-fact
II-3
<PAGE>
EXHIBIT 1.1
FIRST SECURITY AUTO GRANTOR TRUST 1997-A
[ ]% ASSET BACKED CERTIFICATES, CLASS A
[ ]% ASSET BACKED CERTIFICATES, CLASS B
FIRST SECURITY BANK, N.A.
(Seller and Servicer)
UNDERWRITING AGREEMENT
March __, 1997
J.P. Morgan Securities Inc.
As Representative of the Several Underwriters
Listed in Schedule I (the "Representative")
60 Wall Street
New York, New York 10260
Ladies and Gentlemen:
First Security Bank, N.A. (the "BANK"), proposes to sell to the
several Underwriters listed on Schedule I hereto (the "UNDERWRITERS")
$[_________________] principal amount of [ ]% Asset Backed Certificates,
Class A (the "CLASS A CERTIFICATES") and $_______ principal amount of [ ]%
Asset Backed Certificates, Class B (the "CLASS B CERTIFICATES," and together
with the Class A Certificates, the "CERTIFICATES") to be issued by the First
Security Auto Grantor Trust 1997-A. Each Certificate will represent an
undivided interest in the First Security Auto Grantor Trust 1997-A (the
"TRUST"). The assets of the Trust will include, among other things, a pool of
retail motor vehicle installment sale contracts and installment loans secured by
new and used automobiles and light trucks (collectively, the "RECEIVABLES") and
certain monies due thereunder after the close of business of the Bank on
February 25, 1997 (the "CUTOFF DATE"), such Receivables and other property to be
sold to the Trust by the Bank and to be serviced for the Trust by the Servicer.
The Class B Certificates are, to the extent specified in the Pooling and
Servicing Agreement, subordinated to the rights of the holders of the Class A
Certificates. The Certificates will be issued pursuant to a Pooling and
Servicing Agreement dated as of March __, 1997 (the "POOLING AND SERVICING
AGREEMENT"), by and among the Bank, as seller (in such capacity, the "SELLER")
and as servicer (in such capacity, the "SERVICER"), and Bankers Trust Company, a
New York banking corporation ("Bankers Trust"), as trustee (in such capacity,
the "TRUSTEE"), and as collateral agent for the Yield Supplement Account and the
Reserve Account (in such capacity, the "COLLATERAL AGENT").
The Bank has prepared and filed with the Securities and Exchange
Commission (the "COMMISSION") in accordance with the provisions of the
Securities Act of 1933, as amended (the "ACT"), and the rules and regulations of
the Commission thereunder (the "RULES AND REGULATIONS"), a registration
statement, including a prospectus, relating to the Certificates. The
registration statement as amended at the time when it shall become effective,
or, if a post-effective amendment is filed with respect thereto, as amended by
such post-effective amendment at the time of its
<PAGE>
effectiveness, including in each case information (if any) deemed to be part of
the registration statement at the time of effectiveness pursuant to Rule 430A
under the Act, is referred to in this Agreement as the "REGISTRATION STATEMENT,"
and the prospectus in the form used to confirm sales of the Certificates is
referred to in this Agreement as the "PROSPECTUS."
The terms which follow, when used in this Agreement, shall have the
meanings indicated. "EFFECTIVE DATE" shall mean each date that the Registration
Statement and any post-effective amendment or amendments thereto became or
become effective. "EXECUTION TIME" shall mean the date and time that this
Agreement is executed and delivered by the parties hereto. "RULE 424" and "RULE
430A" refer to such rules under the Act. To the extent not defined herein,
capitalized terms used herein have the meanings assigned to such terms in the
Pooling and Servicing Agreement.
The Bank represents and warrants to, and agrees with, the Underwriters
as follows:
1. The Bank hereby agrees to sell and deliver the Certificates to
the several Underwriters as hereinafter provided, and each Underwriter, upon the
basis of the representations and warranties herein contained, but subject to the
conditions hereinafter stated, agrees to purchase, severally and not jointly,
from the Bank the respective principal amount of the Certificates set forth
opposite such Underwriter's name in Schedule I hereto. The Class A Certificates
and the Class B Certificates are to be purchased by the Underwriters at the
purchase price of [ ] and [ ], respectively, of
the aggregate principal amount thereof plus accrued interest on the principal
amount thereof at the applicable Pass-Through Rate calculated from (and
including) March 15, 1997, to (but excluding) the Closing Date.
2. The Bank understands that the Underwriters intend (i) to make a
public offering of their respective portions of the Certificates as soon after
the Registration Statement and this Agreement have become effective as in the
judgment of the Representative is advisable and (ii) initially to offer the
Certificates upon the terms set forth in the Prospectus.
3. Payment for the Certificates shall be made to the Bank or to its
order, by wire transfer of same day funds at the office of Kirkland & Ellis, 153
East 53rd Street, New York, New York 10022, at 9:00 a.m. (New York time) on
March __, 1997 (the "CLOSING DATE"), or at such other time on the same or such
other date, not later than the fifth Business Day thereafter, as the
Representative and the Bank may agree upon in writing. As used herein, the term
"BUSINESS DAY" means any day other than a day on which banks are permitted or
required to be closed in the City of New York.
Payment for the Certificates shall be made against delivery to the
Representative for the respective accounts of the several Underwriters of the
Certificates registered in the name of Cede & Co. as nominee of The Depositary
Trust Company and in such denominations, as permitted by the Pooling and
Servicing Agreement, as the Representative shall request in writing not later
than two full Business Days prior to the Closing Date, with any transfer taxes
payable in connection with
-2-
<PAGE>
the transfer to the Underwriters of the Certificates duly paid by the Bank. The
certificates for the Certificates will be made available for inspection and
packaging by the Representative at the office of Kirkland & Ellis, 153 East 53rd
Street, New York, New York 10022, not later than 1:00 p.m. (New York time) on
the Business Day prior to the Closing Date.
4. The Bank hereby represents and warrants to, and agrees with, each
Underwriter that:
(a) The Registration Statement on Form S-1 (no. 333-18089),
including the Prospectus and such amendments thereto as may have been required
on or prior to the date hereof, relating to the Certificates, has been filed
with the Commission and such Registration Statement as amended has become
effective. With respect to the Registration Statement, the conditions to the
use of a registration statement on Form S-1 under the Act, as set forth in the
General Instructions to Form S-1, have been satisfied by the Bank;
(b) No stop order suspending the effectiveness of the
Registration Statement has been issued and no proceeding for that purpose has
been instituted or, to the knowledge of the Bank, threatened by the Commission,
and on the Effective Date of the Registration Statement, the Registration
Statement and the Prospectus conformed in all respects to the requirements of
the Act and the Rules and Regulations, and did not include any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading, and, on the
Closing Date, the Registration Statement and the Prospectus will conform in all
respects to the requirements of the Act and the Rules and Regulations, and
neither of such documents will include any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary to
make the statements therein not misleading; provided, however, that this
representation and warranty shall not apply to any statements or omissions made
in reliance upon and in conformity with information furnished to the Bank in
writing by any Underwriter through the Representative expressly for use therein;
(c) The computer tape with respect to the Receivables to be sold
to the Trust created as of the Cutoff Date (the "COMPUTER TAPE"), and made
available to the Representative by the Bank, was complete and accurate in all
material respects as of the date thereof;
(d) The Bank has been duly organized and is validly existing as
a United States banking association, is in good standing under the laws of the
United States, with power and authority (corporate and other) to own its
properties and conduct its business as described in the Prospectus, and has been
duly qualified for the transaction of business and is in good standing under the
laws of each other jurisdiction in which it owns or leases properties, or
conducts any business, so as to require such qualification, other than where the
failure to be so qualified or in good standing would not have a material adverse
effect on the Bank;
(e) The Certificates have been duly authorized, and, when issued
and delivered pursuant to the Pooling and Servicing Agreement, duly
authenticated by the Trustee and
-3-
<PAGE>
paid for by the Underwriters in accordance with the terms of this Agreement,
will be duly and validly issued, authenticated and delivered and entitled to the
benefits provided by the Pooling and Servicing Agreement; each of the Pooling
and Servicing Agreement, the Yield Supplement Agreement and this Agreement have
been duly authorized by the Bank and, when executed and delivered by the Bank
and the other parties thereto (in the case of the Pooling and Servicing
Agreement and the Yield Supplement Agreement), each of the Pooling and Servicing
Agreement, the Yield Supplement Agreement and this Agreement will constitute a
valid and binding agreement of the Bank; the Certificates, the Pooling and
Servicing Agreement and the Yield Supplement Agreement will conform to the
descriptions thereof in the Prospectus in all material respects;
(f) No consent, approval, authorization or order of, or filing
with, any court or governmental agency or body is required to be obtained or
made by the Bank for the consummation of the transactions contemplated by this
Agreement, the Pooling and Servicing Agreement or the Yield Supplement Agreement
except such as have been obtained and made under the Act, such as may be
required under state securities laws and the filing of any financing statements
required to perfect the Trust's interest in the Receivables;
(g) The Bank is neither in violation of its articles of
association or by-laws nor is in default in the performance or observance of any
obligation, agreement, covenant or condition contained in any agreement or
instrument to which it is a party or by which it or its properties is bound
which would have a material adverse effect on the transactions contemplated
herein or in the Pooling and Servicing Agreement or the Yield Supplement
Agreement. The execution, delivery and performance of this Agreement, the
Pooling and Servicing Agreement and the Yield Supplement Agreement, and the
issuance and sale of the Certificates and compliance with the terms and
provisions hereof and thereof, will not result in a breach or violation of any
of the terms and provisions of, or constitute a default under, any statute,
rule, regulation or order of any governmental agency or body or any court having
jurisdiction over the Bank or any of its properties or any agreement or
instrument to which the Bank is a party or by which the Bank is bound or to
which any of the properties of the Bank is subject, or the articles of
association or by-laws of the Bank; and the Bank has full power and authority to
authorize and to sell, and to establish the Trust that will issue, the
Certificates as contemplated by this Agreement and to enter into this Agreement,
the Pooling and Servicing Agreement and the Yield Supplement Agreement;
(h) Other than as set forth or contemplated in the Prospectus,
there are no legal or governmental proceedings pending or, to the knowledge of
the Bank, threatened, to which the Bank is or may be a party or to which any
property of the Bank is or may be the subject which, if determined adversely to
the Bank, could individually or in the aggregate reasonably be expected to have
a material adverse effect on the general affairs, business, prospects,
management, financial position, stockholders, equity or results of operations of
the Bank or that would reasonably be expected to materially adversely affect the
interests of the holders of the Certificates; and there are no contracts or
other documents of a character required to be filed as an exhibit to the
Registration Statement or required to be described in the Registration Statement
or the Prospectus which are not filed or described as required; and
-4-
<PAGE>
(i) By assignment and delivery of each of the Receivables to the
Trust as of the Closing Date, the Bank will transfer all of its right, title and
interest in, to and under the Receivables and certain related property to the
Trust, subject to no prior lien, mortgage, security interest, pledge, adverse
claim, charge or other encumbrance.
5. The Bank covenants and agrees with the several Underwriters that:
(a) Prior to the termination of the offering of the
Certificates, the Bank will not file or cause to be filed any amendment of the
Registration Statement or supplement to the Prospectus which shall be reasonably
disapproved of promptly by the Representative after reasonable notice thereof.
Subject to the foregoing sentence, if the Registration Statement has become or
becomes effective pursuant to Rule 430A, or filing of the Prospectus is
otherwise required under Rule 424(b), the Bank will cause the Prospectus,
properly completed, and any supplement thereto, to be filed with the Commission
pursuant to the applicable paragraph of Rule 424(b) within the time period
prescribed and will provide evidence satisfactory to the Underwriters of such
timely filing. The Bank will promptly advise the Underwriters (i) when the
Prospectus, and any supplement thereto, shall have been filed (if required) with
the Commission pursuant to Rule 424(b), (ii) when, prior to termination of the
offering of the Certificates, any amendment to the Registration Statement shall
have become effective, (iii) of any request by the Commission for any amendment
of the Registration Statement or supplement to the Prospectus or for any
additional information, (iv) of the receipt by the Bank of notification with
respect to the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or the institution or threatening of
any proceeding for that purpose and (v) of the receipt by the Bank of
notification with respect to the suspension of the qualification of the
Certificates for sale in any jurisdiction or the initiation or threatening of
any proceeding for such purpose. The Bank will use its best efforts to prevent
the issuance of any such stop order and, if issued, to obtain as soon as
possible the withdrawal thereof;
(b) The Bank will deliver or cause to be delivered, at its
expense, to the Representative, two signed copies of the Registration Statement
(as originally filed) and each amendment thereto, in each case including
exhibits, and to each other Underwriter a conformed copy of the Registration
Statement and each amendment thereto, in each case without exhibits, and, during
the period mentioned in paragraph (e) below, to each of the Underwriters as many
copies of the Prospectus (including all amendments and supplements thereto) as
the Representative may reasonably request. The Bank will furnish or cause to be
furnished to the Representative copies of all reports on Form SR required by
Rule 463 under the Act;
(c) The Bank will, if (i) during such period of time after the
first date of the public offering of the Certificates as in the opinion of
counsel for the Underwriters a Prospectus relating to the Certificates is
required by law to be delivered in connection with sales by an underwriter or
dealer, (ii) any event shall occur as a result of which it is necessary to amend
or supplement the Prospectus in order to make the statements therein, in the
light of the circumstances when the Prospectus is delivered to a purchaser, not
misleading, or (iii) it is necessary to amend or supplement the Prospectus to
comply with the applicable law, forthwith prepare and furnish, at the
-5-
<PAGE>
expense of the Bank, to the Underwriters and to the dealers (whose names and
addresses the Representative will furnish to the Bank) to which the Certificates
may have been sold by the Representative on behalf of the Underwriters and upon
request by the Representative to any other dealers identified by the
Representative, such amendments or supplements to the Prospectus as may be
necessary so that the statements in the Prospectus as so amended or supplemented
will not, in the light of the circumstances when the Prospectus is delivered to
a purchaser, be misleading or so that the Prospectus will comply with the law;
(d) The Bank will qualify the Certificates for offer and sale
under the securities or "BLUE SKY" laws of such jurisdictions as the
Representative shall reasonably request and will continue such qualification in
effect so long as reasonably required for distribution of the Certificates and
will pay all fees and expenses (including fees and disbursements of counsel to
the Underwriters) reasonably incurred in connection with such qualification and
in connection with the determination of the eligibility of the Certificates for
investment under the laws of such jurisdictions as the Representative may
designate; PROVIDED, HOWEVER, that the Bank shall not be obligated to qualify to
do business in any jurisdiction in which it is not currently so qualified; and
PROVIDED FURTHER that the Bank shall not be required to file a general consent
to service of process in any jurisdiction;
(e) On or before March 31, 1998, the Bank will cause the Trust
to make generally available to the Certificateholders and to the Representative
as soon as practicable an earnings statement covering a period of at least
twelve months beginning with the first fiscal quarter of the Trust occurring
after the effective date of the Registration Statement, which shall satisfy the
provisions of Section 11(a) of the Act and Rule 158 of the Commission
promulgated thereunder;
(f) For the period from the date of this Agreement until the
retirement of the Certificates the Servicer will furnish to the Representative
(x) copies of each certificate and the annual statements of compliance delivered
to the Trustee pursuant to the Pooling and Servicing Agreement and the annual
independent certified public accountant's servicing reports furnished to the
Trustee pursuant to the Pooling and Servicing Agreement, by first-class mail as
soon as practicable after such statements and reports are furnished to the
Trustee and (y) copies of each amendment to the Pooling and Servicing Agreement,
and on each Determination Date or as soon thereafter as practicable, the
Servicer shall give notice substantially in the form of Schedule II hereto by
telex or telecopy to the Representative of the Class A Pool Factor and the Class
B Pool Factor as of the related Record Date;
(g) During the period beginning on the date hereof and
continuing to and including the Business Day following the Closing Date, the
Bank will not offer, sell, contract to sell or otherwise dispose of any
securities of or guaranteed by the Bank which are substantially similar to the
Certificates without the prior written consent of the Representative;
(h) To the extent, if any, that the rating provided with respect
to the Certificates by the rating agency or rating agencies rating the
Certificates (the "RATING AGENCY") is
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<PAGE>
conditional upon the furnishing of documents or the taking of any other action
by the Bank agreed upon on or prior to the Closing Date, the Bank shall use its
reasonable best efforts to furnish such documents and take any such other
action; and
(i) So long as any of the Certificates are outstanding, the Bank
will furnish to the Representative, by first class mail, (i) as soon as
practical after the end of the Bank's fiscal year, copies of all documents,
records and financial statements required to be distributed to
Certificateholders (including Certificate Owners) or filed with the Commission
pursuant to the Exchange Act, or any order of the Commission thereunder and
(ii) from time to time, any other information concerning the Bank filed with any
government or regulatory authority or national securities exchange which is
otherwise publicly available, as the Representative may reasonably request.
6. The Bank will pay all costs and expenses incident to the
performance of its obligations under this Agreement, including, without limiting
the generality of the foregoing, all costs and expenses (i) incident to the
preparation, issuance, execution, authentication and delivery of the
Certificates, (ii) incident to the preparation, printing and filing under the
Act of the Registration Statement, the Prospectus and any preliminary prospectus
(including in each case all exhibits, amendments and supplements thereto),
(iii) incurred in connection with the registration or qualification and
determination of eligibility for investment of the Certificates under the laws
of such jurisdictions as the Underwriters may designate (including fees and
disbursements of counsel for the Underwriters with respect thereto),
(iv) related to any filing with the National Association of Securities Dealers,
Inc., (v) in connection with the printing (including word processing and
duplication costs) and delivery of this Agreement, the Pooling and Servicing
Agreement, the Yield Supplement Agreement and any Blue Sky Memorandum and the
furnishing to the Underwriters and dealers of copies of the Registration
Statement and the Prospectus as herein provided, (vi) the fees and disbursements
of the Bank's counsel and accountants and that portion of the Underwriters'
counsel fees and disbursements that are chargeable to the Bank, and (vii) any
fees and expenses payable to the Rating Agencies in connection with the rating
of the Certificates.
7. The obligations of the several Underwriters to purchase and pay
for the Certificates will be subject to the accuracy of the representations and
warranties on the part of the Bank herein, to the accuracy of the statements of
officers of the Bank made pursuant to the provisions hereof, to the performance
by the Bank of its obligations hereunder and to the following additional
conditions precedent:
(a) At the time this Agreement is executed and delivered by the
Bank and at the Closing Date, Deloitte and Touche, L.L.P. shall have furnished
to the Representative letters dated, respectively, as of the date of this
Agreement and as of the Closing Date substantially in the forms of the drafts to
which the Representative previously agreed.
(b) The Prospectus shall have been filed with the Commission
pursuant to Rule 424(b) within the applicable time period prescribed for such
filing by the Rules and
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<PAGE>
Regulations and in accordance with Section 5(a) of this Agreement; no stop order
suspending the effectiveness of the Registration Statement shall be in effect,
and no proceedings for such purpose shall be pending before or, to the knowledge
of the Bank, threatened by the Commission; and all requests for additional
information from the Commission with respect to the Registration Statement shall
have been complied with to the satisfaction of the Representative.
(c) The Representative shall have received an officer's
certificate, dated the Closing Date, signed by the Chairman of the Board, the
President, or any Vice President of the Bank representing and warranting that,
as of the Closing Date, except to the extent that they relate expressly to
another date (in which case they will be true and correct as of such date on the
Closing Date), the representations and warranties of the Bank in this Agreement
are true and correct, that the Bank has complied with all agreements and
satisfied all conditions on its part to be performed or satisfied hereunder at
or prior to the Closing Date, that no stop order suspending the effectiveness of
the Registration Statement has been issued and no proceedings for that purpose
have been instituted or, to the best of its knowledge, are contemplated by the
Commission.
(d) Subsequent to the execution and delivery of this Agreement,
there shall not have occurred (i) any change, or any development involving a
prospective change, in or affecting particularly the business or properties of
the Trust, the Bank or the Servicer which, in the judgment of the
Representative, materially impairs the investment quality of the Certificates or
makes it impractical or inadvisable to proceed with completion of the sale of
and payment for the Certificates or (ii) any downgrading in the rating of any
debt securities of the Bank or any of its direct or indirect subsidiaries by any
"nationally recognized statistical rating organization" (as defined for purposes
of Rule 436(g) under the Act), or any public announcement that any such
organization has under surveillance or review its rating of any such debt
securities (other than an announcement with positive implications of a possible
upgrading, and no implication of a possible downgrading, of such rating).
(e) Ray, Quinney & Nebeker, special counsel to the Bank, shall
have furnished to the Representative its written opinion, dated the Closing
Date, in form and substance satisfactory to the Representative, to the effect
that:
(i) The Bank has been duly organized and is validly existing
as a United States banking association in good standing under the laws of
the United States with full corporate power and authority to own its
properties and conduct its business as described in the Prospectus, and is
duly qualified to transact business and is in good standing in each
jurisdiction in which the conduct of its business or the ownership of its
property requires such qualification except where the failure to be so
qualified or in good standing would not have a material adverse effect on
the Bank.
(ii) The Pooling and Servicing Agreement and the Yield
Supplement Agreement have been duly authorized, executed and delivered by
the Bank.
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<PAGE>
(iii) This Agreement has been duly authorized, executed and
delivered by the Bank.
(iv) The execution, delivery and performance of this Agreement,
the Pooling and Servicing Agreement and the Yield Supplement Agreement by
the Bank will not conflict with or result in a breach of any of the terms
or provisions of, or constitute a default under, or result in the creation
or imposition of any lien, charge or encumbrance upon any of the properties
or assets of the Bank, pursuant to its articles of association or by-laws,
any statute, regulation or publicly issued rule or order, or, to the best
of such counsel's knowledge, after due inquiry, any privately issued rule
or order of any governmental agency or body or any court having
jurisdiction over the Bank, or its properties or any agreement or
instrument known to such counsel to which the Bank, is a party or by which
the Bank, or any of its respective properties is bound.
(v) To the best of such counsel's knowledge, after due
inquiry, no authorization, approval or consent of any court or governmental
agency or authority is necessary in connection with the execution, delivery
and performance by the Bank of this Agreement, the Pooling and Servicing
Agreement or the Yield Supplement Agreement, except such as may be required
under the Act or the Rules and Regulations and state securities laws, and
except for such authorizations, approvals or consents (specified in such
opinion) as are in full force and effect as of the Closing Date.
(vi) The Certificates have been duly authorized by the Bank.
(vii) Nothing has come to such counsel's attention that would
cause it to believe that as of the latest Effective Date and at the Closing
Date (x) the Registration Statement and the Prospectus (other than the
financial statements and the other accounting, statistical and financial
information contained therein or omitted therefrom) contained or contain
any untrue statement of a material fact or omitted or omit to state any
material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading and (y) the descriptions therein of statutes and
governmental proceedings and contracts and other documents are inaccurate
in any material respect or do not fairly present the information required
to be shown therein.
(viii) Such counsel does not know of any contract or other
document of a character required to be filed as an exhibit to the
Registration Statement or required to be described in the Registration
Statement or the Prospectus which is not filed or described as required.
(ix) There are no legal or governmental proceedings pending to
which the Bank is a party, or of which any property, of the Bank is the
subject, and no such proceedings are known by such counsel to be threatened
or contemplated by governmental authorities or threatened by others, in
each such case, (A) that are required to be disclosed
-9-
<PAGE>
in the Registration Statement or (B) asserting the invalidity of all or
part of this Agreement, the Pooling and Servicing Agreement or the Yield
Supplement Agreement, (C) seeking to prevent the issuance of the
Certificates, (D) that could materially and adversely affect the Bank's
obligations under this Agreement, the Pooling and Servicing Agreement or
the Yield Supplement Agreement, as applicable, or (E) seeking to affect
adversely the federal or state income tax attributes of the Certificates.
(x) The Bank has full power and authority to sell and assign
the property to be sold and assigned to and deposited with the Trustee as
part of the Trust pursuant to the Pooling and Servicing Agreement and has
duly authorized such sale and assignment to the Trustee by all necessary
corporate action.
(xi) To the best of such counsel's knowledge, immediately prior
to the transfer of Receivables by the Bank pursuant to the Pooling and
Servicing Agreement, the Bank was the sole owner of all right, title and
interest in its Receivables and the other property to be transferred by it
to the Trust.
(xii) To the best of such counsel's knowledge, Receivables
transferred to the Trust by the Bank are "chattel paper" as defined in the
Relevant UCC.
(xiii) Such counsel is familiar with the Bank's standard
operating procedures relating to the Bank's acquisition of a perfected
first priority security interest in the vehicles financed by the Bank
pursuant to retail installment sale contracts in the ordinary course of the
Bank's business. Assuming that the Bank's standard procedures have been
followed with respect to the perfection of security interests in the
Financed Vehicles (and such counsel has no reason to believe that the Bank
has not followed its standard procedures in connection with the perfection
of security interest in the Financed Vehicles), the Bank has acquired or
will acquire a perfected first priority security interest in each of the
Financed Vehicles.
(xiv) To the extent that the Relevant UCC applies to the
perfection of the Trustee's security interests in the Receivables and other
property, rights and interests conveyed by the Bank to the Trust pursuant
to the Pooling and Servicing Agreement, when financing statements have been
duly executed and delivered and filed or recorded, as appropriate, in the
appropriate filing offices, such security interests will be perfected.
Under the Relevant UCC, no other security interest of any other creditor of
the Bank is equal or prior to the security interest of the Trustee in such
Receivables and other property conveyed to the Trust.
(xv) All filings necessary under applicable law to perfect both
the sale of, and grant of a security interest in, Receivables and the
proceeds thereof by the Bank to the Trustee as Trustee of the Trust
pursuant to the Pooling and Servicing Agreement have been made and,
provided that the Bank does not relocate its chief executive office in a
state
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<PAGE>
other than Utah, and that the Trustee maintains the list of Receivables for
inspection by interested parties, and no administrative errors are made by
state or local agencies, no other filings (other than the filing of
continuation statements) need be made to maintain the perfection of the
transfer of the Receivables and the proceeds thereof to the Trustee as
Trustee of the Trust pursuant to the Pooling and Servicing Agreement.
(xvi) The statements in the Registration Statement and the
Prospectus under the headings "ERISA Considerations" and "Certain Legal
Aspects of the Receivables," to the extent they constitute descriptions of
matters of law or legal conclusions with respect thereto, have been
prepared or reviewed by such counsel and are correct in all material
respects.
(xvii) The Pooling and Servicing Agreement is not required to be
qualified under the Trust Indenture Act of 1939, as amended, and the Trust
is not required to be registered as an "investment company" under the
Investment Company Act of 1940, as amended.
(xviii)The Registration Statement has become effective under the
Act and no stop order suspending the effectiveness of the Registration
Statement or any part thereof has been issued and no proceeding for that
purpose has been instituted or, to the best of such counsel's knowledge,
threatened by the Commission; the Registration Statement and the Prospectus
(other than the accounting, financial and statistical data contained in the
Registration Statement or the Prospectus, or omitted therefrom, as to which
such counsel need express no opinion) comply as to form in all material
respects with the requirements of the Act and the Rules and Regulations.
(xix) The Certificates, this Agreement, the Pooling and
Servicing Agreement and the Yield Supplement Agreement each conform in all
material respects with the descriptions thereof contained in the
Registration Statement and the Prospectus.
(f) Kirkland & Ellis shall have furnished to the Representative its
written opinion, dated the Closing Date, in form and substance satisfactory to
the Representative, to the effect that, (i) assuming the due authorization,
execution and delivery of the Pooling and Servicing Agreement and the Yield
Supplement Agreement by the Bank, each of the Pooling and Servicing Agreement
and the Yield Supplement Agreement constitutes the legal, valid and binding
obligation of the Bank, enforceable against the Bank in accordance with its
terms, and (ii) when executed and authenticated by the Trustee in accordance
with the Pooling and Servicing Agreement and delivered and paid for in
accordance with this Agreement, the Certificates will be validly issued and
outstanding and entitled to the benefits provided by the Pooling and Servicing
Agreement. Such opinion may be made subject to the qualifications that the
enforceability of the terms of the Pooling and Servicing Agreement and the Yield
Supplement Agreement may be subject to bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights, and the remedy of specific performance and injunctive and
other forms of equitable
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<PAGE>
relief may be subject to equitable defenses and to the discretion of the court
before which any proceeding therefor may be brought.
(g) Kirkland & Ellis shall have furnished to the Representative its
written opinion, dated the Closing Date, in form and substance satisfactory to
the Representative, to the effect that:
(i) The Trust created by the Pooling and Servicing Agreement
will not be classified as an association taxable as a corporation for
federal income tax purposes and, instead, under subpart E, part I of
subchapter J of the Internal Revenue Code of 1986, as amended, the Trust
will be treated as a grantor trust and, subject to possible
recharacterization of certain fees paid by the Trust to the Bank or the
Servicer, each Certificate Owner will be treated as the owner of an
undivided PRO RATA interest in the income and corpus attributable to the
Trust.
(ii) The statements in the Registration Statement and
Prospectus under the heading "Federal Income Tax Consequences," to the
extent that they constitute descriptions of matters of law or legal
conclusions with respect thereto, have been prepared or reviewed by such
counsel and are correct in all material respects.
(iii) The Yield Supplement Account and the Reserve Account will
not be treated as an association taxable as a corporation or other separate
taxable entity for federal tax purposes; and neither the Trustee nor the
Certificate Owners will be treated as the owner of any portion of the Yield
Supplement Account or the Reserve Account and the funds therein for such
purposes.
(h) Ray, Quinney & Nebeker, special Utah tax counsel to the Bank,
shall have furnished to the Representative its written opinion, dated the
Closing Date, in form and substance satisfactory to the Representative, to
the effect that:
(i) The Trust will not be classified as a separate entity on
which Utah franchise tax will be imposed, and will not be subject to other
Utah taxes measured by income, capital, profits or receipts (other than
sales, excise, or AD VALOREM taxes that might be imposed upon the ownership
or sale of a vehicle acquired upon default of a Receivable);
(ii) Certificate owners who would not otherwise be subject to
tax in Utah will not be subject to Utah income or franchise taxes with
respect to interest or other amounts (including payments under the Yield
Supplement Agreement and from the Yield Supplement Account and the Reserve
Account) attributable solely to the beneficial ownership of a Certificate
(other than such Certificate Owner's share of sales, excise, or AD VALOREM
taxes that might be imposed upon the ownership or sale of a vehicle
acquired upon default of a Receivable);
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<PAGE>
(iii) The Yield Supplement Account and the Reserve Account will
not be treated as an association taxable as a corporation or other separate
taxable entity for Utah state tax purposes;
(iv) and neither the Trustee nor the Certificate Owners will be
treated as the owner of any portion of the Yield Supplement Account or the
Reserve Account and the funds therein for Utah state tax purposes.
(i) Moffatt, Thomas, Barrett, Rock & Fields, special Idaho tax
counsel to the Bank, shall have furnished to the Representative its written
opinion, dated the Closing Date, in form and substance satisfactory to the
Representative, to the effect that:
(i) The Trust will not be classified as a separate entity on
which Idaho franchise tax will be imposed, and will not be subject to other
Idaho taxes measured by income, capital, profits or receipts (other than
sales, excise, or AD VALOREM taxes that might be imposed upon the ownership
or sale of a vehicle acquired upon default of a Receivable);
(ii) Certificate owners who would not otherwise be subject to
tax in Idaho will not be subject to Idaho income or franchise taxes with
respect to interest or other amounts (including payments under the Yield
Supplement Agreement and from the Yield Supplement Account and the Reserve
Account) attributable solely to the beneficial ownership of a Certificate
(other than such Certificate Owner's share of sales, excise, or AD VALOREM
taxes that might be imposed upon the ownership or sale of a vehicle
acquired upon default of a Receivable);
(iii) The Yield Supplement Account and the Reserve Account will
not be treated as an association taxable as a corporation or other separate
taxable entity for Idaho state tax purposes;
(iv) and neither the Trustee nor the Certificate Owners will be
treated as the owner of any portion of the Yield Supplement Account or the
Reserve Account and the funds therein for Idaho state tax purposes.
(j) Kirkland & Ellis, special New York tax counsel to the Bank, shall
have furnished to the Representative its written opinion, dated the Closing
Date, in form and substance satisfactory to the Representative, to the effect
that:
(i) The Trust will not be classified as a separate entity on
which New York franchise tax will be imposed; and the Trust will not be
subject to other New York taxes measured by income, capital, profits or
receipts (other than sales, excise, or AD VALOREM taxes that might be
imposed upon the sale of a vehicle acquired upon default of a Receivable).
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<PAGE>
(ii) Certificate Owners who would not otherwise be subject to
tax in New York will not be subject to New York income or franchise taxes
with respect to interest or other amounts (including payments under the
Yield Supplement Agreement and from the Yield Supplement Account and the
Reserve Account) attributable solely to the beneficial ownership of a
Certificate (other than such Certificate Owner's share of sales, excise, or
AD VALOREM taxes that might be imposed upon the sale of a vehicle acquired
upon default of a Receivable).
(iii) The Yield Supplement Account and the Reserve Account will
not be treated as an association taxable as a corporation or other separate
taxable entity for New York state tax purposes; and neither the Trustee
nor the Certificate Owners will be treated as the owner of any portion of
the Yield Supplement Account or the Reserve Account and the funds therein
for such purposes.
(k) The Representative shall have received an opinion of Kirkland &
Ellis, dated the Closing Date, with respect to such matters as the
Representative shall require and the Bank shall have furnished or caused to be
furnished to such counsel such documents as they may reasonably request for the
purpose of enabling them to pass upon such matters.
(l) The Representative shall have received an opinion of counsel to
Bankers Trust, addressed to the Underwriters and the Bank, dated the Closing
Date and satisfactory in form and substance to the Representative and its
counsel, to the effect that:
(i) Bankers Trust is a New York banking corporation duly
organized and validly existing under the laws of the United States.
(ii) Bankers Trust has the power and authority to enter into
and perform the Pooling and Servicing Agreement. The execution, delivery
and performance of the Pooling and Servicing Agreement have been duly
authorized by all requisite action, and the Pooling and Servicing Agreement
has been duly executed and delivered by Bankers Trust.
(iii) No consent, approval, authorization, order of or filing
with any court, governmental agency or body (including without limitation,
any banking regulatory agency or body or arbitrator having jurisdiction
over Bankers Trust) is required in connection with the execution and
delivery by Bankers Trust of the Pooling and Servicing Agreement and the
performance by Bankers Trust of the transactions thereunder.
(iv) The Pooling and Servicing Agreement, assuming due
authorization, execution and delivery thereof by the Bank and the Servicer,
constitutes a valid and legally binding agreement of Bankers Trust and is
enforceable against Bankers Trust in accordance with its terms, except as
the same may be limited by bankruptcy, insolvency, reorganization or other
similar laws relating to or affecting the enforcement of
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<PAGE>
creditors' rights generally and the rights of creditors of banks in
particular and by general principles of equity.
(v) The Certificates have been duly executed, authenticated
and delivered by Bankers Trust.
(vi)If Bankers Trust were acting as Servicer under the Pooling
and Servicing Agreement as of the date of this Agreement, Bankers Trust
would have the corporate power and authority to perform the obligations of
the Servicer as provided in the Pooling and Servicing Agreement.
(m) The Representative shall have received a letter or letters from
each counsel delivering any written opinion to any Rating Agency in connection
with the transaction described herein which is not otherwise described in this
Agreement allowing the Underwriters to rely on such opinion as if it were
addressed to the Underwriters.
(n) The Representative shall have received an officer's certificate
dated the Closing Date of the Chairman of the Board, the President or any Vice
President and by a principal financial or accounting officer of the Bank and the
Servicer in which each such officer shall state that, the representations and
warranties of the Bank or the Servicer, as applicable, contained in the Pooling
and Servicing Agreement are true and correct in all material respects and that
the Bank or the Servicer, as applicable, has complied with all agreements and
satisfied all conditions on its part to be performed or satisfied under such
agreements at or prior to the Closing Date in all material respects.
(o) The Class A Certificates shall have been rated "Aaa" by Moody's
and "AAA" by S&P and the Class B Certificates shall have been rated "A" by
Moody's and "A" by S&P.
(p) On the Closing Date, the representations and warranties of the
Bank in the Pooling and Servicing Agreement will be true and correct.
(q) Any taxes, fees and other governmental charges which are due and
payable in connection with the execution, delivery and performance of this
Agreement, the Pooling and Servicing Agreement, the Yield Supplement Agreement
and the Certificates shall have been paid by the Bank at or prior to the Closing
Date.
8. (a) The Bank agrees to indemnify and hold harmless each Underwriter
and each person, if any, who controls any Underwriter within the meaning of
either Section 15 of the Act or Section 20 of the Exchange Act, from and against
any and all losses, claims, damages and liabilities (including, without
limitation, the legal fees and other expenses reasonably incurred in connection
with investigating, preparing or defending any suit, action or proceeding or any
claim asserted, except as otherwise provided below regarding the limitation on
use of counsel) caused by any untrue statement or alleged untrue statement of a
material fact contained in the Registration
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<PAGE>
Statement or the Prospectus (as amended or supplemented if the Bank shall have
furnished such amendments or supplements thereto) or any preliminary prospectus,
or caused by any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, except insofar as such losses, claims, damages or liabilities are
caused by any untrue statement or omission or alleged untrue statement or
omission made in reliance upon and in conformity with information furnished to
the Bank in writing by any Underwriter through the Representative expressly for
use therein; PROVIDED that the foregoing indemnity with respect to any
preliminary prospectus shall not inure to the benefit of any Underwriter (or to
the benefit of any person controlling such Underwriter) from whom the person
asserting any losses, claims or damages purchased Certificates if such untrue
statement or omission or alleged untrue statement or omission made in such
preliminary prospectus is eliminated or remedied in the Prospectus (as amended
or supplemented if the Bank shall have furnished any amendments or supplements
thereto) and, if the furnishing of a copy of the Prospectus (as so amended or
supplemented) to such person was required by law or was requested in writing by
the Bank, a copy of the Prospectus (as so amended or supplemented) shall not
have been furnished to such person at or prior to the written confirmation of
the sale of such Certificates to such person.
(b) Each Underwriter agrees, severally and not jointly, to indemnify
and hold harmless the Bank, each director and officer of the Bank who signed the
Registration Statement, and each person who controls the Bank within the meaning
of either Section 15 of the Act or Section 20 of the Exchange Act to the same
extent as the foregoing indemnity from the Bank to each Underwriter, but only
with reference to information furnished to the Bank in writing by such
Underwriter through the Representative expressly for use in the Registration
Statement, the Prospectus, any amendment or supplement thereto, or any
preliminary prospectus.
(c) If any suit, action, proceeding (including any governmental or
regulatory investigation), claim or demand shall be brought or asserted against
any person in respect of which indemnity may be sought pursuant to either of
Sections 8(a) or (b), such person (the "INDEMNIFIED PERSON") shall promptly
notify the person against whom such indemnity may be sought (the "INDEMNIFYING
PERSON") in writing, and the Indemnifying Person, upon request of the
Indemnified Person, shall retain counsel reasonably satisfactory to the
Indemnified Person to represent the Indemnified Person and any others the
Indemnifying Person may designate in such proceeding and shall pay the fees and
expenses of such counsel related to such proceeding. In any such proceeding,
any Indemnified Person shall have the right to retain its own counsel, but the
fees and expenses of such counsel shall be at the expense of such Indemnified
Person unless (i) the Indemnifying Person and the Indemnified Person shall have
mutually agreed to the contrary, (ii) the Indemnifying Person has failed within
a reasonable time to retain counsel reasonably satisfactory to the Indemnified
Person or (iii) the named parties in any such proceeding (including any
impleaded parties) include both the Indemnifying Person and the Indemnified
Person and representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests between them, in
which case such counsel for the Indemnified Person shall be reasonably
satisfactory to the Indemnifying Person. It is understood that the Indemnifying
Person shall not, in connection with any proceeding or related proceeding in the
same jurisdiction, be liable for the fees
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<PAGE>
and expenses of more than one separate firm (in addition to one local counsel in
each applicable jurisdiction) for all Indemnified Persons, and that all such
fees and expenses shall be reimbursed as they are incurred. Any such separate
firm for the Underwriters and such control persons of the Underwriters shall be
designated in writing by the Representative and any such separate firm for the
Bank or either of its directors or officers who sign the Registration Statement
or control persons shall be designated in writing by the Bank. The Indemnifying
Person shall not be liable for any settlement of any claim or proceeding
effected without its written consent. Notwithstanding the foregoing sentence,
if at any time an Indemnified Person shall have requested an Indemnifying Person
to reimburse the Indemnified Person for fees and expenses of counsel as
contemplated by the third sentence of this Section 8(c), the Indemnifying Person
agrees that it shall be liable for any settlement of any proceeding effected
without its written consent if (i) such settlement is entered into more than 30
days after receipt by such Indemnifying Person of the aforesaid request and
(ii) such Indemnifying Person shall not have reimbursed the Indemnified Person
in accordance with such request prior to the date of such settlement. No
Indemnifying Person shall, without the prior written consent of the Indemnified
Person, effect any settlement of any pending or threatened proceeding in respect
of which any Indemnified Person is or could have been a party and indemnity
could have been sought hereunder by such Indemnified Person, unless such
settlement includes an unconditional release of such Indemnified Person from all
liability on claims that are the subject matter of such proceeding.
(d) If the indemnification provided for in Sections 8(a) and (b) is
unavailable other than in accordance with its terms to an Indemnified Person in
respect of any losses, claims, damages or liabilities referred to therein, then
each Indemnifying Person under either of Sections 8(a) or (b), in lieu of
indemnifying such Indemnified Person thereunder, shall contribute to the amount
paid or payable by such Indemnified Person as a result of such losses, claims,
damages or liabilities (i) in such proportion as is appropriate to reflect the
relative benefits received by the Bank on the one hand and the Underwriters on
the other hand from the offering of the Certificates or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause (i) above but also the relative fault of the Bank on the one hand
and the Underwriters on the other in connection with the statements or omissions
that resulted in such losses, claims, damages or liabilities, as well as any
other relevant equitable considerations. The relative benefits received by the
Bank on the one hand and the Underwriters on the other shall be deemed to be in
the same respective proportions as the net proceeds from the offering (before
deducting expenses) received by the Bank and the total underwriting discounts
and the commissions received by the Underwriters, in each case as set forth in
the table on the cover of the Prospectus, bear to the aggregate public offering
price of the Certificates. The relative fault of the Bank on the one hand and
the Underwriters on the other shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Bank or by any of the Underwriters and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.
-17-
<PAGE>
(e) The Bank and the Underwriters agree that it would not be just and
equitable if contribution pursuant to Section 8 were determined by PRO RATA
allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation that does not take account of the
equitable considerations referred to in Section 8(d). The amount paid or
payable by an Indemnified Person as a result of the losses, claims, damages and
liabilities referred to in Section 8(d) shall be deemed to include, subject to
the limitations set forth above, any legal or other expenses reasonably incurred
by such Indemnified Person in connection with investigating or defending any
such action or claim. Notwithstanding the provisions of Section 8, in no event
shall an Underwriter be required to contribute any amount in excess of the
amount by which the total price at which the Certificates underwritten by it and
distributed to the public were offered to the public exceeds the amount of any
damages that such Underwriter has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The Underwriters' obligations to
contribute pursuant to this Section 8 are several in proportion to the
respective principal amount of the Certificates set forth opposite their names
in Schedule I hereto, and not joint.
(f) The indemnity and contribution agreements contained in this
Section 8 are in addition to any liability which the Indemnifying Persons may
otherwise have to the Indemnified Persons referred to above.
(g) The indemnity and contribution agreements contained in this
Section 8 and the representations and warranties of the Bank set forth in this
Agreement shall remain operative and in full force and effect regardless of
(i) any termination of this Agreement, (ii) any investigation made by or on
behalf of any Underwriter or any person controlling any Underwriter or by or on
behalf of the Bank, or any of its officers or directors or any other person
controlling the Bank and (iii) acceptance of and payment for any of the
Certificates.
9. Notwithstanding anything herein contained, this Agreement may be
terminated in the absolute discretion of the Representative, by notice given to
the Bank, if after the execution and delivery of this Agreement and prior to the
Closing Date (i) trading generally shall have been suspended or materially
limited on or by, as the case may be, the New York Stock Exchange or the
American Stock Exchange; (ii) trading of any securities of or guaranteed by the
Bank shall have been suspended on any exchange or in any over-the-counter
market; (iii) a general moratorium on commercial banking activities in New York
shall have been declared by either Federal or New York State authorities; or
(iv) there shall have occurred any outbreak or escalation of hostilities or any
change in financial markets or any calamity or crisis that, in the judgment of
the Representative is material and adverse and which, in the judgment of the
Representative, makes it impracticable to market the Certificates on the terms
and in the manner contemplated in the Prospectus.
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<PAGE>
10. (a) This Agreement shall become effective upon the later of
(x) execution and delivery hereof by the parties hereto and (y) release of
notification of the effectiveness of the Registration Statement (or, if
applicable, any post-effective amendment) by the Commission.
(b) If on the Closing Date any one or more of the Underwriters shall
fail or refuse to purchase Certificates which it or they have agreed to purchase
hereunder on such date, and the aggregate principal amount of Certificates which
such defaulting Underwriter or Underwriters agreed but failed or refused to
purchase is not more than one-tenth of the aggregate principal amount of the
Certificates to be purchased on such date, the other Underwriters shall be
obligated severally in the proportions that the principal amount of Certificates
set forth opposite their respective names in Schedule I bears to the aggregate
principal amount of Certificates set forth opposite the names of all such
non-defaulting Underwriters, or in such other proportions as the Representative
may specify, to purchase the Certificates which such defaulting Underwriter or
Underwriters agreed but failed or refused to purchase on such date; PROVIDED
that in no event shall the principal amount of Certificates that any Underwriter
has agreed to purchase pursuant to Section 1 be increased pursuant to this
Section 10(b) by an amount in excess of one-ninth of such principal amount of
Certificates without the written consent of such Underwriter. If on the Closing
Date any Underwriter or Underwriters shall fail or refuse to purchase
Certificates which it or they have agreed to purchase hereunder on such date,
and the aggregate principal amount of Certificates with respect to which such
default occurs is more than one-tenth of the aggregate principal amount of
Certificates to be purchased on such date, and arrangements satisfactory to the
Representative and the Bank for the purchase of such Certificates are not made
within 36 hours after such default, this Agreement shall terminate without
liability on the part of any non-defaulting Underwriter or the Bank. In any
such case either the Representative or the Bank shall have the right to postpone
the Closing Date, but in no event for longer than seven days, in order that the
required changes, if any, in the Registration Statement and in the Prospectus or
in any other documents or arrangements may be effected. Any action taken under
this Section 10(b) shall not relieve any defaulting Underwriter from liability
in respect of any default of such Underwriter under this Agreement.
11. If this Agreement shall be terminated by the Underwriters, or any
of them, because of any failure or refusal on the part of the Bank to comply
with the terms or to fulfill any of the conditions of this Agreement, or if for
any reason the Bank shall be unable to perform its obligations under this
Agreement or any condition of the Underwriters cannot be fulfilled, the Bank
agrees to reimburse the Underwriters or such Underwriters as have so terminated
this Agreement with respect to themselves, severally, for all out-of-pocket
expenses (including the fees and expenses of their counsel) reasonably incurred
by such Underwriters in connection with this Agreement or the offering
contemplated hereunder.
12. Any action by the Underwriters hereunder may be taken by the
Representative alone on behalf of the Underwriters, and any such action taken by
the Representative alone shall be binding upon the Underwriters. All notices
and other communications hereunder shall be in writing and shall be deemed to
have been duly given if mailed, delivered by hand or transmitted by any standard
form of telecommunication. Notices to the Underwriters shall be given to the
-19-
<PAGE>
Representative, c/o J.P. Morgan Securities Inc., 60 Wall Street, New York, New
York 10260 (Facsimile No.: 212-648-5909), Attention: Syndicate Desk. Notices
to the Bank shall be given to it at First Security Bank, N.A., 79 South Main
Street, Salt Lake City, Utah 84111 (Facsimile No.: 801-359-6928), Attention:
Executive Vice President and Chief Financial Officer.
13. This Agreement shall inure to the benefit of and be binding upon
the Bank, the Underwriters, any controlling persons referred to herein and their
respective successors and assigns. Nothing expressed or mentioned in this
Agreement is intended or shall be construed to give any other person, firm or
corporation any legal or equitable right, remedy or claim under or in respect of
this Agreement or any provision herein contained. No purchaser of the
Certificates from any Underwriter shall be deemed to be a successor by reason
merely of such purchase.
14. This Agreement may be signed in counterparts, each of which shall
be an original and all of which together shall constitute one and the same
instrument. This Agreement shall be governed by and construed in accordance
with the laws of the State of New York.
* * * * *
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<PAGE>
If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return to us the enclosed duplicate hereof, whereupon
it will become a binding agreement among the Bank and the Underwriters in
accordance with its terms.
Very truly yours,
FIRST SECURITY BANK, N.A.
BY:_____________________________________
Name: Scott C. Ulbrich
Title: Authorized Officer
The foregoing Underwriting
Agreement is hereby confirmed
and accepted as of the date
first above written.
J.P. MORGAN SECURITIES INC.
As Representative of
the Underwriters
By: J.P. MORGAN SECURITIES INC.
By:_____________________________
Name:
Title:
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<PAGE>
SCHEDULE I
UNDERWRITERS
PRINCIPAL AMOUNT
J.P. Morgan Securities Inc.
Class A Certificates $
Class B Certificates $
First Chicago Capital Markets, Inc.
Class A Certificates $
Class B Certificates $
A-1
<PAGE>
SCHEDULE II
FORM OF SERVICER'S CERTIFICATE
J.P. Morgan Securities Inc.
60 Wall Street
New York, New York 10260
Attention:
Re: Pooling and Servicing Agreement dated as of March __, 1997
(as amended, supplemented or otherwise modified and in
effect, the "Pooling and Servicing Agreement") between First
Security Bank, N.A., as seller and servicer and Bankers
Trust Company, as trustee AND COLLATERAL AGENT
Determination Date to which this Certificate relates:
___________________, ____
For Monthly Period ending on ____________, ____
1. The undersigned Servicing Officer does hereby certify that the
Class A Pool Factor is ______________.
2. The undersigned Servicing Officer does hereby certify that the
Class B Pool Factor is _____________________ .
3. Capitalized terms used in this Certificate shall have the same
meanings as in the Pooling and Servicing Agreement.
IN WITNESS WHEREOF, I have hereunto set my hand as of the
above-referenced Determination Date.
_________________, as Servicer
By:_________________________________
Servicing Officer
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<PAGE>
EXHIBIT 4.1
================================================================================
FIRST SECURITY BANK, N.A.
AS SELLER AND SERVICER,
AND
BANKERS TRUST COMPANY
AS TRUSTEE
ON BEHALF OF THE CERTIFICATEHOLDERS
AND AS COLLATERAL AGENT
POOLING AND SERVICING AGREEMENT
DATED AS OF MARCH __, 1997
FIRST SECURITY AUTO GRANTOR TRUST 1997-A
_____% ASSET BACKED CERTIFICATES, CLASS A
_____% ASSET BACKED CERTIFICATES, CLASS B
================================================================================
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I
DEFINITIONS
Section 1.1 Definitions.....................................................1
Section 1.2 Usage of Terms.................................................19
Section 1.3 Calculations...................................................19
Section 1.4 References.....................................................19
Section 1.5 Section References.............................................19
Section 1.6 Action by or Consent of Certificateholders.....................19
ARTICLE II
THE TRUST PROPERTY
Section 2.1 Conveyance of Trust Property...................................19
Section 2.2 Warranties of the Seller as to Each Receivable.................20
Section 2.3 Warranties as to the Receivables in the Aggregate and Actions of
the Seller.....................................................23
Section 2.4 Repurchase upon Breach.........................................25
Section 2.5 Custody of Receivable Files....................................25
Section 2.6 Duties of the Servicer as Custodian............................26
Section 2.7 Instructions; Authority to Act.................................27
Section 2.8 Custodian's Indemnification....................................27
Section 2.9 Effective Period and Termination...............................27
ARTICLE III
ADMINISTRATION AND SERVICING OF THE TRUST PROPERTY
Section 3.1 Duties of the Servicer.........................................28
Section 3.2 Collection of Receivable Payments; Credit Deferrals; Optional
Payment Deferrals..............................................31
Section 3.3 Realization upon Receivables...................................32
Section 3.4 Physical Damage Insurance......................................33
Section 3.5 Maintenance of Security Interests in Financed Vehicles.........34
Section 3.6 Covenants of the Servicer......................................34
Section 3.7 Purchases by the Servicer......................................34
Section 3.8 Servicing Compensation.........................................35
Section 3.9 Servicer's Certificate.........................................35
Section 3.10 Annual Statement as to Compliance..............................36
Section 3.11 Independent Certified Public Accountants' Reports..............36
Section 3.12 Access to Certain Documentation and Information Regarding
Receivables....................................................36
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<PAGE>
Section 3.13 Reports to the Commission......................................37
Section 3.14 Reports to the Rating Agencies.................................37
ARTICLE IV
DISTRIBUTIONS; RESERVE ACCOUNT;
STATEMENTS TO CERTIFICATEHOLDERS
Section 4.1 Establishment of Accounts......................................37
Section 4.2 Collections....................................................41
Section 4.3 Advances.......................................................43
Section 4.4 Additional Deposits; Net Deposits..............................43
Section 4.5 Distributions..................................................44
Section 4.6 Reserve Account................................................45
Section 4.7 Statements to Certificateholders...............................45
ARTICLE V
YIELD SUPPLEMENT ACCOUNT
Section 5.1 Yield Supplement Agreement.....................................47
Section 5.2 Yield Supplement Account.......................................47
ARTICLE VI
THE CERTIFICATES
Section 6.1 The Certificates...............................................50
Section 6.2 Authentication of Certificates.................................51
Section 6.3 Registration of Transfer and Exchange of Certificates..........51
Section 6.4 Mutilated, Destroyed, Lost or Stolen Certificates..............52
Section 6.5 Persons Deemed Owners..........................................52
Section 6.6 Access to List of Certificateholders' Names and Addresses......52
Section 6.7 Maintenance of Office or Agency................................52
Section 6.8 Book-Entry Certificates........................................53
Section 6.9 Notices to Clearing Agency.....................................54
Section 6.10 Definitive Certificates........................................54
ARTICLE VII
THE SELLER
Section 7.1 Representations and Warranties of the Seller...................54
Section 7.2 Liability of the Seller; Indemnities...........................56
Section 7.3 Merger or Consolidation of the Seller..........................57
Section 7.4 Limitation on Liability of the Seller and Others...............57
Section 7.5 Seller May Own Certificates....................................57
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<PAGE>
ARTICLE VIII
THE SERVICER
Section 8.1 Representations and Warranties of the Servicer.................57
Section 8.2 Liability of the Servicer; Indemnities.........................59
Section 8.3 Merger or Consolidation of the Servicer........................60
Section 8.4 Limitation on Liability of the Servicer and Others.............60
Section 8.5 Servicer Not to Resign.........................................61
Section 8.6 Servicer May Own Certificates..................................61
ARTICLE IX
SERVICING TERMINATION
Section 9.1 Events of Servicing Termination................................61
Section 9.2 Trustee to Act; Appointment of Successor Servicer..............63
Section 9.3 Effect of Servicing Transfer...................................63
Section 9.4 Notification to Certificateholders.............................64
Section 9.5 Waiver of Past Events of Servicing Termination.................64
Section 9.6 Transfer of Accounts...........................................64
ARTICLE X
THE TRUSTEE
Section 10.1 Acceptance by Trustee..........................................65
Section 10.2 Duties of Trustee..............................................65
Section 10.3 Trustee's Certificate..........................................66
Section 10.4 Trustee's Assignment of Purchased Receivables..................66
Section 10.5 Certain Matters Affecting the Trustee..........................67
Section 10.6 Trustee Not Liable for Certificates or Receivables.............68
Section 10.7 Trustee May Own Certificates...................................69
Section 10.8 Trustee's Fees and Expenses....................................69
Section 10.9 Trustee May Enforce Claims Without Possession of Certificates..70
Section 10.10 Eligibility Requirements for Trustee...........................70
Section 10.11 Resignation or Removal of Trustee and Collateral Agent.........70
Section 10.12 Successor Trustee..............................................71
Section 10.13 Merger or Consolidation of Trustee.............................71
Section 10.14 Appointment of Co-Trustee or Separate Trustee..................72
Section 10.15 Representations and Warranties of Trustee......................73
Section 10.16 Reports by Trustee.............................................73
Section 10.17 Tax Accounting.................................................74
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<PAGE>
ARTICLE XI
TERMINATION
Section 11.1 Termination of the Trust.......................................74
Section 11.2 Optional Purchase of All Receivables...........................75
ARTICLE XII
MISCELLANEOUS PROVISIONS
Section 12.1 Amendment......................................................75
Section 12.2 Protection of Title to Trust...................................76
Section 12.3 Limitation on Rights of Certificateholders.....................78
Section 12.4 Governing Law..................................................78
Section 12.5 Notices........................................................79
Section 12.6 Severability of Provisions.....................................79
Section 12.7 Assignment.....................................................79
Section 12.8 Certificates Nonassessable and Fully Paid......................79
Section 12.9 Intention of Parties...........................................79
Section 12.10 Counterparts...................................................80
Section 12.11 Limitation of Liability of the Trustee and the Collateral
Agent ........................................................80
SCHEDULES
Schedule A Schedule of Receivables
Schedule B Location of Receivable Files
EXHIBITS
Exhibit A Form of Class A Certificate
Exhibit B Form of Class B Certificate
Exhibit C Form of Servicer's Certificate
Exhibit D Form of Depository Agreement
Exhibit E Form of Yield Supplement Agreement
-iv-
<PAGE>
POOLING AND SERVICING AGREEMENT
POOLING AND SERVICING AGREEMENT, dated as of March __, 1997 (as
amended, supplemented or otherwise modified and in effect, this "AGREEMENT"), by
and among FIRST SECURITY BANK, N.A., a national banking association, as Seller
and Servicer, and BANKERS TRUST COMPANY, a New York banking corporation, as
trustee hereunder (in such capacity, the "TRUSTEE") and as collateral agent with
respect to the Reserve Account and the Yield Supplement Account (in such
capacity, the "COLLATERAL AGENT") .
In consideration of the premises and of the mutual agreements herein
contained, and other good and valuable consideration, the receipt of which is
acknowledged, the parties hereto, intending to be legally bound, agree as
follows:
ARTICLE
DEFINITIONS
Section 1.1 DEFINITIONS. Whenever used in this Agreement, the
following words and phrases, unless the context otherwise requires, whenever
capitalized shall have the following meanings:
"ACCOUNTS" mean, collectively, the Certificate Account, the Class A
Distribution Account and the Class B Distribution Account.
"ACCOUNT PROPERTY" means all amounts and investments held from time to
time in any Account, the Reserve Account or the Yield Supplement Account, as the
case may be (whether in the form of deposit accounts, Physical Property,
book-entry securities, uncertificated securities or otherwise), and all proceeds
of the foregoing.
"ADVANCES" shall have the meaning specified in Section 4.3.
"AFFILIATE" means, with respect to any Person, any other Person
directly or indirectly controlling, controlled by, or under direct or indirect
common control with such specified Person. For purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"AGGREGATE NET LOSSES" means, for any Collection Period, the aggregate
amount allocable to principal of all Receivables newly designated during such
Collection Period as Defaulted Receivables minus all Liquidation Proceeds to the
extent allocable to principal collected during such Collection Period with
respect to all Defaulted Receivables (whether or not newly designated as such).
<PAGE>
"AMOUNT FINANCED" in respect of a Receivable means the amount advanced
under the Receivable and related costs and shown as such in the contract
evidencing such Receivable and as disclosed for truth-in-lending purposes.
"AUTHORIZED OFFICER" means any officer within the Corporate Trust
Office of the Trustee, including any managing director, vice president,
assistant vice president, assistant treasurer, assistant secretary or any other
officer of the Trustee customarily performing functions similar to those
performed by any of the above designated officers and having direct
responsibility for the administration of this Agreement and also, with respect
to a particular matter, any other officer to whom such matter is referred
because of such officer's knowledge of and familiarity with the particular
subject.
"AVAILABLE INTEREST" means, with respect to any Distribution Date, the
excess of (a) the sum of (i) Interest Collections, (ii) the Yield Supplement
Amount for such Distribution Date and (iii) all Advances made by the Servicer
with respect to such Distribution Date pursuant to Section 4.3(a), over (b) the
amount of Outstanding Advances to be reimbursed on or with respect to such
Distribution Date pursuant to Section 4.3(c).
"AVAILABLE PRINCIPAL" means, with respect to any Distribution Date,
the sum of the following amounts with respect to the related Collection Period:
(i) that portion of all Collections received during such Collection Period and
allocable to principal in accordance with the terms of the Receivables and the
Servicer's customary servicing procedures; (ii) to the extent attributable to
principal, the Purchase Amount received with respect to each Receivable
repurchased by the Seller or purchased by the Servicer under an obligation which
arose during the related Collection Period; and (iii) all Liquidation Proceeds,
to the extent allocable to principal. "Available Principal" on any Distribution
Date shall exclude all payments and proceeds of any Receivables the Purchase
Amount of which has been distributed on a prior Distribution Date.
"AVAILABLE RESERVE AMOUNT" shall mean, for each Distribution Date, an
amount equal to the lesser of (i) the amount on deposit in the Reserve Account
(exclusive of investment earnings) and (ii) the Specified Reserve Account
Balance.
"AVERAGE DELINQUENCY RATIO" means, as of any Distribution Date, the
average of the Delinquency Ratios for the preceding three Collection Periods.
"AVERAGE NET LOSS RATIO" means, as of any Distribution Date, the
average of the Net Loss Ratios for the preceding three Collection Periods.
"BASIC SERVICING FEE" means, with respect to any Distribution Date, an
amount equal to the product of (i) one-twelfth of the Basic Servicing Fee Rate
and (ii) the Pool Balance as of the first day of the preceding Collection
Period.
"BASIC SERVICING FEE RATE" shall be 1.0% per annum, calculated on the
basis of a 360-day year consisting of twelve 30-day months.
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<PAGE>
"BENEFIT PLAN" has the meaning specified in Section 6.3.
"BOOK-ENTRY CERTIFICATES" mean beneficial interests in the Definitive
Certificates, the ownership of which shall be evidenced, and transfers of which
shall be made, through book entries by a Clearing Agency as described in
Section 6.8.
"BUSINESS DAY" means a day on which the Trustee and commercial banks
located in the State of Utah, the State of Idaho and the City of New York, are
open for the purpose of conducting commercial banking business; provided,
however, that for purposes of determining any Distribution Date, the term
"Business Day" shall mean a day on which the Trustee and commercial banks
located in the State of New York generally and the City of New York are open for
the purpose of conducting a commercial banking business.
"CERTIFICATE" means any Class A Certificate or Class B Certificate.
"CERTIFICATE ACCOUNT" means the account or accounts established and
maintained as such pursuant to Section 4.1.
"CERTIFICATE OWNER" means, with respect to a Book-Entry Certificate,
the Person who is the owner of such Book-Entry Certificate, as reflected on the
books of the Clearing Agency, or on the books of a Person maintaining an account
with such Clearing Agency (directly or as an indirect participant, in accordance
with the rules, regulations and procedures of such Clearing Agency).
"CERTIFICATE REGISTER" means the register maintained by the Trustee
for the registration of Certificates and of transfers and exchanges of
Certificates as provided in Section 6.3.
"CERTIFICATEHOLDER" means the Person in whose name a Certificate shall
be registered in the Certificate Register, except that, solely for the purpose
of giving any consent, request or waiver pursuant to this Agreement, the
interest evidenced by any Certificate registered in the name of the Seller, the
Servicer, or any Person actually known to an Authorized Officer of the Trustee
to be an Affiliate of the Seller or the Servicer, shall not be taken into
account in determining whether the requisite percentage necessary to effect any
such consent, request or waiver shall have been obtained.
"CLASS A CERTIFICATE" means a certificate executed by the Trustee on
behalf of the Trust and authenticated by the Trustee, substantially in the form
of Exhibit A hereto.
"CLASS A CERTIFICATEHOLDER" or "CLASS A HOLDER" means the Person in
whose name a Class A Certificate shall be registered in the Certificate
Register, except that, solely for the purpose of giving any consent, request or
waiver pursuant to this Agreement, the interest evidenced by any Class A
Certificate registered in the name of the Seller, the Servicer, or any Person
actually known to an Authorized Officer of the Trustee to be an Affiliate of the
Seller or the Servicer, shall not be taken into account in determining whether
the requisite percentage necessary to effect any such consent, request or waiver
shall have been obtained.
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<PAGE>
"CLASS A CERTIFICATE BALANCE" at any time, means the Original Class A
Certificate Balance as reduced by all amounts allocable to principal on the
Class A Certificates distributed to Class A Certificateholders prior to such
time.
"CLASS A CERTIFICATE OWNER" means, with respect to a Book-Entry
Certificate representing a beneficial interest in the Class A Certificates, the
Person who is the owner of such Book-Entry Certificate, as reflected on the
books of the Clearing Agency, or on the books of a Person maintaining an account
with such Clearing Agency (directly or as an indirect participant in accordance
with the rules, regulations and procedures of such Clearing Agency).
"CLASS A DISTRIBUTION ACCOUNT" means the account established and
maintained as such pursuant to Section 4.1.
"CLASS A INTEREST CARRYOVER SHORTFALL" means, (i) with respect to the
initial Distribution Date, zero and (ii) with respect to any other Distribution
Date, the excess of Class A Monthly Interest for the preceding Distribution Date
and any outstanding Class A Interest Carryover Shortfall on such preceding
Distribution Date, over the amount in respect of interest that is actually
deposited into the Class A Distribution Account on such preceding Distribution
Date, plus 30 days of interest on such excess, to the extent permitted by law,
at the Class A Pass-Through Rate.
"CLASS A INTEREST DISTRIBUTION" means, with respect to any
Distribution Date, the sum of Class A Monthly Interest for such Distribution
Date and the Class A Interest Carryover Shortfall for such Distribution Date.
"CLASS A MONTHLY INTEREST" means, with respect to any Distribution
Date, one-twelfth of the Class A Pass-Through Rate multiplied by the Class A
Certificate Balance as of the preceding Distribution Date (after giving effect
to any distributions made on such Distribution Date) or, in the case of the
first Distribution Date, as March 15, 1997.
"CLASS A MONTHLY PRINCIPAL" means, with respect to any Distribution
Date, the Class A Percentage of Available Principal for such Distribution Date
plus the Class A Percentage of Realized Losses (to the extent allocable to
principal) with respect to the related Collection Period.
"CLASS A PASS-THROUGH RATE" means ____% per annum, calculated on the
basis of a 360-day year consisting of twelve 30-day months.
"CLASS A PERCENTAGE" means a fraction the numerator of which is the
Original Class A Certificate Balance and the denominator of which is the
Original Class A Certificate Balance plus the Original Class B Certificate
Balance.
"CLASS A POOL FACTOR" means, with respect to any Distribution Date,
the Class A Certificate Balance as of the immediately preceding Distribution
Date (after giving effect to any payments made on such Distribution Date)
divided by the Original Class A Certificate Balance, expressed as a seven-digit
decimal.
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<PAGE>
"CLASS A PRINCIPAL CARRYOVER SHORTFALL" means, (i) with respect to the
initial Distribution Date, zero and (ii) with respect to any other Distribution
Date, the excess of Class A Monthly Principal for such Distribution Date and any
outstanding Class A Principal Carryover Shortfall from the preceding
Distribution Date over the amount in respect of principal that is actually
deposited into the Class A Distribution Account on such Distribution Date.
"CLASS A PRINCIPAL DISTRIBUTION" means, with respect to the initial
Distribution Date, the Class A Monthly Principal for such Distribution Date and,
with respect to any Distribution Date other than the initial Distribution Date,
the sum of Class A Monthly Principal for such Distribution Date and the Class A
Principal Carryover Shortfall as of the close of the preceding Distribution
Date. In addition, on the Final Scheduled Distribution Date, the Class A
Principal Distribution shall include the lesser of (i) the Class A Percentage of
any Scheduled Payment of principal due and remaining unpaid on each Receivable
as of the related Distribution Date and (ii) the amount that is necessary (after
giving effect to the other amounts described above to be distributed to the
Class A Certificateholders on such Distribution Date and allocable to principal)
to reduce the Class A Certificate Balance to zero, subject to the availability
of funds therefor.
"CLASS B CERTIFICATE" means a certificate executed by the Trustee on
behalf of the Trust and authenticated by the Trustee, substantially in the form
of Exhibit B hereto.
"CLASS B CERTIFICATEHOLDER" or "CLASS B HOLDER" means the Person in
whose name a Class B Certificate shall be registered in the Certificate
Register, except that, solely for the purpose of giving any consent, request or
waiver pursuant to this Agreement, the interest evidenced by any Class B
Certificate registered in the name of the Seller, the Servicer, or any Person
actually known to an Authorized Officer of the Trustee to be an Affiliate of the
Seller or the Servicer, shall not be taken into account in determining whether
the requisite percentage necessary to effect any such consent, request or waiver
shall have been obtained.
"CLASS B CERTIFICATE BALANCE" at any time, equals the Original Class B
Certificate Balance, as reduced by all amounts allocable to principal on the
Class B Certificates distributed to Class B Certificateholders prior to such
time.
"CLASS B CERTIFICATE OWNER" means, with respect to a Book-Entry
Certificate representing a beneficial interest in the Class B Certificates, the
Person who is the owner of such Book-Entry Certificate, as reflected on the
books of the Clearing Agency, or on the books of a Person maintaining an account
with such Clearing Agency (directly or as an indirect participant in accordance
with the rules, regulations and procedures of such Clearing Agency).
"CLASS B DISTRIBUTION ACCOUNT" means the account established and
maintained as such pursuant to Section 4.1.
"CLASS B INTEREST CARRYOVER SHORTFALL" means, (i) with respect to the
initial Distribution Date, zero and (ii) with respect to any other Distribution
Date, the excess of Class B Monthly Interest for the preceding Distribution Date
and any outstanding Class B Interest Carryover Shortfall on such preceding
Distribution Date, over the amount in respect of interest that is actually
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deposited into the Class B Distribution Account on such preceding Distribution
Date, plus 30 days of interest on such excess, to the extent permitted by law,
at the Class B Pass-Through Rate.
"CLASS B INTEREST DISTRIBUTION" means, with respect to any
Distribution Date, the sum of Class B Monthly Interest for such Distribution
Date and the Class B Interest Carryover Shortfall for such Distribution Date.
"CLASS B MONTHLY INTEREST" means, with respect to any Distribution
Date, one-twelfth of the Class B Pass-Through Rate multiplied by the Class B
Certificate Balance as of the preceding Distribution Date (after giving effect
to any distributions made on such Distribution Date) or, in the case of the
first Distribution Date, as of the Closing Date.
"CLASS B MONTHLY PRINCIPAL" means, with respect to any Distribution
Date, the Class B Percentage of Available Principal for such Distribution Date
plus the Class B Percentage of Realized Losses with respect to the related
Collection Period.
"CLASS B PASS-THROUGH RATE" means ___% per annum, calculated on the
basis of a 360-day year consisting of twelve 30-day months.
"CLASS B PERCENTAGE" means a fraction the numerator of which is the
Original Class B Certificate Balance and the denominator of which is the
Original Class A Certificate Balance plus the Original Class B Certificate
Balance.
"CLASS B POOL FACTOR" means, with respect to any Distribution Date,
the Class B Certificate Balance as of the immediately preceding Distribution
Date (after giving effect to any payments made on such Distribution Date)
divided by the Original Class B Certificate Balance, expressed as a seven-digit
decimal.
"CLASS B PRINCIPAL CARRYOVER SHORTFALL" means, (i) with respect to the
initial Distribution Date, zero and (ii) with respect to any other Distribution
Date, the excess of Class B Monthly Principal for such Distribution Date and any
outstanding Class B Principal Carryover Shortfall from the preceding
Distribution Date over the amount in respect of principal that is actually
deposited into the Class B Distribution Account on such Distribution Date.
"CLASS B PRINCIPAL DISTRIBUTION" means, with respect to the initial
Distribution Date, the Class B Monthly Principal for such Distribution Date and,
with respect to any Distribution Date other than the initial Distribution Date,
the sum of Class B Monthly Principal for such Distribution Date and the Class B
Principal Carryover Shortfall as of the close of the preceding Distribution
Date. In addition, on the Final Scheduled Distribution Date, the Class B
Principal Distribution shall include the lesser of (i) the Class B Percentage of
any Scheduled Payment of principal due and remaining unpaid on each Receivable
as of the related Distribution Date and (ii) the amount that is necessary (after
giving effect to the other amounts described above to be distributed to the
Class B Certificateholders on such Distribution Date and allocable to principal)
to reduce the Class B Certificate Balance to zero, subject to the availability
of funds therefor.
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"CLEARING AGENCY" means an organization registered as a "clearing
agency" pursuant to Section 17A of the Securities Exchange Act of 1934, as
amended. The initial Clearing Agency shall be The Depository Trust Company.
"CLEARING AGENCY PARTICIPANT" means a broker, dealer, bank, other
financial institution or other Person for whom from time to time a Clearing
Agency effects book-entry transfers of securities deposited with the Clearing
Agency.
"CLOSING DATE" means the date of the initial issuance of the
Certificates hereunder.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COLLATERAL AGENT" means Bankers Trust Company, a New York banking
corporation, in its capacity as collateral agent for the benefit of the
Certificateholders with respect to the Reserve Account and the Yield Supplement
Account and any successor collateral agent appointed and acting pursuant to
Section 10.11.
"COLLECTION PERIOD" means, during the term of this Agreement, the
period from and including the 26th day of a calendar month to and including the
25th day of the next succeeding calendar month or, in the case of the initial
Collection Period, the period from the close of business of the Servicer on the
Cutoff Date to and including March 25, 1997. With respect to any Determination
Date, Deposit Date or Distribution Date, the "related Collection Period" shall
mean the Collection Period preceding the month in which such Determination Date,
Deposit Date or Distribution Date occurs.
"COLLECTIONS" means all collections on the Receivables.
"COMMISSION" means the Securities and Exchange Commission, or any
successor thereto.
"COMPUTER TAPE" means the computer tape generated by the Seller which
provides information relating to the Receivables and which was used by the
Seller in selecting the Receivables conveyed to the Trust hereunder.
"CONTRACT RATE" means, with respect to a Receivable, the rate per
annum of interest charged on the outstanding Principal Balance of such
Receivable.
"CONTROL" over a Security Entitlement shall be considered obtained by
the Trustee if:
(i) the Trustee is the Securities Intermediary for the Account in
which such Security Entitlement is held, or (b) the Trustee (1)
is registered on the records of the Securities Intermediary as
the person having such a Security Entitlement against the
Securities Intermediary, or (2) has obtained the agreement, in
writing, of the Securities Intermediary for such Security
Entitlement that it will comply with orders of the Trustee
regarding the sale
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or redemption of the Security Entitlement without further consent
of any other person; and
(ii) the "Securities Intermediary" for such Security Entitlement (a)
is the registered owner of the related Financial Asset, (b) is
the holder of the Security Certificate for the related Financial
Asset, or (c) holds its interest in the related Financial Asset
directly through a clearing corporation (as defined in Revised
Article 8).
"CORPORATE TRUST OFFICE" means the principal office of the Trustee at
which at any particular time its corporate trust business shall be administered,
which office at date of execution of this Agreement is located at Bankers Trust
Company, Four Albany Street, 10th Floor, New York, New York 10006, Attention:
Corporate Trust and Agency Group - Structured Finance, or at such other address
as the Trustee may designate from time to time by notice to the
Certificateholders, the Seller and the Servicer, or the principal corporate
trust office of any successor Trustee (the address of which the successor
Trustee will notify the Certificateholders, the Seller and the Servicer).
"CREDIT DEFERRAL" has the meaning specified in Section 3.2.
"CUTOFF DATE" means February 25, 1997.
"CUTOFF DATE PRINCIPAL BALANCE" means, with respect to any Receivable,
the initial Principal Balance of such Receivable minus the sum of the portion of
all payments received under such Receivable from or on behalf of the related
Obligor on or prior to the close of business of the Servicer on the Cutoff Date
and allocable to principal in accordance with the terms of the Receivable.
"DEALER" means, with respect to a Receivable, the seller of the
related Financed Vehicle, who originated and assigned the Receivable relating to
such Financed Vehicle to the Seller under a Dealer Agreement and a Dealer
Assignment.
"DEALER AGREEMENT" means an agreement between the Seller and a Dealer
relating to the assignment of Receivables to the Seller and all documents and
instruments (other than the related Dealer Assignments) relating thereto.
"DEALER ASSIGNMENT" means the executed assignment conveying a
Receivable from a Dealer to the Seller.
"DEALER LOAN" means a motor vehicle retail installment sale contract
originated by a Dealer and conveyed to the Seller pursuant to a Dealer
Assignment.
"DEFAULTED RECEIVABLE" means, with respect to any Collection Period, a
Receivable (other than a Purchased Receivable) which the Servicer, on behalf of
the Trust, has determined to charge off during such Collection Period in
accordance with its customary servicing practices; provided, however, that any
Receivable which the Seller or the Servicer is obligated to repurchase
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or purchase shall be deemed not to be a Defaulted Receivable during a Collection
Period unless the Seller or the Servicer fails to deposit the Purchase Amount on
the related Deposit Date when due, unless such Receivable is otherwise
repurchased or purchased on or prior to the last day of the Collection Period in
which such Receivable is determined to be a Defaulted Receivable.
"DEFERRAL FEE" means the fee associated with any Optional Payment
Deferral or Credit Deferral.
"DEFINITIVE CERTIFICATES" shall have the meaning specified in
Section 6.8.
"DELIVERY" when used with respect to Account Property means:
(a) with respect to Physical Property other than a certificated
security, transfer thereof to the Trustee or its nominee, agent or
custodian by physical delivery to the Trustee or its nominee, agent or
custodian endorsed to, or registered in the name of, the Trustee or its
nominee, agent or custodian or endorsed in blank, and, with respect to a
"certificated security" (as defined in Section 8-102(1)(a) of the Relevant
UCC) transfer thereof (i) by delivery of such certificated security
endorsed to, or registered in the name of, the Trustee or its nominee,
agent or custodian or endorsed in blank to a "financial intermediary" (as
defined in Section 8-313(4) of the Relevant UCC) and the making by such
financial intermediary of entries on its books and records identifying such
certificated securities as belonging to the Trustee or its nominee, agent
or custodian and the sending by such financial intermediary of a
confirmation of the purchase of such certificated security by the Trustee
or its nominee, agent or custodian, or (ii) by delivery thereof to a
"clearing corporation" (as defined in Section 8-102(3) of the Relevant UCC)
and the making by such clearing corporation of appropriate entries on its
books reducing the appropriate securities account of the transferor and
increasing the appropriate securities account of a financial intermediary
by the amount of such certificated security, the identification by the
clearing corporation of the certificated securities for the sole and
exclusive account of the financial intermediary, the maintenance of such
certificated securities by such clearing corporation or a "custodian bank"
(as defined in Section 8-102(4) of the Relevant UCC) or the nominee of
either subject to the clearing corporation's exclusive control, the sending
of a confirmation by the financial intermediary of the purchase by the
Trustee or its nominee, agent or custodian of such securities and the
making by such financial intermediary of entries on its books and records
identifying such certificated securities as belonging to the Trustee, as
applicable, or its respective nominee, agent or custodian, and, in any
event, any such Physical Property in registered form shall be in the name
of the Trustee or its nominee, agent or custodian; and such additional or
alternative procedures as may hereafter become appropriate to effect the
complete transfer of ownership of any such Account Property (as defined
herein) to the Trustee or its nominee, agent or custodian, consistent with
changes in applicable law or regulations or the interpretation thereof;
(b) with respect to any item of Account Property that is an
Uncertificated Security and that is not a Federal Book-Entry Security,
registration on the books and records of the issuer thereof in the name of
the financial intermediary, the sending of a confirmation by the
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financial intermediary of the purchase by the Trustee or its nominee, agent
or custodian of such uncertificated security, the making by such financial
intermediary of entries on its books and records identifying such
uncertificated certificates as belonging to the Trustee or its nominee,
agent or custodian; and
(c) with respect to any Federal Book-Entry Security, the following
procedures, all in accordance with applicable law, including applicable
Federal regulations and Articles 8 and 9 of the Relevant UCC: book-entry
registration of such Account Property to an appropriate book-entry account
maintained with a Federal Reserve Bank by a financial intermediary which is
also a "depository" pursuant to applicable Federal regulations and issuance
by such financial intermediary of a deposit advice or other written
confirmation of such book-entry registration to the Trustee or its nominee,
agent or custodian of the purchase by the Trustee or its nominee or
custodian of such book-entry securities; the making by such financial
intermediary of entries in its books and records identifying such
book-entry security held through the Federal Reserve System pursuant to
Federal book-entry regulations as belonging to the Trustee or its nominee,
agent or custodian and indicating that such custodian holds such Account
Property solely as agent for the Trustee or its nominee, agent or
custodian; and such additional or alternative procedures as may hereafter
become appropriate to effect the complete transfer of ownership of any such
Account Property to the Trustee or its nominee, agent or custodian,
consistent with changes in applicable law or regulations or the
interpretation thereof.
"DELINQUENCY RATIO" means, for any Collection Period, the ratio,
expressed as a percentage, of (i) the principal amount of all outstanding
Receivables (other than Purchased Receivables and Defaulted Receivables) which
are 60 or more days delinquent as of the last day of such Collection Period,
determined in accordance with the Servicer's, customary practices, divided by
(ii) the Pool Balance as of the last day of such Collection Period.
"DEPOSIT DATE" means, with respect to any Collection Period, the
Business Day preceding the related Distribution Date.
"DEPOSITORY AGREEMENT" means the agreement among the Seller, the
Servicer, the Trustee and the initial Clearing Agency, dated ____________, 1997,
substantially in the form attached hereto as Exhibit D.
"DETERMINATION DATE" means the tenth day of each month (or, if such
day is not a Business Day, the next succeeding Business Day).
"DIRECT MOTOR VEHICLE LOAN" means a Receivable that is a motor vehicle
retail installment loan originated by the Seller.
"DISTRIBUTION DATE" means the 15th day of each month (or, if such day
is not a Business Day, the next succeeding Business Day), commencing April 15,
1997.
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"ELECTRONIC LEDGER" means the electronic master record of the retail
installment sale contracts and retail installment loans of the Seller.
"ELIGIBLE DEPOSIT ACCOUNT" means either (i) a segregated account with
an Eligible Institution or (ii) a segregated trust account with the trust
department of a depository institution organized under the laws of the United
States of America or any one of the states thereof or the District of Columbia
(or any domestic branch of a foreign bank), having trust powers and acting as
trustee for funds deposited in such account, so long as the long-term unsecured
debt rating of such depository institution shall have a credit rating from each
Rating Agency in one of its generic rating categories which signifies investment
grade.
"ELIGIBLE INSTITUTION" means any depository institution with trust
powers (which may include the Seller, the Servicer or the Trustee), organized
under the laws of the United States, any state thereof, the District of Columbia
or any domestic branch of a foreign bank, having combined capital and surplus in
excess of $50,000,000, the deposits of which are insured to the full extent
permitted by law by the Federal Deposit Insurance Corporation, which is subject
to supervision and examination by Federal or state banking authorities and which
has (i) a rating of at least P-1 from Moody's and A-l from S&P with respect to
short-term deposit obligations, or (ii) if such institution has issued long-term
unsecured debt obligations, a rating of A2 or higher from Moody's and A or
higher from S&P with respect to long-term unsecured debt obligations. If such
depository institution publishes reports of condition at least annually,
pursuant to law or the requirements of the aforesaid supervising or examining
authority, then the combined capital and surplus of such corporation shall be
deemed to be its combined capital and surplus as set forth in its most recent
report of condition so published.
"ELIGIBLE INVESTMENTS" shall mean, at any time, any one or more of the
following types of investments, each of which shall mature on or prior to the
next succeeding Distribution Date:
(a) direct marketable obligations of the United States having a
maturity of not more than 30 days from the date of acquisition;
(b) marketable obligations directly and fully guaranteed by the
United States as to the full and timely payment of principal and interest
having a maturity of not more than 30 days from the date of acquisition;
(c) bankers' acceptances and certificates of deposit denominated in
U.S. Dollars in each case having a maturity of not more than 30 days from
the date of acquisition, and issued by any bank with capital, surplus and
undivided profits aggregating at least $100,000,000, the short-term
securities of which are rated at least A-l by S&P and P-1 by Moody's; and
(d) commercial paper having a maturity of not more than 30 days and
which is rated at least A-l by S&P and P-1 by Moody's;
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(e) freely redeemable shares in no-load money market funds which
invest solely in obligations, bankers' acceptances, certificates of deposit
and commercial paper of the types described in clauses (a) through (d),
without regard to the limitations as to the maturity of such obligations,
bankers' acceptances, certificates of deposit or commercial paper set forth
in such clauses, rated at least AAAm by S&P and Aaa by Moody's; and
(f) any Bankers Trust Company mutual or money market fund so long as
it shall be rated by each Rating Agency as either AAAm, Aaa (in the case of
money market funds), as an eligible investment for AAA rated transactions,
or in the highest short-term rating assigned by a particular Rating Agency.
Eligible Investments may include, if otherwise eligible pursuant to
paragraphs (a) to (e) above, debt securities of the Trustee, the Seller or any
of their Affiliates and non-money market mutual funds rated at least A2 by
Moody's for which the Trustee, the Seller or any of their Affiliates is an
investment manager or investment advisor.
"ELIGIBLE SERVICER" means (a) any Affiliate of the Seller, (b) Bankers
Trust Company or (c) any Person which, at the time of its appointment as
Servicer or as a subservicer, (i) has a net worth of not less than $50,000,000,
(ii) is servicing a portfolio of motor vehicle retail installment sale contracts
and/or motor vehicle loans, (iii) is legally qualified, and has the capacity, to
service the Receivables, (iv) has demonstrated the ability to service a
portfolio of motor vehicle retail installment sale contracts and/or motor
vehicle loans similar to the Receivables professionally and competently in
accordance with standards of skill and care that are consistent with prudent
industry standards, and (v) 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 or any subservicer uses in connection with
performing its duties and responsibilities under this Agreement or the related
subservicing agreement or obtains rights to use, or develops at its own expense,
software which is adequate to perform its duties and responsibilities under this
Agreement or the related subservicing agreement.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"EVENT OF SERVICING TERMINATION" means an event specified in
Section 9.1.
"FEDERAL BOOK-ENTRY SECURITY" means an obligation issued by the U.S.
Treasury, the Federal Home Loan Mortgage Corporation or the Federal National
Mortgage Association, or any other direct obligation of, or obligation fully
guaranteed as to timely payment of principal and interest by, the United States
of America, that is a book-entry security held through the Federal Reserve
System pursuant to Federal book-entry regulations.
"FINANCIAL ASSET" has the meaning given such term in Revised Article
8. As used herein, the Financial Asset "related to" a Security Entitlement is
the Financial Asset in which the entitlement holder (as defined in Revised
Article 8) holding such Security Entitlement has the rights and property
interest specified in Revised Article 8.
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"FINAL SCHEDULED DISTRIBUTION DATE" means the August 15, 2003
Distribution Date.
"FINAL SCHEDULED MATURITY DATE" means the last day of the Collection
Period preceding the Final Scheduled Distribution Date.
"FINANCED VEHICLE" means the Motor Vehicle, together with all
accessions thereto, securing an Obligor's indebtedness under a Receivable.
"INSURANCE POLICIES" means all comprehensive and collision, fire and
theft insurance policies maintained by the Obligors naming the Seller as an
additional insured or loss payee and any credit and disability and physical
damage insurance policies maintained by the Obligors and benefitting any holder
of the Receivables.
"INTEREST COLLECTIONS" means, for any Distribution Date, the sum of
the following amounts for the related Collection Period: (i) that portion of
the Collections on the Receivables received during the related Collection Period
that is allocable to interest in accordance with the Servicer's customary
procedures, (ii) all Liquidation Proceeds, to the extent allocable to interest,
(iii) all Recoveries and (iv) to the extent attributable to accrued interest,
the Purchase Amount of all Receivables that are repurchased or purchased by the
Seller or the Servicer as of any day in the related Collection Period.
"Interest Collections" for any Distribution Date shall exclude all payments and
proceeds of any Receivables the Purchase Amount of which has been distributed on
a prior Distribution Date.
"LIQUIDATION PROCEEDS" means, with respect to any Distribution Date
and a Receivable that became a Defaulted Receivable during the related
Collection Period, (i) insurance proceeds received during such Collection Period
by the Servicer, with respect to insurance policies relating to the Financed
Vehicles or the Obligors, (ii) amounts received by the Servicer during such
Collection Period from a Dealer in connection with such Defaulted Receivable
pursuant to the exercise of rights under a Dealer Agreement, and (iii) the
monies collected by the Servicer (from whatever source, including proceeds of a
sale of a Financed Vehicle or deficiency balance recovered after the charge-off
of the related Receivable) during such Collection Period on such Defaulted
Receivable net of any expenses incurred by the Servicer in connection with the
collection of such Receivable and the disposition of the Financed Vehicle and
any payments required by law to be remitted to the Obligor, but, in any event,
not less than zero. Liquidation Proceeds shall be applied first to accrued and
unpaid interest on the Receivable and then to the Principal Balance thereof.
"MOODY'S" means Moody's Investors Service, Inc.
"MOTOR VEHICLE" means a new or used automobile or light-duty truck
which is the subject of a retail installment sale contract originated by a
dealer or a retail installment loan originated by the Seller.
"NET LOSS RATIO" means, for any Collection Period, an amount,
expressed as a percentage, equal to (i) the Aggregate Net Losses minus
Recoveries for such Collection Period,
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divided by (ii) the average of the Pool Balances on each of the first day of
such Collection Period and the last day of such Collection Period.
"OBLIGOR" means the purchaser or the co-purchasers of a Financed
Vehicle purchased in part or in whole by the execution and delivery of the
related Receivable or the borrower or co-borrowers under the related Receivables
the proceeds of which were applied to purchase in part or in whole the Financed
Vehicle, and any other co-signer of the Receivable who owes or may be liable for
payments under such Receivable.
"OFFICER'S CERTIFICATE" means a certificate signed by the chairman,
the president, any vice president or the treasurer of the Seller or the
Servicer, as the case may be, and delivered to the Trustee.
"OPINION OF COUNSEL" means a written opinion of counsel (who may be
outside counsel to the Seller or the Servicer) acceptable in form to the
Trustee.
"OPTIONAL PAYMENT DEFERRAL" shall have the meaning specified in
Section 3.2(c).
"ORIGINAL CERTIFICATE BALANCE" means the sum of the Original Class A
Certificate Balance and the Original Class B Certificate Balance.
"ORIGINAL CLASS A CERTIFICATE BALANCE" means $________________.
"ORIGINAL CLASS B CERTIFICATE BALANCE" means $_________________.
"ORIGINAL POOL BALANCE'' means, as of the Cutoff Date,
$300,071,473.85.
"OUTSTANDING ADVANCES" means, with respect to any Distribution Date,
the aggregate of all Advances made by the Servicer with respect to prior
Distribution Dates that have not been reimbursed pursuant to Section 4.3(c).
"PASS-THROUGH RATE" means the Class A Pass-Through Rate and the Class
B Pass-Through Rate.
"PERSON" means a legal person, including any individual, corporation,
limited liability company, estate, partnership, joint venture, association,
joint stock company, trust, unincorporated organization, or government or any
agency or political subdivision thereof, or any other entity of whatever nature.
"PHYSICAL PROPERTY" means (i) bankers' acceptances, commercial paper,
negotiable certificates of deposit and other obligations that constitute
"instruments" within the meaning of Section 9-105(1)(i) of the Relevant UCC and
are susceptible of physical delivery and (ii) certificated securities (as
defined in Section 8-102 of the Relevant UCC).
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"POOL BALANCE" means, on any date of determination, the aggregate
outstanding Principal Balance of the Receivables on such date.
"PRINCIPAL BALANCE" means, as of any time, for any Receivable, the
Cutoff Date Principal Balance minus the sum of the portions of all payments
received from or on behalf of the related Obligor after the close of business of
the Servicer on the Cutoff Date and prior to such time that are allocable to
principal in accordance with the terms of the Receivable plus the amount of any
Deferral Fee.
"PURCHASE AMOUNT" of any Receivable means, with respect to any Deposit
Date, an amount equal to the sum of (i) the outstanding Principal Balance of
such Receivable as of the last day of the related Collection Period and (ii) an
amount equal to the amount of accrued and unpaid interest on such Principal
Balance at the related Contract Rate through the last day of the related
Collection Period, in each case, after giving effect to Collections on such
Receivable in such Collection Period.
"PURCHASED RECEIVABLE" means, on any date of determination, a
Receivable as to which payment of the Purchase Amount has been made by the
Seller or the Servicer pursuant to this Agreement.
"RATING AGENCY" means at any time any nationally recognized
statistical rating agency providing a rating for the Certificates at the request
of the Seller at such time.
"REALIZED LOSSES" means, with respect to any Distribution Date and a
Receivable that became a Defaulted Receivable during the related Collection
Period, the excess of (i) the aggregate Principal Balance of such Receivable as
of the first day of the related Collection Period over (ii) Liquidation Proceeds
received with respect to such Receivable during such Collection Period to the
extent allocable to principal.
"RECEIVABLE" means a motor vehicle retail installment sale contract or
a motor vehicle retail installment loan described in the Schedule of
Receivables, but excluding any Purchased Receivables.
"RECEIVABLE FILE" means, with respect to a Receivable, the electronic
entries, documents, instruments and writings specified in Section 2.5.
"RECORD DATE" means, with respect to each Collection Period and the
related Distribution Date, the day immediately preceding such Distribution Date
(or, if Definitive Certificates are issued, the last day of such Collection
Period).
"RECOVERIES" means, with respect to any Distribution Date, all monies
received by the Servicer with respect to any Defaulted Receivable during the
related Collection Period if such Collection Period follows the Collection
Period in which such Receivable became a Defaulted Receivable, net of the sum of
(i) any expenses incurred by the Servicer in connection with the collection of
such Receivable and the disposition of the Financed Vehicle (to the extent not
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previously reimbursed) and (ii) any payments required by law to be remitted to
the Obligor, but, in any event, not less than zero.
"RELEVANT UCC" shall mean the Uniform Commercial Code as in effect in
the relevant jurisdiction, as amended from time to time.
"REQUIRED RATING" means a rating with respect to short-term deposit
obligations of at least P-1 by Moody's and at least A-1 by S&P.
"RESERVE ACCOUNT" means the fund established pursuant to Section 4.1
and maintained as such pursuant to Section 4.6.
"RESERVE ACCOUNT INITIAL DEPOSIT" means, with respect to the Closing
Date, $___________________.
"REVISED ARTICLE 8" means Revised Article 8 (1994 Version) (and
corresponding amendments to Article 9) as promulgated in 1994 by the National
Conference of Commissioners on Uniform State Laws. From and after the Revised
Article 8 Effective Date, "Revised Article 8" means such version in the form in
which it is adopted in the State of New York.
"REVISED ARTICLE 8 EFFECTIVE DATE" means the date (if any) on which
Revised Article 8 (with such changes thereto as shall be effected by the State
of New York) becomes effective in the State of New York.
"S&P" means Standard & Poor's Ratings Service, a Division of the
McGraw Hill Companies.
"SCHEDULE OF RECEIVABLES" means the list identifying the Receivables
attached hereto as Schedule A.
"SCHEDULED PAYMENT" means, for any Collection Period for any
Receivable, the amount indicated in such Receivable as required to be paid by
the Obligor in such Collection Period (without giving effect to deferments of
payments pursuant to Section 3.2 or any rescheduling in any insolvency or
similar proceedings).
"SECURITY CERTIFICATE" has the meaning given such term in Revised
Article 8.
"SECURITY ENTITLEMENT" has the meaning given such term in Revised
Article 8.
"SELLER" means First Security Bank, N.A. (including all Persons merged
into or otherwise consolidated with, and all other predecessors thereto) in its
capacity as seller of the Receivables to the Trust under this Agreement, and
each successor thereto (in the same capacity) pursuant to Section 7.3.
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"SERVICER" means First Security Bank, N.A., in its capacity as
servicer of the Receivables under this Agreement, each successor thereto (in the
same capacity) pursuant to Section 8.3, and each successor servicer appointed
and acting pursuant to Section 9.2.
"SERVICER'S CERTIFICATE" has the meaning specified in Section 3.9.
"SERVICING OFFICER" means any officer of the Servicer involved in, or
responsible for, the administration and servicing of the Receivables, whose name
appears on a list of servicing officers attached to an Officer's Certificate
furnished to the Trustee by the Servicer on the Closing Date, as such list may
be amended from time to time by the Servicer in writing.
"SIMPLE INTEREST METHOD" means the method of allocating a fixed level
payment between principal and interest, pursuant to which the portion of such
payment that is allocated to interest is equal to the product of the Contract
Rate multiplied by the unpaid principal balance multiplied by the period of time
elapsed since the preceding payment of interest was made and the remainder of
such payment is allocable to principal.
"SIMPLE INTEREST RECEIVABLE" means any Receivable under which the
portion of a payment allocable to interest and the portion allocable to
principal is determined in accordance with the Simple Interest Method.
"SPECIFIED RESERVE ACCOUNT BALANCE" with respect to any Distribution
Date, means [4.50]% of the Pool Balance as of the last day of the preceding
Collection Period, but in any event will not be less than the lesser of (i)
$____________ and (ii) the sum of such Pool Balance and an amount sufficient to
pay interest on (a) the Class A Percentage of such Pool Balance at a rate equal
to the sum of the Class A Pass-Through Rate and the Basic Servicing Fee Rate
through the Final Distribution Date and (b) the Class B Percentage of such Pool
Balance at a rate equal to the sum of the Class B Pass-Through Rate and the
Basic Servicing Fee Rate through the Final Scheduled Distribution Date; provided
that the Specified Reserve Account Balance will be calculated using a percentage
of [9.00]% for any Distribution Date (beginning ___________, 1997) on which the
Average Net Loss Ratio exceeds ____% or the Average Delinquency Ratio exceeds
____%. The Specified Reserve Account Balance may be reduced to a lesser amount
as determined by the Seller; provided that such reduction does not adversely
affect the ratings of the Certificates by the Rating Agencies.
"SPECIFIED YIELD SUPPLEMENT BALANCE" means, with respect to any
Distribution Date, an amount equal to at least the sum of all projected Yield
Supplement Amounts for all future Distribution Dates, assuming that future
scheduled payments on the Receivables are made on their scheduled due dates;
provided that if on any date the Seller shall fail to pay the amount payable
under the Yield Supplement Agreement in accordance with the terms thereof, then,
in such event, the Specified Yield Supplement Balance shall not thereafter be
reduced hereunder.
"SUPPLEMENTAL SERVICING FEE" shall have the meaning set forth in
Section 3.8.
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"TRADES" means regulations promulgated by the U.S. Department of the
Treasury governing book-entry Treasury bonds, notes and bills, 31 C.F.R. Part
357, which replace prior Treasury regulations and which designate Revised
Article 8 as the applicable governing law.
"TRADES EFFECTIVE DATE" means with respect to a Federal Book-Entry
Security, the date (which is January 1, 1997, in the case of securities issued
by the U.S. Treasury) on which TRADES or an equivalent set of regulations
becomes effective.
"TRANSFER DATE" means, with respect to any Distribution Date, the
Business Day preceding such Distribution Date.
"TRUST" means the First Security Auto Grantor Trust 1997-A created by
this Agreement.
"TRUSTEE" means Bankers Trust Company, a New York banking corporation,
as Trustee under this Agreement, or any successor, and any successor trustee
appointed and acting pursuant to Sections 10.11 and 10.12.
"TRUST PROPERTY" means the Receivables; all monies received under the
Receivables after the close of business of the Servicer on the Cutoff Date; the
Certificate Account, the Class A Distribution Account and the Class B
Distribution Account and such amounts as from time to time may be held therein
(including the Account Property related thereto); security interests in the
Financed Vehicles; all rights of the Trust under the Yield Supplement Agreement;
the Seller's rights (if any) to receive proceeds from claims on Insurance
Policies covering the Financed Vehicles or the Obligors; the Seller's rights
relating to the Receivables under the Dealer Agreements and Dealer Assignments;
the Seller's rights to all documents and information contained in the Receivable
Files; the rights of the Trust under this Agreement; and all proceeds (within
the meaning of the Relevant UCC) of the foregoing. Notwithstanding anything to
the contrary contained herein, the Trust Property shall not include, and the
Trust shall not have any right to, the Reserve Account, the Yield Supplement
Account, any funds actually or deemed to be deposited in such accounts or any
investments therein or any amounts paid by the Servicer for physical damage
insurance pursuant to Section 3.4.
"UNCERTIFICATED SECURITY" as of any date, has the meaning given to
such term under the Relevant UCC as in effect on such date.
"YIELD SUPPLEMENT ACCOUNT" shall mean the account established,
maintained and designated as the "Yield Supplement Account" pursuant to Section
5.2.
"YIELD SUPPLEMENT ACCOUNT PROPERTY" shall have the meaning set forth
in Section 5.2.
"YIELD SUPPLEMENT AGREEMENT" means the Yield Supplement Agreement
dated as of the Closing Date between the Seller and the Trustee, substantially
in the form attached hereto as Exhibit E.
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"YIELD SUPPLEMENT AMOUNT" shall have the meaning specified in Section
5.l.
"YIELD SUPPLEMENT INITIAL DEPOSIT" means cash or Eligible Investments
having a value of at least $____________________.
Section 1.2 USAGE OF TERMS. With respect to all terms used in this
Agreement, the singular includes the plural and the plural the singular; words
importing any gender include the other gender; references to "writing" include
printing, typing, lithography, and other means of reproducing words in a visible
form; references to agreements and other contractual instruments include all
subsequent amendments thereto or changes therein entered into in accordance with
their respective terms and not prohibited by this Agreement; references to
Persons include their permitted successors and assigns; and the terms "include"
or "including" mean "include without limitation" or "including without
limitation."
Section 1.3 CALCULATIONS. All calculations of the amount of
interest accrued on the Certificates during any Collection Period and all
calculations of the amount of the Basic Servicing Fee payable with respect to a
Collection Period shall be made on the basis of a 360-day year consisting of
twelve 30-day months.
Section 1.4 REFERENCES. All references to the first day of a
Collection Period shall refer to the opening of business on such day. All
references to the last day of a Collection Period shall refer to the close of
business of the Servicer on such day.
Section 1.5 SECTION REFERENCES. All section references shall be to
Sections in this Agreement unless otherwise specified.
Section 1.6 ACTION BY OR CONSENT OF CERTIFICATEHOLDERS. Whenever
any provision of this Agreement refers to action to be taken, or consented to,
by Certificateholders, such provision shall be deemed to refer to
Certificateholders of record as of the Record Date immediately preceding the
date on which such action is to be taken, or consented to by Certificateholders.
ARTICLE
THE TRUST PROPERTY
Section 2.1 CONVEYANCE OF TRUST PROPERTY. In consideration of the
Trustee's delivery to, or upon the written order of, the Seller of authenticated
Certificates, in authorized denominations, in an aggregate amount equal to the
Original Certificate Balance and the rights to receive certain amounts as
specified herein, the Seller hereby sells, transfers, assigns and conveys to the
Trustee, on the behalf of the Trust, for the benefit of the Certificateholders,
upon the terms and conditions hereof, the Trust Property to the Trust, without
recourse. The sale, transfer, assignment and conveyance made hereunder shall
not constitute and is not intended to result in an assumption by the Trustee,
any Certificateholder or any Certificate Owner of any obligation of the Seller
to the
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Obligors, the Dealers, or any other Person in connection with the Receivables
and the other Trust Property or any agreement, document or instrument related
thereto.
(b) The Seller intends that the transfer and conveyance of the Trust
Property to the Trust hereunder constitutes a complete sale and assignment of
all of the Seller's right, title and interest in, to and under the Trust
Property to the Trust and that the beneficial interest of the Seller in, and
title to, the Trust Property will not be a part of the Seller's estate in the
event of any liquidation, reorganization or similar insolvency proceeding with
respect to the Seller. In the event that the transfer hereunder is not
respected as a complete sale and assignment of the Trust Property to the Trust,
then, in such event, the Seller hereby grants to the Trustee on behalf of the
Certificateholders a security interest in the Trust Property. This Agreement
shall constitute a security agreement under applicable law.
Section 2.2 WARRANTIES OF THE SELLER AS TO EACH RECEIVABLE. The
Seller hereby makes the following warranties as to each Receivable conveyed by
it to the Trust hereunder on which the Trustee shall rely in accepting the Trust
Property in trust and authenticating the Certificates. Unless otherwise
indicated, such warranties shall speak as of the Closing Date, but shall survive
the sale, transfer, and assignment of the Receivables and the other Trust
Property to the Trust.
(i) CHARACTERISTICS OF RECEIVABLES. The Receivable has
been fully and properly executed by the parties thereto and (a) (x) has
been originated by the Seller or (y) has been originated by a Dealer for
the retail sale of a Motor Vehicle in the ordinary course of such Dealer's
business, and has been purchased by the Seller from such Dealer in the
ordinary course of the Seller's business and has been validly assigned by
such Dealer to the Seller, (b) is secured by a valid, subsisting, and
enforceable first priority security interest in favor of the Seller in the
Financed Vehicle (subject to administrative delays and clerical errors on
the part of the applicable government agency), which security interest is
assignable together with such Receivable, and has been so assigned, by the
Seller to the Trustee, (c) contains or is accompanied by a security
agreement which contains customary and enforceable provisions such that the
rights and remedies of the secured party are adequate for realization of
the benefits of the security interest in the subject collateral, (d)
provides at origination for level monthly payments (provided that the first
and the last payment may be less than or minimally more than the level
payment), which fully amortize the Amount Financed over the original term
and provides for interest at the related Contract Rate and (e) provides for
a payment that will fully pay the Principal Balance of such Receivable as
of the first day of the Collection Period in which the Receivable is
prepaid, together with interest accrued at least to the date of prepayment
at the related Contract Rate.
(ii) SCHEDULE OF RECEIVABLES. The information set forth
in the Schedule of Receivables with respect to such Receivable has been
produced from the Electronic Ledger and was true and correct as of the
close of business of the Servicer on the Cutoff Date; and the Cutoff Date
Principal Balance and the Contract Rate of the Receivable has been
accurately and correctly calculated.
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(iii) COMPLIANCE WITH LAWS. To the best knowledge of the
Seller, the Receivable, and the sale of the related Financed Vehicle,
complied at the time it was originated or made, and will comply as of the
Closing Date, in all material respects with all requirements of applicable
federal, state, and local laws, and regulations thereunder, including, to
the extent applicable, usury laws, the Federal Truth-in-Lending Act, the
Equal Credit Opportunity Act, the Fair Credit Billing Act, the Fair Credit
Reporting Act, the Fair Debt Collection Practices Act, Federal Reserve
Board Regulations B and Z, and any other consumer credit, equal
opportunity, and disclosure laws; provided, however, that if,
notwithstanding the best knowledge of the Seller, any Receivable, or the
sale of the related Financed Vehicle, fails to comply with applicable law
in the manner and to the extent set forth herein, the Seller shall
repurchase such Receivable in accordance with the terms and conditions set
forth in Section 2.4, but such failure to comply with such laws shall not
constitute a breach of this warranty except for purposes of Section 2.4.
(iv) BINDING OBLIGATION. The Receivable constitutes the
genuine, legal, valid, and binding payment obligation in writing of the
Obligor, enforceable by the holder thereof in accordance with its terms,
except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization or other similar laws affecting the enforcement
of creditors' rights generally.
(v) NO GOVERNMENT OBLIGOR. The Obligor on the
Receivable is not the United States of America or any State thereof or any
local government, or any agency, department, political subdivision or
instrumentality of the United States of America or any State thereof or any
local government.
(vi) RECEIVABLES IN FORCE. The Receivable has not been
satisfied, subordinated, or rescinded and the Financed Vehicle has not been
released from the lien granted by the Receivable in whole or in part.
(vii) NO AMENDMENT OR WAIVER. No material provision of
the Receivable has been amended, waived, altered or modified in any
respect, except pursuant to a document, instrument or writing included in
the Receivable File and reflected in the Electronic Ledger and no such
amendment, waiver, alteration or modification causes such Receivable not to
conform to the other warranties contained in this Section.
(viii) NO DEFENSES. The Receivable is not subject to any
right of rescission, setoff, counterclaim or defense, including the defense
of usury, and the operation of any of the terms of the Receivable, or the
exercise of any right thereunder, will not render the Receivable
unenforceable in whole or in part or subject to any right of rescission,
setoff, counterclaim or defense, including the defense of usury, and no
such right of rescission, setoff, counterclaim or defense has been asserted
with respect thereto.
(ix) NO LIENS. To the best knowledge of the Seller,
there are no liens or claims, including liens for work, labor, materials or
unpaid state or federal taxes
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relating to the Financed Vehicle, that are or may be liens prior to, or
equal to or coordinate with, the lien granted by the Obligor.
(x) NO DEFAULT. Except for payment delinquencies
continuing for a period of not more than 30 days as of the Cutoff Date, no
default, breach, violation, or event permitting acceleration under the
terms of any Receivable exists; and no continuing condition that with
notice or lapse of time, or both, would constitute a default, breach,
violation, or event permitting acceleration under the terms of any
Receivable has arisen; and the Seller has not waived any of the foregoing.
(xi) INSURANCE. If the Principal Balance of the
Receivable exceeds $2,000, the Financed Vehicle securing such Receivable is
insured under an Insurance Policy, the premiums for which have been paid in
full, and such Insurance Policy is in full force and effect.
(xii) GOOD TITLE. The Receivable has not been sold,
assigned, pledged or otherwise conveyed by the Seller to any Person other
than the Trust, and, immediately prior to the transfer and assignment
herein contemplated, the Seller had good and marketable title to the
Receivable free and clear of any encumbrance, equity, lien, pledge, charge,
claim, security interest or other right or interest of any other Person,
was the sole owner thereof and had full right and power to transfer and
assign the Receivable to the Trust. Immediately upon the transfer and
assignment of the Receivable to the Trust, the Trust shall have good and
marketable title to the Receivable, free and clear of any encumbrance,
equity, lien, pledge, charge, claim, security interest or other right or
interest of any other Person; and all filings and actions required by the
Relevant UCC with respect to the transfer of Receivables associated with
the sale of the same have been accomplished for the purpose of complying
with the Relevant UCC provisions governing the relative priority of
interests of parties in the Receivables.
(xiii) LAWFUL ASSIGNMENT. The Receivable has not been
originated in, and is not subject to the laws of, any jurisdiction under
which the sale, transfer, and assignment of such Receivable hereunder or
pursuant to transfers of the Certificates are unlawful, void, or voidable.
(xiv) ALL FILINGS MADE. All filings have been made,
including filings under the Relevant UCC, which are necessary in any
jurisdiction to cause the ownership and title interests of the Trust in the
Receivables to be afforded priority over competing claims of the holders of
security interests or other claims against whom such filings can assure
priority.
(xv) VALID SECURITY INTEREST. On the Closing Date, there
will exist a valid, subsisting and enforceable first priority perfected
security interest in the Financed Vehicle securing the Receivable (subject
to administrative delays and clerical errors on the part of the applicable
government agency and to any statutory or other lien arising by operation
of law after the Closing Date which is prior to such security interest).
With respect
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to the foregoing, the Seller hereby covenants to take all action necessary
such that, at such time as enforcement of such security interest is sought,
there shall exist a valid, subsisting and enforceable first priority
perfected security interest in the Financed Vehicle for the benefit of the
Trust (subject to administrative delays and clerical errors on the part of
the applicable government agency and any statutory or other lien arising by
operation of law after the Closing Date which is prior to such interest).
(xvi) CAPACITY OF PARTIES. All parties to the Receivable
had capacity to execute the Receivable.
(xvii) ONE ORIGINAL. There is only one executed original
of each Receivable, which original has been delivered by the Seller to the
Trustee as provided in Section 2.5(i).
(xviii) OBLIGATIONS; NO IMPAIRMENT. The Seller has duly
fulfilled all obligations on its part to be fulfilled under, or in
connection with, the Receivable and has done nothing to impair the rights
of the Trust, the Class A Certificateholders or the Class B
Certificateholders in the Receivable or the proceeds thereof.
(xix) NO FRAUD OR MISREPRESENTATION. To the best
knowledge of the Seller, in the case of a Receivable originated by a
Dealer, the Receivable was originated by a Dealer and sold by such Dealer
to the Seller without any conduct constituting fraud or misrepresentation
on the part of such Dealer; provided, however, that if, notwithstanding the
best knowledge of the Seller, any Receivable was originated and sold under
conduct constituting fraud or misrepresentation on the part of such Dealer,
the Seller shall repurchase such Receivable in accordance with the terms
and conditions of Section 2.4, with the existence of such conduct not
constituting a breach of this warranty, except for purposes of Section 2.4.
(xx) POSSESSION. Immediately prior to the Closing Date,
the Seller (or an Affiliate thereof) will have possession of the original
Receivable and the related Receivable File, and there are and there will be
no custodial agreements in effect materially adversely affecting the right
or ability of the Seller to make, or cause to be made, any delivery
required hereunder.
(xxi) BULK TRANSFER LAWS. The transfer, assignment and
conveyance of the Receivable and Receivable Files by the Seller pursuant to
this Agreement is not subject to the bulk transfer or any similar statutory
provisions in effect in any applicable jurisdiction.
Section 2.3 WARRANTIES AS TO THE RECEIVABLES IN THE AGGREGATE
AND ACTIONS OF THE SELLER. The Seller hereby makes the following warranties as
to the Receivables conveyed by it to the Trust hereunder on which the Trustee
shall rely in accepting the Trust Property in trust and authenticating the
Certificates. Unless otherwise indicated, such warranties shall speak as of the
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Closing Date, but shall survive the sale, transfer, and assignment of the
Receivables and the other Trust Property to the Trust.
(i) AMOUNTS. The aggregate Cutoff Date Principal
Balances of the Receivables are equal to the Original Pool Balance.
(ii) INDIVIDUAL CHARACTERISTICS. The Receivables have
the following individual characteristics as of the close of business of the
Servicer on the Cutoff Date: (a) the obligations of the Obligors on the
Receivables are secured by security interests in new or used automobiles or
light-duty trucks; (b) each Receivable has a Contract Rate of at least 6%
and not more than 14%; (c) each Receivable had a remaining maturity, as of
the Cutoff Date, of not less than six months and not more than 60 months;
(d) each Receivable had a remaining Principal Balance of not less than $100
and not more than $77,000 as of the Cutoff Date; (e) no Receivable was more
than 30 days delinquent as of the Cutoff Date; (f) no Financed Vehicle had
been repossessed as of the Cutoff Date; (g) each Receivable is a motor
vehicle retail installment sale contract or motor vehicle retail
installment loan; (h) each Receivable provides for allocation of payments
between principal and interest by the Simple Interest Method; (i) the
Dealers of the Financed Vehicles, if any, have no participation in, or
other right to receive, any proceeds of the Receivable; and (j) each
Receivable was originated on or after December 15, 1990. The Receivables
were selected utilizing selection procedures that were not adverse to the
Certificateholders.
(iii) AGGREGATE CHARACTERISTICS. The Receivables had the
following characteristics in the aggregate as of the Cutoff Date: (a)
approximately 33.29% of the Original Pool Balance was attributable to loans
for purchases of new Financed Vehicles, and approximately 66.71% of the
Original Pool Balance was attributable to loans for purchases of used
Financed Vehicles; (b) approximately 62.34% of the Original Pool Balance
was attributable to Receivables the mailing addresses of the Obligors with
respect to which are located in the States of Utah and Idaho; (c) the
weighted average Contract Rate of the Receivables was 10.009%; (d)
approximately 93.69% of the Original Pool Balance was attributable to
Receivables originated by the Seller; (e) approximately 93.69% of the
Original Pool Balance was attributable to Receivables that are Dealer
Loans; and (f) approximately 1.07% of the Original Pool Balance was
attributable to Receivables that are subject to a repurchase obligation by
the originating Dealer upon default and repossession.
(iv) COMPUTER TAPE. The Computer Tapes made available by
the Seller were complete and accurate as of the Cutoff Date and include a
description of the same Receivables that are described in the Schedule of
Receivables.
(v) MARKING RECORDS. By the Closing Date, the Seller
will have caused the portions of the Electronic Ledger relating to the
Receivables to be clearly and unambiguously marked to show that such
Receivables constitute part of the Trust Property and are owned by the
Trust in accordance with the terms of the trust created hereunder.
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(vi) NO ASSIGNMENT. As of the Closing Date, the Seller
shall not have taken any action to convey any right to any Person that
would result in such Person having a right to payments received under the
Insurance Policies, the Dealer Agreements, the Dealer Assignments or
payments due under the Receivables that is senior to, or equal with, that
of the Trust.
Section 2.4 REPURCHASE UPON BREACH. The Seller, the Servicer,
or the Trustee, as the case may be, shall inform the other parties promptly, in
writing, upon the discovery of any breach or failure to be true of the
warranties (including in the case of Sections 2.2(iii), (ix) and (xix) any
breach or failure which would have occurred if such warranty had not been made
to the best knowledge of the Seller) made by the Seller pursuant to Section 2.2
or Section 2.3. Unless the breach or failure shall have been cured by the last
day of the Collection Period which includes the 60th day after the date on which
the Seller becomes aware of, or receives written notice from the Trustee or the
Servicer of, such breach or failure, the Seller shall repurchase from the Trust,
without recourse, representation or warranty, other than that the Trustee, on
behalf of the Trust, has not imposed any liens on the Receivable to be
repurchased, any Receivable, the interests of the Trust and the
Certificateholders in which is materially and adversely affected by the breach
or failure, on the Deposit Date related to such Collection Period. Such
purchase shall occur as of the last day of such Collection Period. Any breach
of a representation relating to the status of a Receivable as a Simple Interest
Receivable or the Contract Rate of a Receivable shall be deemed to materially
and adversely affect the Certificateholders. In consideration of the repurchase
of a Receivable hereunder, the Seller shall remit the Purchase Amount of such
Receivable, no later than the close of business (New York time) on the
applicable Deposit Date, in the manner specified in Section 4.3(b). Except as
provided in Section 7.2, the sole remedy of the Trust, the Trustee, or the
Certificateholders with respect to a breach or failure to be true of the
warranties made by the Seller pursuant to Section 2.2 or Section 2.3 shall be to
require the Seller to repurchase Receivables pursuant to this Section.
Section 2.5 CUSTODY OF RECEIVABLE FILES. To assure uniform
quality in servicing the Receivables and to reduce administrative costs, the
Trustee, on behalf of the Trust, upon the execution and delivery of this
Agreement, revocably appoints the Servicer, as agent, and the Servicer accepts
such appointment and revocably appoints First Security Service Company, to act
as custodian on behalf of the Trustee of the following documents or instruments,
which are hereby constructively delivered to the Trustee with respect to each
Receivable (collectively, a "RECEIVABLE FILE"):
(i) the original of the Receivable;
(ii) any documents evidencing the existence of any
Insurance Policies;
(iii) copies of the original credit application, fully
executed by the Obligor;
(iv) either (x) the original certificate of title, or
such other documents as the Seller shall keep on file, in accordance with
its customary procedures,
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evidencing the security interest of the Seller in the Financed Vehicle or
the efforts (including the proof of application for notice of lien or other
evidence of such security interest) made by the Seller to perfect such
security interest; or (y) with respect to jurisdictions in which the
certificate of title or other evidence of ownership is not issued to the
holder of a lien, evidence of the Seller's security interest in the
Financed Vehicle (or the efforts made by the Seller to perfect such
security interest (including the proof of application for notice of lien or
other evidence of such security interest)), in each case issued by the
appropriate governmental agency of the State in which such Financed Vehicle
is registered;
(v) electronic entries and originals or true copies of
all documents, instruments or writings relating to extensions, amendments
or waivers of the Receivable;
(vi) in the case of a Dealer Loan, the Dealer Assignment;
and
(vii) any and all other documents or electronic records
that the Seller or the Servicer, as the case may be, shall keep on file, in
accordance with its customary procedures, relating to the Receivable, the
Obligor or the Financed Vehicle.
Section 2.6 DUTIES OF THE SERVICER AS CUSTODIAN. SAFEKEEPING.
The Servicer, in its capacity as custodian, shall hold, or cause an Affiliate to
hold, the Receivable Files on behalf of the Trustee for the benefit of all
present and future Certificateholders, and maintain such accurate and complete
accounts, records, and computer systems pertaining to each Receivable as shall
enable the Servicer and the Trustee to comply with the terms and provisions of
this Agreement applicable to it. In performing its duties as custodian
hereunder, the Servicer shall act with reasonable care, exercising the degree of
skill and care that the Servicer exercises with respect to similar motor vehicle
retail installment sale contracts owned and/or serviced by it and that is
consistent with industry standards. The Servicer shall implement written
policies and procedures, signed by a Servicing Officer, with respect to the
handling and custody of the Receivable Files, so that the integrity and physical
possession of the Receivable Files shall be maintained, and, in general, shall
attend to all details in connection with maintaining custody of the Receivable
Files as agent of the Trustee, for the benefit of the Trust and the
Certificateholders. The Servicer shall also maintain a current inventory of the
Receivables and conduct, or cause to be conducted, periodic audits (to the
extent required by Section 3.11) of the Receivable Files held by it under this
Agreement and the related accounts, records, and computer systems, and shall
otherwise maintain the Receivable Files in such a manner as shall enable the
Trustee to verify, if the Trustee so elects, the accuracy of the record keeping
of the Servicer. The Servicer shall promptly report to the Trustee any failure
on its part to hold the Receivable Files and maintain its accounts, records, and
computer systems as herein provided, and promptly take appropriate action to
remedy any such failure.
(b) MAINTENANCE OF AND ACCESS TO RECORDS. The Servicer shall
maintain each Receivable File at the location specified in Schedule B to this
Agreement, or at such other office of the Servicer or an Affiliate within the
State of Utah or Idaho (or, in the case of any successor servicer, within the
State in which its principal place of business is located) as shall be specified
to the Trustee by 30 days' prior written notice. The Servicer shall make
available to the Trustee or its Authorized Officers (or, when requested in
writing by the Trustee, to its attorneys or auditors) and
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to Certificateholders (for legitimate business purposes relating to the Trust)
the Receivable Files and the related accounts, records, and computer systems
maintained by the Servicer at such times during the normal business hours of the
Servicer as the Trustee shall reasonably instruct.
(c) RELEASE OF DOCUMENTS. Upon written instructions from the
Trustee, the Servicer shall release any document in the Receivable Files to the
Trustee, the Trustee's agent, or the Trustee's designee, as the case may be, at
such place or places as the Trustee may designate, as soon thereafter as is
practicable. Any document so released shall be handled by the Trustee with due
care and returned to the Servicer for safekeeping as soon as the Trustee or its
agent or designee, as the case may be, shall have no further need therefor.
(d) TITLE TO RECEIVABLES. The Servicer agrees that, in respect of
any Receivable held by it as custodian hereunder, the Servicer will not at any
time have or in any way attempt to assert any interest in such Receivable or the
related Receivable File, other than solely for the purpose of collecting or
enforcing the Receivable for the benefit of the Trust and that the entire
equitable interest in such Receivable and the related Receivable File shall at
all times be vested in the Trust.
Section 2.7 INSTRUCTIONS; AUTHORITY TO ACT. The Servicer shall be
deemed to have received proper instructions with respect to the Receivable Files
upon its receipt of written instructions signed by an Authorized Officer of the
Trustee. A certified copy of excerpts of bylaws or certain resolutions of the
Board of Directors of the Trustee shall constitute conclusive evidence of the
authority of any such Authorized Officer to act and shall be considered in full
force and effect until receipt by the Servicer of written notice to the contrary
given by the Trustee.
Section 2.8 CUSTODIAN'S INDEMNIFICATION. The Servicer, in its
capacity as custodian, shall indemnify and hold harmless the Trustee, its
officers, directors, employees and agents and the Certificateholders from and
against any and all liabilities, obligations, losses, compensatory damages,
payments, costs or expenses (including legal fees if any) of any kind whatsoever
that may be imposed on, incurred, or asserted against the Trustee or the
Certificateholders as the result of any act or omission relating to the
maintenance and custody of the Receivable Files; provided, however, that the
Servicer shall not be liable hereunder to the extent, but only to the extent,
that such liabilities, obligations, losses, compensatory damages, payments,
costs or expenses result from the willful misfeasance, bad faith, or negligence
of the Trustee. The obligations of the Servicer, in its capacity as custodian
under this Section 2.8, shall survive the resignation or removal of the Servicer
as custodian under Section 2.9 hereof.
Section 2.9 EFFECTIVE PERIOD AND TERMINATION. The Servicer's
appointment as custodian shall become effective as of the Cutoff Date and shall
continue in full force and effect until terminated pursuant to this Section 2.9.
If the Servicer resigns as a Servicer under Section 8.5, or if all of the rights
and obligations of the Servicer shall have been terminated under Section 9.1,
the appointment of the Servicer as custodian hereunder may be terminated by the
Trustee or by the holders of Certificates evidencing not less than a majority of
the aggregate outstanding principal balance of the Class A Certificates and the
Class B Certificates taken together as a single class, in the same manner as the
Trustee or such holders may terminate the rights and obligations of the Servicer
under Section 9.1. The Trustee may terminate the Servicer's appointment as a
custodian
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hereunder at any time with cause, or with 30 days' prior notice without cause,
upon written notification to the Servicer. As soon as practicable after any
termination of such appointment the Servicer shall deliver, or cause to be
delivered, the Receivable Files to the Trustee, the Trustee's agent or the
Trustee's designee at such place or places as the Trustee may reasonably
designate. Notwithstanding any termination of the Servicer as custodian
hereunder (other than in connection with a termination resulting from the
termination of the Servicer, as such, pursuant to Section 9.1), the Trustee
agrees that, from and after the date of such termination, and for so long as the
Servicer is acting as such pursuant to this Agreement, the Trustee shall
provide, or cause the successor custodian to provide, access to the Receivable
Files to the Servicer, at the times as the Servicer shall request, for the
purpose of carrying out its duties and responsibilities with respect to the
servicing of the Receivables hereunder.
ARTICLE
ADMINISTRATION AND SERVICING OF THE TRUST PROPERTY
Section 3.1 DUTIES OF THE SERVICER. (a) The Servicer, acting alone
and/or through subservicers as provided in this Section 3.1, shall administer
the Receivables serviced by it with reasonable care. The Servicer's duties
shall include, but not be limited to, the collection and posting of all
payments, responding to inquiries by Obligors on the Receivables, or by federal,
state, or local governmental authorities, investigating delinquencies, reporting
tax information to Obligors, furnishing monthly and annual statements to the
Trustee with respect to distributions, monitoring the status of the Insurance
Policies with respect to Financed Vehicles and providing collection and
repossession services in the event of Obligor default. The Servicer shall also
administer and enforce all rights and responsibilities of the holder of the
Receivables provided for in the Dealer Agreements, the Dealer Assignments and
the Insurance Policies, to the extent that such Dealer Agreements, Dealer
Assignments and Insurance Policies relate to the Receivables, the Financed
Vehicles or the Obligors. In performing its duties as Servicer hereunder, the
Servicer will exercise that degree of skill and care that the Servicer exercises
with respect to similar motor vehicle retail installment sale contracts or motor
vehicle retail installment loans owned and/or serviced by the Servicer and that
is consistent with prudent industry standards. Without limiting the generality
of the foregoing, the Servicer is hereby authorized and empowered by the Trustee
to execute and deliver, on behalf of itself, the Trust, the Trustee, and the
Certificateholders, any and all instruments of satisfaction or cancellation, or
of partial or full release or discharge, and all other comparable instruments,
with respect to the Receivables or to the Financed Vehicles, all in accordance
with this Agreement; provided, however, that notwithstanding the foregoing, the
Servicer shall not, except pursuant to an order from a court of competent
jurisdiction, release an Obligor from payment of any unpaid amount under any
Receivable or waive the right to collect the unpaid balance (including accrued
interest) of any Receivable from the Obligor, except in connection with a de
minimis deficiency which the Servicer would not attempt to collect in accordance
with its customary procedures. If the Servicer shall commence a legal
proceeding to enforce a Receivable, the Trustee shall thereupon be deemed to
have automatically assigned such Receivable to the Servicer, which assignment
shall be solely for purposes of collection. The Trustee shall furnish the
Servicer with any powers of attorney and
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other documents or instruments necessary or appropriate to enable the Servicer
to carry out its servicing and administrative duties hereunder.
From time to time during the term of this Agreement, the Servicer may
enter into agreements with (i) one or more Affiliates for the servicing and
administration of certain of the Receivables; provided, however, that any such
subservicer shall be and shall remain, for so long as it is acting as
subservicer, an Eligible Servicer, and any fees paid to such subservicer shall
be paid by the Servicer and not out of the proceeds of the Trust, and any such
subservicer shall agree to service the Receivables in a manner consistent with
the terms of this Agreement or (ii) subcontractors who are in the business of
performing specific duties delegated to it.
(b) References in this Agreement to actions taken, to be taken,
permitted to be taken, or restrictions on actions permitted to be taken by the
Servicer in servicing the Receivables and other actions taken, to be taken,
permitted to be taken, or restrictions on actions to be taken with respect to
the Trust Property shall include actions taken, to be taken, permitted to be
taken, or restrictions on actions permitted to be taken by a subservicer or
subcontractor on behalf of the Servicer and references herein to payments or
Recoveries received by the Servicer shall include payments or Recoveries
received by a subservicer or subcontractor, irrespective of whether such
payments or Recoveries are actually deposited in the Certificate Account by such
subservicer or subcontractor. Any subservicing agreement will contain terms and
provisions substantially identical to the terms and provisions of this Agreement
and such other terms and provisions as are not inconsistent with this Agreement
and as the Servicer and the subservicer have agreed.
(c) The Servicer shall be entitled to terminate any subservicing or
subcontracting agreement in accordance with the terms and conditions of such
subservicing or subcontracting agreement and without any limitation by virtue of
this Agreement; provided, however, that, in the event of termination of any
subservicing or subcontracting agreement by the Servicer, the Servicer shall
either act directly as servicer of the related Receivable or enter into a
subservicing or subcontracting agreement with a successor subservicer or
subcontractor which will be bound by the terms of the related subservicing or
subcontracting agreement.
(d) As a condition to the appointment of any subservicer other than
an Affiliate of the Seller, the Servicer shall notify the Trustee in writing and
the Rating Agencies before such assignment becomes effective and such
subservicer shall be required to execute and deliver an instrument in which it
agrees that, for so long as it acts as subservicer of the Receivables and the
other Trust Property being serviced by it, the covenants, conditions,
indemnities, duties, obligations and other terms and provisions of this
Agreement applicable to the Servicer hereunder shall be applicable to it as
subservicer, that it shall be required to perform its obligations as subservicer
for the benefit of the Trust as if it were the Servicer hereunder (subject,
however, to the right of the Servicer to direct the performance of such
obligations in accordance with this Agreement) and that, notwithstanding any
provision of a subservicing agreement to the contrary, such subservicer shall be
directly liable to the Trustee and the Trust (notwithstanding any failure by the
Servicer to perform its duties and obligations hereunder) for the failure by
such subservicer to perform its obligations hereunder or under any subservicing
agreement, and that (notwithstanding any failure by the Servicer to perform its
respective duties and obligations hereunder) the Trustee may enforce the
provisions
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of this Agreement and any subservicing agreement against the subservicer for the
benefit of the Trust and the Certificateholders, without diminution of such
obligations or liabilities by virtue of any subservicing agreement, by virtue of
any indemnification provided thereunder or by virtue of the fact that the
Servicer is primarily responsible hereunder for the performance of such duties
and obligations, as if a subservicer alone were servicing and administering,
under this Agreement, the Receivables and the other Trust Property being
serviced by it under the subservicing agreement.
(e) Notwithstanding any subservicing or subcontracting agreement, any
of the provisions of this Agreement relating to agreements or arrangements
between the Servicer or a subservicer or subcontractor or reference to actions
taken through such Persons or otherwise, the Servicer shall remain obligated and
liable to the Trust, the Trustee and the Certificateholders for the servicing
and administering of the Receivables and the other Trust Property serviced by it
in accordance with the provisions of this Agreement (including for the deposit
of payments and Recoveries received by a subservicer or subcontractor,
irrespective of whether such payments or Recoveries are actually remitted to the
Servicer or deposited in the Certificate Account by such subservicer or
subcontractor; provided that if such amounts are so deposited, the Servicer
shall have no further obligation to do so) without diminution of such obligation
or liability by virtue of such subservicing or subcontracting agreements or
arrangements or by virtue of indemnification from a subservicer or
subcontractor, to the same extent and under the same terms and conditions as if
the Servicer alone were servicing and administering the Receivables and the
other Trust Property. The Servicer shall be entitled to enter into any
agreement with a subservicer or subcontractor for indemnification of the
Servicer, and nothing contained in this Agreement shall be deemed to limit or
modify such indemnification.
(f) In the event the Servicer shall for any reason no longer be
acting as such (including by reason of the occurrence of an Event of Servicing
Termination), the successor servicer may, in its discretion, thereupon assume
all of the rights and obligations of the outgoing Servicer under a subservicing
agreement. In such event, the successor servicer shall be deemed to have
assumed all of the outgoing Servicer's interest therein and to have replaced the
outgoing Servicer as a party to such subservicing agreement to the same extent
as if such subservicing agreement had been assigned to the successor servicer,
except that the outgoing Servicer shall not thereby be relieved of any liability
or obligation on the part of the outgoing Servicer to the subservicer under such
subservicing agreement. The outgoing Servicer shall, upon request of the
Trustee, but at the expense of the outgoing Servicer, deliver to the successor
servicer all documents and records relating to each such subservicing agreement
and the Receivables and the other Trust Property then being serviced thereunder
and an accounting of amounts collected and held by it and otherwise use its best
efforts to effect the orderly and efficient transfer of the subservicing
agreement to the successor servicer. In the event that the successor servicer
elects not to assume a subservicing agreement, the outgoing Servicer, at its
expense, shall cause the subservicer to deliver to the successor servicer all
documents and records relating to the Receivables and the other Trust Property
being serviced thereunder and all amounts held (or thereafter received) by such
subservicer (together with an accounting of such amounts) and shall otherwise
use its best efforts to effect the orderly and efficient transfer of servicing
of the Receivables and the other Trust Property being serviced by such
subservicer to the successor servicer. The relationship of the Servicer (and of
any successor to the
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Servicer as servicers under this Agreement) to the Trustee under this Agreement
is intended by the parties to be that of independent contractors and not that of
joint venturers, partners or agents.
Section 3.2 COLLECTION OF RECEIVABLE PAYMENTS; CREDIT DEFERRALS;
OPTIONAL PAYMENT DEFERRALS. The Servicer shall make reasonable efforts to
collect all payments called for under the terms and provisions of the
Receivables as and when the same shall become due, and otherwise act with
respect to the Receivables, the Dealer Agreements, the Dealer Assignments, the
Insurance Policies and the other Trust Property in such manner as will, in the
reasonable judgment of the Servicer, maximize the amount to be received by the
Trust with respect thereto, in accordance with the standard of care required by
Section 3.1. Other than as explicitly permitted in Section 3.2(b) or Section
3.2(c) below, the Servicer will not increase or decrease the number or amount of
any Scheduled Payment, or the Amount Financed under a Receivable or the Contract
Rate of a Receivable, or extend, rewrite or otherwise modify the payment terms
of a Receivable, release collateral securing a Receivable, or otherwise modify
or waive any material term of a Receivable.
(b) Notwithstanding the foregoing, the Servicer may grant to an
Obligor one or more payment deferrals (each, a "CREDIT DEFERRAL") if (i) the
Servicer determines that, absent such deferral, a payment default by the Obligor
is reasonably foreseeable; (ii) the Servicer would grant such Credit Deferral if
the Receivable were serviced by it for its own account and in accordance with
its customary standards; (iii) the cumulative extensions with respect to any
Receivable shall not cause the term of such Receivable to extend beyond the last
day of the Collection Period immediately preceding the Final Scheduled
Distribution Date; (iv) such extensions in the aggregate do not exceed two
months for each twelve months of the original term of the Receivable; and (v)
interest continues to accrue on the outstanding Principal Balance of the
Receivable during the term of such Credit Deferral. The Servicer may charge a
fee in connection with the grant of Credit Deferrals in accordance with its
customary practices and procedures, which fee shall be added to the Principal
Balance of the related Receivable. In the event that the Servicer fails to
comply with the provisions of the first sentence of this Section 3.2(b), the
Servicer shall be required to purchase the Receivable or Receivables affected
thereby, for the Purchase Amount, in the manner specified in Section 3.7 as of
the close of the Collection Period in which such failure occurs.
(c) On or after the Closing Date, the Servicer shall notify each
Obligor meeting the requirements set forth below, in writing, at least three
weeks prior to the first month with respect to which such Obligor would be
entitled to an optional extension pursuant to this Section 3.2(c), that such
qualifying Obligor, at such Obligor's option during the remaining term of the
Receivable, shall be entitled to a non-credit related extension of any regularly
scheduled payment due under a Receivable (each, an "OPTIONAL PAYMENT DEFERRAL")
if such qualifying Obligor satisfies the following conditions:
(i) at the time of such extension, such Receivable shall
not have been the subject of two such Optional Payment Deferrals in the
related fiscal year of the Trust;
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(ii) such Receivable shall (x) not have been the subject
of any Credit Deferral within 90 days of the related Optional Payment
Deferral, or (y) not have been the subject of more than two Credit
Deferrals since its date of origination;
(iii) at the time of such Optional Payment Deferral, the
Receivable shall not have been more than 30 days past due twice or more;
(iv) at the time of such Optional Payment Deferral, the
Receivable shall not be more than 15 days or more delinquent;
(v) at the time of such Optional Payment Deferral, the
remaining term of the Receivable at such time shall be greater than 20%,
but not more than 95%, of the original specified term of such Receivable;
and
(vi) in the reasonable judgment of the Servicer, the
Receivable is not likely to become a Defaulted Receivable following such
Optional Payment Deferral.
The Servicer may charge a fee in connection with the grant of Optional
Payment Deferrals in accordance with its customary practices and procedures,
which fee shall be added to the Principal Balance of the related Receivable.
If, as an inadvertent result of any extension granted pursuant to this Section
3.2(c), such extension breached any of the terms of the preceding criteria (i)
through (vi) or caused the term of such Receivable to extend beyond the last day
of the Collection Period immediately preceding the Final Scheduled Distribution
Date, then the Servicer shall be obligated to purchase such Receivable pursuant
to Section 3.7. For the purpose of such purchases pursuant to Section 3.7,
notice shall be deemed to have been received by the Servicer at such time as
shall make such purchase mandatory as of the Record Date immediately following
the discovery of such breach.
Section 3.3 REALIZATION UPON RECEIVABLES. On behalf of the Trust,
the Servicer shall charge off a Receivable as a Defaulted Receivable in
accordance with its customary servicing procedures and shall use its best
efforts to repossess and liquidate the Financed Vehicle securing any Defaulted
Receivable as soon as feasible after default, in accordance with the standard of
care required by Section 3.1. In taking such action, the Servicer shall follow
such customary and usual practices and procedures as it shall deem necessary or
advisable in its servicing of motor vehicle retail installment sale contracts,
and as are otherwise consistent with the standard of care required under Section
3.1, which shall include the exercise of any rights of recourse to Dealers under
the Dealer Agreements and Dealer Assignments (or rights to compel repurchase
against third Persons) and selling the Financed Vehicle at public or private
sale. The Servicer shall be entitled to recover all reasonable expenses
incurred by it in the course of repossessing and liquidating a Financed Vehicle
into cash proceeds, but only out of the cash proceeds of such Financed Vehicle,
any deficiency obtained from the Obligor or any amounts received from the
related Dealer. The foregoing shall be subject to the provision that, in any
case in which a Financed Vehicle shall have suffered damage, the Servicer shall
not expend funds in connection with the repair or the repossession of such
Financed Vehicle unless it shall determine in its discretion that such repair
and/or repossession will increase the Liquidation Proceeds or Recoveries of the
related Receivable
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by an amount equal to or greater than the amount of such expenses (which, in any
event, shall not be unreasonable).
If the Servicer elects to commence a legal proceeding to enforce a
Dealer Agreement or Dealer Assignment, the act of commencement shall be deemed
to be an automatic assignment from the Trustee to the Servicer of the rights of
recourse under such Dealer Agreement and Dealer Assignment. If, however, in any
enforcement suit or legal proceeding, it is held that the Servicer may not
enforce a Dealer Agreement or Dealer Assignment on the grounds that it is not a
real party in interest or a Person entitled to enforce the Dealer Agreement or
Dealer Assignment, the Trustee, at the Servicer's expense, or the Seller, at the
Seller's expense, shall take such steps as the Servicer deems necessary to
enforce the Dealer Agreement or Dealer Assignment, including bringing suit in
its name or the names of the Certificateholders.
Section 3.4 PHYSICAL DAMAGE INSURANCE. The Servicer, in
accordance with the standard of care required by Section 3.1, shall require that
each Financed Vehicle be insured under an Insurance Policy naming the Seller as
loss payee. In the event that an Insurance Policy shall lapse or shall be
otherwise terminated and the Principal Balance of the Receivable related thereto
is in excess of $2,000, the Servicer, at its expense (and not at the expense of
the Trust), shall procure a substitute policy of insurance, issued by an insurer
having a claims-paying ability the same as, or better than, that of the insurer
under the terminated Insurance Policy and naming the Servicer or the Seller as
loss payee. Any substitute Insurance Policy procured hereunder shall provide
coverage against similar risks, shall be subject to the same, or a lower,
deductible and shall contain loss payable clauses and other provisions no less
favorable to the named insured than those contained in the terminated Insurance
Policy. The cost of such Insurance Policy may, to the extent consistent with
applicable law and the terms of the applicable Receivable, be added to the
amount owing by an Obligor, but shall be treated as a separate receivable not
owned by the Trust for all purposes hereunder and, in furtherance of the
foregoing, shall not be included in the definition of Principal Balance or Pool
Balance and collections with respect thereto shall not be part of Available
Interest or Available Principal. In the event that any payment by an Obligor is
insufficient to pay the payment currently due on the Receivable and the amount
due on the receivable arising from the cost of such Insurance Policy, the
payment shall be divided pro rata based on the amount currently due on each.
(b) The Servicer may sue to enforce or collect upon the Insurance
Policies, in its own name, if possible, or as agent for the Trust. If the
Servicer elects to commence a legal proceeding to enforce an Insurance Policy,
the act of commencement shall be deemed to be an automatic assignment of the
rights of the Trust under such Insurance Policy to the Servicer for purposes of
collection only. If, however, in any enforcement suit or legal proceeding it is
held that the Servicer may not enforce an Insurance Policy on the grounds that
it is not a real party in interest or a holder entitled to enforce the Insurance
Policy, the Trustee, on behalf of the Trust, at the Servicer's expense, or the
Seller, at Servicer's expense, shall take such steps as the Servicer deems
necessary to enforce such Insurance Policy, including bringing suit in its name
or the names of the Certificateholders.
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Section 3.5 MAINTENANCE OF SECURITY INTERESTS IN FINANCED VEHICLES.
The Servicer, in accordance with the standard of care required under Section
3.1, shall take such steps as are necessary to maintain perfection of the
security interest created by each Receivable in the related Financed Vehicle for
the benefit of the Trust. The Trustee, on behalf of the Trust, hereby
authorizes the Servicer, and the Servicer hereby agrees, to take such steps as
are necessary to re-perfect such security interest on behalf of the Trust in the
event the Servicer receives notice of the relocation of a Financed Vehicle. If
there has been an Event of Servicing Termination (or the occurrence of an event
specified in clause (iii) or (iv) of Section 9.1(a) with respect to the Seller),
upon the request of the Trustee, the Servicer, at its expense, shall promptly
and duly execute and deliver such documents and instruments, and take such other
actions as may be necessary, as evidenced by an Opinion of Counsel delivered to
the Trustee, to perfect the Trust's interest in the Trust Property against all
other Persons, including the delivery of the Receivables and the Receivable
Files to the Trustee, its agent, or its designee, the endorsement and delivery
of the Insurance Policies or the notification of the insurers thereunder, the
execution of transfer instruments, and the endorsement to the Trustee and the
delivery of the certificates of title to the Financed Vehicles to the
appropriate department or departments of motor vehicles (or other appropriate
governmental agency).
Section 3.6 COVENANTS OF THE SERVICER. The Servicer makes the
following covenants upon which the Trustee relies in accepting the Trust
Property in trust and in executing (on behalf of the Trust) and authenticating
the Certificates:
(i) SECURITY INTEREST TO REMAIN IN FORCE. The Financed
Vehicle securing each Receivable will not be released from the security
interest granted by the Receivable in whole or in part, except as
contemplated herein.
(ii) NO IMPAIRMENT. The Servicer will not (nor will it
permit any subservicer to) impair in any material respect the rights of the
Certificateholders in the Receivables, the Dealer Agreements, the Dealer
Assignments or the Insurance Policies or, subject to clause (iii) below,
otherwise amend or alter the terms thereof if, as a result of such
amendment or alteration, the interests of the Trust and the
Certificateholders hereunder would be materially adversely affected.
(iii) AMENDMENTS. The Servicer will not increase or
decrease the number or amount of Scheduled Payments or the Amount Financed
under a Receivable, or extend, rewrite or otherwise waive, amend, or modify
any material term of a Receivable, except in accordance with Section 3.2.
Section 3.7 PURCHASES BY THE SERVICER. The Seller, the Servicer or
the Trustee, as the case may be, shall inform the other parties promptly, in
writing, upon the discovery (which, in the case of the Trustee, shall occur only
upon the actual knowledge of an Authorized Officer of the Trustee) of any breach
by the Servicer of its covenants under Section 3.6. Unless the breach shall have
been cured by the last day of the Collection Period which includes the 60th day
after the date on which the Servicer becomes aware of, or receives written
notice of, such breach, the Servicer shall purchase the Receivable or
Receivables from the Trust, without recourse, representation or warranty, other
than that the Trustee, on behalf of the Trust, has not imposed any liens on the
Receivable or
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Receivables to be repurchased materially and adversely affected thereby on the
related Deposit Date; provided, however, that in the case of a breach of the
covenant contained in Section 3.6(iii), the Servicer shall be obligated to
purchase the affected Receivable or Receivables on the Deposit Date related to
the Collection Period during which the Servicer becomes aware of, or receives
written notice of, such breach (which in all cases shall be deemed to have a
material adverse effect on the Certificateholders). If the Servicer grants an
Optional Payment Deferral pursuant to Section 3.2(c) and such deferral causes
the term of the applicable Receivable to extend beyond the last day of the
Collection Period immediately preceding the Final Scheduled Distribution Date,
the Servicer shall be obligated to purchase the applicable Receivable on the
Deposit Date related to the Collection Period during which the Servicer grants
such Optional Payment Deferral. Such purchase shall occur as of the last day of
the related Collection Period. In consideration of the purchase of a Receivable
hereunder, the Servicer shall remit the Purchase Amount of such Receivable in
the manner specified in Section 4.3. Except as provided in Section 8.2, the
sole remedy of the Trust, the Trustee, or the Certificateholders against the
Servicer with respect to a breach pursuant to Section 3.6 shall be to require
the Servicer to purchase Receivables pursuant to this Section 3.7.
Section 3.8 SERVICING COMPENSATION. On each Distribution Date, the
Servicer shall be paid the Basic Servicing Fee for such Distribution Date and
any unpaid Basic Servicing Fees related to it from prior Distribution Dates to
the extent of funds available therefor in accordance with the provisions of
Section 4.5, but solely from Interest Collections. If it is acceptable to each
Rating Agency without a reduction in the rating of the Certificates, the Basic
Servicing Fee in respect of a Collection Period (together with any portion of a
Basic Servicing Fee that remains unpaid from prior Distribution Dates) at the
option of the Servicer may be paid at or as soon as possible after the beginning
of such Collection Period out of the first collections of interest received on
the Receivables serviced by the Servicer for such Collection Period. In
addition, the Servicer shall retain any late fees, prepayment charges (other
than Deferral Fees) or other fees and charges collected during the Collection
Period and the Servicer shall be paid any interest earned during the Collection
Period on deposits in the Accounts of Collections on the Receivables
(collectively, the "SUPPLEMENTAL SERVICING FEE"). The Servicer shall be
required to pay all expenses incurred by it in connection with its activities
hereunder (including fees and expenses of the Trustee (and any custodian
appointed by the Trustee) and independent accountants, any subservicer, taxes
imposed on the Servicer or any subservicer, and expenses incurred in connection
with distributions and reports to Certificateholders) except expenses incurred
in connection with realizing upon Receivables under Section 3.3. No transfer,
sale, pledge or other disposition of the Servicer's right to receive all or any
portion of the Basic Servicing Fee shall be made, and any such attempted
transfer, sale, pledge or other disposition shall be void, unless such transfer
is made to one or more successor servicers in connection with the assumption by
any such successor servicer of the duties hereunder pursuant to Section 9.2 and
all (and not a portion) of the Basic Servicing Fee is transferred to any such
successor servicer.
Section 3.9 SERVICER'S CERTIFICATE. On or before the Determination
Date immediately preceding each Distribution Date, the Servicer shall deliver to
the Trustee and Collateral Agent a report of a Servicing Officer substantially
in the form of Exhibit C hereto, as certified by such officer (each, a
"SERVICER'S CERTIFICATE") containing all information necessary to make the
distributions pursuant to Section 4.5, and all information necessary for the
Trustee to send
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statements to Certificateholders pursuant to Section 4.7. The Servicer also
shall separately identify (by account number of the Receivable as it appears in
the related Schedule of Receivables) in a written notice to the Trustee the
Receivables to be repurchased by the Seller or to be purchased by the Servicer,
as the case may be, on the related Deposit Date, and each Receivable which
became a Defaulted Receivable during the related Collection Period.
Section 3.10 ANNUAL STATEMENT AS TO COMPLIANCE. The Servicer shall
deliver to the Trustee, on or before March 31 of each year, commencing March 31,
1998, an Officer's Certificate, stating that (i) a review of the activities of
the Servicer during the preceding calendar year (or shorter period, in the case
of the first such Officer's Certificate) and of its performance of its
obligations under this Agreement has been made under such officer's supervision
and (ii) to the best of such officer's knowledge, based on such review, the
Servicer has fulfilled all its obligations under this Agreement throughout such
year (or shorter period, in the case of the first such certificate), or, if
there has been a default in the fulfillment of any such obligation, specifying
each such default known to such officer and the nature and status thereof.
(b) The Servicer shall deliver to the Trustee, promptly upon having
knowledge thereof, but in no event later than five Business Days thereafter,
written notice in an Officer's Certificate of any event which constitutes or,
with the giving of notice or lapse of time, or both, would become, an Event of
Servicing Termination under Section 9.1.
Section 3.11 INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS' REPORTS. The
Servicer shall cause a firm of independent certified public accountants (who may
also render audit and other services to the Servicer and the Seller) to deliver
to the Trustee on or before March 15 of each year, commencing March 15, 1998, a
report of examination addressed to the Board of Directors of the Servicer and to
the Trustee to the effect that such firm has examined the automobile and
light-duty truck receivable servicing functions of the Servicer over the
previous calendar year (or shorter period, in the case of the first such report)
and that such examination (i) included tests relating to automobile and
light-duty truck loans serviced for others and such other auditing procedures as
such firm considered necessary under the circumstances and (ii) except as
described in such report, disclosed no exceptions or errors in the records
relating to automobile and light-duty truck loans serviced for others that in
such firm's opinion, requires such firm to report. In the event such firm
requires the Trustee to agree to the procedures performed by such firm, the
Servicer shall direct the Trustee in writing to so agree; it being understood
and agreed that the Trustee will deliver such letter of agreement in conclusive
reliance upon the written direction of the Servicer, and the Trustee makes no
independent inquiry or investigation as to, and shall have no obligation or
liability in respect of, the sufficiency, validity or correctness of such
procedures.
Section 3.12 ACCESS TO CERTAIN DOCUMENTATION AND INFORMATION
REGARDING RECEIVABLES. The Servicer shall provide the Trustee and the
Certificateholders with access to the Receivable Files (in the case of the
Certificateholders, where the Certificateholder shall be required by applicable
statutes or regulations to have access to such documentation). Such access
shall be afforded without charge, but only upon reasonable request and during
normal business hours at the office of the Servicer. Nothing in this Section
3.12 shall affect the obligation of the Servicer to observe any applicable law
prohibiting disclosure of information regarding the Obligors, and the
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failure of the Servicer to provide access to information as a result of such
obligation shall not constitute a breach of this Section. Any
Certificateholder, by its acceptance of a Certificate, shall be deemed to have
agreed to keep any information obtained by it pursuant to this Section
confidential, except as may be required by applicable law.
Section 3.13 REPORTS TO THE COMMISSION. The Servicer shall, on
behalf of the Trust, cause to be filed with the Commission any periodic reports
required to be filed under the provisions of the Securities Exchange Act of
1934, as amended, and the rules and regulations of the Commission thereunder.
Section 3.14 REPORTS TO THE RATING AGENCIES. The Servicer shall
deliver to each Rating Agency, at such address as each Rating Agency may
request, a copy of all reports or notices furnished or delivered pursuant to
this Article and a copy of any amendments, supplements or modifications to this
Agreement and, if any subservicer is not an Affiliate of the Seller, any
subservicing agreement and any other information reasonably requested by such
Rating Agency to monitor this transaction.
ARTICLE
DISTRIBUTIONS; RESERVE ACCOUNT;
STATEMENTS TO CERTIFICATEHOLDERS
Section 4.1 ESTABLISHMENT OF ACCOUNTS. (a)(i) The Trustee, on
behalf of the Trust and for the benefit of the Certificateholders, shall
establish and maintain in the name of the Trustee one or more Eligible
Deposit Accounts (the "CERTIFICATE ACCOUNT"), bearing a designation clearly
indicating that the funds deposited therein are held for the benefit of the
Certificateholders. The Trustee, on behalf of the Trust and for the
benefit of the Class A Certificateholders, shall establish and maintain in
the name of the Trustee an Eligible Deposit Account (the "CLASS A
DISTRIBUTION ACCOUNT"), bearing a designation clearly indicating that the
funds deposited therein are held for the benefit of the Class A
Certificateholders. The Trustee, on behalf of the Trust and for the
benefit of the Class B Certificateholders, shall establish and maintain in
the name of the Trustee an Eligible Deposit Account (the "CLASS B
DISTRIBUTION ACCOUNT"), bearing a designation clearly indicating that the
funds deposited therein are held for the benefit of the Class B
Certificateholders.
(ii) Funds on deposit in the Accounts shall be invested
by the Trustee in Eligible Investments selected by the Servicer (as
provided in a writing signed by it); provided, however, it is understood
and agreed that the Trustee shall not be liable for any loss arising from
such investment in Eligible Investments or incurred as a result of the
liquidation of any investment prior to its stated maturity or the failure
of the Servicer to provide timely written investment direction. In no
event shall the Trustee be liable for the selection of Eligible
Investments. The Trustee shall have no obligation to invest or reinvest
any amounts held hereunder in the absence of written investment direction.
All such Eligible Investments shall be held by the Trustee for the benefit
of the beneficiaries of the applicable
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Account; provided that on each Distribution Date, all interest and other
investment income (net of losses and investment expenses) on funds on
deposit therein shall be withdrawn from the Accounts at the direction of
the Servicer and shall be paid to the Seller. Funds on deposit in the
Accounts shall be invested in Eligible Investments that will mature so that
such funds will be available at the close of business (New York time) on
the Transfer Date preceding the following Distribution Date. Funds
deposited in an Account on a Transfer Date which immediately precedes a
Distribution Date upon the maturity of any Eligible Investments are not
required to be (but may be) invested overnight.
(iii) The Accounts shall initially be established at
Bankers Trust Company. The Trustee shall possess all right, title and
interest in all funds on deposit from time to time in the Accounts and in
all proceeds thereof (including all income thereon) and all such funds,
investments, proceeds and income shall be part of the Trust Property. The
Accounts shall be under the sole dominion and control of the Trustee. If,
at any time, any of the Accounts ceases to be an Eligible Deposit Account,
the Trustee (or the Servicer on its behalf) shall within 10 Business Days
(or such longer period, not to exceed 30 calendar days, as to which each
Rating Agency shall consent) establish a new Account as an Eligible Deposit
Account and shall transfer any cash and/or any investments that are in the
existing Account which is no longer an Eligible Deposit Account to such new
Account.
(v) With respect to the Account Property in respect of any
Account:
(A) any Account Property that is held in deposit
accounts shall be held solely in an Eligible Deposit Account; and each
such Eligible Deposit Account shall be subject to the exclusive
custody and control of the Trustee, and the Trustee shall have sole
signature authority with respect thereto;
(B) prior to the Revised Article 8 Effective Date, any
Account Property that constitutes Physical Property shall be delivered
to the Trustee in accordance with paragraph (a) of the definition of
"Delivery" and shall be held, pending maturity or disposition, solely
by the Trustee or a financial intermediary (as such term is defined in
Section 8-313(4) of the Relevant UCC) acting solely for the Trustee;
(C) prior to the Revised Article 8 Effective Date, any
Account Property that is an "uncertificated security" under Article 8
of the Relevant UCC and that is not a Federal Book-Entry Security
shall be delivered to the Trustee in accordance with paragraph (b) of
the definition of "Delivery" and shall be maintained by the Trustee,
pending maturity or disposition, through continued registration of the
Trustee's (or its nominee's) ownership of such security;
(D) prior to the TRADES Effective Date, any Account
Property that is a Federal Book-Entry Security shall be delivered in
accordance with paragraph (c) of the definition of "Delivery" and
shall be maintained by the Trustee, pending
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maturity or disposition, through continued book-entry registration of
such Account Property as described in such paragraph;
(E) on and after the Revised Article 8 Effective Date
(with respect to any Account Property that constitutes a Security
Entitlement or an Uncertificated Security) and on and after the TRADES
Effective Date (with respect to any Account Property that constitutes
a Federal Book-Entry Security), the Trustee shall maintain Control
over each Account in which any such Account Property is held; and
(F) on and after the Revised Article 8 Effective Date
(with respect to any Account Property that constitutes either a
Security Certificate or any other Account Property that constitutes
Physical Property and that is not a Security Entitlement), transfer of
such Security Certificate or other Account Property to the Trustee or
its nominee or custodian by physical delivery to the Trustee or its
nominee or custodian endorsed to, or registered in the name of, the
Trustee or its nominee or custodian or endorsed in blank.
(v) The Servicer shall have the power, revocable by the
Trustee, to instruct the Trustee to make withdrawals and payments from the
Accounts for the purpose of permitting the Servicer to carry out its duties
hereunder or permitting the Trustee to carry out its duties.
(b) (i) The Servicer, for the benefit of the Certificateholders,
shall establish and maintain in the name of Bankers Trust Company, as
Collateral Agent, an Eligible Deposit Account (the "RESERVE ACCOUNT"),
which account shall bear a designation clearly indicating that such account
has been pledged to the Collateral Agent for the benefit of the
Certificateholders. The Reserve Account and any amounts therein shall not
be property of the Trust, but will be pledged to and held by the Collateral
Agent, as secured party for the benefit of the Certificateholders.
(ii) Funds on deposit in the Reserve Account shall be invested
by the Collateral Agent in Eligible Investments selected by the Servicer
(as provided in writing signed by it); provided, however, it is understood
and agreed that the Collateral Agent shall not be liable for any loss
arising from such investment in Eligible Investments or incurred as a
result of the liquidation of any investment prior to its stated maturity or
the failure of the Servicer to provide timely, written investment
direction. In no event shall the Collateral Agent be liable for the
selection of Eligible Investments. The Collateral Agent shall have no
obligation to invest or reinvest any amounts held hereunder in the absence
of written investment direction. All such Eligible Investments shall be
held by the Collateral Agent for the benefit of the Certificateholders;
provided that on each Distribution Date all interest and other investment
income (net of losses and investment expenses) on funds on deposit therein
shall be withdrawn from the Reserve Account at the direction of the
Servicer and shall be paid to the Seller. Funds on deposit in the Reserve
Account shall be invested in Eligible Investments that will mature so that
such funds will be available at the opening of business
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on the next following Transfer Date; provided, however, that to the extent
permitted by the Rating Agencies, funds on deposit in the Reserve Account
may be invested in Eligible Investments that mature later than the next
Transfer Date.
(iii) The Reserve Account shall be under the sole dominion and
control of the Collateral Agent. If, at any time, the Reserve Account
ceases to be an Eligible Deposit Account, the Servicer shall within 10
Business Days (or such longer period, not to exceed 30 calendar days, as to
which each Rating Agency may consent) establish a new Reserve Account as an
Eligible Deposit Account and shall transfer any cash and/or any investments
that are in the existing Account which is no longer an Eligible Deposit
Account to such new Reserve Account.
(iv) With respect to the Account Property in respect of the
Reserve Account:
(A) any Account Property that is held in deposit
accounts shall be held solely in an Eligible Deposit Account; and each
such Eligible Deposit Account shall be subject to the exclusive
custody and control of the Collateral Agent and the Collateral Agent
shall have sole signature authority with respect thereto;
(B) prior to the Revised Article 8 Effective Date, any
Account Property that constitutes Physical Property shall be delivered
to the Collateral Agent in accordance with paragraph (a) of the
definition of "Delivery" (except that all references therein to the
"Trustee" shall be deemed to be references to the Collateral Agent)
and shall be held, pending maturity or disposition, solely by the
Collateral Agent or a financial intermediary (as such term is defined
in Section 8-313(4) of the Relevant UCC) acting solely for the benefit
of the Certificateholders;
(C) prior to the Revised Article 8 Effective Date, any
Account Property that is an "uncertificated security" under Article 8
of the Relevant UCC and that is not a Federal Book-Entry Security
shall be delivered to the Collateral Agent in accordance with
paragraph (b) of the definition of "Delivery" (except that all
references therein to the "Trustee" shall be deemed to be references
to the Collateral Agent) and shall be maintained by the Collateral
Agent, pending maturity or disposition, through continued registration
of the Collateral Agent's (or its nominee's) ownership of such
security;
(D) prior to the TRADES Effective Date, any Account
Property that is a Federal Book-Entry Security shall be delivered in
accordance with paragraph (c) of the definition of "Delivery" and
shall be maintained by the Trustee, pending maturity or disposition,
through continued book-entry registration of such Account Property as
described in such paragraph;
(E) on and after the Revised Article 8 Effective Date
(with respect to any Account Property that constitutes a Security
Entitlement or an Uncertificated
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Security) and on and after the TRADES Effective Date (with respect to
any Account Property that constitutes a Federal Book-Entry Security),
the Trustee shall maintain Control over each Account in which any such
Account Property is held; and
(F) on and after the Revised Article 8 Effective Date
(with respect to any Account Property that constitutes either a
Security Certificate or any other Account Property that constitutes
Physical Property and that is not a Security Entitlement), transfer of
such Security Certificate or other Account Property to the Trustee or
its nominee or custodian by physical delivery to the Trustee or its
nominee or custodian endorsed to, or registered in the name of, the
Trustee or its nominee or custodian or endorsed in blank.
(v) The Servicer shall have the power, revocable by the
Collateral Agent, to instruct the Collateral Agent to make withdrawals and
payments from the Reserve Account for the purpose of permitting the
Servicer to carry out its duties hereunder or permitting the Collateral
Agent to carry out its duties.
(vi) The Seller (and any successor to the Seller in accordance
with Section 7.3) and the Servicer agree to take or cause to be taken such
further actions, to execute, deliver and file or cause to be executed,
delivered and filed such further documents and instruments (including,
without limitation, any financing statements under the Relevant UCC or this
Agreement) as may be determined to be necessary, in order to perfect the
interests created by this Section 4.1 and otherwise fully to effectuate the
purposes, terms and conditions of this Section 4.1(b). The Seller (and any
successor to the Seller in accordance with Section 7.3) and the Servicer
shall:
(A) promptly execute, deliver and file any financing
statements, amendments, continuation statements, assignments,
certificates and other documents with respect to such interests and
perform all such other acts as may be necessary in order to perfect or
to maintain the perfection of the Collateral Agent's security
interest; and
(B) make the necessary filings of financing statements
or amendments thereto within five days after the occurrence of any of
the following: (1) any change in their respective names or any trade
names; (2) any change in the location of their respective chief
executive offices or principal places of business and (3) any merger
or consolidation or other change in their respective identities or
corporate structures; and all promptly notify the Collateral Agent of
any such filings.
Section 4.2 COLLECTIONS. (a) Subject to the provisions of
subsections (b) and (c) below, the Servicer shall remit to the Certificate
Account all payments by or on behalf of the Obligors on the Receivables,
including all Liquidation Proceeds and Recoveries received by the Servicer
during any Collection Period, as soon as practicable, but in no event after the
close of business (New York time) on the second Business Day after receipt
thereof. Subject to the provisions of subsection (c) hereof, on the Closing
Date, the Servicer shall deposit in the Certificate
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Account all payments by or on behalf of the Obligors on the Receivables received
by the Servicer after the close of business of the Servicer on the Cutoff Date
and on or prior to the second Business Day immediately preceding the Closing
Date.
(b) Notwithstanding the provisions of Section 4.2(a), if (i) the
Servicer shall have the Required Rating or (ii) (a) the Servicer shall have
obtained a letter of credit or surety bond (or similar form of performance
guaranty) in favor of the Trustee, on behalf of the Trust for the benefit of the
Certificateholders, providing that the Trustee may demand payment (up to the
amount then available thereunder) in the event that the Servicer fails to make
any payment or deposit required hereunder (other than with respect to Advances)
and (b) the Trustee shall have received written notice from each of the Rating
Agencies that the then outstanding rating on the Class A Certificates and the
Class B Certificates would not be lowered or withdrawn as a result, the Servicer
may deposit the amounts referred to in subsection (a) above into the Certificate
Account not later than the close of business on the Deposit Date immediately
succeeding the last day of the related Collection Period, for so long as the
Servicer shall have the Required Rating or such letter of credit, surety bond or
similar form of performance guaranty is in full force and effect, as the case
may be; provided, however, that (i) if an Event of Servicing Termination has
occurred and is continuing, (ii) the Servicer has been terminated as such
pursuant to Section 9.1 or (iii) the Servicer ceases to have the Required Rating
(and the Servicer has not obtained a letter of credit (or similar form of
performance guaranty) satisfying the conditions specified above), the Servicer
shall deposit such amounts (including any amounts then being held by the
Servicer) into the Certificate Account as provided in Section 4.2(a).
Notwithstanding the foregoing, the provisions of the proviso to the preceding
sentence shall not be applicable to a successor servicer solely by reason of the
occurrence of an event specified in clauses (i), (ii) and (iii) of such proviso
with respect to the outgoing Servicer. Following the occurrence of an event
specified in clauses (i), (ii) or (iii) in the preceding proviso, on a monthly
basis, all Collections shall be segregated by book-entry or similar form of
identification on the Servicer's books and records and identified as the
property of the Trust. The Servicer shall promptly notify the Trustee in
writing if it shall obtain or lose the Required Rating or the benefit of such
letter of credit, surety bond, or similar form of performance guaranty.
(c) Notwithstanding the provisions of subsections (a) and (b) hereof,
the Servicer may retain, or will be entitled to be reimbursed, from amounts
otherwise payable into, or on deposit in, the Certificate Account with respect
to a Collection Period and the Receivables originated by it any amounts
previously deposited in the Certificate Account but later determined to have
resulted from mistaken deposits or postings or checks returned for insufficient
funds, in each case, with respect to which the Servicer has not been previously
reimbursed hereunder. The amount to be retained or reimbursed hereunder shall
not be included in Collections with respect to the related Distribution Date.
(d) In those cases where a subservicer is servicing a Receivable, the
Servicer shall cause the subservicer to remit to the Certificate Account as soon
as practicable, but in no event later than the close of business (New York time)
on the second Business Day after receipt thereof by the subservicer (but subject
to the provisions of Section 4.2 (b) and the limitations contained in Section
4.2(c) of this Agreement) the amounts referred to in Section 4.2(a) in respect
of a Receivable being serviced by the subservicer.
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Section 4.3 ADVANCES. (a) On each Deposit Date, the Servicer shall
make a payment with respect to each Receivable serviced by it (other than a
Defaulted Receivable) equal to the excess, if any, of (i) the product of the
Principal Balance of such Receivable as of the first day of the related
Collection Period and one twelfth of its Contract Rate (calculated on the basis
of a 360-day year comprised of twelve 30-day months) over (ii) Interest
Collections actually received by the Servicer as of the last day of such
Collection Period with respect to such Receivable (each such payment, an
"ADVANCE"). With respect to each Receivable, the Advance shall increase
Outstanding Advances. If such calculation results in a negative number, an
amount equal to such amount shall be paid to the Servicer. The Servicer may
elect not to make any Advance of due and unpaid interest with respect to a
Receivable to the extent that the Servicer, in its sole discretion, determines
that such Advance is not recoverable from subsequent payments on such Receivable
or from funds in the Reserve Account. The Servicer shall not make any advance
with respect to principal of Receivables.
(b) The Servicer shall deposit in the Certificate Account the
aggregate Advances on Receivables serviced by the Servicer pursuant to Section
4.3(a). To the extent that the Servicer fails to make an Advance pursuant to
Section 4.3(a) on the date required, the Servicer shall so notify the Trustee,
and the Trustee shall withdraw such amount (or, if determinable, such portion of
such amount as does not represent advances for delinquent interest) from the
Reserve Account and deposit such amount in the Certificate Account. The
Servicer and the Seller shall deposit or cause to be deposited in the
Certificate Account the aggregate Purchase Amount with respect to Purchased
Receivables. All such deposits shall be made in immediately available funds on
the Distribution Date. The Trustee shall deposit in the Certificate Account the
aggregate of any amounts received pursuant to the Yield Supplement Agreement on
the date of receipt thereof.
(c) On each Distribution Date, prior to making any of the
distributions set forth in Section 4.5, the Servicer shall be reimbursed for all
Outstanding Advances with respect to prior Distribution Dates to the extent of
the Interest Collections for such Distribution Date and, to the extent such
Interest Collections are insufficient, to the extent of the funds in the Reserve
Account. If it is acceptable to each Rating Agency without reduction in the
rating of the Certificates, the Outstanding Advances at the option the Servicer
may be paid at or as soon as possible after the beginning of the related
Collection Period out of the first collections of interest received on the
Receivables for such Collection Period.
Section 4.4 ADDITIONAL DEPOSITS; NET DEPOSITS. The Servicer may make
the remittances to be made by it pursuant to Section 4.2 net of amounts to be
distributed to it pursuant to Section 4.5 (but subject to the priorities set
forth therein), for so long as (i) no Event of Servicing Termination has
occurred and is continuing and (ii) the Servicer has not been terminated as such
pursuant to Section 9.1 hereof; provided, however, that the Servicer shall
account for all of such amounts in the related Servicer's Certificate as if such
amounts were deposited and distributed separately; and provided further that, if
an error is made by the Servicer in calculating the amount to be deposited or
retained by it and a shortfall in the amount deposited into the Certificate
Account results, the Servicer shall make a payment of the deficiency to the
Certificate Account, immediately upon becoming aware, or receiving notice from
the Trustee, of such shortfall.
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Section 4.5 DISTRIBUTIONS. (a) On or before each Determination Date,
the Servicer shall calculate all amounts to be deposited in the Class A
Distribution Account and the Class B Distribution Account, which calculations
shall be set forth in the Servicer's Certificate delivered to the Trustee on or
before such Determination Date.
(b) On each Distribution Date, after making the reimbursements to the
Servicer of Outstanding Advances to the extent provided in Section 4.3(c), the
Trustee will make the following deposits and distributions from the Certificate
Account to the extent of the sum of Available Interest and any Available Reserve
Amount remaining after such reimbursements (and, in the case of shortfalls
occurring under clause (ii) below in the Class A Interest Distribution, the
Class B Percentage of Available Principal to the extent of such shortfalls), in
the following priority, all in accordance with the direction contained in the
Servicer's Certificate:
(i) to the Servicer, any unpaid Basic Servicing Fee owing to
the Servicer for the related Collection Period and all unpaid Basic
Servicing Fees from prior Collection Periods, but only from Interest
Collections and Available Reserve Amount;
(ii) to the Class A Distribution Account, the Class A Interest
Distribution for such Distribution Date; and
(iii) to the Class B Distribution Account, the Class B Interest
Distribution for such Distribution Date.
On each Distribution Date, the Trustee will make the following deposits and
distributions, to the extent of the portion of Available Principal, Available
Interest and Available Reserve Amount remaining after the application of clauses
(i), (ii) and (iii) above, in the following priority:
(iv) to the Class A Distribution Account, the Class A
Principal Distribution for such Distribution Date;
(v) to the Class B Distribution Account, the Class B
Principal Distribution for such Distribution Date;
(vi) to the Collateral Agent for deposit in the Reserve
Account, any amounts remaining, until the amount on deposit in the Reserve
Account equals the Specified Reserve Account Balance; and
(vii) to the Collateral Agent for distribution to the Seller,
any amounts remaining.
(c) On each Distribution Date, all amounts on deposit in the Class A
Distribution Account will be distributed to the Class A Certificateholders by
the Trustee, all amounts on deposit in the Class B Distribution Account will be
distributed to the Class B Certificateholders by the Trustee and all amounts on
deposit in the Reserve Account in excess of the Specified Reserve Account
Balance will be distributed to the Seller by the Collateral Agent; provided
however that
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upon distribution with respect to the Class A Certificates of an amount,
together with all prior distributions with respect to the Class A Certificates,
equal to the Original Class A Certificate Balance, the Class A
Certificateholders shall have no right to any additional distribution and the
Trustee shall make no distributions with respect to the Class A Certificates,
and upon distribution with respect to the Class B Certificates of an amount,
together with all prior distributions with respect to the Class B Certificates,
equal to the Original Class B Certificate Balance, the Class B
Certificateholders shall have no right to any additional distributions and the
Trustee shall make no distributions with respect to the Class B Certificates.
Except as provided in Section 11.1, payments under this subsection (c) shall be
made to the Certificateholders by check mailed by the Trustee to each
Certificateholder's respective address of record (or, in the case of
Certificates registered in the name of a Clearing Agency or its nominee, by wire
transfer of immediately available funds). To the extent that the Trustee is
required to wire funds to the Certificateholders from the Class A Distribution
Account or the Class B Distribution Account, as applicable, it shall request the
bank maintaining the Class A Distribution Account or the Class B Distribution
Account, as applicable, to make a wire transfer of the amount to be distributed
and the bank maintaining the Class A Distribution Account or the Class B
Distribution Account, as applicable, shall promptly deliver to the Trustee a
confirmation of such wire transfer. To the extent that the Trustee is required
to make payments to Certificateholders by check hereunder, it shall request the
bank maintaining the Class A Distribution Account or the Class B Distribution
Account, as applicable, to provide it with a supply of checks to make such
payments. The bank shall, if a request is made by the Trustee for a wire
transfer by 9:00 a.m. (New York time) on any Distribution Date, wire such funds
to the Trustee in accordance with such instructions by 10:00 a.m. (New York
time) on such Distribution Date, and it will otherwise act in compliance with
the provisions of this Section and the other provisions of this Agreement
applicable to it as the bank maintaining the Class A Distribution Account or the
Class B Distribution Account, as applicable. The Servicer shall take all
necessary action (including requiring an agreement to such effect) to ensure
that any bank maintaining the Class A Distribution Account or the Class B
Distribution Account, as applicable, agrees to comply, and complies, with the
provisions of this Section and the other provisions of this Agreement applicable
to it as the bank maintaining the Class A Distribution Account or the Class B
Distribution Account, as applicable.
Section 4.6 RESERVE ACCOUNT. On the Closing Date, the Seller shall
deposit the Reserve Account Initial Deposit into the Reserve Account. The
Seller hereby grants to the Collateral Agent for the benefit of the
Certificateholders a security interest in and to the Reserve Account and any and
all property credited thereto from time to time, including, but not limited to,
Eligible Investments, to secure payment of the Certificates according to their
terms. Amounts held from time to time in the Reserve Account will continue to
be held by the Collateral Agent for the benefit of Class A Certificateholders
and the Class B Certificateholders, but the Reserve Account shall not be an
asset of the Trust and upon any distribution to the Seller of amounts from the
Reserve Account, the Certificateholders will not have any rights in, or claims
to, such amounts. By acceptance of their Certificates, Certificateholders shall
be deemed to have appointed Bankers Trust Company as Collateral Agent. Bankers
Trust Company hereby accepts such appointment as Collateral Agent.
Section 4.7 STATEMENTS TO CERTIFICATEHOLDERS. (a) On each
Distribution Date, the Servicer shall provide to the Trustee (with a copy to the
Rating Agencies) for the Trustee to forward on such date to each
Certificateholder of record a statement substantially in the form of Exhibit C
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setting forth at least the following information as to the Certificates for the
related Collection Period, to the extent applicable:
(i) the amount of the distribution allocable to principal on
the Class A Certificates and the Class B Certificates;
(ii) the amount of the distribution allocable to interest on
the Class A Certificates and the Class B Certificates;
(iii) the Yield Supplement Amount;
(iv) the amount of the Basic Servicing Fee paid to the
Servicer with respect to the related Collection Period;
(v) the Class A Certificate Balance, the Class A Pool Factor,
the Class B Certificate Balance and the Class B Pool Factor as of such
Distribution Date, after giving effect to payments allocated to principal
reported pursuant to clause (i) above;
(vi) the Pool Balance as of the close of business of the
Servicer on the last day of the related Collection Period;
(vii) the amount of the aggregate Realized Losses, if any, for
such Collection Period;
(viii) the amount of the aggregate Defaulted Receivables, if
any, for such Collection Period;
(ix) the amount otherwise distributable to the Class B
Certificateholders that is distributed to the Class A Certificateholders
for the related Collection Period;
(x) the aggregate Purchase Amount of Receivables repurchased
by the Seller or purchased by the Servicer;
(xi) the amount of Advances made in respect of such Collection
Period and the amount of unreimbursed Advances on such Distribution Date;
(xii) the balance of the Reserve Account on such Distribution
Date, after giving effect to changes therein on such Distribution Date;
(xiii) (x) the excess, if any, of the Class A Certificate
Balance over the Pool Balance and (y) the excess, if any, of the Class B
Certificate Balance over the amount by which the Pool Balance exceeds the
Class A Certificate Balance; and
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(xiv) the aggregate outstanding balances of the Receivables
which were delinquent 30-59 days, 60-89 days, 90-119 days and 120 or more
days, respectively, as of the close of business on the last day of the
related Collection Period.
Each amount set forth pursuant to clauses (i) through (iv) above shall be
expressed in the aggregate and as a dollar amount per $1,000 of original
denomination of the Certificates.
(b) Within a reasonable period of time after the end of each calendar
year, but not later than the latest date permitted by law, the Servicer shall
furnish a report to the Trust and the Trustee shall furnish, or cause to be
furnished, to each Person who at any time during such calendar year shall have
been a Certificateholder, a statement based upon such report as to the sum of
the amounts determined in clauses (i) through (iv) above for such calendar year,
or, in the event such Person shall have been a Certificateholder during a
portion of such calendar year, for the applicable portion of such year, and such
other information as is available to the Servicer as the Servicer deems
necessary or desirable to enable the Certificateholders to prepare their federal
income tax returns.
ARTICLE
YIELD SUPPLEMENT ACCOUNT
Section 5.1 YIELD SUPPLEMENT AGREEMENT. Simultaneously with the
execution of this Agreement, the Seller conveyed the Yield Supplement Agreement
to the Trust as part of the Trust Property and has deposited the Yield
Supplement Initial Deposit into the Yield Supplement Account. The Yield
Supplement Agreement, with respect to each Receivable (other than Purchased
Receivables and Defaulted Receivables), provides for the payment by the Seller
on or prior to each Deposit Date of an amount (if positive) calculated by the
Servicer equal to one-twelfth of the difference between (i) the sum of interest
on the Class A Percentage of such Receivable's Principal Balance as of the first
day of the related Collection Period at a rate equal to the sum of the Class A
Pass-Through Rate and the Basic Servicing Fee Rate and interest on the Class B
Percentage of such Receivable's Principal Balance as of the first day of the
related Collection Period at a rate equal to the sum of the Class B Pass-Through
Rate and the Basic Servicing Fee Rate and (ii) interest on such Receivable's
Principal Balance as of the first day of the related Collection Period at a rate
equal to the Contract Rate (in the aggregate for all Receivables with respect to
any Distribution Date, the "YIELD SUPPLEMENT AMOUNT").
Section 5.2 YIELD SUPPLEMENT ACCOUNT. (a) The Seller shall establish
and maintain in the name of the Collateral Agent an Eligible Deposit Account to
secure the Seller's obligations under the Yield Supplement Agreement (the "YIELD
SUPPLEMENT ACCOUNT"). The Yield Supplement Account and any amounts therein
shall not be property of the Trust, but shall be pledged to the Collateral Agent
for the benefit of Certificateholders. The Yield Supplement Account shall
initially be maintained at Bankers Trust Company.
(b) In order to provide for the prompt payment by the Seller of the
Yield Supplement Amount, to assure availability of the amounts maintained in the
Yield Supplement
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Account and as security for the performance by the Seller of its obligations
under the Yield Supplement Agreement the Seller, on behalf of itself and its
successors and assigns, hereby pledges to the Collateral Agent and its
successors and assigns for the benefit of the Certificateholders, all of its
right, title and interest in and to the Yield Supplement Account, and all
proceeds of the foregoing, including, without limitation, all other amounts and
investments held from time to time in the Yield Supplement Account (whether in
the form of deposit accounts, Physical Property, book-entry securities,
uncertificated securities or otherwise) including, without limitation, the Yield
Supplement Initial Deposit, subject, however, to the limitations set forth
below, and solely for the purpose of securing payment of the Yield Supplement
Amount (all of the foregoing, subject to the limitations set forth in this
Section, the "YIELD SUPPLEMENT ACCOUNT PROPERTY"), to have and to hold all the
aforesaid property, rights and privileges unto the Collateral Agent, its
successors and assigns, in trust for the uses and purposes, and subject to the
terms and provisions, set forth in this Section. The Collateral Agent hereby
acknowledges such transfer and accepts the trust hereunder and shall hold and
distribute the Yield Supplement Account Property in accordance with the terms
and provisions of this Section.
(c) Funds on deposit in the Yield Supplement Account shall be
invested by the Collateral Agent in Eligible Investments selected by the Seller
and designated in writing by the Seller to the Collateral Agent; provided,
however, it is understood and agreed that the Collateral Agent shall not be
liable for any loss arising from such investment in Eligible Investments or
incurred as a result of the liquidation of any investment prior to its stated
maturity or the failure of the Servicer to provide timely, written direction.
In no event shall the Collateral Agent be liable for the selection of Eligible
Investments. The Collateral Agent shall have no obligation to invest or
reinvest any amounts held hereunder in the absence of written investment
direction. Funds on deposit in the Yield Supplement Account shall be invested
in Eligible Investments that will mature so that all such funds will be
available at the opening of business on each Deposit Date; provided, however,
that to the extent permitted by the Rating Agencies, funds on deposit in the
Yield Supplement Account may be invested in Eligible Investments that mature
later than the next Deposit Date. Funds deposited in the Yield Supplement
Account on a Deposit Date upon the maturity of any Eligible Investments are not
required to be (but may be) invested overnight. The Seller will treat the
funds, Eligible Investments and other assets in the Yield Supplement Account as
its own for Federal, state and local income tax and franchise tax purposes and
will report on its tax returns all income, gain and loss from the Yield
Supplement Account.
(d) No later than 11:00 a.m. (New York time) on each Deposit Date,
the Seller shall deposit to the Certificate Account an amount equal to the Yield
Supplement Amount for the related Collection Period; provided that if, on any
Distribution Date, the Seller fails to pay the Yield Supplement Amount, then, in
such event, the Trustee shall direct the Collateral Agent to withdraw from the
Yield Supplement Account an amount equal to such deficiency and deposit such
amount into the Certificate Account.
(e) The Yield Supplement Account shall be under the sole custody and
control of the Collateral Agent. If, at any time, the Yield Supplement Account
ceases to be an Eligible Deposit Account, the Collateral Agent shall within 10
Business Days (or such longer period, not to exceed 30 calendar days, as to
which each Rating Agency may consent) establish a new Yield
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Supplement Account as an Eligible Deposit Account and shall transfer any cash
and/or any investments that are in the existing Yield Supplement Account which
is no longer an Eligible Deposit Account to such new Yield Supplement Account.
(f) Amounts on deposit in the Yield Supplement Account will be
released to the Seller on each Distribution Date to the extent that the amount
on deposit in the Yield Supplement Account would exceed the Specified Yield
Supplement Balance. Upon a distribution to the Seller of amounts from the Yield
Supplement Account, the Certificateholders will not have any rights in, or
claims to, such amounts. Amounts properly distributed to the Seller from the
Yield Supplement Account or otherwise shall not be available under any
circumstances to the Trust, the Trustee, the Collateral Agent or the
Certificateholders and the Seller shall in no event thereafter be required to
refund any such distributed amounts.
(g) With respect to the Yield Supplement Account Property:
(i) any Yield Supplement Account Property that is held in
deposit accounts shall be held solely in the name of the Collateral Agent
at one or more depository institutions having the Required Rating; each
such deposit account shall be subject to the exclusive custody and control
of the Collateral Agent, and the Collateral Agent shall have sole signature
authority with respect thereto;
(ii) any Yield Supplement Account Property that constitutes
Physical Property shall be delivered to the Collateral Agent in accordance
with paragraph (a) of the definition of "Delivery" (except that all
references therein to the "Trustee," shall be deemed to be references to
the Collateral Agent) and shall be held, pending maturity or disposition,
solely by the Collateral Agent or a financial intermediary (as such term is
defined in the Relevant UCC) acting solely for the benefit of
Certificateholders;
(iii) any Yield Supplement Account Property that is a
book-entry security held through the Federal Reserve System pursuant to
Federal book-entry regulations shall be delivered in accordance with
paragraph (b) of the definition of "Delivery" and shall be maintained by
the Collateral Agent, pending maturity or disposition, through continued
book-entry registration of such Yield Supplement Account Property as
described in such paragraph; and
(iv) any Yield Supplement Account Property that is an
"uncertificated security" under the Relevant UCC and that is not governed
by clause (iii) above shall be delivered to the Collateral Agent in
accordance with paragraph (c) of the definition of "Delivery" (except that
all references therein to the "Trustee" shall be deemed to be references to
the Collateral Agent) and shall be maintained by the Collateral Agent,
pending maturity, or disposition, through continued registration of the
Collateral Agent's (or its nominee's) ownership of such security.
Effective upon Delivery of any Yield Supplement Account Property in the form of
Physical Property, book-entry securities or uncertificated securities, the
Collateral Agent shall be deemed to
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have represented that it has purchased such Yield Supplement Account Property
for value, in good faith and without notice of any adverse claim thereto.
(h) The Seller (and any successor to the Seller in accordance with
Section 7.3) and the Servicer agree to take or cause to be taken such further
actions, to execute, deliver and file or cause to be executed, delivered and
filed such further documents and instruments (including, without limitation, any
financing statements under the Relevant UCC or this Agreement) as may be
determined to be necessary, in order to perfect the interests created by this
Section 5.2 and otherwise fully to effectuate the purposes, terms and conditions
of this Section 5.2. The Seller (and any successor to the Seller in accordance
with Section 7.3) and the Servicer shall:
(i) promptly execute, deliver and file any financing
statements, amendments, continuation statements, assignments, certificates
and other documents with respect to such interests and perform all such
other acts as may be necessary in order to perfect or to maintain the
perfection of the Collateral Agent's security interest; and
(ii) make the necessary filings of financing statements or
amendments thereto within five days after the occurrence of any of the
following: (A) any change in their respective names or any trade names, (B)
any change in the location of their respective chief executive offices or
principal places of business and (C) any merger or consolidation or other
change in their respective identities or corporate structures; and shall
promptly notify the Collateral Agent of any such filings.
(i) Investment earnings attributable to the Yield Supplement Account
Property and proceeds therefrom shall be held by the Collateral Agent for the
benefit of the Seller. Investment earnings attributable to the Yield Supplement
Account Property shall not be available to pay the Yield Supplement Amount and
shall not otherwise be subject to any claims or rights of the Certificateholders
or the Servicer. The Collateral Agent shall cause all investment earnings
attributable to the Yield Supplement Account to be distributed on each
Distribution Date to the Seller.
ARTICLE
THE CERTIFICATES
Section 6.1 THE CERTIFICATES. The Trustee shall, upon written order
or request signed in the name of the Seller by one of its officers authorized to
do so and delivered to an Authorized Officer of the Trustee, execute on behalf
of the Trust, authenticate and deliver the Certificates to or upon the order of
the Seller in the aggregate principal amount and denominations as set forth in
such written order or request. The Certificates shall be issuable in
denominations of $1,000 and integral multiples thereof; provided, however, that
one Class A Certificate and one Class B Certificate may be issued in a
denomination that represents the residual amount of the Original Class A
Certificate Balance and the Original Class B Certificate Balance, respectively.
Upon initial issuance, the Class A Certificates and the Class B Certificates
shall be in the form of Exhibit A and
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Exhibit B, respectively, which are incorporated by reference herein, and shall
be issued as provided in Section 6.8, in an aggregate amount equal to the
Original Class A Certificate Balance and the Original Class B Certificate
Balance, respectively. The Certificates shall be executed by the Trustee on
behalf of the Trust by manual signature of an Authorized Officer of the Trustee
under the Trustee's seal imprinted thereon and attested by the manual signature
of an Authorized Officer of the Trustee. Certificates bearing the manual or
facsimile signatures of individuals who were, at the time when such signatures
shall have been affixed, authorized to sign on behalf of the Trust, shall be
valid and binding obligations of the Trust, notwithstanding that such
individuals shall have ceased to be so authorized prior to the authentication
and delivery of such Certificates or did not hold such offices at the date of
such Certificates.
Section 6.2 AUTHENTICATION OF CERTIFICATES. No Certificate shall
entitle the Certificateholders thereof to any benefit under this Agreement, or
shall be valid for any purpose, unless there shall appear on such Certificate a
certificate of authentication, substantially in the form set forth in the form
of Certificates attached hereto as Exhibit A and Exhibit B, executed by the
Trustee by manual signature. Such authentication shall constitute conclusive
evidence, and the only evidence, that such Certificate has been duly
authenticated and delivered hereunder. All Certificates shall be dated the date
of their authentication.
Section 6.3 REGISTRATION OF TRANSFER AND EXCHANGE OF CERTIFICATES.
The Trustee shall maintain, or cause to be maintained, at the office or agency
to be maintained by it in accordance with Section 6.7, a Certificate Register in
which, subject to such reasonable regulations as it may prescribe, the Trustee
shall provide for the registration of Certificates and of transfers and
exchanges of Certificates as herein provided. Upon surrender for registration
of transfer of any Class A Certificate or Class B Certificate at such office or
agency, the Trustee shall execute, authenticate and deliver, in the name of the
designated transferee or transferees, one or more new Class A Certificates or
Class B Certificates, as the case may be, in authorized denominations of a like
aggregate amount. At the option of a Certificateholder, Class A Certificates or
Class B Certificates may be exchanged for other Class A Certificates or Class B
Certificates, as the case may be, of authorized denominations of a like
aggregate amount at the office or agency maintained by the Trustee in accordance
with Section 6.7. Every Certificate presented or surrendered for registration
of transfer or exchange shall be accompanied by a written instrument of transfer
duly executed by the Certificateholder and in a form satisfactory to the
Trustee. No service charge shall be made for any registration of transfer or
exchange of Certificates, but the Trustee may require payment of a sum
sufficient to cover any tax or governmental charge that may be imposed in
connection with any transfer or exchange of Certificates. All Certificates
surrendered for registration of transfer or exchange shall be cancelled and
disposed of in a commercially reasonable manner approved by the Trustee.
The Class B Certificates and any beneficial interest in such Class B
Certificates may not be acquired by (a) an employee benefit plan (as defined in
Section 3(3) of ERISA) that is subject to the provisions of Title 1 of ERISA,
(b) a plan described in Section 4975(e)(1) of the Code or (c) any entity whose
underlying assets include plan assets by reason of a plan's investment in the
entity (each, a "BENEFIT PLAN"). By accepting and holding a Class B Certificate
or an interest therein, the
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Certificateholder thereof or Class B Certificate Owner thereof shall be deemed
to have represented and warranted that it is not a Benefit Plan.
Section 6.4 MUTILATED, DESTROYED, LOST OR STOLEN CERTIFICATES. If
any mutilated Class A Certificate or Class B Certificate shall be surrendered to
the Trustee, or if the Trustee shall receive evidence to its satisfaction of the
destruction, loss, or theft of any Class A Certificate or Class B Certificate
and there shall be delivered to the Trustee such security or indemnity as it
may require to save it harmless, then in the absence of notice that such Class A
Certificate or Class B Certificate shall have been acquired by a bona fide
purchaser, the Trustee shall execute on behalf of the Trust, authenticate and
deliver, in exchange for or in lieu of any such mutilated, destroyed, lost, or
stolen Class A Certificate or Class B Certificate, a new Class A Certificate or
Class B Certificate of like tenor and denomination. In connection with the
issuance of any new Certificate under this Section 6.4, the Trustee may require
the payment of a sum sufficient to cover any tax or other governmental charge
that may be imposed in connection herewith. Any replacement Certificate issued
pursuant to this Section 6.4 shall constitute conclusive evidence of ownership
in the Trust, as if originally issued, whether or not the lost, stolen, or
destroyed Certificate shall be found at any time.
Section 6.5 PERSONS DEEMED OWNERS. Prior to due presentation of a
Certificate for registration of transfer, the Trustee may treat the Person in
whose name any Certificate shall be registered as the owner of such Certificate
for the purpose of receiving distributions pursuant to Section 4.5 and for all
other purposes, and the Trustee shall not be bound by any notice to the
contrary.
Section 6.6 ACCESS TO LIST OF CERTIFICATEHOLDERS' NAMES AND
ADDRESSES. The Trustee shall furnish or cause to be furnished to the Servicer,
within 15 days after receipt by the Trustee of a request therefor from the
Servicer in writing, a list of the names and addresses of the Certificateholders
as of the most recent Record Date. If Definitive Certificates have been issued,
the Trustee, upon written request of the holders of Class A Certificates or
Class B Certificates evidencing not less than 25% of the aggregate outstanding
principal balance of either the Class A Certificates or the Class B
Certificates, as the case may be, will, within five Business Days after the
receipt of such request, afford such Class A Certificateholders or Class B
Certificateholders access during normal business hours to the most current list
of Certificateholders for purposes of communicating with other
Certificateholders with respect to their rights under the Agreement. Each
Certificateholder, by receiving and holding a Certificate, shall be deemed to
have agreed to hold neither the Seller, the Servicer nor the Trustee accountable
by reason of the disclosure of its name and address, regardless of the source
from which such information was derived.
Section 6.7 MAINTENANCE OF OFFICE OR AGENCY. The Trustee shall
maintain, or cause to be maintained, at its expense, in New York, New York, an
office or agency where Certificates may be surrendered for registration of
transfer or exchange and where notices and demands to or upon the Trustee in
respect of the Certificates and this Agreement may be served. The Trustee
initially designates the Corporate Trust Office as its office for such purposes.
The Trustee shall give prompt written notice to the Servicer and to
Certificateholders of any change in the location of any such office or agency.
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Section 6.8 BOOK-ENTRY CERTIFICATES. Upon original issuance, the
Class A Certificates and the Class B Certificates, other than the Class A
Certificate and the Class B Certificate representing the residual amount of the
Original Class A Certificate Balance and the Original Class B Certificate
Balance, respectively, which shall be issued upon the written order of the
Seller, shall be issued in the form of one or more typewritten Certificates
representing the Book-Entry Certificates, to be delivered to the initial
Clearing Agency, by, or on behalf of, the Seller. Such Certificates shall
initially be registered on the Certificate Register in the name of CEDE & Co.,
the nominee of the initial Clearing Agency, and no Certificate Owner will
receive a definitive certificate representing such Certificate Owner's interest
in the Class A Certificates or the Class B Certificates, as the case may be,
except as provided in Section 6.10. Unless and until definitive, fully
registered Certificates (collectively, "DEFINITIVE CERTIFICATES") have been
issued to Class A Certificateholders or Class B Certificateholders, as the case
may be, pursuant to Section 6.10:
(i) the provisions of this Section 6.8 shall be in full force
and effect;
(ii) the Seller, the Servicer, the Trustee and their officers,
directors, employees and agents may deal with the Clearing Agency for all
purposes (including the making of distributions on the Certificates and the
taking of actions by the Certificateholders) as the authorized
representative of the Certificate Owners;
(iii) to the extent that the provisions of this Section 6.8
conflict with any other provisions of this Agreement, the provisions of
this Section 6.8 shall control;
(iv) the rights of Certificate Owners shall be exercised only
through the Clearing Agency and shall be limited to those established by
law, the rules, regulations and procedures of the Clearing Agency and
agreements between such Certificate Owners and the Clearing Agency and all
references in this Agreement to actions by Certificateholders shall refer
to actions taken by the Clearing Agency upon instructions from the Clearing
Agency Participants, and all references in this Agreement to distributions,
notices, reports and statements to Certificateholders shall refer to
distributions, notices, reports and statements to the Clearing Agency or
its nominee, as registered holder of the Certificates, as the case may be,
for distribution to Certificate Owners in accordance with the rules,
regulations and procedures of the Clearing Agency; and
(v) pursuant to the Depository Agreement, the initial
Clearing Agency will make book-entry transfers among the Clearing Agency
Participants and receive and transmit distributions of principal and
interest on the Certificates to the Clearing Agency Participants, for
distribution by such Clearing Agency Participants to the Certificate Owners
or their nominees.
For purposes of any provision of this Agreement requiring or
permitting actions with the consent of, or at the direction of, holders of
Certificates evidencing specified percentages of the aggregate outstanding
principal balance of such Certificates, such direction or consent may be given
by Certificate Owners having interests in the requisite percentage, acting
through the Clearing Agency.
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Section 6.9 NOTICES TO CLEARING AGENCY. Whenever notice or other
communication to the Certificateholders is required under this Agreement unless
and until Definitive Certificates shall have been issued to Certificate Owners
pursuant to Section 6.10, the Trustee shall give all such notices and
communications specified herein to be given to Certificateholders to the
Clearing Agency.
Section 6.10 DEFINITIVE CERTIFICATES. If (i) (A) the Seller advises
the Trustee in writing that the Clearing Agency is no longer willing or able to
discharge properly its responsibilities under the Depository Agreement and (B)
the Trustee or the Seller is unable to locate a qualified successor, (ii) the
Seller, at its option, advises the Trustee in writing that it elects to
terminate the book-entry system through the Clearing Agency or (iii) after the
occurrence of an Event of Servicing Termination, with respect to the Class A
Certificates, Class A Certificate Owners representing in the aggregate not less
than a majority of the aggregate outstanding principal balance of the Class A
Certificates or, with respect to the Class B Certificates, Class B Certificate
Owners representing in the aggregate not less than a majority of the aggregate
outstanding principal balance of the Class B Certificates, advise the Trustee
and the Clearing Agency through the Clearing Agency Participants in writing, and
the Clearing Agency shall so notify the Trustee, that the continuation of a
book-entry system through the Clearing Agency is no longer in the Class A
Certificate Owners' or the Class B Certificate Owners', as the case may be, best
interests, the Trustee shall notify the Clearing Agency, which shall be
responsible to notify the Class A Certificate Owners or the Class B Certificate
Owners or both, as the case may be, of the occurrence of any such event and of
the availability of Definitive Certificates to Class A Certificate Owners or
Class B Certificate Owners or both, as the case may be, requesting the same.
Upon surrender to the Trustee by the Clearing Agency of the Class A Certificates
or the Class B Certificates or both, as the case may be, registered in the name
of the nominee of the Clearing Agency, accompanied by re-registration
instructions from the Clearing Agency for registration, the Trustee shall
execute, on behalf of the Trust, authenticate and deliver Definitive
Certificates in accordance with such instructions. The Seller shall arrange
for, and will bear all costs of, the printing and issuance of such Definitive
Certificates. Neither the Seller, the Servicer nor the Trustee shall be liable
for any delay in delivery of such instructions and may conclusively rely on, and
shall be protected in relying on, such instructions. Upon the issuance of
Definitive Certificates, the Trustee shall recognize the holders of the
Definitive Certificates as Certificateholders hereunder.
ARTICLE
THE SELLER
Section 7.1 REPRESENTATIONS AND WARRANTIES OF THE SELLER. The Seller
makes the following representations and warranties, on which the Trustee relies
in accepting the Receivables and the other Trust Property in trust and executing
and authenticating the Certificates. These representations are made as of the
Closing Date, but shall survive the sale, transfer and assignment of the
Receivables and the other Trust Property to the Trust.
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(i) ORGANIZATION AND GOOD STANDING. The Seller has been duly
incorporated and is validly existing as a national banking association,
with the power and authority to own its properties and to conduct its
business as such properties are presently owned and such business is
presently conducted, and had at all relevant times, and has, full power,
authority and legal right to acquire, own and sell its Receivables.
(ii) DUE QUALIFICATION. The Seller is duly qualified to do
business as a foreign corporation in good standing, and has obtained all
necessary licenses and approvals, in all jurisdictions where the failure to
do so would materially and adversely affect the ownership or servicing of
the Receivables or render any of the Receivables unenforceable.
(iii) POWER AND AUTHORITY. The Seller has the power, authority
and legal right to execute and deliver this Agreement and to carry out its
terms and to sell and assign the property to be sold and assigned to and
deposited with the Trustee as Trust Property; and the execution, delivery,
and performance of this Agreement and all of the documents required
pursuant hereto have been duly authorized by the Seller by all necessary
action.
(iv) NO CONSENT REQUIRED. The Seller is not required to
obtain the consent of any other Person, or any consent, license, approval
or authorization or registration or declaration with, any governmental
authority, bureau or agency in connection with the execution, delivery or
performance of this Agreement, other than as may be required under the blue
sky or securities laws of any State or the Securities Act of 1933, as
amended, under state laws governing the perfection of the interests created
under this Agreement and under ERISA.
(v) VALID SALE; BINDING OBLIGATION. This Agreement effects a
valid sale, transfer and assignment of the Receivables and the other Trust
Property conveyed by the Seller to the Trust hereunder, enforceable against
creditors of and purchasers from the Seller; and this Agreement constitutes
a legal, valid, and binding obligation of the Seller, enforceable against
the Seller in accordance with its terms, subject, as to enforceability, to
applicable bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect affecting the enforcement of
creditors' rights in general and except as such enforceability may be
limited by general principles of equity (whether considered in a suit at
law or in equity).
(vi) NO VIOLATION. The execution, delivery and performance by
the Seller of this Agreement, the consummation of the transactions
contemplated hereby and the fulfillment of the terms hereof will not
conflict with, result in any breach of any of the terms and provisions of,
or constitute (with or without notice or lapse of time) a default under,
the certificate of incorporation or bylaws of the Seller, or conflict with,
or breach any of the terms or provisions of, or constitute (with or without
notice or lapse of time) a default under, any indenture, agreement,
mortgage, deed of trust or other instrument to which the Seller is a party
or by which the Seller is bound or any of its properties are subject, or
result in the creation or imposition of any lien upon any of its properties
pursuant to the terms of any such indenture, agreement, mortgage, deed of
trust or other instrument (other than this
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Agreement), or violate any law, order, rule, or regulation, applicable to
the Seller or its properties, of any federal or state regulatory body, any
court, administrative agency, or other governmental instrumentality having
jurisdiction over the Seller or any of its properties.
(vii) NO PROCEEDINGS. There are no proceedings or
investigations pending, or, to the knowledge of the Seller, threatened,
before any court, regulatory body, administrative agency, or other tribunal
or governmental instrumentality having jurisdiction over the Seller or its
properties: (a) asserting the invalidity of this Agreement or the
Certificates, (b) seeking to prevent the issuance of the Certificates or
the consummation of any of the transactions contemplated by this Agreement,
(c) seeking any determination or ruling that might materially and adversely
affect the performance by the Seller of its obligations under, or the
validity or enforceability of, this Agreement or the Certificates, or (d)
that may adversely affect the federal or state income, excise, franchise or
similar tax attributes of the Certificates.
Section 7.2 LIABILITY OF THE SELLER; INDEMNITIES. (a) The Seller
shall be liable in accordance herewith only to the extent of the obligations
specifically undertaken by the Seller under this Agreement and shall have no
other obligations or liabilities hereunder.
(b) The Seller shall indemnify, defend and hold harmless the Trustee,
its directors, officers, employees and agents, the Trust and the
Certificateholders from and against any taxes that may at any time be asserted
against the Trustee, its directors, officers, employees and agents, the Trust or
a Certificateholder with respect to, and as of the date of, the sale, transfer
and assignment of the Trust Property to the Trust or the issuance and original
sale of the Certificates, including any sales, gross receipts, general
corporation, tangible or intangible personal property, privilege, or license
taxes (but not including any taxes asserted with respect to ownership of the
Trust Property or federal or other income taxes, including franchise taxes
measured by net income, arising out of the transactions contemplated by this
Agreement or transfer taxes arising in connection with the transfer of the
Certificates), and reasonable costs and expenses in defending against the same.
(c) The Seller shall indemnify, defend and hold harmless the Trustee,
its directors, officers, employees and agents, the Trust and the
Certificateholders from and against any loss, liability or expense incurred by
reason of (i) the Seller's willful misfeasance, bad faith, or negligence in the
performance of its duties hereunder, or by reason of reckless disregard of the
obligations and duties hereunder; or (ii) any action taken, or failed to be
taken, by the Seller in respect of any portion of the Trust Property.
(d) The Seller shall indemnify, defend and hold harmless the Trustee,
its directors, officers, employees and agents, the Trust and the
Certificateholders from and against any loss, liability or expense incurred by
reason of the violation by the Seller of federal or state securities laws in
connection with the registration or the sale of the Certificates.
(e) The Seller shall indemnify, defend and hold harmless the Trustee,
its directors, officers, employees and agents, the Trust and the
Certificateholders from and against any loss, liability or expense imposed upon,
or incurred by, the Trustee, the Trust or the Certificateholders as
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the result of the failure of any Receivable conveyed by it to the Trust
hereunder, or the sale of the related Financed Vehicle, to comply with all
requirements of applicable law.
(f) Indemnification under this Section 7.2 shall include reasonable
fees and expenses of counsel and expenses of litigation and shall survive
termination of the Trust or the earlier resignation or removal of the Trustee.
If the Seller shall have made any indemnity payments to the Trustee pursuant to
this Section 7.2 and the Trustee thereafter shall collect any of such amounts
from Persons other than the Seller, the Trustee shall immediately upon receipt
thereof repay such amounts to the Seller, without interest.
Section 7.3 MERGER OR CONSOLIDATION OF THE SELLER. Any corporation
or other entity (i) into which the Seller may be merged or consolidated, (ii)
that may result from any merger, conversion, or consolidation to which the
Seller is a party, or (iii) that may succeed by purchase and assumption to all
or substantially all of the business of the Seller, where the Seller is not the
surviving entity, which corporation or other entity shall execute an agreement
of assumption to perform every obligation of the Seller under this Agreement,
shall be the successor to the Seller hereunder without the execution or filing
of any document or any further act by any of the parties to this Agreement. The
Seller shall promptly inform the Trustee and the Rating Agency of any such
merger, conversion, consolidation or purchase and assumption, where the Seller
is not the surviving entity.
Section 7.4 LIMITATION ON LIABILITY OF THE SELLER AND OTHERS. The
Seller, and any of its directors, officers, employees or agents may rely in good
faith on any document of any kind, believed by it to be genuine and properly
executed and submitted by any Person respecting any matters arising hereunder.
The Seller shall be under no obligation under this Agreement to appear in,
prosecute or defend any legal action that shall be unrelated to its obligations
under this Agreement and that in its opinion may involve it in any expense or
liability.
Section 7.5 SELLER MAY OWN CERTIFICATES. The Seller, and any
Affiliate of the Seller, may in its individual or any other capacity become the
owner or pledgee of Certificates with the same rights as it would have if it
were not the Seller or an Affiliate thereof, except as otherwise provided in the
definition of "Certificateholder," "Class A Certificateholder" and "Class B
Certificateholder" in Section 1.1. Certificates so owned by or pledged to the
Seller or such controlling, controlled or commonly controlled Person shall have
an equal and proportionate benefit under the provisions of this Agreement,
without preference, priority, or distinction as among all of the Certificates.
ARTICLE
THE SERVICER
Section 8.1 REPRESENTATIONS AND WARRANTIES OF THE SERVICER. The
Servicer makes the following representations and warranties on which the Trustee
relies in accepting the Receivables and the other Trust Property in trust and in
authenticating the Certificates. These representations are
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made as of the Closing Date, but shall survive the sale, transfer and assignment
of the Receivables and the other Trust Property to the Trust.
(i) ORGANIZATION AND GOOD STANDING. The Servicer has been
duly incorporated and is validly existing as a national banking
association, with the power and authority to own its properties and to
conduct its business as such properties are presently owned and such
business is presently conducted, and had at all relevant times, and shall
have, the power, authority and legal right to service the Receivables.
(ii) DUE QUALIFICATION. The Servicer is duly qualified to do
business as a foreign corporation in good standing, and has obtained all
necessary licenses and approvals, in all jurisdictions where the failure to
do so would materially and adversely affect the ability of the Servicer to
service, or the enforceability of, the Receivables.
(iii) POWER AND AUTHORITY. The Servicer has the power,
authority and legal right to execute and deliver this Agreement and to
carry out its terms; and the execution, delivery and performance of this
Agreement has been duly authorized by the Servicer by all necessary
corporate action.
(iv) NO CONSENT REQUIRED. The Servicer is not required to
obtain the consent of any other Person, or any consent, license, approval
or authorization or registration or declaration with, any governmental
authority, bureau or agency in connection with the execution, delivery or
performance of this Agreement other than as may be required under ERISA.
(v) BINDING OBLIGATION. This Agreement constitutes a legal,
valid, and binding obligation of the Servicer, enforceable against the
Servicer in accordance with its terms, subject, as to enforceability, to
applicable bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect affecting the enforcement of
creditors' rights in general and except as such enforceability may be
limited by general principles of equity (whether considered in a suit at
law or in equity).
(vi) NO VIOLATION. The execution, delivery and performance of
this Agreement, the consummation of the transactions contemplated hereby
and the fulfillment of the terms hereof will not conflict with, result in
any breach of any of the terms and provisions of, or constitute (with or
without notice or lapse of time) a default under, the certificate of
incorporation or bylaws of the Servicer, or conflict with or breach any of
the terms or provisions of, or constitute (with or without notice or lapse
of time) a default under, any indenture, agreement, mortgage, deed of trust
or other instrument to which the Servicer is a party or by which the
Servicer is bound or to which any of its properties are subject, or result
in the creation or imposition of any lien upon any of its properties
pursuant to the terms of any such indenture, agreement, mortgage, deed of
trust or other instrument (other than this Agreement), or violate any law,
order, rule, or regulation applicable to the Servicer or its properties of
any federal or state regulatory body, any court, administrative agency, or
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other governmental instrumentality having jurisdiction over the Servicer or
any of its properties.
(vii) NO PROCEEDINGS. There are no proceedings or
investigations pending, or, to the Servicer's knowledge, threatened, before
any court, regulatory body, administrative agency, or tribunal or other
governmental instrumentality having jurisdiction over the Servicer or its
properties: (a) asserting the invalidity of this Agreement or the
Certificates, (b) seeking to prevent the issuance of the Certificates or
the consummation of any of the transactions contemplated by this Agreement,
(c) seeking any determination or ruling that might materially and adversely
affect the performance by the Servicer of its obligations under, or the
validity or enforceability of, this Agreement or the Certificates, or (d)
that may adversely affect the federal or state income, excise, franchise or
similar tax attributes of the Certificates.
Section 8.2 LIABILITY OF THE SERVICER; INDEMNITIES. The Servicer
shall be liable in accordance herewith only to the extent of the obligations
specifically undertaken by the Servicer under this Agreement and shall have no
other obligations or liabilities hereunder.
(b) The Servicer shall indemnify, defend and hold harmless the
Trustee, the Collateral Agent, their directors, officers, employees and agents,
the Trust, and the Certificateholders from and against 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 with respect to any Receivable or other portion of the Trust
Property.
(c) The Servicer shall indemnify, defend and hold harmless the
Trustee, the Collateral Agent, their directors, officers, employees and agents,
the Trust and the Certificateholders from and against any taxes that may at any
time be asserted against the Trustee, the Trust or the Certificateholders with
respect to the transactions contemplated hereby, including any sales, gross
receipts, general corporation, tangible or intangible personal property,
privilege, or license taxes (but not including any taxes asserted with respect
to, and as of the date of, the sale, transfer and assignment of the Trust
Property to the Trust or the issuance and original sale of the Certificates, or
asserted with respect to ownership of the Receivables or other Trust Property,
federal or other income taxes, including franchise taxes measured by net income,
arising out of distributions on the Certificates or any other transactions
contemplated by this Agreement or transfer taxes arising in connection with
transfers of the Certificates) and reasonable costs and expenses in defending
against the same.
(d) The Servicer shall indemnify, defend and hold harmless the
Trustee, the Collateral Agent, their directors, officers, employees and agents,
the Trust and the Certificateholders from and against any and all costs,
expenses, losses, claims, damages, and liabilities, to the extent that such
cost, expense, loss, claim, damage, or liability arose out of, or was imposed
upon, or incurred by, the Trust, the Trustee or the Certificateholders as a
result of the willful misfeasance, negligence, or bad faith of the Servicer in
the performance of its duties under this Agreement.
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(e) The Servicer, or, in the event that the Trustee is also a
servicer, a predecessor Servicer, shall indemnify, defend and hold harmless the
Trustee, the Collateral Agent and their directors, officers, employees and
agents, from and against all costs, expenses, losses, claims, damages, and
liabilities arising out of or incurred in connection with the acceptance or
performance of the Trust and the duties herein contained, except to the extent
that such costs, expenses, losses, claims, damages or liabilities: (i) shall be
due to the willful misfeasance, negligence or bad faith of the Trustee; (ii)
relates to any tax other than the taxes with respect to which either the Seller
or the Servicer shall be required to indemnify the Trustee; (iii) shall arise
from the Trustee's breach of any of its representations or warranties set forth
in Section 10.15; (iv) shall be one as to which the Seller is required to
indemnify the Trustee; or (v) shall arise out of, or be incurred in connection
with, the acceptance or performance by the Trustee of its duties as a successor
servicer hereunder.
(f) Indemnification under this Section 8.2 shall include reasonable
fees and expenses of counsel and expenses of litigation. The indemnity
obligations of the Servicer hereunder shall survive any termination of the
Servicer pursuant to Section 9.1, but only with respect to obligations arising
prior thereto, and any payment of the amount owing under, or the Purchase Amount
with respect to, any Receivable and shall survive the termination of the Trust
or the earlier removal or resignation of the Trustee. If the Servicer shall
have made any indemnity payments pursuant to this Section 8.2 and the Trustee
thereafter collects any of such amounts from others, the Trustee shall, as soon
as practicable upon receipt thereof, repay such amounts to the Servicer, without
interest.
Section 8.3 MERGER OR CONSOLIDATION OF THE SERVICER. Any corporation
or other entity (i) into which the Servicer may be merged or consolidated, (ii)
that may result from any merger, conversion, or consolidation to which the
Servicer is a party, or (iii) that may succeed by purchase and assumption to all
or substantially all of the business of the Servicer, where the Servicer is not
the surviving entity, which corporation or other entity shall be an Eligible
Servicer and shall execute an agreement of assumption to perform every
obligation of the Servicer under this Agreement, shall be the successor to the
Servicer under this Agreement (without relieving the outgoing Servicer of its
responsibilities hereunder, if it survives such merger, conversion or
consolidation) without any further act on the part of any of the parties to this
Agreement. The Servicer shall promptly inform the Trustee and the Rating
Agencies of any such merger, conversion, consolidation or purchase and
assumption where the Servicer is not the surviving entity.
Section 8.4 LIMITATION ON LIABILITY OF THE SERVICER AND OTHERS.
Except as provided in this Agreement, the Servicer shall be under no obligation
to appear in, prosecute or defend any legal action that shall not be incidental
to its duties to service the Receivables in accordance with this Agreement and
that in its opinion may cause it to incur any expense or liability; provided,
however, that the Servicer may undertake, at its expense, any reasonable action
that it may deem necessary or desirable in respect of this Agreement and the
rights and duties of the parties to this Agreement and the interests of the
Certificateholders under this Agreement.
(b) The Servicer, and any director or officer or employee or agent of
the Servicer, may rely in good faith on any document of any kind, believed by it
to be genuine and properly executed and submitted by any Person respecting any
matters arising hereunder.
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Section 8.5 SERVICER NOT TO RESIGN. The Servicer shall not resign
from its obligations and duties under this Agreement except upon a determination
that the performance of its duties is no longer permissible under applicable
law. Any such determination permitting the resignation of the Servicer shall be
evidenced by an Opinion of Counsel (which counsel shall be outside counsel to
the Servicer) to such effect delivered to the Trustee. No such resignation
shall become effective until the Trustee or a successor servicer shall have
assumed the responsibilities and obligations of the outgoing Servicer in
accordance with Section 9.2.
Section 8.6 SERVICER MAY OWN CERTIFICATES. The Servicer, and any
Affiliate of the Servicer, may, in its individual or any other capacity, become
the owner or pledgee of Certificates with the same rights as it would have if it
were not the Servicer or an Affiliate thereof, except as otherwise provided in
the definition of "Certificateholder," "Class A Certificateholder" and "Class B
Certificateholder" in Section 1.1. Certificates so owned by or pledged to the
Servicer or such Affiliate shall have an equal and proportionate benefit under
the provisions of this Agreement, without preference, priority or distinction as
among all of the Certificates.
ARTICLE
SERVICING TERMINATION
Section 9.1 EVENTS OF SERVICING TERMINATION. (a) If any one of the
following events ("EVENTS OF SERVICING TERMINATION") shall occur and be
continuing:
(i) Any failure by the Servicer to deliver to the Trustee the
Servicer's Certificate for any Collection Period, which shall continue
beyond the earlier of three Business Days from the date the Servicer's
Certificate was due to be delivered and the related Deposit Date, or any
failure by the Servicer to deliver to any of the Accounts, the Reserve
Account or the Yield Supplement Account any proceeds or payment required to
be so delivered under the terms of the Certificates and this Agreement,
which shall continue unremedied for a period of five Business Days
following the due date therefor (or, in the case of a payment or deposit to
be made no later than a Deposit Date immediately preceding a Distribution
Date, the failure to make such payment or deposit by such Distribution
Date); or
(ii) Any failure on the part of the Servicer duly to observe
or to perform in any material respect any other covenants or agreements set
forth in the Certificates or in this Agreement (which determination shall
be made without regard to whether funds are available to the
Certificateholders pursuant to the Reserve Account), which failure shall
(a) materially and adversely affect the rights of Certificateholders and
(b) continue unremedied for a period of 90 days after the date on which
written notice of such failure, requiring the same to be remedied, shall
have been given (1) to the Servicer by the Trustee, or (2) to the Trustee
and the Servicer by the holders of Certificates evidencing not less than a
majority of the aggregate outstanding principal balance of the Class A
Certificates and the Class B Certificates taken together as a single class;
or
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(iii) The entry of a decree or order by a court or agency or
supervisory authority of competent jurisdiction for the appointment of a
conservator, receiver, liquidator or trustee for the Servicer in any
bankruptcy, insolvency, readjustment of debt, marshaling of assets and
liabilities, or similar proceedings, or for the winding up or liquidation
of its affairs, and any such decree or order continues unstayed and in
effect for a period of 60 consecutive days; or
(iv) The consent by the Servicer to the appointment of a
conservator, receiver, liquidator or trustee in any bankruptcy, insolvency,
readjustment of debt, marshaling of assets and liabilities, or similar
proceedings of or relating to the Servicer or relating to substantially all
of its property, the admission in writing by the Servicer of its inability
to pay its debts generally as they become due, the filing by the Servicer
of a petition to take advantage of any applicable bankruptcy, insolvency or
reorganization statute, the making by the Servicer of an assignment for the
benefit of its creditors or the voluntary suspension by the Servicer of
payment of its obligations; or
(v) The failure by the Servicer to be an Eligible Servicer;
then, and in each and every case and so long as an Event of Servicing
Termination shall not have been cured or waived, either the Trustee, or the
holders of Certificates evidencing not less than a majority of the aggregate
outstanding principal balance of the Class A Certificates and the Class B
Certificates taken together as a single class, by notice then given in writing
to the Servicer, may terminate all of the rights and obligations of the Servicer
under this Agreement. On or after the receipt by the Servicer of such written
notice, all authority and power of the Servicer under this Agreement, whether
with respect to the Certificates or the Trust Property or otherwise, shall pass
to and be vested in the Trustee or successor servicer appointed by the Trustee
pursuant to Section 9.2; and thereupon the Trustee shall be authorized and
empowered to execute and deliver, on behalf of the Servicer, as attorney-in-fact
or otherwise, any and all documents and other instruments, and to do or
accomplish all other acts or things necessary or appropriate to effect the
purposes of such notice of termination, whether to complete the transfer and
endorsement of the Receivable Files or the Insurance Policies, the certificates
of title to the Financed Vehicles, or otherwise. The Servicer shall cooperate
with the Trustee or such successor servicer in effecting the termination of
their responsibilities and rights as Servicer under this Agreement, including
the transfer to the Trustee or such successor servicer for administration of all
cash amounts that are at the time held by the Servicer for deposit, shall have
been deposited by the Servicer in the Certificate Account, or thereafter shall
be received with respect to a Receivable, all Receivable Files and all
information or documents that the Trustee or such successor servicer may
require. In addition, the Servicer shall transfer its electronic records
relating to the Receivables to the successor servicer in such electronic form as
the successor servicer may reasonably request. All reasonable costs and
expenses incurred by the successor servicer, including allowable compensation of
employees and overhead costs, in connection with the transfer of servicing shall
be paid by the outgoing Servicer upon presentation of reasonable documentation
of such costs and expenses.
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(b) If any of the foregoing Events of Servicing Termination occur,
the Trustee shall have no obligation to notify Certificateholders or any other
Person of such occurrence prior to the continuance of such event through the end
of any cure period specified in Section 9.1(a).
Section 9.2 TRUSTEE TO ACT; APPOINTMENT OF SUCCESSOR SERVICER. Upon
the Servicer's resignation pursuant to Section 8.5, or upon the Servicer's
receipt of notice of termination as Servicer pursuant to Section 9.1, the
Trustee shall be the successor in all respects to the Servicer in its capacity
as Servicer under this Agreement, and shall be subject to all the
responsibilities, duties and liabilities relating thereto placed on the Servicer
by the terms and provisions of this Agreement, except that the Trustee, when
acting as a successor servicer, shall not be obligated to purchase Receivables
pursuant to Section 3.7 unless the obligation to purchase arose after the date
of the notice of termination given to the Servicer pursuant to Section 9.1, and
the Trustee shall not be liable for any acts or omissions of such terminated
Servicer or for any breach by the terminated Servicer of any of its
representations or warranties contained herein or in any related documents or
agreements. As compensation therefor, the Trustee shall be entitled to such
compensation (whether payable out of the Certificate Account or otherwise) as
the Servicer would have been entitled to under this Agreement if no such notice
of termination or resignation had been given. Notwithstanding the above, the
Trustee may, if it shall be unwilling or legally unable so to act, appoint, or
petition a court of competent jurisdiction to appoint, an Eligible Servicer as
the successor to the terminated Servicer under this Agreement. In connection
with such appointment, the Trustee may make such arrangements for the
compensation of such successor servicer out of payments on Receivables as it and
such successor shall agree, which, in no event, shall be greater than that
payable to First Security Bank, N.A. in its capacity as the Servicer hereunder.
The Trustee or such successor servicer shall take such action, consistent with
this Agreement, as shall be necessary to effectuate any such succession. No
Servicer shall resign or be relieved of its duties under this Agreement until a
newly appointed servicer shall have assumed the responsibilities and obligations
of the terminated Servicer under this Agreement.
Section 9.3 EFFECT OF SERVICING TRANSFER. After the transfer of
servicing hereunder, the Trustee or the successor servicer shall notify Obligors
to make directly to the successor servicer payments that are due under the
Receivables after the effective date of such transfer.
(b) Except as provided in Sections 8.2 and 10.8 after the transfer of
servicing hereunder, the outgoing Servicer shall have no further obligations
with respect to the management, administration, servicing, custody or collection
of the Receivables and the successor servicer shall have all of such
obligations, except that the outgoing Servicer will transmit or cause to be
transmitted directly to the successor servicer for its own account, promptly on
receipt and in the same form in which received, any amounts held by the outgoing
Servicer (properly endorsed where required for the successor servicer to collect
any such items) received as payments upon or otherwise in connection with the
Receivables and the outgoing Servicer shall continue to cooperate with the
successor servicer by providing information and in the enforcement of the Dealer
Agreements, the Dealer Assignments and the Insurance Policies.
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(c) A transfer of servicing hereunder shall not affect the rights and
duties of the parties hereunder (including the obligations and indemnities of
the Seller pursuant to Sections 2.4, 3.3, 7.1 and 7.2 or, with respect to
obligations and indemnities arising prior to, or concurrently with, a transfer
of servicing hereunder, the outgoing Servicer pursuant to Section 3.7, 8.1 or
8.2) other than those relating to the management, administration, servicing,
custody or collection of the Receivables and the other Trust Property. The
successor servicer shall, upon its appointment pursuant to Section 9.2 and as
part of its duties and responsibilities under this Agreement, promptly take all
action it deems necessary or appropriate so that the outgoing Servicer (in
whatever capacity) is paid or reimbursed all amounts it is entitled to receive
under this Agreement on each Distribution Date subsequent to the date on which
it is terminated as Servicer hereunder.
(d) Any successor servicer shall provide the Seller with access to
the Receivable Files and to the successor servicer's records (whether written or
automated) with respect to the Receivable Files. Such access shall be afforded
without charge, but only upon reasonable request and during normal business
hours at the offices of the successor servicer. Nothing in this Section 9.3
shall affect the obligation of the successor servicer to observe any applicable
law prohibiting disclosure of information regarding the Obligors, and the
failure of the successor servicer to provide access to information as a result
of such obligation shall not constitute a breach of this Section 9.3.
Section 9.4 NOTIFICATION TO CERTIFICATEHOLDERS. Upon any notice of
an Event of Servicing Termination or upon any termination of, or appointment of
a successor to, the Servicer pursuant to this Article IX, the Trustee shall give
prompt written notice thereof to Certificateholders at their respective
addresses of record, and to the Rating Agencies at the following addresses:
Moody's Investors Service, Inc., 99 Church Street, New York, New York 10007,
Attention: ABS Monitoring Department, 4th Floor; Standard & Poor's Ratings
Group, 26 Broadway, New York, New York 10004-1064, Attention: Asset Backed
Surveillance Group.
Section 9.5 WAIVER OF PAST EVENTS OF SERVICING TERMINATION. The
holders of Certificates evidencing not less than a majority of the aggregate
outstanding principal balance of the Class A Certificates and the Class B
Certificates taken together as a single class, may, on behalf of all holders of
Certificates waive any Event of Servicing Termination hereunder and its
consequences, except an event resulting from the failure to make any required
deposits to, or payments from, any of the Accounts or the Reserve Account in
accordance with this Agreement. Upon any such waiver of a past Event of
Servicing Termination, such event shall cease to exist, and shall be deemed to
have been remedied for every purpose of this Agreement. No such waiver shall
extend to any subsequent or other event or impair any right arising therefrom,
except to the extent expressly so waived.
Section 9.6 TRANSFER OF ACCOUNTS. Notwithstanding the provisions of
Section 9.1, if any of the Accounts, the Yield Supplement Account or the Reserve
Account is maintained with the Servicer or any Affiliate of the Servicer and an
Event of Servicing Termination shall occur and be continuing, the Servicer shall
promptly, and in any event within five Business Days, give notice to the Trustee
and the Seller of such Event of Servicing Termination, and the Trustee or the
Seller, as the case may be, within five days after the receipt of such notice,
shall establish new Eligible Deposit Accounts conforming with the requirements
of this Agreement and promptly shall transfer
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all funds in any such Accounts, the Yield Supplement Account or the Reserve
Account to such new Eligible Deposit Accounts.
ARTICLE
THE TRUSTEE
Section 10.1 ACCEPTANCE BY TRUSTEE. The Trustee, by its execution of
this Agreement, accepts all consideration conveyed by the Seller pursuant to
Section 2.1 and the Trust created hereunder and declares that it shall hold such
consideration in trust upon the terms hereof set forth for the benefit of the
Certificateholders.
Section 10.2 DUTIES OF TRUSTEE. (a) The Trustee, both prior to and
after the curing or waiver of an Event of Servicing Termination, undertakes to
perform only such duties as are specifically set forth in this Agreement, and no
implied covenants or obligations shall be read into this Agreement against the
Trustee. If an Event of Servicing Termination shall have occurred and shall not
have been cured (the appointment of a successor servicer (including the Trustee)
to constitute a cure for the purposes of this Article X) or otherwise waived,
the Trustee shall exercise such of the rights and powers vested in it by this
Agreement, and shall use the same degree of care and skill in their exercise, as
a prudent man would exercise or use under the circumstances in the conduct of
his own affairs; provided, however, that if the Trustee assumes the duties of
the Servicer pursuant to Section 9.2, the Trustee in performing such duties
shall use the degree of skill and attention required by Section 3.1.
(b) The Trustee, upon receipt of all resolutions, certificates,
statements, opinions, reports, documents, orders, or other instruments furnished
to the Trustee that are required specifically to be furnished pursuant to any
provision of this Agreement, shall examine them to determine whether they
conform to the requirements of this Agreement.
(c) No provision of this Agreement shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act, its own willful misconduct or its own bad faith; provided, however,
that:
(i) prior to the occurrence of an Event of Servicing
Termination, and after the curing or waiver of all such Events of Servicing
Termination that may have occurred, the duties and obligations of the
Trustee shall be determined solely by the express provisions of this
Agreement, the Trustee shall not be liable except for the performance of
such duties and obligations as are specifically set forth in this
Agreement, no implied covenants or obligations shall be read into this
Agreement against the Trustee, the permissible right of the Trustee (solely
in its capacity as such) to do things enumerated in this Agreement shall
not be construed as a duty and, in the absence of bad faith on the part of
the Trustee, or manifest error, the Trustee (solely in its capacity as
such) may conclusively rely on the truth of the statements and the
correctness of the computations and opinions expressed upon any
certificates or opinions furnished to the Trustee and conforming to the
requirements of this Agreement;
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(ii) the Trustee shall not be liable for an error of judgment
made in good faith by an officer of the Trustee, unless it shall be proved
that the Trustee shall have been negligent in performing its duties in
accordance with the terms of this Agreement; and
(iii) the Trustee shall not be liable with respect to any
action taken, suffered, or omitted to be taken in good faith in accordance
with the direction of the holders of Certificates evidencing not less than
a majority of the aggregate outstanding principal balance of the Class A
Certificates and the Class B Certificates taken together as a single class,
as set forth in Section 9.1, relating to the time, method and place of
conducting any proceeding or any remedy available to the Trustee, or
exercising any trust or power conferred upon the Trustee, under this
Agreement.
(d) The Trustee shall not be required to expend or risk its own funds
or otherwise incur any financial liability in the performance of any of its
duties hereunder, or in the exercise of any of its rights or powers, if it shall
have reasonable grounds for believing that the repayment of such funds or
indemnity satisfactory to it against such risk or liability shall not be assured
to it, and none of the provisions contained in this Agreement shall in any event
require the Trustee to perform, or be responsible for the manner of performance
of, any of the obligations of the Servicer under this Agreement except during
such time, if any, as the Trustee shall be the successor to, and be vested with
the rights, duties, powers and privileges of, the Servicer in accordance with
the terms of this Agreement.
(e) Except for actions expressly authorized by this Agreement, the
Trustee shall take no action reasonably likely to impair the security interests
created or existing under any Receivable or Financed Vehicle or to impair the
value of any Receivable or Financed Vehicle.
(f) The Trustee shall have no power to vary the corpus of the Trust
including (i) accepting any substitute obligation for a Receivable initially
assigned to the Trustee under this Agreement, (ii) adding any other investment,
obligation or security, or (iii) withdrawing any Receivable, except for a
withdrawal permitted under this Agreement.
Section 10.3 TRUSTEE'S CERTIFICATE. As soon as practicable after each
Deposit Date on which Receivables shall be assigned to the Seller pursuant to
Section 2.4 or to the Servicer pursuant to Section 3.7 or 11.2, as applicable,
the Trustee shall execute a certificate, prepared by the Servicer, including its
date and the date of the Agreement, and accompanied by a copy of the Servicer's
Certificate for the related Collection Period. The Trustee's certificate shall
operate, as of such Deposit Date, as an assignment pursuant to Section 10.4.
Section 10.4 TRUSTEE'S ASSIGNMENT OF PURCHASED RECEIVABLES. With
respect to all Receivables repurchased by the Seller pursuant to Section 2.4, or
purchased by the Servicer pursuant to Section 3.7 or 11.2, the Trustee shall
assign, without recourse, representation, or warranty, to the Seller or the
Servicer, as the case may be, all the Trustee's right, title, and interest in,
to and under such Receivables, and all security and documents and all other
Trust Property conveyed pursuant to Section 2.1 with respect to such
Receivables. Such assignment shall be a sale and assignment outright, and not
for security. If, in any enforcement suit or legal proceeding, it is held that
the Seller
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or the Servicer, as the case may be, may not enforce any such Receivable on the
ground that it shall not be a real party in interest or a holder entitled to
enforce the Receivable, the Trustee shall, at the expense of the Seller or the
Servicer, as the case may be, take such steps as the Seller or the Servicer, as
the case may be, deems necessary to enforce the Receivable, including bringing
suit in the Trustee's name or the names of the Certificateholders.
Section 10.5 CERTAIN MATTERS AFFECTING THE TRUSTEE. Except as
otherwise provided in Section 10.2:
(i) The Trustee may conclusively rely and shall be fully
protected in acting or refraining from acting upon any resolution,
certificate of auditors or accountants or any other certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
appraisal, bond, note or other paper or document believed by it to be
genuine and to have been signed or presented by the proper party or
parties.
(ii) The Trustee may consult with counsel and any Opinion of
Counsel or any advice of such counsel shall be full and complete
authorization and protection in respect of any action taken or suffered or
omitted by it under this Agreement in good faith and in accordance with
such Opinion of Counsel or any advice of such counsel.
(iii) The Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Agreement, or to institute,
conduct or defend any litigation under this Agreement or in relation to
this Agreement, at the request, order or direction of any of the
Certificateholders pursuant to the provisions of this Agreement, unless
such Certificateholders shall have offered to the Trustee security or
indemnity satisfactory to it against the costs, expenses, and liabilities
that may be incurred therein or thereby. Nothing contained in this
Agreement, however, shall relieve the Trustee of the obligations, upon the
occurrence of an Event of Servicing Termination that is not timely cured or
waived pursuant to Section 9.5, to exercise such of the rights and powers
vested in it by this Agreement, and to use the same degree of care and
skill in their exercise as a prudent man would exercise or use under the
circumstances in the conduct of his own affairs.
(iv) The Trustee shall not be personally liable for any action
taken, suffered or omitted by it in good faith and believed by it to be
authorized or within the discretion, rights or powers conferred upon it by
this Agreement.
(v) Prior to the occurrence of an Event of Servicing
Termination and after the curing or waiver of all Events of Servicing
Termination that may have occurred, the Trustee shall not be bound to make
any investigation into the facts of any matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice, request,
consent, direction, order, approval, bond, note or other paper or document,
unless requested in writing so to do by holders of Certificates evidencing
not less than a majority of the aggregate outstanding principal balance of
the Class A Certificates and the Class B Certificates taken together as a
single class; provided, however, that if the payment within a reasonable
time to the Trustee of the costs, expenses, or liabilities likely to be
incurred by it in the making
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of an investigation requested by the Certificateholders is, in the opinion
of the Trustee, not reasonably assured to the Trustee by the security
afforded to it by the terms of this Agreement, the Trustee may require
indemnity satisfactory to it against such cost, expense, or liability as a
condition to so proceeding. The reasonable expense of every such
examination shall be paid by the Servicer, or, if paid by the Trustee,
shall be reimbursed by the Servicer upon demand. Nothing in this clause
(v) shall affect the obligation of the Servicer to observe any applicable
law prohibiting disclosure of information regarding the Obligors; provided,
further, that the Trustee shall be entitled to make such further inquiry or
investigation into such facts or matters as it may reasonably see fit, and
if the Trustee shall determine to make such further inquiry or
investigation it shall be entitled to examine the books and records of the
Servicer or the Seller, personally or by agent or attorney, at the sole
cost and expense of the Servicer or the Seller, as the case may be.
(vi) The Trustee may execute any of the trusts or powers
hereunder or perform any duties under this Agreement either directly or by
or through agents, attorneys, nominees or a custodian, and shall not be
liable for the acts of, or for the supervision of, such agents, attorneys,
nominees or custodians, provided that they have been appointed with due
care.
(vii) The Trustee shall not be required to make any initial or
periodic examination of any documents or records related to the Receivables
or Financed Vehicles for the purpose of establishing the presence or
absence of defects, the compliance by the Seller with their representations
and warranties or for any other purpose.
Section 10.6 TRUSTEE NOT LIABLE FOR CERTIFICATES OR RECEIVABLES. The
Trustee assumes no responsibility for the correctness of the recitals contained
herein and in the Certificates (other than the certificate of authentication on
the Certificates). Except as expressly provided herein, the Trustee makes no
representations as to the validity or sufficiency of this Agreement or of the
Certificates (other than the Trustee's execution of, and the certificate of
authentication on, the Certificates), or of any Receivable or related document,
or for the validity of the execution by the Seller and the Servicer of this
Agreement or of any supplements hereto or instruments of further assurance, or
for the sufficiency of the Trust Property hereunder, and the Trustee shall not
be bound to ascertain or inquire as to the performance or observance of any
covenants, conditions or agreements on the part of the Seller or the Servicer
under this Agreement except as herein set forth; but the Trustee may require the
Seller or the Servicer to provide full information and advice as to the
performance of the aforesaid covenants, conditions and agreements. The Trustee
(solely in its capacity as such) shall have no obligation under any circumstance
to perform any of the duties of the Seller or of the Servicer except as
explicitly set forth in this Agreement. The Trustee shall have no liability in
connection with compliance of the Servicer or the Seller with statutory or
regulatory requirements related to the Receivables. The Trustee shall not make
or be deemed to have made any representations or warranties with respect to the
Receivables or the validity or sufficiency of any assignment of the Receivables
to the Trust or the Trustee. The Trustee (solely in its capacity as such) shall
at no time have any responsibility or liability for, or with respect to, the
legality, validity or enforceability of any security interest in any Financed
Vehicle or (prior to the time, if any, that the Servicer is terminated as
custodian hereunder) any Receivable, or the perfection and priority of
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such a security interest or the maintenance of any such perfection and priority,
the efficacy of the Trust or its ability to generate funds sufficient to provide
for the payments to be distributed to Certificateholders under this Agreement,
the existence, condition, location, and ownership of any Financed Vehicle, the
existence and enforceability of any Insurance Policy, the existence and contents
of any Receivable or any computer or other record thereof, the validity of the
assignment of any Receivable to the Trust or of any intervening assignment, the
completeness of any Receivable, the performance or enforcement of any
Receivable, the compliance by the Seller with any warranty or representation
made by it under this Agreement or in any related document and the accuracy of
any such warranty or representation, prior to the Trustee's receipt of notice or
other discovery of any noncompliance therewith or any breach thereof, any
investment of monies by the Servicer or any loss resulting therefrom (it being
understood that the Trustee shall remain responsible for any Trust Property that
it may hold), the acts or omissions of the Seller, the Servicer, or any Obligor,
any action of the Servicer taken in the name of the Trustee, or any action by
the Trustee taken at the instruction of the Servicer in the absence of bad faith
on the part of the Trustee or manifest error in such instruction; provided,
however, that the foregoing shall not relieve the Trustee of its obligation to
perform its duties under this Agreement. Except with respect to a claim based
on the failure of the Trustee to perform its duties under this Agreement
(whether in its capacity as Trustee or as successor servicer) or based on the
Trustee's willful misconduct, negligence, or bad faith, or based on the
Trustee's breach of a representation and warranty contained in Section 10.15, no
recourse shall be had to the Trustee (whether in its individual capacity or as a
Trustee) for any claim based on any provision of this Agreement, the
Certificates, or any Receivable or assignment thereof against the Trustee in its
individual capacity; the Trustee shall not have any personal obligation,
liability, or duty whatsoever to any Certificateholder or any other Person with
respect to any such claim. The Trustee shall not be accountable for the use or
application by the Seller of the proceeds of such Certificates, or for the use
or application of any funds paid to the Servicer in respect of the Receivables
prior to the time such amounts are deposited in the Certificate Account (whether
or not the Certificate Account is maintained with the Trustee). The Trustee
shall have no liability for any losses from the investment or reinvestment in
Eligible Investments made in accordance with Section 4.1.
Section 10.7 TRUSTEE MAY OWN CERTIFICATES. The Trustee in its
individual or any other capacity may become the owner or pledgee of Certificates
and may transact banking business with the Seller, the Servicer and their
respective Affiliates with the same rights as it would have if it were not
Trustee.
Section 10.8 TRUSTEE'S FEES AND EXPENSES. The Servicer agrees to pay
to the Trustee, and the Trustee shall be entitled to, reasonable compensation
(which shall not be limited by any provision of law in regard to the
compensation of a trustee of an express trust) for all services rendered by it
in the execution of the trusts created by this Agreement and in the exercise and
performance of any of the powers and duties under this Agreement as the Trustee,
and the Servicer shall pay or reimburse the Trustee upon its request for all
reasonable expenses (including, without limitation, expenses incurred in
connection with notices or other communications to Certificateholders),
disbursements, and advances (including the reasonable compensation and the
reasonable expenses and disbursements of its counsel and of all persons not
regularly in its employ) incurred or made by the Trustee in accordance with any
of the provisions of this Agreement (including the reasonable fees and expenses
of its agents, any co-trustee and counsel) or in defense
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of any action brought against it in connection with this Agreement except any
such expense, disbursement, or advance as may arise from its negligence, willful
misfeasance, or bad faith. The Servicer's covenant to pay the expenses,
disbursements and advances provided for in the preceding sentence shall survive
the termination of this Agreement or the earlier resignation or removal of the
Trustee. When the Trustee incurs expenses or renders services in connection
with an Event or Servicing Termination described in Sections 9.1(a)(iii) or
9.1(a)(iv), such expenses (including the fees and expenses of its counsel) and
the compensation for such services are intended to constitute expenses of
administration under any bankruptcy law or law relating to creditor's rights
generally.
Section 10.9 TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF
CERTIFICATES. All rights of action and claims under this Agreement or the
Certificates may be prosecuted and enforced by the Trustee without the
possession of any of the Certificates or the production thereof in any
proceeding relating thereto, and any such proceeding instituted by the Trustee
shall be brought in its own name as trustee. Any recovery of judgment shall,
after provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, be for the
ratable benefit of the Certificateholders in respect of which such judgment has
been obtained.
Section 10.10 ELIGIBILITY REQUIREMENTS FOR TRUSTEE. The Trustee
under this Agreement shall at all times have an office in the same state as the
Corporate Trust Office is located on the date of this Agreement or which is
otherwise consented to by the Seller. The Trustee shall be organized and doing
business under the banking laws of such state or of the United States, shall be
authorized under such laws to exercise corporate trust powers, shall have a
consolidated net worth of at least $50,000,000, shall have a credit rating of at
least [Baa3] from Moody's and shall be subject to supervision or examination by
federal or state banking authorities. If such corporation shall publish reports
of condition at least annually, pursuant to law or to the requirements of the
aforesaid supervising or examining authority, then for the purpose of this
Section 10.10, the consolidated net worth of such corporation shall be deemed to
be its consolidated capital and surplus as set forth in its most recent
consolidated report of condition so published. In case at any time the Trustee
shall cease to be eligible in accordance with the provisions of this Section
10.10, the Trustee shall resign immediately in the manner and with the effect
specified in Section 10.11.
Section 10.11 RESIGNATION OR REMOVAL OF TRUSTEE AND COLLATERAL AGENT.
The Trustee may at any time resign and be discharged from the Trust hereby
created by giving 30 days' prior written notice thereof to the Servicer. Upon
receiving such notice of resignation, the Servicer shall promptly appoint a
successor trustee, by written instrument, in duplicate, one copy of which
instrument shall be delivered to the resigning Trustee and one copy to the
successor trustee. If no successor trustee shall have been so appointed and
have accepted appointment within 30 days after the giving of such notice of
resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor trustee.
(b) If at any time the Trustee shall cease to be eligible in
accordance with the provisions of Section 10.10 and shall fail to resign after
written request therefor by the Servicer, or if at any time the Trustee shall be
legally unable to act, or shall be adjudged bankrupt or insolvent, or a
receiver, conservator or liquidator of the Trustee or of its property shall be
appointed, or any
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public officer shall take charge or control of the Trustee or of its property or
affairs for the purpose of rehabilitation, conservation or liquidation, then the
Servicer may remove the Trustee. If the Trustee is removed under the authority
of the immediately preceding sentence, the Servicer shall promptly appoint a
successor trustee by written instrument, in duplicate, one copy of which
instrument shall be delivered to the Trustee so removed, the successor trustee,
the Certificateholders at their respective addresses of record and the Rating
Agencies.
(c) Any resignation or removal of the Trustee and appointment of a
successor trustee pursuant to any of the provisions of this Section 10.11 shall
not become effective until acceptance of appointment by the successor trustee
pursuant to Section 10.12.
(d) The respective obligations of the Seller and the Servicer
described in this Agreement shall survive the removal or resignation of the
Trustee as provided in this Agreement.
(e) Upon the removal or termination of the Trustee for any reason,
the Collateral Agent shall also be removed or terminated and the successor
trustee appointed pursuant to Section 10.12 shall be appointed and become the
successor collateral agent so that the Trustee and the Collateral Agent remain
the same Person.
Section 10.12 SUCCESSOR TRUSTEE. (a) Any successor Trustee appointed
pursuant to Section 10.11 shall execute, acknowledge, and deliver to the
Servicer and to its predecessor Trustee an instrument accepting such appointment
under this Agreement, and thereupon the resignation or removal of the
predecessor Trustee shall become effective and such successor trustee, without
any further act, deed or conveyance, shall become fully vested with all rights,
powers, duties, and obligations of its predecessor under this Agreement, with
like effect as if originally named as Trustee. The predecessor Trustee shall
deliver to the successor Trustee all documents and statements held by it under
this Agreement, and the Servicer and the predecessor Trustee shall execute and
deliver such instruments and do such other things as may reasonably be required
for fully and certainly vesting and confirming in the successor Trustee all such
rights, powers, duties, and obligations.
(b) No successor trustee shall accept appointment as provided in this
Section 10.12 unless at the time of such acceptance such successor trustee shall
be eligible pursuant to Section 10.10.
(c) Upon acceptance of appointment by a successor trustee pursuant to
this Section 10.12, the Servicer shall mail notice of such acceptance by the
successor trustee under this Agreement to all Certificateholders at their
respective addresses of record and to the Rating Agencies. If the Servicer
shall fail to mail such notice within 10 days after acceptance of appointment by
the successor trustee, the successor trustee shall cause such notice to be
mailed at the expense of the Servicer. No Trustee hereunder shall be liable for
the acts or omissions of any successor trustee.
Section 10.13 MERGER OR CONSOLIDATION OF TRUSTEE. Any corporation or
banking association which is eligible to be a successor trustee under Section
10.10 (i) into which the Trustee
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may be merged or consolidated, (ii) that may result from any merger, conversion,
or consolidation to which the Trustee shall be a party, or (iii) that may
succeed by purchase and assumption to the business of the Trustee, where the
Trustee is not the surviving entity, which corporation or banking association
executes an agreement of assumption to perform every obligation of the Trustee
under this Agreement, shall be the successor of the Trustee hereunder, without
the execution or filing of any instrument or any further act on the part of any
of the parties hereto, anything herein to the contrary notwithstanding. The
Trustee shall promptly notify the Servicer and the Rating Agencies of any such
merger, conversion, consolidation or purchase and assumption where the Trustee
is not the surviving entity.
Section 10.14 APPOINTMENT OF CO-TRUSTEE OR SEPARATE TRUSTEE. (a)
Notwithstanding any other provisions of this Agreement, at any time, for the
purpose of meeting any legal requirements of any jurisdiction in which any part
of the Trust Property or any Financed Vehicle may at the time be located, the
Servicer and the Trustee acting jointly shall have the power and shall execute
and deliver all instruments to appoint one or more Persons approved by the
Trustee to act as co-trustee, jointly with the Trustee, or separate trustee or
separate trustees, of all or any part of the Trust, and to vest in such Person,
in such capacity and for the benefit of the Certificateholders, such title to
the Trust, or any part thereof, and, subject to the other provisions of this
Section 10.14, such powers, duties, obligations, rights, and trusts as the
Servicer and the Trustee may consider necessary or desirable. If the Servicer
shall not have joined in such appointment within 15 days after the receipt by it
of a request so to do, or in case an Event of Servicing Termination shall have
occurred and be continuing, the Trustee alone shall have the power to make such
appointment. No co-trustee or separate trustee under this Agreement shall be
required to meet the terms of eligibility as a successor trustee pursuant to
Section 10.10 and no notice to Certificateholders of the appointment of any
co-trustee or separate trustee shall be required pursuant to Section 10.12.
Notwithstanding the appointment of a co-trustee or separate trustee hereunder,
the Trustee shall not be relieved of any of its obligations under this
Agreement.
(b) Each separate trustee and co-trustee shall, to the extent
permitted by law, be appointed and act subject to the following provisions and
conditions:
(i) All rights, powers, duties, and obligations conferred or
imposed upon the Trustee shall be conferred upon and exercised or performed
by the Trustee and such separate trustee or co-trustee jointly (it being
understood that such separate trustee or co-trustee is not authorized to
act separately without the Trustee joining in such act), except to the
extent that under any law of any jurisdiction in which any particular act
or acts are to be performed (whether as Trustee under this Agreement or as
successor to the Servicer under this Agreement), the Trustee shall be
incompetent or unqualified to perform such act or acts, in which event such
rights, powers, duties, and obligations (including the holding of title to
the Trust Property or any portion thereof in any such jurisdiction) shall
be exercised and performed singly by such separate trustee or co-trustee,
but solely at the direction of the Trustee.
(ii) No co-trustee or separate trustee under this Article
shall be personally liable by reason of any act or omission of any other
trustee under this Agreement.
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(iii) The Servicer and the Trustee acting jointly may at any
time accept the resignation of or remove any separate trustee or
co-trustee.
(c) Any notice, request or other writing given to the Trustee shall
be deemed to have been given to each of the then separate trustees and
co-trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Agreement and
in particular to the provisions of this Article X. Each separate trustee and
co-trustee, upon its acceptance of the trusts conferred, shall be vested with
the estates or property specified in its instrument of appointment, either
jointly with the Trustee or separately, as may be provided therein, subject to
all the provisions of this Agreement, specifically including every provision of
this Agreement relating to the conduct of, affecting the liability of, or
affording protection to, the Trustee. Each such instrument shall be filed with
the Trustee and a copy thereof given to the Servicer.
(d) Any separate trustee or co-trustee may, at any time, appoint the
Trustee its agent or attorney-in-fact with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect of this
Agreement on its behalf and in its name. If any separate trustee or co-trustee
shall die, become incapable of acting, resign or be removed, all of its estates,
properties, rights, remedies and trusts shall vest in and be exercised by the
Trustee, to the extent permitted by law, without the appointment of the Trustee
as a new or successor trustee. The Trustee shall promptly notify the Servicer
and the Rating Agencies of any appointment made pursuant to this Section 10.14.
Section 10.15 REPRESENTATIONS AND WARRANTIES OF TRUSTEE. The Trustee
makes the following representations and warranties on which the Seller, the
Servicer, and Certificateholders may rely:
(i) ORGANIZATION AND GOOD STANDING. The Trustee is a banking
corporation duly organized, validly existing, and in good standing under
the laws of the State of New York;
(ii) POWER AND AUTHORITY. The Trustee has full power,
authority and legal right to execute, deliver, and perform this Agreement
and has taken all necessary action to authorize the execution, delivery,
and performance by it of this Agreement; and
(iii) ENFORCEABILITY. This Agreement has been duly executed
and delivered by the Trustee and this Agreement constitutes a legal, valid
and binding obligation of the Trustee, enforceable against the Trustee in
accordance with its terms, subject as to enforceability, to applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
now or hereafter in effect affecting the enforcement of creditors' rights
in general and except as such enforceability may be limited by general
principles of equity (whether considered in a suit at law or in equity).
Section 10.16 REPORTS BY TRUSTEE. The Trustee shall provide to any
Certificateholder or Certificate Owner who so requests in writing (addressed to
the Corporate Trust Office) a copy of any Servicer's Certificate, the annual
statement described in Section 3.10, and the annual
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accountant's examination described in Section 3.11. The Trustee may require any
Certificateholder or Certificate Owner requesting such report to pay a
reasonable sum to cover the cost of the Trustee's complying with such request.
Section 10.17 TAX ACCOUNTING. The Servicer shall prepare or shall
cause to be prepared any tax returns required to be filed by the Trust and shall
remit such returns to the Trustee for signature at least five days before such
returns are due to be filed. The Trustee, upon request, will furnish the
Servicer with all such information known to the Trustee as may be reasonably
required in connections with the preparation of all tax returns of the Trust,
and shall, upon request, execute such returns. The Servicer shall prepare the
tax returns of the Trust in accordance with (i) the Code and any regulations
(including, to the extent applicable by their terms, proposed regulations)
thereunder or (ii) any applicable state or local statute or regulation.
ARTICLE
TERMINATION
Section 11.1 TERMINATION OF THE TRUST. (a) The Trust, and the
respective obligations and responsibilities of the Seller, the Servicer, and the
Trustee hereunder shall terminate (except as otherwise expressly provided
herein) upon the earliest of: (i) the Distribution Date next succeeding the
purchase by the Servicer at its option, pursuant to Section 11.2, of the
Receivables (other than Defaulted Receivables) remaining in the Trust, (ii) the
payment to Certificateholders, the Trustee and the Collateral Agent of all
amounts required to be paid to them pursuant to this Agreement or (iii) the
Distribution Date next succeeding the month which is six months after the
maturity or the liquidation of the last Receivable held in the Trust and the
disposition of any amounts received upon liquidation of any property remaining
in the Trust; provided, however, that in no event shall the Trust created by
this Agreement continue beyond the expiration of 21 years from the date hereof.
The Servicer shall promptly notify the Trustee of any prospective termination
pursuant to this Section 11.1, which notice shall contain the information
required by the Trustee to give its notice thereunder.
(b) Notice of any termination, specifying the Distribution Date upon
which the Certificateholders may surrender the Certificates to the Trustee for
payment of the final distribution and cancellation, shall be given promptly by
the Trustee by letter to Certificateholders of record and the Rating Agencies
mailed not earlier than the 15th day and not later than the 25th day of the
month next preceding the specified Distribution Date stating the amount of any
such final payment and that the Record Date otherwise applicable to such
Distribution Date is not applicable, payments being made only upon presentation
and surrender of the Certificates at the office of the Trustee therein
specified. Upon presentation and surrender of the Certificates, the Trustee
shall cause to be distributed to Certificateholders amounts distributable on
such Distribution Date pursuant to Section 4.5. Amounts remaining after
distribution, or providing for distribution, to the Certificateholders shall be
distributed to the Seller.
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(c) In the event that all of the Certificateholders shall not
surrender their Certificates for cancellation within six months after the date
specified in the above-mentioned written notice, the Trustee shall give a second
written notice to the remaining Certificateholders to surrender their
Certificates for cancellation and receive the final distribution with respect
thereto. The Trustee shall after giving such notice deliver or cause to be
delivered to the Servicer a list of those Certificateholders who have not
surrendered Certificates for cancellation. If, within one year after the second
notice, all the Certificates shall not have been surrendered for cancellation,
the Servicer may take appropriate steps, or may appoint an agent to take
appropriate steps, to contact the remaining Certificateholders concerning
surrender of their Certificates, and the cost thereof shall be paid out of the
funds and other assets that shall remain subject to this Agreement. Any funds
remaining in the Trust after exhaustion of such remedies shall be distributed by
the Trustee to the Seller and the Certificateholders shall thereafter look
solely to the Seller for such payment.
Section 11.2 OPTIONAL PURCHASE OF ALL RECEIVABLES. In the event that
the Pool Balance shall be 10% or less of the Original Pool Balance as of the
last day of any Collection Period, the Servicer shall have the option to
purchase the corpus of the Trust on any Distribution Date occurring in a
subsequent Collection Period. To exercise such option, the Servicer shall
notify the Trustee no later than the 10th day of the month in which such
purchase is to be effected and deposit the aggregate Purchase Amount for the
Receivables (other than Defaulted Receivables) into the Certificate Account on
the Deposit Date occurring in the month in which such purchase is to be
effected. The payment shall be made in the manner specified in Section 4.3, and
shall be distributed pursuant to Section 4.5. Upon such payment the Servicer
shall succeed to and own all interests in and to the Trust and the Trust
Property.
ARTICLE
MISCELLANEOUS PROVISIONS
Section 12.1 AMENDMENT. (a) This Agreement may be amended by the
Seller, the Servicer and the Trustee, without the consent of any of the
Certificateholders, for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Agreement or modifying
in any manner the rights of the Certificateholders; provided, however, that such
action shall not, as evidenced by an Opinion of Counsel to the Seller delivered
to the Trustee, materially and adversely affect the interests of any
Certificateholder or cause the Trust to be classified for federal tax purposes
as an association taxable as a corporation.
(b) This Agreement may also be amended from time to time by the
Seller, the Servicer and the Trustee, with the consent of the holders of
Certificates evidencing not less than a majority of the aggregate outstanding
principal balance of the Class A Certificates and the Class B Certificates taken
together as a single class, for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of this Agreement,
or of modifying in any manner the rights of the Certificateholders; provided,
however, that no such amendment shall (i) increase or reduce in any manner the
amount of, or accelerate or delay the timing of, or change the allocation or
priority of, collections of payments on Receivables or distributions that are
required to be made
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on any Certificate, without the consent of all adversely affected
Certificateholders, (ii) reduce the percentage of the aggregate outstanding
principal balance of the Certificates, the holders of which are required to
consent to any such amendment, without the consent of all Certificateholders,
(iii) materially and adversely affect the interests of either the Class A
Certificateholders or the Class B Certificateholders without the consent of the
holders of Class A Certificates or Class B Certificates, as the case may be,
evidencing not less than a majority of the aggregate outstanding principal
balance of the Class A Certificates or the Class B Certificates, as the case may
be, (iv) adversely affect the rating of the Class A Certificates or the Class B
Certificates by the Rating Agencies without the consent of holders of Class A
Certificates or Class B Certificates, as the case may be, evidencing not less
than two-thirds of the aggregate outstanding principal balance of the Class A
Certificates or the Class B Certificates, as the case may be, or (v) cause the
Trust to be classified as an association taxable as a corporation. Promptly
after the execution of any such amendment or consent, the Trustee shall furnish
written notification of the substance of such amendment or consent to each
Certificateholder.
(c) It shall not be necessary for the consent of Certificateholders
pursuant to this Section 12.1 to approve the particular form of any proposed
amendment or consent, but it shall be sufficient if such consent shall approve
the substance thereof. The manner of obtaining such consents and of evidencing
the authorization of the execution thereof by Certificateholders shall be
subject to such reasonable requirements as the Trustee may prescribe.
(d) Notice of any amendment of this Agreement shall be sent by the
Servicer to the Rating Agencies, at such address as the Rating Agencies may from
time to time specify in writing.
(e) The Trustee may, but shall not be obligated to, enter into any
such amendment which affects the Trustee's own rights, duties, indemnities or
immunities under this Agreement or otherwise.
(f) In connection with any amendment pursuant to this Section 12.1,
the Trustee shall be entitled to receive an Opinion of Counsel to the effect
that such amendment is authorized or permitted by the Agreement.
Section 12.2 PROTECTION OF TITLE TO TRUST. (a) The Servicer shall
execute and file such financing statements and cause to be executed and filed
such continuation statements, all in such manner and in such places as may be
required by law fully to preserve, maintain and protect the interest of the
Certificateholders and the Trustee under this Agreement in the Trust Property
and in the proceeds thereof. The Servicer shall deliver (or cause to be
delivered) to the Trustee file-stamped copies of, or filing receipts for, any
document filed as provided above, as soon as available following such filing.
In the event the Servicer fails to perform its obligations under this
subsection, the Trustee may (but shall not be obligated to) do so, at the
expense of the Servicer.
(b) Neither the Seller nor the Servicer shall change its name,
identity, or corporate structure in any manner that would, could, or might make
any financing statement or continuation statement filed by the Servicer in
accordance with paragraph (a) above seriously misleading within
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the meaning of Section 9-402(7) of the Relevant UCC, unless it shall have given
the Trustee at least 60 days' prior written notice thereof.
(c) The Seller and the Servicer shall give the Trustee at least 60
days' prior written notice of any relocation of their principal executive
offices if, as a result of such relocation, the applicable provisions of the
Relevant UCC would require the filing of any amendment of any previously filed
financing or continuation statement or of any new financing statement. The
Seller and the Servicer shall at all times maintain each office from which it
shall service Receivables, and its principal executive office, within the United
States of America.
(d) The Servicer shall maintain accounts and records as to each
Receivable accurately and in sufficient detail to permit (i) the reader thereof
to know, as of the most recent monthly calculation, the status of such
Receivable, including payments, Liquidation Proceeds and Recoveries made and
payments owing (and the nature of each), and (ii) reconciliation between
payments or Recoveries on (or with respect to) each Receivable and the amounts
from time to time deposited in the Certificate Account in respect of such
Receivable.
(e) The Servicer shall maintain its computer systems so that, from
and after the time of sale under this Agreement of the Receivables to the
Trustee, the Servicer's master computer records (including archives) that shall
refer to a Receivable indicate clearly that such Receivable is owned by the
Trust. Indication of the Trust's ownership of a Receivable shall be deleted
from or modified on the Servicer's computer systems when, and only when, the
Receivable shall be paid or shall become a Purchased Receivable.
(f) If at any time the Seller or the Servicer shall propose to sell,
grant a security interest in, or otherwise transfer any interest in motor
vehicle retail installment sale contracts to any prospective purchaser, lender
or other transferee, the Seller or the Servicer, as the case may be, shall give
to such prospective purchaser, lender, or other transferee computer tapes,
records, or print-outs (including any restored from archives) that, if they
shall refer in any manner whatsoever to any Receivable, shall indicate clearly
that such Receivable has been sold and is owned by the Trust.
(g) Upon request, the Servicer, at its expense, shall furnish to the
Trustee, within 10 Business Days, a list of all Receivables then held as part of
the Trust, together with a reconciliation of such list to each Schedule of
Receivables and to the Servicer's Certificate furnished pursuant to Section 3.9
indicating removal of Receivables from the Trust.
(h) The Servicer shall deliver to the Trustee upon the Closing Date,
upon the date which is 60 months after the initial filings required hereunder to
perfect the security interest of the Trustee and upon the execution and delivery
of each amendment, if any, of this Agreement, an Opinion of Counsel to the
Servicer either (x) stating that, in the opinion of such counsel, no filings or
other action, other than the filings required in the appropriate filing offices
as described in such opinion, are necessary to perfect and maintain (i) the
security interest of the Trustee in the Financed Vehicles, subject to certain
exceptions stated therein, and (ii) the interest of the Trustee in the
Receivables, the Dealer Agreements or the Dealer Assignments and in each case
the proceeds thereof against third parties, subject to certain exceptions stated
therein, and reciting the details of such
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<PAGE>
filings or referring to prior Opinions of Counsel in which such details are
given, or (y) stating that, in the opinion of such counsel, no such action shall
be necessary to perfect or continue the perfected status of such interest.
Section 12.3 LIMITATION ON RIGHTS OF CERTIFICATEHOLDERS. (a) The death
or incapacity of any Certificateholder shall not operate to terminate this
Agreement or the Trust, or entitle the Certificateholder's legal representatives
or heirs to claim an accounting or to take any action or commence any proceeding
in any court for a partition or winding up of the Trust, or otherwise affect the
rights, obligations, and liabilities of the parties to this Agreement or any of
them.
(b) No Certificateholder shall have any right to vote (except as
expressly provided herein) or in any manner otherwise control the operation and
management of the Trust, or the obligations of the parties to this Agreement,
nor shall anything set forth in this Agreement, or contained in the terms of the
Certificates, be construed so as to constitute the holders as partners or
members of an association; nor shall any Certificateholder be under any
liability to any third party by reason of any action taken pursuant to any
provision of this Agreement.
(c) No Certificateholder shall have any right by virtue or by
availing itself of any provisions of this Agreement to institute any suit,
action, or proceeding in equity or at law upon or under or with respect to this
Agreement, unless such holder previously shall have given to the Trustee a
written notice of default and of the continuance thereof, as hereinbefore
provided, and unless the holders of the Certificates evidencing not less than a
majority of the aggregate outstanding principal balance of the Class A
Certificates and the Class B Certificates taken together as a single class shall
have made written request upon the Trustee to institute such action, suit, or
proceeding in its own name as Trustee under this Agreement and shall have
offered to the Trustee such indemnity as it may require against the costs,
expenses, and liabilities to be incurred therein or thereby, and the Trustee,
for 30 days after its receipt of such notice, request, and offer of indemnity,
shall have neglected or refused to institute any such action, suit or
proceeding; no one or more holders of Certificates shall have any right in any
manner whatever by virtue or by availing itself or themselves of any provisions
of this Agreement to affect, disturb or prejudice the rights of the holders of
any other Certificates, or to obtain or seek to obtain priority over or
preference to any other such holder or to enforce any right, under this
Agreement, except in the manner provided in this Agreement and for the equal,
ratable, and common benefit of all Class A Certificateholders or Class B
Certificateholders, as the case may be. For the protection and enforcement of
the provisions of this Section 12.3, each Certificateholder and the Trustee
shall be entitled to such relief as can be given either at law or in equity.
SECTION 12.4 GOVERNING LAW. ALL ISSUES AND QUESTIONS CONCERNING THE
CONSTRUCTION, VALIDITY, INTERPRETATION AND ENFORCEABILITY OF THIS AGREEMENT
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
NEW YORK, WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW OR CONFLICT OF LAW RULES OR
PROVISIONS (WHETHER OF THE STATE OF NEW YORK OR ANY OTHER JURISDICTION) THAT
WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE
OF NEW YORK.
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<PAGE>
Section 12.5 NOTICES. All demands, notices, directions and
communications under this Agreement shall be in writing, personally delivered,
or sent by telecopier, overnight courier or mailed by certified mail, return
receipt requested, and shall be deemed to have been duly given upon receipt (a)
in the case of the Seller or the Servicer, to First Security Bank, N.A. at
Office of the General Counsel, 79 South Main Street, Salt Lake City, Utah 84111,
Attention: Executive Vice President and General Counsel, Facsimile No.:
801-246-5422, or at such other address as shall be designated by the Seller or
the Servicer in a written notice to the Trustee, with a copy to David Cowley,
Vice President, Corporate Finance, First Security Bank, 41 East 100 South, 3rd
Floor, Salt Lake City, Utah 84111, Facsimile No.: 801-246-5973 and (b) in the
case of the Trustee, at the Corporate Trust Office, Facsimile No.: 212-250-6439.
Any notice required or permitted to be mailed to a Certificateholder shall be
given by first class mail, postage prepaid, at the address of record of such
holder. Any notice so mailed within the time prescribed in this Agreement shall
be conclusively presumed to have been duly given, whether or not the
Certificateholder shall receive such notice.
Section 12.6 SEVERABILITY OF PROVISIONS. If any one or more of the
covenants, provisions or terms of this Agreement shall be for any reason
whatsoever held invalid, then such covenants, provisions or terms shall be
deemed severable from the remaining covenants, provisions or terms of this
Agreement, and shall in no way affect the validity or enforceability of the
other provisions of this Agreement or of the Certificates or the rights of the
holders thereof.
Section 12.7 ASSIGNMENT. Notwithstanding anything to the contrary
contained herein, except as provided in Section 8.3, this Agreement may not be
assigned by the Servicer. This Agreement may not be assigned by the Trustee
except as provided by Sections 10.11 through 10.14 hereof.
Section 12.8 CERTIFICATES NONASSESSABLE AND FULLY PAID. The interests
represented by the Certificates shall be nonassessable for any losses or
expenses of the Trust or for any reason whatsoever, and, upon authentication
thereof by the Trustee pursuant to Section 6.1, each Certificate shall be deemed
fully paid.
Section 12.9 INTENTION OF PARTIES. (a) The execution and delivery of
this Agreement shall constitute an acknowledgment by the Seller and the Trustee,
on behalf of the Certificateholders, that it is intended that the assignment and
transfer herein contemplated constitute a sale and assignment outright, and not
for security, of the Receivables and the other Trust Property, conveying good
title thereto free and clear of any liens, from the Seller to the Trust, and
that the Receivables and the other Trust Property shall not be a part of the
Seller's estate in the event of the bankruptcy, insolvency, receivership,
conservatorship or the occurrence of another similar event of, or with respect
to, the Seller. In the event that such conveyance is determined to be made as
security for a loan made by the Trust or the Certificateholders to the Seller,
the parties intend that the Seller shall have granted to the Trustee a security
interest in all of the Seller's right, title and interest in, to and under the
Trust Property conveyed to the Trust pursuant to Section 2.1 in order to secure
the obligations under the Certificates, and that this Agreement shall constitute
a security agreement under applicable law.
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<PAGE>
(b) The execution and delivery of this Agreement shall constitute an
acknowledgment by the Seller and the Trustee on behalf of the Certificateholders
that they intend that the Trust be classified (for Federal tax purposes) as a
grantor trust under Subpart E, Part I of Subchapter J of the Code of which the
Certificateholders are owners, rather than as an association taxable as a
corporation. The powers granted and obligations undertaken in this Agreement
shall be construed so as to further such intent. The Seller, the Trustee and
the Certificateholders shall take no action that is inconsistent with treating
the Trust as a grantor trust for federal income tax purposes.
Section 12.10 COUNTERPARTS. For the purpose of facilitating the
execution of this Agreement and for other purposes, this Agreement may be
executed in one or more counterparts, and by different parties hereto on
separate counterparts, each of which counterparts shall be deemed to be an
original, and all of which counterparts shall constitute one and the same
instrument.
Section 12.11 LIMITATION OF LIABILITY OF THE TRUSTEE AND THE
COLLATERAL AGENT. Notwithstanding anything contained herein to the contrary (i)
this Agreement has been accepted by Bankers Trust Company, not in its individual
capacity but solely as Trustee and as Collateral Agent with respect to the
Reserve Account and the Yield Supplement Account and in no event shall Bankers
Trust Company have any liability for the representations, warranties, covenants,
agreements or other obligations of the Seller hereunder or in any of the
certificates, notices or agreements delivered pursuant hereto, as to all of
which recourse shall be had solely to the assets of the Seller and (ii) under no
circumstances shall Bankers Trust Company be personally liable for the payment
of any indebtedness or expenses of the Trust; provided, however, nothing
contained herein shall relieve Bankers Trust Company of its obligations
contained herein in its capacity as successor servicer. Notwithstanding
anything to the contrary contained herein, the Collateral Agent shall have the
same rights, protections, warranties and indemnities afforded to the Trustee
hereunder.
* * * * *
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Pooling and
Servicing Agreement to be duly executed by their respective officers thereunto
duly authorized as of the day and year first above written.
FIRST SECURITY BANK, N.A.,
as Seller and Servicer
By:
-----------------------------
Name: Scott C. Ulbrich
Title: Authorized Officer
BANKERS TRUST COMPANY,
not in its individual capacity but
solely as Trustee
By:
-----------------------------
Name:
-----------------------
Title:
-----------------------
BANKERS TRUST COMPANY,
not in its individual capacity but
solely as Collateral Agent
By:
-----------------------------
Name:
------------------------
Title:
------------------------
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<PAGE>
EXHIBIT A
THIS CERTIFICATE REPRESENTS A FRACTIONAL UNDIVIDED INTEREST IN THE TRUST AND
DOES NOT REPRESENT AN INTEREST IN OR OBLIGATION OF FIRST SECURITY BANK, N.A. OR
ANY AFFILIATE THEREOF. THIS CERTIFICATE AND THE RECEIVABLES ARE NOT DEPOSITS
AND ARE NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION
OR ANY OTHER GOVERNMENTAL AGENCY.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
FIRST SECURITY AUTO GRANTOR TRUST 1997-A
% ASSET BACKED CERTIFICATE, CLASS A
Evidencing a fractional undivided interest in the Trust, as
defined below, the property of which includes a pool of motor
vehicle retail installment sale contracts and motor vehicle
retail installment loans secured by the new and used automobiles
and light-duty trucks financed thereby and sold to the Trust by
First Security Bank, N.A.
NUMBER CUSIP 336211 AC 1
____________ $______________________
Original Principal Amount
THIS CERTIFIES THAT CEDE & Co. is the registered owner of a
$_________, nonassessable, fully paid, fractional undivided interest in the
First Security Auto Grantor Trust 1997-A (the "Trust") formed by First Security
Bank, N.A., a national banking association, as seller (the "Seller"). The Trust
was created pursuant to a Pooling and Servicing Agreement dated as of
March , 1997 (as amended, supplemented or otherwise modified and in effect
from time to time, the "Agreement"), by and among the Seller, First Security
Bank, N.A. as servicer (the "Servicer"), and Bankers Trust Company, as trustee
(the "Trustee") and as collateral agent, a summary of certain of the provisions
of which is set forth on the reverse hereof.
To the extent not otherwise defined herein, the capitalized terms used
herein have the meanings assigned to them in the Agreement. This Certificate is
one of the duly authorized
<PAGE>
Certificates designated as "______% Asset Backed Certificates, Class A" (herein
called the "Certificates"). This Certificate is issued under and is subject to
the terms, provisions, and conditions of the Agreement, to which the holder of
this Certificate by virtue of the acceptance hereof assents and by which such
holder is bound. The Trust Property includes (as more fully described in the
Agreement) a pool of retail installment sale contracts and retail installment
loans (the "Receivables") for the purchase of the new and used automobiles and
light-duty trucks financed thereby (the "Financed Vehicles"), certain monies
owing or received thereunder after the close of business of the Servicer on
February 25, 1997 (the "Cutoff Date"), the Seller's security interests in the
Financed Vehicles, the right to receive payments under certain circumstances
from the Reserve Account and all proceeds of the foregoing.
Subject to the terms and conditions of the Agreement (including the
availability of funds for distributions) and until the obligations created by
the Agreement shall have terminated in accordance therewith, there will be
distributed, but only from funds on deposit in the Class A Distribution Account,
on the 15th day of each month or, if such 15th day is not a Business Day, the
next succeeding Business Day (each such date, a "Distribution Date"), commencing
April 15, 1997 to the Person in whose name this Certificate is registered at the
close of business of the Trustee on the day immediately preceding such
Distribution Date (or, if Definitive Certificates are issued, the last day of
the Collection Period immediately preceding such Distribution Date) (the "Record
Date"), such Certificateholder's fractional undivided interest in the amounts to
be distributed to Class A Certificateholders pursuant to the Agreement on such
Distribution Date.
Distributions on this Certificate will be made by the Trustee by check
mailed to the Certificateholder of record at its address as it appears in the
Certificate Register without the presentation or surrender of this Certificate
or the making of any notation hereon, except that with respect to a Certificate
registered in the name of a Clearing Agency or its nominee, distributions will
be made by wire transfer of immediately available funds. Except as otherwise
provided in the Agreement and notwithstanding the above, the final distribution
on this Certificate will be made after due notice by the Trustee of the pendency
of such distribution and only upon presentation and surrender of this
Certificate at the office or agency maintained for that purpose by the Trustee
in the Borough of Manhattan, The City of New York.
This Certificate does not purport to summarize the Agreement and
reference is hereby made to the Agreement for information with respect to the
rights, benefits, obligations and duties evidenced thereby. A copy of the
Agreement may be examined during normal business hours at the Corporate Trust
Office of the Trustee, located at Bankers Trust Company, Four Albany Street,
10th Floor, New York, New York 10006 Attention: Corporate Trust and Agency
Group-Structured Finance, and at such other places, if any, designated by the
Trustee, by any Certificateholder upon request.
Reference is hereby made to the further provisions of this Certificate
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
A-2
<PAGE>
Unless the certificate of authentication hereon shall have been
executed by an authorized officer of the Trustee, by manual signature, this
Certificate shall not entitle the holder hereof to any benefit under the
Agreement or be valid for any purpose.
IN WITNESS WHEREOF, the Trustee, on behalf of the Trust, and not in
its individual capacity, has caused this Certificate to be duly executed.
FIRST SECURITY AUTO GRANTOR TRUST
1997-A
By: Bankers Trust Company,
not in its capacity, but solely as Trustee
By: _______________________________
Authorized Officer
DATED: March ____ , 1997
(SEAL)
ATTEST:
____________________________
Authorized Officer
Trustee's Certificate of
Authentication:
This is one of the Class A Certificates referred to in the within-mentioned
Agreement.
BANKERS TRUST COMPANY,
as Trustee
By: _______________________________
Authorized Officer
A-3
<PAGE>
REVERSE OF CERTIFICATE
FIRST SECURITY AUTO GRANTOR TRUST 1997-A
_____% ASSET BACKED CERTIFICATE, CLASS A
The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights of the Certificateholders
under the Agreement at any time by the Seller, the Servicer and the Trustee with
the consent of the holders of Certificates evidencing not less than a majority
of the aggregate outstanding principal balance of the Class A Certificates and
the Class B Certificates taken together as a single class. Any such consent by
the holder of this Certificate shall be conclusive and binding on such holder
and on all future holders of this Certificate and of any Certificate issued upon
the transfer hereof or in exchange herefor or in lieu hereof whether or not
notation of such consent is made upon this Certificate. The Agreement also
permits the amendment thereof, in certain circumstances, without the consent of
the holders of any of the Certificates.
As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registerable in the
Certificate Register upon surrender of this Certificate for registration of
transfer at the office or agency maintained by the Trustee in the Borough of
Manhattan, The City of New York, accompanied by a written instrument of transfer
in form satisfactory to the Trustee duly executed by the holder hereof or such
holder's attorney duly authorized in writing, and thereupon one or more new
Certificates of authorized denominations evidencing the same aggregate interest
in the Trust will be issued to the designated transferee.
As provided in the Agreement and subject to certain limitations
therein set forth, Certificates are exchangeable for new Certificates of
authorized denominations evidencing the same aggregate interest in the Trust, as
requested by the holder surrendering the same. No service charge will be made
for any such registration of transfer or exchange, but the Trustee may require
payment of a sum sufficient to cover any tax or governmental charges payable in
connection therewith.
The Seller, the Servicer, the Trustee, and any agent of the Seller,
the Servicer or the Trustee may treat the person in whose name this Certificate
is registered as the owner hereof for all purposes, and none of the Seller, the
Servicer, the Trustee, or any such agent shall be affected by any notice to the
contrary.
The obligations and responsibilities created by the Agreement and the
Trust created thereby will terminate upon the earliest of (i) the Distribution
Date immediately succeeding the purchase by the Servicer, at its option, of the
Receivables (other than Defaulted Receivables) remaining in the Trust, as
described below, (ii) the payment to Certificateholders of all amounts required
to be paid to them pursuant to the Agreement, or (iii) the Distribution Date
which is six months after the maturity or the liquidation of the last Receivable
held in the Trust and the disposition of any amounts received upon liquidation
of any property remaining in the Trust. The Agreement provides that the
Servicer may, at its option, purchase the Receivables remaining in the Trust
(other than Defaulted Receivables) at a price equal to the aggregate Purchase
Amounts thereof,
A-4
<PAGE>
and such purchase of the Receivables will effect early retirement of the
Certificates; however, such right of purchase is exercisable only after the
first day of a Collection Period as of which the Pool Balance is 10% or less of
the original Pool Balance.
Notwithstanding anything contained in the Agreement to the contrary
(i) the Agreement has been accepted and this Certificate has been executed by
Bankers Trust Company not in its individual capacity but solely as Trustee and
as Collateral Agent with respect to the Reserve Account and the Yield Supplement
Account and in no event shall Bankers Trust Company have any liability for the
representations, warranties, covenants, agreements or other obligations of the
Seller thereunder or in any of the certificates, notices or agreements delivered
pursuant thereto, as to all of which recourse shall be had solely to the assets
of the Seller and (ii) except in its capacity as successor Servicer, under no
circumstances shall Bankers Trust Company be personally liable for the payment
of any indebtedness or expenses of the Trust.
A-5
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers
unto
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER
OF ASSIGNEE
(Please print or typewrite name and address, including postal zip code, of
assignee)
the within Certificate, and all rights thereunder, hereby irrevocably
constituting and appointing
Attorney to transfer said Certificate on the books of the Certificate Registrar,
with full power of substitution in the premises.
Dated: _____________________________*
Signature Guaranteed:
_____________________________*
__________________
*NOTICE: The signature to this assignment must correspond with the name as
it appears upon the face of the within Certificate in every particular, without
alteration, enlargement or any change whatever. The signature must be guaranteed
by an institution which is a member of one of the following recognized Signature
Guaranty Programs: (i) The Securities Transfer Agent Medallion Program; (ii)
The New York Stock Exchange Medallion Program; (iii) The Stock Exchange
Medallion Program; or (iv) in such other guarantee program acceptable to the
Trustee.
A-6
<PAGE>
EXHIBIT B
THIS CERTIFICATE REPRESENTS A FRACTIONAL UNDIVIDED INTEREST IN THE TRUST AND
DOES NOT REPRESENT AN INTEREST IN OR OBLIGATION OF FIRST SECURITY BANK, N.A. OR
ANY AFFILIATE THEREOF. THIS CERTIFICATE AND THE RECEIVABLES ARE NOT DEPOSITS
AND ARE NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION
OR ANY OTHER GOVERNMENTAL AGENCY.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
THIS CERTIFICATE AND ANY BENEFICIAL INTEREST IN THIS CERTIFICATE MAY NOT BE
ACQUIRED BY (a) AN EMPLOYEE BENEFIT PLAN (AS DEFINED IN SECTION 3(3) OF THE
EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA")), THAT IS
SUBJECT TO THE PROVISIONS OF TITLE 1 OF ERISA, (b) A PLAN DESCRIBED IN SECTION
4975(e)(1) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED, OR (c) ANY ENTITY
WHOSE UNDERLYING ASSETS BY REASON OF A PLAN'S INVESTMENT IN THE ENTITY (EACH A
"BENEFIT PLAN"). BY ACCEPTING AND HOLDING THIS CERTIFICATE OR AN INTEREST
HEREIN, THE HOLDER HEREOF OR OWNER HEREOF SHALL BE DEEMED TO HAVE REPRESENTED
AND WARRANTED THAT IT IS NOT A BENEFIT PLAN.
FIRST SECURITY AUTO GRANTOR TRUST 1997-A
______% ASSET BACKED CERTIFICATE, CLASS B
Evidencing a fractional undivided interest in the Trust, as
defined below, the property of which includes a pool of motor
vehicle retail installment sale contracts and motor vehicle
retail installment loans secured by the new and used automobiles
and light-duty trucks financed thereby and sold to the Trust by
First Security Bank, N.A.
NUMBER CUSIP 336211 AD 9
______________ $__________________________________
Original Principal Amount
<PAGE>
THIS CERTIFIES THAT CEDE & CO. is the registered owner of a $________,
nonassessable, fully paid, fractional undivided interest in the First Security
Auto Grantor Trust 1997-A (the "Trust") formed by First Security Bank, N.A., a
national banking association, as seller (the "Seller"). The Trust was created
pursuant to a Pooling and Servicing Agreement dated as of March _____, 1997 (as
amended, supplemented or otherwise modified and in effect from time to time, the
"Agreement") by and among the Seller, First Security Bank, N.A., as servicer (in
such capacity, the "Servicer"), and Bankers Trust Company, as trustee (the
"Trustee") and as collateral agent, a summary of certain of the provisions of
which is set forth an the reverse hereof.
To the extent not otherwise defined herein, the capitalized terms used
herein have the meanings assigned to them in the Agreement. This Certificate is
one of the duly authorized Certificates designated as "____% Asset Backed
Certificates, Class B" (herein called the "Certificates"). This Certificate is
issued under and is subject to the terms, provisions, and conditions of the
Agreement, to which the holder of this Certificate by virtue of the acceptance
hereof assents and by which such holder is bound. The Trust Property includes
(as more fully described in the Agreement) a pool of retail installment sale
contracts and retail installment loans (the "Receivables") for the purchase of
the new and used automobiles and trucks financed thereby (the "Financed
Vehicles"), certain monies owing or received thereunder after the close of
business of the Servicer on February 25, 1997 (the "Cutoff Date"), the Seller's
security interests in the Financed Vehicles, the right to receive payments under
certain circumstances from the Reserve Account and all proceeds of the
foregoing.
Subject to the terms and conditions of the Agreement (including the
availability of funds for distributions) and until the obligations created by
the Agreement shall have terminated in accordance therewith, there will be
distributed, but only from funds on deposit in the Class B Distribution Account,
on the 15th day of each month or, if such 15th day is not a Business Day, the
next succeeding Business Day (each such date, a "Distribution Date"), commencing
April 15, 1997, to the Person in whose name this Certificate is registered at
the close of business of the Trustee on the day immediately preceding such
Distribution Date (or, if Definitive Certificates are issued, the last day of
the Collection Period immediately preceding such Distribution Date) (the "Record
Date"), such Certificateholder's fractional undivided interest in the amounts to
be distributed to Class B Certificateholders pursuant to the Agreement on such
Distribution Date.
Pursuant to the Agreement distributions of interest and principal on
the Class B Certificates will be subordinated in priority of payment to interest
and principal due on the Class A Certificates in the event of defaults and
delinquencies on the Receivables. The Class B Certificateholders will not
receive any distributions of interest with respect to a Collection Period until
the full amount of interest on the Class A Certificates relating to such
Collection Period has been deposited in the Class A Distribution Account, and
the Class B Certificateholders will not receive any distributions of principal
with respect to such Collection Period until the full amount of interest on and
principal of the Class A Certificates relating to such Collection Period has
been deposited in the Class A Distribution Account as set forth in the
Agreement.
Distributions on this Certificate will be made by the Trustee by check
mailed to the Certificateholder of record at its address as it appears in the
Certificate Register without the
B-2
<PAGE>
presentation or surrender of this Certificate or the making of any notation
hereon, except that with respect to a Certificate registered in the name of a
Clearing Agency or its nominee, distributions will be made by wire transfer of
immediately available funds. except as otherwise provided in the Agreement and
notwithstanding the above, the final distribution an this Certificate will be
made after due notice by the Trustee of the pendency of such distribution and
only upon presentation and surrender of this Certificate at the office or agency
maintained for that purpose by the Trustee in the Borough of Manhattan, The City
of New York.
This Certificate does not purport to summarize the Agreement and
reference is hereby made to the Agreement for information with respect to the
rights, benefits, obligations and duties evidenced thereby. A copy of the
Agreement may be examined during normal business hours at the Corporate Trust
Office of the Trustee, located at Bankers Trust Company, Four Albany Street,
10th Floor, New York, New York 10006, Attention: Corporate Trust and Agency
Group-Structured Finance, and at such other places, if any, designated by the
Trustee, by any Certificateholder upon request.
Reference is hereby made to the further provisions of this Certificate
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon shall have been
executed by an authorized officer of the Trustee, by manual signature, this
Certificate shall not entitle the holder hereof to any benefit under the
Agreement or be valid for any purpose.
B-3
<PAGE>
IN WITNESS WHEREOF, the Trustee, on behalf of the Trust, and not in
its individual capacity, has caused this Certificate to be duly executed.
FIRST SECURITY AUTO GRANTOR
TRUST 1997-A
By: Bankers Trust Company,
not in its capacity, but solely as Trustee
By: __________________________
Authorized Officer
DATED: March ___, 1997
(SEAL)
ATTEST:
______________________________
Authorized Officer
Trustee's Certificate of
Authentication:
By: ___________________________
Authorized Officer
This is one of the Class B Certificates referred to in the
within-mentioned Agreement.
BANKERS TRUST COMPANY,
as Trustee
By: ________________________________
Authorized Officer
<PAGE>
REVERSE OF CERTIFICATE
FIRST SECURITY AUTO GRANTOR TRUST 1997-A
_____% ASSET BACKED CERTIFICATE, CLASS B
The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights of the Certificateholders
under the Agreement at any time by the Seller, the Servicer and the Trustee with
the consent of the holders of Certificates evidencing not less than a majority
of the aggregate outstanding principal balance of the Class A Certificates and
the Class B Certificates taken together as a single class. Any such consent by
the holder of this Certificate shall be conclusive and binding on such Holder
and on all future Holders of this Certificate and of any Certificate issued upon
the transfer hereof or in exchange herefor or in lieu hereof whether or not
notation of such consent is made upon this Certificate. The Agreement also
permits the amendment thereof, in certain circumstances, without the consent of
the holders of any of the Certificates.
As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registerable in the
Certificate Register upon surrender of this Certificate for registration of
transfer at the office or agency maintained by the Trustee in the Borough of
Manhattan, The City of New York, accompanied by a written instrument of transfer
in form satisfactory to the Trustee duly executed by the holder hereof or such
holder's attorney duly authorized in writing, and thereupon one or more new
Certificates of authorized denominations evidencing the same aggregate interest
in the Trust will be issued to the designated transferee.
As provided in the Agreement and subject to certain limitations
therein set forth, Certificates are exchangeable for new Certificates of
authorized denominations evidencing the same aggregate interest in the Trust, as
requested by the holder surrendering the same. No service charge will be made
for any such registration of transfer or exchange, but the Trustee may require
payment of a sum sufficient to cover any tax or governmental charges payable in
connection therewith.
The Seller, the Servicer, the Trustee, and any agent of the Seller,
the Servicer or the Trustee may treat the person in whose name this Certificate
is registered as the owner hereof for all purposes, and none of the Seller, the
Servicer, the Trustee, or any such agent shall be affected by any notice to the
contrary.
The obligations and responsibilities created by the Agreement and the
Trust created thereby will terminate upon the earliest of (i) the Distribution
Date immediately succeeding the purchase by the Servicer, at its option, of the
Receivables (other than Defaulted Receivables) remaining in the Trust, as
described below, (ii) the payment to Certificateholders of all amounts required
to be paid to them pursuant to the Agreement, or (iii) the Distribution Date
which is six months after the maturity or the liquidation of the last Receivable
held in the Trust and the disposition of any amounts received upon liquidation
of any property remaining in the Trust. The Agreement provides that the
Servicer may, at its option, purchase the Receivables remaining in the Trust
(other than Defaulted Receivables) at a price equal to the aggregate Purchase
Amounts thereof,
B-5
<PAGE>
and such purchase of the Receivables will effect early retirement of the
Certificates; however, such right of purchase is exercisable only after the
first day of a Collection Period as of which the Pool Balance is 10% or less of
the Original Pool Balance.
Notwithstanding anything contained in the Agreement to the contrary
(i) the Agreement has been accepted and this Certificate has been executed by
Bankers Trust Company not in its individual capacity but solely as Trustee and
as Collateral Agent with respect to the Reserve Account and the Yield Supplement
Account, and in no event shall Bankers Trust Company have any liability for the
representations, warranties, covenants, agreements or other obligations of the
Seller thereunder or in any of the certificates, notices or agreements delivered
pursuant thereto, as to all of which recourse shall be had solely to the assets
of the Seller and (ii) except in its capacity as successor Servicer, under no
circumstances shall Bankers Trust Company be personally liable for the payment
of any indebtedness or expenses of the Trust.
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers
unto
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER
OF ASSIGNEE
Please print or typewrite name and address, including postal zip code, of
assignee)
the within Certificate, and all rights thereunder, hereby irrevocably
constituting and appointing
Attorney to transfer said Certificate on the books of the Certificate
Registrar, with full power of substitution in the premises.
Dated:
____________________________________________*
Signature Guaranteed:
____________________________________________*
__________________________
*NOTICE: The signature to this assignment must correspond with the name as
it appears upon the face of the within Certificate in every particular, without
alteration, enlargement or any change whatever. The signature must be
guaranteed by an institution which is a member of one of the following
recognized Signature Guaranty Programs: (i) The Securities Transfer Agent
Medallion Program; (ii) The New York Stock Exchange Medallion Program; (iii) The
Stock Exchange Medallion Program; or (iv) in such other guarantee program
acceptable to the Trustee.
<PAGE>
EXHIBIT C
FORM OF SERVICER'S CERTIFICATE
(See attached)
<PAGE>
EXHIBIT D
FORM OF DEPOSITORY AGREEMENT
(See attached)
<PAGE>
EXHIBIT E
FORM OF YIELD SUPPLEMENT AGREEMENT
(See attached)
<PAGE>
SCHEDULE A
SCHEDULE OF RECEIVABLES
(See attached)
<PAGE>
SCHEDULE B
RECEIVABLE FILE LOCATIONS
On the date hereof, the Receivables and Receivable Files for the Servicer
are held by the Consumer Loan Servicing Department of First Security Service
Company, an affiliate of the Servicer, located at 4540 Overland Road, Boise,
Idaho 83705.
<PAGE>
EXHIBIT 4.2
YIELD SUPPLEMENT AGREEMENT
First Security Auto Grantor Trust 1997-A
c/o Bankers Trust Company, as Trustee
and as Collateral Agent
Four Albany Street, 10th Floor
New York, New York 10006
Attn: Corporate Trust and Agency Group-Structured Finance
March __, 1997
Ladies and Gentlemen:
For good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, we (the "SELLER") hereby confirm arrangements
made as of the date hereof with you (the "TRUST") to be effective upon receipt
by the Seller of the enclosed copy of this letter agreement (as amended,
supplemented or otherwise modified and in effect from time to time, the "YIELD
SUPPLEMENT AGREEMENT").
1. On or prior to the Determination Date preceding each Distribution
Date, the Servicer shall notify the Trust and the Seller of the Yield Supplement
Amount for such Distribution Date.
2. The Seller agrees to establish a Yield Supplement Account pursuant
to Article V of the Pooling and Servicing Agreement, dated as of March __,
1997 (as amended, supplemented or otherwise modified and in effect from time
to time, the "POOLING AND SERVICING AGREEMENT") by and among the Seller, in
its individual capacity and as a servicer (the "SERVICER"), and Bankers Trust
Company, a New York banking corporation, as trustee thereunder (the
"TRUSTEE") and as collateral agent thereunder with respect to the Reserve
Account and the Yield Supplement Account (in such capacity, the "COLLATERAL
AGENT"), and the Seller hereby agrees to deposit to the Certificate Account
an amount equal to the Yield Supplement Amount prior to the close of business
on each Deposit Date. If and to the extent that such amounts shall not have
been paid by the Seller in full at such time, then, in such event, pursuant
to Section 5.2(d) of the Pooling and Servicing Agreement, the Trustee shall
instruct the Collateral Agent to withdraw the amount of any such
insufficiency from the Yield Supplement Account and deposit such funds into
the Certificate Account.
3. All payments pursuant hereto shall be made by federal wire transfer
(same day) funds or in immediately available funds, to the Certificate Account
(as the Trustee on behalf of the Trust designates in writing to the Seller prior
to the relevant Distribution Date).
4. Our agreements set forth in this Yield Supplement Agreement are our
primary obligations and such obligations are irrevocable, absolute and
unconditional, shall not be subject to
<PAGE>
any counterclaim, setoff or defense (other than full and strict compliance by us
with our obligations hereunder) and shall remain in full force and effect
without regard to, and shall not be released, discharged or in any way affected
by, any circumstances or condition whatsoever.
5. This Yield Supplement Agreement shall be governed by, and construed
in accordance with, the laws of the State of New York, without giving effect
to any choice of law or conflict of law rules or provisions (whether of the
State of New York or any other jurisdiction) that would cause the application
of the laws of any jurisdiction other than the State of New York.
6. All demands, notices and communications under this Yield Supplement
Agreement shall be in writing, personally delivered, sent by telecopier, Federal
Express or mailed by certified mail, return receipt requested, and shall be
deemed to have been duly given upon receipt. All notices shall be directed as
set forth below, or to such other address or to the attention of such other
Person as the relevant party shall have designated for such purpose in a written
notice.
The Trust:
First Security Auto Grantor Trust 1997-A
c/o Bankers Trust Company, as Trustee
Four Albany Street, 10th Floor
New York, New York 10006
Attention: Corporate Trust and Agency Group-Structured Finance
Telecopy: 212-250-6439
The Seller:
First Security Bank, N.A.
79 South Main Street
Salt Lake City, Utah 84111
Attention: Executive Vice President and General Counsel
Telecopy: (801) 246-5422
7. This Yield Supplement Agreement may be executed in one or more
counterparts and by the different parties hereto on separate counterparts, each
of which counterparts shall be deemed to be an original, and all of which
counterparts shall constitute one and the same document.
8. Capitalized terms used herein but not otherwise defined shall have
the meanings assigned thereto in the Pooling and Servicing Agreement.
-2-
<PAGE>
If the foregoing satisfactorily sets forth the terms and conditions of
our agreement, please indicate your acceptance thereof by signing in the space
provided below and returning to us the enclosed duplicate original of this
letter.
Very truly yours,
FIRST SECURITY BANK, N.A.
By: _____________________________________
Name: Scott C. Ulbrich
Title: Authorized Officer
Agreed and accepted as of
the date first above written:
FIRST SECURITY AUTO GRANTOR TRUST 1997-A
By: Bankers Trust Company,
not in its individual capacity, but solely
as Trustee and as Collateral Agent
By: __________________________________
Authorized Signatory
-3-
<PAGE>
EXHIBIT 5.1
[K&E NEW YORK LETTERHEAD]
March 11, 1997
First Security Bank, N.A.
79 South Main Street
Salt Lake City, Utah 84111
Re: First Security Auto Grantor Trust (No. 333-18089)
We have acted as special counsel to First Security Bank, N.A., a
national banking association (the "BANK"), in connection with certain matters
relating to the registration under the Securities Act of 1933, as amended (the
"SECURITIES ACT"), of certain Asset Backed Certificates, Class A and certain
Asset Backed Certificates, Class B (collectively, the "CERTIFICATES") to be
issued by First Security Auto Grantor Trust 1997-A (the "TRUST") as described in
the above-mentioned Registration Statement on Form S-1 (together with the
exhibits and amendments or supplements thereto, the "REGISTRATION STATEMENT").
In arriving at the opinion expressed below, among other things, we
have examined and relied, to the extent we deem proper on (i) the form of the
Pooling and Servicing Agreement to be executed by the Bank and Bankers Trust
Company, a New York banking corporation, as trustee and as collateral agent (in
such capacities, the "TRUSTEE") (the "POOLING AND SERVICING AGREEMENT") and (ii)
the form of the Underwriting Agreement to be executed by the Bank and J.P.
Morgan Securities Inc., as Representative of the several underwriters (the
"UNDERWRITERS") listed on Schedule I thereto (the "UNDERWRITING AGREEMENT").
Subject to the assumptions, qualifications, and limitations identified
in this letter, and assuming the aforementioned documents are duly executed and
delivered in substantially the form we have examined, we hereby advise you that
in our opinion after the Requisite Preliminary Actions identified below have
been taken, the Certificates will have been validly issued and will be fully
paid and non-assessable.
The term "Requisite Preliminary Actions" means: (i) the approval by
the Bank's Board of Directors of resolutions authorizing the Bank to execute and
deliver the Pooling and Servicing Agreement and the Underwriting Agreement, to
take the actions necessary to obtain issuance of the Certificates under the
Pooling and Servicing Agreement and to sell the Certificates in accordance with
the terms of the Underwriting Agreement and to take the other actions
<PAGE>
First Security Bank, N.A.
March 11, 1997
Page 2
contemplated by the Pooling and Servicing Agreement and the Underwriting
Agreement; (ii) the issuance by any committee, group or executive of such
authorization as may be required by the resolutions contemplated in clause (i)
as requisite to any of the actions cited in clause (i); (iii) the execution and
delivery of the Pooling and Servicing Agreement by the Bank and the Trustee;
(iv) the effective assignment and delivery of a pool of retail motor vehicle
installment sale contracts and installment loans in accordance with the Pooling
and Servicing Agreement and the execution, authentication and delivery of the
Certificates by the Trustee to the Bank in accordance with the terms of the
Pooling and Servicing Agreement; and (v) the sale of the Certificates by the
Bank in accordance with the terms of the Underwriting Agreement and the payment
to the Bank of the consideration for the Certificates prescribed by the
Underwriting Agreement.
For purposes of this letter, once the Underwriters have paid for the
Certificates pursuant to the Underwriting Agreement, the Certificates will be
considered "fully paid and nonassessable."
Our advice on every legal issue addressed in this letter is based
exclusively on the internal law of New York. We advise you that issues addressed
by this letter may be governed in whole or in part by other laws, but we express
no opinion as to whether any relevant difference exists between the laws upon
which our opinions are based and any other laws which may actually govern. For
purposes of our opinions we have assumed without independent investigation that
factual information supplied to us for purposes of our opinions is complete and
accurate.
We consent to the filing of both this letter and the letter filed as
Exhibit 8.1 of the Registration Statement as exhibits to the Registration
Statement and to the reference to this firm under the caption titled "Legal
Matters" in the prospectus which is part of the Registration Statement. In
giving this consent, we do not thereby admit that we come within the category of
persons whose consent is required under Section 7 of the Securities Act of 1933,
as amended, or the rules and regulations of the Securities and Exchange
Commission thereunder.
Very truly yours,
/s/ Kirkland & Ellis
KIRKLAND & ELLIS
<PAGE>
EXHIBIT 8.1
[K&E NEW YORK LETTERHEAD]
March 11, 1997
First Security Bank, N.A.
79 South Main Street
Salt Lake City, Utah 84111
Re: First Security Auto Grantor Trust 1997-A (No. 333-18089)
--------------------------------------------------------
We have acted as special counsel to First Security Bank, N.A., a
national banking association (the "BANK"), in connection with the
above-referenced Registration Statement, filed with the Securities and Exchange
Commission on December 17, 1996 (together with the exhibits and amendments or
supplements thereto, the "REGISTRATION STATEMENT"), in connection with the
registration by the Bank of certain Asset Backed Certificates, Class A and
certain Asset Backed Certificates, Class B (collectively, the "CERTIFICATES").
The Certificates will be issued by First Security Auto Grantor Trust 1997-A (the
"TRUST"), a trust which will be formed by the Bank pursuant to a Pooling and
Servicing Agreement, between the Bank, as seller and servicer, and Bankers Trust
Company, a New York banking corporation, as trustee and as collateral agent (the
"POOLING AND SERVICING AGREEMENT").
In arriving at the opinion expressed below, among other things, we
have examined and relied, to the extent we deem proper, on (i) the Registration
Statement, (ii) in each case as filed as an exhibit to the Registration
Statement, (a) the form of Underwriting Agreement, (b) the form of Pooling and
Servicing Agreement, and (c) the form of Yield Supplement Agreement and (iii)
copies of such other documents as we have deemed necessary for the expression of
the opinion contained herein.
We have examined and relied, with your permission, as to factual
matters upon the representations and warranties contained in or made pursuant to
the documents referred to above and upon the originals or copies certified or
otherwise identified to our satisfaction of all such corporate records of the
Bank and such other instruments and certificates of public officials, officers
and representatives of the Bank and other persons, and we have made such
investigations of law as we have deemed appropriate. In such examination, we
have assumed, with your permission, the authenticity of all documents submitted
to us as originals, the conformity to the originals of all documents submitted
to us as copies, and the authenticity of the originals of all documents
submitted to us as copies. With your permission, we have further assumed the
genuineness of the signatures of persons signing all documents and instruments
and the authority of such persons signing on behalf of the parties thereto.
<PAGE>
First Security Bank, N.A.
March 11, 1997
Page 2
In rendering our opinion, we have also considered and relied upon the
Internal Revenue Code of 1986, as amended (the "CODE"), administrative rulings,
judicial decisions, regulations, and such other authorities (including Treasury
regulations) as we have deemed appropriate, all as in effect on the date hereof
and all which are subject to change or different interpretation. However, we
will not seek a tax ruling from the Internal Revenue Service (the "IRS") with
respect to any of the matters discussed herein. Moreover, the statutory
provisions, regulations, interpretations and other authorities upon which our
opinion is based are subject to change, and such changes could apply
retroactively. In addition, there can be no assurance that positions contrary
to those stated in our opinion will not be taken by the IRS. Our opinion is in
no way binding on the IRS or any court, and it is possible that the IRS or a
court could, when presented with these facts, reach a different conclusion.
Based on the foregoing, and assuming the aforementioned documents are
duly executed and delivered in substantially the form we have examined, we are
of the opinion that the statements in the Prospectus under the heading "Federal
Income Tax Consequences," to the extent that they constitute matters of law or
legal conclusions with respect thereto, have been prepared or reviewed by us and
are correct in all material respects.
Except for the opinion expressed above, we express no opinion as to
any other tax consequences of the transaction to any part under federal, state,
local, or foreign laws. In addition, we express no opinion as to the laws of
any jurisdiction other than the federal laws of the United States of America to
the extent specifically referred to herein.
Very truly yours,
/s/ Kirkland & Ellis
KIRKLAND & ELLIS
