<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 20, 1999
REGISTRATION NO. 333-70003
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------------
FIRST SECURITY AUTO GRANTOR TRUSTS
(Issuer with respect to the Certificates)
FIRST SECURITY AUTO OWNER TRUSTS
(Issuer with respect to the Notes and the Certificates)
FIRST SECURITY BANK,-REGISTERED TRADEMARK- N.A.
(Originator of the Trust described herein)
<TABLE>
<S> <C> <C>
UNITED STATES OF AMERICA 6025 87-0131890
(State or other jurisdiction (Primary Standard Industrial (IRS Employer
of Classification Code No.) Identification
incorporation or organization) No.)
</TABLE>
FIRST SECURITY BANK, N.A.
79 SOUTH MAIN STREET
SALT LAKE CITY, UTAH 84111
(801) 246-5976
(Address, including zip code, and telephone number, including area code, of the
Registrant's principal executive office)
------------------------------
BRAD D. HARDY
EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
FIRST SECURITY CORPORATION
79 SOUTH MAIN STREET
SALT LAKE CITY, UTAH 84111
(801) 246-5976
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------------
Copies to:
<TABLE>
<S> <C>
A.R. THORUP KENNETH P. MORRISON
RAY, QUINNEY & NEBEKER JILL SUGAR FACTOR
79 SOUTH MAIN STREET, 400 DESERT BUILDING KIRKLAND & ELLIS
SALT LAKE CITY, UTAH 84145-0385 200 EAST RANDOLPH DRIVE
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: /X/
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering: / /
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: / /
------------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<S> <C> <C> <C> <C>
PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE PER AGGREGATE OFFERING REGISTRATION FEE
SECURITIES TO BE REGISTERED BE REGISTERED (1) UNIT (2) PRICE (2) (3)
Asset Backed Securities.............. $2,500,000,000 100% $2,500,000,000 $695,000
</TABLE>
(1) $280,517,678.78 aggregate principal amount of Asset Backed Securities
registered by the Registrant under Registration Statement No. 333-35847
referred to below and not previously sold are consolidated in this
Registration Statement pursuant to Rule 429. All registration fees in
connection with such unsold amount of Asset Backed Securities have
previously been paid under Registration Statement No. 333-35847. The total
amount registered under this Registration Statement as so consolidated as of
the date of this filing is $2,780,517,678.78.
(2) Estimated solely for the purposes of calculating the registration fee.
(3) All $695,000 of such registration fee was paid with the initial filing.
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 THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
PURSUANT TO RULE 429 UNDER THE SECURITIES ACT OF 1933, THE PROSPECTUSES
WHICH ARE PART OF THIS REGISTRATION STATEMENT ARE COMBINED PROSPECTUSES AND
INCLUDE ALL OF THE INFORMATION CURRENTLY REQUIRED IN A PROSPECTUS RELATING TO
THE SECURITIES COVERED BY REGISTRATION STATEMENT 333-35847 PREVIOUSLY FILED BY
THE REGISTRANT.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT IS NOT COMPLETE AND MAY BE
CHANGED. WE MAY NOT SELL THESE CERTIFICATES UNTIL THE REGISTRATION STATEMENT
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS
SUPPLEMENT IS NOT AN OFFER TO SELL THESE CERTIFICATES AND IT IS NOT SOLICITING
AN OFFER TO BUY THESE CERTIFICATES IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.
Prospectus Supplement to Prospectus dated January 20, 1999
[LOGO]
$ ________
First Security Auto Grantor Trust 19__-__
$________ __% ASSET BACKED CERTIFICATES, CLASS A
$________ __% ASSET BACKED CERTIFICATES, CLASS B
First Security Bank-Registered Trademark-, N.A.
SELLER AND SERVICER
CONSIDER CAREFULLY
THE RISK FACTOR ON
PAGE S-2 IN THIS
PROSPECTUS
SUPPLEMENT AND
THE RISK FACTORS
BEGINNING ON
PAGE 10 IN THE
PROSPECTUS.
The Certificates represent the beneficial interest in the related Trust only.
The Certificates issued by any Trust do not represent obligations of or
interests in, and are not guaranteed by, First Security Bank-Registered
Trademark-, N.A. or any of its affiliates.
This Prospectus Supplement may be used to offer and sell the Certificates only
if accompanied by the Prospectus.
THE CERTIFICATES
The Trust will issue the following Certificates:
<TABLE>
<S> <C> <C>
Class A Class B
Certificates Certificates
------------------- -------------------
Principal Amount
Price to Public(1)
Underwriting Discount(2)
Proceeds to Seller(3)
</TABLE>
(1) Plus accrued interest, if any, from ________. Total price to public
(excluding such interest) = $________.
(2) Total underwriting discount = $________.
(3) Total proceeds to the Seller = $________.
Principal and interest on the Certificates will be payable on each
monthly Distribution Date. Interest will begin accruing on ________,
19__. The first Distribution Date will be ________.
CREDIT ENHANCEMENT
- The Class B Certificates are subordinated to the Class A Certificates
as described in the related Prospectus.
- Reserve Account, with an initial balance of $________.
- Yield Supplement Agreement and the related Yield Supplement Account
provide funds to supplement interest collections on certain
Receivables. The initial balance in the Yield Supplement Account will
be $________.
NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED THESE
SECURITIES
OR DETERMINED THAT THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS IS ACCURATE OR
COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Underwriters of the Class A Certificates
Underwriters of the Class B Certificates
[DATE]
<PAGE>
Important Notice About Information Presented in this
Prospectus Supplement and the Accompanying Prospectus
We tell you about the Certificates in two separate documents that progressively
provide more detail:
(a) the accompanying Prospectus, which provides general information.
(b) this Prospectus Supplement, which describes the specific terms of your
Certificates and the specific meanings certain terms will have.
If the terms of the Certificates vary between this Prospectus Supplement and the
Prospectus, you should rely on the information in this Prospectus Supplement.
You should rely only on the information provided in this Prospectus Supplement
and the accompanying Prospectus, including the information incorporated by
reference. We have not authorized anyone to provide you with other or different
information. We are not offering the Certificates in any jurisdiction where the
offer is not permitted. We do not claim the accuracy of the information in this
Prospectus Supplement or the accompanying Prospectus as of any date other than
the dates stated on their respective covers.
We include cross-references in this Prospectus Supplement and in the
accompanying Prospectus to captions in these materials where you can find
further related discussions. The following Table of Contents and the Table of
Contents included in the accompanying Prospectus provide the pages on which
these captions are located.
Capitalized terms used in this Prospectus Supplement but not otherwise defined
shall have the meanings given such terms in the Prospectus. You can find a
listing of the pages where capitalized terms are defined under the caption
"Index of Terms for Prospectus" beginning on page 58 in the accompanying
Prospectus.
------------------------
2
<PAGE>
Table of Contents
<TABLE>
<CAPTION>
Page
---
<S> <C>
THE CERTIFICATES.................. S-1
RISK FACTOR....................... S-2
Lack of Geographic
Diversification................ S-2
DELINQUENCY AND LOSS EXPERIENCE OF
SELLER.......................... S-3
Delinquency Experience.......... S-3
Credit Loss/Repossession
Experience..................... S-3
THE RECEIVABLES POOL.............. S-4
The Receivables................. S-4
Certain Characteristics......... S-4
<CAPTION>
Page
---
<S> <C>
Composition of the
Receivables.................... S-4
Distribution by Contract Rate of
the Receivables................ S-4
Geographic Distribution of the
Receivables.................... S-5
Payments on the Receivables..... S-5
Weighted Average Life of the
Certificates................... S-5
THE TRUSTEE....................... S-8
ERISA CONSIDERATIONS.............. S-8
UNDERWRITING...................... S-9
</TABLE>
i
<PAGE>
The Certificates
The First Security Auto Grantor Trust 19__-__ will issue the following
Certificates. This series of Certificates consists of two classes, entitled __%
Asset Backed Certificates, Class A and __% Asset Backed Certificates, Class B.
The initial Collection Period will be the period from but not including the
Cutoff Date to and including ____, 19_.
<TABLE>
<S> <C>
General
Original Pool Balance.................................... $
Cutoff Date.............................................. , 19
Closing Date............................................. , 19
Collateral Agent.........................................
Required Class A Rating.................................. AAA
Required Class B Rating.................................. Investment Grade
Certificate Terms
Class A Percentage....................................... %
Class B Percentage....................................... %
Original Class A Certificate Balance..................... $
Original Class B Certificate Balance..................... $
Class A Pass-Through Rate................................ %
Class B Pass-Through Rate................................ %
Interest Accrual Date.................................... , 19
Initial Distribution Date................................ , 19
Final Scheduled Distribution Date........................ , 20
Reserve Account and Yield Supplement Account
Reserve Account Initial Deposit.......................... $
Basic Reserve Account Percentage......................... %
Reserve Account Floor Amount............................. $
Reserve Account Increase Percentage...................... %
Reserve Account Trigger Starting Date.................... , 19
Default Trigger.......................................... %
Delinquency Trigger...................................... %
Yield Supplement Initial Deposit......................... $
</TABLE>
S-1
<PAGE>
Risk Factor
IN ADDITION TO THE OTHER INFORMATION CONTAINED IN THIS PROSPECTUS SUPPLEMENT,
YOU SHOULD CONSIDER THE FOLLOWING RISK FACTOR AND THE RISK FACTORS SET FORTH IN
THE PROSPECTUS IN DECIDING WHETHER TO PURCHASE THE CERTIFICATES.
<TABLE>
<S> <C>
Lack of Geographic Diversification 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 %, % and % of the Original Pool Balance
were located in Utah, Washington and Idaho,
respectively. Adverse economic conditions in Utah,
Washington and/or Idaho, or that area of the country
generally, may have a disproportionate impact on the
performance of the Receivables. Economic factors such as
unemployment, interest rates, the rate of inflation and
consumer perceptions may affect the rate of prepayment
and defaults on the Receivables and could reduce or
delay payments to you. See "The Receivables
Pool--Certain Geographic Distribution of the
Receivables."
</TABLE>
S-2
<PAGE>
Delinquency and Loss Experience of Seller
The tables set forth below indicate the delinquency and credit loss/repossession
experience for each of the last five calendar years of the Bank's entire
portfolio of Motor Vehicle Loans (including Motor Vehicle Loans that it
previously sold but continues to service). The tables include both Mother
Vehicle Loans originated directly by the Bank and through Dealers in a relative
proportion substantially similar to the Motor Vehicle Loans to be transferred to
the Trust. Fluctuations in delinquencies, repossessions and charge-offs
generally follow trends in the overall economic environment and may be affected
by such factors as increased competition for Obligors, rising consumer debt
burden per household and increases in personal bankruptcies.
No assurance can be made, that the delinquency and loss experience for the Motor
Vehicle Loans as a whole or those transferred to the Trust will be similar to
the historical experience set forth below.
Delinquency Experience
<TABLE>
<CAPTION>
As of
As of September 30, December 31,
---------------------------------------------------------------------------- -------------
1998 1997 1996 1995
------------------------ ------------------------ ------------------------ -------------
Number Number Number Number
of Loans Amount of Loans Amount of Loans Amount of Loans
------------- --------- ------------- --------- ------------- --------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Portfolio at Period End
Delinquency(1)
30-59 Days.....................
60-89 Days.....................
90 Days or More................
Total Delinquencies..............
Total Delinquencies as Percentage
of the Portfolio
<CAPTION>
1994 1993
------------------------ ------------------------
Number Number
Amount of Loans Amount of Loans Amount
--------- ------------- --------- ------------- ---------
<S> <C> <C> <C> <C> <C>
Portfolio at Period End
Delinquency(1)
30-59 Days.....................
60-89 Days.....................
90 Days or More................
Total Delinquencies..............
Total Delinquencies as Percentage
of the Portfolio
</TABLE>
- ------------------------------
(1) The period of delinquency is based on the number of days payments are
contractually past due for all Motor Vehicle Loans under than Motor Vehicle
Loans previously charged off.
Credit Loss/Repossession Experience
<TABLE>
<CAPTION>
Nine Months Ended
September 30, Year Ended December 31,
-------------------- ------------------------------------------
1998 1997 1997 1996 1995 1994
--------- --------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Portfolio Balance at Period End..............................
Average Portfolio Balance During Period......................
Average Number of Loans Outstanding During the Period........
Number of Repossessions During the Period....................
Number of Repossessions as percentage of Average Number of
Loans Outstanding...........................................
Gross Charge-offs(1).........................................
Recoveries on Loans Previously Charged Off(2)................
Net Charge-offs(3)...........................................
Net Charge-offs as a Percentage of Portfolio Balance at
Period End..................................................
Net Charge-offs as a Percentage of Average Balance During
Period......................................................
<CAPTION>
1993
---------
<S> <C>
Portfolio Balance at Period End..............................
Average Portfolio Balance During Period......................
Average Number of Loans Outstanding During the Period........
Number of Repossessions During the Period....................
Number of Repossessions as percentage of Average Number of
Loans Outstanding...........................................
Gross Charge-offs(1).........................................
Recoveries on Loans Previously Charged Off(2)................
Net Charge-offs(3)...........................................
Net Charge-offs as a Percentage of Portfolio Balance at
Period End..................................................
Net Charge-offs as a Percentage of Average Balance During
Period......................................................
</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.
S-3
<PAGE>
The Receivables Pool
The Receivables
Approximately ___% of the Original Pool Balance of Motor Vehicle Loans were
originated by the Seller through Dealers in the ordinary course of the Seller's
business and in accordance with Seller's underwriting standards; the remainder
of the Motor Vehicle Loans were made directly by the Seller to the Obligors in
accordance with the Seller's underwriting standards. The Seller will warrant in
the Agreement that all the Receivables have the following individual
characteristics, among others: (i) the obligation of the related Obligor under
each Receivable is secured by a security interest in either a new or used
automobile or light truck; (ii) each Receivable has a contractual interest rate
("CONTRACT RATE") of at least ___% and not more than ___%; (iii) each Receivable
had a remaining maturity, as of the Cutoff Date, of not less than ___ months and
not more than ___ months; (iv) each Receivable had a remaining principal balance
of not less than $_______ and not more than $________ as of the Cutoff Date; (v)
no Receivable was more than ___ 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
__________. 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 and installment
loans constituting the Receivables which are material to the Certificateholders
are described in the Prospectus.
Certain Characteristics
As of the Cutoff Date, approximately ___% of the Original Pool Balance was
attributable to loans for purchases of new Financed Vehicles and approximately
___% of the Original Pool Balance was attributable to loans for purchases of
used Financed Vehicles.
The composition, distribution by Contract Rate and distribution by remaining
term of the Receivables as of the Cutoff Date are set forth in the following
tables. Due to rounding, the percentages shown in these tables may not add to
100.00%.
Composition of the Receivables
<TABLE>
<CAPTION>
Weighted Average Number of
Contract Rate of Original Pool Receivables in Average Principal Weighted Average Weighted Average
Receivables Balance Pool Balance Original Term Remaining Term
- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
<S> <C> <C> <C> <C> <C>
_______% $________ _________ $________ ____ mos. ____ mos.
</TABLE>
Distribution by Contract Rate of the Receivables
<TABLE>
<CAPTION>
Aggregate Percentage of
Number of Principal Original Pool
Contract Rate Range Receivables Balance Balance
- ----------------------------------------------------------------------------------- ------------- ----------------- -------------
<S> <C> <C> <C>
6.00-6.99%......................................................................... $ %
7.00-7.99%......................................................................... $ %
8.00-8.99%......................................................................... $ %
9.00-9.99%......................................................................... $ %
10.00-10.99%....................................................................... $ %
11.00-11.99%....................................................................... $ %
12.00-12.99%....................................................................... $ %
13.00-13.99%....................................................................... $ %
14.00-14.99%....................................................................... $ %
15.00 and up....................................................................... $ %
</TABLE>
S-4
<PAGE>
Geographic Distribution of the Receivables
The following table sets forth the percentage of the Original Pool Balance:
<TABLE>
<CAPTION>
Percentage of
Original
State Pool Balance
- --------------------------------------------------------------------------------------- -------------------
<S> <C>
Utah................................................................................... %
Idaho.................................................................................. %
Oregon................................................................................. %
Nevada................................................................................. %
Washington............................................................................. %
Montana................................................................................ %
Wyoming................................................................................ %
</TABLE>
Payments on the Receivables
All Receivables provide for the allocation of payments according to the "Simple
Interest" method (each a "SIMPLE INTEREST RECEIVABLE"). A Simple Interest
Receivable provides for the amortization of the amount financed under the
Receivable over a series of fixed level months payments (except that the last
such payment may be different). However, each monthly payment consists of an
installment of interest which is calculated on the basis of the 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 proceedings from
credit life, disability, theft or physical damage, insurance, repurchases by the
Seller as a result of certain uncured breaches of the warranties made by it in
the 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.
Weighted Average Life of the Certificates
Prepayments on automotive receivables can be measured relative to a prepayment
standard or model. The model used in this Prospectus Supplement, the Absolute
Prepayment Model ("ABS"), represents an assumed rate of prepayment each month
relative to the original number of receivables in a pool of receivables. ABS
further assumes that all the receivables are the same size and amortize at the
same rate and that each receivable in each month of its life will either be paid
as scheduled or be prepaid in full. For example, in a pool of receivables
originally containing
S-5
<PAGE>
10,000 receivables, a 1% ABS rate means that 100 receivables prepay each month.
ABS does not purport to be an historical description of prepayment experience or
a prediction of the anticipated rate of prepayment of any pool of receivables,
including the Receivables.
As the rate of payment of principal of each class of Certificates will depend on
the rate of payment (including prepayments) of the principal balance of the
Receivables and the final distribution in respect of either class of
Certificates could occur significantly earlier than the respective Final
Scheduled Distribution Dates. Reinvestment risk associated with early payment of
the Certificates will be borne exclusively by the Certificateholders.
The table captioned "Percent of Original Certificate Balance at Various ABS
Percentages" (the "ABS TABLE") has been prepared on the basis of the
characteristics of the Receivables. The ABS Table assumes that (i) the
Receivables prepay in full at the specified constant percentage of ABS monthly,
with no defaults, losses or repurchases, (ii) each scheduled monthly payment on
the Receivables is made on the last day of each month and each month has 30
days, (iii) distributions on the Certificates are made on each Distribution Date
(and each such date is assumed to be the fifteenth day of each applicable
month), (iv) the balance in the Reserve Account on each Distribution Date is
equal to the Specified Reserve Balance and (v) the Servicer does not exercise
its option to purchase the Receivables. The pools have an assumed cutoff date of
__________. The ABS Table indicates the projected weighted average life of each
class of Certificates and sets forth the percent of the Original Certificate
Balance of each class of the Certificates that is projected to be outstanding
after each of the Distribution Dates shown at various constant ABS percentages.
The ABS Table also assumes that the Receivables have been aggregated into
hypothetical pools with all of the Receivables within each such pool having the
following characteristics and that the level scheduled monthly payment for each
of the pools (which is based on its aggregate principal balance, Contract Rate,
original term to maturity and remaining term to maturity as of the Cutoff Date)
will be such that each pool will be fully amortized by the end of its remaining
term to maturity.
<TABLE>
<CAPTION>
Original Term Remaining Term
Aggregate to Maturity to Maturity
Pool Principal Balance Contract Rate (In Months) (In Months)
- -------------------------------------------------- ----------------- --------------- --------------- -----------------
<S> <C> <C> <C> <C>
1................................................. $
2.................................................
3.................................................
4.................................................
5.................................................
6.................................................
7.................................................
8.................................................
9.................................................
10................................................
11................................................
------
12................................................
------
------
</TABLE>
The actual characteristics and performance of the Receivables will differ from
the assumptions used in constructing the ABS Table. The assumptions used are
hypothetical and have been provided only to give a general sense of how the
principal cash flows might behave under varying prepayment scenarios. For
example, it is very unlikely that the Receivables will prepay at a constant
level of ABS until maturity or that all of the Receivables will prepay at the
same level of ABS. Moreover, the diverse terms of receivables within each of the
hypothetical pools could produce slower or faster principal distributions than
indicated in the ABS Table at the various constant percentages of ABS specified,
even if the original and remaining terms to maturity of the Receivables are as
assumed. Any difference between such assumptions and the actual characteristics
and performance of the Receivables, or actual prepayment experience, will affect
the percentages of initial amounts outstanding over time and the weighted
average lives of each class of the Certificates.
S-6
<PAGE>
Percent of Original Certificate Balance at Various ABS Percentages
<TABLE>
<CAPTION>
Class A Certificates Class B Certificates
------------------------------------------ -------------------------------
Distribution Date 0.5% 1.0% 1.5% 1.8% 0.5% 1.0% 1.5%
- --------------------------------------------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Closing Date................................. 100.00 100.00 100.00 100.00 100.00 100.00 100.00
__/__/__.....................................
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Weighted Average Life (years) (1)............
<CAPTION>
Distribution Date 1.8%
- --------------------------------------------- ---------
<S> <C>
Closing Date................................. 100.00
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Weighted Average Life (years) (1)............
</TABLE>
- ------------------------------
(1) The weighted average life of a Certificate is determined by (i) multiplying
the amount of each principal payment on a Certificate by the number of years
from the date of the issuance of the Certificate to the related Distribution
Date, (ii) adding the results and (iii) dividing the sum by the related
Original Certificate Balance of the Certificate.
The ABS Table has been prepared based on the assumptions described above
(including the assumptions regarding the characteristics and performance of the
Receivables which will differ from the actual characteristics and performance
thereof) and should be read in conjunction therewith.
S-7
<PAGE>
The Trustee
The Trustee will be ________________. The Trustee's Corporate Trust Office is
located at ____________________.
ERISA Considerations
The Exemption described under "ERISA Considerations" in the Prospectus refers to
the exemption granted to J.P. Morgan Securities Inc. (Prohibited Transaction
Exemption 90-23).
S-8
<PAGE>
Underwriting
Subject to the terms and conditions set forth in the Underwriting Agreement, the
Seller has agreed to sell to each of the Underwriters named below, and each of
the Underwriters has severally agreed to purchase from the Seller, the principal
amount of Class A Certificates and Class B Certificates set forth opposite its
name below:
<TABLE>
<CAPTION>
Principal Amount Principal Amount
of Class A of Class B
Certificates Certificates
---------------- ----------------
<S> <C> <C>
................................................................ $ $
................................................................
................................................................
................................................................
Total................................................................. $ $
</TABLE>
The Seller has been advised 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.
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
transactions with the seller and its affiliates.
[The Seller will retain a Class A Certificate in the principal amount of $_____.
First Security Capital Markets, Inc. ("FSCM") is an affiliate of the Seller. Any
obligations of FSCM are the sole obligations of FSCM and do not create any
obligations on the part of any affiliate of FSCM.]
S-9
<PAGE>
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE CERTIFICATES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE CERTIFICATES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
CERTIFICATES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
Base Prospectus
[LOGO]
First Security-Registered Trademark- Auto Grantor Trusts
ASSET BACKED CERTIFICATES, CLASS A
ASSET BACKED CERTIFICATES, CLASS B
First Security Bank-Registered Trademark-, N.A.
SELLER AND SERVICER
CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE 10 IN THIS PROSPECTUS.
The Certificates of a series represent the beneficial interest in the related
Trust only. The Certificates issued by any Trust do not represent obligations of
or interests in, and are not guaranteed by, First Security Bank-Registered
Trademark-, N.A. or any of its respective affiliates.
This Prospectus may be used to offer and sell any Certificates only if
accompanied by an applicable Prospectus Supplement.
THE TRUSTS--
- A new trust will be formed to issue each series of Certificates. Each
series will include two classes of Certificates, the Class A Certificates
and the Class B Certificates.
- The primary assets of each Trust will be:
- a pool of fixed rate retail motor vehicle installment sales contracts
and installment loans;
- monies received on such contracts and loans;
- a security or ownership interest in the automobiles and lights trucks
financed under such contracts and loans;
- rights to amounts on deposit in the related Reserve Account and the
related Yield Supplement Account and under the related Yield Supplement
Agreement; and
- other related assets.
THE CERTIFICATES--
- will represent beneficial interests in the related Trust in the
percentages set forth in the related Prospectus Supplement;
- will be paid only from the assets of the related Trust and amounts on
deposit in the related Reserve Account;
- will represent the right to payments of principal and interest on a
monthly basis in the amounts described herein and in the related
Prospectus Supplement; and
- the Class B Certificates issued by any Trust will be subordinated to
the related Class A Certificates.
NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED THESE
CERTIFICATES OR DETERMINED THAT THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
January 20, 1999
<PAGE>
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS AND THE ACCOMPANYING PROSPECTUS SUPPLEMENT
We tell you about the Certificates in two separate documents that progressively
provide more detail:
(a) this Prospectus, which provides general information and terms of the
Certificates.
(b) the accompanying supplement to this Prospectus (a "PROSPECTUS
SUPPLEMENT"), which will describe the specific terms of your Certificates and
the specific meanings the following terms will have:
- Original Pool Balance
- Cutoff Date
- Closing Date
- Collateral Agent
- Required Class A and B Ratings
- Class A Percentage, Class B Percentage
- Original Class A Certificate Balance, Original Class B Certificate Balance
- Class A Pass-Through Rate, Class B Pass-Through Rate
- Interest Accrual Date
- Initial Distribution Date
- Final Scheduled Distribution Date
- Reserve Account Initial Deposit
- Basic Reserve Account Percentage
- Reserve Account Floor Amount
- Reserve Account Increase Percentage
- Reserve Account Trigger Starting Date
- Default Trigger
- Delinquency Trigger
- Yield Supplement Initial Deposit
The terms of particular Certificates may vary between this Prospectus and the
Prospectus Supplement, in which case you should rely on the information in the
Prospectus Supplement.
You should rely only on the information provided in this Prospectus and the
accompanying Prospectus Supplement, including the information incorporated by
reference. We have not authorized anyone to provide you with other or different
information. We are not offering the Certificates in any jurisdiction where the
offer is not permitted. We do not claim the accuracy of the information in this
Prospectus or the accompanying Prospectus Supplement as of any date other than
the dates stated on their respective covers.
We include cross-references in this Prospectus and in the accompanying
Prospectus Supplement to captions in these materials where you can find further
related discussions. The following Table of Contents and the Table of Contents
included in the accompanying Prospectus Supplement provide the pages on which
these captions are located.
You can find a listing of the pages where capitalized terms used in this
Prospectus are defined under the caption "Index of Terms" beginning on page 58
in this Prospectus.
------------------------
2
<PAGE>
Table of Contents
<TABLE>
<CAPTION>
Page
---
<S> <C>
PROSPECTUS SUMMARY................ 5
The Parties..................... 5
The Offered Certificates........ 5
The Trust Property.............. 7
Reserve Account................. 7
Yield Supplement Agreement;
Yield Supplement Account....... 8
Advances........................ 8
Servicing Fees.................. 9
Optional Repurchase............. 9
Tax Status...................... 9
ERISA Considerations............ 9
RISK FACTORS...................... 10
Maturity and Prepayment
Considerations................. 10
Extensions and Deferrals of
Payments on Receivables........ 10
Limited Assets of Each Trust.... 10
Potential Priority of Certain
Liens.......................... 11
Possible Reductions and Delays
in Payments Due to Bankruptcy
and Insolvency................. 11
Limited Enforceability of the
Receivables.................... 12
Limited Reliance on the Bank and
its Affiliates................. 12
Subordination................... 12
Risk of Commingling of Assets... 13
Federal Income Taxation;
Subordination of Class B
Certificate Owners............. 13
Limited Ability to Resell
Certificates................... 14
Limited Significance of
Ratings........................ 14
FORMATION OF THE TRUSTS........... 15
TRUST PROPERTY.................... 15
THE MOTOR VEHICLE LOAN PORTFOLIO.. 16
General......................... 16
Origination of Receivables...... 16
Underwriting.................... 16
Servicing and Collections....... 17
Physical Damage Insurance....... 18
Delinquency and Loss
Experience..................... 18
<CAPTION>
Page
---
<S> <C>
MATURITY AND PREPAYMENT
ASSUMPTIONS..................... 19
YIELD CONSIDERATIONS.............. 19
POOL FACTORS AND OTHER
INFORMATION..................... 20
USE OF PROCEEDS................... 20
THE BANK.......................... 20
THE CERTIFICATES.................. 21
General......................... 21
Book-Entry Registration......... 22
Definitive Certificates......... 24
Sale and Assignment of the
Receivables.................... 25
Mandatory Repurchase of
Receivables.................... 27
Credit Deferrals and Optional
Payment Deferrals.............. 27
Accounts........................ 28
Collections on the
Receivables.................... 29
Servicing Procedures............ 29
Servicing Compensation.......... 30
Advances........................ 30
Yield Supplement Account; Yield
Supplement Agreement........... 31
Reserve Account................. 32
Distributions on Certificates... 34
Statements to
Certificateholders............. 38
Evidence as to Compliance....... 38
Certain Matters Regarding the
Servicer....................... 39
Events of Servicing
Termination.................... 39
Rights upon an Event of
Servicing Termination.......... 40
Amendment....................... 40
List of Certificateholders...... 41
Termination..................... 41
The Trustee..................... 42
Duties of the Trustee........... 42
CERTAIN LEGAL ASPECTS OF THE
RECEIVABLES..................... 43
Rights in the Receivables....... 43
Security Interests in the
Financed Vehicles.............. 43
Repossession.................... 45
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
Page
---
Notice of Sale; Redemption
Rights......................... 45
<S> <C>
Deficiency Judgments and Excess
Proceeds....................... 45
Consumer Protection Laws........ 46
Other Limitations............... 47
FEDERAL INCOME TAX CONSEQUENCES... 47
Tax Status of the Trusts........ 47
Treatment of Certificate Owners'
Interest in Trust Property..... 47
Discount and Premium............ 49
Class B Certificate Owners...... 52
<CAPTION>
Page
---
<S> <C>
Yield Supplement Amounts........ 52
Sale of a Certificate........... 53
Foreign Certificate Owners...... 53
Backup Withholding.............. 54
ERISA CONSIDERATIONS.............. 54
PLAN OF DISTRIBUTION.............. 56
LEGAL MATTERS..................... 57
WHERE YOU CAN FIND MORE
INFORMATION..................... 57
INDEX OF TERMS.................... 58
</TABLE>
4
<PAGE>
Prospectus Summary
- This summary highlights selected information from this document and does
not contain all of the information that you need to consider in making
your investment decision. To understand all of the terms of an offering of
the Certificates, read carefully this entire document and the accompanying
Prospectus Supplement.
- This summary provides an overview of certain information to aid your
understanding and is qualified by the full description of this information
in this Prospectus and the accompanying Prospectus Supplement.
THE PARTIES
<TABLE>
<S> <C>
ISSUER....................... Each Series of Certificates will be issued by a separate
Trust created pursuant to a Pooling and Servicing Agreement.
SELLER AND SERVICER.......... First Security Bank-Registered Trademark-, N.A. will be the
Seller and the Servicer for each Trust.
TRUSTEE...................... Each Trust will have a Trustee as specified in the related
Prospectus Supplement.
COLLATERAL AGENT............. Each Trust will have a Collateral Agent as specified in the
related Prospectus Supplement.
</TABLE>
<TABLE>
<S> <C>
THE OFFERED CERTIFICATES We will describe in each Prospectus Supplement the
Certificates we are offering at that time. The offered
Certificates will include two classes of asset-backed
Certificates, the Class A Certificates and the Class B
Certificates. We sometimes refer to the Certificates issued
by the same Trust as a "SERIES." We may retain one or more
of the Certificates.
Interest
- Interest on the Class A Certificates will be payable at
the Class A Pass-Through Rate set forth in the related
Prospectus Supplement.
- Interest on the Class B Certificates will be payable at
the Class B Pass-Through Rate set forth in the related
Prospectus Supplement.
- Interest will be payable monthly on the Distribution Dates
set forth in the Prospectus Supplement.
- Interest will be paid in any Distribution Date only to the
extent funds are available therefor as described herein.
- Payment of interest on the of Class B Certificates will be
subordinated to payment of interest on the Class A
Certificates to the extent described herein.
Principal
- Payments of principal on the Certificates will be made
monthly on Distribution Dates.
</TABLE>
5
<PAGE>
<TABLE>
<S> <C>
- Principal payments will be in an amount based on the
amount of principal payments on the Receivables received by
the Servicer during the related Collection Period and all
Liquidation Proceeds, to the extent allocable to
principal. Principal will be paid on any Distribution Date
only to the extent funds are available therefor as
described herein.
- Principal payments will generally be made pro rata to the
holders of Class A Certificates and Class B Certificates
based on their respective percentage interest in the
Trust.
- Payments of principal on the Class B Certificates will be
subordinated to payments of principal and interest on the
Class A Certificates to the extent described herein.
Subordination of Class B Certificates
On each Distribution Date:
- The Class B Certificateholders will receive distributions
of interest only after the full amount of interest on the
Class A Certificates has been provided for.
- The Class B Certificateholders will receive distributions
of principal only after the full amount of interest and
principal on the Class A Certificates has been provided
for.
Registration and Clearance
Unless otherwise provided, the Certificates offered hereby
will be registered in the name of Cede & Co., as the nominee
of the Depository Trust Company in the United States or
Cedel or Euroclear in Europe. A Certificate Owner will not
receive a definitive certificate representing its interest,
except in certain limited circumstances when Certificates in
fully registered, certificated form are issued.
Denominations
The Certificates will be available for purchase in the
denominations specified in the related Prospectus
Supplement. If no denomination is specified, then the
Certificates will be available for purchase in denominations
of $1,000 and greater whole-dollar denominations.
Ratings of the Certificates
We will not issue the Certificates unless (1) the Class A
Certificates be rated in the "AAA" category or its
equivalent and (2) the Class B Certificates be rated at
least in the "A" category or its equivalent, in each case by
at least two nationally recognized statistical rating
agencies. There can be no assurance that such ratings will
not be lowered or withdrawn by the applicable rating agency.
</TABLE>
6
<PAGE>
<TABLE>
<S> <C>
THE TRUST PROPERTY The primary assets of each Trust will be a pool of fixed
rate retail motor vehicle installment sales contracts and
installment loans made by the Seller or through a Dealer
that sold a motor vehicle. The Receivables in each Trust
will be sold by the Seller to the Trust. The Trust Property
will also include:
- All monies due or received under the Receivables after a
date which will be specified in the related Prospectus
Supplement;
- A security or ownership interest in the new and used
automobiles and lights trucks financed by the Receivables;
- Any proceeds from claims on certain related insurance
policies or from obligors under the Receivables;
- Certain amounts on deposit in the Accounts as described
under "The Certificates--Accounts" and in the related
Prospectus Supplement;
- Certain rights of the Seller relating to Receivables from
agreements between the Seller and the Dealers that sold the
Financed Vehicles and related documents; and
- All rights of the Trust under the related Agreement.
RESERVE ACCOUNT Unless otherwise specified in the related Prospectus
Supplement, the Collateral Agent for each Trust will hold a
"RESERVE ACCOUNT." The Reserve Account will be funded as
follows:
- On the Closing Date, the Seller will deposit the RESERVE
ACCOUNT INITIAL DEPOSIT set forth in the related Prospectus
Supplement.
- For each Collection Period, the amount in the Reserve
Account will be supplemented by the deposit of funds
remaining in the Certificate Account after providing for
amounts to be distributed to the holders of the
Certificates and the Servicer.
Funds on deposit in the Reserve Account will be applied for
each Collection Period in the following priority:
- To reimburse the Servicer for Advances previously made and
not reimbursed;
- To the Servicer, in respect of accrued and unpaid Basic
Servicing Fees;
- To the Certificateholders, to the extent the amounts on
deposit in the Certificate Account are insufficient to pay
amounts distributable to the Certificateholders; and
- To the Seller, to the extent funds on deposit in the
Reserve Account exceed the Specified Reserve Account
Balance.
</TABLE>
7
<PAGE>
<TABLE>
<S> <C>
Unless otherwise specified in the related Prospectus
Supplement, the Specified Reserve Account Balance will equal
a percentage of the Pool Balance as of the last day of the
related Collection Period. In no event will the Specified
Reserve Account Balance be less than the lesser of:
- the Reserve Account Floor Amount set forth in the related
Prospectus Supplement; and
- the sum of the Pool Balance of the related Trust and an
amount sufficient to pay interest on the Certificates and
the Basic Servicing Fee through the Final Scheduled
Distribution Date.
YIELD SUPPLEMENT AGREEMENT; Unless otherwise specified in the related Prospectus
YIELD SUPPLEMENT ACCOUNT Supplement, with respect to each Series of Certificates, the
Seller will enter a Yield Supplement Agreement with the
related Trust if any Receivable has a Contract Rate below
the sum of (i) the applicable Class A Pass-Through Rate or
the Class B Pass-Through Rate and (ii) the Basic Servicing
Fee Rate. The Yield Supplement Agreement will provide funds
to supplement the interest collections on such Receivables.
Unless otherwise specified in the related Prospectus
Supplement, the Yield Supplement Amount for all Receivables
with respect to any Collection Period, will equal
one-twelfth of the difference, if any, of (i) the sum of:
(A) 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 Class A Pass
-Through Rate and the Basic Servicing Fee Rate; and
(B) 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 MINUS (ii) interest at the Contract Rate on such
Receivable's principal balance of the first day of the
related Collection Period.
Under each Yield Supplement Agreement, the Seller will be
obligated to pay to the Trust the Yield Supplement Amount
for each Collection Period. The Seller's obligation will be
secured by funds on deposit in an account to be maintained
by the Seller in the name of the Collateral Agent. The
amount on deposit in a Yield Supplement Account and
available for any Collection Period 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. Amounts in excess of this amount will
be paid to the Seller. If the amount on deposit is less than
the Specified Yield Supplement Balance, funds will not be
withdrawn from the Yield Supplement Account.
On the Closing Date, the Seller will deposit the YIELD
SUPPLEMENT INITIAL DEPOSIT set forth in the related
Prospectus Supplement in the Yield Supplement Account.
ADVANCES To the extent specified herein, the Servicer may make an
Advance with respect to each Receivable serviced by it if
payments are due and unpaid on such Receivable. The Servicer
will not be obligated to make any Advance in
</TABLE>
8
<PAGE>
<TABLE>
<S> <C>
respect of a Receivable to the extent that it does not
expect to recover such Advance from subsequent collections
or recoveries on such Receivable. The Servicer will be
entitled to reimbursement of all Advances. See "The
Certificates--Advances."
SERVICING FEES With respect to each Series of Certificates, the Servicer
will receive, on a monthly basis, the Basic Servicing Fee to
compensate it for servicing the Receivables. In addition,
the Servicer will also receive to the Supplemental Servicing
Fee. See "The Certificates--Servicing Compensation."
OPTIONAL REPURCHASE Unless otherwise provided in the Prospectus Supplement, the
Servicer will have the option to purchase the Receivables of
a Trust in the manner and on the terms and conditions
described under "The Certificates--Termination." Any such
purchase would result in the payment in full of all
outstanding Certificates.
TAX STATUS In the opinion of Kirkland & Ellis, special tax counsel to
the Seller, each 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. Subject to certain limitations applicable to
individuals, estates and trusts, Certificate Owners may
deduct their respective allocable shares of reasonable
servicing and other fees. Individuals should consult their
own tax advisors to determine the federal, state, local and
other tax consequences of the purchase, ownership and
disposition of the Class A Certificates or the Class B
Certificates. See "Federal Income Tax Consequences."
ERISA CONSIDERATIONS Subject to the considerations discussed under "ERISA
Considerations" herein and in the related Prospectus
Supplement, the Class A Certificates are eligible for
purchase by employee benefit plans.
No Class B Certificates may be acquired by any employee
benefit plan subject to the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), or by any
individual retirement account. See "ERISA Considerations"
herein and in the related Prospectus Supplement.
</TABLE>
9
<PAGE>
Risk Factors
You should consider the following risk factors in deciding whether to purchase
any Certificates.
<TABLE>
<S> <C>
Maturity and Prepayment Obligors may prepay the Receivables in full or in part. In
Considerations addition, prepayment may result from defaults or the receipt
of proceeds from credit life, disability or physical damage
insurance. Also, the Seller may be required to repurchase
Receivables from a Trust in certain circumstances, and the
Servicer may have the right to purchase all remaining
Receivables from a Trust pursuant to its optional purchase
right. See "The Certificates--Sale and Assignment of
Receivables" and "--Termination." Each such prepayment,
repurchase or purchase will shorten the average life of the
related Certificates. Prepayment rates may be influenced by
a variety of economic, social and other factors and cannot
be predicted with any assurance. For example, decreases in
interest rates and the fact that the Obligor may not sell or
transfer the Financed Vehicle without the consent of the
Seller may affect the rate of prepayment. If prepayments
occurred after a decline in interest rates, you may be
required to reinvest your funds at a return lower than the
applicable Pass-Through Rate. You will bear all reinvestment
risk resulting from a faster or slower rate of prepayment,
repurchase or extension of the Receivables held by your
Trust unless otherwise provided in the related Prospectus
Supplement. See "Maturity and Prepayment Assumptions."
Extensions and Deferrals In certain circumstances, the Servicer may permit an
of Payments on Receivables extension on payments due on Receivables on a case-by-case
basis. In addition, the Servicer has historically offered
payment deferrals to all Obligor's that meet the Bank's
eligibility requirements for such deferrals in June and in
December of each year. Any such deferrals or extensions may
extend the maturity of the Receivables and increase the
weighted average life of the related Certificates. Any fees
received by the Servicer associated with such deferrals or
extensions will increase the principal balance of the
related Receivable. Any reinvestment risk resulting from
extensions or deferrals of payments on Receivables will be
borne entirely by you as a Certificateholder. However, if
any payment deferral of a Receivable results in extending
the term beyond the FINAL SCHEDULED DISTRIBUTION DATE (as
defined in the related Prospectus Supplement) for any class
of Certificates, the Servicer will be required to purchase
the Receivable from the related Trust. See "The Motor
Vehicle Loan Portfolio--Underwriting."
Limited Assets of Each Each Trust will not have any significant assets or sources
Trust of funds other than the Receivables and the right to receive
payments in certain circumstances from the Reserve Account
and the Yield Supplement Account and under the Yield
Supplement Agreement. The Certificates will represent
interests in the related Trust. The Certificates will not be
insured or guaranteed by the Seller, any Trustee, any of
their affiliates or any other person or entity. You must
rely on payments on the related Receivables and, if
available, amounts on deposit in the Reserve Account and the
Yield Supplement Account and payable under the Yield
Supplement Agreement for repayment of your Certificates.
</TABLE>
10
<PAGE>
<TABLE>
<S> <C>
Potential Priority of The Seller will file financing statements to perfect the
Certain Liens interest of each Trust in its Receivables as required by the
Uniform Commercial Code in the relevant states (the "UCC").
For each Trust, the Servicer will appoint First Security
Service Company, an affiliate of the Servicer, as the
custodian to hold the Receivables and the Receivable Files.
The Receivables Files will not be segregated, stamped or
otherwise marked to indicate that they have been sold to the
Trust. However, the Servicer and First Security Service
Company will note in their computer records that the
Receivables have been sold to the Trust. If another party
purchases or takes a security interest in the Receivables
(i) for value, (ii) in the ordinary course of business and
(iii) without actual knowledge of the Trust's 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 interest in the Financed
Vehicles to the Trust. The certificates of title or
ownership of the Leased Vehicles will not identify the Trust
as the new secured party. In Utah, Idaho and most other
states, in most cases, if (i) the Bank files an application
requesting the Bank's lien be noted on the certificates of
title or ownership, and/or (ii) the Bank has possession of
such certificates with the notation within 20 days after the
Obligor takes possession of the Financed Vehicle, then the
security interest of the Trust in the Financed Vehicle will
be perfected against other security interests. Idaho also
has procedures allowing for a paperless electronic record of
title. There is a risk, however, in certain states that if
the Trust is not identified as the new secured party on the
certificate of title, its security interest may not be
perfected. In the event a Trust does not have a perfected
security interest in a Financed Vehicle, its security
interest would be subordinate to a bankruptcy trustee of the
Obligor, a subsequent purchaser of the Financed Vehicle or a
holder of a perfected security interest. See "Certain Legal
Aspects of the Receivables."
Possible Reductions and The Seller intends that the transfer of Receivables to each
Delays in Payments Due to Trust be treated as a sale. If the Seller were to become
Bankruptcy and Insolvency insolvent, the Federal Deposit Insurance Act ("FDIA"), as
amended by the Financial Institutions Reform, Recovery and
Enforcement Act of 1989 ("FIRREA"), gives certain powers to
the Federal Deposit Insurance Corporation ("FDIC"), if it
were approved as receiver. FDIC staff positions taken prior
to the passage of FIRREA do not suggest that the FDIC would
interrupt the timely transfer to a Trust of payments
collected on the related Receivables. Under FIRREA, if the
transfer of the Receivables to the Trust were characterized
as a loan secured by a pledge of Receivables rather than a
sale, such Trust's security interest in the Receivables
should be respected by the FDIC if--
- the Seller's transfer of the Receivables is the grant of a
valid security interest in the Receivables to such Trust;
- the Seller becomes insolvent and the FDIC is appointed
conservator or receiver of the Seller; and
- the security interest (a) is validly perfected before the
Seller's insolvency and (b) was not taken in contemplation
of the Seller's insolvency or with the intent to hinder,
delay or defraud the Seller or its creditors.
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If the FDIC were to assert a different position, your
payments of outstanding principal and interest could be
delayed and possibly reduced or the FDIC might have the
right to repay the Certificates early and for an amount
which may be greater or less than their principal balance.
For example, under the FDIA, the FDIC could--
- require the Trust to go through an administrative claims
procedure to establish its right to those payments;
- request a stay of proceedings with respect to the Seller;
or
- reject the Seller's sales contract and limit the Trust's
resulting claim to "actual direct compensatory damages."
See "Certain Legal Aspects of the Receivables--Other
Limitations" in this Prospectus.
Limited Enforceability Federal and state consumer protection laws regulate the
of the Receivables creation and enforcement of consumer loans such as the
Receivables. Specific statutory liabilities are imposed upon
creditors who fail to comply with these regulatory
provisions. In some cases, this liability could affect an
assignee's ability to enforce secured loans such as the
Receivables. If an Obligor had a claim against any Trust for
violation of these laws prior to the Cutoff Date, the Seller
must repurchase the Receivable unless the breach is cured.
If the Seller fails to repurchase such Receivable, payments
in respect of your Certificate may be reduced or delayed.
Limited Reliance on the Bank The Bank and its affiliates are generally not obligated to
and its Affiliates make any payments to you in respect of your Certificates and
do not guarantee payments on the Receivables or your
Certificates. However, the Bank, as Seller will make
representations and warranties with respect to the
characteristics of the Receivables. In certain
circumstances, the Seller may be required to repurchase
Receivables with respect to which the representations and
warranties have been breached. If the Seller fails to
repurchase such Receivables, payments in respect of your
Certificate may be reduced or delayed. See "The
Certificates--Sale and Assignment of Receivables."
In addition, in certain circumstances, the Servicer may be
required to purchase Receivables. If the Servicer fails to
purchase Receivables, payments in respect of your
Certificate may be reduced or delayed. See "The
Certificates--Servicing Procedures." If the Bank were to
stop acting as the Servicer, delays in processing payments
on the Receivables and information in respect of the
Receivables could occur and result in delays in payments to
you.
Subordination 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. If
you hold the Class B Certificates on any Distribution Date,
you will not receive any distributions of interest until the
full amount of interest then due on the Class A Certificates
has been provided for and you will not receive any
distributions of principal until the full amount of interest
and principal then due on the Class A Certificates has been
provided for. See "The Certificates--Distributions on
Certificates."
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Risk of Commingling of With respect to each Trust, the Servicer will generally be
Assets required to deposit all collections and proceeds of the
Receivables into the Certificate Account of such Trust
within two business days of receipt. However, if certain
conditions satisfactory to the Rating Agencies are
satisfied, the Servicer will not be required to deposit such
amounts in the Certificate Account until shortly before
funds are needed to make required distributions to the
Certificateholders. Until these funds have been deposited in
the Collection Account, the Servicer may invest these funds
at its own risk and for its own benefit and will not
segregate them from its own funds. If the Servicer cannot
deposit the funds in the Certificate Account on the
specified date, you might incur a loss. See "The
Certificates--Collections on the Receivables."
Federal Income Taxation; If amounts otherwise payable on the Class B Certificates are
Subordination of Class B paid on the Class A Certificates pursuant to the
Certificate Owners subordination provisions described above, we expect that,
for federal income tax purposes, such amounts 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 receive less than their
share of the related Trust's receipts of principal or
interest (the "SHORTFALL AMOUNT"), we expect that Class B
Certificate Owners would, for Federal income tax purposes,
be treated as if they had:
- received as distribution their full share of such
receipts;
- paid over to the Class A Certificate Owners an amount
equal to such Shortfall Amount; and
- 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,
- Class B Certificate Owners would be required to accrue as
current income any interest or OID income of such Trust that
was a component of the Shortfall Amount, even though they
did not receive such amount as it was in fact paid to the
Class A Certificate Owners,
- Class B Certificate Owners would only be allowed a loss
when their right to receive reimbursement of such Shortfall
Amount become worthless (for example, when it becomes
clear that such amount will not be available from any
source to reimburse such loss), and
- Class B Certificate Owners would not have taxable income
for reimbursement of such Shortfall Amount prior to such a
claim of worthlessness because such amount was previously
included in income.
If you hold a Class B Certificate, these results should not
significantly affect the inclusion of income to you if you
are on the accrual method of accounting. However, if you are
on the cash method of accounting, it could accelerate
inclusion of income by, in effect, placing you on the
accrual method.
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Limited Ability to The related Underwriters may assist in resales of the
Resell Certificates Certificates but they are not required to do so. A secondary
market for any Certificates may not develop. If a secondary
market does develop, it might not continue or it might not
be sufficiently liquid to allow you to resell any of your
Certificates.
Limited Significance of Each class of Certificates offered hereunder will be issued
Ratings only if the rating specified in the related Prospectus
Supplement is received. A security rating is not a
recommendation to buy, sell or hold the Certificates. The
ratings may be revised or withdrawn at any time. Ratings on
the Certificates do not address the timing of distributions
of principal and interest on the Certificates prior to the
applicable Final Scheduled Distribution Date.
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Formation of the Trusts
With respect to each Series of Certificates, the Seller will establish a trust
(a "TRUST") by selling and assigning the Receivables and certain other Trust
Property to the related Trust in exchange for the Certificates. Prior to such
sale and assignment, such Trust will have no assets or obligations or any
operating history. No Trust will engage in any activity other than acquiring and
holding the related Trust Property, issuing the Certificates and making payments
on the Certificates.
The Servicer will service the Receivables of each Trust, 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. The Servicer will also be entitled to the Supplemental
Servicing Fee. Certain other expenses of each Trust will be paid by the Servicer
or by the Seller as provided in the applicable Agreement. See "The
Certificates--Servicing Procedures," "--Servicing Compensation" and
"--Distributions on Certificates."
For each Trust, the Servicer will appoint an affiliate, First Security Service
Company, to hold the Receivables and Receivable Files as custodian (the
"CUSTODIAN") for the Trust and the Trustee. Although the Receivables will not be
marked or stamped to indicate that they have been sold to a Trust, and the
certificates of title for the Financed Vehicles will not be endorsed or
otherwise amended to identify such Trust as the new secured party, the Servicer
and the Custodian will indicate in their computer records that the Receivables
have been sold to that Trust. Under such circumstances and in certain
jurisdictions, a Trust's interest in the Receivables and the Financed Vehicles
may be subordinate to certain third parties. See "Certain Legal Aspects of the
Receivables--Rights in the Receivables" and "--Security Interests in the
Financed Vehicles."
No Trust will acquire any assets other than the related Trust Property, and it
is not anticipated that any Trust will have a need for additional capital
resources. Because each Trust will have no operating history upon its
establishment and will not engage in any activity other than acquiring and
holding the Trust Property, issuing the Certificates and distributing payments
on the Certificates, no historical or pro forma financial statements or ratios
of earnings to fixed charges with respect to a Trust have been included herein,
nor will any be included in a Prospectus Supplement.
Trust Property
Each Certificate will represent a fractional undivided interest in the related
Trust. The primary assets of each Trust (the "TRUST PROPERTY") will include (i)
a pool of fixed rate motor vehicle installment sales contracts and installment
loans made by the Seller or through a motor vehicle dealer (a "DEALER") that
sold a motor vehicle (collectively, for any Trust, the "RECEIVABLES"), (ii) all
monies due or received under such Receivables after a date which will be
specified in the related Prospectus Supplement (the "CUTOFF DATE"), (iii)
certain amounts from time to time on deposit in the related Certificate Account,
Class A Distribution Account and Class B Distribution Account, (iv) security
interests in the new and used automobiles and light trucks financed by the
Receivables (the "FINANCED VEHICLES"), (v) certain rights of such Trust under
the related Yield Supplement Agreement (if any), (vi) the Seller's rights (if
any) to receive proceeds from claims on credit life, disability, theft and
physical damage insurance policies covering such Financed Vehicles or the
related obligors under the Receivables (each, an "OBLIGOR"), (vii) the Seller's
right to all documents and information contained in the Receivable Files, (viii)
the rights of such Trust under the related Agreement, (ix) certain of the
Seller's rights relating to such Receivables from agreements between the Seller
and the Dealers that sold the Financed Vehicles and related documents (the
"DEALER AGREEMENTS"), and (x) all proceeds (within the meaning of the UCC) of
the foregoing. The Reserve Account and the Yield Supplement Account for a Series
of Certificates, and any amounts therein, will not be property of the related
Trust, but will be pledged to and held by the Collateral Agent, as secured party
for the benefit of the related Certificateholders.
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The Motor Vehicle Loan Portfolio
General
The Bank originates retail motor vehicles installment sales contracts and
installment loans secured by new and used automobiles and light-duty trucks
manufactured by a number of automobile manufacturers through Dealers and
branches of the Bank ("MOTOR VEHICLE LOANS"). The Motor Vehicle Loans to be
transferred to any Trust have been or will be originated by participating
Dealers or will be made by the Bank directly to borrowers. All applications are
reviewed by the Bank in accordance with its established underwriting procedures.
Historically, a substantial portion of the Bank's portfolio of Motor Vehicle
Loans are located in Utah and Idaho, and that area of the country generally.
Detailed information relating to the geographic distribution of Motor Vehicle
Loans will be set forth in the related Prospectus Supplement.
The following is a description of the origination, underwriting and servicing of
the Bank's portfolio of Motor Vehicle Loans as of the date of this Prospectus.
Any material changes to this information with respect to a Trust known at the
time such Trust is created will be set forth in the related Prospectus
Supplement.
Origination of Receivables
The Bank's direct loans are referred to, and approved at, the Direct Loan Center
located in Boise.
Applications for credit which originate with Dealers are sent via facsimile to
the Application Processing Center in Boise. These applications are data-entered
and transmitted through the Application Processing System to Regional Dealer
Services Centers located in Salt Lake City, Utah and Boise and Lewiston, Idaho.
These centers are responsible for all credit analysis and credit decisions on
indirect loan requests.
Bank wide consumer loan collections are performed by the Consumer Collection
Center located in Salt Lake City.
The Consumer Loan Servicing Center located in Boise, reviews and tracks all loan
documentation, stores and maintains all loan files, follows up on lien
perfection, processes payments, reconciles accounting records and provides for
internal and external reporting for all of the Bank's direct and indirect
consumer lending business. In addition, this department provides central
processing of manufacturers' drafts and flooring requests for the Regional
Dealer Services Centers and processing of flooring billing and payments.
Credit administration is provided by the Small Business and Consumer Loan
Administration department located in Boise. This department provides policy and
functional guidance for all areas of consumer lending.
Underwriting
The Bank uses the applicant's creditworthiness as the basic criterion in
purchasing a retail installment sale contract from a Dealer and in making an
installment loan. Each applicant is evaluated individually by the Bank based on
underwriting guidelines developed by the Bank. These underwriting guidelines are
intended to assess the applicant's ability to repay such loan and the adequacy
of the Financed Vehicle as collateral. Among the criteria considered in
evaluating the individual applications are (i) stability of the applicant with
specific regard to the applicant's length of residence in the area, occupation,
length of employment, and whether the applicant rents or owns a residence, (ii)
the applicant's payment history, (iii) a debt service to net monthly income
ratio test, and (iv) a loan to value ratio test taking into account the age,
type and market value of the Financed Vehicle.
The Bank obtains information from the loan application form which generally
lists the applicant's income, deposit accounts, liabilities, credit history,
employment history, and a description of the Financed Vehicle. Upon receipt of
an application, the Bank obtains a credit bureau report from a major credit
reporting agency summarizing the applicant's credit history and paying habits,
including such items as open accounts, delinquent payments, bankruptcies,
repossessions, lawsuits and judgments. The Bank's analysts generally verify the
applicant's employment or, where appropriate, check directly with the
applicant's creditors. The Bank's general policy has been to reject applications
for applicants whose debt service to net monthly income ratio exceeds 45%.
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The amount financed by the Bank under a retail installment sale contract
generally will not exceed (i) for a new Financed Vehicle, the Dealer wholesale
price, plus sales tax, license fees, title fees, service and warranty contracts,
and premiums for credit life and credit accident and health insurance obtained
in connection with the vehicle or the financing and (ii) for a used Financed
Vehicle, 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. However, the maximum
amounts advanced for Motor Vehicle Loans is often less than such amounts
depending on a number of factors, including the length of the Motor Vehicle Loan
term and the model and year of the Financed Vehicle. These adjustments are made
to assure the Financed Vehicle constitutes adequate collateral to secure the
Motor Vehicle Loan.
Since January 1994, an empirically based credit scoring process has been used to
objectively index an applicant's creditworthiness. This scoring process was
created using historical information from the database of Motor Vehicle Loans
owned and serviced by the Bank. Through credit scoring, the Bank evaluates
credit profiles in order to quantify credit risk. The credit scoring process
entails the use of statistics to correlate common characteristics with credit
risk. The credit scoring process used by the Bank is periodically reviewed and
validated and, if necessary, updated based upon statistical sampling of actual
credit results. The Bank's credit scoring process is intended to provide a basis
for lending decisions, but is not meant to supersede the judgment of the credit
analyst.
The information for an applicant is evaluated by the Bank's experienced credit
officers as a package; no one factor is determinative to the analysis. As a
result, certain Motor Vehicle Loans may not comply with all of the Bank's
guidelines. Deviations from the guidelines must be approved by a lending officer
with appropriate authority. Motor Vehicle Loans which do not comply with all of
the Bank's guidelines must have strong compensating factors which indicate a
high ability of the applicant to repay the loan. Any Receivables sold by the
Bank to any Trust which were the subject of special financing or other
promotional programs will have been approved by the Bank in accordance with its
normal and customary underwriting practices and procedures for all Motor Vehicle
Loans.
The Bank has established internal control procedures and performs periodic
audits to ensure compliance with the underwriting guidelines and its established
policies and procedures for Motor Vehicle Loans originated directly by the Bank
as well as those originated through Dealers.
Dealers from which the Bank purchases retail installment sale contracts have
been selected by the Bank based on the Dealer's financial and operating history.
Each such Dealer has made representations and warranties to the Bank with
respect to the contracts originated through it and the security interests in the
Financed Vehicles relating thereto, although such representations and warranties
do not relate to the creditworthiness of any applicant or the collectibility of
any loans. However, as to a generally small percentage of the Motor Vehicle
Loans, there is recourse to a Dealer ("DIRECT RECOURSE") if an applicant
defaults under a Receivable, subject to certain conditions to be fulfilled by
the Bank. Upon breach of any representation or warranty made by a Dealer with
respect to a retail installment sale contract originated through it, the Bank
has a right against such Dealer to require it to repurchase such contract.
Generally, in determining whether to exercise such right or any right of direct
recourse, the Bank considers the prior performance of the Dealer and other
business and commercial considerations. The Bank, as Servicer, is obligated to
enforce such rights with respect to Dealer Agreements relating to the
Receivables in accordance with such customary practices, and the right to any
proceeds received upon such enforcement will be conveyed to the applicable
Trust.
Servicing and Collections
Collection activities with respect to delinquent Motor Vehicle Loans are
performed by the Bank's collection personnel. Under current practices,
collection personnel generally initiate contact, by mail, with obligors whose
Motor Vehicle Loans have become more than 10 days delinquent. In the event that
such contact fails to resolve the delinquency, the collection personnel
typically contact the obligor by telephone after the Motor Vehicle Loan becomes
13 days delinquent. Generally, after a Motor Vehicle Loan continues delinquent
for 90 days, the Financed Vehicle is repossessed; however, under certain
circumstances, the Financed Vehicle may be repossessed immediately after a Motor
Vehicle Loan has become delinquent. After repossession, the Bank is required to
give reasonable notice of any proposed sale of the Financed Vehicle, and the
Bank's practice is to give the obligor 10 days' notice. Losses may occur in
connection with delinquent Motor Vehicle Loans and can arise in several ways,
including inability to locate
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the vehicle to be repossessed. The Bank recognizes losses on Motor Vehicle Loans
at the time it deems such Motor Vehicle Loans to be uncollectible, which is
generally at the time it has exhausted all of its non-legal remedies, typically
no later than the 120th day of delinquency. The servicing and charge-off
policies and collection practices of the Bank may change over time in accordance
with the Bank's business judgment. Upon repossession and disposition of the
Financed Vehicle, any deficiency remaining will be pursued to the extent deemed
practical.
The Bank, as Servicer, may, on a case-by-case basis, permit extensions with
respect to the due dates of Receivables or payment deferrals in the discretion
of a senior credit officer other than the origination officer. In addition to
such extensions, the Bank, as Servicer, has historically offered payment
deferrals to a broader population of qualifying applicants in June and in
December of each year. Unless otherwise specified in a Prospectus Supplement,
all obligors that meet the Bank's eligibility requirements will be given the
opportunity to take advantage of such payment deferrals. Any such deferrals or
extensions may extend the maturity of the applicable Receivable and increase the
weighted average life of the Receivables and any fees associated therewith will
increase the principal balance of the related Receivable. Any deferral or
extension could also result in delays of payments on the Certificates.
Physical Damage Insurance
The Bank requires that an obligor provide an insurance policy covering collision
and comprehensive insurance. The deductibles are a maximum of $1,000 (or such
other amount as the Servicer determines, consistent with the standard of care
required by the applicable Agreement) 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 Motor
Vehicle Loan is less than $3,500 (or such other amount as the Servicer
determines, consistent with the standard of care required by the applicable
Agreement) 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. Unless
otherwise specified in the Prospectus Supplement, such additional principal and
any interest thereon will not be deemed 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 on the Motor Vehicle Loans is currently
written through Balboa Life and Casualty Company. Balboa Life and Casualty
Company also currently provides the Bank with an errors and omissions policy for
insurance follow-ups.
Delinquency and Loss Experience
Fluctuations in delinquencies, repossessions and charge-offs generally follow
trends in the overall economic environment and may be affected by such factors
as increased competition for obligors, rising consumer debt burden per household
and increases in personal bankruptcies. Information with respect to
delinquencies, repossessions and charge-offs will be set forth in the Prospectus
Supplement, including, to the extent appropriate, data indicating the
delinquency and credit/loss repossession experience for each of the last five
calendar years of the Bank's entire portfolio of Motor Vehicle Loans. No
assurance can be made that the performance of the Receivables in any Trust will
be similar to historical experience.
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Maturity and Prepayment Assumptions
Full or partial prepayments on the Receivables in a Trust will have the effect
of reducing the weighted average life of the 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 related 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 applicable Pass-Through Rate.
Certificateholders will bear all reinvestment risk resulting from prepayment of
the Receivables in the related Trust.
The rate of prepayments on the Receivables may be influenced by a variety of
economic, social and other factors, including the fact that an Obligor may not
sell or transfer a Financed Vehicle without the consent of the Servicer. The
Servicer believes that the actual rate of prepayments will result in a
substantially shorter weighted average life than the scheduled weighted average
life of the Receivables in a Trust. Any reinvestment risks resulting from a
faster or slower incidence of prepayment of such Receivables will be borne by
the related Certificateholders. See "The Certificates--Termination" regarding
the Servicer's option to purchase all of the Receivables in a Trust as of the
last day of any Collection Period in which (i) the Pool Balance of such Trust as
a percentage of the Original Pool Balance is 10.0% or less (or such other
percentage as is specified in the related Prospectus Supplement) and (ii) the
Purchase Amount for the Receivables (other than Defaulted Receivables) is
greater than or equal to the sum of the Class A Certificate Balance and the
Class B Certificate Balance.
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 a Trust. In any event, no assurance can be given that prepayments
on such Receivables would conform to any historical experience, and no
prediction can be made as to the actual prepayment experience to be expected
with respect to any Receivables.
Yield Considerations
With respect to any Series of Certificates, 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 related
Certificate Account and in the related 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 related 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 the Certificateholders
because the Seller has entered into a Yield Supplement Agreement with each
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."
Additional information concerning the Receivables, including the selection
criteria and other characteristics of the Receivables, will be set forth in the
Prospectus Supplement for each Series of Certificates.
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Pool Factors and Other Information
The "CLASS A POOL FACTOR" and the "CLASS B POOL FACTOR" for any Series of
Certificates will each be a seven-digit decimal which 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 (after giving effect to distributions made on such
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 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 related 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 related Class B Pool Factor.
Pursuant to the applicable Agreement, the Certificateholders of a Series will
receive from the related Trustee monthly reports concerning the payments
received on the Receivables, Pool Balance, Class A Pool Factor and Class B Pool
Factor, and various other items of information. In addition, Certificateholders
of record during any calendar year will be furnished information by such Trustee
for tax reporting purposes not later than the latest date permitted by law. See
"The Certificates--Statements to Certificateholders."
Use of Proceeds
For any Series of Certificates, the Seller will receive the Certificates in
exchange for the contribution to a Trust of the Receivables and the other Trust
Property described in a related Prospectus Supplement. Unless the related
Prospectus Supplement provides for other applications, the net proceeds from the
sale of the Certificates will be added to its general corporate funds and will
be used for general corporate purposes.
The Bank
First Security Bank-Registered Trademark-, N.A., a national banking association
(the "BANK"), which will act as the Seller and Servicer for the Trusts, is a
subsidiary of First Security Corporation, a Delaware multi-state financial
services corporation based in Salt Lake City, Utah. First Security Corporation
is the oldest continuously operating multi-state bank holding company in the
United States. The Bank is a major participant in the motor vehicle financing
and dealer flooring markets in Utah, Idaho and neighboring market areas, as well
as in all facets of consumer and commercial lending.
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The Certificates
With respect to each Trust, asset-backed certificates (the "CERTIFICATES") will
be issued pursuant to the terms of a Pooling and Servicing Agreement (an
"AGREEMENT"). The Certificates will be issued in Series. Each Series of
Certificates will consist of two classes, the "CLASS A CERTIFICATES" and the
"CLASS B CERTIFICATES," in each case as designated in the related Prospectus
Supplement. A form of Agreement has been filed as an exhibit to the Registration
Statement of which this Prospectus is a part. Copies of an 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 is qualified in its entirety by reference
to, all of the provisions of the related Agreement. Where particular provisions
or terms used in an Agreement are referred to, the actual provisions (including
definitions of terms) are incorporated by reference as a part of such summaries.
General
Each Series of Certificates will evidence interests in a Trust to be created
pursuant to an Agreement. The Class A Certificates will evidence in the
aggregate an undivided ownership interest of the CLASS A PERCENTAGE (as defined
in the related Prospectus Supplement) of the outstanding principal balance of
the Receivables determined in accordance with the Agreement (the "POOL BALANCE")
as of the Cutoff Date (the "ORIGINAL POOL BALANCE") of the Trust. The Class B
Certificates will evidence in the aggregate an undivided ownership interest of
the CLASS B PERCENTAGE (as defined in the related Prospectus Supplement) of the
Original Pool Balance of the Trust. The Class A Certificates will be issued in
an initial principal amount specified in the related Prospectus Supplement (the
"ORIGINAL CLASS A CERTIFICATE BALANCE"), and the Class B Certificates will be
issued in an initial principal amount specified in the related Prospectus
Supplement (the "ORIGINAL CLASS B CERTIFICATE BALANCE" and, together with the
Original Class A Certificate Balance, the "ORIGINAL CERTIFICATE BALANCE"). On
each Distribution Date, the Trustee will distribute, to holders of record of the
related Class A Certificates (the "CLASS A CERTIFICATEHOLDERS") or the Class B
Certificates (the "CLASS B CERTIFICATEHOLDERS" and, together with the Class A
Certificateholders, the "CERTIFICATEHOLDERS") as of the 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 related Certificate Account or available in the related 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
related Reserve Account, payments pursuant to the related 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 a nominee of DTC (together with any
successor depository selected by the Trust (the "DEPOSITORY") except as set
forth below. No Certificate Owner will be entitled to receive a Definitive
Certificate representing such person's interest in any 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 the Depository upon
instructions from its Direct Participants and all references to distributions,
notices, reports and statements to Certificateholders shall refer to
distributions, notices, reports and statements to the Depository. See
"--Definitive Certificates."
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Book-Entry Registration
Certificate Owners may hold their Certificates through the Depository Trust
Company ("DTC") (in the United States) or Cedel or Euroclear (in Europe), which
in turn hold through DTC, if they are participants of such systems, or
indirectly through organizations that are participants in such systems.
DTC's nominee will be Cede & Co. ("CEDE"), unless another nominee is specified
in the related Prospectus Supplement. Accordingly, such nominee is expected to
be the holder of record of any book-entry securities of any class or Series.
Unless and until Definitive Certificates are issued under the limited
circumstances described therein or in the related Prospectus Supplement, no
Certificate Owner will be entitled to receive a physical certificate
representing its interest in such Certificate. All references herein and in the
related Prospectus Supplement to actions by Certificateholders refer to actions
taken by DTC upon instructions from its Participants and all references herein
and in the related Prospectus Supplement to distributions, notices, reports and
statements to Certificateholders of book-entry securities refer to
distributions, notices, reports and statements to DTC or its nominee, as the
registered holder of the applicable Certificates, for distribution to
Certificateholders in accordance with DTC's procedures with respect thereto. See
"--Definitive Certificates" herein.
Cedel and Euroclear will hold omnibus positions on behalf of the Cedel
Participants and the Euroclear Participants, respectively, through customers'
securities accounts in Cedel's and Euroclear's names on the books of their
respective depositaries (collectively, the "DEPOSITARIES") which in turn will
hold such positions in customers' securities accounts in the Depositaries' names
on the books of DTC.
DTC is a limited-purpose trust company organized under the laws of the State of
New York, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York Uniform Commercial Code and a "clearing
agency" registered pursuant to the provisions of Section 17A of the Exchange
Act. DTC was created to hold securities for its Participants and facilitate the
clearance and settlement of securities transactions between Participants through
electronic book-entry changes in accounts of its Participants, thereby
eliminating the need for physical movement of certificates. "PARTICIPANTS"
include securities brokers and dealers (who may include an underwriter with
respect to any series), banks, trust companies and clearing corporations and may
include certain other organizations, including Cedel and Euroclear. Indirect
access to the DTC system also is available to "INDIRECT PARTICIPANTS" such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a Participant, either directly or indirectly.
Transfers between Participants will occur in accordance with DTC rules.
Transfers between Cedel Participants and Euroclear Participants will occur in
the ordinary way in accordance with their applicable rules and operating
procedures.
Cross-market transfers between persons holding directly or indirectly through
DTC in the United States, on the one hand, and directly or indirectly through
Cedel Participants or Euroclear Participants, on the other, will be effected in
DTC in accordance with DTC rules on behalf of the relevant European
international clearing system by its Depositary; however, such cross-market
transactions will require delivery of instructions to the relevant European
international clearing system by the counterparty in such system in accordance
with its rules and procedures and within its established deadlines (European
time). The relevant European international clearing system will, if the
transaction meets its settlement requirements, deliver instructions to its
Depositary to take action to effect final settlement on its behalf by delivering
or receiving securities in DTC, and making or receiving payment in accordance
with normal procedures for same-day funds settlement applicable to DTC. Cedel
Participants and Euroclear Participants may not deliver instructions directly to
the Depositaries.
Because of time-zone differences, credits or securities in Cedel or Euroclear as
a result of a transaction with a Participant will be made during the subsequent
securities settlement processing, dated the business day following the DTC
settlement date, and such credits or any transactions in such securities settled
during such processing will be reported to the relevant Cedel Participant or
Euroclear Participant on such business day. Cash received in Cedel or
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Euroclear as a result of sales of securities by or through a Cedel Participant
or Euroclear Participant to a Participant will be received with value on the DTC
settlement date but will be available in the relevant Cedel or Euroclear cash
account only as of the business day following settlement in DTC.
Certificate Owners that are not Participants or Indirect Participants but desire
to purchase, sell or otherwise transfer ownership of, or other interest in,
Certificates may do so only through Participants and Indirect Participants. DTC
has advised the Seller that it will take any action permitted to be taken by a
Certificateholder under the related Agreement only at the direction of one or
more Participants to whose accounts with DTC the Certificates are credited. DTC
has advised the Seller that to the extent the applicable 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 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 Participants whose holdings include such undivided interests.
Under the rules, regulations and procedures creating and affecting DTC and its
operations (the "RULES"), DTC is required to make book-entry transfers of
Certificates among Participants on whose behalf it acts with respect to the
Certificates and to receive and transmit distributions of principal of, and
interest on, the Certificates. 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 Owner. Accordingly, although Certificate
Owners will not physically possess Certificates, the Rules provide a mechanism
by which Participants will receive payments and will be able to transfer their
interests.
Because DTC can only act on behalf of Participants, who in turn act on behalf of
Indirect Participants and certain banks, the ability of a 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 lack of physical certificates for such Certificates.
Cedel Bank, societe anonyme ("CEDEL") is incorporated under the laws of
Luxembourg as a professional depository. Cedel holds securities for its
participating organizations ("CEDEL PARTICIPANTS") and facilitates the clearance
and settlement of securities transactions between Cedel Participants through
electronic book-entry changes in accounts of Cedel Participants, thereby
eliminating the need for physical movement of certificates. Transactions may be
settled by Cedel in any of 28 currencies, including United States dollars. Cedel
provides to its Cedel Participants, among other things, services for
safekeeping, administration, clearance and settlement of internationally traded
securities and securities lending and borrowing. Cedel interfaces with domestic
markets in several countries. As a professional depository, Cedel is subject to
regulations by the Luxembourg Monetary Institute. Cedel Participants are
recognized financial institutions around the world, including underwriters,
securities brokers and dealers, banks, trust companies, clearing corporations
and certain other organizations and may include an underwriter of any series.
Indirect access to Cedel is also available to others, such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a Cedel Participant, either directly or indirectly.
The Euroclear System ("EUROCLEAR") was created in 1968 to hold securities for
participants of Euroclear ("EUROCLEAR PARTICIPANTS") and to clear and settle
transactions between Euroclear Participants through simultaneous electronic
book-entry delivery against payment, thereby eliminating the need for physical
movement of certificates and any risk from lack of simultaneous transfers of
securities and cash. Transactions may now be settled in any of 27 currencies,
including United States dollars. Euroclear includes various other services,
including securities lending and borrowing and interfaces with domestic markets
in several countries generally similar to the arrangement for cross-market
transfers with DTC described above. Euroclear is operated by Morgan Guaranty
Trust Company of New York, Brussels, Belgium office (the "EUROCLEAR OPERATOR"),
under contract with Euroclear Clearance System, S.C., a Belgian cooperative
corporation (the "COOPERATIVE"). All operations are conducted by the Euroclear
Operator, and all Euroclear securities clearance accounts and Euroclear cash
accounts are accounts with the Euroclear Operator, not the Cooperative. The
Cooperative establishes policy for Euroclear on behalf of Euroclear
Participants. Euroclear
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Participants include banks (including central banks), securities brokers and
dealers and other professional financial intermediaries and may include an
underwriter of any series. Indirect access to Euroclear is also available to
other firms that clear through or maintain a custodial relationship with a
Euroclear Participant, either directly or indirectly.
The Euroclear Operator is the Belgian branch of a New York banking corporation
which is a member of the Federal Reserve System. As such, it is regulated and
examined by the Board of Governors of the Federal Reserve System and the New
York State Banking Department, as well as the Belgian Banking Commission.
Securities clearance accounts and cash accounts with the Euroclear Operator are
governed by the Terms and Conditions Governing Use of Euroclear and the related
Operating Procedures of Euroclear and applicable Belgian law (collectively, the
"TERMS AND CONDITIONS"). The Terms and Conditions govern transfers of securities
and cash within Euroclear, withdrawal of securities and cash from Euroclear, and
receipts of payments with respect to securities in Euroclear. All securities in
Euroclear are held on a fungible basis without attribution of specific
certificates to specific securities clearance accounts. The Euroclear Operator
acts under the Terms and Conditions only on behalf of Euroclear Participants and
has no record of or relationship with persons holding through Euroclear
Participants.
Distributions with respect to Certificates held through Cedel or Euroclear will
be credited to the cash accounts of Cedel Participants or Euroclear Participants
in accordance with the relevant system's rules and procedures, to the extent
received by its Depositary. Such distributions will be subject to tax reporting
in accordance with relevant United States tax laws and regulations. Cedel or the
Euroclear Operator, as the case may be, will take any other action permitted to
be taken by a Certificateholders under the related Agreement on behalf of a
Cedel Participant or a Euroclear Participant only in accordance with its
relevant rules and procedures and subject to its Depositary's ability to effect
such actions on its behalf through DTC.
Although DTC, Cedel and Euroclear have agreed to the foregoing procedures in
order to facilitate transfers of certificates among participants of DTC, Cedel
and Euroclear, they are under no obligation to perform or continue to perform
such procedures, and such procedures may be discontinued at any time.
Except as required by law, the Trustee will not have any liability for any
aspect of the records relating to or payments made on account of beneficial
ownership interests of the Certificates of any series held by DTC, Cedel or
Euroclear or for maintaining, supervising or reviewing any records relating to
such beneficial ownership interests.
Definitive Certificates
Each Series of Certificates will be issued in fully registered, certificated
form ("DEFINITIVE CERTIFICATES") to Certificate Owners or their nominees, rather
than to the Depository or its nominee, only if (i) the Seller advises the
related Trustee in writing that the Depository is no longer willing or able to
discharge properly its responsibilities as depository with respect to the
Certificates and such 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 the Depository or (iii) after the occurrence of an Event of
Servicing Termination, with respect to a Series of the Class A Certificates,
Class A Certificate Owners of such Series 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 Depository through Direct Participants in writing that the continuation
of a book-entry system through the Depository (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 of the events described in the immediately preceding
paragraph, the Depository is required to notify all Direct Participants of the
availability through the Depository of Definitive Certificates. Upon surrender
by the Depository 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 related Agreement ("HOLDERS").
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Distributions of principal of, and interest on, the Class A Certificates and the
Class B Certificates will be made by the Trustee directly to Holders of
Definitive Certificates in accordance with the procedures set forth herein and
in the related 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 such Trustee.
The final payment on any Definitive Certificate, however, will be made only upon
presentation and surrender of the Definitive Certificate at the office or agency
specified in the related 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 or prior to a Closing Date, pursuant to each Agreement, the Seller will sell
and assign to the related Trust, without recourse, the Seller's entire interest
in the Receivables, certain related property and the proceeds thereof,
including, among other things, its security interests in the related Financed
Vehicles. Each such Receivable with respect to a Trust will be identified in a
schedule appearing as an exhibit to the related 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
the Depository. The Seller will sell the related Certificates offered hereby
(which may not include all Certificates of such Series) to the respective
underwriters set forth in the Prospectus Supplement. See "Plan of Distribution."
The Seller will warrant in each Agreement as to each Receivable conveyed by it
to the related 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 in the ordinary
course of its business or has been originated by a Dealer for the retail sale of
a Motor Vehicle in the ordinary course of such Dealer's business and has been
purchased by the Seller in the ordinary course of the Seller's business and has
been validly assigned by such Dealer to the Seller, (b) is secured by a valid,
subsisting and enforceable security interest in favor of the Seller in the
related Financed Vehicle (subject to administrative delays and clerical errors
on the part of the applicable government agency) prior in right to the security
interest of any other creditor, which security interest is assignable together
with such Receivable, and has been so assigned, by the Seller to the Trust, (c)
contains customary and enforceable provisions such that the rights and remedies
of the holder thereof are adequate for realization against the collateral of the
benefits of the security, (d) provided, at origination, for level monthly
payments (although the amount of the first and last payments may be different),
which fully amortize the initial principal balance of the Receivable over the
original term and (e) in the event of a complete prepayment, provides for a
payment that will fully pay the principal balance of such Receivable as of the
first day of the Collection Period in which the Receivable is fully prepaid,
together with interest accrued at least to the date of prepayment at the related
Contract Rate; (ii) the information set forth in the related Schedule of
Receivables was true and correct as of the close of business of the Seller on
the Cutoff Date; (iii) the Receivable complied at the time it was originated or
made, and will comply as of the Closing Date, in all material respects with all
requirements of applicable Federal, state and local laws, and regulations
thereunder; (iv) the Receivable constitutes the genuine, legal, valid and
binding payment obligation in writing of the Obligor, enforceable in all
material respects by the holder thereof in accordance with its terms, and the
Receivable is not subject to any right of rescission, setoff, counterclaim or
defense, including the defense of usury, and the operation of any of the terms
of the Receivable, or the exercise of any right thereunder, will not render the
Receivable unenforceable in whole or in part or subject to any right of
rescission, setoff, counterclaim or defense, including the defense of usury, and
the Seller has no notice that any right of rescission, setoff, counterclaim or
defense has been asserted with respect thereto; (v) the Seller has taken no
action which would have the effect of releasing the related Financed Vehicle
from the lien granted by the Receivable in whole or in part; (vi) no material
provision of the Receivable has been amended, waived, altered or modified in any
respect, except such waivers as would be permitted under the related 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
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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 $3,500 (or such other amount as is specified in the related
Prospectus Supplement or as determined by the Servicer, consistent with the
standard of care required by the Agreement), 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
is in full force and effect, (x) the Receivable has not been sold, assigned,
pledged or otherwise conveyed by the Seller to any person other than the related
Trust, and, immediately prior to the transfer and assignment under the related
Agreement, the Seller had good and marketable title to the Receivable free and
clear of any encumbrance, equity, lien, pledge, charge, claim, security interest
or other right or interest of any other person and had full right and power to
transfer and assign the Receivable to the Trust and immediately upon the
transfer and assignment of the Receivable to the Trust, such Trust will have
good and marketable title to the Receivable, free and clear of any encumbrance,
equity, lien, pledge, charge, claim, security interest or other right or
interest of any other person and, if such transfer to such Trust is deemed to be
a transfer for security, such Trust's interest in the Receivable resulting from
the transfer has been perfected under the UCC; (xi) the Receivables are "chattel
paper" as defined in the UCC; (xii) the Seller has duly fulfilled all
obligations on its part to be fulfilled under, or in connection with, the
Receivable and (xiii) there is only one original executed Receivable, and
immediately prior to the related Closing Date, the Seller will have possession
of such original executed Receivable.
The Seller also will warrant in each Agreement that: (i) the Original Pool
Balance will be a specified amount (which amount is described in the related
Prospectus Supplement); (ii) as of the related Cutoff Date, the Receivables had
the individual characteristics described in the applicable Prospectus Supplement
under "The Receivables--Selection Criteria;" (iii) as of the related Cutoff
Date, the Receivables had the characteristics described in the applicable
Prospectus Supplement under "The Receivables--Certain Characteristics;" (iv) by
the related 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 such Receivables
constitute part of the Trust Property and are owned by such Trust in accordance
with the terms of the related 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, pursuant to each Agreement, the Trustee will appoint the
Servicer and the Servicer will appoint the Custodian to hold the 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 the Custodian. Documents related to the Receivables that are
not included in the original Receivable Files will be maintained by the
Custodian on behalf of the Servicer, in a computer imaging system (but not in
original form). The Seller's and the Custodian's accounting records and computer
systems will reflect the sale and assignment of the Receivables to such Trust,
and UCC financing statements with respect to such sale and assignment will be
filed. See "Formation of the Trusts" 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 in a Trust, which breach or failure materially and adversely affects
the interests of such Trust and the related 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 related 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 related Final Scheduled Distribution
Date, the Servicer is required to purchase that 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 related
Certificateholders, Trustee or Trust against the Seller for any such uncured
breach or failure, except with respect to certain indemnities of the Seller
under the related Agreement.
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 applicable 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 related 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.
Unless otherwise provided in a Prospectus Supplement, 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 related 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
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inadvertent result of any Optional Payment Deferral, the extension 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
With respect to each Trust, the Trustee will establish one or more segregated
accounts (collectively for such Series, the "CERTIFICATE ACCOUNT"), in the name
of the Trustee on behalf of the related Trust and for the benefit of the
Certificateholders of such Series, into which all payments made on or with
respect to the Receivables will be deposited. Additionally, with respect to each
Series of Certificates, the Trustee will establish a segregated account (the
"CLASS A DISTRIBUTION ACCOUNT") in the name of the Trustee on behalf of the
related 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 related 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 for a Series are collectively referred to as the
"ACCOUNTS," and such Accounts shall initially be established with the Trustee.
Each Account will be at all times an Eligible Deposit Account, unless otherwise
provided in the related Prospectus Supplement. If any Account held by the
Trustee in its own trust department ceases to be an Eligible Deposit Account,
the Trustee will be required to transfer such Account to an Eligible Bank or
otherwise cause such Account to again become an Eligible Deposit Account.
"ELIGIBLE DEPOSIT ACCOUNT" means either (a) a segregated account with an
Eligible Bank or (b) a segregated trust account with the trust department of a
depository institution organized under the laws of the United States of America
or any one of the states thereof or the District of Columbia (or any domestic
branch of a foreign bank), having trust powers and acting as trustee for funds
deposited in such account, so long as the long-term unsecured debt of such
depository institution shall have a credit rating from each nationally
recognized rating agency (each, a "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
$100,000,000, the deposits of which are insured to the full extent permitted by
law by the FDIC, which is subject to supervision and examination by Federal or
state banking authorities and which has (A) (i) a rating of at least P-1 from
Moody's Investors Service, Inc. ("MOODY'S") and A-l+ from Standard & Poor's
Ratings Service, a Division of the McGraw Hill Companies ("S&P") with respect to
short-term deposits obligations, and (ii) a rating of A2 or higher from Moody's
and A from S&P with respect to long-term unsecured debt obligations, or (B) such
other ratings as may be described in a Prospectus Supplement.
The 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 related Agreement in
Eligible Investments. "ELIGIBLE INVESTMENTS" will generally be 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 money market
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. Unless otherwise provided in the related Prospectus Supplement,
any earnings (net of losses and investment expenses) on amounts on deposit in
the Accounts will be paid to the Servicer and will not be available to
Certificateholders.
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Collections on the Receivables
The Servicer will deposit all payments on Receivables held by a Trust (other
than late fees, prepayment charges and certain other amounts payable to the
Servicer under the applicable Agreement, which are not required to be deposited
into the related 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
representing monies due or received under the Receivables 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 held by a Trust in a manner consistent with the
related 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 related 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.
In each Agreement, the Servicer will covenant 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 such Agreement; (B) the Servicer will not impair in
any material respect the rights of the Certificateholders in the Receivables,
the Dealer Agreements or the physical damage insurance policies; and (C) except
in the case of certain extensions, amendments or modifications explicitly
permitted by such 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 related 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
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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 of the related Series, the Servicer will be
required to purchase that Receivable 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 related Trust or Trustee against the Servicer for any such uncured breach,
except with respect to certain indemnities of the Servicer under the related
Agreement.
Each Agreement will also generally require the Servicer to charge off a
Receivable as a Defaulted Receivable in accordance with its customary servicing
procedures, to 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 related 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."
Each Agreement will provide that the Servicer will defend and indemnify the
related Trust, Collateral Agent and 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
an Agreement. The Servicer's obligations to indemnify the related Trust, the
Collateral Agent and the Certificateholders for the Servicer's actions or
omissions will survive the removal of the Servicer, but will not apply to any
action or omission of a successor servicer.
Servicing Compensation
With respect to each Series of Certificates, 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 a per annum rate (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 (or such other percentage as is set forth in the
related Prospectus Supplement). In addition, with respect to each Series of
Certificates, 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 with respect to each
Series of Certificates 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 each Agreement in connection with administering and servicing the
Receivables.
Advances
With respect to any Series of Certificates, on each Deposit Date, the Servicer
may, in its sole discretion, subject to the following and unless otherwise
specified in a Prospectus Supplement, 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 applicable 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
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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.
With respect to any Series of Certificates, on each Distribution Date, prior to
making any distribution to the Certificateholders, the Servicer shall be
reimbursed for all Advances previously made and not reimbursed ("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 related 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 applicable
Collection Period out of the first collections of interest received on the
Receivables held by the related Trust for such Collection Period.
The Servicer will deposit all Advances into the applicable Certificate Account
on the Deposit Date.
Yield Supplement Account; Yield Supplement Agreement
Unless otherwise provided in the related Prospectus Supplement, with respect to
any Series of Certificates, simultaneously with the sale and assignment of the
Receivables by the Seller to the related Trust, such Trust and the Seller will
enter into a Yield Supplement Agreement (each, a "YIELD SUPPLEMENT AGREEMENT")
if the amount calculated below is greater than zero. Each Yield Supplement
Agreement will, with respect to each Receivable held by the related Trust,
provide for the payment by the Servicer on or prior to each Deposit Date of the
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 applicable Collection Period (in the aggregate, for all Receivables with
respect to a Deposit Date, the "YIELD SUPPLEMENT AMOUNT").
The Seller's obligations under each Yield Supplement Agreement will be secured
by funds on deposit in a separate Eligible Deposit Account to be maintained by
the Seller in the name of the Collateral Agent for the benefit of the
Certificateholders (a "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. The amount on deposit in
a 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 (the "SPECIFIED YIELD SUPPLEMENT
BALANCE").
Each 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 such 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 a Yield Supplement Account
may be invested in Eligible Investments that mature later than the next Deposit
Date. A Yield Supplement Account and any amounts therein shall not be property
of the related Trust, but will be pledged to and held for the benefit of the
Collateral Agent, as secured party for the benefit of the Certificateholders.
Each Yield Supplement Account shall initially be maintained at the corporate
trust office of the related Trustee.
Amounts on deposit in a Yield Supplement Account will be released to the Seller
on each Distribution Date to the extent the amount on deposit in such Yield
Supplement Account exceeds the Specified Yield Supplement Balance. The
Collateral Agent also shall cause all investment earnings attributable to any
Yield Supplement Account to be distributed on each Distribution Date to the
Seller. Upon any distribution to the Seller of amounts from a Yield
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Supplement Account, the Certificateholders will not have any rights in, or
claims to, such amounts. If the amount on deposit in the Yield Supplement
Account is less than the Specified Yield Supplement Balance, funds will not be
withdrawn from the Yield Supplement Account.
Reserve Account
Unless otherwise provided in the related Prospectus Supplement, with respect to
each Series of Certificates, a separate 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 related 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 related Reserve Account until
the amount of such Reserve Account is equal to the Specified Reserve Account
Balance.
Each 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 related
Collateral Agent. Funds on deposit in any Reserve Account will be invested in
Eligible Investments selected by the Seller; PROVIDED that, if permitted by the
Rating Agencies, funds on deposit in such Reserve Account may be invested in
Eligible Investments that mature later than the next Deposit Date. A Reserve
Account and any amounts therein will not be property of the Trust, but will be
pledged to and held by the related Collateral Agent, as secured party for the
benefit of the related Certificateholders.
On each Distribution Date, the amount available in any Reserve Account (the
"AVAILABLE RESERVE AMOUNT") will equal the lesser of (i) the amount on deposit
in such Reserve Account (net of investment earnings) and (ii) the Specified
Reserve Account Balance.
Unless otherwise provided in the related Prospectus Supplement, for each Series,
on or prior to each Deposit Date, the related Collateral Agent will withdraw
funds from the applicable Reserve Account (i) to the extent required to make
reimbursements of Outstanding Advances to the extent not recovered from 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 a Certificate Account
may result from, among other things, Receivables becoming Defaulted Receivables
or the failure of the Servicer to make any remittance required to be made under
the related Agreement. The aggregate amount to be withdrawn from a specific
Reserve Account on any Deposit Date will not exceed the Available Reserve Amount
with respect to the applicable Distribution Date. The related Collateral Agent
will deposit the proceeds of the withdrawal described in clause (ii) above into
the Certificate Account on or before the Distribution Date with respect to which
such withdrawal was made.
For each Series, the "SPECIFIED RESERVE ACCOUNT BALANCE" on any Distribution
Date will equal the Basic Reserve Account Percentage of the related 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) the Reserve Account Floor Amount and (ii) the
Full Payoff Amount; provided that the Specified Reserve Account Balance will be
calculated using the Reserve Account Increase Percentage instead of the Basic
Reserve Account Percentage for any Distribution Date (beginning on the Reserve
Account Trigger Starting Date) on which the Average Net Loss Ratio exceeds the
Default Trigger or the Average Delinquency Ratio exceeds the Delinquency
Trigger.
"AGGREGATE NET LOSSES" means, for each Series, 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, for each Series, as of any Distribution
Date, the average of the Delinquency Ratios for the preceding three
Collection Periods.
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"AVERAGE NET LOSS RATIO" means, for each Series, as of any Distribution
Date, the average of the Net Loss Ratios for the preceding three Collection
Periods.
"BASIC RESERVE ACCOUNT PERCENTAGE" for any Series will be specified in the
related Prospectus Supplement.
"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.
"DEFAULT TRIGGER" for any Series will be specified in the related Prospectus
Supplement.
"DELINQUENCY RATIO" means, for each Series, 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.
"DELINQUENCY TRIGGER" for any Series will be specified in the related
Prospectus Supplement.
"FULL PAYOFF AMOUNT" for a Series means the sum of the Pool Balance of the
related Trust plus an amount sufficient to pay interest on (i) 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 (ii) 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.
"LIQUIDATION PROCEEDS" means, for each Series, 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 each Series, for any Collection Period, an
amount, expressed as a percentage, equal to (i) the product of (a) the
Aggregate Net Losses minus Recoveries for such Collection Period and (b)
twelve, divided by (ii) the average of the Pool Balances on each of the
first day of such Collection Period and the last day of such Collection
Period.
"RECOVERIES" means, for each Series, 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.
"RESERVE ACCOUNT FLOOR AMOUNT" for any Series will be specified in the
related Prospectus Supplement.
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"RESERVE ACCOUNT INCREASE PERCENTAGE" for any Series will be specified in
the related Prospectus Supplement.
"RESERVE ACCOUNT TRIGGER STARTING DATE" for any Series will be specified in
the related Prospectus Supplement.
The Specified Reserve Account Balance with respect to each Series of
Certificates may be reduced to a lesser amount as determined by the Seller,
provided that the Seller gives prior written notice of such reduction to the
Rating Agencies and such reduction does not adversely affect the ratings of the
Certificates by the Rating Agencies. Amounts on deposit in any Reserve Account
will be released to the Seller on each Distribution Date to the extent that the
amount on deposit in such Reserve Account would exceed the Specified Reserve
Account Balance. The related Collateral Agent will cause all investment earnings
attributable to the applicable Reserve Account to be distributed on each
Distribution Date to the Seller. Upon any distribution to the Seller of amounts
from any Reserve Account, the Certificateholders will not have any rights in, or
claims to, such amounts.
In the event that the funds in a Reserve Account are reduced to zero, the
Certificateholders of such Series will bear directly the credit and other risks
associated with ownership of the Receivables held by the related Trust,
including the risk that such Trust may not have a perfected security interest in
the Financed Vehicles. In such 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. With respect to each Series of Certificates,
on or before the Determination Date, the Servicer will provide the related
Trustee and Collateral Agent with a certificate (the "SERVICER'S CERTIFICATE")
containing certain information with respect to the applicable Collection Period,
including the amount of aggregate collections on the Receivables during such
Collection Period, the aggregate amount of Receivables held by the related Trust
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.
With respect to each Series of Certificates, on or before each Deposit Date, (a)
the Servicer will cause all related Collections and Liquidation Proceeds and
Recoveries to be deposited into the applicable 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 for such
Series and deposit such amounts into the Certificate Account, (d) the Servicer
will deposit all Advances for the related Distribution Date 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, for each Series, 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, for each Series, 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; (iii) all related
Recoveries, to the extent allocable to principal and (iv) all related
Liquidation Proceeds, to the extent allocable to principal. "Available
Principal" on any Distribution Date shall exclude all payments and proceeds
of any Receivables the Purchase Amount of which has been distributed on a
prior Distribution Date.
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"COLLECTIONS" means all collections on the Receivables.
"INTEREST COLLECTIONS" means, for each Series, for any Distribution Date,
the sum of the following amounts for the related Collection Period: (i) that
portion of the Collections on the Receivables received during the related
Collection Period that is allocable to interest in accordance with the terms
of the Receivables and the Servicer's customary procedures, (ii) all related
Liquidation Proceeds, to the extent allocable to interest, (iii) to the
extent allocable to interest, all related Recoveries and (iv) to the extent
attributable to interest, the 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 applicable Agreement.
DEPOSITS TO THE DISTRIBUTION ACCOUNTS. With respect to each Series of
Certificates, 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;
(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.
With respect to each Series of Certificates, 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:
(a) to the Class A Distribution Account, the Class A Principal Distribution
for such Distribution Date;
(b) to the Class B Distribution Account, the Class B Principal Distribution
for such Distribution Date;
(c) 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
(d) to the Collateral Agent for distribution to the Seller, any amounts
remaining.
With respect to any Series of Certificates, 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 such 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 plus interest thereon, such 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 plus interest thereon, 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" for each Series, at any time, equals the
Original Class A Certificate Balance, as reduced by all amounts allocable to
principal on such Class A Certificates distributed to Class A
Certificateholders prior to such time.
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"CLASS A INTEREST CARRYOVER SHORTFALL" means, for each Series, (i) with
respect to any 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 applicable Class A Pass-Through Rate.
"CLASS A INTEREST DISTRIBUTION" means, for each Series, 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, for each Series, with respect to any
Distribution Date, one-twelfth of the applicable Class A Pass-Through Rate
multiplied by the Class A Certificate Balance as of the preceding
Distribution Date, or, in the case of the first Distribution Date, as of the
Closing Date.
"CLASS A MONTHLY PRINCIPAL" means, for each Series, with respect to any
Distribution Date, (i) the sum of the Class A Percentage of Available
Principal for such Distribution Date and the Class A Percentage of Realized
Losses with respect to the related Collection Period over (ii) the Class A
Percentage of all Recoveries received during the related Collection Period,
to the extent allocable to principal.
"CLASS A PRINCIPAL CARRYOVER SHORTFALL" means, for each Series, (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, for each Series, 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 for such Series, the Class A Principal
Distribution shall include 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.
"CLASS B CERTIFICATE BALANCE" for each Series, at any time, equals the
Original Class B Certificate Balance, as reduced by all amounts allocable to
principal on such Class B Certificates distributed to Class B
Certificateholders prior to such time.
"CLASS B INTEREST CARRYOVER SHORTFALL" means, for each Series, (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 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, for each Series, 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, for each Series, 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.
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"CLASS B MONTHLY PRINCIPAL" means, for each Series, with respect to any
Distribution Date, (i) the sum of the Class B Percentage of Available
Principal for such Distribution Date and the Class B Percentage of Realized
Losses with respect to the related Collection Period over (ii) the Class B
Percentage of all Recoveries received during the related Collection Period,
to the extent allocable to principal.
"CLASS B PRINCIPAL CARRYOVER SHORTFALL" means, for each Series, (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, for each Series, with respect to any
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 for such Series, the Class B Principal
Distribution will include 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.
"INTEREST ACCRUAL DATE" means, for each Series, the date on which interest
begins to accrue on the Certificates of such Series, which date will be
specified in the Prospectus Supplement.
"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 and defines a significant period and dates to a hypothetical monthly
distribution with respect to a Series of Certificates:
<TABLE>
<S> <C>
May 24-June 23 The COLLECTION PERIOD is the period from and including the 24th day of a
calendar month to and including the 23rd day of the succeeding calendar
month. The Initial Collection Period will be the period from but not
including the Cutoff Date to and including the 23rd day of the succeeding
month. The Servicer receives monthly payments, prepayments, and other
proceeds in respect of the Receivables.
July 10 The DETERMINATION DATE is the tenth calendar day of each month. 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.
July 14 The RECORD DATE is the day immediately before each Distribution Date (or,
if Definitive Certificates are issued, the Record Date will be the last day
of the Correction Period, June 23 for a July 15 Distribution Date).
Distributions on the next Distribution Date are made to Certificateholders
of record at the close of business of the Trustee on this date.
July 14 The DEPOSIT DATE is the Business Day immediately preceding each
Distribution 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.
July 15 The DISTRIBUTION DATE is the 15th day of each calendar month (or the next
Business Day) unless otherwise specified in the related Prospectus
Supplement. 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>
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Statements to Certificateholders
With respect to each Series of Certificates, 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, to the extent applicable to that Series:
(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 with respect to the related Collection
Period;
(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.
With respect to each Series of 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 of such Series 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
Each 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 the first
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March 15 which is at least three months after the related Closing Date, a report
of examination to the effect that such firm has examined the motor vehicle loan
servicing functions of the Servicer over the previous calendar year (or shorter
or longer 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.
Each Agreement will also provide for delivery to the Trustee, on or before March
15 of each year, beginning on the first March 15 which is at least three months
after the related Closing Date, 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
Each 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 an Agreement, will be the
successor to the Servicer under that Agreement.
Each Agreement will provide that the Servicer will be liable only to the extent
of the obligations specifically undertaken by it under such Agreement and will
have no other obligations or liabilities thereunder.
Each Agreement will also provide that the Servicer will not be under any
obligation to appear in, prosecute, or defend any legal action that is not
incidental to the Servicer's servicing responsibilities under such 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 an Agreement and the rights and
duties of the parties thereto and the interests of the Certificateholders
thereunder.
Events of Servicing Termination
Except as otherwise provided in the related Prospectus Supplement, "EVENTS OF
SERVICING TERMINATION" under each Agreement will consist of: (i) any failure by
the Servicer to deliver to the related 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 related 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 of the Servicer in the
Certificates and the related Agreement, which failure materially and adversely
affects the rights of the Trust or the Certificateholders of such Series (which
determination shall be made without regard to whether funds are available to the
Certificateholders pursuant to the applicable 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 Class A Certificates of a Series, for so long as Class A
Certificates of such Series are outstanding, evidencing not less than a majority
of the aggregate outstanding principal balance of the Class A Certificates of
such Series or, if no Class A Certificates of a Series are outstanding, the
holders of Class B Certificates evidencing not less than a majority of the
aggregate outstanding principal balance of the Class B Certificates of such
Series, (iv) certain
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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.
For so long as Class A Certificates of a Series are outstanding, the holders of
Class A Certificates evidencing not less than a majority of the aggregate
outstanding principal balance of the Class A Certificates of such Series or, if
no Class A Certificates of a Series are outstanding, the holders of Class B
Certificates evidencing not less than a majority of the aggregate outstanding
principal balance of the Class B Certificate of such Series may waive any Event
of Servicing Termination, except an event resulting from the failure to make any
required deposit or payment to a related Account.
If an Event of Servicing Termination occurs, the Trustee will have no obligation
to notify Certificateholders of such Series of such event prior to the end of
any cure period described above.
Rights upon an Event of Servicing Termination
Unless otherwise provided in the related Prospectus Supplement, as long as an
Event of Servicing Termination under an Agreement remains unremedied, the
Trustee or, if Class A Certificates of a Series are outstanding, the holders of
Class A Certificates of such Series evidencing not less than a majority of the
aggregate outstanding principal balance of the Class A Certificates or, if no
Class A Certificates of a Series are outstanding, the holders of Class B
Certificates evidencing not less than a majority of the aggregate outstanding
principal balance of Class B Certificates of such Series may terminate the
Servicer's rights and obligations under such Agreement, whereupon the Trustee
will succeed to all the responsibilities, duties and liabilities of the Servicer
under such Agreement. Thereafter, the Trustee will be entitled to the same Basic
Servicing Fee and Supplemental Servicing Fee otherwise payable to the Servicer.
In the event that such Trustee is unwilling or unable to so act, it 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 such
Agreement. The Trustee may make such arrangement for compensation to be paid to
such successor which in no event may be greater than the Basic Servicing Fees
payable to the outgoing Servicer under such 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 related 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) the Trustee 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 (or such other amount as is specified in the
related Prospectus Supplement), (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
related Agreement or obtains rights to use, or develops at its own expense,
software which is adequate to perform its duties and responsibilities under the
related Agreement.
Amendment
Each Agreement may be amended by the Seller, the Servicer and the Trustee,
without the consent of the Certificateholders of such Series, to add any
provisions to or change in any manner or eliminate any of the provisions of any
Agreement or modify the rights of the Certificateholders of such Series;
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 of such Series or cause the related Trust
to be classified for Federal income tax purposes as an association taxable as a
corporation. Each such 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
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Class A Certificates and the Class B Certificates of such Series 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 that Agreement or of
modifying the rights of the Certificateholders of such Series; except that 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 of
such Series, without the consent of all adversely affected Certificateholders,
(ii) reduce the percentage of the aggregate outstanding principal balance of the
Certificates of such Series, the holders of which are required to consent to any
such amendment, without the consent of all Certificateholders of such Series,
(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 of such Series, 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 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 of such Series, as the case may be or
(v) cause the related Trust to be taxable as a corporation.
List of Certificateholders
With respect to any Series of Certificates, 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 of such Series, 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 of such Series for purposes of
communicating with other Certificateholders of such Series with respect to their
rights under the related 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."
No Agreement will provide for holding any annual or other meetings of
Certificateholders.
Termination
With respect to each Series of Certificates, the Trust, and the respective
obligations and responsibilities of the Seller, the Servicer and the Trustee
under each such 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 related 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.
Unless otherwise provided in the related Prospectus Supplement, in order to
avoid excessive administration expense, the Servicer will be permitted, at its
option, in the event that (i) the Pool Balance as of the last day of a
Collection Period has declined to 10.0% or less of the applicable Original Pool
Balance (or such other percentage as is specified in the related Prospectus
Supplement) and (ii) the aggregate Purchase Amount for the Receivables (other
than Defaulted Receivables) is greater than or equal to the sum of the Class A
Certificate Balance and the Class B Certificate 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 (other than Defaulted
Receivables). The exercise of this right may effect an early retirement of the
related Certificates.
The Trustee will give written notice of termination of the Trust to each related
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
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Trustee specified in the notice of termination. Any funds remaining in such
Trust after setting aside all funds required to be distributed to
Certificateholders, will be distributed to the Seller or as otherwise provided
in the related Agreement.
The Trustee
With respect to any Series of Certificates, the Trustee will be specified in the
related Prospectus Supplement. 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 related Trust. In the
event of such appointment, all rights, powers, duties, and obligations conferred
or imposed upon the Trustee by an 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. Each Agreement will provide that the Servicer will pay the
Trustee's reasonable fees and expenses.
A Trustee may resign at any time, in which event the Servicer will be obligated
to appoint a successor trustee. The Servicer may also remove a Trustee if such
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 a 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 a Trustee for any
reason, the related Collateral Agent will also be removed or terminated, and the
successor Trustee shall also become the successor Collateral Agent.
The address of the Trustee's Corporate Trust Office will be specified in the
related Prospectus Supplement. The Seller, the Servicer and their respective
affiliates may have other banking relationships with a Trustee and its
affiliates in the ordinary course of their business.
Duties of the Trustee
No Trustee will make representations as to the validity or sufficiency of any
Agreement, the Certificates (other than the execution and authentication of the
Certificates), the Receivables, or any related documents, and no Trustee will 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 related Certificate Account. No Trustee will independently verify the
Receivables.
If no Event of Servicing Termination has occurred and is continuing, a Trustee
will be required to perform only those duties specifically required of it under
the related 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 such Trustee under the related Agreement, in which case the
Trustee will only be required to examine such instruments to determine whether
they conform to the requirements of the related Agreement.
No Trustee will be under any obligation to exercise any of the rights or powers
vested in it by the related 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
such 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 such Agreement to institute any
proceeding with respect to that Agreement, unless such holder has given the
Trustee written notice of default and unless, if there are Class A Certificates
of a Series outstanding, the holders of the Class A Certificates evidencing not
less than a majority of the aggregate outstanding principal balance of the Class
A Certificates of such Series or, if no Class A Certificates of a Series are
outstanding, the holders of Class B Certificates of such Series evidencing not
less than a majority of the aggregate outstanding principal balance of the Class
B Certificates of such Series, 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.
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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 related
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
transferred to such Trust. First, the Seller will cause appropriate financing
statements to be filed with the appropriate governmental authorities in the
states of Washington, Utah and Idaho. Second, following the sale and assignment
of the Receivables to such Trust, pursuant to the related 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 such Trust; however,
the Servicer and the Custodian will indicate in their computer records that the
Receivables have been sold to that Trust and both will have notice of the
interest of such Trust in such Receivables. If, through inadvertence or
otherwise, another party purchases (or takes a security interest in) the
Receivables for new value in the ordinary course of business and somehow manages
to take possession of the Receivables without actual knowledge of the Trust's
interests, such purchaser (or secured party) will acquire an interest in the
Receivables superior to the interest of that Trust. Under the related 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
motor vehicles. The loan documents also constitute personal property security
agreements and include grants of security interests in the vehicles under the
UCC. Perfection of security interests in motor vehicles is generally governed by
the motor vehicle registration laws of the state in which the vehicle is
located. In Washington, Utah, Idaho and most other states, with the exception of
the Idaho electronic title option hereinafter described, perfection of a
security interest in the vehicle is accomplished by taking action to have the
secured party's lien noted on the certificate of title. If the filing of the
registration, title and lien application papers necessary to cause such notation
to occur is accomplished within the appropriate period (20 days for Idaho and
Washington and 30 days for Utah), the date of perfection is the date that such
papers were executed except that the date of perfection in Washington is the
date of attachment. Not all states have similar relation-back rules. Otherwise,
perfection is deemed to occur at the time of filing such papers. Accordingly, if
for any reason there is a failure to file such papers within the aforesaid
period, subsequent purchasers and lien or security interest claimants whose
interests are perfected before the filing of such papers would have prior claims
to the vehicle. Also, even though the laws in Utah allow 30 days for such
filing, a filing after 20 days exposes the secured party to a possible claim in
a bankruptcy proceeding that the Obligor's grant of the security interest is a
preferential transfer.
According to recent revisions to the laws of Washington, a security interest in
a certificated vehicle may be temporarily perfected through use of a
"transitional ownership record." This is an electronic record of the interests
of secured parties in a particular vehicle. It is only effective when a secured
party does not possess the actual title to the vehicle and the department of
licensing already has a computer record of the vehicles. None of the Receivables
will be perfected utilizing this revision.
In Idaho, upon receipt of a properly completed title application, the department
of motor vehicles is authorized to create a paperless electronic record of title
to a vehicle in lieu of issuing a paper certificate of title if the department
and the lienholder so agree in writing. Under this alternative method of
registering and maintaining title to a motor vehicle, liens filed with the
department shall be perfected and take priority according to the order of time
in which the same are entered into the electronic records of the department. In
the absence of a written agreement between the department and the lienholder to
create a paperless electronic title, the paper certificate of title is the
controlling title document evidencing the recording date.
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The Bank's practice is to take such action as is required in accordance with its
normal and customary servicing practices and procedures to perfect its security
interest in a Financed Vehicle under the laws of the jurisdiction in which the
Financed Vehicle is registered. If the Bank, because of clerical error or
otherwise, has failed to take such action with respect to a Financed Vehicle, it
will not have a perfected security interest in the Financed Vehicle and its
security interest may be subordinate to the interests of, among others,
subsequent purchasers of the Financed Vehicle that give value without notice of
the Bank's security interest and to whom a certificate of title is issued in
such purchaser's name, holders of perfected security interests in the Financed
Vehicle, and the trustee in bankruptcy of the Obligor. The Bank's security
interest may also be subordinate to such third parties in the event of fraud or
forgery by the Obligor or administrative error by state recording officials or
in the circumstances noted below. As described more fully below, the Bank will
warrant in each Agreement that it has an enforceable first priority perfected
security interest with respect to each Financed Vehicle and will be required to
repurchase the related Receivable in the event of an uncured breach of such
warranty.
Pursuant to each Agreement, the Seller will assign its security interests in the
Financed Vehicles, along with the sale and assignment of the Receivables, to the
related 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. Of
course, as provided above, actions to perfect such assignment are also taken. In
Utah, Idaho and most other states, in the absence of fraud or forgery by the
vehicle owner or of fraud, forgery, negligence or error by the Bank or
administrative error by state or local agencies, the notation of the Bank's lien
on the certificates of title or ownership and/or possession of such certificates
with such notation will be sufficient to protect the related Trust 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 related 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.
With respect to each Trust, the Seller will warrant in the related Agreement as
to each Receivable conveyed by it to such Trust that, on the Closing Date, it
has a valid, subsisting, and enforceable first priority perfected security
interest in the Financed Vehicle securing the Receivable (subject to
administrative delays and clerical errors on the part of the applicable
government agency) and such security interest will be assigned by the Seller to
the related Trust 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 affected 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 Washington, Utah, Idaho and
most other states, a perfected security interest in a motor vehicle continues
for four months after such relocation and thereafter, in most instances, until
the Obligor re-registers the motor vehicle in the new state, but in any event
not beyond the surrender of the certificate of title. A majority of states
require surrender of a certificate of title to reregister a motor vehicle, and
many require that notice of such surrender be given to each secured party
noticed on the certificate of title. In those states that require a secured
party to take possession of a certificate of title to perfect a security
interest, the secured party would likely learn of the re-registration through
the request from the Obligor to surrender possession of the certificate of
title. In those states that require a secured party to note its lien on a
certificate of title to perfect a security interest but do not require
possession of the certificate of title, the secured party would likely learn of
the re-registration through the notice from the state department of motor
vehicles that the certificate of title had been surrendered. The requirements
that a certificate of title be surrendered and that notices of such surrender be
given to each secured party also apply to re-registrations effected following a
sale of a motor vehicle. The Servicer would therefore have the opportunity to
re-
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perfect the Seller's security interest in a Financed Vehicle in the state of
re-registration following relocation of the Obligor and would be able to require
satisfaction of the related Receivable following a sale of the Financed Vehicle.
In states that do not require a certificate of title for registration of a motor
vehicle, re-registration could defeat perfection. In the ordinary course of
servicing Motor Vehicle Loans, the Servicer takes steps to effect re-perfection
upon receipt of notice of re-registration or information from the Obligor of a
relocation. However, there is a risk that an Obligor could relocate without
notification to the Servicer, then file a false affidavit with the new state to
cause a new certificate of title to be issued without notation of the Seller's
lien.
Under the laws of Washington, Utah, Idaho and many other states, certain
possessory liens for repairs performed on or storage of a motor vehicle and
liens for unpaid taxes may take priority over a perfected security interest in
the motor vehicle. The Code also grants priority to certain Federal tax liens
over the lien of a secured party. The laws of certain states and Federal law
permit the confiscation of motor vehicles under certain circumstances if used in
unlawful activities, which may result in a loss of a secured party's perfected
security interest in the confiscated motor vehicle. For each Trust, the Seller
will warrant in the related Agreement that, as of the Closing Date, the Seller
has not taken any action which would have a material and adverse effect on the
interests of the related Trust and Certificateholders. If the Seller takes any
such action, the Seller will be required to repurchase the Receivable secured by
the Financed Vehicle involved. This repurchase obligation will constitute the
sole remedy available to the related Trust and 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 Washington, Utah and Idaho) require that the Obligor be notified of the
default and be given a time period within which he may cure the default prior to
repossession, except such notice need not be given in emergency situations
pursuant to an order from the appropriate state court.
Notice of Sale; Redemption Rights
The UCC and other state laws require the secured party to provide an Obligor
with reasonable notice of the date, time and place of any public sale and/or the
date after which any private sale of the collateral may be held. The Obligor
generally has the right to redeem the collateral prior to actual sale by paying
the secured party the unpaid principal balance of the obligation plus accrued
and unpaid interest and, in most cases, reasonable expenses for repossessing,
holding and preparing the collateral for disposition and arranging for its sale
plus, in some jurisdictions, reasonable attorneys' fees. In some states (but not
Washington, Utah and Idaho), the Obligor has the right, prior to actual sale, to
reinstatement of the original loan terms and to return of the collateral by
payment of delinquent installments of the unpaid balance.
Deficiency Judgments and Excess Proceeds
The proceeds of resale of Financed Vehicles generally will be applied first to
the expenses of repossession and resale and then to the satisfaction of the
indebtedness on the related Receivable. While some states impose prohibitions or
limitations on deficiency judgments if the net proceeds from resale do not cover
the full amount of the indebtedness, a deficiency judgment can be sought in
Utah, Idaho and other states that do not prohibit or limit such judgments
(assuming proper notice of sale has been given and the sale has been conducted
in a commercially reasonable manner and otherwise in compliance with applicable
UCC provisions). Although a deficiency judgment can be sought in Washington,
deficiency judgments are limited to the extent (i) the agreement so provides and
(ii) the collateral is chattel paper or accounts. Any such deficiency judgment
would be a personal judgment against the Obligor for the shortfall,
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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 most states.
Although the Bank is not a seller of motor vehicles and is not subject to the
jurisdiction of the FTC, the loan agreements evidencing the Receivables contain
provisions which contractually apply the FTC Rule. Accordingly, the Bank, and
each Trust as a holder of Receivables, will be subject to claims or defenses, if
any, that the purchaser of a Financed Vehicle may assert against the seller of
such vehicle. In Washington, Utah and Idaho, such claims and defenses could also
arise under state "lemon laws," statutes governing the sale of "salvage"
vehicles, and other consumer protection laws. Other examples of such claims
include, but are not limited to, breach of implied UCC warranties and fraud.
Under the motor vehicle dealer licensing laws of most states, sellers of motor
vehicles are required to be licensed to sell such vehicles at retail sale. In
addition, with respect to used motor vehicles, the FTC's Rule on Sale of Used
Vehicles requires that all sellers of used motor vehicles prepare, complete and
display a "Buyer's Guide" which explains the warranty coverage of such vehicles.
Federal Odometer Regulations promulgated under the Motor Vehicle Information and
Cost Savings Act require that all sellers of used motor vehicles furnish a
written statement signed by the seller certifying the accuracy of the odometer
reading. If a seller is not properly licensed or if either a Buyer's Guide or
Odometer Disclosure Statement was not properly provided to the purchaser of a
Financed Vehicle, such purchaser may be able to assert a claim against the
seller of such vehicle. Although the Bank is not a seller of motor vehicles and
is not subject to those laws, a violation thereof may form the basis for a claim
or defense against the Bank or a Trust as a holder of the affected Receivable.
Courts have applied general equitable principles to secured parties pursuing
repossession or litigation involving deficiency balances. These equitable
principles may have the effect of relieving an Obligor from some or all of the
legal consequences of a default.
The Seller will warrant in each Agreement as to each Receivable conveyed by it
to the related Trust that such Receivable complied at the time it was originated
and as of the Closing Date in all material respects with all requirements of
applicable law. If, as of the Cutoff Date, an Obligor had a claim against such
Trust for violation of any law and such claim materially and adversely affects
that Trust's interest in a Receivable, such violation would create an obligation
of the Seller to repurchase the Receivable unless the breach was cured. This
repurchase
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obligation will constitute the sole remedy of the Trust, the related Trustee and
Certificateholders against the Seller in respect of any such uncured breach,
except with respect to the affected Seller's indemnity obligations under the
related 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 each Agreement
constitute a sale. FIRREA sets forth certain powers that the FDIC could exercise
if it were appointed as receiver for the Seller. Subject to clarification by
FDIC regulations or interpretations, it would appear from the positions taken by
the FDIC before and after the passage of FIRREA that the FDIC in its capacity as
receiver for the Seller would not interfere with the timely transfer to a Trust
of payments collected on the Receivables. To the extent that the Seller is
deemed to have granted a security interest in the Receivables to 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 such Trust with respect to the affected
Receivables should not be subject to recovery by the FDIC as receiver. If,
however, the FDIC were to assert a contrary position, such as by requiring the
Trustee, on behalf of the Trust, to establish its right to those payments by
submitting to and completing the administrative claims procedure established
under FIRREA, delays in distributions on the 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.
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 Trusts
In the opinion of Kirkland & Ellis, special tax counsel to the Seller, each
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 related Trust and paid directly its share of
reasonable expenses paid by that Trust.
Treatment of Certificate Owners' Interest in Trust Property
With respect to any Series of Certificates, each Certificate Owner could be
considered to own either (i) an undivided interest in a single debt obligation
held by the related 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
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in each of the Receivables and in the Yield Supplement Agreement and any other
Trust Property. Each 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 such 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 related Certificates,
and would increase or decrease to reflect prepayments at a faster or slower rate
than anticipated. The related 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 of any given Series will be treated as owning an interest in
each Receivable (and the proceeds thereof) held by the related Trust and an
interest in the related Yield Supplement Agreement and other Trust Property of
such Trust.
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 "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 will 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 such Receivables will
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 will 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.
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A Class A Certificate Owner will 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, will 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 will 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 of any given Series 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) by 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.
Discount and Premium
In determining whether a Certificate Owner has purchased its interest in the
Receivables (or any Receivable) held by the related Trust 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.
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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 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
of a particular Trust 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.
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SUPPLEMENTED RECEIVABLES. The Supplemented Receivables will not be treated as
stripped bonds. A portion of the Certificate Owner's purchase price for a
Certificate will be allocated to each Supplemented Receivable, based on its fair
market value 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.
In general, under the market discount provisions of the Code, principal payments
received by a 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. It is also 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. 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.
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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 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 such 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 Basic 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
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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 Yield Supplement Agreement decline during any period by reason of
prepayments on the 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
With respect to any Series of Certificates, 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 related 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 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 held by any Trust 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 pursuant to any
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.
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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% (or such other level as
may be applicable under then current law) 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
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 any Series of Certificates by a Plan might result in the assets
of the related Trust being deemed to constitute Plan assets, which in turn might
mean that certain aspects of such investment, including the operation of such
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 any Certificates are deemed to own an interest in the underlying
assets of the related 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 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.
Unless otherwise provided in the Prospectus Supplement, the DOL has granted an
administrative exemption (each, an "EXEMPTION") to the underwriter(s) specified
in the related Prospectus Supplement, exempting 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
applicable 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 the underwriter specified in the Prospectus Supplement, 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;
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(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 related 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 related 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 the underwriter
specified in the related prospectus supplement 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 related 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 of 1933, as amended (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 related 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 fourth general
condition set forth above. The Seller and the Servicer expect that the fifth
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 and sixth general
conditions set forth above will be satisfied with respect to the Class A
Certificates.
In addition the related Trust must satisfy the following requirements:
(a) the corpus of such 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 investment 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 underwriter specified in the related Prospectus Supplement and a Plan other
than an Excluded Plan when
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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 related 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 related Trust. Each Agreement is a pooling
and servicing agreement as defined in the Exemption. All transactions relating
to the servicing, management and operations of each Trust will be carried out in
accordance with the related 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.
Plan of Distribution
Subject to the terms and conditions set forth in an underwriting agreement
relating to any Series of Certificates (an "UNDERWRITING AGREEMENT"), the Seller
will agree to sell to each of the underwriters named therein and in the related
Prospectus Supplement, and each of such underwriters will severally agree to
purchase from the Seller, the principal amount of Class A Certificates and Class
B Certificates set forth therein and in the related Prospectus Supplement
(subject to proportional adjustment on the terms and conditions set forth in the
related Underwriting Agreement (if any) in the event of an increase or decrease
in the aggregate amount of Class A Certificates and Class B Certificates offered
hereby and by the related Prospectus Supplement).
In each Underwriting Agreement, the several underwriters will agree, subject to
the terms and conditions set forth therein, to purchase all the Class A
Certificates and Class B Certificates offered hereby and by the related
Prospectus Supplement if any of such Class A Certificates and Class B
Certificates are purchased. In the event of a default by any underwriter, each
Underwriting Agreement will provide that, in certain circumstances, purchase
commitments of the nondefaulting underwriters may be increased or the
Underwriting Agreement may be terminated.
Each Prospectus Supplement will set forth the prices at which the Class A
Certificates and Class B Certificates being offered thereby initially will be
offered to the public and any concessions that may be offered to certain dealers
participating in the offering of such Certificates. After the initial public
offering, the public offering price and such concessions may be changed.
Each Underwriting Agreement will provide that the Seller will indemnify the
related underwriters against certain liabilities, including liabilities under
the Securities Act.
The place and time of delivery for the Certificates in respect of which this
Prospectus is being delivered will be set forth in the accompanying Prospectus
Supplement.
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Legal Matters
Certain legal matters will be passed upon for the Seller by Ray, Quinney &
Nebeker, Salt Lake City, Utah and for the Underwriters by Kirkland & Ellis.
Certain federal income tax and other matters will be passed upon for the Seller
by Kirkland & Ellis. Certain Idaho state tax and other matters will be passed
upon for the Seller by Moffatt, Thomas, Barrett, Rock & Fields. Alonzo W.
Watson, a shareholder and director of Ray, Quinney & Nebeker, is also an officer
of First Security Corporation. A daughter of the chief executive officer of
First Security Corporation is a shareholder and director of Ray, Quinney &
Nebeker.
Where You Can Find More Information
We filed a registration statement relating to the Certificates with the SEC.
This Prospectus is part of the registration statement, but the registration
statement includes additional information.
The Servicer will file with the SEC all required annual, monthly and special SEC
reports and other information about the Trust.
You may read and copy any reports, statements or other information we file at
the SEC's public reference room in Washington, D.C., New York, New York or
Chicago, Illinois. You can request copies of these documents, upon payment of a
duplicating fee, by writing to the SEC. Please call the SEC at (800) SEC-0330
for further information on the operation of the public reference rooms. Our SEC
filings are also available to the public over the Internet at the SEC web site
(http://www.sec.gov.).
The SEC allows us to "incorporate by reference" information we file with it,
which means that we can disclose important information to you by referring you
to those documents. The information incorporated by reference is considered to
be part of this Prospectus. Information that we file later with the SEC will
automatically update the information in this Prospectus. In all cases, you
should rely on the later information over different information included in this
Prospectus or the accompanying Prospectus Supplement.
As a recipient of this Prospectus, you may request a copy of any document we
incorporate by reference, except exhibits to the documents (unless the exhibits
are specifically incorporated by reference), at no cost, by writing or calling
us at: 801-246-5976.
57
<PAGE>
Index of Terms
<TABLE>
<CAPTION>
Page
---
<S> <C>
Accounts.................................................................................................... 28
Advance..................................................................................................... 30
Aggregate Net Losses........................................................................................ 32
Agreement................................................................................................... 21
Available Interest.......................................................................................... 34
Available Principal......................................................................................... 34
Available Reserve Amount.................................................................................... 32
Average Delinquency Ratio................................................................................... 32
Average Net Loss Ratio...................................................................................... 33
Bank........................................................................................................ 20
Basic Reserve Account Percentage............................................................................ 33
Basic Servicing Fee......................................................................................... 30
Basic Servicing Fee Rate.................................................................................... 30
Cede........................................................................................................ 22
Cedel....................................................................................................... 23
Cedel Participants.......................................................................................... 23
Certificate Account......................................................................................... 28
Certificateholders.......................................................................................... 21
Certificates................................................................................................ 21
Class A Certificate Balance................................................................................. 35
Class A Certificateholders.................................................................................. 21
Class A Certificates........................................................................................ 21
Class A Distribution Account................................................................................ 28
Class A Interest Carryover Shortfall........................................................................ 36
Class A Interest Distribution............................................................................... 36
Class A Monthly Interest.................................................................................... 36
Class A Monthly Principal................................................................................... 36
Class A Percentage.......................................................................................... 21
Class A Pool Factor......................................................................................... 20
Class A Principal Carryover Shortfall....................................................................... 36
Class A Principal Distribution.............................................................................. 36
Class B Certificate Balance................................................................................. 36
Class B Certificateholders.................................................................................. 21
Class B Certificates........................................................................................ 21
Class B Distribution Account................................................................................ 28
Class B Interest Carryover Shortfall........................................................................ 36
Class B Interest Distribution............................................................................... 36
Class B Monthly Interest.................................................................................... 36
Class B Monthly Principal................................................................................... 37
Class B Percentage.......................................................................................... 21
Class B Pool Factor......................................................................................... 20
Class B Principal Carryover Shortfall....................................................................... 37
Class B Principal Distribution.............................................................................. 37
Closing Date................................................................................................ 20
Code........................................................................................................ 47
Collateral Agent............................................................................................ 5
Collection Period........................................................................................... 37
Collections................................................................................................. 35
</TABLE>
58
<PAGE>
<TABLE>
<S> <C>
Cooperative................................................................................................. 23
Credit Deferral............................................................................................. 27
Custodian................................................................................................... 15
Cutoff Date................................................................................................. 15
Dealer...................................................................................................... 15
Dealer Agreements........................................................................................... 15
Default Trigger............................................................................................. 33
Defaulted Receivable........................................................................................ 33
Definitive Certificates..................................................................................... 24
Delinquency Ratio........................................................................................... 33
Delinquency Trigger......................................................................................... 33
Deposit Date................................................................................................ 37
Depositaries................................................................................................ 22
Depository.................................................................................................. 21
Determination Date.......................................................................................... 37
direct recourse............................................................................................. 17
Distribution Date........................................................................................... 37
DOL......................................................................................................... 54
DTC......................................................................................................... 22
Eligible Bank............................................................................................... 28
Eligible Deposit Account.................................................................................... 28
Eligible Investments........................................................................................ 28
Eligible Servicer........................................................................................... 40
ERISA....................................................................................................... 9
Euroclear................................................................................................... 23
Euroclear Operator.......................................................................................... 23
Euroclear Participants...................................................................................... 23
Events of Servicing Termination............................................................................. 39
Exemption................................................................................................... 54
FDIA........................................................................................................ 11
FDIC........................................................................................................ 11
Final Scheduled Distribution Date........................................................................... 11
Financed Vehicles........................................................................................... 15
FIRREA...................................................................................................... 11
FTC Rule.................................................................................................... 46
Full Payoff Amount.......................................................................................... 33
Holders..................................................................................................... 24
Indirect Participants....................................................................................... 22
Interest Accrual Date....................................................................................... 37
Interest Collections........................................................................................ 35
IRS......................................................................................................... 47
Issuer...................................................................................................... 5
Liquidation Proceeds........................................................................................ 33
Moody's..................................................................................................... 28
Motor Vehicle Loans......................................................................................... 16
Net Loss Ratio.............................................................................................. 33
Obligor..................................................................................................... 15
OID......................................................................................................... 48
OID Regulations............................................................................................. 50
Optional Payment Deferral................................................................................... 27
Original Certificate Balance................................................................................ 21
Original Class A Certificate Balance........................................................................ 21
</TABLE>
59
<PAGE>
<TABLE>
<S> <C>
Original Class B Certificate Balance........................................................................ 21
Original Pool Balance....................................................................................... 21
Outstanding Advances........................................................................................ 31
Participants................................................................................................ 22
Plan........................................................................................................ 54
Pool Balance................................................................................................ 21
Prepayment Assumption....................................................................................... 48
Prospectus Supplement....................................................................................... 2
Purchase Amount............................................................................................. 27
Purchase Price.............................................................................................. 49
Purchased Receivable........................................................................................ 35
Rating Agency............................................................................................... 28
Realized Losses............................................................................................. 37
Receivable File............................................................................................. 26
Receivables................................................................................................. 15
Record Date................................................................................................. 37
Recoveries.................................................................................................. 33
Regulation.................................................................................................. 54
Reserve Account............................................................................................. 7
Reserve Account Floor Amount................................................................................ 33
Reserve Account Increase Percentage......................................................................... 34
Reserve Account Initial Deposit............................................................................. 7
Reserve Account Trigger Starting Date....................................................................... 34
Restricted Group............................................................................................ 57
Retained Yield.............................................................................................. 48
Rules....................................................................................................... 23
S&P......................................................................................................... 28
Schedule of Receivables..................................................................................... 25
Section 1286 Regulations.................................................................................... 49
Securities Act.............................................................................................. 55
Seller...................................................................................................... 5
Series...................................................................................................... 5
Servicer.................................................................................................... 5
Servicer's Certificate...................................................................................... 34
Shortfall Amount............................................................................................ 13
Specified Reserve Account Balance........................................................................... 32
Specified Yield Supplement Balance.......................................................................... 31
stripped bonds.............................................................................................. 48
stripped coupons............................................................................................ 48
Stripped Receivable......................................................................................... 48
Supplemental Servicing Fee.................................................................................. 30
Supplemented Receivables.................................................................................... 48
Terms and Conditions........................................................................................ 24
Trust....................................................................................................... 15
Trust Property.............................................................................................. 15
Trustee..................................................................................................... 5
UCC......................................................................................................... 11
Underwriting Agreement...................................................................................... 56
Yield Supplement Account.................................................................................... 31
Yield Supplement Agreement.................................................................................. 31
Yield Supplement Amount..................................................................................... 31
Yield Supplement Initial Deposit............................................................................ 8
</TABLE>
60
<PAGE>
THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT IS NOT COMPLETE AND MAY BE
CHANGED. WE MAY NOT SELL THESE NOTES UNTIL THE REGISTRATION STATEMENT FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS SUPPLEMENT
IS NOT AN OFFER TO SELL THESE NOTES AND IT IS NOT SOLICITING AN OFFER TO BUY
THESE NOTES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED JANUARY 20, 1999
[LOGO]
FIRST SECURITY AUTO OWNER TRUST ____-____
ASSET BACKED NOTES
FIRST SECURITY BANK-REGISTERED TRADEMARK-, N.A.
SELLER AND SERVICER
CONSIDER CAREFULLY THE RISK FACTORS ON PAGE IN THIS
PROSPECTUS SUPPLEMENT AND THE RISK FACTORS BEGINNING ON PAGE
IN THE PROSPECTUS.
The Notes represent obligations of the Trust only and do not
represent obligations of or interests in, and are not
guaranteed by, First Security Bank-Registered Trademark-,
N.A. or any of its affiliates.
This Prospectus Supplement may be used to offer and sell the
Notes only if accompanied by the Prospectus.
THE NOTES
The Trust will sell pursuant hereto the following Notes:
<TABLE>
<CAPTION>
CLASS A NOTES
------------------------------------------------
A-1 NOTES A-2 NOTES A-3 NOTES
<S> <C> <C> <C>
Initial Principal Amount
Interest Rate
Final Scheduled Distribution Date
Price to Public(1)
Underwriting Discount(2)
Proceeds to Seller(3)
</TABLE>
(1) Plus accrued interest, if any, from ______________. Total price to public
(excluding such interest) = $______________
(2) Total underwriting discount = $_________
(3) Before deducting expenses payable by the Seller, estimated to be $________.
Total proceeds to the Seller = $______________
- - Principal and interest on all Notes will be payable on each monthly
Distribution Date. The first Distribution Date will be _______________.
CREDIT ENHANCEMENT
- The Trust will also issue Class B ___% Notes in the aggregate principal
amount of $______________, all of which will be initially held by the
Seller. The Class B Notes are subordinated to the Class A Notes as
described herein.
- Reserve Account, with an initial balance of $_____________.
NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED THESE
SECURITIES OR DETERMINED THAT THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS
IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
________________
__________________
__________________
(Date)
<PAGE>
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS
We tell you about the Notes in two separate documents that progressively provide
more detail: (a) the accompanying Prospectus, which provides general
information, some of which may not apply to the Notes, and (b) this Prospectus
Supplement, which describes the specific terms of your Notes.
If the terms of the Notes vary between this Prospectus Supplement and the
Prospectus, you should rely on the information in this Prospectus Supplement.
You should rely only on the information provided in this Prospectus Supplement
and the accompanying Prospectus, including the information incorporated by
reference. We have not authorized anyone to provide you with other or different
information. We are not offering the Notes in any jurisdiction where the offer
is not permitted. We do not claim the accuracy of the information in this
Prospectus Supplement or the accompanying Prospectus as of any date other than
the dates stated on their respective covers.
We include cross-references in this Prospectus Supplement and in the
accompanying Prospectus to captions in these materials where you can find
further related discussions. The following Table of Contents and the Table of
Contents included in the accompanying Prospectus provide the pages on which
these captions are located.
You can find a listing of the pages where capitalized terms used in this
Prospectus Supplement are defined under the caption "Index of Terms for
Prospectus Supplement" beginning on page 29 in this Prospectus Supplement and
under the caption "Index of Terms for Prospectus" beginning on page __ in the
accompanying Prospectus.
------------------------
i
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SUMMARY OF TERMS.......................................................... S-1
The Parties............................................................. S-1
The Securities.......................................................... S-1
Credit Enhancement...................................................... S-4
Trust Property.......................................................... S-5
The Receivables......................................................... S-5
Collection Account; Priority of Distributions........................... S-6
Tax Status.............................................................. S-6
ERISA Considerations.................................................... S-6
Legal Investment........................................................ S-6
RISK FACTORS.............................................................. S-7
Lack of Geographic Diversification...................................... S-7
THE TRUST................................................................. S-8
Capitalization of the Trust............................................. S-8
The Owner Trustee....................................................... S-8
DELINQUENCY AND LOSS EXPERIENCE OF SELLER................................. S-9
Delinquency Experience.................................................. S-9
Credit Loss/Repossession Experience..................................... S-9
THE RECEIVABLES POOL...................................................... S-10
The Receivables......................................................... S-10
Certain Characteristics................................................. S-10
Composition of the Receivables.......................................... S-10
Distribution by Contract Rate of the Receivables........................ S-11
Distribution by Remaining Term of the Receivables....................... S-11
Geographic Distribution of the Receivables.............................. S-12
Payments on the Receivables............................................. S-12
Weighted Average Life of the Notes...................................... S-12
<CAPTION>
PAGE
----
<S> <C>
THE NOTES................................................................. S-16
General................................................................. S-16
Payments of Interest.................................................... S-16
Payments of Principal................................................... S-17
Monthly Dates........................................................... S-17
Redemption.............................................................. S-18
Parity and Priority of Notes............................................ S-18
Voting Rights........................................................... S-18
THE TRANSFER AND SERVICING AGREEMENTS..................................... S-18
Distributions........................................................... S-18
Servicing Compensation.................................................. S-22
Advances................................................................ S-22
Reserve Account......................................................... S-22
CERTAIN FEDERAL INCOME TAX CONSEQUENCES................................... S-23
Characterization as Debt................................................ S-24
Characterization of the Trust........................................... S-24
Interest Income to Noteholders.......................................... S-24
Original Issue Discount................................................. S-24
Disposition of Notes.................................................... S-25
Information Reporting and Backup Withholding............................ S-25
Certain Tax Consequences to Foreign Noteholders......................... S-25
STATE AND LOCAL TAX CONSEQUENCES.......................................... S-26
ERISA CONSIDERATIONS...................................................... S-26
UNDERWRITING.............................................................. S-27
LEGAL OPINIONS............................................................ S-28
</TABLE>
ii
<PAGE>
SUMMARY OF TERMS
- This summary highlights selected information from this document and does
not contain all of the information that you need to consider in making
your investment decision. To understand all of the terms of our offering
of the Notes, we urge you to read carefully this entire document and the
accompanying Prospectus, including the information under "Risk Factors" in
both as well.
- This summary provides an overview of certain calculations, cash flows and
other information to aid your understanding and is qualified by the full
description of these calculations, cash flows and other information in
this Prospectus Supplement and the accompanying Prospectus.
THE PARTIES
<TABLE>
<S> <C>
Issuer....................... First Security Auto Owner Trust -, a Delaware business
trust.
Seller and Servicer.......... First Security Bank-Registered Trademark-, N.A. will be the
Seller and the Servicer.
Indenture Trustee............ .
Owner Trustee................ .
</TABLE>
<TABLE>
<S> <C>
THE SECURITIES THE NOTES
The Trust will issue the following Notes:
- Class A Notes
- Class A-1 % Asset Backed Notes in the aggregate
principal amount of $;
- Class A-2 % Asset Backed Notes in the aggregate
principal amount of $; and
- Class A-3 % Asset Backed Notes in the aggregate
principal amount of $.
- Class B % Asset Backed Notes in the aggregate principal
amount of $.
All of the Class B Notes will be initially held by the
Seller and are not offered hereby.
The Notes will have the benefit of the Credit Enhancements
described below.
RATINGS OF THE NOTES
We will not issue the Notes unless (1) the Class A-1 Notes
are rated in the highest short-term rating category, (2) the
Class A-2 Notes and the Class A-3 Notes are rated in the
highest long-term rating category and (3) the Class B Notes
are rated at least investment grade, in each case by at
least two nationally recognized statistical rating agencies
(the "RATING AGENCIES"). After the Notes are issued, any
ratings may be lowered or withdrawn by the applicable Rating
Agency.
</TABLE>
S-1
<PAGE>
<TABLE>
<S> <C>
CLOSING DATE
The purchase of the Receivables and the issuance of the
Notes will take place on .
DISTRIBUTION DATES
The 15th day of each calendar month (or, if not a Business
Day, the next Business Day), beginning with .
INTEREST PAYMENTS
- The interest rate for each Class of Notes is the fixed
rate as specified on the cover page of this Prospectus
Supplement. Interest will be payable on all Notes on each
Distribution Date.
- Interest on the Class A-1 Notes and the Class A-2 Notes
will be calculated on the basis of the actual number of days
elapsed from the last Distribution Date and a 360-day
year.
- Interest on the Class A-3 Notes and the Class B Notes will
be calculated on the basis of a 360-day year of twelve
30-day months.
- Payments of interest on the Class B Notes are subordinated
to interest payments on the Class A Notes.
- On any Distribution Date, interest on the Class B
Notes will not be paid until all accrued and unpaid
interest on the Class A Notes has been paid in full.
- After an acceleration of the Notes following an Event
of Default or if any Notes remain outstanding following
the applicable Final Scheduled Distribution Date, no
interest will be paid on the Class B Notes until all
principal and interest on the Class A Notes has been
paid in full.
PRINCIPAL PAYMENTS
- Principal on the Notes will be payable on each
Distribution Date in an aggregate amount based on the amount
of principal collected on the Receivables during the
related Collection Period:
- first, 100% to the Class A Notes, sequentially, so
that no principal will be paid on any class of Class A
Notes until each class of Class A Notes with a lower
numerical designation has been paid in full (e.g., no
principal will be paid on the Class A-2 Notes until
the Class A-1 Notes have been paid in full and no
principal will be paid on the Class A-3 Notes until
the Class A-1 Notes and the Class A-2 Notes have been
paid in full) until all off the Class A Notes have
been paid in full; and
- second, 100% to the Class B Notes until paid in full.
</TABLE>
S-2
<PAGE>
<TABLE>
<S> <C>
- After an acceleration of the Notes following an Event of
Default or if any Notes remain outstanding following the
applicable Final Scheduled Distribution Date, in lieu of
the above, principal payments will be made as follows:
- first, to the Class A Noteholders ratably according to
the amount due and payable on each class until all the
Class A Notes have been paid in full; and
- second, to the Class B Noteholders until the Class B
Notes have been paid in full.
- After an acceleration of the Notes following an Event of
Default or if any Notes remain outstanding following the
applicable Final Scheduled Distribution Date, any amounts
otherwise payable as interest on the Class B Notes will be
available to make payments of principal on the Class A
Notes.
FINAL SCHEDULED DISTRIBUTION DATES
The outstanding principal amount, if any, of each class of
Notes will be payable in full on the date set forth below.
We refer to each such date as a "FINAL SCHEDULED
DISTRIBUTION DATE". If any class of Notes is not repaid in
full on or prior to the applicable Final Scheduled
Distribution Date, an Event of Default will occur. In
addition, in such event, no interest or principal will be
paid as to the Class B Notes until all interest and
principal has been paid on the Class A Notes.
</TABLE>
<TABLE>
<CAPTION>
Final Scheduled
Notes Distribution Date
--------------------------- ---------------------------
<S> <C> <C>
Class A-1
Class A-2
Class A-3
Class B
</TABLE>
<TABLE>
<S> <C>
REDEMPTION
The Class A-3 Notes and the Class B Notes will be redeemed
in whole on any Distribution Date if the Servicer exercises
its option to purchase from the Trust the Receivables and
other Trust Property. The Servicer may exercise this option
only if:
- the Aggregate Receivables Balance declines to 10% or less
of the Aggregate Starting Receivables Balance;
- the aggregate of the Repurchase Amount of the Receivables
(other than Liquidating Receivables) is greater than or
equal to the sum of the outstanding principal balance of
all Notes, plus accrued and unpaid interest thereon; and
- the Class A-1 Notes and the Class A-2 Notes have been paid
in full.
The redemption price will be equal to the unpaid principal
amount of such Class A-3 Notes and Class B Notes, plus
accrued and unpaid interest thereon.
</TABLE>
S-3
<PAGE>
<TABLE>
<S> <C>
VOTING RIGHTS
If the Prospectus specifies certain circumstances under
which a specified percentage in principal amount of the
outstanding Notes must consent, approve, direct or request
an action, such action shall be valid only if all
outstanding Class A Notes (or, in the event no Class A Notes
are outstanding, all outstanding Class B Notes) voting as a
single class have voted to give such consent, approval,
direction, request or notice, or take such action.
Any Notes held by the Seller will not be deemed to be
outstanding and shall be disregarded when a vote is taken.
CREDIT ENHANCEMENT SUBORDINATION
The Class B Notes are subordinated to the Class A Notes.
This provides additional credit enhancement for the Class A
Notes.
- No interest will be paid on the Class B Notes on any
Distribution Date until all accrued and unpaid interest on
the Class A Notes has been paid in full.
- No principal will be paid on the Class B Notes on any
Distribution Date until all principal owed on all the Class
A Notes has been paid in full.
- After an acceleration of the Notes following an Event of
Default or if any of the Notes remain outstanding on and
after the applicable Final Scheduled Distribution Date, no
principal or interest will be paid on the Class B Notes
until all principal and interest owed on the Class A Notes
has been paid in full. In addition, in such event, amounts
otherwise payable as interest on the Class B Notes will be
available to make payments of principal on the Class A
Notes.
RESERVE ACCOUNT
Funds on deposit in the Reserve Account will be available on
each Distribution Date to cover shortfalls in distributions
of interest and principal on the Notes due to delinquencies
and defaults on the Receivables. Amounts in the Reserve
Account will also be available to pay servicing fees.
The Reserve Account will be funded as follows:
- On the Closing Date, the Seller will deposit the Reserve
Account Initial Deposit of $ into the Reserve Account.
- On each Distribution Date, any collections on the
Receivables remaining after providing for all required
payments to holders of the Notes, the payment of the Total
Servicing Fee and reimbursement of Outstanding Advances
will be deposited in the Reserve Account.
On each Distribution Date, any amount in the Reserve Account
in excess of the Specified Reserve Account Balance will be
paid to the Certificateholders (which will initially be the
Seller). The Noteholders will have no further rights to any
amounts paid to the Certificateholders from the Reserve
Account.
</TABLE>
S-4
<PAGE>
<TABLE>
<S> <C>
The "SPECIFIED RESERVE ACCOUNT BALANCE" for any Distribution
Date will equal % of the Aggregate Receivables Balance as of
the last day of the related Collection Period. However, the
Specified Reserve Account Balance will be calculated as % of
the Aggregate Receivables Balance for any Distribution Date
(beginning on ) on which the Average Net Loss Ratio exceeds
% or the Average Delinquency Ratio exceeds %. In no event
will the Specified Reserve Account Balance be less than the
lesser of (i) $ and (ii) the aggregate outstanding principal
amount of the Notes. We may change this definition without
your consent so long as the change does not cause the
ratings of the Notes to be reduced or withdrawn.
TRUST PROPERTY The primary assets of the Trust will be the Receivables,
which are a pool of fixed rate retail motor vehicle
installment sales contracts and installment loans made by
the Seller or through a Dealer that sold a motor vehicle.
The Receivables in the Trust will be sold by the Seller to
the Trust. The Trust Property will also include:
- All monies due or received under the Receivables after the
Cutoff Date;
- A security or ownership interest in the new and used
automobiles and lights trucks financed by the Receivables;
- Any proceeds from claims on certain related insurance
policies or from Obligors under the Receivables;
- Amounts on deposit in the Trust Accounts, including the
Reserve Account;
- Certain rights of the Seller relating to Receivables from
agreements between the Seller and the Dealers that sold the
Financed Vehicles and related documents; and
- All rights of the Trust under the Sale and Servicing
Agreement.
The Trust Property will be assigned by the Trust to the
Indenture Trustee for the benefit of the Noteholders to the
extent provided in the Indenture and the Certificateholders.
THE RECEIVABLES On the Closing Date, the Trust will acquire Receivables with
an Aggregate Starting Receivables Balance of approximately $
as of the Cutoff Date. As of the Cutoff Date:
- the weighted average Contract Rate of the Receivables is
approximately %,
- the weighted average remaining term (i.e., the period from
but excluding the Cutoff Date to and including each
Receivable's maturity date) of the Receivables is
approximately months, and
- the weighted average original term of the Receivables is
approximately months.
No Receivable has a scheduled maturity later than the date
that is six months prior to the Final Scheduled Distribution
Date for the Class B Notes.
</TABLE>
S-5
<PAGE>
<TABLE>
<S> <C>
COLLECTION ACCOUNT; PRIORITY Payments received on the Receivables will deposited in the
OF DISTRIBUTIONS Collection Account until paid to the Noteholders or
otherwise applied by the Trust. On each Distribution Date,
funds on deposit in the Collection Account relating to the
prior Collection Period will be applied to the following (in
the priority indicated but subject to the subordination
provisions described above):
(i) reimbursement of Outstanding Advances;
(ii) the Total Servicing Fee;
(iii) accrued and unpaid interest on the Class A Notes;
(iv) accrued and unpaid interest on the Class B Notes;
(v) principal on the Notes; and
(vi) the remaining balance, if any, to be deposited in the
Reserve Account.
Funds on deposit in the Reserve Account will also be
available as described herein.
TAX STATUS As described below under "Certain Federal Income Tax
Consequences," Kirkland & Ellis, special Federal tax counsel
to the Seller, will opine that for Federal income tax
purposes the Class A Notes will be characterized as debt and
the Trust will not be characterized as an association (or
publicly traded partnership) taxable as a corporation. See
"Certain Federal Income Tax Consequences" herein for
additional information concerning the application of Federal
tax laws to the Trust and the Class A Notes. See also "State
and Local Tax Consequences."
ERISA CONSIDERATIONS Subject to the considerations discussed under "ERISA
Considerations," the Class A Notes are eligible for purchase
by employee benefit plans. See "ERISA Considerations" herein
and "ERISA Considerations" in the Prospectus.
LEGAL INVESTMENT The Class A-1 Notes will be eligible securities for purchase
by money market funds under paragraph (a)(9) of Rule 2a-7
under the Investment Company Act of 1940, as amended.
</TABLE>
S-6
<PAGE>
RISK FACTORS
IN ADDITION TO THE OTHER INFORMATION CONTAINED IN THIS PROSPECTUS SUPPLEMENT,
YOU SHOULD CONSIDER THE FOLLOWING RISK FACTOR AND THE RISK FACTORS SET FORTH IN
THE PROSPECTUS IN DECIDING WHETHER TO PURCHASE THE NOTES.
<TABLE>
<S> <C>
LACK OF GEOGRAPHIC Economic conditions in states where Obligors reside may
DIVERSIFICATION 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 %, % and % by Aggregate Receivables Balance of
the Receivables were located in Washington, Utah and Idaho,
respectively. Adverse economic conditions in Washington,
Utah and/or Idaho, or that area of the country generally,
may have a disproportionate impact on the performance of the
Receivables. Economic factors such as unemployment, interest
rates, the rate of inflation and consumer perceptions may
affect the rate of prepayment and defaults on the
Receivables and could reduce or delay payments to you. See
"The Receivables Pool--Certain Geographic Distribution of
the Receivables."
</TABLE>
S-7
<PAGE>
THE TRUST
The Issuer, First Security Auto Owner Trust __-__ (the "TRUST"), is a business
trust formed under the laws of the State of Delaware pursuant to a Trust
Agreement dated as of the Closing Date between the Seller and the Owner Trustee,
acting thereunder not in its individual capacity but solely as trustee of the
Trust (as amended and supplemented from time to time, the "TRUST AGREEMENT").
After its formation, the Trust will not engage in any activities other than (i)
acquiring, holding and managing the Receivables and the other assets of the
Trust and proceeds therefrom, (ii) issuing the Notes, (iii) making payments on
the Notes and (iv) engaging in other activities that are necessary, suitable,
desirable or convenient to accomplish the foregoing or are incidental thereto or
connected therewith. The Trust will deliver the Securities to the Seller in
exchange for the Receivables and other assets pursuant to the Sale and Servicing
Agreement.
The Trust's principal offices are in ______________, Delaware, in care of
____________________________, as Owner Trustee, at the address listed in "--The
Owner Trustee" below.
CAPITALIZATION OF THE TRUST
The following table illustrates the capitalization of the Trust as of
as if the issuance and sale of the Notes offered hereby had taken
place on such date:
<TABLE>
<CAPTION>
<S> <C>
Class A-1 % Asset Backed Notes............................................. $
Class A-2 % Asset Backed Notes............................................. $
Class A-3 % Asset Backed Notes............................................. $
Class B % Asset Backed Notes............................................... $
-----------------
Total.................................................................... $
-----------------
-----------------
</TABLE>
The Trust will also issue Certificates. The Certificates represent the equity of
the Trust and will be issued pursuant to the Trust Agreement. The Class B Notes
and the Certificates will initially be held by the Seller and/or one or more of
its affiliates and are not offered hereby.
THE OWNER TRUSTEE
____________________________ is the Owner Trustee under the Trust Agreement.
____________________________ is a ____________________________ and its principal
offices are located at ____________________________________.
S-8
<PAGE>
DELINQUENCY AND LOSS EXPERIENCE OF SELLER
The tables set forth below indicate the delinquency and credit loss/repossession
experience for each of the last five calendar years of the Bank's entire
portfolio of Motor Vehicle Loans (including Motor Vehicle Loans that it
previously sold but continues to service). The tables include both Mother
Vehicle Loans originated directly by the Bank and through Dealers in a relative
proportion substantially similar to the Motor Vehicle Loans to be transferred to
the Trust. Fluctuations in delinquencies, repossessions and charge-offs
generally follow trends in the overall economic environment and may be affected
by such factors as increased competition for Obligors, rising consumer debt
burden per household and increases in personal bankruptcies.
No assurance can be made that the delinquency and loss experience for the Motor
Vehicle Loans as a whole or those transferred to the Trust will be similar to
the historical experience set forth below.
DELINQUENCY EXPERIENCE
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, AS OF DECEMBER 31,
1998 1997 1997 1996
---------------------- ---------------------- ---------------------- ----------------------
NUMBER OF NUMBER OF NUMBER OF NUMBER OF
LOANS AMOUNT LOANS AMOUNT LOANS AMOUNT LOANS AMOUNT
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Portfolio at Period End..... 288,900 $3,261,808 231,374 $2,402,246 242,396 $2,557,565 200,922 $1,979,782
Delinquency(1)
30-59 Days................ 3,869 $ 40,872 3,341 $ 33,377 3,557 $ 35,995 3,380 $ 31,646
60-89 Days................ 1,141 $ 12,728 807 $ 8,440 765 $ 8,035 1,209 $ 11,330
90 Days or More........... 638 $ 6,923 394 $ 4,320 444 $ 4,694 600 $ 5,947
Total Delinquencies......... 5,648 $ 60,522 4,542 $ 46,137 4,766 $ 48,724 5,189 $ 48,923
Total Delinquencies as
Percentage of the
Portfolio.................. 1.96% 1.86% 1.96% 1.92% 1.97% 1.91% 2.58% 2.47%
<CAPTION>
1995 1994
---------------------- ----------------------
NUMBER OF NUMBER OF
LOANS AMOUNT LOANS AMOUNT
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Portfolio at Period End..... 193,634 $1,824,411 197,996 $1,885,491
Delinquency(1)
30-59 Days................ 2,867 $ 24,914 2,345 $ 20,775
60-89 Days................ 557 $ 5,358 603 $ 5,839
90 Days or More........... 255 $ 2,462 273 $ 2,594
Total Delinquencies......... 3,679 $ 32,734 3,221 $ 29,208
Total Delinquencies as
Percentage of the
Portfolio.................. 1.90% 1.79% 1.63% 1.55%
</TABLE>
- ----------------------------------------
(1) The period of delinquency is based on the number of days payments are
contractually past due for all Motor Vehicle Loans other than Motor Vehicle
Loans previously charged off.
CREDIT LOSS/REPOSSESSION EXPERIENCE
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
---------------------- ----------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Portfolio Balance at Period End............. $3,261,808 $2,402,246 $2,557,565 $1,979,782 $1,824,411 $1,885,491 $1,409,268
Average Portfolio Balance during Period..... $2,886,636 $2,190,936 $2,270,731 $1,883,171 $1,850,693 $1,670,756 $1,237,865
Average Number of Loans Outstanding during
the Period................................. 264,609 216,426 222,092 195,749 195,834 180,660 147,126
Number of Repossessions during the Period... 4,579 3,666 4,967 4,198 4,153 3,528 2,583
Number of Repossessions as percentage of
Average Number of Loans Outstanding........ 2.31% 2.26% 2.24% 2.14% 2.12% 1.95% 1.76%
Gross Charge-offs(1)........................ $ 35,752 $ 29,691 $ 39,184 $ 29,488 25,644 17,354 11,631
Recoveries on Loans Previously Charged
Off(2)..................................... $ 13,812 $ 13,196 $ 16,901 $ 11,849 11,321 8,370 6,885
Net Charge-offs(3).......................... $ 21,940 $ 16,495 $ 22,283 $ 17,639 14,323 8,985 4,746
Net Charge-offs as a Percentage of Portfolio
Balance at Period End(4)................... 0.90% 0.92% 0.87% 0.89% 0.79% 0.48% 0.34%
Net Charge-offs as a Percentage of Average
Balance During Period(4)................... 1.01% 1.00% 0.98% 0.94% 0.77% 0.54% 0.38%
</TABLE>
- ------------------------------
(1) Gross Charge-offs are generally stated net of liquidation proceeds.
(2) Recoveries on Loans Previously Charged Off generally include amounts
received with respect to loans previously charged off, other than
liquidation proceeds, net of collection expenses. A portion of recoveries
has resulted from certain collection and recovery efforts used by the Bank
with respect to defaulted receivables acquired by the Bank from other
institutions as a result of mergers. Such defaulted receivables are not
being transferred to the Trust and such reported recoveries may not be
indicative of future results.
(3) Net Charge-offs equal Gross Charge-offs minus Recoveries on Loans Previously
Charged Off.
(4) Annualized.
S-9
<PAGE>
THE RECEIVABLES POOL
THE RECEIVABLES
Approximately ___% of the Aggregate Receivables Balance of Motor Vehicle Loans
were originated by the Seller through Dealers in the ordinary course of the
Seller's business and in accordance with Seller's underwriting standards; the
remainder of the Motor Vehicle Loans were made directly by the Seller to the
Obligors in accordance with the Seller's underwriting standards. The Seller will
warrant in the Agreement that all the Receivables have the following individual
characteristics, among others: (i) the obligation of the related Obligor under
each Receivable is secured by a security interest in either a new or used
automobile or light truck; (ii) each Receivable has a contractual interest rate
("CONTRACT RATE") of at least __% and not more than ___%; (iii) each Receivable
had a remaining maturity, as of the Cutoff Date, of not less than _ months and
not more than _ months; (iv) each Receivable had a remaining principal balance
of not less than $__ and not more than $____ as of the Cutoff Date; (v) no
Receivable was more than _ days past due as of the Cutoff Date; (vi) no Financed
Vehicle had been repossessed as of the Cutoff Date; (vii) each Receivable is a
Simple Interest Receivable (as described below); (viii) the Dealer of the
Financed Vehicle, if any, has no participation in, or other right to receive,
any proceeds of the Receivable and (ix) each Receivable was originated on or
after _______________. No procedures adverse to Noteholders were used by the
Seller in selecting the Receivables to be transferred to the Trust on the
Closing Date. All terms of the retail motor vehicle installment sale contracts
and installment loans constituting the Receivables which are material to the
Noteholders are described in the Prospectus.
CERTAIN CHARACTERISTICS
As of the Cutoff Date, approximately ___% of the Aggregate Receivables Balance
was attributable to loans for purchases of new Financed Vehicles and
approximately ___% of the Aggregate Receivables Balance was attributable to
loans for purchases of used Financed Vehicles.
The composition, distribution by Contract Rate and distribution by remaining
term of the Receivables as of the Cutoff Date are set forth in the following
tables. Due to rounding, the percentages shown in these tables may not add to
100.00%.
COMPOSITION OF THE RECEIVABLES
<TABLE>
<CAPTION>
WEIGHTED AVERAGE AGGREGATE NUMBER OF AVERAGE WEIGHTED WEIGHTED
CONTRACT RATE OF RECEIVABLES RECEIVABLES IN RECEIVABLE AVERAGE AVERAGE
RECEIVABLES BALANCES POOL BALANCE ORIGINAL TERM REMAINING TERM
- ----------------- ----------------- ----------------- ----------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
% $ $ mos. mos.
</TABLE>
S-10
<PAGE>
DISTRIBUTION BY CONTRACT RATE OF THE RECEIVABLES
<TABLE>
<CAPTION>
NUMBER OF RECEIVABLES PERCENTAGE OF AGGREGATE
CONTRACT RATE RANGE RECEIVABLES BALANCE RECEIVABLES BALANCE
- ----------------------------------------------------------- ----------- ------------------ -----------------------
<S> <C> <C> <C>
6.00-6.99%................................................. $
7.00-7.99%................................................. $
8.00-8.99%................................................. $
9.00-9.99%................................................. $
10.00-10.99%............................................... $
11.00-11.99%............................................... $
12.00-12.99%............................................... $
13.00-13.99%............................................... $
14.00-14.99%............................................... $
15.00-15.99%............................................... $
16.00-16.99%............................................... $
17.00-17.99%............................................... $
18.00-18.99%............................................... $
19.00-19,99%............................................... $
20.00-20.99%............................................... $
21.00-21.99%............................................... $
22.00-22.99%............................................... $
23.00-23.99%............................................... $
24.00-24.99%............................................... $
25.00-25.99%............................................... $
26.00-26.99%............................................... $
27.00-27.99%............................................... $
28.00-28.99%............................................... $
29.00%..................................................... $
----------- ------------------ -----
Total.................................................... $
----------- ------------------ -----
----------- ------------------ -----
</TABLE>
DISTRIBUTION BY REMAINING TERM OF THE RECEIVABLES
<TABLE>
<CAPTION>
NUMBER OF PERCENTAGE OF AGGREGATE
REMAINING TERM (MONTHS) RECEIVABLES RECEIVABLE BALANCE RECEIVABLES BALANCE
- ----------------------------------------------------------- ----------- ------------------ -----------------------
<S> <C> <C> <C>
6-12....................................................... $
13-24...................................................... $
25-36...................................................... $
37-48...................................................... $
49-60...................................................... $
61-65...................................................... $
----------- ------------------ -----
Total.................................................... $
----------- ------------------ -----
----------- ------------------ -----
</TABLE>
The following table sets forth the percentage of the Aggregate Receivables
Balance of the Receivables in the states with the largest concentration of
Receivables. No other state accounts for more than 1.0% of the Aggregate
Receivables Balance of the Receivables.
S-11
<PAGE>
GEOGRAPHIC DISTRIBUTION OF THE RECEIVABLES
<TABLE>
<CAPTION>
PERCENTAGE OF AGGREGATE
STATE RECEIVABLES BALANCE
- ------------------------------------------------------------------------ -----------------------
<S> <C>
Washington.............................................................. %
Utah.................................................................... %
Idaho................................................................... %
Nevada.................................................................. %
Oregon.................................................................. %
Montana................................................................. %
California.............................................................. %
Wyoming................................................................. %
</TABLE>
PAYMENTS ON THE RECEIVABLES
All Receivables provide for the allocation of payments according to the "Simple
Interest" method (each a "SIMPLE INTEREST RECEIVABLE"). A Simple Interest
Receivable provides for the amortization of the amount financed under the
Receivable over a series of fixed level months payments (except that the last
such payment may be different). However, each monthly payment consists of an
installment of interest which is calculated on the basis of the Receivable
Balance multiplied by the stated Contract Rate and further multiplied by the
period elapsed (as a fraction of a calendar year) since the preceding payment of
interest was made. As payments are received under a Simple Interest Receivable
the amount received is applied first to interest accrued and unpaid to the date
of payment and the balance is applied to reduce the unpaid Receivable Balance of
the Receivables. Accordingly, if an Obligor pays a fixed monthly installment
before its schedule date, the portion of the payment allocable to interest for
the period since the preceding payment was made will be less than it would have
been had the payment been made as scheduled, and the portion of the payment
applied to reduce the unpaid principal balance will be correspondingly greater,
thereby having the effect of a prepayment. Conversely, if an Obligor pays a
fixed monthly installment after its scheduled due date, the portion of the
payment allocable to interest for the period since the preceding payment was
made will be greater than it would have been had the payment been made as
scheduled, and the portion of the payment applied to reduce the unpaid principal
balance will be correspondingly less. In either case, the Obligor pays a fixed
monthly installment until the final scheduled payment date, at which time the
amount of the final installment is increased or decreased as necessary to repay
the Receivable Balance as of such date.
The Receivables are prepayable at any time. Prepayments may also result from
liquidations due to default, the receipt of monthly installments earlier than
the scheduled due dates for such installments, the receipt of proceedings from
credit life, disability, theft or physical damage, insurance, repurchases by the
Seller as a result of certain uncured breaches of the warranties made by it in
the Sale and Servicing Agreement with respect to the Receivables, purchases by
the Servicer as a result of certain uncured breaches of the covenants made by it
in the Sale and Servicing Agreement with respect to the Receivables, or the
Servicer exercising its option to purchase all of the remaining Receivables.
Prepayments on the Receivables may be influenced by a variety of economic,
social, and other factors, including decreases in interest rates and the fact
that an Obligor may not sell or transfer the Financed Vehicle securing a
Receivable without the consent of the Seller.
WEIGHTED AVERAGE LIFE OF THE NOTES
Prepayments on automotive receivables can be measured relative to a prepayment
standard or model. The model used in this Prospectus Supplement, the Absolute
Prepayment Model (the "MODEL"), is based on an assumed rate of prepayment (the
"ABS") each month relative to the original number of receivables in a pool of
receivables. The Model further assumes that all the receivables are the same
size and amortize at the same rate and that each receivable in each month of its
life will either be paid as scheduled or be prepaid in full. For example, in a
pool of receivables originally containing 10,000 receivables, a 1% ABS rate
means that 100 receivables prepay each month. ABS does not purport to be an
historical description of prepayment experience or a prediction of the
anticipated rate of prepayment of any pool of receivables, including the
Receivables.
S-12
<PAGE>
As the rate of payment of principal of each class of Notes will depend on the
rate of payment (including prepayments) of the principal balance of the
Receivables and the final payment in respect of any class of Notes could occur
significantly earlier than the respective Final Scheduled Distribution Dates.
Reinvestment risk associated with early payment of the Notes will be borne
exclusively by the Noteholders.
The table on the following pages captioned "Percent of Initial Principal Balance
at Various ABS Percentages" (the "ABS TABLE") has been prepared on the basis of
the characteristics of the Receivables, as described below. The ABS Table
assumes that (i) the Receivables prepay in full at the specified constant
percentage of ABS monthly, with no defaults, losses or repurchases, (ii) each
scheduled monthly payment on the Receivables is made on the last day of each
month and each month has 30 days, (iii) distributions on the Notes are made on
each Distribution Date (and each such date is assumed to be the fifteenth day of
each applicable month) and (iv) the Servicer does not exercise its option to
purchase the Receivables. The pool has an assumed cutoff date of
_______________. The ABS Table indicates the projected weighted average life of
each class of Notes and sets forth the percent of the initial principal balance
of each class of the Notes that is projected to be outstanding after payments
are made on each of the Distribution Dates shown at various constant ABS
percentages. The ABS Table also indicates the month in which the Servicer can
exercise its optional clean-up call and the associated projected average
weighted life.
The ABS Table also assumes that the Receivables have been aggregated into a
hypothetical pool, with all of the Receivables within the pool having the
following characteristics and that the level scheduled monthly payment (which is
based on its Aggregate Receivables Balance, annual percentage rate ("APR"),
original term to maturity and remaining term to maturity as of the Cutoff Date)
will be such that the pool will be fully amortized by the end of its remaining
term to maturity.
<TABLE>
<CAPTION>
AGGREGATE
RECEIVABLES ORIGINAL TERM TO REMAINING TERM TO
BALANCE APR MATURITY (MOS.) MATURITY (MOS.)
- ------------------ --------- --------------------- ---------------------
<S> <C> <C> <C>
$
</TABLE>
The actual characteristics and performance of the Receivables will differ from
the assumptions used in constructing the ABS Table. The assumptions used are
hypothetical and have been provided only to give a general sense of how the
principal cash flows might behave under varying prepayment scenarios. For
example, it is very unlikely that the Receivables will prepay at a constant
level of ABS until maturity or that all of the Receivables will prepay at the
same level of ABS. Moreover, the diverse terms of receivables within the
hypothetical pool could produce slower or faster principal distributions than
indicated in the ABS Table at the various constant percentages of ABS specified,
even if the original and remaining terms to maturity of the Receivables are as
assumed. Any difference between such assumptions and the actual characteristics
and performance of the Receivables, or actual prepayment experience, will affect
the percentages of initial amounts outstanding over time and the weighted
average lives of each class of the Notes.
S-13
<PAGE>
PERCENT OF INITIAL PRINCIPAL BALANCE AT VARIOUS ABS PERCENTAGES
<TABLE>
<CAPTION>
CLASS A NOTES
--------------------------------------------------------------------------------------
CLASS A-1 NOTES CLASS A-2 NOTES
------------------------------------------ ------------------------------------------
DISTRIBUTION DATE 0.0% 1.2% 1.5% 1.8% 0.0% 1.2% 1.5% 1.8%
- ------------------------- --------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
<CAPTION>
CLASS A NOTES
---------------------------------------
CLASS A-3 NOTES CLASS B NOTES
--------------------------------------- ------------------------------------------
DISTRIBUTION DATE 0.0% 1.2% 1.5% 1.8% 0.0% 1.2% 1.5% 1.8%
- ------------------------- ------ --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
S-14
<PAGE>
PERCENT OF INITIAL PRINCIPAL BALANCE AT VARIOUS ABS PERCENTAGES
<TABLE>
<CAPTION>
CLASS A NOTES
--------------------------------------------------------------------------------------
CLASS A-1 NOTES CLASS A-2 NOTES
------------------------------------------ ------------------------------------------
DISTRIBUTION DATE 0.0% 1.2% 1.5% 1.8% 0.0% 1.2% 1.5% 1.8%
- ------------------------- --------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Weighted Average Life
(years) (1).............
*Weighted Average Life to
Optional Clean Up Call
(years) (1).............
*Optional Clean Up Call
Date (mo/yr)............
<CAPTION>
CLASS A NOTES
---------------------------------------
CLASS A-3 NOTES CLASS B NOTES
--------------------------------------- ------------------------------------------
DISTRIBUTION DATE 0.0% 1.2% 1.5% 1.8% 0.0% 1.2% 1.5% 1.8%
- ------------------------- ------ --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Weighted Average Life
(years) (1).............
*Weighted Average Life to
Optional Clean Up Call
(years) (1).............
*Optional Clean Up Call
Date (mo/yr)............
</TABLE>
- ------------------------------
(1) The weighted average life of a Note is determined by (i) multiplying the
amount of each principal payment on a Note by the number of years from the
date of the issuance of the Note to the related Distribution Date, (ii)
adding the results and (iii) dividing the sum by the related principal
balance of the Note.
S-15
<PAGE>
The ABS Table has been prepared based on the assumptions described above
(including the assumptions regarding the characteristics and performance of the
Receivables which will differ from the actual characteristics and performance
thereof) and should be read in conjunction therewith.
THE NOTES
GENERAL
The Notes will be issued pursuant to the terms of an Indenture to be dated as of
the Closing Date between the Trust and the Indenture Trustee (as amended and
supplemented from time to time, the "INDENTURE"), a form of which has been filed
as an exhibit to the Registration Statement of which this Prospectus Supplement
and the Prospectus form a part. A copy of the Indenture will be available from
the Indenture Trustee upon request to holders of Notes and will be filed with
the Securities and Exchange Commission following the issuance of the Notes. The
following summary describes certain terms of the Notes and the Indenture. The
summary does not purport to be complete and is subject to, and is qualified in
its entirety by reference to, all of the provisions of the Notes, the Indenture
and the Prospectus. Where particular provisions or terms used in the Indenture
are referred to, the actual provisions (including definitions of terms) are
incorporated by reference as part of such summary.
For each class of Notes, the "INTEREST RATE" will be a fixed rate as set forth
below:
<TABLE>
<CAPTION>
INTEREST RATE
(PER ANNUM)
-------------
<S> <C>
Class A-1 Notes.................................................................. %
Class A-2 Notes.................................................................. %
Class A-3 Notes.................................................................. %
Class B Notes.................................................................... %
</TABLE>
PAYMENTS OF INTEREST
Interest on the unpaid principal balance of each class of Notes will accrue at
the applicable Interest Rate and will be payable monthly on each Distribution
Date commencing with the Distribution Date on ______________; PROVIDED, HOWEVER,
that interest on the Class B Notes will not be paid on any Distribution Date
until all accrued interest due and payable on the Class A Notes on such
Distribution Date has been paid in full. In addition, after acceleration of the
Notes following an Event of Default and if any Notes remain outstanding
following the applicable Final Scheduled Distribution Date, no interest will be
payable on the Class B Notes until all principal of and interest on the Class A
Notes has been paid in full.
Interest on the Class A-1 Notes and the Class A-2 Notes will be calculated on
the basis of the actual number of days elapsed since the last Distribution Date
and a 360-day year. Interest on the Class A-3 Notes and the Class B Notes will
be calculated on the basis of a 360-day year consisting of twelve 30-day months.
All references in the Prospectus to "Payment Date" or "Payment Dates" shall be
deemed references to "Distribution Date" or "Distribution Dates," as applicable,
for purposes of this Prospectus Supplement.
On each Distribution Date, interest payments to all classes of Class A Notes
will have the same priority while interest on the Class B Notes will not be paid
until all accrued interest on the Class A Notes has been paid in full. Under
certain circumstances, the amount available for such payments could be less than
the amount of interest payable on the Class A Notes on any Distribution Date, in
which case Noteholders of each class of Class A Notes will receive their ratable
share (based upon the aggregate amount of interest due to such class of
Noteholders) of the aggregate amount available to be distributed in respect of
interest on the Class A Notes. See "The Transfer and Servicing
Agreements--Distributions" and "--Reserve Account."
S-16
<PAGE>
PAYMENTS OF PRINCIPAL
On each Distribution Date, principal of the Notes will be payable in an
aggregate amount (the "PRINCIPAL PAYMENT AMOUNT") equal to the lesser of (x) the
Noteholders' Principal Distributable Amount and (y) the Total Available Amount
remaining after payment of the Total Servicing Fee, the Aggregate Class A
Noteholders' Interest Distributable Amount and the Class B Noteholders' Interest
Distributable Amount.
The Principal Payment Amount will be applied on each Distribution Date as
follows:
(i) first, 100% to the Class A Notes, all of which shall be paid to the
Class A-1 Notes until paid in full, then to the Class A-2 Notes until
paid in full, then to the Class A-3 Notes until paid in full; and
(ii) second, 100% to the Class B Notes, until the Class B Notes are paid in
full.
If an Event of Default occurs as a result of which the Notes are declared
immediately due and payable or if any Notes remain outstanding after the
applicable Final Scheduled Distribution Date, 100% of the Principal Payment
Amount on each Distribution Date will be allocated pro rata to each outstanding
class of the Class A Notes on the basis of their respective unpaid principal
balances. Upon repayment of the Class A Notes in full, the Class B Notes will be
allocated 100% of the Principal Payment Amount on each Distribution Date until
the Class B Notes are paid in full.
MONTHLY DATES
The following chart defines a Collection Period and certain related dates and
demonstrates the application of such terms to a hypothetical monthly
distribution with respect to the Notes:
<TABLE>
<CAPTION>
<S> <C>
May 24-June 23 A "COLLECTION PERIOD" is the period from and including the 24th day of a calendar
month to and including the 23rd day of the succeeding calendar month. The Initial
Collection Period will be the period from but not including the Cutoff Date to
and including .
July 10 The "DETERMINATION DATE" is the tenth calendar day of each month. On or before
this date, the Servicer will deliver to the Indenture Trustee and the Owner
Trustee a certificate specifying the amounts required to be distributed and the
amounts available for distribution on the next Distribution Date.
July 14 The "RECORD DATE" is the day before each Distribution Date (or, if Definitive
Securities are issued, the Record Date will be the last day of the Collection
Period, June 23 for a July 15 Distribution Date). Distributions on the next
Distribution Date are made to Noteholders of record at the close of business of
the Indenture Trustee on this date
July 14 The "DEPOSIT DATE" is the Business Day immediately preceding each Distribution
Date. All Collections and Advances relating to the related Collection Period are
required to be deposited into the Collection Account on or before this date.
Funds will also be transferred between the Reserve Account and the Collection
Account to the extent required as described below.
July 15 The "DISTRIBUTION DATE" is the 15th day of each calendar month (or the next
Business Day). The Indenture Trustee pays to Noteholders amounts payable in
respect of the Notes, pays the Total Servicing Fee and reimburses Outstanding
Advances to the Servicer, deposits any excess funds to the Reserve Account and,
if the Reserve Account is equal to the Specified Reserve Account Balance, pays
any remaining funds to the Certificateholders.
</TABLE>
A "BUSINESS DAY" means a day on which the Indenture Trustee and commercial banks
located in the State of Utah, the State of Idaho, the State of Delaware and the
City of New York are open for the purpose of conducting
S-17
<PAGE>
commercial banking business; provided, however, that for purposes of determining
any Distribution Date, the term "Business Day" shall mean a day on which the
Indenture Trustee and commercial banks located in the State of New York
generally and the City of New York are open for the purpose of conducting a
commercial banking business.
REDEMPTION
The Class A-3 Notes and the Class B Notes will be redeemed in whole, but not in
part, on any Distribution Date after all of the other classes of Notes have been
paid in full if the Servicer exercises its option to purchase the Receivables
when (i) the Aggregate Receivables Balance of the Receivables on the last day of
the prior Collection Period shall have declined to 10% or less of the Aggregate
Starting Receivables Balance and (ii) the sum of the Repurchase Amount of the
Receivables (other than the Liquidating Receivables) is greater than or equal to
the sum of the outstanding principal balance of all of the Class A-3 Notes and
the Class B Notes, plus accrued and unpaid interest thereon, as described in the
Prospectus under "Description of the Transfer and Servicing Agreements--
Termination." The redemption price will be equal to the unpaid principal amount
of the Class A-3 Notes and the Class B Notes, plus accrued and unpaid interest
thereon.
PARITY AND PRIORITY OF NOTES
Distribution of principal and interest payments on the Notes will be made in
accordance with the priorities described in "--Payments of Interest" and
"--Payments of Principal" above. Also see "The Transfer and Servicing
Agreements--Distributions."
VOTING RIGHTS
To the extent the Prospectus specifies certain circumstances under which the
consent, approval, direction, or request of a specified percentage in principal
amount of the outstanding Notes must be obtained, given or made, or under which
such a specified percentage are permitted to take an action or give a notice,
then such consent, approval, direction, request, action or notice shall be valid
only if the holders of such specified percentage in principal amount of (a) all
the outstanding Class A Notes and Class B Notes voting together as a single
class and (b) the outstanding Class A Notes voting as a single class have voted
to give such consent, approval, direction, request or notice, or take such
action. However, after an acceleration of the Notes following an Event of
Default, the direction to the Indenture Trustee to sell or liquidate the Trust
Property requires the approval of all of the outstanding Class A Notes (or, if
no Class A Notes are outstanding, all of the outstanding Class B Notes).
Any Notes held by the Seller will not be deemed to be outstanding and shall be
disregarded when a vote is taken.
THE TRANSFER AND SERVICING AGREEMENTS
The following summary describes certain terms of the Transfer and Servicing
Agreements. Forms of the Transfer and Servicing Agreements have been filed as
exhibits to the Registration Statement of which this Prospectus Supplement and
the Prospectus form a part. A copy of the Transfer and Servicing Agreements will
be available from the Servicer upon request to Noteholders. The summary does not
purport to be complete and is subject to, and qualified in its entirety by
reference to, all of the provisions of the Transfer and Servicing Agreements and
the Prospectus. Where particular provisions or terms used in the Transfer and
Servicing Agreements are referred to, the actual provisions (including
definitions of terms) are incorporated by reference as part of such summary.
DISTRIBUTIONS
Unless the Servicer satisfies the conditions for monthly remittances described
in "The Transfer and Servicing Agreements--Collections" in the Prospectus, it
will transfer all collections on the Receivables (including all prepayments) to
the Collection Account within two Business Days after receipt thereof. The
Indenture Trustee will make distributions to the Note Distribution Account out
of the amounts on deposit in the Collection Account. The amount to be
distributed to the Note Distribution Account will be determined in the manner
described below.
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DETERMINATION OF AVAILABLE AMOUNTS. The "AVAILABLE AMOUNT" for each
Distribution Date will be the sum of the Available Interest and the Available
Principal. The "TOTAL AVAILABLE AMOUNT" for a Distribution Date will be the sum
of the Available Amount and all cash or other immediately available funds on
deposit in the Reserve Account immediately prior to such Distribution Date. See
"Description of the Transfer and Servicing Agreements-- Determination of
Available Amount" in the Prospectus.
MONTHLY WITHDRAWALS AND DEPOSITS. On or before the Determination Date, the
Servicer will calculate, with respect to the preceding Collection Period and the
related Distribution Date, the Available Amount, the Total Available Amount,
Collected Interest, Collected Principal, the Total Servicing Fee, the Aggregate
Class A Noteholders' Interest Distributable Amount, the Class B Noteholders'
Interest Distributable Amount, the Noteholders' Principal Distributable Amount,
the Principal Payment Amount and certain other items. Based on such
calculations, the Servicer will deliver to the Indenture Trustee a certificate
specifying such amounts and instructing the Indenture Trustee to make
withdrawals, deposits and payments of the following amounts on the Deposit Date:
(i) the amount, if any, to be withdrawn from the Reserve Account and
deposited in the Collection Account;
(ii) the amounts to be withdrawn from the Collection Account and paid to the
Servicer in respect of reimbursement of Outstanding Advances;
(iii) the amount to be withdrawn from the Collection Account and paid to the
Servicer in respect of the Total Servicing Fee for such Distribution
Date;
(iv) the amounts to be withdrawn from the Collection Account in respect of
the Aggregate Class A Noteholders' Interest Distributable Amount, the
Class B Noteholders' Interest Distributable Amount and the Noteholders'
Principal Distributable Amount and deposited in the Note Distribution
Account for payment to Noteholders on such Distribution Date;
(v) the amount, if any, to be withdrawn from the Collection Account and
deposited in the Reserve Account; and
(vi) the amount, if any, to be withdrawn from the Reserve Account and paid
to the Certificateholders.
The amount, if any, to be withdrawn from the Reserve Account and deposited in
the Collection Account on the Deposit Date as specified in clause (i) above will
be the lesser of (A) the amount of cash or other immediately available funds on
deposit in the Reserve Account on the Deposit Date and (B) the amount, if any,
by which (x) the sum of the Total Servicing Fee, the Aggregate Class A
Noteholders' Interest Distributable Amount, the Class B Noteholders' Interest
Distributable Amount and the Noteholders' Principal Distributable Amount exceeds
(y) the Available Amount for such Distribution Date.
The amount, if any, to be withdrawn from the Collection Account and deposited in
the Reserve Account on the Deposit Date as specified in clause (v) above will
equal the amount, if any, by which the Available Amount for such Distribution
Date exceeds the amount described in subclause (x) of clause (B) of the
preceding sentence.
The amount, if any, to be withdrawn from the Reserve Account and paid to the
Certificateholders as specified in clause (vi) above will equal the amount, if
any, by which the amount on deposit in the Reserve Account after all other
deposits (including the deposit pursuant to clause (v) above) and withdrawals on
the Deposit Date exceeds the Specified Reserve Account Balance for such
Distribution Date.
On each Distribution Date, all amounts on deposit in the Note Distribution
Account will be distributed to the Noteholders, as described herein.
PRIORITIES FOR WITHDRAWALS FROM COLLECTION ACCOUNT. Withdrawals of funds from
the Collection Account on each Deposit Date will be made first for
reimbursements of Outstanding Advances. Thereafter, withdrawals of funds from
the Collection Account will be made for application as described in clauses
(iii) and (iv) under "Distributions-- Monthly Withdrawals and Deposits" above,
but only to the extent of the Total Available Amount allocated to such
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application for such Distribution Date. In calculating the amounts which can be
withdrawn from the Collection Account and applied as specified in such clauses
(iii) and (iv), the Indenture Trustee, at the direction of the Servicer, will
allocate the Total Available Amount in the following order of priority:
(i) the Total Servicing Fee;
(ii) the Aggregate Class A Noteholders' Interest Distributable Amount;
(iii) the Class B Noteholders' Interest Distributable Amount; and
(iv) the Noteholders' Principal Distributable Amount.
All amounts allocated pursuant to clauses (iii) and (iv) above shall be
deposited in the Note Distribution Account and will be applied as described
above under "The Notes--Payments of Interest" and "--Payments of Principal,"
including the subordination provisions contained therein.
CERTAIN DEFINITIONS.
"AGGREGATE CLASS A NOTEHOLDERS' INTEREST DISTRIBUTABLE AMOUNT" means, with
respect to any Distribution Date, the sum of the Class A Noteholders' Interest
Distributable Amounts for all classes of Class A Notes and the Class A
Noteholders' Interest Carryover Shortfall as of the preceding Distribution Date.
"AVAILABLE INTEREST" means, with respect to any Distribution Date, the excess of
(a) the sum of (i) Interest Collections for such Distribution Date and (ii) all
Advances made by the Servicer with respect to such Distribution Date, over (b)
the amount of Outstanding Advances to be reimbursed on or with respect to such
Distribution Date.
"AVAILABLE PRINCIPAL" means, with respect to any Distribution Date, the sum of
the following amounts with respect to the related Collection Period: (i) that
portion of all Collections allocable to principal in accordance with the terms
of the Receivables and the Servicer's customary servicing procedures; (ii) to
the extent attributable to principal, the Repurchase Amount received with
respect to each Receivable repurchased by the Seller or purchased by the
Servicer as of any day in the related Collection Period; (iii) all related
Recoveries, to the extent allocable to principal, and (iv) all related
Liquidation Proceeds, to the extent allocable to principal. "Available
Principal" on any Distribution Date shall exclude all payments and proceeds of
any Receivables the Repurchase Amount of which has been distributed on a prior
Distribution Date.
"CLASS A NOTEHOLDERS' INTEREST CARRYOVER SHORTFALL" means, as of the close of
any Distribution Date, the excess, if any, of the Aggregate Class A Noteholders'
Interest Distributable Amount for such Distribution Date over the amount that
was actually deposited in the Note Distribution Account on the related Deposit
Date in respect of interest on the Class A Notes.
"CLASS A NOTEHOLDERS' INTEREST DISTRIBUTABLE AMOUNT" means, (A) with respect to
the Class A-1 Notes and the Class A-2 Notes and any Distribution Date the
product of (i) the outstanding principal balance of such class of Class A Notes
on the preceding Distribution Date after giving effect to all payments of
principal in respect of such class of Class A Notes on such preceding
Distribution Date (or, in the case of the first Distribution Date, the
outstanding principal balance on the Closing Date) and (ii) the product of the
Interest Rate for such class of Class A Notes and a fraction, the numerator of
which is the actual number of days elapsed from the most recent Distribution
Date (or the Closing Date, in the case of the initial period), and the
denominator of which is 360 and (B) with respect to the Class A-3 Notes, the
product of (i) the outstanding principal balance of the Class A-3 Notes on the
preceding Distribution Date after giving effect to all payments of principal in
respect of the Class A-3 Notes on such preceding Distribution Date (or, in the
case of the first Distribution Date, the outstanding principal balance on the
Closing Date) and (ii) the product of the Interest Rate for such class and 1/12
(multiplied by, in the case of the first Distribution Date, a fraction, the
numerator of which is the number of days elapsed from the Closing Date and the
denominator of which is 30).
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"CLASS B NOTEHOLDERS' INTEREST CARRYOVER SHORTFALL" means, as of the close of
any Distribution Date, the excess, if any, of the Class B Noteholders' Interest
Distributable Amount for such Distribution Date over the amount that was
actually deposited in the Note Distribution Account on the related Deposit Date
in respect of payments of interest on the Class B Notes.
"CLASS B NOTEHOLDERS' INTEREST DISTRIBUTABLE AMOUNT" means, with respect to any
Distribution Date, the sum of (i) the Class B Noteholders' Monthly Interest
Distributable Amount for such Distribution Date and (ii) the Class B
Noteholders' Interest Carryover Shortfall as of the preceding Distribution Date.
"CLASS B NOTEHOLDERS' MONTHLY INTEREST DISTRIBUTABLE AMOUNT" means, with respect
to any Distribution Date, the product of (i) the outstanding principal balance
of the Class B Notes on the preceding Distribution Date after giving effect to
all payments of principal in respect of the Class B Notes on such preceding
Distribution Date (or, in the case of the first Distribution Date, the
outstanding principal balance on the Closing Date) and (ii) the product of the
Interest Rate for the Class B Notes and 1/12 (multiplied by, in the case of the
first Distribution Date, a fraction, the numerator of which is the number of
days elapsed from the Closing Date and the denominator of which is 30).
"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 related Liquidation Proceeds,
to the extent allocable to interest, (iii) to the extent allocable to interest,
all related Recoveries, and (iv) to the extent attributable to interest, the
Repurchase Amount of all Receivables that are repurchased by the Seller or
purchased by the Servicer as of any day in the related Collection Period.
"Interest Collections" for any Distribution Date shall exclude all payments and
proceeds of any Receivables the Repurchase Amount of which has been distributed
on a prior Distribution Date.
"LIQUIDATION PROCEEDS" means, with respect to any Distribution Date, and a
Receivable that became a Liquidating Receivable during the related Collection
Period, (i) insurance proceeds received during such Collection Period by the
Servicer with respect to Insurance Policies relating to the Financed Vehicles or
the Obligors, (ii) amounts received by the Servicer during such Collection
Period from a Dealer in connection with such Liquidating Receivable pursuant to
the exercise of rights under a Dealer Agreement, and (iii) the monies collected
by the Servicer (from whatever source, including proceeds of a sale of a
Financed Vehicle or a deficiency balance recovered after the charge-off of the
related Receivable) during such Collection Period on such Liquidating
Receivable, net of any expenses incurred by the Servicer in connection with the
collection of such Receivable and the disposition of the Financed Vehicle and
any payments required by law to be remitted to the Obligor, but, in any event,
not less than zero. Liquidation Proceeds shall be applied first to accrued and
unpaid interest on the Receivable and then to the Receivable Balance thereof.
"NOTEHOLDERS' PRINCIPAL CARRYOVER SHORTFALL" means, on a Distribution Date, the
excess, if any, of the Noteholders' Principal Distributable Amount over the
Principal Payment Amount on such Distribution Date.
"NOTEHOLDERS' PRINCIPAL DISTRIBUTABLE AMOUNT" means, for any Distribution Date,
the sum of (i) the Principal Distributable Amount, (ii) the Noteholders'
Principal Carryover Shortfall for the prior Distribution Date and (iii) without
duplication, on the Final Scheduled Distribution Date for a class of Notes, the
amount necessary to reduce the outstanding principal balance of such class of
Notes to zero.
"PRINCIPAL DISTRIBUTABLE AMOUNT" means, with respect to any Distribution Date
and the related Collection Period, the excess of (i) Available Principal for
such Distribution Date plus Realized Losses over (ii) all related Recoveries, to
the extent allocable to principal.
"PURCHASED RECEIVABLE" means, at any time, a Receivable as to which payment of
the Repurchase Amount has previously been made by the Seller or the Servicer
pursuant to the applicable Agreement.
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"REALIZED LOSSES" means, with respect to any Distribution Date and a Receivable
that became a Liquidating Receivable during the related Collection Period, the
excess of (i) the Receivable Balance of such Receivable as of the first day of
the related Collection Period over (ii) Liquidation Proceeds received with
respect to such Receivable during such Collection Period, to the extent
allocable to principal.
"RECOVERIES" means, with respect to any Distribution Date, all monies received
by the Servicer with respect to any Liquidating Receivable during the related
Collection Period if such Collection Period follows the Collection Period in
which such Receivable became a Liquidating Receivable net of the sum of (i) any
expenses incurred by the Servicer in connection with the collection of such
Receivable and the disposition of the Financed Vehicle (to the extent not
previously reimbursed) and (ii) any payments required by law to be remitted to
the Obligor but, in any event, not less than zero.
SERVICING COMPENSATION
On each Distribution Date, the Servicer will be entitled to receive the "TOTAL
SERVICING FEE," which consists of the Servicing Fee for the related Collection
Period and any unpaid Servicing Fees from prior Distribution Dates. The
Servicing Fee Rate will be 1.0% per annum.
ADVANCES
On each Deposit Date, the Servicer may, subject to the following, make an
Advance with respect to each Receivable serviced by it (other than a Liquidating
Receivable) equal to the excess, if any, of (x) the product of the Receivables
Balance of such Receivable as of the first day of the related Collection Period
and one-twelfth of its Contract Rate (calculated on the basis of a 360-day year
comprised of twelve 30-day months), over (y) the interest actually received by
the Servicer with respect to such Receivable from the Obligor during or with
respect to such Collection Period. The Servicer may elect not to make an Advance
of interest due and unpaid to the extent that the Servicer, in its sole
discretion, determines that such Advance is not recoverable from subsequent
payments on such Receivable or from funds in the Reserve Account. On each
Distribution Date, the Servicer will be reimbursed for all Outstanding Advances
as described above.
RESERVE ACCOUNT
Pursuant to the Sale and Servicing Agreement, the Seller will establish in the
name of the Indenture Trustee the Reserve Account with the Indenture Trustee.
The Reserve Account will be funded by a deposit by the Seller of $______________
of cash on the Closing Date (the "RESERVE ACCOUNT INITIAL DEPOSIT"). On each
Deposit Date, an amount equal to the Available Amount remaining with respect to
such Distribution Date after the payment of the Total Servicing Fee and the
deposit of the Aggregate Class A Noteholders' Interest Distributable Amount, the
Class B Noteholders' Interest Distributable Amount and the Noteholders'
Principal Distributable Amount in the Note Distribution Account (see
"Distributions--Monthly Withdrawals and Deposits") shall be deposited in the
Reserve Account. If the amount on deposit in the Reserve Account on any
Distribution Date (after giving effect to all deposits or withdrawals therefrom
on the related Deposit Date, including the deposit pursuant to the preceding
sentence) is greater than the Specified Reserve Account Balance for such
Distribution Date, the Servicer will instruct the Indenture Trustee to
distribute the amount of the excess to the Certificateholders. Upon any
distribution to the Certificateholders of amounts from the Reserve Account, the
Noteholders will not have any rights in, or claims to, such amounts.
The initial Certificateholders may at any time, without consent of the
Noteholders, sell, transfer, convey or assign in any manner its rights to and
interests in distributions from the Reserve Account, including interest earnings
thereon, provided that certain conditions are satisfied, including: (i) such
action will not result in a reduction or withdrawal of the rating of any class
of the Notes, (ii) the Certificateholders provide to the Owner Trustee and the
Indenture Trustee an opinion of independent counsel that such action will not
cause the Trust to be treated as an association (or publicly traded partnership)
taxable as a corporation for Federal income tax purposes, and (iii) such
transferee or assignee agrees to take positions for tax purposes consistent with
the tax positions agreed to be taken by the Certificateholders.
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"AGGREGATE NET LOSSES" means, for any Collection Period, the aggregate amount
allocable to principal of all Receivables newly designated during such
Collection Period as Liquidating Receivables minus all Liquidation Proceeds to
the extent allocable to principal collected during such Collection Period with
respect to all Liquidating Receivables (whether or not newly designated as
such).
"AVERAGE DELINQUENCY RATIO" means, as of any Distribution Date, the average of
the Delinquency Ratios for the preceding three Collection Periods.
"AVERAGE NET LOSS RATIO" means, as of any Distribution Date, the average of the
Net Loss Ratios for the preceding three Collection Periods.
"DELINQUENCY RATIO" means, for any Collection Period, the ratio, expressed as a
percentage, of (i) the principal amount of all outstanding Receivables (other
than Purchased Receivables and Liquidating Receivables) which are 60 or more
days delinquent as of the last day of such Collection Period, determined in
accordance with the Servicer's customary practices, divided by (i) the Aggregate
Receivables Balance as of the last day of such Collection Period.
"NET LOSS RATIO" means, for any Collection Period, an amount, expressed as
percentage, equal to (i) the product of (a) the Aggregate Net Losses minus
Recoveries for such Collection Period and (b) twelve, divided by (ii) the
average of the Aggregate Receivables Balance on each of the first day of such
Collection Period and the last day of such Collection Period.
"SPECIFIED RESERVE ACCOUNT BALANCE" with respect to any Distribution Date will
equal __% of the Aggregate Receivables Balance, except that the Specified
Reserve Account Balance will never be less than the lesser of: (i)
$______________ and (ii) the aggregate outstanding principal amount of the
Notes. The Specified Reserve Account Balance will be calculated as __% of the
Aggregate Receivables Balance for any Distribution Date (beginning on
_______________) on which the Average Net Loss Ratio exceeds __% or the Average
Delinquency Ratio exceeds __%. The Specified Reserve Account Balance may be
reduced or the definition thereof otherwise modified without the consent of the
Noteholders if the Rating Agencies confirm in writing or fail to object in
writing after having received notice thereof, that such reduction or
modification will not result in a reduction or withdrawal of the rating of the
Notes.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a discussion of certain material U.S. federal income tax
consequences of the acquisition, ownership and disposition of the Class A Notes.
This discussion does not purport to deal with all aspects of federal income
taxation that may be relevant to the Class A Noteholders in light of their
personal investment circumstances nor, except for certain limited discussions of
particular topics, to certain types of holders subject to special treatment
under the federal income tax laws (e.g., financial institutions, broker-dealers,
life insurance companies and tax-exempt organizations). This information is
directed to prospective purchasers who purchase Class A Notes in the initial
distribution thereof, who are citizens or residents of the United States (except
as set forth under "Certain Tax Consequences to Foreign Noteholders"), including
domestic corporations and partnerships, and who hold the Class A Notes as
"capital assets" within the meaning of Section 1221 of the Internal Revenue Code
of 1986, as amended (the "CODE"). Taxpayers and preparers of tax returns
(including those filed by any partnership or other issuer) should be aware that
under applicable Treasury regulations a provider of advice on specific issues of
law is not considered an income tax return preparer unless the advice is (i)
given with respect to events that have occurred at the time the advice is
rendered and is not given with respect to the consequences of contemplated
actions, and (ii) is directly relevant to the determination of an entry on a tax
return. ACCORDINGLY, TAXPAYERS SHOULD CONSULT THEIR OWN TAX ADVISORS AND TAX
RETURN PREPARERS REGARDING THE PREPARATION OF ANY ITEM ON A TAX RETURN, EVEN
WHERE THE ANTICIPATED TAX TREATMENT HAS BEEN DISCUSSED HEREIN. THIS DISCUSSION
IS FOR GENERAL INFORMATION PURPOSES ONLY AND DOES NOT CONSIDER ALL ASPECTS OF
U.S. FEDERAL INCOME TAXATION THAT MAY BE RELEVANT TO THE PURCHASE, OWNERSHIP AND
DISPOSITION OF THE NOTES BY A PROSPECTIVE INVESTOR, ESPECIALLY IN LIGHT
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OF SUCH INVESTOR'S PERSONAL CIRCUMSTANCES. PROSPECTIVE INVESTORS SHOULD CONSULT
WITH THEIR OWN TAX ADVISORS AS TO THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE
CLASS A NOTES.
This discussion is based upon the Code, existing regulations thereunder, and
current administrative rulings and court decisions. The discussion below under
"Original Issue Discount" takes into consideration the rules governing original
issue discount ("OID") that are set forth in Sections 1271-1275 of the Code and
in Treasury regulations issued under the OID provisions of the Code. All of the
foregoing are subject to change, possibly on a retroactive basis, and any such
change could affect the continuing validity of this discussion.
CHARACTERIZATION AS DEBT
With respect to the Class A Notes, Kirkland & Ellis, special tax counsel to the
Seller ("TAX COUNSEL"), will deliver its opinion to the effect that, although no
specific authority exists with respect to the characterization for federal
income tax purposes of securities having the same terms as the Class A Notes,
based on the terms of the Class A Notes and the transactions relating to the
Receivables as set forth herein, the Class A Notes will be treated as debt for
federal income tax purposes. The Seller, the Servicer and each Class A
Noteholder, by acquiring an interest in a Class A Note, will agree to treat the
Class A Notes as indebtedness for federal, state and local income and franchise
tax purposes.
CHARACTERIZATION OF THE TRUST
With respect to the Trust, Tax Counsel will deliver its opinion to the effect
that the Trust will not be characterized as an association (or publicly traded
partnership) taxable as a corporation.
INTEREST INCOME TO NOTEHOLDERS
If the Class A Notes do not have OID, interest payments on the Class A Notes
will be taxable as ordinary income for Federal income tax purposes when received
by Class A Noteholders utilizing the cash method of accounting and when accrued
by Class A Noteholders utilizing the accrual method of accounting. Interest
received on the Class A Notes may constitute "investment income" for purposes of
certain limitations of the Code concerning the deductibility of investment
interest expense.
ORIGINAL ISSUE DISCOUNT
Although it is not currently anticipated that the Class A Notes will be issued
at a greater than DE MINIMIS discount and therefore should not have OID, the
Class A Notes may nevertheless be deemed to have been issued with OID. For
example, the IRS could take the position that the Class A Notes have OID
pursuant to section 1272(a)(6) of the Code because prepayments of the
Receivables could accelerate the Class A Notes. In addition, the IRS could take
the position that the Class A Notes have OID because interest payments on the
Class A Notes are not "unconditionally payable" and thus do not constitute
"qualified stated interest" (as defined below).
The total amount of OID, if any, with respect to a Class A Note will be equal to
the excess of the "stated redemption price at maturity" of such Class A Note
over its "issue price." The "stated redemption price at maturity" of a Class A
Note will be the sum of all payments, whether denominated as interest or
principal, required to be made on such Class A Note other than payments of
"qualified stated interest." "Qualified stated interest" is stated interest that
is unconditionally payable at least annually at a single fixed rate that
appropriately takes into account the length of the interval between payments. It
is anticipated that the "issue price" will be the face amount of the Class A
Notes.
The holder of a Class A Note that is treated as having OID (including a cash
method holder) would be required to include OID on that Class A Note in his or
her income for Federal income tax purposes on a constant yield basis, resulting
in the inclusion of income in advance of the receipt of cash attributable to
that income. This treatment may not significantly affect an accrual method
holder of Class A Notes, although such treatment would accelerate taxable
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income to a cash method holder by in effect requiring such holder to report
interest income on the accrual method. Finally, even if a Class A Note has OID
falling within the DE MINIMIS exception, the holder must include such DE MINIMIS
OID in income proportionately as principal payments are made on such Class A
Note.
DISPOSITION OF NOTES
Upon the sale, exchange, redemption, retirement or other disposition of a Class
A Note, the holder will recognize gain or loss in an amount equal to the
difference between the amount realized on the disposition and the holder's
adjusted tax basis in the Class A Note. The adjusted tax basis of the Class A
Note to a particular Class A Noteholder will equal the holder's cost for the
Class A Note, increased by any OID, market discount and gain previously included
by such Class A Noteholder in income with respect to the Class A Note and
decreased by any cash payments previously received by such Class A Noteholder
with respect to such Class A Note. Subject to the market discount rules of the
Code, any such gain or loss will be capital gain or loss if the Class A Note was
held as a capital asset. Capital gain or loss will be long-term if the Class A
Note was held by the holder for more than one year and otherwise will be
short-term. Any capital losses realized generally may be used by a corporate
taxpayer only to offset capital gains, and by an individual taxpayer only to the
extent of capital gains plus $3,000 of other income.
INFORMATION REPORTING AND BACKUP WITHHOLDING
The Seller will be required to report annually to the IRS, and to each related
Class A Noteholder of record, the amount of interest paid on the Class A Notes
(and the amount of interest withheld for federal income taxes, if any) for each
calendar year, except as to exempt holders (generally, corporations, tax-exempt
organizations, qualified pension and profit-sharing trusts, individual
retirement accounts, or nonresident aliens who provide certification as to their
status). Each holder (other than holders who are not subject to the reporting
requirements) will be required to provide to the Seller, under penalties of
perjury, a certificate containing the holder's name, address, correct federal
taxpayer identification number and a statement that the holder is not subject to
backup withholding. Should a nonexempt Class A Noteholder fail to provide the
required certification, the Seller will be required to withhold, from interest
otherwise payable to the holder, 31% of such interest and remit the withheld
amount to the IRS as a credit against the holder's federal income tax liability.
NOTEHOLDERS SHOULD CONSULT THEIR TAX ADVISORS AS TO THEIR QUALIFICATION FOR
EXEMPTION FROM BACKUP WITHHOLDING AND THE PROCEDURE FOR OBTAINING SUCH
EXEMPTION.
CERTAIN TAX CONSEQUENCES TO FOREIGN NOTEHOLDERS
The following discussion does not deal with all aspects of U.S. federal income
taxation that may be relevant to the purchase, ownership or disposition of the
Class A Notes by any particular non-U.S. Class A Noteholder in light of such
holder's personal circumstances, including holding the Notes through a
partnership. For example, persons who are partners in foreign partnerships or
beneficiaries of foreign trusts or estates and who are subject to U.S. federal
income tax because of their own status, such as United States residents or
foreign persons engaged in a trade or business in the United States, may be
subject to U.S. federal income tax even though the entity is not subject to
income tax on disposition of its Class A Note.
If interest paid (or accrued) to a Noteholder who is a nonresident alien,
foreign corporation or other non-United States person (a "FOREIGN PERSON") is
not effectively connected with the conduct of a trade or business within the
United States by the foreign person, the interest generally will be considered
"portfolio interest," and generally will not be subject to United States federal
income tax and withholding tax, as long as the foreign person (i) is not
actually or constructively a "10 percent shareholder" of the Seller or the
Seller (including a holder of 10% of the outstanding Certificates) or a
"controlled foreign corporation" with respect to which the Seller is a "related
person" within the meaning of the Code, and (ii) provides an appropriate
statement, signed under penalties of perjury, certifying that the beneficial
owner of the Class A Note is a foreign person and providing that foreign
person's name and address. If the information provided in this statement
changes, the foreign person must so inform the Tax Partnership within 30 days of
such change. The statement generally must be provided in the year a payment
occurs
S-25
<PAGE>
or in either of the two preceding years. If such interest were not portfolio
interest, then it would be subject to United States federal income and
withholding tax at a rate of 30% unless reduced or eliminated pursuant to an
applicable tax treaty.
Any capital gain realized on the sale, redemption, retirement or other taxable
disposition of a Class A Note by a foreign person will be exempt from United
States federal income and withholding tax, provided that (i) the gain is not
effectively connected with the conduct of a trade or business in the United
States by the foreign person, and (ii) in the case of an individual foreign
person, the foreign person is not present in the United States for 183 days or
more in the taxable year.
If the interest, gain or income on a Class A Note held by a foreign person is
effectively connected with the conduct of a trade or business in the United
States by the foreign person, the holder (although exempt from the withholding
tax previously discussed if an appropriate statement is furnished) generally
will be subject to United States federal income tax on the interest, gain or
income at regular federal income tax rates. In addition, if the foreign person
is a foreign corporation, it may be subject to a branch profits tax equal to 30%
of its "effectively connected earnings and profits" within the meaning of the
Code for the taxable year, as adjusted for certain items, unless it qualifies
for a lower rate under an applicable tax treaty.
STATE AND LOCAL TAX CONSEQUENCES
The above discussion does not address the tax treatment of the Trust or the
Notes under any state or local tax laws. Prospective investors are urged to
consult with their own tax advisors regarding the state and local tax treatment
of the Trust, as well as any state and local tax consequences to them of
purchasing, holding and disposing of the Notes.
ERISA CONSIDERATIONS
Although there is little guidance on the subject, the Seller believes the Class
A Notes should be treated as indebtedness without substantial equity features
for purposes of the Plan Assets Regulation. Therefore, the Class A Notes are
available for investment by a Benefit Plan, subject to a determination by such
Benefit Plan's fiduciary that the Class A Notes are suitable investments for
such Benefit Plan under ERISA and the Code. For additional information regarding
treatment of the Class A Notes under ERISA, see "ERISA Considerations" in the
Prospectus.
S-26
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement, the
Seller has agreed to sell to each of the underwriters (each, an "UNDERWRITER")
named below, and each of the Underwriters has severally agreed to purchase from
the Seller, the principal amount of Notes set forth opposite its name below:
<TABLE>
<CAPTION>
AGGREGATE PRINCIPAL AMOUNT TO BE PURCHASED
CLASS A-1 NOTES CLASS A-2 NOTES CLASS A-3 NOTES
----------------- ----------------- -----------------
<S> <C> <C> <C>
......................................................... $ $ $
----------------- ----------------- -----------------
Total.................................................. $ $ $
----------------- ----------------- -----------------
----------------- ----------------- -----------------
</TABLE>
In the Underwriting Agreement, the Underwriters have agreed, subject to the
terms and conditions set forth therein, to take and pay for all of the Class A
Notes offered hereby if any of the Notes are taken. All of the Class B Notes
will initially be held by the Seller.
The Seller has been advised by the Underwriters that they propose initially to
offer the Class A Notes to the public at the prices set forth on the cover page
hereof, and to certain dealers at such prices less a selling concession not in
excess of the percentage set forth below for each class of Class A Notes. The
Underwriters may allow, and such dealers may reallow to certain other dealers, a
subsequent concession not in excess of the percentage set forth below for each
class of securities. After the initial public offering, the public offering
price and such concessions may be changed.
<TABLE>
<CAPTION>
SELLING
CONCESSION REALLOWANCE
----------- -------------
<S> <C> <C>
Class A-1 Notes......................................................
Class A-2 Notes......................................................
Class A-3 Notes......................................................
</TABLE>
The Seller has agreed not to offer for sale, sell, contract to sell or otherwise
dispose of, directly or indirectly, or file a registration statement for, or
announce any offering of, any securities collateralized by, or evidencing an
ownership interest in, a pool of Motor Vehicle Loans (other than the Securities)
for a period of 30 days from the date of this Prospectus Supplement, without the
prior written consent of the Underwriters.
____________________, on behalf of the Underwriters, may engage in
over-allotment transactions, stabilizing transactions, syndicate covering
transactions and penalty bids with respect to the Notes in accordance with
Regulation M under the Exchange Act. Over-allotment transactions involve
syndicate sales in excess of the offering size which creates a syndicate short
position. Stabilizing transactions permit bids to purchase the Class A Notes so
long as the stabilizing bids do not exceed a specified maximum. Syndicate
covering transactions involve purchases of the Class A Notes in the open market
after the distribution has been completed in order to cover syndicate short
positions. Penalty bids permit ____________________ to reclaim a selling
concession from a syndicate member when the Class A Notes originally sold by
such syndicate member are purchased in a syndicate covering transaction. Such
over-allotment transactions, stabilizing transactions, syndicate covering
transactions and penalty bids may cause prices of the Class A Notes to be higher
than they would otherwise be in the absence of such transactions. Neither the
Trust nor any of the Underwriters represent that ____________________ will
engage in any such transactions nor that such transactions, once commenced, will
not be discontinued without notice.
The Seller has agreed to indemnify the Underwriters against certain civil
liabilities, including liabilities under the Securities Act, or to contribute to
payments which the Underwriters may be required to make in respect thereof. The
Seller has also agreed to reimburse the Underwriters for certain of their
expenses.
In the ordinary course of their respective businesses, the Underwriters and
their respective affiliates have engaged and may in the future engage in
commercial banking and investment banking transactions with affiliates of the
Seller.
[First Security Capital Markets, Inc. ("FSCM") is an affiliate of the Seller.
Any obligations of FSCM are the sole obligations of FSCM and do not create any
obligations on the part of any affiliate of FSCM.]
S-27
<PAGE>
LEGAL OPINIONS
In addition to the legal opinions described in the Prospectus, certain legal
matters relating to the Class A Notes will be passed upon for the Underwriters
by Kirkland & Ellis.
S-28
<PAGE>
INDEX OF TERMS
<TABLE>
<CAPTION>
<S> <C>
ABS................................................................................................... S-12
ABS Table............................................................................................. S-13
Aggregate Class A Noteholders' Interest Distributable Amount.......................................... S-20
Aggregate Net Losses.................................................................................. S-23
APR................................................................................................... S-13
Available Amount...................................................................................... S-19
Available Interest.................................................................................... S-20
Available Principal................................................................................... S-20
Average Delinquency Ratio............................................................................. S-23
Average Net Loss Ratio................................................................................ S-23
Business Day.......................................................................................... S-17
Class A Noteholders' Interest Carryover Shortfall..................................................... S-20
Class A Noteholders' Interest Distributable Amount.................................................... S-20
Class A-1 Notes....................................................................................... S-1
Class A-2 Notes....................................................................................... S-1
Class A-3 Notes....................................................................................... S-1
Class B Noteholders' Interest Carryover Shortfall..................................................... S-21
Class B Noteholders' Interest Distributable Amount.................................................... S-21
Class B Noteholders' Monthly Interest Distributable Amount............................................ S-21
Class B Notes......................................................................................... S-1
Code.................................................................................................. S-23
Collection Period..................................................................................... S-17
Collections........................................................................................... S-21
Contract Rate......................................................................................... S-10
Delinquency Ratio..................................................................................... S-23
Deposit Date.......................................................................................... S-17
Determination Date.................................................................................... S-17
Distribution Date..................................................................................... S-17
Final Scheduled Distribution Date..................................................................... S-3
foreign person........................................................................................ S-25
FSCM.................................................................................................. S-27
Indenture............................................................................................. S-16
Interest Collections.................................................................................. S-21
Interest Rate......................................................................................... S-16
Issuer................................................................................................ S-1
Liquidation Proceeds.................................................................................. S-21
Model................................................................................................. S-12
Net Loss Ratio........................................................................................ S-23
Noteholders' Principal Carryover Shortfall............................................................ S-21
Noteholders' Principal Distributable Amount........................................................... S-21
OID................................................................................................... S-24
Principal Distributable Amount........................................................................ S-21
Principal Payment Amount.............................................................................. S-17
Purchased Receivable.................................................................................. S-21
Rating Agencies....................................................................................... S-1
Realized Losses....................................................................................... S-22
Record Date........................................................................................... S-17
Recoveries............................................................................................ S-22
Reserve Account Initial Deposit....................................................................... S-22
Simple Interest Receivable............................................................................ S-12
Specified Reserve Account Balance..................................................................... S-5, S-23
Tax Counsel........................................................................................... S-24
Total Available Amount................................................................................ S-19
Total Servicing Fee................................................................................... S-22
Trust................................................................................................. S-8
Trust Agreement....................................................................................... S-8
Underwriter........................................................................................... S-27
</TABLE>
S-29
<PAGE>
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES
IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
BASE PROSPECTUS
[LOGO]
FIRST SECURITY-REGISTERED TRADEMARK- AUTO OWNER TRUSTS
ASSET BACKED NOTES
ASSET BACKED CERTIFICATES
FIRST SECURITY BANK-REGISTERED TRADEMARK-, N.A.
SELLER AND SERVICER
CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE 9 IN THIS PROSPECTUS.
The Notes of any series represent the obligations of the related Trust only. The
Certificates of such series represent the beneficial interest in the related
Trust only. Neither the Notes nor the Certificates issued by any Trust represent
obligations of or interests in, and are not guaranteed by, First Security
Bank-Registered Trademark-, N.A. or any of its respective affiliates.
This Prospectus may be used to offer and sell any Securities only if accompanied
by an applicable Prospectus Supplement.
THE TRUSTS--
- A new trust will be formed to issue each series of Securities.
- The primary assets of each Trust will be:
- a pool of fixed rate retail motor vehicle installment sales contracts
and installment loans;
- monies received on such contracts and loans;
- a security or ownership interest in the automobiles and lights trucks
financed under such contracts and loans; and
- other related assets.
THE SECURITIES--
- will represent indebtedness of the related Trust (in the case of the
Notes) or beneficial interests in the related Trust (in the case of the
Certificates);
- will be paid only from the assets of the related Trust;
- will represent the right to payments in the amounts and at the times
described in the related Prospectus Supplement;
- may benefit from one or more forms of credit enhancement; and
- will be issued as part of a designated series, which will include one
or more classes of Notes and one or more classes of Certificates.
NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED THESE
SECURITIES OR DETERMINED THAT THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
January 20, 1999
<PAGE>
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS AND THE ACCOMPANYING PROSPECTUS SUPPLEMENT
We tell you about the Securities in two separate documents that progressively
provide more detail: (a) this Prospectus, which provides general information,
some of which may not apply to particular Securities, including your Securities,
and (b) the accompanying supplement to this Prospectus (a "PROSPECTUS
SUPPLEMENT"), which will describe the specific terms of your Securities,
including:
- the timing of any interest and principal payments;
- the priority of any interest and principal payments;
- financial and other information about the property owned by the related
Trust;
- information about credit enhancement for each class;
- the ratings of each class; and
- the method for selling the Securities.
The terms of particular Securities may vary between this Prospectus and the
Prospectus Supplement, in which case you should rely on the information in the
Prospectus Supplement.
You should rely only on the information provided in this Prospectus and the
accompanying Prospectus Supplement, including the information incorporated by
reference. We have not authorized anyone to provide you with other or different
information. We are not offering the Securities in any jurisdiction where the
offer is not permitted. We do not claim the accuracy of the information in this
Prospectus or the accompanying Prospectus Supplement as of any date other than
the dates stated on their respective covers.
We include cross-references in this Prospectus and in the accompanying
Prospectus Supplement to captions in these materials where you can find further
related discussions. The following Table of Contents and the Table of Contents
included in the accompanying Prospectus Supplement provide the pages on which
these captions are located.
You can find a listing of the pages where capitalized terms used in this
Prospectus are defined under the caption "Index of Terms" beginning on page 50
in this Prospectus.
------------------------
2
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---
<S> <C>
PROSPECTUS SUMMARY................ 4
The Parties..................... 4
The Offered Securities.......... 4
The Trust Property.............. 5
Credit Enhancement.............. 6
Servicing and Administrative
Arrangements.................. 7
Optional Repurchase............. 8
The Agreements.................. 8
Tax Status...................... 8
ERISA Considerations............ 8
RISK FACTORS...................... 9
Maturity and Prepayment
Considerations................ 9
Extensions and Deferrals of
Payments on Receivables....... 9
Limited Assets of Each Trust.... 9
Potential Priority of Certain
Liens......................... 10
Possible Reductions and Delays
in Payments Due to Bankruptcy
and Insolvency................ 10
Limited Enforceability of the
Receivables................... 11
Limited Reliance on the Bank and
its Affiliates................ 11
Subordination................... 12
Risk of Commingling of Assets... 12
Limited Ability to Resell
Securities.................... 12
Limited Significance of
Ratings....................... 12
FORMATION OF THE TRUSTS........... 13
TRUST PROPERTY.................... 13
THE MOTOR VEHICLE LOAN
PORTFOLIO....................... 14
General......................... 14
Origination of Receivables...... 14
Underwriting.................... 14
Servicing and Collections....... 15
Physical Damage Insurance....... 16
Delinquency and Loss
Experience.................... 16
MATURITY AND PREPAYMENT
ASSUMPTIONS..................... 17
POOL FACTORS AND TRADING
INFORMATION..................... 17
USE OF PROCEEDS................... 18
THE BANK.......................... 18
DESCRIPTION OF THE NOTES.......... 19
General......................... 19
Principal and Interest on the
Notes......................... 19
The Indenture................... 20
Certain Covenants............... 22
The Indenture Trustee........... 23
DESCRIPTION OF THE CERTIFICATES... 24
General......................... 24
<CAPTION>
PAGE
---
<S> <C>
Distributions of Interest and
Certificate Balance........... 24
The Owner Trustee............... 24
CERTAIN INFORMATION REGARDING THE
SECURITIES...................... 25
Fixed Rate Securities........... 25
Floating Rate Securities........ 25
Indexed Securities.............. 25
Book-Entry Registration......... 26
Definitive Securities........... 29
Reports to Securityholders...... 29
DESCRIPTION OF THE TRANSFER AND
SERVICING AGREEMENTS............ 32
Sale and Assignment of
Receivables................... 32
Accounts........................ 34
Servicing Procedures............ 35
Collections..................... 35
Servicing Compensation and
Payment of Expenses........... 35
Net Deposits.................... 36
Advances........................ 36
Certain Matters Regarding the
Servicer...................... 36
Distributions................... 37
Credit Enhancement.............. 37
Statements to Trustees and
Trust......................... 38
Evidence as to Compliance....... 38
Events of Servicing
Termination................... 39
Rights Upon Event of Servicing
Termination................... 39
Waiver of Past Defaults......... 40
Amendment....................... 40
Payment of Notes................ 40
Termination..................... 40
Administration Agreement........ 41
CERTAIN LEGAL ASPECTS OF THE
RECEIVABLES..................... 42
Rights in the Receivables....... 42
Security Interests in the
Financed Vehicles............. 42
Repossession.................... 44
Notice of Sale; Redemption
Rights........................ 44
Deficiency Judgments and Excess
Proceeds...................... 45
Consumer Protection Laws........ 45
Other Limitations............... 46
ERISA CONSIDERATIONS.............. 46
PLAN OF DISTRIBUTION.............. 47
LEGAL MATTERS..................... 48
WHERE YOU CAN FIND MORE
INFORMATION..................... 49
INDEX OF TERMS.................... 50
</TABLE>
3
<PAGE>
PROSPECTUS SUMMARY
- This summary highlights selected information from this document and does
not contain all of the information that you need to consider in making
your investment decision. To understand all of the terms of an offering of
the Securities, read carefully this entire document and the accompanying
Prospectus Supplement.
- This summary provides an overview of certain information to aid your
understanding and is qualified by the full description of this information
in this Prospectus and the accompanying Prospectus Supplement.
<TABLE>
<S> <C>
THE PARTIES
Issuer....................... Each Series of Securities will be issued by a separate Trust
created pursuant to a Trust Agreement.
Seller and Servicer.......... First Security Bank-Registered Trademark-, N.A. will be the
Seller and the Servicer for each Trust.
Owner Trustee................ Each Trust will have an Owner Trustee as specified in the
related Prospectus Supplement.
Indenture Trustee............ Each Trust will have an Indenture Trustee as specified in
the related Prospectus Supplement.
THE OFFERED SECURITIES We will describe in each Prospectus Supplement the
Securities we are offering at that time. The offered
Securities will include one or more classes of asset-backed
Notes and may include one or more classes of asset-backed
Certificates. We sometimes refer to the Notes and
Certificates issued by the same Trust as a "SERIES". We may
not offer all classes of a Series pursuant to this
Prospectus. Instead, we may retain one or more classes and
we may sell one or more classes in private placements.
THE NOTES
Each Note will represent the right to receive payments of
principal and interest as described in the related
Prospectus Supplement.
In general, each class of Notes will have a stated principal
amount and will bear interest at a specified rate or rates
(with respect to each class of Notes, the "INTEREST RATE").
The Interest Rate for each class of Notes, or the method for
determining the Interest Rate, will be specified in the
related Prospectus Supplement. Each class of Notes may have
a different Interest Rate, which may be fixed, variable or
adjustable, or any combination of these. Each class of Notes
may also provide for principal payments to be made at
different times and in different amounts.
If a Series includes two or more classes of Notes, each
class may differ as to the timing and priority of payments
of principal and interest, seniority and allocations of
losses. Some classes of Notes may be subordinated to other
classes of Notes of the same Series as described in the
related Prospectus
</TABLE>
4
<PAGE>
<TABLE>
<S> <C>
Supplement.
THE CERTIFICATES
The Certificates included in each Series may or may not be
offered under this Prospectus and the related Prospectus
Supplement. In general, each class of Certificates will have
a stated Certificate Balance (the "CERTIFICATE BALANCE") and
will accrue interest on such Certificate Balance at a
specified rate (with respect to each class of Certificates,
the "PASS-THROUGH RATE"). Each Prospectus Supplement will
specify the Pass-Through Rate for each class of Certificates
offered by that Prospectus Supplement or the method for
determining the Pass-Through Rate. Each Certificate offered
hereby will represent the right to receive payments of
interest and with respect to Certificate Balance as
described in the related Prospectus Supplement. Each class
of Certificates may also provide for payments in respect of
Certificate Balance to be made at different times and in
different amounts.
Payments on the Certificates issued by a Trust will be
subordinated in priority to payments on the related Notes.
The details of the subordination will be specified in the
related Prospectus Supplement. In addition, if a Series
includes two or more classes of Certificates, each class may
differ as to timing and priority of payments of interest and
with respect to Certificate Balance, seniority and
allocations of losses. Some classes of Certificates may be
subordinated to other classes of Certificates of the same
Series as described in the related Prospectus Supplement.
REGISTRATION AND CLEARANCE
Unless otherwise provided, Securities offered hereby will be
registered in the name of Cede & Co., as the nominee of the
Depository Trust Company in the United States or Cedel or
Euroclear in Europe. A holder of Securities will not receive
a definitive certificate representing its interest, except
in certain limited circumstances when Securities in fully
registered, certificated form are issued.
DENOMINATIONS
Securities will be available for purchase in the
denominations specified in the related Prospectus
Supplement. If no denomination is specified, then the Notes
will be available for purchase in minimum denominations of
$1,000 and in greater whole-dollar denominations and the
Certificates will be available for purchase in minimum
denominations of $20,000 and in greater whole-dollar
denominations.
RATINGS
Each Prospectus Supplement will specify the ratings upon
which the issuance of the related Securities will be
conditioned.
</TABLE>
5
<PAGE>
<TABLE>
<S> <C>
THE TRUST PROPERTY The primary assets of each Trust will be a pool of fixed
rate retail motor vehicle installment sales contracts and
installment loans made by the Seller or through a Dealer
that sold a motor vehicle. The Receivables in each Trust
will be sold by the Seller to the Trust. The Trust Property
will also include:
- All monies due or received under the Receivables after
the Cutoff Date specified in the related Prospectus
Supplement;
- A security or ownership interest in the new and used
automobiles and light trucks financed by the
Receivables;
- Any proceeds from claims on certain related insurance
policies or from obligors under the Receivables;
- Certain amounts on deposit in the Trust Accounts as
described herein and in the related Prospectus
Supplement;
- Certain rights of the Seller relating to Receivables
from agreements between the Seller and the Dealers that
sold the Financed Vehicles and related documents; and
- All rights of the Trust under the Sale and Servicing
Agreement.
In addition, a Trust may have the right to purchase
additional Receivables (the "SUBSEQUENT RECEIVABLES") from
the Seller after the related Securities are issued if
certain conditions are satisfied. In such case, a portion of
the proceeds from the sale of the related Securities
(referred to as the "PRE-FUNDED AMOUNT") will be held in a
Trust Account (referred to as the "PRE-FUNDING ACCOUNT") and
used to pay the purchase price for Subsequent Receivables
and related purposes. The related Prospectus Supplement will
describe the right, if any, of a Trust to purchase
Subsequent Receivables.
The Trust Property will be assigned by each Trust to the
related Indenture Trustee for the benefit of the Noteholders
and the Certificateholders to the extent provided in the
related Indenture.
CREDIT ENHANCEMENT A holder of a class of Securities may benefit from one or
more features that provide additional payment protection.
These features are called "CREDIT ENHANCEMENT" and may
include any one or more of the following, as specified in
the related Prospectus Supplement:
- subordination of one or more other classes of Securities
- a Reserve Account
- a Yield Supplement Account
- Advances
- interest rate swaps or caps
</TABLE>
6
<PAGE>
<TABLE>
<S> <C>
- over collateralization
- letters of credit
- credit or liquidity facilities
- repurchase obligations
- third party payments or other support
- cash deposits
RESERVE ACCOUNT
If so specified in the related Prospectus Supplement, the
Trust will have a RESERVE ACCOUNT. The Reserve Account will
be funded as follows:
- On the Closing Date, the Seller will deposit the
Reserve Account Initial Deposit specified in the related
Prospectus Supplement.
- To the extent provided in the related Prospectus
Supplement, additional amounts will be deposited in the
Reserve Account in connection with the purchase of
Subsequent Receivables.
- To the extent specified in the related Prospectus
Supplement, the amount in the Reserve Account will be
supplemented by the deposit of funds remaining after
providing for amounts to be distributed to the holders
of the Notes and the Certificates and the payment to
the Servicer of the Servicing Fee.
Funds on deposit in the Reserve Account will be available on
each Distribution Date to cover shortfalls in distributions
of interest and principal on the Securities to the extent
described herein and in the related Prospectus Supplement.
Unless otherwise specified in the related Prospectus
Supplement, amounts in the Reserve Account (after giving
effect to all distributions to be made to or for the benefit
of the Noteholders, the Certificateholders and the Servicer)
in excess of the SPECIFIED RESERVE ACCOUNT BALANCE (as
defined in the related Prospectus Supplement) will be paid
to the Seller.
YIELD SUPPLEMENT AGREEMENT; YIELD SUPPLEMENT ACCOUNT
If so specified in the related Prospectus Supplement, the
Seller or a third party will enter into a yield supplement
agreement for any Trust and/or establish a yield supplement
account for the benefit of the holders of the related
Securities. A yield supplement agreement or account is
designed to provide for payments to Securityholders where
the interest rate of a Receivable is less than the sum of
the applicable Interest Rate or Pass-Through Rate and the
Servicing Fee Rate.
</TABLE>
7
<PAGE>
<TABLE>
<S> <C>
SERVICING AND With respect to each Series of Securities, the Seller will
ADMINISTRATIVE transfer the Receivables to the related Trust pursuant to a
ARRANGEMENTS Sale and Servicing Agreement between the Seller and the
Trust (the "SALE AND SERVICING AGREEMENT"). The Servicer
will service, manage, maintain custody of and make
collections on the Receivables. The Servicer will receive a
servicing fee from the related Trust. In addition, the Bank,
as the Administrator, will undertake certain administrative
duties with respect to each Trust under an Administration
Agreement. See "Description of the Transfer and Servicing
Agreements-- Servicing Compensation and Payment of
Expenses."
The Prospectus Supplement may provide that the Servicer may
make an Advance with respect to each Receivable in an amount
described in the related Prospectus Supplement if payments
are due and unpaid on such Receivable. The Servicer will not
be obligated to make any Advance in respect of a Receivable
to the extent that it does not expect to recover such
Advance from subsequent collections or recoveries on such
Receivable. The Servicer will be entitled to reimbursement
of all Advances.
OPTIONAL REPURCHASE Unless otherwise provided in the Prospectus Supplement, the
Servicer will have the option to purchase the Receivables of
a Trust in the manner and on the terms and conditions
described under "Description of the Transfer and Servicing
Agreements--Termination." Any such purchase would result in
the payment in full of all outstanding Securities.
THE AGREEMENTS With respect to each Trust, we will enter into the
agreements described below. We may also enter into other
agreements to provide for Credit Enhancement or other
matters.
SALE AND SERVICING AGREEMENT
A Sale and Servicing Agreement between the Seller, the Trust
and the Indenture Trustee will provide for the transfer of
the Receivables by the Seller to the related Trust. The Sale
and Servicing Agreement will also appoint the Servicer and
set forth servicing procedures, compensation and other
matters relating to the servicing of the Receivables, as
well as matters relating to collections and distributions on
the Securities.
THE TRUST AGREEMENT
A Trust Agreement between the Seller and the Owner Trustee
will provide for the formation of each Trust and the
issuance of the related Certificates.
THE INDENTURE
For each Trust, the Notes will be issued pursuant to the
terms of an Indenture between the Trust and the related
Indenture Trustee. The Trust Property will be pledged by
each Trust to the related Indenture Trustee for the benefit
of the Notes and Certificates to the extent provided in such
Indenture.
ADMINISTRATION AGREEMENT
</TABLE>
8
<PAGE>
<TABLE>
<S> <C>
Pursuant to an Administration Agreement between the Bank,
the Trust and the related Indenture Trustee, the Bank will
agree to act as Administrator and provide notices and
perform on behalf of the related Trust and Owner Trustee
certain other administrative obligations required by the
related Indenture.
TAX STATUS For information concerning the application of the federal
income tax laws, including whether the Notes will be
characterized as debt for federal income tax purposes, see
the accompanying Prospectus Supplement. We urge you to
consult your own tax counsel before you purchase any
Securities.
ERISA CONSIDERATIONS Subject to the considerations discussed under "ERISA
Considerations" herein and in the related Prospectus
Supplement, the Notes are eligible for purchase by employee
benefit plans.
No Certificates may be acquired by any employee benefit plan
subject to the Employee Retirement Income Security Act of
1974, as amended, or by any individual retirement account.
See "ERISA Considerations" herein and in the related
Prospectus Supplement.
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RISK FACTORS
You should consider the following risk factors in deciding whether to purchase
any Securities.
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MATURITY AND PREPAYMENT Obligors may prepay the Receivables in full or in part. In
CONSIDERATIONS addition, prepayment may result from defaults or the receipt
of proceeds from credit life, disability or physical damage
insurance. Also, the Seller may be required to repurchase
Receivables from a Trust in certain circumstances, and the
Servicer may have the right to purchase all remaining
Receivables from a Trust pursuant to its optional purchase
right. See "Description of the Transfer and Servicing
Agreements--Sale and Assignment of Receivables" and
"--Termination." Each such prepayment, repurchase or
purchase will shorten the average life of the related
Securities. Prepayment rates may be influenced by a variety
of economic, social and other factors and cannot be
predicted with any assurance. For example, decreases in
interest rates and the fact that the Obligor may not sell or
transfer the Financed Vehicle without the consent of the
Seller may affect the rate of prepayment. If prepayments
occurred after a decline in interest rates, you may be
required to reinvest your funds at a return lower than the
applicable Interest Rate or Pass Through Rate. You will bear
all reinvestment risk resulting from a faster or slower rate
of prepayment, repurchase or extension of the Receivables
held by your Trust unless otherwise provided in the related
Prospectus Supplement. See "Maturity and Prepayment
Assumptions."
EXTENSIONS AND DEFERRALS In certain circumstances, the Servicer may permit an
OF PAYMENTS ON RECEIVABLES extension on payments due on Receivables on a case-by-case
basis. In addition, the Servicer has historically offered
payment deferrals to all Obligor's that meet the Bank's
eligibility requirements for such deferrals in June and in
December of each year. Any such deferrals or extensions may
extend the maturity of the Receivables and increase the
weighted average life of the related Securities. Any fees
received by the Servicer associated with such deferrals or
extensions will increase the principal balance of the
related Receivable. Any reinvestment risk resulting from
extensions or deferrals of payments on Receivables will be
borne entirely by you as a Securityholder. However, unless
otherwise provided in the related Prospectus Supplement, if
any payment deferral of a Receivable results in extending
the term beyond the latest FINAL SCHEDULED DISTRIBUTION DATE
(as defined in the related Prospectus Supplement) for any
class of Securities, the Servicer will be required to
purchase the Receivable from the related Trust. See "The
Motor Vehicle Loan Portfolio-- Underwriting."
LIMITED ASSETS OF EACH Each Trust will not have any significant assets or sources
TRUST of funds other than the Receivables and any Credit
Enhancement provided for in the related Prospectus
Supplement. The Notes will represent obligations solely of,
and the Certificates will represent interests in, the
related Trust. Except to the extent specifically described
in the related Prospectus Supplement, the Notes and the
Certificates will not be insured or guaranteed by the
Seller, any Owner Trustee, any Indenture Trustee, any of
their affiliates or any other person or entity. You must
rely on payments on the related Receivables and, if
available, amounts on deposit in the Trust Accounts and any
Credit
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Enhancement to the extent provided in the related Prospectus
Supplement for repayment of your Securities.
POTENTIAL PRIORITY OF The Seller will file financing statements to perfect the
CERTAIN LIENS interest of each Trust in its Receivables as required by the
Uniform Commercial Code in the relevant states (the "UCC").
Similarly, financing statements will be filed as required by
the UCC to perfect the pledge of the Receivables by the
Trust to the Indenture Trustee. For each Trust, the Servicer
will appoint First Security Service Company, an affiliate of
the Servicer, as the custodian to hold the Receivables and
the Receivable Files. The Receivables Files will not be
segregated, stamped or otherwise marked to indicate that
they have been sold to the Trust or pledged to the Indenture
Trustee. However, the Servicer and First Security Service
Company will note in their computer records that the
Receivables have been sold to the Trust and pledged to the
Indenture Trustee. If another party purchases or takes a
security interest in the Receivables (i) for value, (ii) in
the ordinary course of business and (iii) without actual
knowledge of the Trust's and the Indenture Trustee's
interest, such purchaser or secured party will acquire an
interest in the Receivables superior to the interest of the
Trust and the Indenture Trustee.
The Seller will assign its security interest in the Financed
Vehicles to the Trust and the Trust will pledge such
security interest to the Indenture Trustee. The certificates
of title or ownership of the Financed Vehicles will not
identify the Trust or the Indenture Trustee as the new
secured party. In Utah, Idaho and most other states, in most
cases, if (i) the Bank files an application requesting the
Bank's lien be noted on the certificates of title or
ownership, and/or (ii) the Bank has possession of such
certificates with the notation within 20 days after the
Obligor takes possession of the Financed Vehicle, then the
security interest of the Trust and the Indenture Trustee in
the Financed Vehicle will be perfected against other
security interests. Idaho also has procedures allowing for a
paperless electronic record of title. There is a risk,
however, in certain states that if the Trust or the
Indenture Trustee is not identified as the new secured party
on the certificate of title, its security interest may not
be perfected. In the event a Trust or the Indenture Trustee
does not have a perfected security interest in a Financed
Vehicle, its security interest, and the security interest of
the Indenture Trustee, would be subordinate to a bankruptcy
trustee of the Obligor, a subsequent purchaser of the
Financed Vehicle or a holder of a perfected security
interest. See "Certain Legal Aspects of the Receivables."
POSSIBLE REDUCTIONS AND The Seller intends that the transfer of Receivables to each
DELAYS IN PAYMENTS DUE TO Trust be treated as a sale. If the Seller were to become
BANKRUPTCY AND INSOLVENCY insolvent, the Federal Deposit Insurance Act ("FDIA"), as
amended by the Financial Institutions Reform, Recovery and
Enforcement Act of 1989 ("FIRREA"), gives certain powers to
the Federal Deposit Insurance Corporation ("FDIC"), if it
were approved as receiver. FDIC staff positions taken prior
to the passage of FIRREA do not suggest that the FDIC would
interrupt the timely transfer to a Trust of payments
collected on the related Receivables. Under FIRREA, if the
transfer of the Receivables to the Trust were characterized
as a loan secured by a pledge of Receivables rather than a
sale, such Trust's security interest in the Receivables
should be respected by the FDIC if--
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- the Seller's transfer of the Receivables is the grant of a
valid security interest in the Receivables to such Trust;
- the Seller becomes insolvent and the FDIC is appointed
conservator or receiver of the Seller; and
- the security interest (a) is validly perfected before
the Seller's insolvency and (b) was not taken in
contemplation of the Seller's insolvency or with the
intent to hinder, delay or defraud the Seller or its
creditors.
If the FDIC were to assert a different position, your
payments of outstanding principal and interest could be
delayed and possibly reduced or the FDIC might have the
right to repay the Securities early and for an amount which
may be greater or less than their principal balance. For
example, under the FDIA, the FDIC could--
- require the Trust or the Indenture Trustee to go
through an administrative claims procedure to establish
its right to those payments;
- request a stay of proceedings with respect to the
Seller; or
- reject the Seller's sales contract and limit the
Trust's resulting claim to "actual direct compensatory
damages."
See "Certain Legal Aspects of the Receivables--Other
Limitations" in this Prospectus.
LIMITED ENFORCEABILITY Federal and state consumer protection laws regulate the
OF THE RECEIVABLES creation and enforcement of consumer loans such as the
Receivables. Specific statutory liabilities are imposed upon
creditors who fail to comply with these regulatory
provisions. In some cases, this liability could affect an
assignee's ability to enforce secured loans such as the
Receivables. If an Obligor had a claim against any Trust for
violation of these laws prior to the Cutoff Date, the Seller
must repurchase the Receivable unless the breach is cured.
If the Seller fails to repurchase such Receivable, payments
in respect of your Security may be reduced or delayed.
LIMITED RELIANCE ON THE The Bank and its affiliates are generally not obligated to
BANK AND ITS AFFILIATES make any payments to you in respect of your Securities and
do not guarantee payments on the Receivables or your
Securities. However, the Bank, as Seller will make
representations and warranties with respect to the
characteristics of the Receivables. In certain
circumstances, the Seller may be required to repurchase
Receivables with respect to which the representations and
warranties have been breached. If the Seller fails to
repurchase such Receivables, payments in respect of your
Security may be reduced or delayed. See "Description of the
Transfer and Servicing Agreements--Sale
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and Assignment of Receivables."
In addition, in certain circumstances, the Servicer may be
required to purchase Receivables. If the Servicer fails to
purchase Receivables, payments in respect of your Security
may be reduced or delayed. See "Description of the Transfer
and Servicing Agreements--Servicing Procedures." If the Bank
were to stop acting as the Servicer, delays in processing
payments on the Receivables and information in respect of
the Receivables could occur and result in delays in payments
to you.
SUBORDINATION To the extent provided in the related Prospectus Supplement,
payments of interest and/or principal on the Securities of
any class of Securities may be subordinated in priority of
payment to interest and/or principal due on one or more
other classes of Securities in the same Series. As a result,
if your class of Securities is subordinated, you will not
receive any distributions on a Distribution Date until the
full amount of interest and/or principal of senior classes
has been allocated to such senior Securities. In addition,
to the extent provided in the related Prospectus Supplement,
the Class B Notes of a Series may not be entitled to vote on
matters while any Class A Notes remain outstanding.
RISK OF COMMINGLING OF With respect to each Trust, the Servicer will generally be
ASSETS required to deposit all collections and proceeds of the
Receivables into the Collection Account of such Trust within
two business days of receipt. However, if certain conditions
satisfactory to the Rating Agencies are satisfied, the
Servicer will not be required to deposit such amounts in the
Collection Account until shortly before funds are needed to
make required distributions to the Securityholders. Until
these funds have been deposited in the Collection Account,
the Servicer may invest these funds at its own risk and for
its own benefit and will not segregate them from its own
funds. If the Servicer cannot deposit the funds in the
Collection Account on the specified date, you might incur a
loss. See "Description of the Transfer and Servicing
Agreements--Collections on the Receivables."
LIMITED ABILITY TO RESELL The related Underwriters may assist in resales of the
SECURITIES Securities but they are not required to do so. A secondary
market for any Securities may not develop. If a secondary
market does develop, it might not continue or it might not
be sufficiently liquid to allow you to resell any of your
Securities.
LIMITED SIGNIFICANCE OF Each class of Securities offered hereunder will be issued
RATINGS only if the rating specified in the related Prospectus
Supplement is received. A security rating is not a
recommendation to buy, sell or hold the Securities. The
ratings may be revised or withdrawn at any time. Ratings on
the Securities do not address the timing of distributions of
principal and interest on the Securities prior to the
applicable Final Scheduled Distribution Date.
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FORMATION OF THE TRUSTS
With respect to each Series of Securities, the Seller will establish a separate
trust (a "TRUST") by selling and assigning the Receivables and certain other
Trust Property to the related Trust in exchange for such Securities. The Notes
and Certificates of a Series are collectively referred to as "SECURITIES." Prior
to such sale and assignment, such Trust will have no assets or obligations or
any operating history. No Trust will engage in any activity other than acquiring
and holding the related Trust Property, issuing the related Securities and
making payments on the related Securities.
The Servicer will service the Receivables of each Trust, either directly or
through subservicers, and will be paid the Servicing Fee out of collections from
the Receivables, prior to distributions to the Securityholders. The Servicer
will also be entitled to the Supplemental Servicing Fee. Certain other expenses
of each Trust will be paid by the Servicer or by the Seller as provided in the
applicable Sale and Servicing Agreement. See "Description of the Transfer and
Servicing Agreement--Servicing Compensation and Payment of Expenses."
For each Trust, the Servicer will appoint an affiliate, First Security Service
Company, to hold the Receivables and Receivable Files as custodian (the
"CUSTODIAN") for the Trust and on behalf of the Indenture Trustee. Although the
Receivables will not be marked or stamped to indicate that they have been sold
to a Trust or pledged to an Indenture Trustee, and the certificates of title for
the Financed Vehicles will not be endorsed or otherwise amended to identify such
Trust or Indenture Trustee as the new secured party, the Servicer and the
Custodian will indicate in their computer records that the Receivables have been
sold to that Trust and pledged to the related Indenture Trustee. Under such
circumstances and in certain jurisdictions, a Trust's or an Indenture Trustee's
interest in the Receivables and the Financed Vehicles may be subordinate to
certain third parties. See "Certain Legal Aspects of the Receivables--Rights in
the Receivables" and "--Security Interests in the Financed Vehicles."
No Trust will acquire any assets other than the related Trust Property, and it
is not anticipated that any Trust will have a need for additional capital
resources. Because each Trust will have no operating history upon its
establishment and will not engage in any activity other than acquiring and
holding the Trust Property, issuing the Securities and distributing payments on
the Securities, no historical or pro forma financial statements or ratios of
earnings to fixed charges with respect to a Trust have been included herein, nor
will any be included in a Prospectus Supplement.
TRUST PROPERTY
The primary assets of each Trust (the "TRUST PROPERTY") will include (i) a pool
of fixed rate motor vehicle installment sales contracts and installment loans
made by the Seller or through a motor vehicle dealer (a "DEALER") that sold a
motor vehicle (collectively, for any Trust, the "RECEIVABLES"), (ii) all monies
due or received under such Receivables after a date which is specified in the
related Prospectus Supplement (a "CUTOFF DATE"), (iii) certain amounts from time
to time on deposit in the related Trust Accounts, including any Reserve Account,
(iv) security interests in the new and used automobiles and light trucks
financed by the Receivables (the "FINANCED VEHICLES"), (v) certain rights of
such Trust under the related Yield Supplement Agreement (if any), (vi) the
Seller's rights (if any) to receive proceeds from claims on credit life,
disability, theft and physical damage insurance policies covering such Financed
Vehicles or the related obligors under the Receivables (each, an "OBLIGOR"),
(vii) the Seller's right to all documents and information contained in the
Receivable Files, (viii) the rights of such Trust under the related Sale and
Servicing Agreement, (ix) certain of the Seller's rights relating to such
Receivables under agreements between the Seller and the Dealers that sold the
Financed Vehicles and related documents (the "DEALER AGREEMENTS"), (x) the
rights under any applicable Credit Enhancement to the extent specified in the
applicable Prospectus Supplement and (xi) all proceeds (within the meaning of
the UCC) of the foregoing.
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THE MOTOR VEHICLE LOAN PORTFOLIO
GENERAL
The Bank originates retail motor vehicles installment sales contracts and
installment loans secured by new and used automobiles and light-duty trucks
manufactured by a number of automobile manufacturers through Dealers and
branches of the Bank ("MOTOR VEHICLE LOANS"). The Motor Vehicle Loans to be
transferred to any Trust have been or will be originated by participating
Dealers or will be made by the Bank directly to borrowers. All applications are
reviewed by the Bank in accordance with its established underwriting procedures.
Historically, a substantial portion of the Bank's portfolio of Motor Vehicle
Loans are located in Utah and Idaho, and that area of the country generally.
Detailed information relating to the geographic distribution of Motor Vehicle
Loans will be set forth in the related Prospectus Supplement.
The following is a description of the origination, underwriting and servicing of
the Bank's portfolio of Motor Vehicle Loans as of the date of this Prospectus.
Any material changes to this information with respect to a Trust known at the
time such Trust is created will be set forth in the related Prospectus
Supplement.
ORIGINATION OF RECEIVABLES
The Bank's direct loans are referred to, and approved at, the Direct Loan Center
located in Boise. Applications for credit which originate with Dealers are sent
via facsimile to the Application Processing Center in Boise. These applications
are data-entered and transmitted through the Application Processing System to
Regional Dealer Services Centers located in Salt Lake City, Utah and Boise and
Lewiston, Idaho. These centers are responsible for all credit analysis and
credit decisions on indirect loan requests.
Bank wide consumer loan collections are performed by the Consumer Collection
Center located in Salt Lake City.
The Consumer Loan Servicing Center located in Boise, reviews and tracks all loan
documentation, stores and maintains all loan files, follows up on lien
perfection, processes payments, reconciles accounting records and provides for
internal and external reporting for all of the Bank's direct and indirect
consumer lending business. In addition, this department provides central
processing of manufacturers' drafts and flooring requests for the Regional
Dealer Services Centers and processing of flooring billing and payments.
Credit administration is provided by the Small Business and Consumer Loan
Administration department located in Boise. This department provides policy and
functional guidance for all areas of consumer lending.
UNDERWRITING
The Bank uses the applicant's creditworthiness as the basic criterion in
purchasing a retail installment sale contract from a Dealer and in making an
installment loan. Each applicant is evaluated individually by the Bank based on
underwriting guidelines developed by the Bank. These underwriting guidelines are
intended to assess the applicant's ability to repay such loan and the adequacy
of the Financed Vehicle as collateral. Among the criteria considered in
evaluating the individual applications are (i) stability of the applicant with
specific regard to the applicant's length of residence in the area, occupation,
length of employment, and whether the applicant rents or owns a residence, (ii)
the applicant's payment history, (iii) a debt service to net monthly income
ratio test, and (iv) a loan to value ratio test taking into account the age,
type and market value of the Financed Vehicle.
The Bank obtains information from the loan application form which generally
lists the applicant's income, deposit accounts, liabilities, credit history,
employment history, and a description of the Financed Vehicle. Upon receipt of
an application, the Bank obtains a credit bureau report from a major credit
reporting agency summarizing the applicant's credit history and paying habits,
including such items as open accounts, delinquent payments, bankruptcies,
repossessions, lawsuits, and judgments. The Bank's analysts generally verify the
applicant's employment or, where appropriate, check directly with the
applicant's creditors. The Bank's general policy has been to reject applications
for applicants whose debt service to net monthly income ratio exceeds 45%.
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The amount financed by the Bank under a retail installment sale contract
generally will not exceed (i) for a new Financed Vehicle, the Dealer wholesale
price, plus sales tax, license fees, title fees, service and warranty contracts,
and premiums for credit life and credit accident and health insurance obtained
in connection with the vehicle or the financing and (ii) for a used Financed
Vehicle, 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. However, the maximum
amounts advanced for Motor Vehicle Loans is often less than such amounts
depending on a number of factors, including the length of the Motor Vehicle Loan
term and the model and year of the Financed Vehicle. These adjustments are made
to assure the Financed Vehicle constitutes adequate collateral to secure the
Motor Vehicle Loan.
Since January 1994, an empirically based credit scoring process has been used to
objectively index an applicant's creditworthiness. This scoring process was
created using historical information from the database of Motor Vehicle Loans
owned and serviced by the Bank. Through credit scoring, the Bank evaluates
credit profiles in order to quantify credit risk. The credit scoring process
entails the use of statistics to correlate common characteristics with credit
risk. The credit scoring process used by the Bank is periodically reviewed and
validated and, if necessary, updated based upon statistical sampling of actual
credit results. The Bank's credit scoring process is intended to provide a basis
for lending decisions, but is not meant to supersede the judgment of the credit
analyst.
The information for an applicant is evaluated by the Bank's experienced credit
officers as a package; no one factor is determinative to the analysis. As a
result, certain Motor Vehicle Loans may not comply with all of the Bank's
guidelines. Deviations from the guidelines must be approved by a lending officer
with appropriate authority. Motor Vehicle Loans which do not comply with all of
the Bank's guidelines must have strong compensating factors which indicate a
high ability of the applicant to repay the loan. Any Receivables sold by the
Bank to any Trust which were the subject of special financing or other
promotional programs will have been approved by the Bank in accordance with its
normal and customary underwriting practices and procedures for all Motor Vehicle
Loans.
The Bank has established internal control procedures and performs periodic
audits to ensure compliance with the underwriting guidelines and its established
policies and procedures for Motor Vehicle Loans originated directly by the Bank
as well as those originated through Dealers.
Dealers from which the Bank purchases retail installment sale contracts have
been selected by the Bank based on the Dealer's financial and operating history.
Each such Dealer has made representations and warranties to the Bank with
respect to the contracts originated through it and the security interests in the
Financed Vehicles relating thereto, although such representations and warranties
do not relate to the creditworthiness of any applicant or the collectibility of
any loans. However, as to a generally small percentage of the Motor Vehicle
Loans, there is recourse to a Dealer ("DIRECT RECOURSE") if an applicant
defaults under a Receivable, subject to certain conditions to be fulfilled by
the Bank. Upon breach of any representation or warranty made by a Dealer with
respect to a retail installment sale contract originated through it, the Bank
has a right against such Dealer to require it to repurchase such contract.
Generally, in determining whether to exercise such right or any right of direct
recourse, the Bank considers the prior performance of the Dealer and other
business and commercial considerations. The Bank, as Servicer, is obligated to
enforce such rights with respect to Dealer Agreements relating to the
Receivables in accordance with such customary practices, and the right to any
proceeds received upon such enforcement will be conveyed to the applicable
Trust.
SERVICING AND COLLECTIONS
Collection activities with respect to delinquent Motor Vehicle Loans are
performed by the Bank's collection personnel. Under current practices,
collection personnel generally initiate contact, by mail, with obligors whose
Motor Vehicle Loans have become more than 10 days delinquent. In the event that
such contact fails to resolve the delinquency, the collection personnel
typically contact the obligor by telephone after the Motor Vehicle Loan becomes
13 days delinquent. Generally, after a Motor Vehicle Loan continues delinquent
for 90 days, the Financed Vehicle is repossessed; however, under certain
circumstances, the Financed Vehicle may be repossessed immediately after a Motor
Vehicle Loan has become delinquent. After repossession, the Bank is required to
give reasonable notice of any proposed sale of the Financed Vehicle, and the
Bank's practice is to give the obligor 10 days' notice. Losses may occur in
connection with delinquent Motor Vehicle Loans and can arise in several ways,
including inability to locate
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the vehicle to be repossessed. The Bank recognizes losses on Motor Vehicle Loans
at the time it deems such Motor Vehicle Loans to be uncollectible, which is
generally at the time it has exhausted all of its non-legal remedies, typically
no later than the 120th day of delinquency. The servicing and charge-off
policies and collection practices of the Bank may change over time in accordance
with the Bank's business judgment. Upon repossession and disposition of the
Financed Vehicle, any deficiency remaining will be pursued to the extent deemed
practical.
The Bank, as Servicer, may, on a case-by-case basis, permit extensions with
respect to the due dates of Receivables or payment deferrals in the discretion
of a senior credit officer other than the origination officer. In addition to
such extensions, the Bank, as Servicer, has historically offered payment
deferrals to a broader population of qualifying applicants in June and in
December of each year. Unless otherwise specified in a Prospectus Supplement,
all obligors that meet the Bank's eligibility requirements will be given the
opportunity to take advantage of such payment deferrals. Any such deferrals or
extensions may extend the maturity of the applicable Receivable and increase the
weighted average life of the Receivables and any fees associated therewith will
increase the principal balance of the related Receivable. Any deferral or
extension could also result in delays of payments on the related Securities.
PHYSICAL DAMAGE INSURANCE
The Bank requires that an obligor provide an insurance policy covering collision
and comprehensive insurance. The deductibles are a maximum of $1,000 (or such
other amount as the Servicer determines, consistent with the standard of care
required by the applicable Sale and Servicing Agreement) each for the collision
insurance and the comprehensive insurance. 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 Motor Vehicle Loan is less than $3,500 (or such other
amount as the Servicer determines, consistent with the standard of care required
by the applicable Sale and Servicing Agreement) 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. Unless otherwise specified in the Prospectus Supplement, such
additional principal and any interest thereon will not be deemed 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 on the Motor
Vehicle Loans is currently written through Balboa Life and Casualty Company.
Balboa Life and Casualty Company also currently provides the Bank with an errors
and omissions policy for insurance follow-ups.
DELINQUENCY AND LOSS EXPERIENCE
Fluctuations in delinquencies, repossessions and charge-offs generally follow
trends in the overall economic environment and may be affected by such factors
as increased competition for obligors, rising consumer debt burden per household
and increases in personal bankruptcies. Information with respect to
delinquencies, repossessions and charge-offs will be set forth in the Prospectus
Supplement, including, to the extent appropriate, data indicating the
delinquency and credit loss/repossession experience for each of the last five
calendar years of the Bank's entire portfolio of Motor Vehicle Loans. No
assurance can be made that the performance of the Receivables in any Trust will
be similar to historical experience.
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MATURITY AND PREPAYMENT ASSUMPTIONS
Full or partial prepayments on the Receivables in a Trust will have the effect
of reducing the weighted average life of the Securities, while delinquencies by
Obligors under the Receivables, as well as extensions and deferrals on the
Receivables, will have the effect of increasing the weighted average life of the
Securities. The Receivables may be prepaid at any time and mandatory prepayments
of a Receivable may result from, among other things, the sale, insured loss or
other disposition of the related Financed Vehicle or the Receivable becoming a
Liquidating Receivable. If a Prospectus Supplement provides that the property of
the related Trust will include a Pre-Funding Account, the related Securities
will be subject to partial redemption on or immediately following the end of the
FUNDING PERIOD (as defined in the related Prospectus Supplement) in an amount
and in the manner specified in the related Prospectus Supplement. No assurance
can be given as to the level or timing of prepayments. If prepayments were to
occur after a decline in interest rates, investors seeking to reinvest their
funds might be required to invest at a return lower than the applicable Interest
Rate or Pass-Through Rate. Securityholders will bear all reinvestment risk
resulting from prepayment of the Receivables in the related Trust.
The rate of prepayments on the Receivables may be influenced by a variety of
economic, social and other factors, including the fact that an Obligor may not
sell or transfer a Financed Vehicle without the consent of the Servicer. The
Servicer believes that the actual rate of prepayments will result in a
substantially shorter weighted average life than the scheduled weighted average
life of the Receivables in a Trust. Any reinvestment risks resulting from a
faster or slower incidence of prepayment of such Receivables will be borne by
the related Securityholders. See "Description of the Transfer and Servicing
Agreements--Termination" regarding the Servicer's option to purchase all of the
Receivables in a Trust in certain circumstances.
The Bank maintains certain records of the historical prepayment experience of
its portfolio of Motor Vehicle Loans. The Bank does not believe that such
records are adequate to provide meaningful information with respect to the
Receivables in a Trust. In any event, no assurance can be given that prepayments
on such Receivables would conform to any historical experience, and no
prediction can be made as to the actual prepayment experience to be expected
with respect to any Receivables.
POOL FACTORS AND TRADING INFORMATION
The "NOTE POOL FACTOR" for each class of Notes will be a seven-digit decimal
which the Servicer will compute prior to each distribution with respect to such
class of Notes expressing the remaining outstanding principal balance of such
class of Notes, as of the close of such date (after giving effect to payments to
be made on such date), as a fraction of the initial outstanding principal
balance of such class of Notes. The "CERTIFICATE POOL FACTOR" for each class of
Certificates, if any, will be a seven-digit decimal which the Servicer will
compute prior to each distribution with respect to such class of Certificates,
as of the close of such date (after giving effect to distributions to be made on
such date), as a fraction of the initial Certificate Balance of such class of
Certificates. Each Note Pool Factor and each Certificate Pool Factor will be
1.0000000 as of the date of the initial issuance of the Securities (the "CLOSING
DATE") and thereafter will decline to reflect reductions in the outstanding
principal balance of the applicable class of Notes or the reduction of the
Certificate Balance of the applicable class of Certificates, as the case may be.
A Noteholder's portion of the aggregate outstanding principal balance of the
related class of Notes is the product of (i) the original denomination of such
Noteholder's Note and (ii) the applicable Note Pool Factor. A
Certificateholder's portion of the aggregate outstanding Certificate Balance for
the related class of Certificates is the product of (a) the original
denomination of such Certificateholder's Certificate and (b) the applicable
Certificate Pool Factor.
Securityholders will receive periodic reports concerning payments received on
the Receivables, the Aggregate Receivables Balance, each Certificate Pool Factor
or Note Pool Factor, as applicable, in each case related to such Trust, and
various other items of information specified in the related Prospectus
Supplement. In addition, Securityholders of record during any calendar year will
be furnished information for tax reporting purposes not later than the latest
date permitted by law. See "Certain Information Regarding the
Securities--Reports to Securityholders."
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USE OF PROCEEDS
Unless the related Prospectus Supplement provides for other applications, the
net proceeds from the sale of the Securities of a given Series (after making the
initial deposit in the related Reserve Account, if any, Yield Supplement
Account, if any, or the deposit of the Pre-Funded Amount into the related
Pre-Funding Account, if any) will be added to the Seller's general funds.
THE BANK
First Security Bank-Registered Trademark-, N.A., a national banking association
(the "BANK"), which will act as the Seller and Servicer for the Trusts, is a
subsidiary of First Security Corporation, a Delaware multi-state financial
services corporation based in Salt Lake City, Utah. First Security Corporation
is the oldest continuously operating multi-state bank holding company in the
United States. The Bank is a major participant in the motor vehicle financing
and dealer flooring markets in Utah, Idaho and neighboring market areas, as well
as in all facets of consumer and commercial lending.
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DESCRIPTION OF THE NOTES
GENERAL
With respect to each Trust, one or more classes of asset-backed notes (the
"NOTES") will be issued pursuant to the terms of an Indenture (each, an
"INDENTURE"), a form of which has been filed as an exhibit to the Registration
Statement of which this Prospectus forms a part. With respect to each Series,
the rights and benefits of the Trust in the Trust Property will be assigned to
the Indenture Trustee as collateral for the related Notes and Certificates to
the extent provided in the related Indenture. The following, as well as other
pertinent information included elsewhere in this Prospectus and in the related
Prospectus Supplement, describes the material terms of the Notes of any Series,
but does not purport to be complete and is subject to, and is qualified in its
entirety by reference to, the provisions of such Notes and the related
Indenture.
Unless otherwise specified in the related Prospectus Supplement, each class of
Notes will initially be represented by one or more Notes, in each case
registered in the name of a nominee of DTC (together with any successor
depository selected by the Trust, the "DEPOSITORY"), except as set forth below.
PRINCIPAL AND INTEREST ON THE NOTES
The timing and priority of payment, seniority, Interest Rate and amount of or
method of determining payments of principal and interest on each class of Notes
will be described in the related Prospectus Supplement. Each Prospectus
Supplement will specify the Distribution Dates on which payments will be made
(each, a "PAYMENT DATE"), which may be monthly, quarterly or otherwise. The
right of holders of any class of Notes to receive payments of principal and
interest may be senior or subordinate to the rights of holders of any other
class or classes of Notes of such Series, as described in the related Prospectus
Supplement. Unless otherwise provided in the related Prospectus Supplement,
payments of interest on the Notes of each Series will be made prior to payments
of principal thereon. To the extent provided in the related Prospectus
Supplement, a Series may include one or more classes of Notes ("STRIP NOTES")
entitled to (i) principal payments with disproportionate, nominal or no interest
payments or (ii) interest payments with disproportionate, nominal or no
principal payments. Each class of Notes may have a different Interest Rate,
which may be a fixed, variable or adjustable Interest Rate (and which may be
zero for certain classes of Strip Notes), or any combination of the foregoing.
The related Prospectus Supplement will specify the Interest Rate or the method
for determining the Interest Rate for each class of Notes of a given Series. One
or more classes of Notes of a Series may be redeemable in whole or in part under
the circumstances specified in the related Prospectus Supplement, including at
the end of any applicable Funding Period or as a result of the Servicer's
exercise of its purchase option.
In the case of a Series of Notes which includes two or more classes of Notes,
the sequential order and priority of payment in respect of principal and
interest of each such class, and any schedule or formula or other provisions
applicable to the determination thereof, will be set forth in the related
Prospectus Supplement. Payments in respect of principal and interest of any
class of Notes will be made on a pro rata basis among all the Noteholders of
such class.
Unless the related Prospectus Supplement specifies that Notes of different
classes within a Series will have different priorities, payments to Noteholders
of all classes within a Series in respect of interest will have the same
priority. Under certain circumstances, the amount available could be less than
the amount of total interest required with respect to the Notes on any of the
Payment Dates; in which case each class of Noteholders will receive its ratable
share (based upon the aggregate amount of interest due to each such class of
Noteholders) of the aggregate amount available to be distributed in respect of
interest on the Notes of such Series. See "Description of the Transfer and
Servicing Agreements--Distributions" and "--Credit Enhancement" herein.
To the extent specified in the related Prospectus Supplement, one or more
classes of the related Series of Notes may be entitled to receive principal
payments prior to the receipt of principal payments by other classes of such
Series. If so provided in the related Prospectus Supplement, a class or classes
of Notes may have a Final Scheduled Distribution Date of less than 397 days from
the applicable Closing Date and such class or classes may have received a
short-term rating by a Rating Agency that is in one of the two highest
short-term rating categories. The failure to
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pay such a class of Notes on or prior to the related Final Scheduled
Distribution Date would constitute an Event of Default under the related
Indenture.
To the extent specified in the related Prospectus Supplement, one or more
classes of the related Series of Notes may have principal payment schedules
which are fixed or based on targeted schedules derived by assuming differing
prepayment rates. One or more classes of the related Series of Notes may be
designated to receive principal payments on a Payment Date only if principal
payments have been made to another class of Notes, and to receive any excess
payments over the amount required to be paid to another class of Notes on such
Payment Date. Noteholders of such Notes would be entitled to receive as payments
of principal on any given Payment Date the applicable amounts set forth on such
schedule with respect to such Notes, in the manner and to the extent set forth
in the related Prospectus Supplement.
If the Servicer exercises its option, if any, to purchase the Receivables of a
Trust in the manner and on the respective terms and conditions described under
"Description of the Transfer and Servicing Agreements--Termination" herein, the
related outstanding Notes will be prepaid as set forth in the related Prospectus
Supplement. In addition, if the related Prospectus Supplement provides that the
property of a Trust will include a Pre-Funding Account, the related outstanding
Notes may be subject to partial prepayment on or immediately following the end
of the related Funding Period in an amount and manner specified in the related
Prospectus Supplement. In the event of such partial prepayment, the Noteholders
of the related Series may be entitled to receive a prepayment premium, in the
amount and to the extent provided in the related Prospectus Supplement.
THE INDENTURE
MODIFICATION OF INDENTURE WITHOUT NOTEHOLDER CONSENT. Each Trust and related
Indenture Trustee (on behalf of such Trust) may, without consent of the related
Noteholders, enter into one or more supplemental indentures for any of the
following purposes: (i) to correct or amplify the description of the collateral
or add additional collateral; (ii) to provide for the assumption of the Notes
and the Indenture obligations by a permitted successor to the Trust; (iii) to
add additional covenants for the benefit of the related Noteholders, or to
surrender any rights or power therein conferred upon the Trust; (iv) to convey,
transfer, assign, mortgage or pledge any property to or with the Indenture
Trustee; (v) to cure any ambiguity or correct or supplement any provision in the
Indenture or in any supplemental indenture which may be inconsistent with any
other provision of the Indenture or in any supplemental indenture; (vi) to
provide for the acceptance of the appointment of a successor Indenture Trustee
or to add to or change any of the provisions of the Indenture as shall be
necessary and permitted to facilitate the administration by more than one
trustee; (vii) to modify, eliminate or add to the provisions of the Indenture in
order to comply with the Trustee Indenture Act of 1939, as amended; and (viii)
to add any provisions to, change in any manner, or eliminate any of the
provisions of, the Indenture or to modify in any manner the rights of
Noteholders under such Indenture; provided that any action specified in this
clause (viii) shall not, as evidenced by an opinion of counsel, adversely affect
in any material respect the interests of any related Noteholder unless
Noteholder consent is otherwise obtained as described below.
MODIFICATION OF INDENTURE WITH NOTEHOLDER CONSENT. With respect to each Trust,
such Trust and the related Indenture Trustee may, with the consent of the
holders of a majority of the outstanding Notes of the related Series, execute a
supplemental indenture to add provisions to, change in any manner or eliminate
any provisions of, the related Indenture, or modify (except as provided below)
in any manner the rights of the related Noteholders.
Unless otherwise specified in the related Prospectus Supplement with respect to
a Series of Notes, without the consent of the holder of each such outstanding
Note affected thereby, no supplemental indenture will: (i) change the date of
payment of any installment of principal of or interest on any such Note or
reduce the principal amount thereof, the Interest Rate specified thereon or the
redemption price with respect thereto or change any place of payment where, or
the coin or currency in which, any such Note or any interest thereon is payable;
(ii) impair the right to institute suit for the enforcement of certain
provisions of the related Indenture regarding payment; (iii) reduce the
percentage of the aggregate amount of the outstanding Notes of such Series, the
consent of the holders of which is required (a) for any such supplemental
indenture or (b) for any waiver of compliance with certain provisions of the
related Indenture or of certain defaults thereunder and their consequences as
provided for in such Indenture; (iv) modify or
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alter the provisions of the related Indenture regarding the voting of Notes held
by the related Trust, any other obligor on such Notes, the Seller or an
affiliate of any of them; (v) reduce the percentage of the aggregate outstanding
amount of such Notes required to direct the related Indenture Trustee to sell or
liquidate the Receivables, the consent of the holders of which is required if
the proceeds of such sale or liquidation would be insufficient to pay the
principal amount and accrued but unpaid interest on the outstanding Notes of
such Series; (vi) decrease the percentage of the aggregate principal amount of
such Notes required to amend the sections of the related Indenture that specify
the applicable percentage of aggregate principal amount of the Notes of such
Series necessary to amend such Indenture or certain other related agreements;
(vii) modify any provisions of the Indenture in such a manner as to affect the
calculation of the amount of any payment of interest or principal due on any
Note on any Payment Date (including the calculation of any of the individual
components of such calculation); or (viii) permit the creation of any lien
ranking prior to or on a parity with the lien of the related Indenture with
respect to any of the collateral for such Notes or, except as otherwise
permitted or contemplated in such Indenture, terminate the lien of such
Indenture on any such collateral or deprive the holder of any such Note of the
security afforded by the lien of such Indenture.
EVENTS OF DEFAULT; RIGHTS UPON EVENT OF DEFAULT. With respect to the Notes of a
given Series, unless otherwise specified in the related Prospectus Supplement,
"EVENTS OF DEFAULT" under the related Indenture will consist of: (i) a default
in the payment of any interest on any such Note for a period of five days; (ii)
a default in the payment of the principal of or any installment of the principal
of any such Note when the same becomes due and payable; (iii) a default in the
observance or performance of any covenant or agreement of the related Trust made
in the related Indenture which default materially and adversely affects the
rights of the related Noteholders, and which default continues for a period of
30 days after written notice thereof is given to such Trust by the related
Indenture Trustee or to such Trust and such Indenture Trustee by the holders of
at least a majority in principal amount of such Notes then outstanding (or for
such longer period, not in excess of 90 days, as may be reasonably necessary to
remedy such default; provided that such default is capable of remedy within 90
days or less); or (iv) certain events of bankruptcy, insolvency, receivership or
liquidation of the related Trust. However, the amount of principal required to
be paid to Noteholders of such Series under the related Indenture will generally
be limited to amounts available to be deposited in the related Note Distribution
Account (absent acceleration of the Notes). Therefore, unless otherwise
specified in the related Prospectus Supplement, the failure to pay principal on
a class of Notes on any Payment Date generally will not result in the occurrence
of an Event of Default until the Final Scheduled Distribution Date for such
class of Notes.
If an Event of Default should occur and be continuing with respect to the Notes
of any Series, unless otherwise specified in the related Prospectus Supplement,
the related Indenture Trustee or holders of a majority in principal amount of
such Notes then outstanding may declare the principal of such Notes to be
immediately due and payable. Unless otherwise specified in the related
Prospectus Supplement, such declaration may, under certain circumstances, be
rescinded by the holders of a majority in principal amount of such Notes then
outstanding.
If the Notes of any Series are declared to be due and payable following an Event
of Default with respect thereto, the related Indenture Trustee may institute
proceedings to collect amounts due or foreclose on the related Trust Property,
exercise remedies as a secured party, sell the related Receivables or elect to
have the related Trust maintain possession of such Receivables and continue to
apply collections on such Receivables as if there had been no declaration of
acceleration. Unless otherwise specified in the related Prospectus Supplement,
however, the related Indenture Trustee is prohibited from selling the related
Receivables following an Event of Default, unless (i) the holders of all such
outstanding Notes consent to such sale, (ii) the proceeds of such sale are
sufficient to pay in full the principal and the accrued interest on such
outstanding Notes at the date of such sale, or (iii) there has been an Event of
Default arising from a failure to make a required payment of principal or
interest on any such Notes, and such Indenture Trustee determines that the
proceeds of Receivables would not be sufficient on an ongoing basis to make all
payments on such Notes as such payments would have become due if such
obligations had not been declared due and payable, and such Indenture Trustee
obtains the consent of the holders of sixty-six and two-thirds percent of the
aggregate outstanding principal amount of such Notes.
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If an Event of Default occurs and is continuing with respect to a Series of
Notes, the related Indenture Trustee will be under no obligation to exercise any
of the rights or powers under the related Indenture at the request or direction
of any of the holders of such Notes, if such Indenture Trustee reasonably
believes it will not be adequately indemnified against the costs, expenses and
liabilities which might be incurred by it in complying with such request.
Subject to the provisions for indemnification and certain limitations contained
in the related Indenture, the holders of a majority in principal amount of the
outstanding Notes of a given Series will have the right to direct the time,
method and place of conducting any proceeding or any remedy available to the
related Indenture Trustee, and the holders of a majority in principal amount of
such Notes then outstanding may, in certain cases, waive any default with
respect thereto, except a default in the payment of principal or interest or a
default in respect of a covenant or provision of such Indenture that cannot be
modified without the waiver or consent of all of the holders of such outstanding
Notes.
Unless and to the extent the related Prospectus Supplement specifies other
circumstances in which a holder of a Note of a Series will have the right to
institute the proceedings described below, no holder of such a Note will have
the right to institute any proceeding with respect to the related Indenture
unless (i) such holder has previously given written notice to the related
Indenture Trustee of a continuing Event of Default, (ii) the holders of not less
than a majority in principal amount of the outstanding Notes of such Series have
made written request to such Indenture Trustee to institute such proceeding in
its own name as Indenture Trustee, (iii) such holder or holders have offered
such Indenture Trustee indemnity reasonably satisfactory to it against the
costs, expenses and liabilities to be incurred in complying with such request,
(iv) such Indenture Trustee has for 60 days after receipt of such notice,
request and offer of indemnity failed to institute such proceeding, and (v) no
direction inconsistent with such written request has been given to such
Indenture Trustee during such 60-day period by the holders of a majority in
principal amount of such outstanding Notes.
In addition, each Indenture Trustee and the related Noteholders, by accepting
the related Notes, will covenant that they will not, for a period of one year
after the termination of the Indenture, institute against the related Trust any
bankruptcy, reorganization or other proceeding under any federal or state
bankruptcy or similar law.
With respect to any Trust, neither the related Indenture Trustee nor the related
Owner Trustee in its individual capacity, nor any holder of a Certificate
representing an ownership interest in such Trust nor any of their respective
owners, beneficiaries, agents, officers, directors, employees, affiliates,
successors or assigns will, in the absence of an express agreement to the
contrary, be personally liable for the payment of the principal of or interest
on the related Notes or for the agreements of such Trust contained in the
related Indenture.
CERTAIN COVENANTS
Each Indenture will provide that the related Trust may not consolidate with or
merge into any other entity, unless (i) the entity formed by or surviving such
consolidation or merger is organized under the laws of the United States, any
state or the District of Columbia, (ii) such entity expressly assumes such
Trust's obligation to make due and punctual payments of principal and interest
on the related Notes and the performance or observance of every agreement and
covenant of such Trust under the Indenture, (iii) no Event of Default with
respect to such Series shall have occurred and be continuing immediately after
such merger or consolidation, (iv) such Trust has been advised that the ratings,
if any, of the Notes and the Certificates, if any, then in effect would not be
downgraded or withdrawn by the related Rating Agencies as a result of such
merger or consolidation, (v) such action as was necessary to maintain the lien
and security interest created by such Indenture shall have been taken, and (vi)
such Trust has received an opinion of counsel to the effect that such
consolidation or merger would have no material adverse tax consequence to such
Trust or to any related Noteholder or Certificateholder.
Each Trust will not, among other things, (i) except as expressly permitted by
the related Indenture, the related Transfer and Servicing Agreements and the
related documents with respect to such Trust (collectively, the "RELATED
DOCUMENTS"), sell, transfer, exchange or otherwise dispose of any of the
properties or assets of such Trust, (ii) claim any credit on or make any
deduction from the principal or interest payable in respect of the Notes of the
related Series (other than amounts withheld under the Code or applicable state
law) or assert any claim against any present or former holder of such Notes
because of the payment of taxes levied or assessed upon such Trust, (iii) permit
the
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validity or effectiveness of the related Indenture to be impaired or permit any
person to be released from any covenants or obligations with respect to such
Notes under such Indenture except as may be expressly permitted thereby, (iv)
permit any lien, charge, excise, claim, security interest, mortgage or other
encumbrance to be created on or extend to or otherwise arise upon or burden the
assets of such Trust or any part thereof, or any interest therein or the
proceeds thereof, or (v) permit any lien of such Indenture not to constitute a
valid first priority security interest in the related Receivables (other than
with respect to any such tax, mechanics' or other lien).
No Trust may engage in any activity other than as specified herein or in the
related Prospectus Supplement. No Trust will incur, assume or guarantee any
indebtedness other than indebtedness incurred pursuant to the related Notes and
the related Indenture, pursuant to any Advances made to it by the Servicer or
otherwise in accordance with the Related Documents.
ANNUAL COMPLIANCE STATEMENT. Each Trust will be required to file annually with
the related Indenture Trustee a written statement as to the fulfillment of its
obligations under the Indenture.
INDENTURE TRUSTEE'S ANNUAL REPORT. The Indenture Trustee for each Trust will be
required to mail each year to all related Noteholders a brief report relating to
its eligibility and qualification to continue as Indenture Trustee under the
related Indenture, any amounts advanced by it under the related Indenture, the
amount, interest rate and maturity date of certain indebtedness owing by such
Trust to the related Indenture Trustee in its individual capacity, the property
and funds physically held by such Indenture Trustee as such and any action taken
by it that materially affects the related Notes and that has not been previously
reported.
SATISFACTION AND DISCHARGE OF INDENTURE. An Indenture will be discharged with
respect to the related Notes upon the delivery to the related Indenture Trustee
for cancellation of all such Notes or, with certain limitations, upon deposit
with such Indenture Trustee of funds sufficient for the payment in full of all
such Notes.
THE INDENTURE TRUSTEE
The Indenture Trustee for a Series of Notes will be specified in the related
Prospectus Supplement. The Indenture Trustee for any Series may resign at any
time. The Administrator of the related Trust may also remove any such Indenture
Trustee if such Indenture Trustee ceases to be eligible to continue as such
under the related Indenture or if such Indenture Trustee becomes insolvent. In
such circumstances, the Administrator of the related Trust will be obligated to
appoint a successor indenture trustee for the related Series of Notes. If an
Event of Default occurs under an Indenture and the related Prospectus Supplement
provides that a given class of Notes of the related Series is subordinated to
one or more other classes of Notes of such Series, pursuant to the Trust
Indenture Act of 1939, as amended, the related Indenture Trustee may be deemed
to have a conflict of interest and be required to resign as trustee for one or
more of such classes of Notes. In any such case, the related Indenture will
provide for a successor trustee to be appointed for one or more of such classes
of Notes and may provide for rights of senior Noteholders to consent to or
direct actions by the related Indenture Trustee which are different from those
of subordinated Noteholders. Any resignation or removal of the Indenture Trustee
and appointment of a successor indenture trustee for any Series of Notes will
not become effective until acceptance of the appointment by the successor
indenture trustee for such Series.
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DESCRIPTION OF THE CERTIFICATES
GENERAL
With respect to each Trust, one or more classes of asset-backed certificates
(the "CERTIFICATES") of the related Series may be issued pursuant to the terms
of a Trust Agreement (each, a "TRUST AGREEMENT"), a form of which has been filed
as an exhibit to the Registration Statement of which this Prospectus forms a
part. The following, as well as other pertinent information included elsewhere
in this Prospectus and in the related Prospectus Supplement, describes the
material terms of the Certificates of any Series, but does not purport to be
complete and is subject to, and is qualified in its entirety by reference to,
the provisions of such Certificates and the related Trust Agreement.
The related Prospectus Supplement will specify whether each class of
Certificates of the related Series offered thereby will initially be represented
by one or more Certificates, in each case registered in the name of the
Depository or its nominee (except as set forth below) or will be issued in fully
registered, certificated form.
DISTRIBUTIONS OF INTEREST AND CERTIFICATE BALANCE
The timing and priority of distributions, seniority, allocations of losses,
Pass-Through Rate and amount of or method of determining distributions with
respect to Certificate Balance and interest of each class of Certificates with
respect to any Series will be described in the related Prospectus Supplement.
Distributions of interest on such Certificates will be made on the Distribution
Dates and will be made prior to distributions with respect to principal of such
Certificates. To the extent provided in the related Prospectus Supplement, a
Series may include one or more classes of Certificates ("STRIP CERTIFICATES")
entitled to (i) distributions in respect of principal with disproportionate,
nominal or no interest distributions, or (ii) interest distributions with
disproportionate, nominal or no distributions in respect of principal. Each
class of Certificates may have a different Pass-Through Rate (which may be zero
for certain classes of Strip Certificates). The related Prospectus Supplement
will specify the Pass-Through Rate for each class of Certificates of a given
Series. Unless otherwise provided in the related Prospectus Supplement,
distributions in respect of the Certificates of a given Series will be
subordinate to payments in respect of the Notes of such Series as more fully
described in the related Prospectus Supplement. Distributions in respect of
interest on and principal of any class of Certificates will be made on a pro
rata basis among all the Certificateholders of such class.
In the case of a Series of Certificates that includes two or more classes of
Certificates, the timing, sequential order, priority of payment or amount of
distributions in respect of interest and principal on each such class, and any
schedule or formula or other provisions applicable to the determination thereof,
shall be as set forth in the related Prospectus Supplement.
If the Servicer exercises its option to purchase the Receivables of a Trust in
the manner and on the respective terms and conditions described under
"Description of the Transfer and Servicing Agreements--Termination" herein,
related Certificateholders will receive as prepayment an amount in respect of
such Certificates as specified in the related Prospectus Supplement. In
addition, if the related Prospectus Supplement provides that the property of a
Trust will include a Pre-Funding Account, related Certificateholders may receive
a partial prepayment of principal on or immediately following the end of the
Funding Period in an amount and manner specified in the related Prospectus
Supplement. In the event of such partial prepayment, the Certificateholders may
be entitled to receive a prepayment premium, in the amount and to the extent
provided in the related Prospectus Supplement.
THE OWNER TRUSTEE
The Owner Trustee for each Trust will be specified in the related Prospectus
Supplement. The Owner Trustee's liability in connection with the issuance and
sale of the related Securities is limited solely to the express obligations of
such Owner Trustee set forth in the related Trust Agreement. The Owner Trustee
under each Trust Agreement will perform administrative functions including, if
specified in the related Prospectus Supplement, making distributions from the
related Certificate Distribution Account. An Owner Trustee may resign at any
time by giving written notice thereof to the Administrator under the related
Trust Agreement, in which event the Administrator or its successor, will be
obligated to appoint a successor trustee. The Administrator may also remove the
Owner Trustee if such Owner
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Trustee ceases to be eligible to continue as Owner Trustee under the related
Trust Agreement, becomes legally unable to act or if such Owner Trustee becomes
insolvent. In such circumstances, the Administrator will be obligated to appoint
a successor trustee. Any resignation or removal of an Owner Trustee and
appointment of a successor trustee will not become effective until acceptance of
the appointment by the successor trustee.
CERTAIN INFORMATION REGARDING THE SECURITIES
FIXED RATE SECURITIES
Each class of Securities (other than certain classes of Strip Notes or Strip
Certificates) may bear interest at a fixed rate per annum ("FIXED RATE
SECURITIES") or at a variable or adjustable rate per annum ("FLOATING RATE
SECURITIES"), as more fully described below and in the related Prospectus
Supplement. Each class of Fixed Rate Securities will bear interest at the
applicable per annum Interest Rate or Pass-Through Rate, as the case may be,
specified in the related Prospectus Supplement. Unless otherwise set forth in
the related Prospectus Supplement, interest on each class of Fixed Rate
Securities will be computed on the basis of a 360-day year of twelve 30-day
months. See "Description of the Notes--Principal and Interest on the Notes" and
"Description of the Certificates--Distributions of Interest and Certificate
Balance" herein.
FLOATING RATE SECURITIES
Each class of Floating Rate Securities will bear interest for each related
Interest Reset Period (as such term is defined in the related Prospectus
Supplement with respect to a class of Floating Rate Securities, an "INTEREST
RESET PERIOD") at a rate per annum determined by reference to an interest rate
basis (the "BASE RATE"), plus or minus the Spread, if any, or multiplied by the
Spread Multiplier, if any, in each case as specified in the related Prospectus
Supplement. The "SPREAD" is the number of basis points (one basis point equals
one one-hundredth of a percentage point) that may be specified in the related
Prospectus Supplement as being applicable to such class, and the "SPREAD
MULTIPLIER" is the percentage that may be specified in the related Prospectus
Supplement as being applicable to such class.
The related Prospectus Supplement will designate a Base Rate for a given
Floating Rate Security based on the London interbank offered rate ("LIBOR"),
commercial paper rates, Federal funds rates, U.S. Government treasury securities
rates, negotiable certificates of deposit rates or another rate as set forth in
such Prospectus Supplement.
As specified in the related Prospectus Supplement, Floating Rate Securities of a
given class may also have either or both of the following (in each case
expressed as a rate per annum): (i) a maximum limitation, or ceiling, on the
rate at which interest may accrue during any interest period and (ii) a minimum
limitation, or floor, on the rate at which interest may accrue during any
interest period. In addition to any maximum interest rate that may be applicable
to any class of Floating Rate Securities, the interest rate applicable to any
class of Floating Rate Securities will in no event be higher than the maximum
rate permitted by applicable law, as the same may be modified by United States
law of general application.
Each Trust with respect to which a class of Floating Rate Securities will be
issued will appoint, and enter into agreements with, a calculation agent (each a
"CALCULATION AGENT") to calculate interest rates on each such class of Floating
Rate Securities issued with respect thereto. The related Prospectus Supplement
will set forth the identity of the Calculation Agent for each such class of
Floating Rate Securities of a given Series, which may be either the Owner
Trustee or any Indenture Trustee with respect to such Series. All determinations
of interest by the Calculation Agent shall, in the absence of manifest error, be
conclusive for all purposes and binding on the holders of Floating Rate
Securities of a given class. Unless otherwise specified in the related
Prospectus Supplement, all percentages resulting from any calculation of the
rate of interest on a Floating Rate Security will be rounded, if necessary, to
the nearest 1/100,000 of 1% (.0000001), with five one-millionths of a percentage
point rounded upward.
INDEXED SECURITIES
To the extent so specified in any Prospectus Supplement, any class of Securities
of a given Series may consist of Securities ("INDEXED SECURITIES") in which the
principal amount payable at the Final Scheduled Distribution Date for
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such class (the "INDEXED PRINCIPAL AMOUNT") is determined by reference to a
measure (the "INDEX") which will be related to (i) the difference in the rate of
exchange between United States dollars and a currency or composite currency (the
"INDEXED CURRENCY") specified in the related Prospectus Supplement (such Indexed
Securities, "CURRENCY INDEXED SECURITIES"); (ii) the difference in the price of
a specified commodity (the "INDEXED COMMODITY") on specified dates (such Indexed
Securities, "COMMODITY INDEXED SECURITIES"); (iii) the difference in the level
of a specified stock index (the "STOCK INDEX"), which may be based on U.S. or
foreign stocks, on specified dates (such Indexed Securities, "STOCK INDEXED
SECURITIES"); or (iv) such other objective price or economic measures as are
described in the related Prospectus Supplement. The manner of determining the
Indexed Principal Amount of an Indexed Security and historical and other
information concerning the Indexed Currency, the Indexed Commodity, the Stock
Index or other price or economic measures used in such determination will be set
forth in the related Prospectus Supplement, together with information concerning
tax consequences to the holders of such Indexed Securities.
If the determination of the Indexed Principal Amount of an Indexed Security is
based on an Index calculated or announced by a third party and such third party
either suspends the calculation or announcement of such Index or changes the
basis upon which such Index is calculated (other than changes consistent with
policies in effect at the time such Indexed Security was issued and permitted
changes described in the related Prospectus Supplement), then such Index shall
be calculated for purposes of such Indexed Security by an independent
calculation agent named in the related Prospectus Supplement on the same basis,
and subject to the same conditions and controls, as applied to the original
third party. If for any reason such Index cannot be calculated on the same basis
and subject to the same conditions and controls as applied to the original third
party, then the Indexed Principal Amount of such Indexed Security shall be
calculated in the manner set forth in the related Prospectus Supplement. Any
determination of such independent calculation agent shall in the absence of
manifest error be binding on all parties.
Unless otherwise specified in the related Prospectus Supplement, interest on an
Indexed Security will be payable based on the amount designated in the related
Prospectus Supplement as the "FACE AMOUNT" of such Indexed Security. The related
Prospectus Supplement will describe whether the principal amount of the related
Indexed Security, if any, that would be payable upon redemption or repayment
prior to the applicable Final Scheduled Distribution Date will be the Face
Amount of such Indexed Security, the Indexed Principal Amount of such Indexed
Security at the time of redemption or repayment or another amount described in
such Prospectus Supplement.
BOOK-ENTRY REGISTRATION
Securityholders may hold their Securities through the Depository Trust Company
("DTC") (in the United States) or Cedel or Euroclear (in Europe), which in turn
hold through DTC, if they are participants of such systems, or indirectly
through organizations that are participants in such systems.
DTC's nominee will be Cede & Co. ("CEDE"), unless another nominee is specified
in the related Prospectus Supplement. Accordingly, such nominee is expected to
be the holder of record of any book-entry securities of any class or Series.
Unless and until Definitive Securities are issued under the limited
circumstances described therein or in the related Prospectus Supplement, no
Securityholder will be entitled to receive a physical certificate representing
its interest in such Security. All references herein and in the related
Prospectus Supplement to actions by Securityholders refer to actions taken by
DTC upon instructions from its Participants and all references herein and in the
related Prospectus Supplement to distributions, notices, reports and statements
to Securityholders of book-entry securities refer to distributions, notices,
reports and statements to DTC or its nominee, as the registered holder of the
applicable Securities, for distribution to Securityholders in accordance with
DTC's procedures with respect thereto. See "--Definitive Securities" herein.
Cedel and Euroclear will hold omnibus positions on behalf of the Cedel
Participants and the Euroclear Participants, respectively, through customers'
securities accounts in Cedel's and Euroclear's names on the books of their
respective depositaries (collectively, the "DEPOSITARIES") which in turn will
hold such positions in customers' securities accounts in the Depositaries' names
on the books of DTC.
DTC is a limited-purpose trust company organized under the laws of the State of
New York, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York Uniform Commercial Code
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and a "clearing agency" registered pursuant to the provisions of Section 17A of
the Exchange Act. DTC was created to hold securities for its Participants and
facilitate the clearance and settlement of securities transactions between
Participants through electronic book-entry changes in accounts of its
Participants, thereby eliminating the need for physical movement of
certificates. "PARTICIPANTS" include securities brokers and dealers (who may
include an underwriter with respect to any series), banks, trust companies and
clearing corporations and may include certain other organizations, including
Cedel and Euroclear. Indirect access to the DTC system also is available to
"INDIRECT PARTICIPANTS" such as banks, brokers, dealers and trust companies that
clear through or maintain a custodial relationship with a Participant, either
directly or indirectly.
Transfers between Participants will occur in accordance with DTC rules.
Transfers between Cedel Participants and Euroclear Participants will occur in
the ordinary way in accordance with their applicable rules and operating
procedures.
Cross-market transfers between persons holding directly or indirectly through
DTC in the United States, on the one hand, and directly or indirectly through
Cedel Participants or Euroclear Participants, on the other, will be effected in
DTC in accordance with DTC rules on behalf of the relevant European
international clearing system by its Depositary; however, such cross-market
transactions will require delivery of instructions to the relevant European
international clearing system by the counterparty in such system in accordance
with its rules and procedures and within its established deadlines (European
time). The relevant European international clearing system will, if the
transaction meets its settlement requirements, deliver instructions to its
Depositary to take action to effect final settlement on its behalf by delivering
or receiving securities in DTC, and making or receiving payment in accordance
with normal procedures for same-day funds settlement applicable to DTC. Cedel
Participants and Euroclear Participants may not deliver instructions directly to
the Depositaries.
Because of time-zone differences, credits or securities in Cedel or Euroclear as
a result of a transaction with a Participant will be made during the subsequent
securities settlement processing, dated the business day following the DTC
settlement date, and such credits or any transactions in such securities settled
during such processing will be reported to the relevant Cedel Participant or
Euroclear Participant on such business day. Cash received in Cedel or Euroclear
as a result of sales of securities by or through a Cedel Participant or
Euroclear Participant to a Participant will be received with value on the DTC
settlement date but will be available in the relevant Cedel or Euroclear cash
account only as of the business day following settlement in DTC.
A "SECURITYHOLDER," as used herein, shall mean a holder of a beneficial interest
in a book-entry security. Unless otherwise provided in the related Prospectus
Supplement, Securityholders that are not Participants or Indirect Participants
but desire to purchase, sell or otherwise transfer ownership of, or other
interest in, Securities may do so only through Participants and Indirect
Participants. In addition, Securityholders will receive all distributions of
principal of and interest on Securities from the related Owner Trustee or
Indenture Trustee, as applicable (the "APPLICABLE TRUSTEE"), through the
Participants, who in turn will receive them from DTC. Under a book-entry format,
Securityholders may experience some delay in their receipt of payments, since
such payments will be forwarded by the Applicable Trustee to Cede, as nominee
for DTC. DTC will forward such payments to its Participants which thereafter
will forward them to Indirect Participants or Securityholders. It is anticipated
that the only "Noteholder" and "Certificateholder" will be Cede, as nominee of
DTC. Securityholders will not be recognized by the Trustee as Noteholders
("NOTEHOLDERS") or Certificateholders ("CERTIFICATEHOLDERS"), as such term is
used in the related Trust Agreement and Indenture, as applicable, and
Securityholders will only be permitted to exercise the rights of Securityholders
indirectly through DTC, Cedel or Euroclear and their respective participants or
organizations.
Under the rules, regulations and procedures creating and affecting DTC and its
operations (the "RULES"), DTC is required to make book-entry transfers of
Securities among Participants on whose behalf it acts with respect to the
Securities and to receive and transmit distributions of principal of, and
interest on, the Securities. Participants and Indirect Participants with which
Securityholders have accounts with respect to the Securities similarly are
required to make book-entry transfers and receive and transmit such payments on
behalf of their respective Securityholders. Accordingly, although
Securityholders will not physically possess Securities, the Rules provide a
mechanism by which Participants will receive payments and will be able to
transfer their interests.
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Because DTC can only act on behalf of Participants, who in turn act on behalf of
Indirect Participants and certain banks, the ability of a Securityholder to
pledge Securities to persons or entities that do not participate in the DTC
system, or to otherwise act with respect to such Securities, may be limited due
to the lack of physical certificates for such Securities.
DTC has advised the Seller that it will take any action permitted to be taken by
a Noteholder under the related Indenture or a Certificateholder under the
related Trust Agreement, only at the direction of one or more Participants to
whose accounts with DTC the applicable Notes or Certificates are credited. DTC
may take conflicting actions with respect to other undivided interests to the
extent that such actions are taken on behalf of Participants whose holdings
include such undivided interests.
Cedel Bank, societe anonyme ("CEDEL") is incorporated under the laws of
Luxembourg as a professional depository. Cedel holds securities for its
participating organizations ("CEDEL PARTICIPANTS") and facilitates the clearance
and settlement of securities transactions between Cedel Participants through
electronic book-entry changes in accounts of Cedel Participants, thereby
eliminating the need for physical movement of certificates. Transactions may be
settled by Cedel in any of 28 currencies, including United States dollars. Cedel
provides to its Cedel Participants, among other things, services for
safekeeping, administration, clearance and settlement of internationally traded
securities and securities lending and borrowing. Cedel interfaces with domestic
markets in several countries. As a professional depository, Cedel is subject to
regulations by the Luxembourg Monetary Institute. Cedel Participants are
recognized financial institutions around the world, including underwriters,
securities brokers and dealers, banks, trust companies, clearing corporations
and certain other organizations and may include an underwriter of any series.
Indirect access to Cedel is also available to others, such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a Cedel Participant, either directly or indirectly.
The Euroclear System ("EUROCLEAR") was created in 1968 to hold securities for
participants of Euroclear ("EUROCLEAR PARTICIPANTS") and to clear and settle
transactions between Euroclear Participants through simultaneous electronic
book-entry delivery against payment, thereby eliminating the need for physical
movement of certificates and any risk from lack of simultaneous transfers of
securities and cash. Transactions may now be settled in any of 27 currencies,
including United States dollars. Euroclear includes various other services,
including securities lending and borrowing and interfaces with domestic markets
in several countries generally similar to the arrangement for cross-market
transfers with DTC described above. Euroclear is operated by Morgan Guaranty
Trust Company of New York, Brussels, Belgium office (the "EUROCLEAR OPERATOR"),
under contract with Euroclear Clearance System, S.C., a Belgian cooperative
corporation (the "COOPERATIVE"). All operations are conducted by the Euroclear
Operator, and all Euroclear securities clearance accounts and Euroclear cash
accounts are accounts with the Euroclear Operator, not the Cooperative. The
Cooperative establishes policy for Euroclear on behalf of Euroclear
Participants. Euroclear Participants include banks (including central banks),
securities brokers and dealers and other professional financial intermediaries
and may include an underwriter of any series. Indirect access to Euroclear is
also available to other firms that clear through or maintain a custodial
relationship with a Euroclear Participant, either directly or indirectly.
The Euroclear Operator is the Belgian branch of a New York banking corporation
which is a member of the Federal Reserve System. As such, it is regulated and
examined by the Board of Governors of the Federal Reserve System and the New
York State Banking Department, as well as the Belgian Banking Commission.
Securities clearance accounts and cash accounts with the Euroclear Operator are
governed by the Terms and Conditions Governing Use of Euroclear and the related
Operating Procedures of Euroclear and applicable Belgian law (collectively, the
"TERMS AND CONDITIONS"). The Terms and Conditions govern transfers of securities
and cash within Euroclear, withdrawal of securities and cash from Euroclear, and
receipts of payments with respect to securities in Euroclear. All securities in
Euroclear are held on a fungible basis without attribution of specific
certificates to specific securities clearance accounts. The Euroclear Operator
acts under the Terms and Conditions only on behalf of Euroclear Participants and
has no record of or relationship with persons holding through Euroclear
Participants.
Distributions with respect to Securities held through Cedel or Euroclear will be
credited to the cash accounts of Cedel Participants or Euroclear Participants in
accordance with the relevant system's rules and procedures, to the extent
received by its Depositary. Such distributions will be subject to tax reporting
in accordance with relevant United
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States tax laws and regulations. Cedel or the Euroclear Operator, as the case
may be, will take any other action permitted to be taken by a Securityholder
under the related Indenture or Trust Agreement, as applicable, on behalf of a
Cedel Participant or a Euroclear Participant only in accordance with its
relevant rules and procedures and subject to its Depositary's ability to effect
such actions on its behalf through DTC.
Although DTC, Cedel and Euroclear have agreed to the foregoing procedures in
order to facilitate transfers of certificates among participants of DTC, Cedel
and Euroclear, they are under no obligation to perform or continue to perform
such procedures, and such procedures may be discontinued at any time.
Except as required by law, neither the Owner Trustee nor the Indenture Trustee
will have any liability for any aspect of the records relating to or payments
made on account of beneficial ownership interests of the Securities of any
series held by DTC, Cedel or Euroclear or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interests.
DEFINITIVE SECURITIES
Unless otherwise specified in the related Prospectus Supplement, any Notes or
Certificates of a given Series will be issued in fully registered, certificated
form ("DEFINITIVE CERTIFICATES" or "DEFINITIVE NOTES," together, the "DEFINITIVE
SECURITIES") to Noteholders or Certificateholders or their respective nominees,
rather than to the Depository or its nominee, only if (i) the related
Administrator notifies the Applicable Trustee in writing that it has been
advised that the Depository is no longer willing or able to discharge properly
its responsibilities as depository with respect to the Notes or the Certificates
and the Administrator is unable to locate a qualified successor, (ii) the
Administrator, at its option, elects to terminate the book-entry system through
the Depository or (iii) after the occurrence of an Event of Default or an Event
of Servicing Termination, with respect to such Securities, the holders
representing at least a majority of the outstanding principal amount of the
related Notes or the Certificates, as applicable, of such Series advise the
Applicable Trustee and DTC through Participants in writing that they have
determined that the continuation of a book-entry system through the Depository
(or successor thereto) with respect to such Notes or Certificates is no longer
in the best interest of the holders of such Securities.
Upon the occurrence of any of the events described in the immediately preceding
paragraph, the Depository is required to notify all Participants of the
availability through the Depository of Definitive Securities. Upon surrender by
DTC to the Applicable Trustee of the global certificates representing the
corresponding Securities and receipt by the Applicable Trustee of instructions
for re-registration, the Applicable Trustee will reissue such Securities as
Definitive Securities and thereafter the Applicable Trustee will recognize the
holders of such Definitive Securities as Noteholders or Certificateholders under
the related Indenture or Trust Agreement ("HOLDERS").
Distributions of principal with respect to, and interest on, such Definitive
Securities will thereafter be made in accordance with the procedures set forth
in the related Indenture or Trust Agreement, as applicable, directly to the
Holders of Definitive Securities in whose names the Definitive Securities were
registered at the close of business on the applicable record date specified for
such Securities in the related Prospectus Supplement. Such distributions will be
made by check mailed to the address of such Holder as it appears on the register
maintained by the related Applicable Trustee. The final payment on any
Definitive Security, however, will be made only upon presentation and surrender
of the Definitive Security at the office or agency specified in the related
notice of final distribution mailed to Holders.
Definitive Securities will be transferable and exchangeable subject to such
reasonable regulations as the Applicable Trustee may prescribe. No service
charge will be imposed for any registration of transfer or exchange, but the
Applicable Trustee may require payment of a sum sufficient to cover any tax or
other government charge imposed in connection therewith.
REPORTS TO SECURITYHOLDERS
With respect to each Series of Securities, on each Distribution Date, the Paying
Agent will include with each distribution to each Noteholder and/or
Certificateholder a statement prepared by the Servicer, which will include (to
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the extent applicable), among other things, the following information (and any
other information so specified in the related Prospectus Supplement) as to the
Notes or Certificates of such Series with respect to such Distribution Date or
the period since the previous Distribution Date, as applicable:
(i) the amount of the distribution allocable to principal with respect
to each class of such Notes and to the Certificate Balance of each class of
such Certificates and the derivation of such amounts;
(ii) the amount of the distribution allocable to interest on or with
respect to each class of Notes and each class of Certificates of such
Series;
(iii) amount of the Servicing Fee paid to the Servicer in respect of the
related Collection Period;
(iv) the amount of the Administration Fee paid to the Administrator in
respect of the related Collection Period;
(v) the aggregate unreimbursed Advances (if any) as of the last day of
the preceding Collection Period and the change in such amount from the
previous Collection Period;
(vi) the Aggregate Receivables Balance as of the close of business on
the last day of the preceding Collection Period;
(vii) the aggregate outstanding principal balance and the Note Pool
Factor for each class of such Notes and the Certificate Balance and the
Certificate Pool Factor for each class of such Certificates, in each case
after giving effect to all payments reported under clause (i) above on such
date;
(viii) the Interest Rate or Pass-Through Rate for the next period with
respect to any class of Notes or any class of Certificates of such Series
with variable or adjustable rates;
(ix) the amount of the aggregate realized losses, if any, for the
preceding Collection Period;
(x) the Noteholders' Interest Carryover Shortfall, the Noteholders'
Principal Carryover shortfall, the Certificateholders' Interest Carryover
Shortfall and the Certificateholders' Principal Carryover Shortfall (each as
defined in the related Prospectus Supplement), if any, in each case as
applicable to each class of Securities and the change in such amounts from
the preceding statement;
(xi) the aggregate Repurchase Amounts with respect to the Receivables,
if any, that were repurchased by the Seller or purchased by the Servicer in
such Collection Period;
(xii) the balance of the Reserve Account (if any) or any other
enhancement account, as of such date, after giving effect to changes therein
on such date, the calculation of the Specified Reserve Account Balance and
the calculation of the components of the Specified Reserve Account Balance
on such date (as defined in the related Prospectus Supplement) or any other
required enhancement account balance on such date, and the components of
calculating any such required balance;
(xiii) for each date during the Funding Period, if any, the remaining
Pre-Funded Amount; and
(xiv) for the first such date that is on or immediately following the end
of the Funding Period, if any, the amount of any remaining Pre-Funded Amount
that has not been used to fund the purchase of Subsequent Receivables and is
being passed through as payments of principal on the Securities of such
Series.
Each amount set forth pursuant to subclauses (i), (ii), (iii) and (iv) with
respect to the Notes or the Certificates of any Series will be expressed as a
dollar amount per $1,000 of the initial principal balance of such Notes or the
initial Certificate Balance of such Certificates, as applicable.
"INITIAL RECEIVABLE BALANCE" means, with respect to a Receivable, the aggregate
amount advanced toward the purchase price of all Financed Vehicles related to
such Receivable, including insurance premiums, federal excise taxes, sales taxes
and other items customarily financed as part of Motor Vehicle Loans and related
costs, less payments received from the Obligor prior to the related Cutoff Date
allocable to principal in accordance with the terms of the Receivable.
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"RECEIVABLE BALANCE" means, as of the last day of the related Collection Period,
with respect to any Receivable, the Initial Receivable Balance minus the sum, in
each case computed in accordance with the terms of the Receivable, of (i) that
portion of payments due on and after the Cutoff Date and on or prior to the last
day of the related Collection Period allocated to principal, (ii) any
prepayments applied by the Servicer to reduce the Receivable Balance and (iii)
that portion of the following received and allocated to principal by the
Servicer: proceeds from any insurance policies covering the Financed Vehicle or
Financed Vehicles, Liquidation Proceeds and proceeds from any Dealer Agreement.
The Obligor on a Receivable secured by multiple Financed Vehicles may prepay an
amount corresponding to the outstanding principal balance for one or more of
such Financed Vehicles and the security interest in such vehicles will generally
be released.
"AGGREGATE RECEIVABLES BALANCE" means, as of any date, the sum of the Receivable
Balances of all outstanding Receivables (other than Liquidating Receivables)
held by the Trust on such date.
Unless otherwise specified in the related Prospectus Supplement, the statements
for each Collection Period will be delivered to DTC for further distribution to
Securityholders in accordance with DTC procedures. See "Certain Information
Regarding the Securities--Book-Entry Registration" herein. The Servicer, on
behalf of each Trust, will file with the Commission such periodic reports with
respect to each Trust as required under the Exchange Act and the rules and
regulations of the Commission thereunder.
Within the prescribed period of time for tax reporting purposes after the end of
each calendar year during the term of each Trust, the Servicer or the Paying
Agent will furnish to each person who at any time during such calendar year has
been a Noteholder or Certificateholder with respect to such Trust and received
any payment thereon a statement containing certain information for the purposes
of such Securityholder's preparation of federal income tax returns. See "Certain
Federal Income Tax Consequences" in the related Prospectus Supplement.
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DESCRIPTION OF THE TRANSFER AND SERVICING AGREEMENTS
The following summary describes certain terms of (i) the Sale and Servicing
Agreement pursuant to which each Trust will acquire Receivables from the Seller
and the Servicer will agree to service such Receivables; (ii) the Trust
Agreement pursuant to which each Trust will be created and (iii) the
Administration Agreement pursuant to which the Bank will undertake certain
administrative duties with respect to each Trust (collectively, the "TRANSFER
AND SERVICING AGREEMENTS"). Forms of the Transfer and Servicing Agreements have
been filed as exhibits to the Registration Statement of which this Prospectus
forms a part. The following summary, as well as other pertinent information
included elsewhere in this Prospectus and in the related Prospectus Supplement,
describes the material terms of the Transfer and Servicing Agreements related to
any Series. This summary does not purport to be complete and is subject to, and
is qualified in its entirety by reference to, the provisions of such Transfer
and Servicing Agreements.
SALE AND ASSIGNMENT OF RECEIVABLES
On or before the Closing Date specified with respect to any given Trust in the
related Prospectus Supplement, the Seller will transfer and assign in
consideration of the receipt of the related Securities, without recourse, to the
related Trust pursuant to a Sale and Servicing Agreement its entire interest in
the Receivables, if any, certain related property and the proceeds thereof,
including, among other things, its security interests in the related Financed
Vehicles. Each such Receivable will be identified in a schedule appearing as an
exhibit to such Sale and Servicing Agreement (a "SCHEDULE OF RECEIVABLES"). The
Seller will sell the related Securities offered hereby (which may or may not
include all Securities of such Series) to the respective underwriters set forth
in the Prospectus Supplement. See "Plan of Distribution." To the extent
specified in the related Prospectus Supplement, a portion of the net proceeds
received from the sale of the Securities of a given Series will be applied to
the deposit of the Pre-Funded Amount into the Pre-Funding Account and/or to the
initial deposit into a Reserve Account, if any, or a Yield Supplement Account,
if any. The related Prospectus Supplement for each Trust will specify whether,
and the terms, conditions and manner under which, Subsequent Receivables will be
sold by the Seller to the related Trust from time to time during any Funding
Period on each date specified as a transfer date in the related Prospectus
Supplement (each, a "SUBSEQUENT TRANSFER DATE").
Each Sale and Servicing Agreement will set forth criteria that must be satisfied
by each Receivable. Unless the related Prospectus Supplement specifies that
certain of the criteria set forth below are not required to be satisfied, the
criteria will include, among others, the following: (i) the Receivable has been
fully and properly executed by the parties thereto and (a) has been originated
by the Seller in the ordinary course of its business or has been originated by a
Dealer for the retail sale of a Motor Vehicle in the ordinary course of such
Dealer's business and has been purchased by the Seller in the ordinary course of
the Seller's business and has been validly assigned by such Dealer to the
Seller, (b) is secured by a valid, subsisting and enforceable security interest
in favor of the Seller in the related Financed Vehicle (subject to
administrative delays and clerical errors on the part of the applicable
government agency) prior in right to the security interest of any other
creditor, which security interest is assignable together with such Receivable,
and has been so assigned, by the Seller to the Trust, (c) contains customary and
enforceable provisions such that the rights and remedies of the holder thereof
are adequate for realization against the collateral of the benefits of the
security, (d) provided, at origination, for level monthly payments (although the
amount of the first and last payments may be different), which fully amortize
the initial principal balance of the Receivable over the original term and (e)
in the event of a complete prepayment, provides for a payment that will fully
pay the principal balance of such Receivable as of the first day of the
Collection Period in which the Receivable is fully prepaid, together with
interest accrued at least to the date of prepayment at the related interest
rate; (ii) the information set forth in the related Schedule of Receivables was
true and correct as of the close of business of the Seller on the Cutoff Date;
(iii) the Receivable complied at the time it was originated or made, and will
comply as of the Closing Date, in all material respects with all requirements of
applicable Federal, state and local laws, and regulations thereunder; (iv) the
Receivable constitutes the genuine, legal, valid and binding payment obligation
in writing of the Obligor, enforceable in all material respects by the holder
thereof in accordance with its terms, and the Receivable is not subject to any
right of rescission, setoff, counterclaim or defense, including the defense of
usury, and the operation of any of the terms of the Receivable, or the exercise
of any right thereunder, will not render the Receivable
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unenforceable in whole or in part or subject to any right of rescission, setoff,
counterclaim or defense, including the defense of usury, and the Seller has no
notice that any right of rescission, setoff, counterclaim or defense has been
asserted with respect thereto; (v) the Seller has taken no action which would
have the effect of releasing the related Financed Vehicle from the lien granted
by the Receivable in whole or in part; (vi) no material provision of the
Receivable has been amended, waived, altered or modified in any respect, except
such waivers as would be permitted under the related Sale and Servicing
Agreement, and no amendment, waiver, alteration or modification causes such
Receivable not to conform to the other representations or warranties contained
in this paragraph; (vii) the Seller has not received notice of any liens or
claims, including liens for work, labor, materials or unpaid state or Federal
taxes relating to the Financed Vehicle securing the Receivable, that are or may
be prior to or equal to the lien granted by the Receivable; (viii) except for
payment delinquencies continuing for a period of not more than 30 days as of the
Cutoff Date, no default, breach, violation or event permitting acceleration
under the terms of the Receivable exists and no continuing condition that with
notice or lapse of time, or both, would constitute a default, breach, violation
or event permitting acceleration under the terms of the Receivable has arisen;
(ix) if the principal balance of a Receivable exceeds $3,500 (or such other
amount as is specified in the related Prospectus Supplement or as determined by
the Servicer, consistent with the standard of care required by the Sale and
Servicing Agreement), 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 is in full force and
effect; (x) the Receivable has not been sold, assigned, pledged or otherwise
conveyed by the Seller to any person other than the related Trust, and,
immediately prior to the transfer and assignment under the related Sale and
Servicing Agreement, the Seller had good and marketable title to the Receivable
free and clear of any encumbrance, equity, lien, pledge, charge, claim, security
interest or other right or interest of any other person and had full right and
power to transfer and assign the Receivable to the Trust and immediately upon
the transfer and assignment of the Receivable to the Trust, such Trust will have
good and marketable title to the Receivable, free and clear of any encumbrance,
equity, lien, pledge, charge, claim, security interest or other right or
interest of any other person and, if such transfer to such Trust is deemed to be
a transfer for security, such Trust's interest in the Receivable resulting from
the transfer has been perfected under the UCC; (xi) the Receivables are "chattel
paper" as defined in the UCC; (xii) the Seller has duly fulfilled all
obligations on its part to be fulfilled under, or in connection with, the
Receivable; and (xiii) there is only one original executed Receivable, and
immediately prior to the related Closing Date, the Seller will have possession
of such original executed Receivable.
Unless otherwise provided in the related Prospectus Supplement, as of the last
day of the month following the date (or, if the Seller elects, the last day of
the month including such date) on which the Seller discovers or receives written
notice from the Indenture Trustee that a Receivable does not meet any of the
criteria set forth in the related Sale and Servicing Agreement and such failure
materially and adversely affects the interests of the related Securityholders in
such Receivable, the Seller, unless it has cured the failed criterion, will
repurchase such Receivable from the related Trust at a price equal to the unpaid
principal balance owed by the Obligor thereof plus interest thereon at the
respective contract rate of interest through the last day of the month of
repurchase (the "REPURCHASE AMOUNT"). The repurchase obligation will constitute
the sole remedy available to any Securityholder, the Owner Trustee or the
Indenture Trustee for the failure of a Receivable to meet any of the criteria
set forth in the related Sale and Servicing Agreement.
Pursuant to each Sale and Servicing Agreement, to assure uniform quality in
servicing the Receivables and to reduce administrative costs, the Trust will
appoint the Servicer and the Servicer will appoint the Custodian to hold such
Receivables and the motor vehicle certificates of title relating thereto (each a
"RECEIVABLE FILE") on behalf of the Trust and the related Indenture Trustee for
the benefit of the Noteholders and Certificateholders to the extent set forth in
the related Indenture. Receivables will not be stamped or otherwise marked to
reflect the transfer of the Receivables to a Trust or the pledge to the
Indenture Trustee and will not be segregated from the other Motor Vehicle Loans
owned or serviced by the Servicer. The Obligors under the Receivables will not
be notified of the transfer of the Receivables to a Trust or the pledge of the
Receivables to the related Indenture Trustee, but the Seller's accounting
records and computer systems will reflect the sale and assignment of the
Receivables to such Trust and the pledge to the related Indenture Trustee. See
"Certain Legal Aspects of the Receivables."
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ACCOUNTS
With respect to each Trust, the Indenture Trustee will establish one or more
segregated accounts in the name of the Indenture Trustee on behalf of the
related Trust and for the benefit of the related Noteholders and any
Certificateholders, into which all payments made on or with respect to the
Receivables will be deposited (the "COLLECTION ACCOUNT"). The Servicer will also
establish and maintain an account, in the name of such Indenture Trustee on
behalf of such Noteholders, into which, to the extent and in the manner
described in the related Prospectus Supplement, amounts released from the
Collection Account and any Pre-Funding Account, Yield Supplement Account,
Reserve Account or other credit or cash flow enhancement for payment to such
Noteholder will be deposited and from which all distributions to such
Noteholders will be made (the "NOTE DISTRIBUTION ACCOUNT"). The Servicer will
establish and maintain an account, in the name of the Trust on behalf of such
Certificateholders, into which amounts released from the Collection Account and
any Pre-Funding Account, Yield Supplement Account, Reserve Account or other
credit or cash flow enhancement for distribution to such Certificateholders will
be deposited and from which all distributions to such Certificateholders will be
made (the "CERTIFICATE DISTRIBUTION ACCOUNT").
The Collection Account, Note Distribution Account, Certificate Distribution
Account, Pre-Funding Account, if any, Reserve Account, if any, Yield Supplement
Account, if any, and any other accounts identified as such in a related
Prospectus Supplement for a Series are collectively referred to as the "TRUST
ACCOUNTS."
Each Trust Account will be at all times an Eligible Deposit Account, unless
otherwise provided in the related Prospectus Supplement. If any Trust Account
held by the Indenture Trustee in its own trust department ceases to be an
Eligible Deposit Account, the Indenture Trustee will be required to transfer
such Account to an Eligible Bank or otherwise cause such Account to again become
an Eligible Deposit Account. "ELIGIBLE DEPOSIT ACCOUNT" means either (a) a
segregated account with an Eligible Bank or (b) a segregated trust account with
the trust department of a depository institution organized under the laws of the
United States of America or any one of the states thereof or the District of
Columbia (or any domestic branch of a foreign bank), having trust powers and
acting as trustee for funds deposited in such account, so long as the long-term
unsecured debt of such depository institution shall have a credit rating from
each Rating Agency in one of its generic rating categories which signifies
investment grade.
"ELIGIBLE BANK" means any institution with trust powers (which may be the Bank
or the Owner Trustee), organized under the laws of the United States of America
or any one of the states thereof or the District of Columbia (or any domestic
branch of a foreign bank) which has a combined capital and surplus in excess of
$100,000,000, the deposits of which are insured to the full extent permitted by
law by the FDIC, which is subject to supervision and examination by Federal or
state banking authorities and which has (A) (i) a rating of at least P-1 from
Moody's Investors Service, Inc. ("MOODY'S") and A-l+ from Standard & Poor's
Ratings Service, a Division of the McGraw Hill Companies ("S&P") with respect to
short-term deposits obligations, and (ii) a rating of A2 or higher from Moody's
and A from S&P with respect to long-term unsecured debt obligations, or (B) such
other ratings as may be described in a Prospectus Supplement.
The Trust Accounts may be maintained with the Bank, or any affiliate of the
Bank, if the Bank or such affiliate, as the case may be, and the Trust Accounts
meet the eligibility criteria described in the preceding paragraphs.
Funds in the Trust Accounts will be invested in Eligible Investments. "ELIGIBLE
INVESTMENTS" will generally be limited to investments acceptable to the Rating
Agencies as being consistent with the rating of the Securities and may include,
if otherwise eligible, debt securities of the Owner Trustees, the Bank or any of
their affiliates and money market funds for which the Owner Trustees, the
Indenture Trustees, the Bank or any of their affiliates is an investment manager
or investment advisor. Investments of amounts on deposit in the Trust Accounts
with respect to any Collection Period or Distribution Date are limited to
obligations or securities that mature not later than the business day preceding
the related Distribution Date or, with respect to the Note Distribution Account,
the next Payment Date (each, a "DEPOSIT DATE"). However, to the extent permitted
by each Rating Agency, funds on deposit in any Reserve Account may be invested
in securities that will not mature prior to the date of the next distribution
with respect to the Securities. Unless otherwise provided in the related
Prospectus Supplement, any earnings (net of losses and investment expenses) on
amounts on deposit in the Trust Accounts will be paid to the Servicer and will
not be available to Securityholders.
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The Bank, in its capacity as the initial paying agent (the "PAYING AGENT") under
each Indenture, will have the revocable right to withdraw funds from a Trust
Account for the purpose of making distributions to the Noteholders in the manner
provided therein.
SERVICING PROCEDURES
The Servicer will service the Receivables of each Trust and will make reasonable
efforts to collect all payments due with respect to such Receivables and, in a
manner consistent with the related Sale and Servicing Agreement and with the
terms of the Receivables, will follow such collection and servicing procedures
as it follows with respect to comparable new or used automobile Receivables that
it services for itself and that are consistent with prudent industry standards.
See "The Motor Vehicle Loan Portfolio--Servicing and Collections." The Servicer
is authorized to grant certain rebates, adjustments or extensions with respect
to a Receivable. However, unless otherwise provided in the related Prospectus
Supplement, if any such modification of a Receivable alters the initial
principal amount of such Receivable, the interest rate or the total number of
payments such that the term is extended beyond the latest Final Scheduled
Distribution Date for any class of Securities, the Servicer will be obligated to
purchase the Receivable. Any such required purchase will constitute the sole
remedy available to the Securityholders, the related Indenture Trustee or the
related Owner Trustee for any such uncured breach.
Each Sale and Servicing Agreement will provide that the Servicer, on behalf of
the related Trust, shall use reasonable efforts, consistent with its customary
servicing procedures, to repossess or otherwise take possession of the Financed
Vehicle securing any Receivable which the Servicer has determined to charge off
during any Collection Period in accordance with its customary servicing
practices (each such Receivable, a "LIQUIDATING RECEIVABLE"). Proceeds of any
Liquidating Receivable are "LIQUIDATION PROCEEDS." See "The Motor Vehicle Loan
Portfolio--Servicing and Collections." The Servicer shall follow such customary
and usual practices and procedures as it shall deem necessary or advisable in
its servicing of new or used automobile Receivables, which may include
reasonable efforts to realize upon any recourse to Dealers, consigning the
Financed Vehicle to a Dealer for resale and selling the Financed Vehicle at
public or private sale. See "Certain Legal Aspects of the Receivables." The
Servicer will be entitled to receive an amount specified in the applicable Sale
and Servicing Agreement as an allowance for amounts charged to the account of
the Obligor, in keeping with the Servicer's customary procedures, for
repossession, refurbishing and disposition of any Financed Vehicle and other
out-of-pocket costs related to the liquidation (collectively, "LIQUIDATION
EXPENSES").
COLLECTIONS
With respect to each Trust, the Servicer will deposit all payments on the
related Receivables (from whatever source) and all proceeds of such Receivables
collected during each collection period specified in the related Prospectus
Supplement (each, a "COLLECTION PERIOD") into the related Collection Account on
a daily basis within forty-eight hours of receipt. However, at any time that and
for so long as each condition to making deposits less frequently than daily as
may be required by the related Rating Agencies or any enhancement provider or as
set forth in the related Prospectus Supplement is satisfied, the Servicer will
not be required to deposit such amounts into the Collection Account until on or
before the Deposit Date preceding the related day in each month specified in the
related Prospectus Supplement (each, a "DISTRIBUTION DATE"). Pending deposit
into the Collection Account, collections may be invested by the Servicer at its
own risk and for its own benefit and will not be segregated from its own funds.
If the Servicer were unable to remit such funds, Securityholders might incur a
loss. The Servicer may, in order to satisfy the requirements described above,
obtain letters of credit or other security for the benefit of the related Trust
to secure timely remittances of collections on the related Receivables.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
Unless otherwise specified in the related Prospectus Supplement with respect to
any Trust, the Servicer will be entitled to receive a fee (the "SERVICING FEE")
for each Collection Period payable on the related Distribution Date in an amount
equal to the sum of (i) the product of one-twelfth of the specified percentage
per annum (as set forth in the related Prospectus Supplement, the "SERVICING FEE
RATE") and the Aggregate Receivables Balance as of the close of business on the
last day of the second Collection Period immediately preceding the Collection
Period in which such
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Distribution Date occurs and (ii) unless otherwise specified in the related
Prospectus Supplement with respect to any Trust, any late fees, prepayment
charges (other than deferral fees) and other fees and charges collected during
the related Collection Period. The Servicing Fee will also include any interest
earned during the Collection Period on deposits in the Trust Accounts to the
extent set forth in the related Prospectus Supplement. The Servicing Fee
(together with any portion of the Servicing Fee that remains unpaid from prior
Distribution Dates, the "TOTAL SERVICING FEE") will be paid solely to the extent
of amounts allocable thereto as specified in the related Prospectus Supplement.
The Servicer will be entitled to reimbursement from each Trust for certain
liabilities.
The Servicing Fee will compensate the Servicer for performing the functions of a
third-party Servicer of motor vehicle Receivables as an agent for the
Securityholders, including collecting and posting all payments and responding to
inquiries of Obligors, investigating delinquencies, reporting tax information to
Obligors and paying costs of collection
and disposition of Financed Vehicles under Liquidating Receivables. The
Servicing Fee also will compensate the Servicer for administering the
Receivables of a Trust, accounting for collections and furnishing monthly and
annual statements to the related Owner Trustee and the related Indenture Trustee
with respect to distributions. The Servicing Fee will also compensate the
Servicer for certain taxes, accounting fees, outside auditor fees, the fees of
the Paying Agent, the Transfer Agent, the Registrar and the Owner Trustee and
its counsel, data processing costs and other costs incurred in connection with
administering the applicable Receivables.
NET DEPOSITS
As an administrative convenience, the Servicer, so long as (i) no Event of
Servicing Termination has occurred and is continuing and (ii) the Servicer has
not been terminated as such, will be permitted to deposit the collections,
aggregate Advances and Repurchase Amounts for any Trust for or with respect to
the related Collection Period net of distributions to be made to the Servicer or
the Seller for such Trust with respect to such Collection Period (remitting
amounts to the Seller directly).
ADVANCES
The Prospectus Supplement may provide that the Servicer may, in its sole
discretion, make a payment (an "ADVANCE") with respect to each delinquent
Receivable in an amount described in such Prospectus Supplement. The Servicer
may elect not to make any Advance with respect to a Receivable under the
circumstances described in the related Prospectus Supplement. The Servicer will
be entitled to be reimbursed for outstanding Advances in the manner described in
the related Prospectus Supplement. The Servicer will deposit all Advances with
respect to any Distribution Date on the related Deposit Date.
CERTAIN MATTERS REGARDING THE SERVICER
Each Sale and Servicing Agreement will provide that the Servicer may not resign
from its obligations and duties as Servicer thereunder, except upon a
determination that the Servicer's performance of such duties is no longer
permissible under applicable law. No such resignation will become effective
until the related Indenture Trustee or a successor Servicer has assumed the
Servicer's servicing obligations and duties under the Sale and Servicing
Agreement.
Any corporation or other entity into which the Servicer may be merged or
consolidated, or that may result from any merger, conversion or consolidation to
which the Servicer is a party, or any entity that may succeed by purchase and
assumption to all or substantially all the business of the Servicer, where the
Servicer is not the surviving entity and where such corporation or other entity
assumes the obligations of the Servicer under a Sale and Servicing Agreement,
will be the successor to the Servicer under that Sale and Servicing Agreement.
Each Sale and Servicing Agreement will provide that the Servicer will be liable
only to the extent of the obligations specifically undertaken by it under such
Sale and Servicing Agreement and will have no other obligations or liabilities
thereunder. Each Sale and Servicing Agreement will also provide that the
Servicer will not be under any obligation to appear in, prosecute or defend any
legal action that is not incidental to the Servicer's Servicing responsibilities
under such Sale and Servicing Agreement and that, in its opinion, may cause it
to incur any expense or liability. The
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Servicer may, however, at its own expense, undertake any reasonable action that
it may deem necessary or desirable in respect of the related Sale and Servicing
Agreement and the rights and duties of the parties thereto and the interests of
the Securityholders thereunder.
DISTRIBUTIONS
With respect to each Trust, beginning on the Distribution Date or Payment Date,
as applicable, specified in the related Prospectus Supplement, distributions of
principal and interest (or, where applicable, in respect of principal or
interest only) on each class of such Securities entitled thereto will be made by
the applicable related Owner Trustee or Paying Agent to the Noteholders and the
Certificateholders of such Series. The timing (monthly, quarterly or otherwise),
calculation, allocation, order, source, priorities of and requirements for all
payments to any class of Noteholders of such Series and all distributions to any
class of Certificateholders of such Series will be set forth in the related
Prospectus Supplement.
With respect to each Trust, on each Distribution Date, collections on the
related Receivables will be transferred from the Collection Account directly to
the Note Distribution Account and the Certificate Distribution Account, if any,
for distribution to Noteholders and Certificateholders to the extent provided in
the related Prospectus Supplement. Credit Enhancement, such as a Reserve Account
or Yield Supplement Account, will be available to cover any shortfalls in the
amount available for distribution on such date to the extent specified in the
related Prospectus Supplement.
Except as otherwise provided in the related Prospectus Supplement, distributions
in respect of interest on the Notes will be made prior to distributions of
principal thereon. Distributions in respect of Certificates will be subordinate
to payments in respect of the Notes, as more fully described in the related
Prospectus Supplement.
CREDIT ENHANCEMENT
The amounts and types of credit and cash flow enhancement arrangements, if any,
and the provider thereof, if applicable, with respect to each class of
Securities of a given Series will be set forth in the related Prospectus
Supplement. If and to the extent provided in the related Prospectus Supplement,
credit enhancement may be in the form of one or more subordinate classes of
Securities, a Reserve Account, a Yield Supplement Agreement, a Yield Supplement
Account, over collateralization, letters of credit, credit or liquidity
facilities, surety bonds, guaranteed investment contracts, swaps or other
interest rate protection agreements, repurchase obligations, other agreements
with respect to third party payments or other support, cash deposits or such
other arrangements as may be described in the related Prospectus Supplement.
Credit or cash flow enhancement for a class of Securities may cover one or more
other classes of Securities of the same Series, and credit or cash flow
enhancement for a Series of Securities may cover one or more other Series of
Securities.
The presence of a Yield Supplement Agreement, a Reserve Account, a Yield
Supplement Account and other forms of credit enhancement for the benefit of any
class or Series of Securities is intended to enhance the likelihood of receipt
by the Securityholders of such class or Series of the full amount of principal
and interest due thereon and to decrease the likelihood that such
Securityholders will experience losses. Unless otherwise specified in the
related Prospectus Supplement, the credit enhancement for a class or Series of
Securities will not provide protection against all risks of loss and will not
guarantee repayment of the entire principal balance and interest thereon. If
losses occur that exceed the amount covered by any credit enhancement or that
are not covered by any form of credit enhancement, Securityholders of any class
or Series will bear their allocable share of deficiencies, as described in the
related Prospectus Supplement. In addition, if a form of credit enhancement
covers more than one Series of Securities, Securityholders of any such Series
will be subject to the risk that such credit enhancement will be exhausted by
the claims of Securityholders of other Series.
The Seller may add to or supplement the Credit Enhancement for any class of
Securities with another form of Credit Enhancement without the consent of the
related Securityholders, provided that if any such addition shall affect any
class of Noteholders or Certificateholders differently from any other class of
Noteholders or Certificateholders, then such addition shall not, as evidenced by
an opinion of counsel, adversely affect in any material respect the interests of
any class of Noteholder or Certificateholder.
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RESERVE ACCOUNT. If provided in the related Prospectus Supplement, pursuant to
the related Sale and Servicing Agreement, the Seller will establish a Reserve
Account which will be maintained in the name of the related Indenture Trustee.
Unless otherwise provided in the related Prospectus Supplement, the Reserve
Account will be included in the property of the related Trust. The Reserve
Account will be funded by an initial deposit on the Closing Date and, if the
related Series has a Funding Period, will also be funded on each Subsequent
Transfer Date. As described in the related Prospectus Supplement, the amount on
deposit in the Reserve Account will be increased on each Distribution Date up to
the Specified Reserve Account Balance (as defined in the related Prospectus
Supplement) by the deposit therein of the amount of collections on the related
Receivables remaining on each Distribution Date after the payment of all other
required payments and distributions on such date. The related Prospectus
Supplement will describe the circumstances and manner under which distributions
will be made out of the related Reserve Account (i) to holders of the Securities
covered thereby in the event of shortfalls and (ii) with respect to amounts, if
any, in excess of the Specified Reserve Account Balance, to the Seller or to a
third-party specified therein.
In the event the funds on deposit in a Reserve Account are reduced to zero, the
Securityholders of such Series will bear directly the credit and other risks
associated with ownership of the Receivables held by the related Trust,
including the risk that such Trust may not have a perfected security interest in
the Financed Vehicles. In such case, the amount available for distribution may
be less than that described in the related Prospectus Supplement and the
Securityholders may experience delays or suffer losses as a result, among other
things, of defaults and delinquencies by the Obligors or previous extensions
made by the Servicer.
YIELD SUPPLEMENT ACCOUNT; YIELD SUPPLEMENT AGREEMENT. If so provided in the
related Prospectus Supplement, the Seller or a third party will enter into a
Yield Supplement Agreement (each, a "YIELD SUPPLEMENT AGREEMENT") and/or
establish a Yield Supplement Account (each, a "YIELD SUPPLEMENT ACCOUNT") with
the related Indenture Trustee or related Owner Trustee for the benefit of the
holders of the related Securities. A Yield Supplement Agreement or a Yield
Supplement Account will be designed to provide payments to the Securityholders
in respect of Receivables the Contract Rate of which is less than the sum of the
applicable Interest Rate or Pass-Through Rate and the Servicing Fee Rate.
STATEMENTS TO TRUSTEES AND TRUST
Prior to each Distribution Date with respect to the Securities, the Servicer
will provide to the related Owner Trustee and any Indenture Trustee a statement
setting forth substantially the same information for such date and the related
Collection Period as is required to be provided in the periodic reports provided
to Securityholders of such Series described herein under "Certain Information
Regarding the Securities--Reports to Securityholders."
EVIDENCE AS TO COMPLIANCE
Each Sale and Servicing Agreement will provide that a firm of independent public
accountants will annually furnish to the related Trust and related Indenture
Trustee a statement as to compliance by the Servicer during the preceding twelve
months (or, in the case of the first such certificate, from the applicable
Closing Date) with certain standards relating to the servicing of the applicable
Receivables, or as to the effectiveness of its processing and reporting
procedures and certain other matters.
Each Sale and Servicing Agreement will also provide for delivery to the related
Trust and the related Indenture Trustee on or before March 15 of each year,
beginning the first March 15 that is at least three months after the related
Closing Date, a certificate signed by an officer of the Servicer stating that
the Servicer has fulfilled its obligations in all material respects under such
Sale and Servicing Agreement throughout the preceding twelve months (or, in the
case of the first such certificate, from the Closing Date) or, if there has been
a default in the fulfillment of any such obligation, describing such default.
Copies of such statements and certificates may be obtained by Securityholders by
a request in writing addressed to the Indenture Trustee or Owner Trustee, as
applicable.
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EVENTS OF SERVICING TERMINATION
Except as otherwise provided in the related Prospectus Supplement, "EVENTS OF
SERVICING TERMINATION" under each Sale and Servicing Agreement will consist of
(i) any failure by the Servicer to deliver to the related Owner Trustee or any
Indenture Trustee the Servicer's report for the related Collection Period or any
failure by the Servicer to deliver to the related Owner Trustee or Indenture
Trustee for deposit in any Trust Account any proceeds or payments required to be
delivered under the terms of such Securities or the related Sale and Servicing
Agreement (or, in the case of a payment or deposit to be made not later than the
Deposit Date, the failure to make such payment or deposit on such Deposit Date),
which failure continues unremedied for five business days after the due date;
(ii) any failure by the Servicer to duly observe or perform in any material
respect any other covenant or agreement of the Servicer set forth in the related
Sale and Servicing Agreement, which failure materially and adversely affects the
rights of the related Trust or the Securityholders (which determination shall be
made without regard to whether funds are available to the Securityholders
pursuant to any related Credit Enhancement) and which continues unremedied for
60 days after the date of written notice of such failure (A) to the Servicer by
the related Owner Trustee or the related Indenture Trustee or (B) to the related
Owner Trustee or the related Indenture Trustee and the Servicer by holders of
the related Notes (so long as Notes are outstanding) evidencing not less than a
majority of the principal amount of such Notes then outstanding (or, if no Notes
are outstanding, Certificates of the related Series evidencing not less than a
majority of the Certificate Balance then outstanding); or (iii) certain events
of bankruptcy, receivership, insolvency or similar proceedings and certain
actions by the Servicer indicating its insolvency pursuant to bankruptcy,
receivership, conservatorship, insolvency or similar proceedings or its
inability to pay its obligations. The holders of the related Notes (so long as
Notes are outstanding) evidencing not less than a majority of the principal
amount of such Notes then outstanding (or, if no Notes are outstanding,
Certificates of the related Series evidencing not less than a majority of the
Certificate Balance then outstanding) may, with the written consent of any
provider of enhancement specified in the related Prospectus Supplement, waive
certain defaults by the Servicer in the performance of its obligations.
RIGHTS UPON EVENT OF SERVICING TERMINATION
Unless otherwise provided in the related Prospectus Supplement, as long as an
Event of Servicing Termination under a Sale and Servicing Agreement remains
unremedied, the related Indenture Trustee or holders of Notes of the related
Series evidencing not less than a majority of the principal amount of such Notes
then outstanding (or, if the Notes have been paid in full and the Indenture has
been discharged in accordance with its terms, by the related Owner Trustee or
holders of Certificates evidencing not less than a majority of the Certificate
Balance then outstanding) by notice given in writing to the Servicer (and to the
related Owner Trustee if given by the Certificateholders), may terminate all the
rights and obligations of the Servicer under such Sale and Servicing Agreement,
whereupon such Indenture Trustee or a successor Servicer appointed by such
Indenture Trustee will succeed to all the responsibilities, duties and
liabilities of the Servicer under such Sale and Servicing Agreement and will be
entitled to similar compensation arrangements. If no Notes are outstanding, as
long as an Event of Servicing Termination under the related Sale and Servicing
Agreement remains unremedied, the related Owner Trustee or holders of
Certificates of the related Series evidencing not less than a majority of the
Certificate Balance then outstanding, by notice given in writing to the Servicer
(and to the related Owner Trustee if given by Certificateholders), may terminate
all of the rights, duties and liabilities of the Servicer under such Sale and
Servicing Agreement, whereupon a successor Servicer appointed by such Owner
Trustee will succeed to all of the rights, duties and liabilities of the
Servicer under such Sale and Servicing Agreement and will be entitled to similar
compensation arrangements. In the event that such Indenture Trustee or successor
Servicer appointed by the Owner Trustee is unwilling or unable to so act, it may
appoint, or petition a court of competent jurisdiction for the appointment of, a
successor Servicer to act as successor to the outgoing Servicer. Such Indenture
Trustee or successor Servicer may make such arrangements for compensation to be
paid, which in no event may be greater than the Servicing Fee payable under such
Sale and Servicing Agreement.
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WAIVER OF PAST DEFAULTS
Unless otherwise provided in the related Prospectus Supplement, the holders of
Notes evidencing at least a majority in principal amount of the then outstanding
Notes of the related Series (or, the holders of any Certificates of such Series
evidencing not less than a majority of the Certificate Balance then outstanding,
in the case of any Event of Servicing Termination that does not adversely affect
the related Indenture Trustee or such Noteholders) may, on behalf of all such
Noteholders and Certificateholders, waive any default by the Servicer in the
performance of its obligations under the related Sale and Servicing Agreement
and its consequences, except an Event of Servicing Termination in making any
required deposits to or payments from any of the Trust Accounts in accordance
with such Sale and Servicing Agreement. No such waiver will impair such
Securityholder's rights with respect to subsequent defaults.
AMENDMENT
Each of the Transfer and Servicing Agreements may be amended by the parties
thereto without the consent of the related Noteholders or Certificateholders (i)
to cure any ambiguity, (ii) to correct or supplement any provision therein that
may be defective or inconsistent with any other provision therein or in the
Related Documents, (iii) to add or supplement any credit enhancement for the
benefit of Noteholders or Certificateholders (provided that if any such addition
affects any class of Noteholders or Certificateholders differently than any
other class of Noteholders or Certificateholders, then such addition will not,
as evidenced by an opinion of counsel, adversely affect in any material respect
the interests of any class of Noteholders or Certificateholders), (iv) to add to
the covenants, restrictions or obligations of the Seller, the Servicer, the
Owner Trustee or the Indenture Trustee, or (v) to add, change or eliminate any
other provision of such Agreement in any manner that will not, as evidenced by
an opinion of counsel, adversely affect in any material respect the interests of
the Noteholders or the Certificateholders. Each such Agreement may also be
amended by the parties thereto with the consent of the holders of at least a
majority in principal amount of such then outstanding Notes and the holders of
such Certificates evidencing at least a majority of the Certificate Balance for
the purpose of adding any provisions to or changing in any manner or eliminating
any of the provisions of such Agreement or modifying in any manner the rights of
such Noteholders or Certificateholders; except that no such amendment may (i)
increase or reduce in any manner the amount of, or accelerate or delay the
timing of, collection of payments on Receivables or distributions that are
required to be made on any Note or Certificate, any Interest Rate, any
Pass-Through Rate or the Specified Reserve Account Balance or (ii) reduce the
aforesaid percentage required of Noteholders or Certificateholders to consent to
any such amendment without the consent of all of the Noteholders or
Certificateholders, as the case may be.
PAYMENT OF NOTES
Upon payment in full of all outstanding Notes of a given Series and the
satisfaction and discharge of the related Indenture, the related Owner Trustee
will succeed to all the rights of the Indenture Trustee, and any
Certificateholders of such Series, will succeed to all the rights of the
Noteholders of such Series under the related Sale and Servicing Agreement,
except as otherwise provided therein.
TERMINATION
With respect to each Trust, the obligations of the Servicer, the Seller, the
related Owner Trustee and any related Indenture Trustee, if any, pursuant to the
Transfer and Servicing Agreements will terminate upon the earlier of (i) the
maturity or other liquidation of the last related Receivable and the disposition
of any amounts received upon liquidation of any property remaining in the
related Trust and (ii) the payment to Securityholders of the related Series of
all amounts required to be paid to them pursuant to the Transfer and Servicing
Agreements.
Unless otherwise provided in the related Prospectus Supplement, in order to
avoid excessive administrative expense, the Servicer will be permitted at its
option to purchase all remaining Trust Property at a purchase price equal to the
aggregate of the Repurchase Amounts of the remaining Receivables (other than
Liquidating Receivables) from each Trust, as of the last day of any applicable
Collection Period in which (i) the outstanding Aggregate Receivables
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Balance with respect to the Receivables held by such Trust is 10% or less (or
such other percentage as is specified in the related Prospectus Supplement) of
the Aggregate Starting Receivables Balance and (ii) the Repurchase Amount for
the Receivables (other than the Liquidating Receivables) is greater than or
equal to the sum of the outstanding principal balance of all of the Securities,
plus accrued and unpaid interest thereon. The "AGGREGATE STARTING RECEIVABLES
BALANCE" shall mean the sum of the aggregate Starting Receivables Balance of all
Receivables transferred to the related Trust.
As more fully described in the related Prospectus Supplement, concurrently with
the purchase event specified above, any outstanding Notes of the related Series
will be redeemed and the subsequent distribution to any related
Certificateholders of all amounts required to be distributed to them pursuant to
the applicable Trust Agreement will effect early retirement of the Certificates
of such Series.
The related Owner Trustee and the related Indenture Trustee will give written
notice of termination to each Securityholder of the related Series of record,
which notice will specify the Distribution Date upon which such Securityholders
may surrender their Securities to the related Owner Trustee for final payment.
Upon receipt of written notice by the Trust, the Indenture Trustee will give
written notice of redemption to each Noteholder of record and the Owner Trustee
will give written notice of redemption to each related Certificateholder of
record. The final distribution to any Noteholder or Certificateholder will be
made only upon surrender and cancellation of such Noteholder's Note at an office
or agency of the Indenture Trustee specified in the notice of redemption or such
Certificateholder's Certificate at an office or agency of the Owner Trustee
specified in the notice of termination.
Subject to applicable law and after the Indenture Trustee has taken certain
measures to notify Noteholders, any money held by the Indenture Trustee or any
Paying Agent in trust for payment on the Notes which remain unclaimed for two
years shall, upon request of such Trust, be paid to such Trust (or its
successor). Following any such payment, the Owner Trustee and any Paying Agent
shall no longer be liable to any Noteholder with respect to such unclaimed
amount, and any claim with respect to such amount shall be an unsecured claim
against such Trust. If, within 18 months after the first notice of final payment
on any Certificates, there remain Certificates which have not been surrendered
for cancellation, the related Owner Trustee may take appropriate steps to notify
the applicable Certificateholders (the cost thereof paid out of the unclaimed
amounts). Subject to applicable law, any funds that then remain shall be paid to
the Seller.
ADMINISTRATION AGREEMENT
With respect to each Trust, the Bank, in its capacity as administrator (the
"ADMINISTRATOR"), will enter into an agreement (as amended and supplemented from
time to time, the "ADMINISTRATION AGREEMENT") with such Trust and the related
Indenture Trustee pursuant to which the Administrator will agree, to the extent
provided in such Administration Agreement, to provide the notices and to perform
on behalf of the related Trust and Owner Trustee certain other administrative
obligations required by the related Indenture. As compensation for the
performance of the Administrator's obligations under the Administration
Agreement and as reimbursement for its expenses related thereto, the
Administrator will be entitled to a monthly administration fee in an amount to
be set forth in the related Prospectus Supplement (the "ADMINISTRATION FEE"),
which will be paid by the Servicer or as otherwise set forth in the related
Prospectus Supplement.
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CERTAIN LEGAL ASPECTS OF THE RECEIVABLES
RIGHTS IN THE RECEIVABLES
The Receivables are "chattel paper" as defined in Article 9 of the UCC. Article
9 of the UCC specifically states that with respect to a sale of chattel paper,
the provisions of Article 9 apply. In that connection and to avail each Trust
and related Indenture Trustee of the benefits and protections afforded by the
UCC to a purchaser of chattel paper whether by reason of a sale thereof or the
grant of a security interest therein against other competing claimants, actions
prescribed by the UCC will be taken to "perfect" the interests of each Trust and
related Indenture Trustee in the Receivables transferred to such Trust and
pledged or granted to the related Indenture Trustee. First, the Seller will
cause appropriate financing statements to be filed with the appropriate
governmental authorities in the states of Washington, Utah and Idaho to evidence
the sale to such Trust and also the pledge to the Indenture Trustee. Second,
following the sale and assignment of the Receivables to a Trust, pursuant to the
related Sale and Servicing Agreement, the Custodian will be appointed by the
Servicer to have physical possession of the Receivables and the Receivable Files
as custodian for the Trust and the related Indenture Trustee. The Receivables
will not be stamped, or otherwise marked to indicate that they have been sold to
such Trust or further pledged to the Indenture Trustee; however, the Servicer
and the Custodian will indicate in their computer records that the Receivables
have been sold to that Trust and pledged or granted to the Indenture Trustee and
both will have notice of the interest of such Trust and the Indenture Trustee in
such Receivables. If, through inadvertence or otherwise, another party purchases
(or takes a security interest in) the Receivables for new value in the ordinary
course of business and somehow manages to take possession of the Receivables
without actual knowledge of the Trust's or the Indenture Trustee's interests,
such purchaser (or secured party) will acquire an interest in the Receivables
superior to the interest of that Trust and the Indenture Trustee. Under the
related Sale and Servicing Agreement, in addition to the obligation to provide
for perfection as above-described, the Seller is also obligated to assure that
the interest of the Trust in the Receivables is perfected in such a manner as to
affect the highest priority afforded by the UCC to such interests. Under the
Indenture, the Trust shall designate the Indenture Trustee as its agent to
assure that its security interest is maintained.
SECURITY INTERESTS IN THE FINANCED VEHICLES
Generally, retail motor vehicle installment sale contracts and installment loans
such as the Receivables evidence loans to obligors to finance the purchase of
motor vehicles. The loan documents also constitute personal property security
agreements and include grants of security interests in the vehicles under the
UCC. Perfection of security interests in motor vehicles is generally governed by
the motor vehicle registration laws of the state in which the vehicle is
located. In Washington, Utah, Idaho and most other states, with the exception of
the Idaho electronic title option hereinafter described, perfection of a
security interest in the vehicle is accomplished by taking action to have the
secured party's lien noted on the certificate of title. If the filing of the
registration, title and lien application papers necessary to cause such notation
to occur is accomplished within the appropriate period (20 days for Idaho and
Washington and 30 days for Utah), the date of perfection is generally the date
that such papers were executed except that the date of perfection in Washington
is the date of attachment. Otherwise, perfection is deemed to occur at the time
of filing such papers. Accordingly, if for any reason there is a failure to file
such papers, or take other appropriate action, within the aforesaid period,
subsequent purchasers and lien or security interest claimants whose interests
are perfected before the filing of such papers would have prior claims to the
vehicle. Also, even though the laws in Utah allow 30 days for such filing, a
filing after 20 days exposes the secured party to a possible claim in a
bankruptcy proceeding that the Obligor's grant of the security interest is a
preferential transfer.
According to recent revisions to the laws of Washington, a security interest in
a certificated vehicle may be temporarily perfected through the use of a
"transitional ownership record." This is an electronic record of the interests
of secured parties in a particular vehicle. It is only effective when a secured
party does not possess the actual title to the vehicle and the department of
licensing already has a computer record of the vehicles. None of the Receivables
will be perfected utilizing this revision.
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In Idaho, upon receipt of a properly completed title application, the department
of motor vehicles is authorized to create a paperless electronic record of title
to a vehicle in lieu of issuing a paper certificate of title if the department
and the lienholder so agree in writing. Under this alternative method of
registering and maintaining title to a motor vehicle, liens filed with the
department shall be perfected and take priority according to the order of time
in which the same are entered into the electronic records of the department. In
the absence of a written agreement between the department and the lienholder to
create a paperless electronic title, the paper certificate of title is the
controlling title document evidencing the recording date.
The Bank's practice is to take such action as is required in accordance with its
normal and customary servicing practices and procedures to perfect its security
interest in a Financed Vehicle under the laws of the jurisdiction in which the
Financed Vehicle is registered. If the Bank, because of clerical error or
otherwise, has failed to take such action with respect to a Financed Vehicle, it
will not have a perfected security interest in the Financed Vehicle and its
security interest may be subordinate to the interests of, among others,
subsequent purchasers of the Financed Vehicle that give value without notice of
the Bank's security interest and to whom a certificate of title is issued in
such purchaser's name, holders of perfected security interests in the Financed
Vehicle, and the trustee in bankruptcy of the Obligor. The Bank's security
interest may also be subordinate to such third parties in the event of fraud or
forgery by the Obligor or administrative error by state recording officials or
in the circumstances noted below. As described more fully below, the Bank will
warrant in each Sale and Servicing Agreement that it has an enforceable first
priority perfected security interest with respect to each Financed Vehicle and
will be required to repurchase the related Receivable in the event of an uncured
breach of such warranty.
Pursuant to each Sale and Servicing Agreement, the Seller will assign its
security interests in the Financed Vehicles, along with the sale and assignment
of the Receivables, to the related Trust. The Trust will pledge such interest to
the Indenture Trustee for the benefit of the Noteholders and the
Certificateholders to the extent provided in the related Indenture. The
certificates of title will not be endorsed or otherwise amended to identify the
Trust or Indenture Trustee as the new secured party, however, because of the
administrative burden and expense involved.
In Utah, Idaho and most other states, an assignment of a security interest in a
Financed Vehicle along with the applicable Receivable is effective without
amendment of any lien noted on a vehicle's certificate of title or ownership,
and the assignee succeeds thereby to the assignor's rights as secured party. In
Utah, Idaho and most other states, in the absence of fraud or forgery by the
vehicle owner or of fraud, forgery, negligence or error by the Bank or
administrative error by state or local agencies, the notation of the Bank's lien
on the certificates of title or ownership and/or possession of such certificates
with such notation will be sufficient to protect the related Trust and Indenture
Trustee against the rights of subsequent purchasers of a Financed Vehicle or
subsequent lenders who take a security interest in a Financed Vehicle. There
exists a risk, however, in not identifying the Trust or Indenture Trustee as the
new secured party on the certificate of title that the security interest of the
Trust or the Indenture Trustee may not be enforceable. In the event the related
Trust or Indenture Trustee has failed to obtain or maintain a perfected security
interest in a Financed Vehicle, their security interest would be subordinate to,
among others, a bankruptcy trustee of the Obligor, a subsequent purchaser of the
Financed Vehicle or a holder of a perfected security interest.
With respect to each Trust, the Seller will warrant in the related Sale and
Servicing Agreement as to each Receivable conveyed by it to such Trust that, on
the Closing Date, it has a valid, subsisting, and enforceable first priority
perfected security interest in the Financed Vehicle securing the Receivable
(subject to administrative delays and clerical errors on the part of the
applicable government agency) and such security interest will be assigned by the
Seller to the related Trust. In the event of an uncured breach of such warranty,
the Seller will be required to repurchase such Receivable for its Repurchase
Amount. The repurchase obligation will constitute the sole remedy available to
the affected Trust, the related Indenture Trustee, the related Owner Trustee and
the related Securityholders for such breach. The Seller's warranties with
respect to perfection and enforceability of a security interest in a Financed
Vehicle will not cover statutory or other liens arising after the Closing Date
by operation of law which have priority over such security interest.
Accordingly, any such lien would not by itself give rise to a repurchase
obligation on the part of the Seller.
In the event that an Obligor moves to a state other than the state in which the
Financed Vehicle is registered, under the laws of Washington, Utah, Idaho and
most other states, a perfected security interest in a motor vehicle continues
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for four months after such relocation and thereafter, in most instances, until
the Obligor re-registers the motor vehicle in the new state, but in any event
not beyond the surrender of the certificate of title. A majority of states
require surrender of a certificate of title to reregister a motor vehicle, and
many require that notice of such surrender be given to each secured party
noticed on the certificate of title. In those states that require a secured
party to take possession of a certificate of title to perfect a security
interest, the secured party would likely learn of the re-registration through
the request from the Obligor to surrender possession of the certificate of
title. In those states that require a secured party to note its lien on a
certificate of title to perfect a security interest but do not require
possession of the certificate of title, the secured party would likely learn of
the re-registration through the notice from the state department of motor
vehicles that the certificate of title had been surrendered. The requirements
that a certificate of title be surrendered and that notices of such surrender be
given to each secured party also apply to re-registrations effected following a
sale of a motor vehicle. The Servicer would therefore have the opportunity to
re-perfect the Seller's security interest in a Financed Vehicle in the state of
re-registration following relocation of the Obligor and would be able to require
satisfaction of the related Receivable following a sale of the Financed Vehicle.
In states that do not require a certificate of title for registration of a motor
vehicle, re-registration could defeat perfection. In the ordinary course of
servicing Motor Vehicle Loans, the Servicer takes steps to effect re-perfection
upon receipt of notice of re-registration or information from the Obligor of a
relocation. However, there is a risk that an Obligor could relocate without
notification to the Servicer, then file a false affidavit with the new state to
cause a new certificate of title to be issued without notation of the Seller's
lien.
Under the laws of Washington, Utah, Idaho and many other states, certain
possessory liens for repairs performed on or storage of a motor vehicle and
liens for unpaid taxes may take priority over a perfected security interest in
the motor vehicle. The Code also grants priority to certain Federal tax liens
over the lien of a secured party. The laws of certain states and Federal law
permit the confiscation of motor vehicles under certain circumstances if used in
unlawful activities, which may result in a loss of a secured party's perfected
security interest in the confiscated motor vehicle. For each Trust, the Seller
will warrant in the related Sale and Servicing Agreement that, as of the Closing
Date, the Seller has not taken any action which would have a material and
adverse effect on the interests of the related Trust and Securityholders. If the
Seller takes any such action, the Seller will be required to repurchase the
Receivable secured by the Financed Vehicle involved. This repurchase obligation
will constitute the sole remedy available to the related Trust, Owner Trustee,
Indenture Trustee and Securityholders for such breach. Any liens for repairs or
taxes arising at any time after the Closing Date during the term of a Receivable
would not give rise to a repurchase obligation on the part of the Seller.
REPOSSESSION
In the event of a default by an Obligor, the holder of a Receivable has all the
remedies of a secured party under the UCC, except where specifically limited by
other state laws or by contract. The remedies of a secured party under the UCC
include the right to repossession by means of self-help, unless such means would
constitute a breach of the peace. Self-help repossession is the method employed
by the Bank in most cases, and is accomplished simply by taking possession of
the Financed Vehicle. Generally, where the Obligor objects or raises a defense
to repossession, a court order must be obtained from the appropriate state
court, and the Financed Vehicle must then be repossessed in accordance with that
order. In the event of a default by an Obligor, the laws of many jurisdictions
(but not Washington, Utah and Idaho) require that the Obligor be notified of the
default and be given a time period within which he may cure the default prior to
repossession, except such notice need not be given in emergency situations
pursuant to an order from the appropriate state court.
NOTICE OF SALE; REDEMPTION RIGHTS
The UCC and other state laws require the secured party to provide an Obligor
with reasonable notice of the date, time and place of any public sale and/or the
date after which any private sale of the collateral may be held. The Obligor
generally has the right to redeem the collateral prior to actual sale by paying
the secured party the unpaid principal balance of the obligation plus accrued
and unpaid interest and, in most cases, reasonable expenses for repossessing,
holding and preparing the collateral for disposition and arranging for its sale
plus, in some jurisdictions,
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reasonable attorneys' fees. In some states (but not Washington, Utah and Idaho),
the Obligor has the right, prior to actual sale, to reinstatement of the
original loan terms and to return of the collateral by payment of delinquent
installments of the unpaid balance.
DEFICIENCY JUDGMENTS AND EXCESS PROCEEDS
The proceeds of resale of Financed Vehicles generally will be applied first to
the expenses of repossession and resale and then to the satisfaction of the
indebtedness on the related Receivable. While some states impose prohibitions or
limitations on deficiency judgments if the net proceeds from resale do not cover
the full amount of the indebtedness, a deficiency judgment can be sought in
Utah, Idaho and other states that do not prohibit or limit such judgments
(assuming proper notice of sale has been given and the sale has been conducted
in a commercially reasonable manner and otherwise in compliance with applicable
UCC provisions). Although a deficiency judgment can be sought in Washington,
deficiency judgments are limited to the extent (i) the agreement so provides and
(ii) the collateral is chattel paper or accounts. Any such deficiency judgment
would be a personal judgment against the Obligor for the shortfall, however, and
a defaulting Obligor may have very little capital or sources of income available
following repossession. Therefore, in many cases, it may not be useful to seek a
deficiency judgment or, if one is obtained, it may be settled at a significant
discount or not paid at all.
Occasionally, after resale of a repossessed motor vehicle and payment of all
expenses and indebtedness, there is a surplus of funds. In that case, the UCC
requires the secured party to remit the surplus to any other holder of a lien
with respect to the Financed Vehicle or, if no such lienholder exists or funds
remain after paying such other lienholders, to the Obligor.
CONSUMER PROTECTION LAWS
Numerous Federal and state consumer protection laws and related regulations
impose substantial and detailed requirements upon lenders and servicers involved
in consumer finance. These laws include the Truth In Lending Act, the Equal
Credit Opportunity Act, the Federal Trade Commission Act, the Fair Credit
Billing Act, the Fair Credit Reporting Act, the Fair Debt Collection Practices
Act, the Magnuson-Moss Warranty Act, the Federal Reserve Board's Regulations B,
Z, and AA, and other similar acts and regulations, state adoptions of the
National Consumer Act and of the Uniform Consumer Credit Code and other similar
laws. Also, state laws impose other restrictions on consumer transactions, may
require contract disclosures in addition to those required under Federal law and
may limit the remedies available in the event of default by an Obligor. These
requirements impose specific statutory liabilities upon creditors who fail to
comply with their provisions where applicable. In most cases, this liability
could affect the ability of an assignee, such as a Trust or an Indenture
Trustee, to enforce secured loans such as the Receivables.
The FTC's holder-in-due-course rule (the "FTC RULE") has the effect of
subjecting a seller of motor vehicles (and certain related lenders and their
assignees) in a consumer credit transaction and any assignee of the seller to
all claims and defenses which the purchaser could assert against the seller.
Liability under the FTC Rule is limited to the amounts paid by the purchaser
under the contract, and the holder of the contract may also be unable to collect
any balance remaining due thereunder from the purchaser. The FTC Rule is
generally duplicated by state statutes or the common law in most states.
Although the Bank is not a seller of motor vehicles and is not subject to the
jurisdiction of the FTC, the loan agreements evidencing the Receivables contain
provisions which contractually apply the FTC Rule. Accordingly, the Bank, and
each Trust as a holder of Receivables, will be subject to claims or defenses, if
any, that the purchaser of a Financed Vehicle may assert against the seller of
such vehicle. In Washington, Utah and Idaho, such claims and defenses could also
arise under state "lemon laws," statutes governing the sale of "salvage"
vehicles, and other consumer protection laws. Other examples of such claims
include, but are not limited to, breach of implied UCC warranties and fraud.
Under the motor vehicle dealer licensing laws of most states, sellers of motor
vehicles are required to be licensed to sell such vehicles at retail sale. In
addition, with respect to used motor vehicles, the FTC's Rule on Sale of Used
Vehicles requires that all sellers of used motor vehicles prepare, complete and
display a "Buyer's Guide" which explains the warranty coverage of such vehicles.
Federal Odometer Regulations promulgated under the Motor Vehicle
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Information and Cost Savings Act require that all sellers of used motor vehicles
furnish a written statement signed by the seller certifying the accuracy of the
odometer reading. If a seller is not properly licensed or if either a Buyer's
Guide or Odometer Disclosure Statement was not properly provided to the
purchaser of a Financed Vehicle, such purchaser may be able to assert a claim
against the seller of such vehicle. Although the Bank is not a seller of motor
vehicles and is not subject to those laws, a violation thereof may form the
basis for a claim or defense against the Bank or a Trust as a holder of the
affected Receivable.
Courts have applied general equitable principles to secured parties pursuing
repossession or litigation involving deficiency balances. These equitable
principles may have the effect of relieving an Obligor from some or all of the
legal consequences of a default.
The Seller will warrant in each Sale and Servicing Agreement as to each
Receivable conveyed by it to the related Trust that such Receivable complied at
the time it was originated and as of the Closing Date in all material respects
with all requirements of applicable law. If, as of the applicable Cutoff Date,
an Obligor had a claim against such Trust for violation of any law and such
claim materially and adversely affects that Trust's interest in a Receivable,
such violation would create an obligation of the Seller to repurchase the
Receivable unless the breach was cured. This repurchase obligation will
constitute the sole remedy of the related Trust, Indenture Trustee, Owner
Trustee and Securityholders against the Seller in respect of any such uncured
breach. See "Description of the Transfer and Servicing Agreements--Sale and
Assignment of the Receivables."
OTHER LIMITATIONS
In addition to the laws limiting or prohibiting deficiency judgments, numerous
other statutory provisions, including Federal bankruptcy laws and related state
laws, may interfere with or affect the ability of a lender to realize upon
collateral or enforce a deficiency judgment. For example, in a Chapter 13
proceeding under the United States Bankruptcy Code, a court may prevent a lender
from repossessing a motor vehicle and, as part of the rehabilitation plan,
reduce the amount of the secured indebtedness to the market value of such
vehicle at the time of bankruptcy (as determined by the court), leaving the
party providing financing as a general unsecured creditor for the remainder of
the indebtedness. A bankruptcy court may also reduce the monthly payments due
under a contract or change the rate of interest and time of repayment of the
indebtedness.
The Seller intends that the transfer of the Receivables under each Sale and
Servicing Agreement constitute a sale. FIRREA sets forth certain powers that the
FDIC could exercise if it were appointed as receiver for the Seller. Subject to
clarification by FDIC regulations or interpretations, it would appear from the
positions taken by the FDIC before and after the passage of FIRREA that the FDIC
in its capacity as receiver for the Seller would not interfere with the timely
transfer to a Trust of payments collected on the Receivables. To the extent that
the Seller is deemed to have granted a security interest in the Receivables to a
Trust, and that interest was validly perfected before the Seller's insolvency
and was not taken in contemplation of insolvency, that security interest should
not be subject to avoidance, and payments to such Trust with respect to the
affected Receivables should not be subject to recovery by the FDIC as receiver.
If, however, the FDIC were to assert a contrary position, such as by requiring
the Indenture Trustee, on behalf of the Trust, to establish its right to those
payments by submitting to and completing the administrative claims procedure
established under FIRREA, delays in distributions on the Securities and possible
reductions in the amount of those payments could occur. Alternatively, in such
circumstances, the FDIC might have the right to repay the Securities for an
amount which may be greater or less than the principal balance thereof and which
would shorten their weighted average life.
ERISA CONSIDERATIONS
The Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and
Section 4975 of the Internal Revenue Code of 1986, as amended (the "CODE"),
impose certain requirements on employee benefit plans and certain other plans
and arrangements, including individual retirement accounts and annuities, Keogh
plans and certain collective investment funds or insurance company general or
separate accounts in which such plans, accounts or arrangements are invested,
that are subject to the fiduciary responsibility provisions of ERISA and/or
Section 4975
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of the Code (collectively, "PLANS"), and on persons who are fiduciaries with
respect to Plans, in connection with the investment of "plan assets" of any Plan
("PLAN ASSETS"). ERISA generally imposes on Plan fiduciaries certain general
fiduciary requirements, including those of investment prudence and
diversification and the requirement that a Plan's investments be made in
accordance with the documents governing the Plan. Generally, any person who has
discretionary authority or control respecting the management or disposition of
Plan Assets, and any person who provides investment advice with respect to Plan
Assets for a fee, is a fiduciary with respect to such Plan Assets.
ERISA and Section 4975 of the Code prohibit a broad range of transactions
involving Plan Assets and persons ("PARTIES IN INTEREST" under ERISA and
"DISQUALIFIED PERSONS" under the Code) who have certain specified relationships
to a Plan or its Plan Assets, unless a statutory or administrative exemption is
available. Parties in Interest or Disqualified Persons that participate in a
prohibited transaction may be subject to a penalty imposed under ERISA and/or an
excise tax imposed pursuant to Section 4975 of the Code, unless a statutory or
administrative exemption is available. These prohibited transactions generally
are set forth in Section 406 of ERISA and Section 4975 of the Code. The
acquisition or holding of Securities by a Plan or with Plan Assets could be
considered to give rise to a prohibited transaction if the Seller, the Servicer,
the related Trust or any of their respective Affiliates is or becomes a party in
interest or a disqualified person with respect to such Plan.
In addition, certain transactions involving a related Trust might be deemed to
constitute prohibited transactions under ERISA and the Code with respect to a
Plan that purchased Securities if assets of the Trust were deemed to be Plan
Assets of the Plan. Under a regulation issued by the United States Department of
Labor (the "Plan Assets Regulation"), the assets of the Trust would be treated
as Plan Assets only if the Plan acquired an "equity interest" in the Trust and
none of the exceptions in the Plan Assets Regulation was applicable. An equity
interest is defined under the Plan Assets Regulation as an interest other than
an instrument which is treated as indebtedness under local law and which has no
substantial equity features.
ANY FIDUCIARY OR OTHER PLAN INVESTOR CONSIDERING WHETHER TO PURCHASE ANY
SECURITIES ON BEHALF OF OR WITH PLAN ASSETS OF ANY PLAN SHOULD CONSULT WITH ITS
COUNSEL AND REFER TO THE RELATED PROSPECTUS SUPPLEMENT FOR GUIDANCE REGARDING
THE ERISA CONSIDERATIONS APPLICABLE TO THE SECURITIES OFFERED THEREBY.
Certain employee benefit plans, such as governmental plans (as defined in
Section 3(32) of ERISA) and certain church plans (as defined in Section 3(33) of
ERISA), are not subject to the requirements of ERISA or Section 4975 of the
Code. Accordingly, assets of such plans may be invested in the Securities
without regard to the ERISA considerations described herein, subject to the
provisions of our applicable federal and state law. However, any such plan that
is qualified and exempt from taxation under Section 401(a) and 501(a) of the
Code is subject to the prohibited transaction rules set forth in Section 503 of
the Code.
PLAN OF DISTRIBUTION
On the terms and conditions set forth in an underwriting agreement (the
"UNDERWRITING AGREEMENT") with respect to each Trust, the Seller will sell to
each of the underwriters named therein and in the related Prospectus Supplement
(each, an "UNDERWRITER"), and each of such Underwriters will severally agree to
purchase from the Seller, the principal amount of each class of Securities of
the related Series set forth therein and in the related Prospectus Supplement.
One or more classes of a Series may not be subject to an Underwriting Agreement.
Any such classes will be retained by the Seller or sold in a private placement.
In each Underwriting Agreement, the Underwriters will agree, subject to the
terms and conditions set forth therein, to purchase all of the Securities
described therein which are offered hereby and by the related Prospectus
Supplement if any of such Securities are purchased. In the event of a default by
any such Underwriter, each Underwriting Agreement will provide that, in certain
circumstances, purchase commitments of the nondefaulting Underwriters may be
increased or the Underwriting Agreement may be terminated.
Each Prospectus Supplement will either (i) set forth the price at which each
class of Securities being offered thereby will be offered to the public and any
concessions that may be offered to certain dealers participating in the offering
of such Securities, or (ii) specify that the related Securities are to be resold
by the Underwriters in negotiated
47
<PAGE>
transactions at varying prices to be determined at the time of such sale. After
the initial public offering of any such Securities, such public offering prices
and such concessions may be changed.
Each Underwriting Agreement will provide that the Seller will indemnify the
Underwriters against certain civil liabilities, including liabilities under the
Securities Act, or contribute to payments the several Underwriters may be
required to make in respect thereof.
Each Trust may, from time to time, invest funds in its Trust Accounts in
Eligible Investments acquired from such Underwriters or from the Seller or any
of its Affiliates.
Underwriters may engage in over-allotment transactions, stabilizing
transactions, syndicate covering transactions and penalty bids with respect to
the Securities in accordance with Regulation M under the Exchange Act.
Over-allotment transactions involve syndicate sales in excess of the offering
size, which creates a syndicate short position. Stabilizing transactions permit
bids to purchase the Security so long as the stabilizing bids do not exceed a
specified maximum. Syndicate covering transactions involve purchases of the
Securities in the open market after the distribution has been completed in order
to cover syndicate short positions. Penalty bids permit such Underwriters to
reclaim a selling concession from a syndicate member when the Securities
originally sold by such syndicate member are purchased in a syndicate covering
transaction. Such over-allotment transactions, stabilizing transactions,
syndicate covering transactions and penalty bids may cause the prices of the
Securities to be higher than they would otherwise be in the absence of such
transactions. Neither the Seller nor any of the Underwriters will represent that
they will engage in any such transactions or that such transactions, once
commenced, will not be discontinued without notice.
Pursuant to each of the Underwriting Agreements with respect to a given Series
of Securities, the closing of the sale of any class of Securities subject to
such Underwriting Agreement will be conditioned on the closing of the sale of
all other such classes of Securities of that Series.
The place and time of delivery for the Securities of any Series in respect of
which this Prospectus is delivered will be set forth in the related Prospectus
Supplement.
LEGAL MATTERS
Certain legal matters will be passed upon for the Seller by Ray, Quinney &
Nebeker, Salt Lake City, Utah and for the Underwriters by Kirkland & Ellis.
Certain federal income tax and other matters will be passed upon for the Seller
by Kirkland & Ellis. Certain Idaho state tax and other matters will be passed
upon for the Seller by Moffatt, Thomas, Barrett, Rock & Fields, Alonzo W.
Watson, a shareholder and director of Ray, Quinney & Nebeker, is also an officer
of First Security Corporation. A daughter of the chief executive officer of
First Security Corporation is a shareholder and director of Ray, Quinney &
Nebeker.
48
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
We filed a registration statement relating to the Securities with the SEC. This
Prospectus is part of the registration statement, but the registration statement
includes additional information.
The Servicer will file with the SEC all required annual, monthly and special SEC
reports and other information about the Trust.
You may read and copy any reports, statements or other information we file at
the SEC's public reference room in Washington, D.C., New York, New York or
Chicago, Illinois. You can request copies of these documents, upon payment of a
duplicating fee, by writing to the SEC. Please call the SEC at (800) SEC-0330
for further information on the operation of the public reference rooms. Our SEC
filings are also available to the public over the Internet at the SEC web site
(http://www.sec.gov.).
The SEC allows us to "incorporate by reference" information we file with it,
which means that we can disclose important information to you by referring you
to those documents. The information incorporated by reference is considered to
be part of this Prospectus. Information that we file later with the SEC will
automatically update the information in this Prospectus. In all cases, you
should rely on the later information over different information included in this
Prospectus or the accompanying Prospectus Supplement.
As a recipient of this Prospectus, you may request a copy of any document we
incorporate by reference, except exhibits to the documents (unless the exhibits
are specifically incorporated by reference), at no cost, by writing or calling
us at: 801-246-5976.
49
<PAGE>
INDEX OF TERMS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Administration Agreement................................................................................. 41
Administration Fee....................................................................................... 41
Administrator............................................................................................ 41
Advance.................................................................................................. 36
Aggregate Receivables Balance............................................................................ 31
Aggregate Starting Receivables Balance................................................................... 41
Applicable Trustee....................................................................................... 27
Bank..................................................................................................... 18
Base Rate................................................................................................ 25
Calculation Agent........................................................................................ 25
Cede..................................................................................................... 26
Cedel.................................................................................................... 28
Cedel Participants....................................................................................... 28
Certificate Balance...................................................................................... 5
Certificate Distribution Account......................................................................... 34
Certificateholders....................................................................................... 27
Certificate Pool Factor.................................................................................. 17
Certificates............................................................................................. 24
Closing Date............................................................................................. 17
Code..................................................................................................... 46
Collection Account....................................................................................... 34
Collection Period........................................................................................ 35
Commodity Indexed Securities............................................................................. 26
Cooperative.............................................................................................. 28
Credit Enhancement....................................................................................... 6
Currency Indexed Securities.............................................................................. 26
Custodian................................................................................................ 13
Cutoff Date.............................................................................................. 13
Dealer................................................................................................... 13
Dealer Agreements........................................................................................ 13
Definitive Certificates.................................................................................. 29
Definitive Notes......................................................................................... 29
Definitive Securities.................................................................................... 29
Deposit Date............................................................................................. 34
Depositaries............................................................................................. 26
Depository............................................................................................... 19
direct recourse.......................................................................................... 15
Disqualified Persons..................................................................................... 47
Distribution Date........................................................................................ 35
DTC...................................................................................................... 26
Eligible Bank............................................................................................ 34
Eligible Deposit Account................................................................................. 34
Eligible Investments..................................................................................... 34
ERISA.................................................................................................... 46
Euroclear................................................................................................ 28
Euroclear Operator....................................................................................... 28
Euroclear Participants................................................................................... 28
Events of Default........................................................................................ 21
</TABLE>
50
<PAGE>
<TABLE>
<S> <C>
Events of Servicing Termination.......................................................................... 39
Face Amount.............................................................................................. 26
FDIA..................................................................................................... 10
FDIC..................................................................................................... 10
Final Scheduled Distribution Date........................................................................ 9
Financed Vehicles........................................................................................ 13
FIRREA................................................................................................... 10
Fixed Rate Securities.................................................................................... 25
Floating Rate Securities................................................................................. 25
FTC Rule................................................................................................. 45
Funding Period........................................................................................... 17
Holders.................................................................................................. 29
Indenture................................................................................................ 19
Indenture Trustee........................................................................................ 4
Index.................................................................................................... 26
Indexed Commodity........................................................................................ 26
Indexed Currency......................................................................................... 26
Indexed Principal Amount................................................................................. 26
Indexed Securities....................................................................................... 25
Indirect Participants.................................................................................... 27
Initial Receivable Balance............................................................................... 30
Interest Rate............................................................................................ 4
Interest Reset Period.................................................................................... 25
Issuer................................................................................................... 4
LIBOR.................................................................................................... 25
Liquidating Receivable................................................................................... 35
Liquidation Expenses..................................................................................... 35
Liquidation Proceeds..................................................................................... 35
Moody's.................................................................................................. 34
Motor Vehicle Loans...................................................................................... 14
Note Distribution Account................................................................................ 34
Noteholders.............................................................................................. 27
Note Pool Factor......................................................................................... 17
Notes.................................................................................................... 19
Obligor.................................................................................................. 13
Owner Trustee............................................................................................ 4
Participants............................................................................................. 27
Parties in Interest...................................................................................... 47
Pass-Through Rate........................................................................................ 5
Paying Agent............................................................................................. 35
Payment Date............................................................................................. 19
Plan Assets.............................................................................................. 47
Plans.................................................................................................... 47
Pre-Funded Amount........................................................................................ 6
Pre-Funding Account...................................................................................... 6
Prospectus Supplement.................................................................................... 2
Receivable Balance....................................................................................... 31
Receivable File.......................................................................................... 33
Receivables.............................................................................................. 13
Related Documents........................................................................................ 22
Repurchase Amount........................................................................................ 33
</TABLE>
51
<PAGE>
<TABLE>
<S> <C>
Reserve Account.......................................................................................... 7
Reserve Account Initial Deposit.......................................................................... 7
Rules.................................................................................................... 27
S&P...................................................................................................... 34
Sale and Servicing Agreement............................................................................. 7
Schedule of Receivables.................................................................................. 32
Securities............................................................................................... 13
Securityholder........................................................................................... 27
Seller................................................................................................... 4
Series................................................................................................... 4
Servicer................................................................................................. 4
Servicing Fee............................................................................................ 35
Servicing Fee Rate....................................................................................... 35
Specified Reserve Account Balance........................................................................ 7
Spread................................................................................................... 25
Spread Multiplier........................................................................................ 25
Staring Receivables Balance.............................................................................. 42
Stock Index.............................................................................................. 26
Stock Indexed Securities................................................................................. 26
Strip Certificates....................................................................................... 24
Strip Notes.............................................................................................. 19
Subsequent Receivables................................................................................... 6
Subsequent Transfer Date................................................................................. 32
Terms and Conditions..................................................................................... 28
Total Servicing Fee...................................................................................... 36
Transfer and Servicing Agreements........................................................................ 32
Trust.................................................................................................... 13
Trust Account............................................................................................ 34
Trust Agreement.......................................................................................... 24
Trust Property........................................................................................... 13
UCC...................................................................................................... 9
Underwriter.............................................................................................. 47
Underwriting Agreement................................................................................... 47
Yield Supplement Account................................................................................. 38
Yield Supplement Agreement............................................................................... 38
</TABLE>
52
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the various expenses in connection with the
issuance and distribution of the securities being registered, other than
underwriting discounts and commissions. All such expenses will be paid by First
Security Bank, N.A. (the "Bank").
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee............... $ 695,000
Accounting Fees and Expenses...................................... $ 120,000
Legal Fees and Expenses........................................... $ 400,000
Trustee's Fees.................................................... $ 45,000
Printing and Engraving............................................ $ 125,000
Blue Sky Fees and Expenses (including counsel).................... $ 75,000
Rating Agency Fees................................................ $ 570,000
Miscellaneous..................................................... $ 200,000
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Articles of Association of the Bank requires the Bank to indemnify its
officers and directors against reasonable expenses (in the event of a derivative
claim), and against reasonable expenses and damages (in the event of a
third-party claim). This indemnity is available only if the officer or director
in question was at the time of the acts complained of acting in his or her
official capacity, in good faith and in or not opposed to the best interests of
the Bank. However, no indemnity is allowed by the Bank if the officer or
director is found to have been guilty of a crime, or to have acted in a manner
evidencing willful misconduct or gross negligence, or where there is a final
order assessing civil money penalties or requiring payments by the officer or
director to the Bank. The Bank will not provide indemnity for a derivative claim
if the officer or director shall have been adjudged to be liable for negligence
or misconduct in the performance of his or her duty to the Bank, unless a court
shall nevertheless determine that indemnity is proper. The availability of
indemnification for an officer or director will be determined under the
foregoing standards by (a) a majority of disinterested directors, (b) the
opinion of independent legal counsel retained to examine the conduct in
question, or (c) a vote of the shareholders of the Bank.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits.
The exhibits to this Registration Statement are listed in the Exhibit Index
below.
(b) Financial Statement Schedules: Not applicable with respect to this
Registrant.
ITEM 17. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement;
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933, unless the information required to be included in
such post-effective amendment is contained in a periodic report filed
with or furnished to the Securities and Exchange Commission by the
Registrant pursuant to Section 13 or Section 15(d) of the Securities
Exchange Act of 1934 and incorporated herein by reference;
II-1
<PAGE>
(ii) To reflect in the Prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in
the Registration Statement. Notwithstanding the foregoing, any increase
or decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering
range may be reflected in the form of prospectus filed with the
commission pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the Calculation of the Registration
Fee table in the effective Registration Statement, unless the information
required to be included in a post-effective amendment is contained in
periodic reports filed by the Registrant pursuant to Section 13 or
Section 15(d) of the Securities Exchange Act of 1934 that are
incorporated herein by reference.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or
any material change to such information in the Registration Statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof;
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for the purpose of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the provisions described in Item 15 above, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission, such indemnification is against public policy as
expressed in the Securities Act of 1933 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 of whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
(d) The undersigned Registrant hereby undertakes to file an application for
the purpose of determining the eligibility of the Indenture Trustee to act under
subsection(a) of Section 310 of the Trust Indenture Act ("Act") in accordance
with the rules and regulations prescribed by the Commission under Section
305(b)(2) of the Trust Indenture Act of 1939.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 1 to Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized in Salt Lake City,
State of Utah on January 20, 1999.
<TABLE>
<S> <C> <C>
FIRST SECURITY BANK, N.A., Registrant
By: *
-----------------------------------------
L. Scott Nelson
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
</TABLE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ --------------------------------------------- ----------------------
<C> <S> <C>
*
--------------------------------- Chairman (a Principal Executive Officer) and January 20, 1999
L. Scott Nelson Director
*
--------------------------------- President (a Principal Executive Officer) and January 20, 1999
J. Patrick McMurray Director
* Executive Vice President and Cashier
--------------------------------- (a Principal Financial and Accounting January 20, 1999
Brad D. Hardy Officer) and Director
*
--------------------------------- Director January 20, 1999
Spencer F. Eccles
*
--------------------------------- Director January 20, 1999
Morgan J. Evans
*
--------------------------------- Director January 20, 1999
Michael P. Caughlin
*
--------------------------------- Director January 20, 1999
Mark D. Howell
*
--------------------------------- Director January 20, 1999
David R. Golden
</TABLE>
The undersigned, by signing his name hereto, does hereby sign this Amendment
No. 1 to Registration Statement on behalf of each of the above indicated
officers and directors of the Registrant pursuant to the power of attorney
signed by such officers and directors.
<TABLE>
<S> <C> <C> <C>
*By: /s/ BRAD D. HARDY
-------------------------
Brad D. Hardy
ATTORNEY-IN-FACT
</TABLE>
II-3
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
- ---------- ------------------------------------------------------------------------------------------------------
<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 Indenture between the Owner Trustee and the Indenture Trustee, including the form of Notes as
exhibits thereto
*4.2 Form of Owner Trust Agreement between First Security Bank, N.A. and the Owner Trustee
*4.3 Form of Owner Trust Sale and Servicing Agreement between First Security Bank, N.A. and the Trust
*4.4 Form of Administration Agreement
*4.5 Form of Grantor Trust Pooling and Servicing Agreement between First Security Bank, N.A. and the Trust,
including the form of Class A Certificate and the form of Class B Certificate and Yield Supplement
Agreement and exhibits thereto
**5.1 Opinion of Kirkland & Ellis re Legality for Grantor Trusts
**5.2 Opinion of Kirkland & Ellis re Legality for Owner Trusts
**8.1 Opinion of Kirkland & Ellis re Tax Consequences for Grantor Trusts
**8.2 Opinion of Kirkland & Ellis re Tax Consequences for Owner Trusts
**23.1 Consent of Kirkland & Ellis (contained in Exhibits 5.1 and 8.1)
**23.2 Consent of Kirkland & Ellis (contained in Exhibits 5.2 and 8.2)
**23.3 Consent of Ray, Quinney & Nebeker for Grantor Trusts
**23.4 Consent of Ray, Quinney & Nebeker for Owner Trusts
**23.5 Consent of Moffatt, Thomas, Barrett, Rock & Fields
**23.6 Consent of Moffatt, Thomas, Barrett, Rock & Fields
**24.1 Powers of Attorney of directors and officers of First Security Bank, N.A. (included on the signature
pages to the Registration Statement)
***25.1 Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939 of the Indenture Trustee.
</TABLE>
- ------------------------
* Incorporated by reference to registrant's Registration Statement No.
333-35847.
** Previously filed.
*** To be filed in accordance with Section 305(b)(2) of the Trust Indenture Act
of 1939.
