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As filed with the Securities and Exchange Commission on January 13, 1998
Registration No. _________
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
U.S. AUTOMOBILE ACCEPTANCE SNP-IV, INC.
(Name of issuer in its charter)
TEXAS 6153 75-2740548
(State or jurisdiction of (Primary Industrial (I.R.S. Employer
incorporation or organization Classification Code No.) Identification No.)
1120 N.W. 63rd Amy Waters
Suite G-106 200 South Rogers, Suite 300A
Oklahoma City, Oklahoma 73116 Waxahachie, Texas 75165
(405) 843-3135 (972) 938-9090
(Address, including the zip code & telephone (Name, address, including zip code
number, including area code of and telephone number, including
Registrant's principal executive office) area code of agent for service)
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Copy to:
Amy Waters
Attorney at Law
200 South Rogers
Suite 300A
Waxahachie, Texas 75165
(972) 938-9090
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Approximate date of commencement of proposed sale to public: As soon as
practicable after the effective date of this Registration Statement.
CALCULATION OF REGISTRATION FEE
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Title of Each Amount Proposed Maximum Proposed Amount of
Class of Securities to be Offering Price Maximum Aggregate Registration
to be Registered Registered Per Unit Offering Price Fee
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Asset-Backed $40,000,000 100% $40,000,000 $11,800.00
Promissory Notes Due
December 31, 2003
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The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration shall
thereafter become effective in accordance with Section 8(a) of the Securities
Act of 1933 or until the registration statement shall become effective on such
date as the Commission, acting pursuant to said Section 8(a), may determine.
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U.S. AUTOMOBILE ACCEPTANCE SNP-IV, INC.
Cross-Reference Sheet
showing location in the Prospectus of
information required by items of Form S-1
Form S-1 Number and Caption Location in Prospectus
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1. Front of Registration Statement and
Outside Front Cover of Prospectus Outside Front Cover Page;
Front Page of Prospectus
2. Inside Front and Outside Back Cover Inside Front Cover Page; Outside
Pages of Prospectus Back Cover Page
3. Summary Information and Risk Factors Prospectus Summary; Risk Factors;
The Company
4. Use of Proceeds Use of Proceeds
5. Determination of Offering Price *
6. Dilution *
7. Selling Security-Holders *
8. Plan of Distribution Plan of Distribution
9. Description of Securities Description of the Notes
10. Interest of Named Experts and Counsel Experts; Legal Matters
11. Information with Respect to the
Registrant
(a) Description of Business The Company; Purchase and
Collection of Contracts
(b) Description of Property *
(c) Legal Proceedings *
(d) Stockholder Matters *
(e) Financial Statements Financial Statements
(f) Selected Financial Date *
(g) Supplementary Financial Date *
(h) Management's Discussion and Analysis Management's Discussion and
of Financial Condition and Results of Operations Analysis of Financial Condition
(i) Changes in and Disagreements with Accountants *
(j) Market Risk Disclosures *
(k) Directors and Executive Officers The Company; Management
(l) Executive Compensation Allowed Expenses and Flow of
Contract Proceeds
(m) Security Ownership of Certain Beneficial Security Ownership of
Owners and Management Beneficial Owners and
Management
(n) Certain Relationships and Related
Transactions Management
12. Disclosure of Commission Position on
Indemnification for Securities Act Liabilities *
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(*) None or Not Applicable
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$40,000,000 (MAXIMUM) $100,000 (MINIMUM)
U.S. AUTOMOBILE ACCEPTANCE SNP-IV, INC.
ASSET-BACKED PROMISSORY NOTES
DUE DECEMBER 31, 2003
U.S. Automobile Acceptance SNP-IV, Inc., a Texas corporation (the
"Company"), which is a newly organized, single purpose corporation, is hereby
offering up to $40,000,000 in principal amount of its Asset-Backed Promissory
Notes (the "Notes") due December 31, 2003. The Notes bear interest at an
initial annual rate of 10.5%, paid monthly (the "Interest"). The Interest rate
will be established by the Company from time to time based on market conditions
and the Company's financial requirements. Once determined, the rate of Interest
payable on a Note will remain fixed for the term of that Note. Notes may be
purchased in multiples of $1,000, subject to a minimum purchase requirement of
$2,000.
The Notes are secured by (i) retail installment finance contracts secured
by used automobiles and light trucks (the "Contracts") to be purchased by the
Company, and (ii) certain other collateral described herein. The contracts will
be purchased from automobile dealerships (the "Automobile Dealers") generally
at a discount, using (a) the net proceeds from the sale of the Notes offered
herby, and (b) the net collection proceeds from previously purchased Contracts.
The Company has contracted with Automobile Acceptance Corporation ("USAAC" or
the "Servicer"), to provide purchasing and collecting services. USAAC is an
affiliate of the Company.
The Company's business is the purchase and collection of the Contracts,
and the Company's only significant assets will be the Contracts. The purchasers
of the Notes (the "Noteholders") must look to the Contracts and related motor
vehicle collateral as the primary source of payment on the Notes, as the
Company has no other significant assets. (See "Risk Factors"). In many
instances the Automobile Dealers will provide the Company some form of dealer
recourse, which will provide additional collateral support for the Notes.
The offering will terminate on April 30, 1999, unless sooner terminated by
the Company for certain reasons. (See "Plan of Distribution.")
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK, INCLUDING
RISKS OF DEFAULT ON THE CONTRACTS. SEE "RISK FACTORS." DEBT SECURITIES OFFERED
WITH HIGH INTEREST OR YIELD GENERALLY INVOLVE MORE RISK THAN MANY OTHER MEDIUM
TERM DEBT INSTRUMENTS WITH LOWER INTEREST OR YIELD. NO PROVISION HAS BEEN MADE
BY THE COMPANY TO ESTABLISH A SINKING FUND TO PAY THE INTEREST ON THE NOTES OR
TO REPAY THE PRINCIPAL.
NO PUBLIC MARKET IS EXPECTED TO DEVELOP FOR THESE SECURITIES. INVESTORS
SHOULD EXPECT TO RETAIN OWNERSHIP OF THE NOTES AND BEAR THE ECONOMIC RISKS OF
THEIR INVESTMENT FOR THE ENTIRE TERM OF THE NOTES.
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Price to Broker's Commission Proceeds to
Public and Expenses (1) Company(2)
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Per Note 100% 7% 93%
Total Minimum $ 100,000 $ 7,000 $ 93,000
Total Maximum $ 40,000,000 $ 2,800,000 $ 37,200,000
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(1) Payable by the Company to participating licensed broker-dealers.
(2) Before deduction of a 5% fee payable by the Company to USAAC as
reimbursement of registration, legal, accounting, printing, trustee,
marketing and other out-of-pocket fees and expenses and allocated general
administrative and overhead expenses relating to the offering and the
organization of the Company borne by USAAC and for services provided by
USAAC in connection with the offering and organization of the Company. A
portion of such fee (up to 1% of the offering price) may be paid to
licensed broker-dealers as a non-accountable expenses allowance, and up to
0.5% of the offering price may be paid for due diligence and expenses. See
"Use of Proceeds" for an estimated breakdown of these expenses.
The Notes are being sold on a "best efforts" basis on behalf of the
company by licensed soliciting broker-dealers that are members of the National
Association of Securities Dealers, Inc., who have been or may hereafter be
engaged by the Company. The Notes may also be offered and sold by employees of
the Company. Investor funds will be held in an escrow account at Chase Bank of
Texas until a minimum of $100,000 in principal amount of the Notes (the
"Minimum Subscription Amount") are sold. In the event the Minimum Subscription
Amount is not subscribed within ninety (90) days after the date the offering is
declared effective by the Securities and Exchange Commission (the "Escrow
Termination Date"), the offering will be terminated and the escrowed funds
will be promptly returned to the investors by the escrow agent. In such event
no funds will be released to the Company. Any subsequent sales proceeds from
the Notes will be immediately available for use by the Company. The Company
reserves the right to reject any subscription in whole or in part.
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This Prospectus is dated , 1998
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AVAILABLE INFORMATION
The Company has filed a Registration Statement with the Securities and
Exchange Commission (the "Commission") with respect to the Notes offered
pursuant to this Prospectus. This Prospectus, which forms a part of the
Registration Statement, does not contain all of the information included in the
Registration Statement and the exhibits thereto. For further information,
reference is made to the Registration Statement and amendments thereof and to
the exhibits thereto, which are available for inspection without charge at the
office of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549,
and copies of which may be obtained from the Commission at prescribed rates. The
Company is not currently subject to the reporting requirements of Section 13 or
15(d) of the Securities Exchange Act of 1934.
REPORTS TO NOTEHOLDERS
The Company will furnish to the Noteholders annual reports of the Company
containing audited financial statements. The Company will also furnish to the
Noteholders quarterly reports containing unaudited summary financial statements
of the Company and other summary information regarding the Contracts, including
the information required to be included in Form 10-Q. An IRS Form 1099 will be
mailed to each Noteholder by January 31 of each year.
AUTHORIZED REPRESENTATIONS
No person is authorized to give any information on or to make any
representations about the Company, the Notes or any other matter referred to
herein, other than the information and representations contained in this
Prospectus and any supplements or amendments thereto. If any other information
or representation is given or made, such information or representation may not
be relied upon as having been authorized by the Company. This Prospectus does
not constitute an offer to sell, or the solicitation of any offer to buy, the
securities offered hereby in any state in which, or to any person to whom, such
an offer would be unlawful.
MINIMUM SUITABILITY STANDARD
THIS OFFERING IS OPEN ONLY TO INVESTORS WHICH MEET THE COMPANY'S MINIMUM
UNIFORM SUITABILITY STANDARD OR THE APPLICABLE STATE SUITABILITY STANDARD,
WHICHEVER IS MORE STRINGENT. IN ORDER TO MEET THE COMPANY'S MINIMUM UNIFORM
SUITABILITY STANDARD, A POTENTIAL INVESTOR MUST (I) HAVE A GROSS ANNUAL INCOME
OF AT LEAST $25,000 AND A NET WORTH (EXCLUSIVE OF PERSONAL RESIDENCE,
FURNISHINGS AND AUTOMOBILES) OF AT LEAST $25,000, OR (II) HAVE A NET WORTH
(EXCLUSIVE OF PERSONAL RESIDENCE, FURNISHINGS AND AUTOMOBILES) OF AT LEAST
$40,000, WITHOUT REFERENCE TO INCOME. IN ADDITION, THE INVESTOR'S INVESTMENT MAY
NOT EXCEED TEN PERCENT (10%) OF THE INVESTOR'S NET WORTH (EXCLUSIVE OF PERSONAL
RESIDENCE FURNISHINGS AND AUTOMOBILES). EACH INVESTOR (OR HIS OR HER REGISTERED
REPRESENTATIVE) WILL BE REQUIRED TO REPRESENT, IN WRITING, THAT THE INVESTOR
SATISFIES THE APPLICABLE STANDARDS.
(The remainder of this page left intentionally blank)
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SUMMARY
The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus.
OVERVIEW Using the net proceeds of this offering (the "Offering"),
the Company will purchase from automobile dealerships (the
"Automobile Dealers") retail installment finance contracts
secured by used automobiles and light trucks (the
"Contracts"). The Contracts will generally be purchased at
discounts ranging from 2% to 25% below the total future net
principal balance owed on such Contracts. The purchase
discount will vary depending on the credit worthiness of the
borrower, the age and mileage of the vehicle financed, and
the availability and financial strength added by additional
recourse or credit support agreements provided by the
Automobile Dealer. These dealer credit support agreements,
when obtained, will be in the form of repurchase agreements,
limited guaranty agreements, cash hold-back arrangements, or
contract replacement guarantees.
The Company has contracted with U.S. Automobile Acceptance
Corporation, an affiliate of the Company ("USAAC"), to
provide ongoing servicing of the Contracts purchased,
including accounting, administration and collections of
payments due under the Contracts. In addition, USAAC will
oversee Automobile Dealer compliance and review, oversee
enforcement and administration of dealer recourse
agreements, and oversee the repossession and sale of
vehicles securing any Contract in default.
The Company and USAAC may, in some instances, subcontract
servicing, collection and repossession functions to third
parties or to qualified Automobile Dealers. The
subcontractors that will provide subcontract services have
substantial prior experience providing servicing, collection
and repossession functions for their own account and/or on
behalf of other automobile finance companies. Compensation
to third parties for providing Contract services, if any,
will be paid by USAAC out of its fees. See "Purchase and
Collection of Contracts."
All proceeds from the collection of the Contracts are
deposited in master collections bank accounts (the "Master
Collections Accounts"). Collections on the Contracts are
used to pay Interest on the Notes and "Allowed Expenses, "
which generally include Contract acquisition fees, Contract
servicing and administration, trustee fees, bank charges,
legal and accounting fees, taxes, repossession costs, repair
and liquidation expenses, insurance premiums and vehicle
warranty service contract charges, cost of enforcement of
dealer recourse agreements, salaries and other general and
administrative expenses. The Company will use cash proceeds
available from Contract collections, less Allowed Expenses,
to purchase additional Contracts, generally at a discount.
See "Security for the Notes - The Contract Proceeds, Master
Cash Accounts" and "Allowed Expenses and Flow of Contract
Proceeds."
The Notes provide for monthly payments of Interest at an
initial annual rate of 10.5% and payment of outstanding
principal on December 31, 2003 (or earlier under some
circumstances). All unpaid principal and accrued Interest
are payable at maturity on December 31, 2003 (the "Maturity
Date"). Investors in this offering will receive an IRS Form
1099 following the end of each calendar year. See
"Description of the Notes - Payments of Principal and
Interest.
NOTES Asset-Backed Promissory Notes due December 31, 2003 (the
"Notes") issued to each Noteholder.
INDENTURE OF TRUST An Indenture of Trust will be entered into between the
Company and the Trustee, for the benefit of Noteholders. The
Trustee will accept title to the Security Agreement on
behalf of Noteholders. The duties of the Trustee are to hold
the Security Agreement, to perform
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certain obligations in the event of a default in the payment
of the principal and Interest on the Notes, and to execute
and deliver to the Company partial or full satisfaction of
the Security Agreement upon partial or full repayment of the
Notes. The form of Indenture of Trust is Exhibit B to the
Prospectus. See "Indenture Provisions" for a summary of the
Indenture of Trust agreement.
THE TRUSTEE Chase Bank of Texas will be the Trustee under the Indenture
for the Notes. The Company is obligated to pay the fees and
expenses of the Trustee relating to the Notes. To secure the
Company's payment of such fees and expenses, the Trustee has
a lien prior to the Notes on the Trust Estate. The Trustee
will also act as "escrow agent" to hold subscription
proceeds until a minimum of $100,000 in Notes are sold.
THE COMPANY U.S. Automobile Acceptance SNP-IV, Inc. (the "Company") is a
newly organized Texas corporation. The Company has been
formed for the purpose of purchasing, collecting and
servicing motor vehicle retail installment contracts (the
"Contracts"). It does not have, and does not expect to have
in the future, any significant assets other than the
Contracts and proceeds thereof that secure the Notes. The
Notes are secured by the Contracts and the related motor
vehicle collateral, and in many instances by additional
recourse agreements from automobiles dealers. The Company
was incorporated under the laws of the State of Texas on
January 2, 1998. The Company's principal executive offices
are located at 1120 N.W. 63rd, Suite G-106, Oklahoma City,
Oklahoma 73116 and its telephone number is (405) 843-3135.
See "The Company."
OFFERING AMOUNT Up to a maximum amount of $40,000,000 in principal amount of
the Notes. Investor funds will be held in escrow until
subscriptions for a minimum amount of $100,000 in principal
amount of the Notes (the "Minimum Subscription Amount") has
been received. See "Plan of Distribution" hereafter in this
Summary for additional information concerning the escrow.
INTEREST PAYMENTS
TO NOTEHOLDERS The Interest rates payable on the Notes offered hereby will
be established by the Company from time to time based on
market conditions and the Company's financial requirements.
The Company will constantly re-evaluate its Interest rates
based on such analysis. Once determined, the rate of
Interest payable on a Note will remain fixed for the term of
the Note. The Company reserves the right to vary from time
to time, in its discretion, the Interest rates it offers on
the Notes based on numerous factors including, but not
limited to, the desire to attract new investors, or receipts
of Notes in excess of current or projected financial
requirements.
The initial Interest rate will be 10.5% per annum on the
outstanding principal balance of each Note payable on the
fifteenth (15th) day of each month beginning with the first
full calendar month following the issuance of such Note and
upon maturity (the "Payment Dates"). The record date for
each payment of Interest on the Notes is the close of
business on the first day of the month of the Payment Date
for that payment. See "Description of the Notes -Payments of
Principal and Interest."
EFFECTIVE YIELD Although the initial stated Interest rate on the Notes is
10.5% per annum, the effective Interest rate will be
somewhat lower because each payment of Interest will be paid
15 days after the month over which it accrued.
PRINCIPAL PAYMENTS
TO NOTEHOLDERS No principal payments will be required to be made on the
Notes until Maturity, except that in the event the Company
has been unable to invest the net proceeds from the sale of
the Notes in suitable Contracts for a period of one hundred
eighty (180) days following the termination date of the
offering, the uninvested net proceeds at such date will be
utilized for a mandatory partial redemption of the Notes
within forty-five (45) days following such date. See
"Description of the Notes - Payments of Principal and
Interest."
MATURITY December 31, 2003.
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SECURITY FOR THE THE CONTRACTS. The Notes will be secured by specified motor
NOTES vehicle retail installment sales contracts (the "Contracts")
and the proceeds thereof. These Contracts will be secured by
liens on used automobiles and light trucks (the "Financed
Vehicles") and will be purchased by the Company from
automobile dealerships (the "Automobile Dealers"), often at
a discount, using (i) the net proceeds from the sale of
Notes, and (ii) any remaining net collection proceeds from
previously purchased Contracts after deduction for payments
of Interest and Allowed Expenses. In addition, the
Automobile Dealers will often provide some form of dealer
recourse agreements, which will provide additional
collateral support for the Notes. The Company presently
intends to utilize employees, independent commission agents
and USAAC to assist in locating eligible Contracts.
Commissions or Contract note purchase fees paid to
independent agents will be negotiated, with a normal fee
being approximately 1-3% of the outstanding principal
balance of the Contracts acquired. The Contracts will be
originated by Automobile Dealers not affiliated with the
Company or USAAC. See "Security for the Notes."
THE CONTRACT PROCEEDS. The proceeds from the Contracts also
will constitute security for the Notes under the Indenture.
All proceeds from the Contracts will be deposited to master
collection accounts maintained by the Company (the "Master
Collections Accounts"). The amounts in the Master
Collections Accounts attributable to the Contracts will be
directly transferred to an operating account maintained by
the Company (the "Master Operating Account"). The Company
will have the right to cause that portion of the funds
contained in the Master Operating Account which is
attributable to the Contracts to be withdrawn or applied for
the following purposes: (1) to the Note Redemption Fund for
the payment of any Interest due on the outstanding Notes on
each Payment Date, (2) to any amounts due the Trustee for
its fees and expenses; (3) to the payment of any other
Allowed Expenses of the Company; and (4) to the purchase of
additional eligible Contracts. The Trustee will be provided
regular reports by which the use of such funds may be
monitored. See "Security for the Notes - The Contract
Proceeds, Master Cash Accounts."
THE SERVICING AGREEMENT. The Company has granted a security
interest to the Trustee in all of its rights under the
Servicing Agreement. See "Security for the Notes - The
Servicing Agreement."
PURCHASE OF
THE CONTRACTS The Company will purchase Contracts using (i) the net
proceeds from the sale of Notes, and (ii) any remaining net
collection proceeds from previously purchased Contracts,
after deduction for payments of Interest and Allowed
Expenses. In connection with such purchases, the Contracts
will satisfy certain purchasing criteria. Obligors under the
Contracts are anticipated to be somewhat less credit-worthy
than prime credit purchasers of automobiles from new car
dealers. Management of the Company believes that an adequate
supply of eligible Contracts will be available for purchase,
based on its experience in the industry; however, there can
be no assurances that Contracts will continue to be
available. See "Purchase and Collection of Contracts.
REDEMPTION OF
NOTES The Company may, at any time, elect to redeem the Notes in
whole or in part. A partial redemption from time to time
would reduce the average life of the Notes, and thereby
reduce the overall return, but not the annual rate of
return, to the Noteholders. In the event that prior to one
hundred eighty (180) days following the termination date of
the offering the Company has been unable to invest the net
proceeds from the sale of the Notes in suitable Contracts,
the uninvested net proceeds at such date will be utilized
for a mandatory partial redemption of the Notes within
forty-five (45) days following such date. In addition, Notes
may be redeemed in the event the Company is unable to
purchase suitable Contracts throughout the term of the
Notes.
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SERVICING The Servicer will be U.S. Automobile Acceptance Corporation
("USAAC"), an affiliate of the Company, whose principal
offices are located at 1120 N.W. 63rd, Suite G-106, Oklahoma
City, Oklahoma 73116. USAAC is to provide services for the
administration and collecting of the Contracts on behalf of
the Company. USAAC has limited operating history, and its
management has limited experience in the servicing and
collection of consumer contracts and notes, including those
secured by automobiles. USAAC may subcontract with third
parties to provide certain of these services and may
sometimes subcontract collecting services to selected
Automobile Dealers. USAAC will be paid $21.50 per month per
Contract for servicing and collecting the Contracts.
TAX STATUS The Notes will be taxable obligations under the Internal
Revenue Code of 1986, as amended, and Interest paid or
accrued will be taxable to non-exempt holders of the Notes.
See "Certain Federal Income Tax Considerations."
USE OF PROCEEDS The Company intends to use 88% of the net proceeds from the
sale of the Notes for the purchase of Contracts and 12% of
such proceeds to pay commissions, fees and expenses as
stated in this Prospectus. See "Use of Proceeds."
DENOMINATIONS The Notes will be issued in fully registered form in
denominations of $ 1,000 and integral multiples thereof.
NO RATING The Company has not sought, and is not required by the
Indenture or any other document, to obtain a rating of the
Notes by a rating agency.
RISK FACTORS An investment in the Notes entails certain risks, including
the risk of default on the Contracts. See "Risk Factors."
PLAN OF
DISTRIBUTION The Notes will be offered and sold on a "best efforts" basis
on behalf of the Company by licensed soliciting
broker-dealers that are members of the National Association
of Securities Dealers, Inc., and are qualified to offer and
sell the Notes in a particular state, who have been or may
hereafter be engaged by the Company. The Notes may also be
offered and sold by employees of the Company. Investor funds
will be held in a subscription escrow account until the
minimum of $100,000 in principal amount of the Notes (the
"Minimum Subscription Amount") are sold. If the Minimum
Subscription Amount is not subscribed within ninety (90)
days after the date the Offering is declared effective by
the Securities and Exchange Commission (the "Escrow
Termination Date"), the Offering will be terminated, and the
escrowed funds will be promptly returned to the subscribing
investors by the escrow agent. Upon receipt of the Minimum
Subscription Amount, the escrowed funds will be released to
the Company. See "Plan of Distribution."
RISK FACTORS
An investment in the Notes entails certain risks. In considering a purchase
of these securities, prospective investors should carefully consider the risks
involved, including the following:
LIMITED ASSETS AND OPERATING HISTORY
The Company has no prior operating history and does not have, and is not
expected to have, any significant assets other than the Contracts and the
proceeds thereof that secure the Notes. While the Notes remain outstanding, the
Company will not engage in any business other than the purchase, collection and
servicing of the Contracts (including repossession and resale of the vehicle
collateral). USAAC, with whom the Company has contracted for the purchasing
and servicing of the Contracts on the Company's behalf, began operations in 1995
and has limited operating history.
PURCHASING AND AVAILABILITY OF CONTRACTS; REDEMPTION OF NOTES
The success of the Company, in large part, depends on its ability to keep
its assets continuously invested in Contracts. While the Company believes that
an adequate supply of eligible Contracts will be available for
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purchase, there can be no assurances that the Company will be able to keep its
assets so invested, which may result in lower rates of return.
In the event that the Company has been unable to invest the total net
proceeds from the sale of the Notes in suitable Contracts prior to one hundred
eighty (180) days following the termination date of the offering, the uninvested
net proceeds at such date will be utilized for a mandatory partial redemption of
the Notes within forty-five (45) days following such date. In addition, Notes
may be redeemed in the event the Company is unable to purchase suitable
Contracts throughout the term of the Notes. In such a case, Notes will be
redeemed on a random basis, by lot.
NO SINKING FUND
No provision has been made by the Company to establish a sinking fund, that
is, a segregated fund with annually scheduled payments, in order to pay the
Interest or principal on the Notes. There can be no assurance that sufficient
funds will be available to make the Interest payments when due or to repay the
principal amount of the Notes at maturity.
CONFLICTS OF INTEREST
USAAC, which provides purchasing and collection services to the Company,
also provides similar services to U.S. Automobile Acceptance SNP-III, Inc.
("SNP-III"), a limited purpose corporation engaged in the same business as the
Company which began operations in February 1997, and U.S. Automobile Acceptance
1995-1, Inc. ("USAA 1995-1"), a limited purpose corporation engaged in the same
business as the Company which began operation in October 1995. Consequently,
there will be conflicts of interest with respect to allocation of management
time, services, overhead expenses and functions. There can be no assurance that
any particular conflict may not be resolved in a manner that adversely affects
Noteholders. Management will have conflicts of interest with respect to the
choice of Contracts purchased by the Company or by parties other than the
Company. In addition, this Note offering is one of which management believes
will be a series of future note or other securities offerings of similar limited
purpose corporations, trusts or other entities under the common control of
Company management. Accordingly, management expects there will be additional
conflicts of interest in the future. Although management of the Company, USAA
1995-1, and SNP-III have established a policy for apportioning business
opportunities among affiliates on a pro rata basis, the risk exists that an
entity other than the Company will receive more favorable treatment with respect
to business opportunities, including the purchase of Contracts. If an
insufficient supply of eligible Contracts is available for purchase, there can
be no assurances that the Company will be able to keep its assets so invested,
which may result in lower rates of return to the investors, and/or early
redemption of the Notes. See "Purchase and Collection of Contracts Allocation of
Available Contracts."
The Company has contracted with USAAC, an affiliate, to act as Servicer of
the Contracts to be purchased. The Company did not seek competitive bids before
contracting with USAAC, and amounts to be paid to USAAC have not been determined
by arms-length negotiation. There can be no assurance that any of these
conflicts will be resolved in a manner that will not adversely affect
Noteholders. The sole director of the Company may face legal consequences based
on his conflicting duties of loyalty, which may adversely affect the Company and
his ability to serve the Company and USAAC.
RELIANCE ON MANAGEMENT
The Company's day-to-day affairs, including but not limited to evaluating
the Contracts, determining which Contracts are to be purchased, effecting
Contract purchases, and overseeing the servicing of the Contracts, will be
administered entirely through, and decisions with respect thereto will be made
exclusively by, management of the Company and USAAC. The sole officer and
director of the Company is Michael R. Marshall. The success of the Company,
therefore, will depend on the quality of the services provided by Mr. Marshall
and persons under the control of Mr. Marshall. Accordingly, no person should
purchase any of the Notes offered hereby unless he is willing to entrust all
aspects of the management and control of the business of the Company to Mr.
Marshall. See "Management."
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COLLECTIONS AND REPOSSESSIONS; PERFORMANCE OF CONTRACTS
The Contracts represent the financing of the sale of used motor vehicles.
The delinquency and repossession rates for this class of retail installment
sales contracts are expected to be higher than for contracts resulting from the
sale of new vehicles.
Based upon management's previous experience and preliminary negotiations
for the purchase of Contracts, the Company believes that Contracts bearing
interest at close to legal rate ceilings in a number of states where Contracts
will be acquired will be available at discounts during the life of the Notes.
Accordingly, the Company expects to meet its obligations on the Notes by
generally purchasing Contracts at a range of 75% - 98% of the remaining
principal balance of the Contracts, bearing interest at rates higher than the
Notes. The collection proceeds of such Contracts will be the source for payment
of the Notes, as the total future installments required to be paid under such
Contracts would be substantially greater than the payments on the Notes.
The Company believes that the aggregate dollar amount of the Contracts
securing the Notes will increase until the Maturity Date. As a result of the
reinvestment by the Company of the net collection proceeds from existing
Contracts, after deduction for Interest and Allowed Expenses, and the purchase
of additional Contracts, the Company believes that the ratio of the aggregate
principal of the outstanding Notes to the total unpaid installments of the
Contracts securing the Notes will continue to increase.
As a consequence of the foregoing, the Company believes that prior to
maturity the Notes will be secured by Contracts whose aggregate value
substantially exceeds the principal amount of the Notes and that the net
collection proceeds from the Contracts, after deduction of Allowed Expenses,
will be sufficient to make the required payments on the Notes. Nevertheless, the
actual collection rates for the Company's Contracts are impossible to predict
precisely. Substantial adverse changes in collectability rates caused by changes
in economic conditions or other factors could adversely affect the Company's
ability to collect on the Contracts. If the Contracts do not collectively
perform as expected by the Company, the Company's ability to make the required
payments on the Notes could also be adversely affected. If Contract Obligors
fail in sufficient quantities to make payments on their respective Contracts and
the Company is unable to sufficiently enforce dealer recourse agreements or
resell Financed Vehicles for enough to cover the outstanding balances on such
Contracts, the Company might become unable to pay the Notes in full.
LACK OF MARKET FOR NOTES
No public market presently exits for the Notes. Although certain
broker-dealers may determine to make a market in the Notes, there can be no
assurance that a secondary market will develop, or that if one develops it will
continue for the life of the Notes. Noteholders have no right to require
redemption of the Notes and may not be able to liquidate their investment in the
Notes in the event of an emergency or for any other reason, and the Notes may
not be readily accepted as collateral for loans. Accordingly, investors should
anticipate holding the Notes until maturity. The Notes should be purchased only
by persons who have no need for liquidity in their investment.
DELAYS IN CONTRACT PURCHASES
To maximize its investment yields, the Company expects to purchase
Contracts using the net proceeds from the sale of Notes without significant
delay after the receipt of such proceeds. If unforeseen delays occur, the
Company's overall profitability and ability to repay the Notes could be
adversely affected because the yields of the short-term investment alternatives
for such funds, i.e., rates in the interim, are expected to be much less than
the yields anticipated to be received by the Company from the Contracts.
FLOW OF CONTRACT PROCEEDS
Automobile Dealers may, in some instances, collect payments by the Obligors
under the Contracts and deposit them into the Master Collections Accounts.
Although the Company has strict standards for selecting the Automobile Dealers,
the risk exists that a Dealer will withhold funds or fail to make timely
deposits. Such practices by Automobile Dealers would have an adverse effect on
the business of the Company and could affect its ability to pay principal and/or
Interest to Noteholders when due.
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CERTAIN LEGAL MATTERS RELATING TO THE CONTRACTS
PRIORITY LIENS IN FINANCED VEHICLES. Statutory liens for repairs or unpaid
taxes may have priority even over a perfected security interest in the Financed
Vehicles, and certain state and federal laws permit the confiscation of motor
vehicles used in unlawful activity which may result in the loss of a secured
party's perfected security interest in a confiscated motor vehicle. Liens for
repairs or taxes, or the confiscation of a Financed Vehicle, could arise or
occur at any time during the term of a Contract. No notice may necessarily be
given to the Company or USAAC in the event such a lien arises or confiscation
occurs.
BANKRUPTCIES AND DEFICIENCY JUDGMENTS. Certain statutory provisions,
including federal and state bankruptcy and insolvency laws, may limit or delay
the ability of USAAC or the Company to repossess and resell Financed Vehicles or
enforce a deficiency judgment. In addition, the Company may determine in its
discretion that a deficiency judgment is not an appropriate or economically
viable remedy, or may settle at a significant discount any deficiency judgment
that it does obtain. In the event that deficiency judgments are not obtained,
are not satisfied, are satisfied at a discount or are discharged in whole or in
part in bankruptcy proceedings, the loss will reduce the collateral securing the
Notes, and if other collateral or dealer recourse agreements are insufficient
may adversely affect the ability of the Company to repay the Notes.
In the event that either USAAC or an Automobile Dealer were declared
bankrupt, there may be delays in the collection of the Contracts; however, such
an event should not affect the nature or extent of the collateral securing the
Notes. In the event of a bankruptcy by the Company, the Trustee is empowered to
file such proofs of claim and other papers or documents to have the claims of
the Trustee and the Noteholders allowed in any judicial proceedings relative to
the Company, its creditors or its property. In the event of a bankruptcy by an
Automobile Dealer, the servicing of Contracts purchased from that Automobile
Dealer would be assumed by USAAC and/or subcontracted to a secondary Servicer.
In the event an Automobile Dealer has collected payments on Contracts it is
servicing and fails to deposit them in the Master Collections Accounts,
notwithstanding its obligation to do so, the Company may have difficulty
recovering such funds in the event of such Automobile Dealer's bankruptcy. It is
the intention of the Company, however, to take such actions as may be necessary
to minimize the effect on the collateral securing the Notes in the event of an
Automobile Dealer's bankruptcy.
CONSUMER PROTECTION LAWS. Numerous federal and state consumer protection
laws impose requirements upon the origination and collection of retail
installment contracts. State laws impose finance charge ceilings and other
restrictions on consumer transactions and may require certain contract
disclosures in addition to those required under federal law. These requirements
impose specific statutory liabilities upon creditors who fail to comply with
their provisions. A risk exists that this liability could affect the ability of
the Company, as an assignee of the Contracts, to enforce the Contracts. In
addition, certain of these laws make an assignee of such contract liable to the
Obligor thereon for any violation by the assignor. Accordingly, the Company, as
holder of the Contracts, may be subject to liability to an Obligor under one or
more of the Contracts.
COMPETITION
The Company has numerous competitors engaged in the business of buying new
and used motor vehicle retail installment contracts at a discount, including
affiliates of the Company. In addition, the Company competes to some extent with
providers of alternative financing services, such as floor plan lines of credit
from financial institutions, lease financing and dealer self-financing. National
or regional rental car companies, auction houses, dealer groups or other firms
with greater financial resources than the Company could elect to compete with
the Company in its market. These competitive factors could have a material
adverse effect upon the operations of the Company.
LACK OF DAMAGE INSURANCE
The owners of the Financed Vehicles may fail to maintain physical damage
insurance. As a consequence, in the event any theft or physical damage to a
Financed Vehicle occurs and no such insurance exists, the Company may suffer a
loss unless the owner is otherwise able to pay for repairs or replacement or its
obligations under the related Contract. If the Company incurs significant losses
from uninsured Financed Vehicles, its ability to pay the Notes may be adversely
affected.
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SALE OF SMALL AMOUNT OF NOTES
The offering may be consummated by the Company with the sale of as little
as $100,000 in principal amount of the Notes. In the event the Company sells
only a small portion of the Notes, the performance of individual Contracts in
the pool securing the Notes will have a greater effect on the ability of the
Company to pay the Notes than if a large portion of the offered Notes are sold.
In addition, although most of the Allowed Expenses of the Company will generally
vary with the amount of Contracts, relatively small amounts of fixed fees and
expenses payable to the Trustee and for on-going banking, accounting and legal
services may not vary in proportion with the amount of the Contracts and may be
relatively higher if only a small portion of the Notes are sold than if a large
portion of the Notes are sold. If the fixed Allowed Expenses are higher than
expected, the Company's ability to repay a small amount of Notes may be
adversely affected.
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
January 6, 1998.
SHAREHOLDERS' EQUITY
Common Stock, $1.00 par value, $ 1,000
authorized 3,000 shares, issued
and outstanding 1,000 shares
Paid-in Capital $ 49,000
--------
TOTAL SHAREHOLDERS' EQUITY $ 50,000
USE OF PROCEEDS
The Company intends to apply 88% of the proceeds from the sale of any Notes
to the purchase of Contracts. The Company will pay to licensed broker-dealers
engaged by the Company a commission of 7%. The Company will also pay to USAAC a
fee of 5% of the gross proceeds from the sale of Notes, as reimbursement for
paying the registration, legal, accounting, printing, marketing, trustee and
other out-of-pocket fees and expenses, for bearing the general administrative
and overhead expenses associated with the offering and the organization of the
Company, and for the services provided by USAAC in connection with the offering
and organization of the Company. All expenses related to this offering, other
than the commissions and fees payable to licensed broker-dealers, will be
advanced by USAAC. In the event USAAC advances amounts in excess of 5% of the
offering proceeds, such excess amount shall be borne by USAAC. If amounts
advanced by USAAC are less than 5% of the offering proceeds, the balance of the
5% will represent compensation to USAAC.
The following table sets forth the anticipated use of proceeds from the
offering, reflecting the Minimum and Maximum Subscription Amounts:
Minimum Maximum
------- -------
Purchase of Contracts $ 86,240 $ 34,496,000
Contract Purchase Fees (1) 1,760 704,000
Broker-Dealer Commissions 7,000 2,800,000
Legal, Accounting & Printing Expenses (2) 5,000 200,000
Trustee and Escrow Fees (2)(3) -0- 50,000
Other Offering Expenses (2)(3)(4) -0- 350,000
Marketing Expenses & Due Diligence (2)(3)(5) -0- 600,000
Compensation to USAAC (2)(3)(6) -0- 800,000
-------- ------------
TOTAL $100,000 $ 40,000,000
- --------------
(1) To be paid to automobile contract suppliers.
(2) To be paid or reimbursed to an affiliate.
(3) The anticipated expenses of the offering if only the Minimum Subscription
Amount is raised are in excess of $5,000. Only $5,000 will be reimbursed to
USAAC.
(4) Includes SEC registration fee, Blue Sky fees and miscellaneous expenses.
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(5) Anticipated to be paid to registered broker-dealers as a
non-accountable expense allowance and due diligence expense
reimbursement.
(6) If the Maximum Subscription Amount is raised, the Company anticipates
that a portion of the 5% reimbursement will represent profit to USAAC.
PLAN OF DISTRIBUTION
The Company is offering up to $40,000,000 in aggregate principal
amount of the Notes. The Notes are being sold on a "best efforts" basis on
behalf of the Company by licensed soliciting broker-dealers that are members of
the National Association of Securities Dealers, Inc. ("NASD") and that are
qualified to offer and sell the Notes in a particular state, as have been or
may hereafter be engaged by the Company. The Notes may also be offered and sold
by employees of the Company.
The Company has agreed to pay to soliciting broker-dealers, in
consideration for their services, a sales commission of 7% of the principal
amount of Notes which the broker-dealers sell. In addition, broker-dealers may
be paid up to an additional 1.5% of the principal amount of Notes sold by
broker-dealers, which represents 1% for a non-accountable expense allowance and
0.5% for due diligence. Such fees, if any, will be paid out of the 5% payable
to USAAC. The total compensation to be paid to NASD members in connection with
the offering will not exceed 8.5%, which includes 7% for sales commissions, 1%
for a non-accountable expense allowance, and 0.5% for due diligence and
expenses. The Company has agreed to indemnify the broker-dealers against
certain liabilities, including liabilities under applicable securities laws.
Minimum suitability requirements have been established. Subscribers
will not be deemed suitable for an investment in the Notes unless they meet one
of two minimum standards established by the Company. All subscribers must
represent that they (i) have a minimum net worth of $25,000, together with an
annual income of a minimum of $25,000, excluding personal residence,
furnishings and automobiles, OR (ii) they have a minimum net worth of $40,000,
without reference to annual income, excluding personal residence, furnishings
and automobiles. Residents of certain states must meet the Company's minimum
standards or the applicable state standard, whichever is more stringent. The
minimum investment is $2,000.
Investor subscriptions are to be made payable to, and will be held in
an escrow account by Chase Bank of Texas, as escrow agent, until the Minimum
Subscription Amount of $100,000 in principal amount of the Notes has been
raised. In the event that the Minimum Subscription Amount is not subscribed
within ninety (90) days after the date the Offering is declared effective by
the Securities and Exchange Commission (the "Escrow Termination Date") or any
earlier termination of the offering as hereinafter provided, the offering will
be terminated and the escrowed funds will be promptly returned to the
subscribing investors by the escrow agent. When the Minimum Subscription Amount
has been reached, the escrowed funds will be released to the Company. Any
subsequent sales proceeds from the sale of additional Notes will be immediately
available for use by the Company. All subscriptions are subject to the right of
the Company to reject any subscription in whole or in part.
The offering will terminate on April 30, 1999, unless sooner
terminated by the Company upon the sale of all of the Notes, or if the Company
believes that suitable Contracts will not be available for purchase by the
Company or that additional selling efforts will be unsuccessful. Although early
termination of the offering may result in the Company selling less than the
Maximum Subscription Amount and may expose prior purchasers of Notes to certain
risks, the Company does not believe an early termination will have a material
adverse effect on any prior purchasers of Notes. The aforedescribed termination
provisions are the exclusive termination provisions for the offering.
DESCRIPTION OF THE NOTES
GENERAL
The Notes are general obligations of the Company, and the holders of
the Notes will have recourse against the assets of the Company; however,
substantially all of the Company's assets will be the Contracts. The Company
has not sought, and is not required to obtain, a rating of the Notes by a
rating agency.
The Notes will be issued pursuant to a trust indenture agreement (the
"Indenture"), between the Company and Chase Bank of Texas, as trustee (the
"Trustee"). The following summaries of certain provisions of the
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Indenture and the summaries included under "The Indenture of Trust Provisions"
do not purport to be complete and are subject to, and qualified in their
entirety by reference to, the provisions of the Indenture. The Trustee will
accept title to the Security Agreement on behalf of Noteholders. The duties of
the Trustee are to hold the Security Agreement, to perform certain obligations
in the event of a default in the payment of the principal and Interest on the
Notes, and to execute and deliver to the Company partial or full satisfaction
of the Security Agreement upon partial or full repayment of the Notes. See
"Indenture Provisions" for a more complete summary of the Indenture of Trust
agreement. The form of Indenture of Trust is Exhibit B to the Prospectus.
No public market exists for the Notes. Accordingly, Investors should
expect to retain ownership of the Notes and bear the economic risks of their
investment for the life of the Notes.
ISSUANCE OF NOTES; TRANSFERS
The Notes will be issued in an aggregate principal amount of up to
$40,000,000, in minimum denominations of $1,000 and integral multiples thereof.
The minimum investment amount for each investor is $2,000. The Company may
charge a reasonable fee for any transfer or exchange of a Note. Each Note will
mature on December 31, 2003.
PAYMENTS OF PRINCIPAL AND INTEREST
The Interest rates payable on the Notes offered hereby will be established
by the Company from time to time based on market conditions and the Company's
financial requirements. The Company will constantly reevalute its Interest
rates based on such analysis. Once determined, the rate of Interest payable on
a Note will remain fixed for the term of the Note. The Company reserves the
right to vary from time to time, in its discretion, the Interest rates it
offers on the Notes based on numerous factors including, but not limited to,
the desire to attract new investors, or receipts of Notes in excess of current
or projected financial requirements.
Each Note will accrue Interest from the date of issuance. The initial
Interest rate will be 10.5% per annum. Interest shall be computed on the basis
of a 365-day year but is paid in twelve (12) equal monthly installments
regardless of the number of days in each month. The Company will be required to
make monthly payments of Interest, paid in arrears, on the outstanding
principal balance at such rate of 10.5% per annum. Payments of Interest will be
due and payable on the fifteenth (15th) day of each successive calendar month
(for Interest accruing during the prior month or months), commencing with the
first full calendar month following the issuance of the Note, and upon the
Maturity Date. The principal balance of the Note will be due and payable on the
Maturity Date. Any installment of Interest which is not paid when and as due
will accrue interest at the lesser of 15% or the highest lawful rate of
interest from the date due to the date of payment. Although the initial stated
interest rate on the Notes is 10.5% per annum, the effective interest rate will
be somewhat lower because each payment of Interest will be paid 15 days after
the month over which it accrued.
All payments of Interest will be made by check mailed to Noteholders
registered as of the close of business on the first day of the month of the
Payment Date, at their addresses appearing on the Note Register, except that
all payments of principal and the payment of Interest due on each Note at
maturity or upon redemption in whole or in part will be made only upon
presentation and surrender of such Note on or after the Maturity Date or
Redemption Date, as the case may be, at the office of the Company.
The Company expects to use the amounts collected under the Contracts to
make the required payments under the Notes. All installments and other proceeds
from the Contracts will be deposited in the Master Collections Accounts
maintained by the Company for all of the various motor vehicle retail
installment contracts ("Contracts"). USAAC and the Company have agreed to
deposit all installments and other proceeds, including proceeds from sales of
repossessed vehicles, net of repossession expenses, into the Master Collections
Accounts. On a periodic basis, the funds in the Master Collections Accounts
will be transferred to a Master Operating Account maintained by the Company.
Payment of Interest on the Notes will be made on each Payment Date by the
Company, or its designee. On or prior to the business day immediately preceding
each Payment Date, the Company will transfer to the Note Redemption Account that
portion of the funds in the Master Operating Account which, together with any
funds in the Note Redemption Account, is sufficient to pay the accrued Interest
due on the outstanding Notes on such
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Payment Date. Prior to collection of the Contracts, funds to pay Interest will
be advanced by USAAC and reimbursed as Contracts are collected.
REDEMPTION
The stated maturity of the principal of the Notes is December 31, 2003. No
principal payments will be made on the Notes until the earlier of maturity or
any redemption at the election of the Company of the Notes in whole or in part,
except in the event that prior to one hundred eighty (180) days following the
termination date of the offering the Company has been unable to invest the total
net proceeds from the sale of the Notes in suitable Contracts, the uninvested
net proceeds at such date will be utilized for a mandatory partial redemption of
the Notes within forty-five (45) days following such date. In addition, Notes
may be redeemed in the event the Company is unable to purchase suitable
Contracts throughout the term of the Notes. In such a case, Notes will be
redeemed on a random basis, by lot.
Redemption of the Notes must occur at the option of the Company on any
Payment Date and may be in whole or from time to time in part. Any redemption of
Notes will be at 100% of the principal amount thereof being redeemed, together
with Interest accrued to the Redemption Date, without any premium or penalty.
Notice will be mailed to all Noteholders setting forth (i) the Redemption Date,
(ii) the Redemption Price, (iii) the name and address of the Paying Agent, (iv)
a statement that the Notes must be delivered to the Paying Agent, and (iv) a
statement that interest on the Notes, or portion thereof being redeemed, ceases
to accrue on and after the Redemption Date. In the case of notice to the holder
of any Note to be redeemed in part, a new Note or Notes in principal amount
equal to the unredeemed portion of such Note will be issued. In the event of
partial redemption of the Notes, the Notes to be redeemed in whole or in part
will be selected on a random basis, by lot.
REPORTS TO NOTEHOLDERS
The Company intends to furnish to the holders of the Notes on a quarterly
basis information containing unaudited quarterly financial statements and other
summary information regarding the Contracts, including information required to
be filed in Form 10-Q. Annually, the Company will furnish audited financial
statements of the Company to the Noteholders, prepared in accordance with
generally accepted accounting principles.
MINIMUM YIELD REQUIREMENTS
In the event that only the Minimum Subscription Amount of $100,000 is
raised, the Company anticipates that the average annual rate of return required
from the Contracts purchased to fully pay Allowed Expenses and Interest on the
Notes during their term, and to repay the principal and Interest at the due
date, will be approximately 29%, or $29,000 annually. An approximate breakdown
of such amount is as follows: 11% ($11,000 annually) for Interest on the Notes;
8% ($8,000 annually) for trustee fees; 1% ($1,000 annually) for legal fees; 2%
($2,000 annually) for accounting fees; 4% ($4,000 annually) for servicing and
collection expenses; and 3% ($3,000 annually) for recovery of initial offering
costs. In the event that only the Minimum Subscription Amount of $100,000 is
raised, costs in excess of $29,000 shall be borne by USAAC. See "Allowed
Expenses and Flow of Contract Proceeds-Summary of Allowed Expenses."
SECURITY FOR THE NOTES
GENERAL
The collateral securing the Notes (the "Trust Estate") will consist of all
of the Company's right, title and interest in (a) the Contracts, together with
all payments and instruments received with respect thereto, (b) the Servicing
Agreement, (c) the Master Collections Accounts, the Master Operating Account,
the Note Redemption Account and all funds (including investments) therein, (d)
all repossessed or returned Financed Vehicles, and (e) all proceeds of the
conversion, voluntary or involuntary, of any of the foregoing into cash or other
liquid property. In some instances the Automobile Dealer will provide the
Company some form of dealer recourse, such as contract repurchase agreements,
limited guaranty agreements, cash hold-back arrangements, or contract
replacement guarantees. These dealer recourse agreements will be additional
collateral securing the notes. Pursuant to the Indenture, the Trustee has been
granted a lien senior to the lien of the Indenture in order to secure payment of
its fees and expenses as Trustee under the Indenture.
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THE CONTRACTS
Each of the Contracts will be a retail installment sales contract
originated by a motor vehicle dealer and purchased by the Company and will be
secured by a used automobile or light-duty truck (a "Financed Vehicle"). The
Contracts will constitute a part of the Trust Estate and will be purchased by
the Company using (i) the net proceeds from the sale of Notes, or (ii) any
remaining net collection proceeds from any previously purchased Contracts after
deduction for payments of Interest and Allowed Expenses. A UCC financing
statement covering the Contracts, and also covering the proceeds therefrom, will
be filed in the appropriate public office.
THE NOTE REDEMPTION ACCOUNT
The Company has established a trust account at a financial institution (the
"Note Redemption Account"). The Note Redemption Account will relate solely to
the Notes and to the Contracts securing the Notes. Funds in the Note Redemption
Account will not be commingled with any other moneys of the Company. All moneys
deposited from time to time in the Note Redemption Account will be held as part
of the Trust Estate. The funds in the Note Redemption Account will be employed
by the Company or a paying agent to pay Interest on the Notes on each Payment
Date. Funds in the Note Redemption Account may be invested as directed by the
Company, but may not be invested in affiliates of the Company. The Company may
only specify investment in (i) bank accounts, (ii) bank money-market accounts,
(iii) short-term certificates of deposit issued by a bank, or (iv) short-term
securities issued or guaranteed by the U.S. Government. The ability of the
Company to direct the investment of funds in the Note Redemption Account,
however, limits the protection provided by the Trustee.
THE CONTRACT PROCEEDS, MASTER CASH ACCOUNTS
The Company has established two types of master accounts (the "Master
Accounts") for the benefit of the Company. The first type account is the "Master
Collections Account," into which all payments made on or with respect to the
Contracts will be deposited. These Master Collections Accounts will be
"lock-box" type accounts at financial institutions where all remittance checks,
drafts and other instruments for the Contracts will be deposited. All servicing
subcontractors will be required under their subcontracts to promptly remit
payments collected by them to the Master Collections Accounts. USAAC has also
agreed to deposit in the Master Collections Accounts any payment proceeds
received directly by USAAC, including any proceeds from resales of returned or
repossessed Financed Vehicles, net of liquidation expenses, and any recoveries
from insurance claims on Financed Vehicles. The Company will periodically
transfer all collected funds from the Master Collections Accounts into the
second account, the "Master Operating Account." The funds may be invested as
directed by the Company.
Collections or other proceeds from the Contracts in the Master Collections
Accounts or the Master Operations Account, or otherwise in its possession or
control, are the Company's property and subject to the security interest of the
Trustee.
It is the intention of the Company to cause the funds contained in the
Master Operating Account to be withdrawn or applied for the following purposes:
first, to the payment of any Allowed Expenses of the Company; second, to any
amounts due the Trustee for its fees and expenses; third, through a direct
transfer to the Note Redemption Account, to the payment of any Interest due on
the outstanding Notes on each Payment Date; and fourth, to the purchase of
additional eligible Contracts.
On or before the business day immediately preceding each Payment Date, the
Company will cause to be transferred directly from the Master Operating Account
to the Note Redemption Account that portion of the funds in the Master Operating
Account which, together with any funds in the Note Redemption Account, is
sufficient to make all Interest payments on the Notes.
THE SERVICING AGREEMENT
The Company has granted to the Trustee a security interest in all of its
rights under the Servicing Agreement. The Servicer is an affiliate of the
Company. The Company may terminate the Servicing Agreement, upon written notice
to USAAC, for failure of USAAC to provide adequate services as required under
the terms of the Servicing Agreement. Upon such termination, all rights, duties,
obligations and responsibilities of USAAC with
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respect to the related Contracts (except for any obligation of USAAC to
indemnify the Company) will vest in and be assumed by the Company or any
servicing agent that the Company may designate.
ALLOWED EXPENSES AND FLOW OF CONTRACT PROCEEDS
The "Allowed Expenses" of the Company will include but are not limited to
the expenses and fees including contract servicing, purchase and investor
administration fees, trustee fees, bank fees and charges, legal fees, title
transfer fees, account fees, contract purchase fees, insurance, repossession,
repair and liquidation expenses, enforcement costs of dealer recourse
agreements, federal state and local taxes, reasonable out-of-pocket expenses
incurred in connection with any Sale of Contracts, salaries, and other general
and administrative expenses of the Company (collectively the "Allowed
Expenses"). As set forth below, portions of such expenses will be paid to
affiliates of the Company.
The following table summarizes the Company's present estimates of its
anticipated Allowed Expenses. Actual incurred Allowed Expenses may vary
significantly from these estimates. In the event that only the Minimum
Subscription Amount is raised, certain of these expenses will be paid by USAAC,
as indicated. See "Description of the Notes -- Minimum Yield Requirements."
Summary of Estimated Allowed Expenses
Allowed Expense Estimated Amount
--------------- ----------------
Servicing and Operating Fees (to be paid
to affiliates of the Company)
Contract Servicing Fee $21.50 per month per Contract, subject to certain
limitations(1)
Purchase Administration Fee $125 per Contract purchased (2)
Investor Administration Fee 1/12th of 1.0% of the aggregate outstanding principal
amount of the Notes, paid monthly, and 1/12th of
1% of aggregate funds held in investment
accounts, paid monthly (2)
Trustee, Registrar and Custodial Fees
Annual Administration $7,500 per year
Note Payments and Registrar Services $12 per year per Note (2)
Note Certificate Corrections $10 each (2)
Bank Fees
Master Collections Accounts $100 to $20,000 per year (varies with volume)
Operating Account $100 to $20,000 per year (varies with number of
transactions)
Legal Fees
Annual Attorney's Opinion to Trustee $1,000 - $10,000
Title Transfers $14 per Contract
Accounting Fees
Annual Audit and Outside Accounting $1,000 - $60,000
Annual Tax Return $1,000 - $10,000
Printing & Mailing $300 - $20,000(2)
Total Annual Servicing, Operating, Trustee, Bank, Estimated to average (i) $2,000,000 if maximum
Legal, Accounting, Administrative amount of Notes is sold, or (ii) $18,000 if the
Minimum Subscription Amount only is sold
- -----------------------------
(1) Limited to a maximum of $120,000 in any month, for calendar year 1998.
This fee will be adjusted at the beginning of each calendar year for inflation
using the U.S. Dept. of Labor Consumer Price Index.
(2) Will be paid by USAAC or will not be incurred, if only the Minimum
Subscription Amount is raised.
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Allowed Expense Estimated Amount
--------------- ----------------
Contract Purchase Fees(3) 1%-3% per Contract(2)
Repossession, Repair and Liquidation Expenses Estimated to average from $ 1,000 to $3,000 for each
repossessed vehicle
Costs of Enforcement of Dealer Recourse Enforcement of dealer recourse agreements reduces
Agreements repossessions, repairs and liquidation expenses
Federal Income Taxes Varies with taxable income
State Corporate Income and Franchise Taxes Varies by state
FLOW OF CONTRACT PROCEEDS
Payments under the Contracts will generally be paid by the Obligors to the
Servicer, who will deposit the funds into the Master Collections Accounts. The
following chart generally illustrates the flow of Contract proceeds from the
Obligors through the Master Accounts to the various applications of such
proceeds including payment of Allowed Expenses, trustee fees and expenses,
Interest payments on Notes, reinvestment in additional contracts, and the
accumulation of funds to pay the Notes.
===========================================================================================================
Servicer/Dealer Servicer/Dealer Company Transfers Company Utilizes Funds
Collects Installments Deposits Installment Funds From Master in Master Operating
Collections Into Master Collections Accounts To Account as Follows(1)
Collections Accounts Master Operating
Account
- -----------------------------------------------------------------------------------------------------------
* * *
===========================================================================================================
(1) Various Proceeds Applications
1. Allowed Expenses.
2. Trustee's fees and expenses.
3. Interest paid by transfers to Note Redemption Account for payment
to Noteholders.
4. Any remaining proceeds used to purchase additional eligible
Contracts.
THE COMPANY
GENERAL
U.S. Automobile Acceptance SNP-IV, Inc. (the "Company") is a newly
incorporated Texas corporation. The Company is wholly owned by Michael R.
Marshall, an individual and resident of Oklahoma. The Company has no
subsidiaries. There is no trading market for the capital stock or Notes of the
Company. The principal offices of the Company are located at 1120 N.W. 63rd,
Suite G-106, Oklahoma City, Oklahoma 73116. The telephone number is (405)
843-3135.
THE BUSINESS OF THE COMPANY
The Company was established for the purpose of purchasing, collecting and
servicing motor vehicle retail installment contracts. The motor vehicle retail
installment sales contracts to be purchased by the Company and pledged to secure
the Notes (the "Contracts") are generally expected to be purchased at discounts
from the net remaining principal balance thereof and will be secured by used
automobiles and light trucks (the "Financed Vehicles"). The Contracts will be
purchased from independent motor vehicle dealers located principally in Texas
- ----------------------
(3) To be paid to independent automobile contract brokers. These fees are
expected to amount to approximately $700,000 initially. See "Purchase and
Collection of Contracts -- General."
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and Oklahoma, and Automobile Dealers will in many instances provide some form of
dealer recourse. The Company may expand its dealer group to other states as the
Company determines to be appropriate. The Company will not participate in the
retail sales by the Automobile Dealers of the Financed Vehicles from which the
Contracts will arise. Obligors under the Contracts are anticipated to be
non-prime customers who are somewhat less creditworthy than prime credit
purchasers of automobiles from new car dealers.
The funds necessary to purchase the Contracts will initially be provided
from the sale of the Notes offered hereby. After the payment of Interest due
upon the Notes and Allowed Expenses, the net collection proceeds from the
Contracts will be used to purchase additional eligible Contracts.
The Company presently anticipates that the Contracts purchased by the
Company will relate primarily to Financed Vehicles where wholesale values range
from $2,000 to $25,000. The Company believes that banks and other traditional
financing institutions are not well equipped to finance used motor vehicles, due
to the large number of relatively small notes or installment contracts, the
institutions' lack of due diligence and collection capability with respect to
used motor vehicles, and the inability of such institutions to approve or
evaluate contracts on a timely, cost-effective basis. Consumer used automobile
receivables are management and collection intensive and require constant
supervision, review and knowledge of repossession and resale services. The
Company believes that the subcontractors selected by the Company and Servicer
will provide this industry expertise at a low marginal cost.
The Company has no material properties, assets, operating history or
pending legal proceedings. The Company intends to register with all required
state credit commissions as a holder of motor vehicle retail installment sales
contracts.
PURCHASE AND COLLECTION OF CONTRACTS
The Contracts will be purchased by the Company and administered on behalf
of the Company under a Servicing Agreement. USAAC, as Servicer, will be
responsible for providing ongoing servicing of the Contracts purchased,
including accounting, administration and collections of payments due under the
Contracts. In addition, USAAC will oversee Automobile Dealer compliance and
review, oversee enforcement and administration of dealer recourse agreements,
and oversee the repossession and sale of vehicles securing any Contract in
default. The Servicing Agreement allows USAAC to subcontract with
industry-qualified third parties to perform its obligations thereunder. Any such
subcontract will not relieve USAAC, as Servicer, from liability for its
obligations under the Servicing Agreement. The Company has granted a security
interest in the Servicing Agreement to the Trustee as security for the Notes and
for the Obligations of the Company. The following summaries do not purport to be
complete and are subject to, and qualified in their entirety by reference to,
the provisions of the Servicing Agreement. References herein to the "Servicer"
are also to any successor or permitted assignee of the Servicer performing the
duties of the Servicer under the Servicing Agreement.
GENERAL
The Company and USAAC presently intend to utilize independent commission
agents as well as employees of USAAC and Company to assist in locating eligible
Contracts. The Company has established certain criteria as a general guide to
govern the purchase of Contracts. The Servicing Agreement establishes criteria
to govern the servicing of Contracts, including the performance of certain
collection activities.
CERTAIN CONTRACT PURCHASE CRITERIA
The Company will endeavor to purchase the Contracts at discounts to their
aggregate remaining unpaid principal balances. In addition, the Company will
seek to obtain Contracts whose maturities are less than the remaining useful
lives of the Financed Vehicles and which require substantial down payments by
the Obligors.
With respect to the credit information to be supplied by Obligors on the
Contracts, the Company has established certain credit criteria to be satisfied
by each Obligor. In order to satisfy these criteria, an Obligor, among other
things, must be able to provide verifiable personal references, must have a
valid driver's license issued by his state of residence, must have been a
resident of such state for a minimum of six months, and must be at least 18
years of age and have no co-signors on the Contract except immediate family
members. In order to verify the foregoing information, the Company or USAAC will
be required to obtain from the Dealer a copy of the credit
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application executed by the Obligor which contains the necessary information, to
verify by telephone or otherwise the Obligor's addresses, employment and
personal references and to obtain a credit report from a credit reporting agency
or from the Dealer. Usually the credit report will be obtained directly from a
credit reporting agency.
Although Obligors under the Contracts are anticipated to be somewhat less
credit-worthy than typical purchasers of new automobiles from new car dealers,
the Company has established certain general criteria to be used as a guide to
purchasing Contracts. These criteria are as indicated below; however, at the
discretion of the Company actual purchase of packages and individual Contracts
may vary substantially from this guide:
* The Company expects the purchase discount will generally range between 2%
and 25% depending on the credit worthiness of each individual buyer, the
age and mileage of the financed vehicle, and the availability and financial
strength added by additional recourse agreements provided by the Automobile
Dealers.
* In many instances, the Automobile Dealer will be required to provide some
form of dealer recourse which is satisfactory to the Company, such as
contract repurchase agreements, limited guaranty agreements, cash hold-back
arrangements, or contract replacement guarantees.
* Contracts will usually have an original term of 66 months or less.
* The age of each Financed Vehicle may not exceed those listed in the
appropriate automobile market guides, which are modified periodically.
* The Obligors on the Contracts are required to make a down payment in cash
plus net trade-in allowance of 10-25% of the purchase price of the Financed
Vehicles.
* The interest rate on the Contracts will not violate any applicable usury
laws.
* The wholesale value for a Financed Vehicle will generally be greater than
$2,000 and less than $25,000. The Company believes that $2,000 is the
minimum value automobile economically feasible for the Company to finance
and $25,000 the maximum desirable.
* The Obligors on the Contracts must have supplied certain credit
information, and credit verification procedures must have been performed by
the Company or Servicer.
DEALER CRITERIA
Contracts will generally be purchased from Automobile Dealers who meet the
following criteria:
* A net worth, exclusive of goodwill or other intangible values, of $100,000,
or a parent or affiliate which meets the net worth criterion and guarantees
the performance of the obligations of the Automobile Dealer under the
Purchase Agreements, servicing subcontracts, and dealer recourse
agreements;
* A minimum of two years of successful operation as an automobile dealer, as
evidenced by financial statements or prior tax returns;
* Verifiable banking references;
* Dealership property owned by dealer or subject to lease of sufficient
length to indicate long term presence; and
* Satisfactory on-site premises inspection.
COLLECTION OF PAYMENTS
Under the Servicing Agreement, USAAC is obligated to exercise discretionary
powers involved in the management, administration and collection of the
Contracts and to bear all costs and expenses incurred in connection therewith.
USACC may, in some instances, subcontract its collecting functions to parties or
to
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selected Automobile Dealers. Funds collected by the subcontracting servicers
will be required to be deposited directly to the Master Collections Accounts and
not to the servicer's account.
USAAC or subcontractor must contact any Obligor on a past due Contract
within fifteen (15) days after the payment due date to pursue collections. Any
material extensions, modifications, or acceptances of partial payments by
Obligors, and any related necessary Contract amendments or default waivers by
USAAC, must be approved by the chief credit officer or president of the Company.
When any Contract becomes over thirty (30) days past due, USAAC and the Company
will take immediate appropriate action to enforce dealer recourse agreements on
behalf of the Company. "Past Due" is defined as 15 days after the payment due
date. USAAC will pursue repossession, subject to compliance with all state and
federal laws relating thereto, of the Financed Vehicle securing any Contract
whose Obligor is (i) past due by at least four scheduled installments in the
case of bi-weekly or semi-monthly installments or two scheduled installments in
the case of monthly installments, and (ii) has failed for 60 consecutive days,
in the case of bi-weekly or semi-monthly installments, or 75 days, in the case
of monthly installments, to remit any sums against the obligations under the
Contract. USAAC may commence repossession sooner if it deems such activity to be
prudent and in the best interests of the Company. USAAC is also required to
document the reasons for each charge-off of any material unpaid amount from an
Obligor under any Contract. As indicated by the foregoing repossession
requirements, to maximize its return the Company prefers to continue collecting
installments on the Contract despite a missed installment by the Obligor in lieu
of repossession of the vehicle.
USAAC is required to deliver monthly to the Company a report certifying
that all Contracts managed by USAAC were serviced in material accordance with
the Servicing Agreement and that USAAC is not in default under the Servicing
Agreement. The report also will contain collection information on each Contract
since the date of the last such report and a reconciliation of the deposits into
the Master Accounts, if any.
SERVICER COMPENSATION
USAAC is entitled under the Servicing Agreement to receive a monthly fee
(the "Servicing Fee") per outstanding Contract of $21.50 per month, subject to
certain limitations. Such compensation shall be limited to a maximum of $120,000
in any month. In addition, the Contract Servicing Fee will be adjusted, if
necessary, so that the total annual Allowed Expenses do not exceed $12,000 in
the event only the Minimum Subscription Amount is sold. In each case, fees will
be adjusted annually by the pro rata published Consumer Price Index inflation
factor. The Servicing Fee is intended to compensate and reimburse USAAC for
administering the collection of the Contracts, including collecting and posting
all payments, responding to inquiries of Obligors on the Contracts,
investigating delinquencies, sending payment coupons to Obligors, and reporting
any required tax information to Obligors. USAAC will be entitled to
reimbursement of its costs and expenses incurred in the repossession,
preparation for sale and resale of any Financed Vehicle and reimbursement of
costs of enforcement of dealer recourse agreements. Compensation to
subcontracting servicers for providing Contract servicing, if any, will be paid
by USAAC out of its Contract Servicing Fees.
ALLOCATION OF AVAILABLE CONTRACTS
Although the Company's management and consultants anticipate that a
sufficient supply of Contracts will be available for purchase throughout the
term of the Notes, a policy has been established for apportioning business
opportunities among the Company, SNP-III, USAA 1995-I, and future affiliated
entities. In the event a limited number of suitable Contracts are available at a
time when several affiliated entities wish to purchase Contracts, the Contracts
will be divided among the entities on a pro rata basis, according to the amount
of funds each entity has available for contract purchase.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth information, as of January 6, 1998, relating
to the beneficial ownership of the Company's capital stock by any person or
"group", as that term is used is Section 13(d)(3) of the Securities and Exchange
Act of 1934 (the "Exchange Act"), known to the Company to own beneficially five
percent (5%) or more of the outstanding shares of Common Stock, and known to the
Company to be owned by each director of the Company and by all officers and
directors of the Company as a group. Except as otherwise noted, each of the
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persons named below is believed by the Company to possess sole voting and
investment power with respect to the shares of Common Stock beneficially owned
by each person.
Name of Director or Amount and Nature of Beneficial Ownership(1)
Name and Address of Percentage of
Beneficial Owner Number of Shares Class Outstanding
---------------- ---------------- -----------------
Mr. Michael R. Marshall 1,000 100%
1120 N.W. 63rd, Suite G-106
Oklahoma City, Oklahoma 73116
- -----------------
(1) The information as to beneficial ownership of Common Stock has been
furnished by the Company and the sole director and officer of the Company.
MANAGEMENT
BUSINESS BACKGROUND AND EXPERIENCE
The name, age, background and principal occupation of the sole director and
executive officer of the Company are set forth below:
Mr. Michael R. Marshall, age 48, is Chairman of the Board and President of
the Company and its Servicer, U.S. Automobile Acceptance Corporation. Mr.
Marshall is Chairman of the Board of Directors, president, and the owner of all
the outstanding common stock of U.S. Automobile Acceptance SNP-III, Inc.
("SNP-III"), U.S. Automobile Acceptance 1995-I, Inc. ("USAA 1995-I") and U.S.
Automobile Acceptance SNP-I, Inc. ("SNP-I") all limited purpose corporations
with business activities similar to the proposed activities of the Company.
Mr. Marshall holds a Bachelor of Business Administration Degree in
Accounting which he obtained in 1971 from Texas A&M University and is a
Certified Public Accountant, licensed to practice in Texas. From 1971 through
1977 Mr. Marshall was employed at Coopers & Lybrand, an international firm of
Certified Public Accountants, which he served in various capacities including
general practice manager of its Oklahoma City office. Mr. Marshall was
self-employed from 1977 to 1982 as a practicing Certified Public Accountant and
as a corporate financial consultant and since 1982 has been President and Chief
Executive Officer of Settlers Capital Corporation, an Oklahoma corporation which
specializes in assisting companies in the placement of private and public debt
and equity finance transactions. Additionally, from 1981 through 1988, Mr.
Marshall was the President of Settlers Energy Corporation, an Oklahoma
corporation, which specialized in purchasing, managing and liquidation of
secured oil and gas loans of distressed financial institutions.
Mr. Marshall has eighteen years experience as a participating investor and
originator of various secured commercial lending transactions and has more than
fifteen years experience in structuring, monitoring, management and liquidation
of secured lending transactions. Mr. Marshall has since early 1994 devoted
substantially all of his time to the automobile finance business.
EMPLOYEES AND CONSULTANTS
Mr. Robert P. Billy, age 50, has been on the Board of Directors of USAAC
for two years. Mr. Billy joined USAAC on a full-time basis in September 1997.
Mr. Billy was formerly executive vice president of Metro Bank, National
Association, located in Oklahoma City, Oklahoma. Mr. Billy has previously been a
banker for more than 20 years and has previously been the senior bank lending
officer for various new and used automobile dealerships and for the largest used
automobile auction in the State of Oklahoma. Mr. Billy assists USAAC and the
Company with developing plans for portfolio credit management and assists in the
selection process for determining eligible automobile dealerships for
participation in the USAAC automobile finance programs and in the credit
screening of Contracts to be purchased by the Company. Mr. Billy holds a
Bachelor of Business Administration in Management and Finance from Central State
University in Edmond, Oklahoma, and has attended various advanced banking and
credit management schools.
Mr. David B. Christofferson, age 49, serves as corporate financial and
legal consultant to USAAC and the Company. Mr. Christofferson is presently
Executive Vice President and General Counsel for Frontier Natural Gas
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Corporation, an over-the-counter publicly traded oil and gas company, located in
Houston, Texas. Mr. Christofferson was, from 1982-1989, Vice President and
General Counsel of Settlers Capital Corporation and was involved in assisting
with the business, corporate finance and legal planning. Mr. Christofferson has
substantial experience in structuring and monitoring secured lending
transactions, and from 1974-1981 he served as a commercial lending officer for
several Oklahoma banks. Mr. Christofferson received his Bachelors Degree in
Finance in 1971 and a Juris Doctorate in 1974 from the University of Oklahoma.
He also received a Master of Divinity Degree from Phillips University in 1985.
Mr. Christofferson will devote approximately 10% of his time to the business of
the U.S. Automobile Acceptance Corporation and the Company, and will function as
an in-house counsel, assisting with offering structure, corporate finance
matters, contract review, and financial planning.
SERVICER
U.S. Automobile Acceptance Corporation, a Texas corporation (the
"Servicer") was formed in January 1995 to begin to consolidate management and
operations of Michael R. Marshall's automobile finance activities. As of
September 30, 1997, the Servicer assets consisted principally of cash and
marketable securities of approximately $1,500,000 and its advances to affiliated
automobile finance related entities as described herein. The Servicer has no
significant liabilities and is not presently a party to any litigation. The
company changed its name from Settlers Acceptance Corporation to U.S. Automobile
Acceptance Corporation in June 1996.
U.S. Automobile Acceptance Corporation will be servicer pursuant to the
Servicing Agreement. USAAC will provide the staffing, administration and
overhead necessary to administrate and collect automobile finance contracts for
the Company. Among the specific functions USAAC will provide are accounting,
administration of collections of payments, dealer selection and supervision,
enforcement of dealer recourse agreements, and the repossession and sale of
repossessed vehicles. USAAC intends to subcontract a portion of the required
services to third parties and certain Automobile Dealers.
PRIOR ACTIVITIES OF SIMILAR BUSINESSES UNDER COMMON CONTROL
U.S. Automobile SNP-I, Inc. ("SNP-I"), formerly named U.S. Automobile
Acceptance Corporation, incorporated in 1993, had operations and activities
similar to those proposed for SNP-IV, In late 1994, SNP-I completed the sale of
a publicly registered note offering in the amount of $2,386,000. In January
1995, Michael R. Marshall acquired 100% of the common stock of SNP-I. SNP-I
became fully operational in early 1995 and had profitable finance operations
during the years ended December 31, 1995 and 1996. In accordance with the note
terms, effective January 1, 1997, SNP-I ceased purchasing additional contracts
and began retaining all net collections from its contracts to pay off its
investor notes. SNP-I began redeeming all its outstanding notes payable in
November 1997. SNP-I has incurred nominal operating losses during the note
redemption period. SNP-I incurred credit losses averaging approximately 4%
annually. The company changed its name from U.S. Automobile Acceptance
Corporation to U.S. Automobile Acceptance SNP-I, Inc. in May 1996.
In June 1995, U.S. Automobile Acceptance 1995-I, Inc. ("USAA 1995-I"), a
Texas corporation, commenced an offering of $9,900,000 of publicly registered
secured promissory notes due December 31, 1999. In September 1995, USAA 1995-I
exceeded the minimum subscription escrow requirement of $500,000 and began its
contract purchasing activities. The note offering continued until it was fully
subscribed in August 1996. The initial contract purchasing activities of USAA
1995-I were completed in early 1997. As of September 30, 1997, USAA 1995-I had
purchased approximately 1400 automobile finance contracts with aggregate
balances of approximately $9,000,000. USAA 1995-I incurred approximately
$300,000 in initial losses from finance operations during the period from
September 1995 through December 31, 1996. The initial losses were incurred
during the "development stage" of SNP-III and resulted substantially from
payment of interest on investor notes prior to purchase of interest-yielding
finance contracts from automobile dealers. The finance operations became
profitable after completion of the initial finance contract portfolio purchases
in early 1997. Net finance income of USAA 1995-I during the nine months ended
September 30, 1997 was approximately $250,000. Credit losses in 1996 and 1997
have approximated 3% annually.
U.S. Automobile Acceptance SNP-III, Inc. ("SNP-III") was incorporated in
June 1996 as a Texas corporation. SNP-III filed a Registration Statement in 1996
with the Securities and Exchange Commission and various state securities
agencies with respect to its offering of up to $24,000,000 of 11% publicly
registered Promissory Notes due December 31, 2001. The offering became effective
in late 1996. As of January 1, 1998,
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the note offering is in process and is expected to continue through early to mid
1998. SNP-III incurred initial operating losses of approximately $340,000
during the period from November 1996 through September 30, 1997, which resulted
substantially from payment of interest on investor notes prior to purchase of
interest-yielding finance contracts from automobile dealers. This is referred to
as negative interest spread. SNP-III is presently considered to be in the
"development stage" as substantially all of its efforts have been expended in
establishing the new business, raising capital and purchasing initial finance
contracts. The SNP-III business plan projects raising $2 million dollars of
investor note funds through the first few months of 1998 and projects purchasing
$2 million per month of automobile finance contracts. SNP-III expects to incur
continued negative interest spread until the initial purchase of the finance
contract portfolio is substantially completed. Accordingly, SNP-III expects
finance operations will become profitable in the third quarter of 1998. As of
December 15, 1997 SNP-III had received note subscriptions totaling approximately
$18,000,000 and had purchased contracts with aggregate balance receivables
totaling approximately $12,000,000. SNP-III had incurred only nominal credit
losses through December 31, 1997.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In addition to owning 100% of the Company's Common Stock, Mr. Marshall owns
all of the outstanding common stock of USAAC, SNP-I, USAA 1995-I, and SNP-III.
Operations and activities of SNP-I, USAA 1995-I, and SNP-III are similar to the
planned activities and operations of the Company.
The Company, SNP-I, USAA 1995-I, SNP-III, and USAAC will have conflicts of
interest in allocating management time, services, overhead and functions.
Management of the Company intends to resolve any such conflicts in a manner that
is fair and equitable to the Company, but there can be no assurance that any
particular conflict may not be resolved in a manner that adversely affects
Noteholders. Management of the Company will endeavor to ensure that it has
sufficient staff personnel to be fully capable of discharging its
responsibilities to all affiliated entities, but there can be no assurance that
such personnel will be available. Although management has established a policy
for apportioning business opportunities on a pro rata basis among affiliates,
the risk exists that an entity other than the Company will receive more
favorable treatment with respect to business opportunities, including the
purchase of Contracts. If an insufficient supply of eligible Contracts is
available for purchase, there can be no assurances that the Company will be able
to keep its assets so invested, which may result in lower rates of return to the
investors and/or early redemption of the Notes. See "Risk Factors -Conflicts of
Interest."
There are no family relationships among any of the directors and executive
officers of the Company. Except as indicated herein, none of the Company's
directors hold directorships in any company with a class of securities
registered pursuant to Section 12 of the Exchange Act or subject to the
requirements of Section 15(d) of the Exchange Act or any company registered as
an investment company under the Investment Company Act of 1940.
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION
GENERAL
As of the date of this Prospectus, the Company has had no operating
history. The net proceeds of the sale of the Notes will be employed to purchase
the Contracts. While the Notes remain outstanding, the Company will not engage
in any business other than the purchase, collection and servicing of the
Contracts (including repossession and resale of the vehicle collateral).
The Company's use of the net collection proceeds from the Contracts will be
restricted to payments on the Notes and to payments of Allowed Expenses and
purchases of additional eligible Contracts.
CAPITAL RESOURCES AND LIQUIDITY
The Company's primary sources of funds for payment of Interest on the Notes
will be proceeds from the Contracts and any income on the reinvestment of such
proceeds. The Company does not have, nor is it expected to have in the future,
any significant source of capital for payment of Interest on the Notes and the
expenses incurred by it other than proceeds from the Contracts and any income
from reinvestment of such proceeds. Payment of the principal or Interest on the
Notes is not guaranteed by any other person or entity. Nevertheless, management
of the Company believes that the Company will realize sufficient proceeds from
the foregoing sources to pay all installments of Interest when due on the Notes.
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INDENTURE OF TRUST PROVISIONS
The following summaries describe certain provisions of the Indenture. The
summaries do not purport to be complete and are subject to, and qualified in
their entirety by reference to, the provisions of the Indenture, and where
particular provisions or terms used in the Indenture are referred to, the actual
provisions are incorporated by reference as part of such summaries.
An Indenture of Trust will be entered into between the Company and the
Trustee, Chase Bank of Texas, for the benefit of Noteholders.
The Company is obligated to pay the fees and expenses of the Trustee
relating to the Notes. To secure the Company's payment of such fees and
expenses, the Trustee has a lien prior to the Notes on the Trust Estate. The
Trustee will also act as "escrow agent" to hold subscription proceeds until a
minimum of $100,000 in Notes are sold. The Trustee will accept title to the
Security Agreement on behalf of the Noteholders. A description of the Indenture
of Trust is set forth below. The duties of the Trustee are to hold the Security
Agreement, to perform certain obligations in the event of a default in the
payment of the principal and Interest on the Notes, and to execute and deliver
to the Company partial or full satisfaction of the Security Agreement upon
partial or full repayment of the Notes.
The Company shall file with the Trustee within 15 days after it files them
with the SEC copies of the annual reports and of the information, documents, and
other reports (or copies of such portions of any of the foregoing as the SEC may
by rules and regulations prescribe). The Company also shall comply with the
other provisions of TIA by filing annually a certificate of compliance with the
Trustee. Copies of any reports filed are available upon request to Noteholders.
No fees will be charged in excess of the Company's out-of-pocket expenses in
providing such reports.
The following constitute Events of Default under the Indenture of Trust:
(1) the Company fails to pay Interest payments on the Notes when due;
(2) the Company fails to pay principal of any Notes when due;
(3) the Company fails to comply with any of its other agreements in the
Notes, the Security Documents, or the Indenture and the default
continues for the period and after the notice specified below;
(4) the Company, pursuant to or within the meaning of any Bankruptcy Law:
(a) commences a voluntary case,
(b) consents to the entry of an order for relief against it in any
involuntary case,
(c) consents to the appointment of a Receiver of it or for any
substantial part of its property,
(d) makes a general assignment for the benefit of its creditors, or
(e) fails generally to pay its debts as they become due; or
(5) a court of competent jurisdiction enters an order or decree under any
Bankruptcy Law that:
(a) is for relief against the Company in an involuntary case,
(b) appoints a Receiver of the Company or for any substantial part of
its property, or
(c) orders the liquidation of the Company,
and the order or decree remains unstayed and in effect for 90 days.
The term "Bankruptcy Law" means Title 11, United States Code, or any
similar federal or state law for the relief of debtors. The term "Receiver"
means any receiver, trustee, assignee, liquidator, or similar official under any
Bankruptcy Law.
A default under section (3) above is not an Event of Default until the
Trustee or the Holders of at least a majority in principal amount of the Notes
notify the Company of the default and the Company does not cure the default
within 90 days after receipt of the notice. The notice must specify the default,
demand that it be remedied, and state that the notice is a "Notice of Default."
If an Event of Default occurs and is continuing, the Trustee may, at the
direction of Holders of at least twenty-five percent (25%) in principal amount
of the Notes by written notice to the Company, declare the principal
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of and accrued interest on all the Notes to be due and payable immediately.
After a declaration such principal and Interest shall be due and payable
immediately.
If an Event of Default occurs and is continuing, the Trustee may pursue any
available remedy by proceeding at law or in equity to collect the payment of
principal and Interest on the Notes or to enforce the performance of any
provision of the Notes, the Security Documents or the Indenture. Notwithstanding
anything to the contrary in the Indenture, the Trustee is required to proceed
against and liquidate all Collateral before looking to any other assets of the
Debtor.
The Holders of not less than seventy-five percent (75%) in Notes at the
time outstanding may consent on behalf of the holders of all such Notes to the
postponement of any Interest payment for a period not exceeding three years from
its due date. The Holders of a majority of the Notes may consent to the waiver
of any past default and its consequences, except a default in payment of
principal and Interest or any other waiver prohibited under the terms of the
Indenture.
The Holders of a majority in principal amount of the Notes may direct the
time, method, and place of conducting any proceeding for any remedy available to
the Trustee or exercising any trust or power conferred on it. The Trustee,
however, may refuse to follow any direction that conflicts with law or this
Indenture, that is unduly prejudicial to the rights of other Noteholders, or
that may subject the Trustee to personal liability.
If the Trustee collects any money subsequent to an Event of Default, it
shall pay out the money in the following order:
First: to the Trustee for amounts due;
Second: to the payment of Allowed Expenses (except in an Event of Default,
payments of Allowed Expenses to affiliates will be subordinated to
the payment of principal and Interest to Noteholders);
Third: to Noteholders for amounts due and unpaid on the Notes for
Interest, then principal, ratably, without preference or priority
of any kind, according to the amounts due and payable on the Notes
for principal and Interest; and
Fourth: to the Company and USAAC as a payment of amounts in excess of
Trustee fees and costs, Allowed Expenses, and Interest and
principal due on the Notes.
The Company may amend or supplement the Indenture or the Notes without
notice to or consent of any Noteholder to cure any ambiguity, omission, defect,
or inconsistency, or to make any change that does not adversely affect the
rights of any Noteholder.
The Company may amend or supplement the Indenture, the Security Documents,
or the Notes without notice to any Noteholder but with the written consent of
the Holders of not less than a majority in principal amount of the Notes. The
Holders of a majority in principal amount of the notes may waive compliance by
the Company with any provision of this Indenture, the Security Documents, or the
Notes without notice to any Noteholder. Without the consent of each Noteholder
affected, however, an amendment, supplement, or waiver, may not:
(1) reduce the amount of Notes whose Holders must consent to an amendment,
supplement or waiver;
(2) reduce the rate or extend the time for payment of Interest on any
Note;
(3) reduce the principal of or extend the fixed maturity of any Note;
(4) make any Note payable in money other than that stated in the Note;
(5) waive a default on payment of principal or of Interest on any Note; or
(6) impair the right to institute suits to enforce payments due on any
Note on or after the respective due dates.
The Company shall furnish to the Trustee a certificate or opinion of an
appraiser or other expert as to the fair value of any property or securities to
be released from the lien of the Security Documents, which certificate or
opinion shall state that in the opinion of the person making the same the
proposed release will not impair the security under the security documents in
contravention of the provisions thereof, and requiring further that such
certificate or opinion shall be made by an independent appraiser, or other
expert, if the fair value such property or securities
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27
and of all other property or securities released since the commencement of the
then current calendar year, as set forth in the certificates or opinions
required by the Indenture, is 40% or more of the aggregate principal amount of
the Notes at the time outstanding; but such a certificate or opinion of an
independent appraiser or other expert shall not be required in the case of any
release of property or securities, if the fair value thereof as set forth in the
certificate or opinion required by this paragraph is less than $25,000 or less
than 1% of the aggregate principal amount of the Notes at the time outstanding.
The Trustee may resign by so notifying the Company. The Holders of a
majority in principal amount of the Notes may remove the Trustee by so notifying
the removed Trustee and may appoint a successor Trustee with the Company's
consent. The Company may remove the Trustee if:
(a) the Trustee fails to comply with certain minimum capital requirements;
(b) the Trustee is adjudged a bankrupt or an insolvent;
(c) a receiver or other public officer takes charge of the Trustee or its
property;
(d) the Trustee otherwise becomes incapable of acting; or
(e) the Trustee is sold or otherwise liquidates.
Within ten (10) days of the mailing of monthly Interest payments to the
Noteholders, the Company shall deliver to the Trustee an Officer's Certificate
stating that such payment has been made. The same procedure shall be followed
with respect to the payment of the principal on the Notes. If the Company fails
to make all or a portion of any or all Interest or principal payments on the
Notes when due, the Company shall deliver a notice to the Trustee and to each
Noteholder within ten (10) days, specifying with instructions the steps that
need to be taken by the Noteholder under this Indenture, if any, to declare an
Event of Default hereunder and the consequences of not taking such steps. Upon
the receipt by the Trustee of an Officer's Certificate that any Notes have been
paid in full and in compliance with the requirements of TIA Sec. 314(d), the
Trustee shall execute and deliver to the Company a partial satisfaction of the
Security Documents in recordable form furnished to it by the Company, which the
Company may record in the Public Records. Upon such delivery to the Trustee of
an Officer's Certificate that all Notes have been paid in full and in compliance
with the requirements of TIA Sec. 314(d) (together with all accrued Interest),
the Trustee shall execute and deliver to the Company a full satisfaction of the
Security Documents to the extent furnished to it by the Company, and the Trustee
and the Company shall be relieved of all further obligations.
CERTAIN LEGAL ASPECTS OF THE CONTRACTS
GENERAL
The Contracts are "chattel paper" as defined in the Uniform Commercial Code
(the "UCC"). Pursuant to the UCC, a security interest in chattel paper may be
perfected by taking possession of the chattel paper or by the filing of a UCC
financing statement with the Secretary of State of the state in which a
corporate debtor's principal place of business is located, which in the case of
the Company is the Secretary of State of Oklahoma.
Upon any purchase of Contracts by the Company, the original Contracts and
related title documents for the Financed Vehicles will be delivered to the
Company. Upon its purchase, each Contract will be physically marked to indicate
the security interest therein of the Company. In addition, a UCC financing
statement will be filed in the appropriate public office to perfect by filing
and giving notice of the Company's security interest in the Contracts and all
proceeds therefrom.
SECURITY INTERESTS IN FINANCED VEHICLES
The Company expects that a significant portion of the Contracts will be
originated in Oklahoma and Texas. Under the UCC as adopted in Oklahoma and Texas
and most other states, retail installment sale contracts such as the Contracts
constitute security agreements for personal property and contain grants of
security interests in the Financed Vehicles.
Perfection of security interests in the Financed Vehicles is generally
governed by the motor vehicle registration laws of the state in which the
vehicle is located. In Oklahoma and Texas and in many other states, a security
interest in a motor vehicle is perfected by notation of the secured party's lien
on the vehicle's certificate of title.
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Upon the purchase of the Contracts, the originating Dealers are required to
assign the Contracts (and the security interests arising thereunder in the
Financed Vehicles) to the Company. The originating Dealers will also provide
evidence that proper applications for certificates of title have been made to
ensure that the Company will be named as the lienholder on the certificates of
title relating to the financed vehicles.
Under the laws of Texas and many other states, liens for repairs performed
on a motor vehicle and liens for certain unpaid taxes take priority over even a
perfected security interest in a vehicle. The Internal Revenue Code of 1986 also
grants priority to certain federal tax liens over the lien of a secured party.
Certain state and federal laws permit the confiscation of motor vehicles under
certain circumstances if used in unlawful activities, which may result in the
loss of a secured party's perfected security interest in the confiscated motor
vehicle. Upon the purchase of each Contract, the Dealer is required to warrant
that the Contract creates a valid, subsisting and enforceable first priority
security interest in favor of the Company in the Financed Vehicle. However,
liens for repairs or taxes, or the confiscation of a Financed Vehicle, could
arise or occur at any time during the term of a Contract. No notice will be
given to the Company in the event such a lien arises or confiscation occurs.
If the owner of a Financed Vehicle relocates to another state, under the
laws of most states the perfected security interest in the Financed Vehicle
would continue for four months after such relocation and thereafter, in most
instances, until the owner re-registers the Financed Vehicle in such state.
Almost all states generally require surrender of a certificate of title to
re-register a titled vehicle. Therefore, the Company must surrender possession,
if it holds the certificate of title to such Financed Vehicle, before the
Financed Vehicle owner may effect the re-registration. In addition, the Company
should receive, absent clerical errors or fraud, notice of surrender of the
certificate of title because the Company will be listed as lienholder on its
face. Accordingly, the Company will have notice and the opportunity to
re-perfect its security interest in the Financed Vehicle in the state of
relocation. If the Financed Vehicle owner moves to one of the few states which
does not require surrender of a certificate of title for registration of a motor
vehicle, re-registration could defeat perfection. In the ordinary course of
servicing the Contracts, the Servicer or the Company takes steps to effect such
re-perfection upon receipt of notice of re-registration or other information
from the Obligor as to relocation. Similarly, when an Obligor under a Contract
sells a Financed Vehicle, the Company must surrender possession of the
certificate of title or the Company will receive notice as a result of its lien
noted thereon. Accordingly, the Company will have an opportunity to require
satisfaction of the related Contact before release of the lien.
REPOSSESSION
In the event of default by an Obligor on a Contract, the holder of the
Contract has all the remedies of a secured party under the UCC. The UCC remedies
of a secured party include the right to repossession by self-help means, unless
such means would constitute a breach of the peace. Unless the Obligor under a
Contract voluntarily surrenders a vehicle, self-help repossession, by an
individual independent repossession specialist engaged by the Servicer,
subcontract Servicer or the Company, is the method presently anticipated to be
employed when an Obligor defaults. Self-help repossession is accomplished by
retaking possession of the Financed Vehicle. If the Obligor objects or raises a
defense to repossession, or if applicable state law so requires, a court order
must be obtained from the appropriate state court and repossess the vehicle in
accordance with that order.
NOTICE OF SALE; REDEMPTION RIGHTS
In the event of default by the Obligor, some jurisdictions require that the
Obligor be notified of the default and be given a time period within which the
Obligor may cure the default prior to repossession. Generally, this right of
reinstatement may be exercised on a limited number of occasions in any one-year
period.
In most jurisdictions, the UCC and other state laws require the secured
party to provide the Obligor with reasonable notice of the date, time and place
of any public sale or the date after which any private sale of the collateral
may be held. Unless the Obligor waives his rights after default, the Obligor has
the right to redeem the collateral prior to actual sale by paying the secured
party the unpaid installments of the Contract (less any required discount for
prepayment) plus reasonable expenses for repossessing, holding and preparing the
collateral for disposition and arranging for this sale, plus in some
jurisdictions, reasonable attorneys' fees, or, in some states, by payment of
delinquent installments. It is presently anticipated that repossessed vehicles
will generally be resold by the Servicer or the Company, its participating
dealer network or through wholesale automobile networks or auctions which are
attended principally by dealers.
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29
DEFICIENCY JUDGMENTS AND EXCESS PROCEEDS
The Servicer or the Company will apply the proceeds of resale of the
repossessed vehicles first to reimburse itself for its expenses of resale and
repossession and then to the satisfaction of the obligations of the Obligor on
the Contract. While some states impose prohibitions or limitations on deficiency
judgments if the net proceeds from resale do not cover the full amount of the
Contract obligations, some states allow a deficiency judgment to be sought. A
deficiency judgment is a personal judgment against the Obligor for the
difference between the amount of the obligations of the Obligor and the net
proceeds from resale. A defaulting Obligor on a Contract typically lacks capital
or income following the repossession of the Obligor's Financed Vehicle.
Therefore, the Servicer or the Company may determine in its discretion that
pursuit of a deficiency judgment is not an appropriate or economically viable
remedy or may settle at a significant discount any deficiency judgment that it
does obtain.
Certain statutory provisions, including federal and state bankruptcy and
insolvency laws, may limit or delay the ability of the Company or the Servicer
to repossess and resell the Financed Vehicles or enforce a deficiency judgment.
In the event that deficiency judgments are not obtained, are not satisfied, are
satisfied at a discount or are discharged, in whole or in part, in bankruptcy
proceedings, including bankruptcy proceedings under Chapter 13 of the Bankruptcy
Reform Act of 1978, as amended, the loss will be borne by the Company and may
adversely affect the ability of the Company to repay the Notes.
Occasionally, after resale of a vehicle and payment of all expenses and
obligations, there is a surplus of funds. In that case, the UCC requires the
secured party to remit the surplus to the former Obligor.
CONSUMER PROTECTION LAWS
Numerous federal and state consumer protection laws and related regulations
impose substantial requirements upon dealers and services involved in consumer
finance. These laws include, but are not limited to, the Trust-In-Lending Act,
the Equal Credit Opportunity Act, the Federal Trade Commission Act, the Fair
Credit Billing Act, the Fair Credit Reporting Act, the Fair Debt Collection
Practices Act, the Magnuson-Moss Warranty Act, the Federal Reserve Board's
Regulations B and Z, state adaptations of the National Consumer Act and of the
Uniform Consumer Credit Code, state motor vehicle retail installment sales acts,
retail installment sales acts, and other similar laws. Also, state laws impose
finance charge ceilings and other restrictions on consumer transactions and
require contract disclosure in addition to those required under federal law.
These requirements impose specific statutory liabilities upon creditors who fail
to comply with their provisions. In some cases, this liability could affect an
assignee's ability to enforce consumer finance contracts such as the Contracts.
The so-called "Holder-in-Due-Course" Rule of the Federal Trade Commission
(the "FTC Rule"), the provisions of which are generally duplicated by the
Uniform Consumer Credit Code, other state statutes, or the common law in certain
states, is intended to defeat the ability of the transferor of a consumer credit
contract (such as the Contracts), which transferor is the seller of the goods
that gave rise to the transaction, to transfer such contract free of notice of
claims by the debtor thereunder. The effect of this rule is to subject the
assignee of such a contract to all claims and defenses which the Obligor under
the contract could assert against the seller of the goods. Most of the Contracts
will be subject to the requirements of the FTC Rule. Accordingly, the Company,
as holder of the Contracts, may be subject to any claims or defenses that the
purchaser of the Financed Vehicle may assert against the seller of the Financed
Vehicle. Such claims are limited to a maximum liability equal to the amounts
paid by the Obligor on the Contract. The Obligor, however, may also assert the
rule to offset remaining amounts due on the Contract as a defense against any
claim brought by the Company against such Obligor.
Under most state motor vehicle dealer licensing laws, sellers of motor
vehicles are required to be licensed to sell motor vehicles at retail sale.
Furthermore, federal odometer regulations promulgated under the Motor Vehicle
Information and Cost Savings Act require that all sellers of new and used
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 an
odometer disclosure statement was not provided to the purchaser of a Financed
Vehicle, the Obligor may be able to assert a defense against the seller of the
vehicle.
Courts have imposed general equitable principals on secured parties
pursuing repossession of collateral or litigation involving deficiency balances.
These equitable principals may have the effect of relieving an Obligor from some
or all of the legal consequences of a default.
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30
In several cases, the obligors have asserted that the self-help remedies of
secured parties under the UCC and related laws violate the due process
protections provided under the 14th Amendment to the Constitution of the United
States. Courts have generally upheld the notice provisions of the UCC and
related laws as reasonable or have found that the repossession and resale by the
creditors do not involve sufficient state action to afford constitutional
protection to consumers.
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 secured party
to realize upon collateral or enforce a deficiency judgment. For example, in a
Chapter 13 proceeding under the federal bankruptcy law, a court may prevent a
lender from repossessing a motor vehicle, and, as part of the rehabilitation
plan, reduce the amount of the secured indebtedness to the market value of the
motor vehicle at the time of bankruptcy (as determined by the court), leaving
the party providing financing 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.
TRANSFERS OF VEHICLES
The terms of the Contracts prohibit the sale or transfer of the Financed
Vehicle securing a Contract without the secured party's consent and allow for
the acceleration of the maturity of the Contract upon a sale or transfer without
its consent. In most circumstances, the Company will not consent to a sale or
transfer of a Financed Vehicle by an Obligor unless the Obligor prepays the
Contract.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following discussion of certain federal income tax considerations
relating to an investment in the Notes is based upon the opinion of Tyson
Hopkins, independent certified public accountant.
INTEREST ON NOTES
Noteholders who report their income on the cash method of accounting for
federal income tax purposes are required to include interest in their gross
income in the taxable year in which it is received. Accrued method taxpayers are
generally required to include the interest in their gross income in the taxable
year in which the interest accrues.
PURCHASE OF NOTES BY EXEMPT PLANS AND OTHER EXEMPT ORGANIZATIONS
Generally, trusts forming part of a pension, profit sharing, or Keogh plan
meeting the requirements of Section 401(a) of the Code (all collectively
referred to as "Exempt Plans"), and individual retirement accounts and trusts
("IRAs and IRTs"), as well as certain charitable and other organizations
described in Code Section 501(c) are exempt from federal income tax. However,
this exemption does not apply where "unrelated business taxable income" is
derived by the Exempt Plan, IRAs, IRTs and other exempt organizations from the
conduct of any trade or business which is not substantially related to the
exempt function of the entity. If Exempt Plans, IRAs, IRTs and other exempt
organizations receive unrelated business taxable income, the Exempt Plans, IRAs,
IRTs and other exempt organizations will be subject to a tax imposed by Section
511 of the Code on the portion of their income constituting unrelated business
taxable income. As Exempt Plan, IRA, IRT or other exempt organizations will also
be subject to alternative minimum tax on the unrelated business taxable income.
Unrelated business taxable income is defined as the gross income derived by
an Exempt Plan, IRA, IRT, or other exempt organization from any unrelated trade
or business regularly carried on by such entity, less allowed deductions
directly connected with the carrying on of such trade or business. However,
certain types of income, including interest, dividends, royalties, gains or
losses from the sale or exchange of property (other than property held as
inventory or held primarily for sale to customers in the ordinary course of
trade or business) or rental payments from real property are excluded from the
unrelated business taxable income computation.
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31
If an excluded category of income constitutes "unrelated debt-financed
income" then such income is not excluded from the computation of unrelated
business taxable income. Unrelated debt-financed income is the percentage of
gross income derived from or on account of property with respect to which there
is "acquisition indebtedness" equal to the ratio which the average acquisition
indebtedness with respect to the property bears to the acquisition basis of such
property. A portion of the deductions which are directly connected with the
property are allowed in the computation of unrelated debt-financed income.
Generally, acquisition indebtedness is indebtedness incurred directly or
indirectly in connection with the acquisition of property as well as
indebtedness the incurrence of which was reasonably foreseeable at the time of
the acquisition of the property. Therefore, if an Exempt Plan, IRA, IRT or other
exempt organization borrows funds to acquire the Notes, the Interest received on
such Notes may be reclassified as unrelated business taxable income on which the
Exempt Plan, IRA, IRT or other exempt organization may be taxed.
In considering an investment in the Notes of the Company of a portion of
the assets of an Exempt Plan, IRA or IRT, a fiduciary should consider: (i)
whether the investment is in accordance with the documents and instruments
governing the Exempt Plan, IRA or IRT, (ii) whether the investment satisfies the
diversification requirements of Section 404(a)(1)(C) of the Employee Retirement
Income Security Act of 1974 ("ERISA"), (iii) whether the investment is prudent,
because there may not be a market created in which he can sell or otherwise
dispose of the Notes or because the Notes are not adequately secured, (iv)
whether the assets of the Company are considered to be "plan assets" under
Department of Labor Regulation 2510.3 - 101, and (v) whether the income would
be unrelated business taxable income because of the use of acquisition
indebtedness as a source of the funds used to acquire the Notes.
EXEMPT PLANS, IRAS, IRTS AND OTHER EXEMPT ORGANIZATIONS ARE STRONGLY URGED
TO CONSULT THEIR TAX ADVISORS RELATIVE TO THE POSSIBILITY OF UNRELATED BUSINESS
TAXABLE INCOME AND ITS CONSEQUENCES TO THEIR SPECIFIC CIRCUMSTANCES PRIOR TO AN
INVESTMENT IN THE NOTES OF THE COMPANY.
THIS SUMMARY IS OF THE TAX LAWS UNDER THE INTERNAL REVENUE CODE AND DOES
NOT INCLUDE A DISCUSSION OF ANY RULES OR REGULATIONS ENACTED OR PROMULGATED BY
THE DEPARTMENT OF LABOR UNDER ERISA. ANY INVESTOR SUBJECT TO ERISA OR DEPARTMENT
OF LABOR REGULATIONS RELATING TO EXEMPT PLANS SHOULD CONSULT ITS ADVISORS
REGARDING AN INVESTMENT IN THE NOTES.
EXPERTS
The financial statements of the Company included in this Prospectus have
been audited by Tyson Hopkins, Oklahoma City, Oklahoma, independent certified
public accountant, whose report thereon appears elsewhere herein, and have been
so included in reliance upon the report and authority of such firm as an expert
in auditing and accounting. Tyson Hopkins has also delivered his opinion to the
Company as to the federal income tax matters discussed under "Certain Federal
Income Tax Considerations."
LEGAL MATTERS
Certain matters with respect to the validity of the Notes have been passed
upon the Company by Amy Waters, Attorney at Law, Waxahachie, Texas. The
discussion of the federal income tax considerations relating to the Notes has
been passed upon by Tyson Hopkins, independent certified public accountant,
Oklahoma City, Oklahoma.
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32
[TYSON HOPKINS LETTERHEAD]
INDEPENDENT AUDITOR'S REPORT
Board of Directors
U.S. Automobile Acceptance SNP-IV, Inc.
I have audited the balance sheet of U.S. Automobile Acceptance SNP-IV, Inc.
(the Company) as of January 6, 1998, and the related statement of stockholders'
equity for the period from the date of incorporation on January 2, 1998 through
January 6, 1998. These financial statements are the responsibility of the
Company's management. My responsibility is to express an opinion on these
financial statements based on my audit.
I conducted my audit in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. I believe that my audit provides a reasonable basis for my
opinion.
In my opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of U.S. Automobile Acceptance
SNP-IV, Inc. and the changes in stockholders' equity as of and for the period
ended January 6, 1998, in conformity with generally accepted accounting
principles.
/s/ TYSON HOPKINS
TYSON HOPKINS
Certified Public Accountant
Oklahoma City, Oklahoma
January 9, 1998
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33
U.S. AUTOMOBILE ACCEPTANCE SNP-IV, INC.
(a development stage enterprise)
BALANCE SHEET
As of January 6, 1998
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 50,000
OTHER ASSETS
Note offering costs 12,500
Organization costs 700
----------
TOTAL ASSETS $ 63,200
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
COMMITMENTS (Notes B and C)
LIABILITIES:
Due to affiliate $ 13,200
STOCKHOLDERS' EQUITY
Common stock - $1.00 par value,
3,000 shares authorized, 1,000
shares issued and outstanding 1,000
Paid-in capital 49,000
----------
Total stockholders' equity 50,000
----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 63,200
==========
See accompanying notes to financial statements
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34
U.S. AUTOMOBILE ACCEPTANCE SNP-IV, INC.
(a development stage enterprise)
STATEMENT OF STOCKHOLDERS' EQUITY
For the period from the date of incorporation on January 2, 1998
through January 6, 1998
Common Stock Paid-In
Shares Amount Capital Total
------ ------ ------- -----
Balance prior to
incorporation on
January 2, 1998 -0- -0- -0- -0-
January 1998, issuance
of common stock for
cash, par value $1.00,
sales price $50.00 per
share 1,000 $ 1,000 $ 49,000 $ 50,000
----- ------- -------- --------
Balances, January 6, 1998 1,000 $ 1,000 $ 49,000 $ 50,000
===== ======= ======== ========
See accompanying notes to financial statements
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35
U.S. AUTOMOBILE ACCEPTANCE SNP-IV, INC.
(a development stage enterprise)
NOTES TO FINANCIAL STATEMENTS
NOTE A - DESCRIPTION OF BUSINESS
GENERAL
U.S. Automobile Acceptance SNP-IV, Inc. (Company) was incorporated on January
2, 1998 as a Texas Corporation. The Company was formed to purchase, collect
and service retail installment sale financing contracts created by the sale of
used automobiles and light trucks. The Company intends to file a Registration
Statement with the Securities and Exchange Commission and various state
security boards with respect to its offering of up to $40,000,000 of Promissory
Notes. Upon completion of the review process of the various federal and state
regulatory authorities the Company will at that time begin the Note offering.
Thereafter, the Company will initiate its principal business operations only
after a minimum of $100,000 in Note subscriptions is received.
The Company's fiscal year will end on December 31.
DEVELOPMENT STAGE ENTERPRISE
The Company is considered to be in the "development stage" as substantially all
of its efforts have been expended in establishing the new business and planned
principal operations have not commenced. In addition, as the Company has
received no income and incurred no expenses since inception, statements of
income and cash flows are not applicable.
NOTE B - SECURED NOTE OFFERING
The Company plans to offer on a "best efforts basis" up to $40,000,000 of
Promissory Notes. The Notes will be offered through licensed broker-dealers.
The broker-dealers will be paid commissions equaling 7.0% of the proceeds of
the Note sale. Additionally, the Company will pay an additional 5% of the Note
proceeds to an affiliate, U.S. Automobile Acceptance Corporation, as
reimbursement of registration, legal, accounting, printing, marketing and other
out-of- pocket fees and expenses and allocated general and administrative
overhead relating to the offering and the organization of the Company which
will be initially borne by the affiliate and for services provided by the
affiliate in connection with the offering and organization of the Company. The
remainder of the Note sale proceeds will be used to acquire retail installment
contracts, generally at a discount, collateralized by used automobiles and
light trucks (Contracts). Investor subscription funds received are to be held
in escrow by a third-party trustee until subscriptions for $100,000 in
principal amount of the Notes have been received by the Company.
The Notes will be issued under the terms of an Indenture Agreement. The
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36
U.S. AUTOMOBILE ACCEPTANCE SNP-IV, INC.
(a development stage enterprise)
Notes will be secured by the Contracts and proceeds thereof.
Use of proceeds of Contract collections is restricted to payments on the notes,
payment of certain allowed expenses of the Company and the purchase of
additional Contracts.
NOTE C - SIGNIFICANT RISKS AND UNCERTAINTIES
Noteholders may incur risks and uncertainties including concentration of assets
since the Company is not expected to have any significant assets other than
automobile finance contracts and since most of the Company's borrowers and the
related automobile collateral are expected to be located in the states of Texas
and Oklahoma. Other risks include limited operating history of the Company,
possible decline in future availability and quality of finance contracts to be
purchased due to increased competition, possible conflicts of interest between
the Company and other affiliates with operations similar to those of the
Company.
In the event the proposed Note offering raises only the minimum amount
($100,000) or the Note offering is relatively small, certain operating expenses
will be higher in proportion to future revenues than if the offering is
substantially larger, and the Company may be unable to pay certain of these
expenses. These minimum required expenses or other unforseen expenses could
impair the economic viability of the Company.
The Company is reliant on the Servicer for all management, operations and
administrative support services, including but not limited to Contract
purchasing, general Contract collections, enforcement of various dealer
recourse agreements, collateral repossessions and all other general
administrative functions. In the event of future economic problems of the
Servicer or the Servicer is otherwise unable to properly provide the required
services, Noteholders could be adversely affected and could incur a substantial
loss of investment.
NOTE D - RELATED PARTY TRANSACTIONS
Michael R. Marshall, an individual and resident of Oklahoma, is the owner 100%
of the issued and outstanding common stock of the Company. Total consideration
for the common stock and paid-in capital contributed to the Company by its sole
stockholder is $50,000.
All Note offering and organization costs will be paid by U.S. Automobile
Acceptance Corporation (USAAC) and if the offering is successfully completed,
the Company will pay 5% of the proceeds of the Note offering to USAAC as
described in Note B. Proceeds from the offering utilized to reimburse the Note
offering and organization costs cannot exceed 5% of the offering. The Company
will only be liable for these costs if the offering is successful.
Pre-offering cost incurred as of January 6, 1998 is approximately $13,000.
These costs have been recorded as a liability and capitalized as an asset on
the balance sheet of the Company. Upon
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37
U.S. AUTOMOBILE ACCEPTANCE SNP-IV, INC.
(a development stage enterprise)
the completion of the offering, Note offering costs will be amortized over the
term of the Notes. Organization costs will be amortized over 60 months.
The Company's Contracts will be administrated, serviced and collected on behalf
of the Company by U.S. Automobile Acceptance Corporation, an affiliate of the
Company (Servicer). The Servicer intends to subcontract a portion of the
servicing of the Contracts to third parties.
The Servicer will be paid a servicing fee of $21.50 per month, per Contract. In
addition, U.S. Automobile Acceptance Corporation will be paid a one time
purchase administration fee of $125 per Contract purchased, paid monthly, and
will be paid a monthly investor administration fee of 1/12th of 1% of the
aggregate principal amount of the Notes outstanding, and 1/12th of 1% of
aggregate funds held in investment accounts.
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EXHIBIT A
U.S. AUTOMOBILE ACCEPTANCE SNP-IV, INC.
ASSET-BACKED PROMISSORY NOTE DUE DECEMBER 31, 2003
$ No.
-------------- -----------------
U.S. Automobile Acceptance SNP-IV, Inc., a Texas corporation (herein
referred to as the "Company"), for value received, hereby promises to pay to
_______________________________________________________________________ or
registered assigns, the principal sum of ________________ _____________ Dollars
on December 31, 2003 (the "Stated Maturity" of such principal), and to pay
interest (computed on the basis of the unpaid portion of said principal sum
outstanding from time to time from the date of issue), until the principal
amount of this Note is paid in full at the rate of _______ percent (___%) per
annum, which interest shall be due and payable upon the fifteenth day of each
calendar month (for such interest accruing during the prior month or months)
commencing with the first calendar month after the issuance hereof and upon the
Stated Maturity (each a "Payment Date"). Interest is calculated on the basis
of a 365-day year but is paid in 12 equal monthly installments, regardless of
the number of days in each month. The Interest rate will be established by the
Company from time to time; however, once determined, the rate of Interest
payable on this Note will remain fixed for the term of the Note.
This Note is one of a duly authorized issue of Notes of the Company,
designated as its Asset-Backed Promissory Notes Due December 31, 2003 (herein
called the "Notes"), all issued and to be issued under an Indenture (herein
called the "Indenture"), between the Company and Chase Bank of Texas (the
"Trustee", which term includes any successor Trustee under the Indenture), to
which Indenture and all indentures supplemental thereto reference is hereby
made for a statement of the respective rights thereunder of the Company, the
Trustee and the Holders of the Notes.
The principal of and interest on this Note are payable in such
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the
Company with respect to this Note shall be applied first to interest due and
payable on this Note as provided above and then to the unpaid principal of this
Note. Any installment of interest which is not paid when and as due shall bear
interest, at the lesser of fifteen percent (15%) or the maximum amount allowed
by law, from the date due to the date of payment thereof.
Monthly payment of interest shall be made by check mailed to the
person whose name appears as the Holder of this Note on the Note Register as of
the first day of the month in which such Payment Date occurs (the "Record
Date") without requiring that this Note be submitted for notation of payment.
Checks returned undelivered will be held by the Company or its designee for
payment to the person entitled thereto. Payment of the outstanding principal
of and accrued interest on this Note at the Stated Maturity or of the
Redemption Price (as hereinafter defined) payable on any Redemption Date (as
hereinafter defined) as of which this Note or any portion hereof has been
called for redemption shall be made upon presentation of this Note to the
Paying Agent appointed by the Company for such purpose.
The payment of principal and accrued interest on the Notes, when due,
is secured by the Trust Estate, which consists of, among other things, a first
security interest in specific motor vehicle retail installment contracts and
the funds in the Master Collections Accounts, the Master Operating Account, and
the Note Redemption Account (as such terms are defined in the Indenture).
If an Event of Default shall occur and be continuing with respect to
the Notes, the Notes, and all principal and unpaid accrued interest, may be
declared due and payable in the manner and with the effect provided in the
Indenture.
The Notes will be redeemed beginning after January 1, 2003, and, at
the option of the Company, may be redeemed or partially redeemed any time
during the term of the Notes on any Payment Date (the "Redemption Date"), at a
redemption price of 100% of the principal amount being redeemed (the
"Redemption Price"), together
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with accrued and unpaid interest on the unpaid principal amount thereof to the
date fixed for redemption. Notice of such redemption shall be mailed by the
Company not later than the twentieth day, and not earlier than the sixtieth
day, before the date fixed for redemption to the Holders of the Notes so to be
redeemed.
If provision is made for the redemption and payment of this Note or
any portion, this Note or such portion shall thereupon cease to bear interest
from and after the Redemption Date. In the event of redemption of any Note in
part only, a new Note or Notes for the unredeemed portion thereof shall be
issued in the name of the registered holder thereof upon surrender thereof.
The transfer of this Note may be registered on the Note Register of
the Company, upon surrender of this Note for registration of transfer at the
office or agency designated by the Company, duly endorsed by, or accompanied by
a written instrument of transfer in form satisfactory to the Company and the
Trustee duly executed by, the Holder hereof or his attorney duly authorized in
writing, and thereupon one or more new Notes of authorized denominations and
for the same aggregate principal amount will be issued to the designated
transferee or transferees.
Prior to the due presentment for registration of transfer of this
Note, the Company, the Trustee and any agent of the Company or the Trustee may
treat the person in whose name this Note is registered as the owner thereof for
all purposes, whether or not this Note be overdue, and neither the Company, the
Trustee nor any such agent shall be affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Notes under the Indenture at any
time by the Company with the consent of the Holders of Notes representing more
than 50% of the principal amount of all Notes at the time outstanding. The
Indenture also contains provisions permitting the Holders of Notes representing
specified percentages of the principal amount of the Notes at the time
outstanding, on behalf of the Holders of all the Notes, to waive compliance by
the Company with certain provisions of the Indenture and certain past defaults
under the Indenture and their consequences. Any such consent or waiver by the
Holder of this Note shall be conclusive and binding upon such Holder and upon
all future holders of this Note and of any Note issued upon the registration of
transfer hereof or in exchange hereof or in lieu hereof whether or not notation
of such consent or waiver is made upon this Note. The Indenture also permits
the Trustee to amend or waive certain terms and conditions set forth in the
Indenture without the consent of Holders of the Note issued thereunder.
The term "Company" as used in this Note includes any successor to the
Company under the Indenture.
The Notes are exchangeable for a like aggregate principal amount of a
different authorized denomination, as requested by the Holder.
This Note shall be construed in accordance with, and governed by, the
laws of the State of Texas applicable to agreements made and to be performed
therein.
IN WITNESS WHEREOF, U.S. Automobile Acceptance SNP-IV, Inc. has caused
this instrument to be duly executed under its corporate seal.
Dated:
--------------------------
U.S. AUTOMOBILE ACCEPTANCE SNP-IV,
INC., a Texas Corporation
By:
----------------------------------
Authorized Officer
[SEAL]
Attest:
--------------------------
Authorized Officer
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EXHIBIT B
INDENTURE OF TRUST
This Indenture of Trust is dated as of the ________ day of
________________, 199___, by and between U.S. AUTOMOBILE ACCEPTANCE SNP-IV,
INC. (the "Company"), and Chase Bank of Texas (the "Trustee").
Each party agrees as follows for the benefit of the other party and
for the equal and ratable benefit of the Holders of the Company's Asset-Backed
Promissory Notes due on December 31, 2003.
NOW, THEREFORE, for valuable consideration, the receipt, adequacy, and
sufficiency of which is hereby acknowledged, the parties agree as follows:
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. DEFINITIONS.
"Collateral" means the collateral as described in the Security
Documents.
"Company" means the party named as such in this Indenture until a
successor replaces it and thereafter means the successor.
"Contracts" means retail installment sales contracts backed by liens
on used automobiles and light trucks to be purchased by the Company from used
automobile dealerships.
"Default" means any event which is, or after notice or lapse of time
or both would be, an Event of Default.
"Financed Vehicles" means the used automobiles and light trucks which
are security for the Contracts.
"Holder" or "Noteholders" means the person in whose name a Note is
registered on the Registrar's books.
"Indenture" means this Indenture of Trust, as amended or supplemented
from time to time.
"Master Collections Accounts" means the bank accounts into which all
proceeds from the collection of the Contracts are to be deposited.
"Master Operating Account" means the operating account to be
maintained by the Company into which the amounts in the Master Collections
Accounts attributable to the Contracts will be directly transferred.
"Note Redemption Account" the interest-bearing account into which the
Company will deposit the net collection proceeds from the Contracts after
January 1, 2003, for payment on the Notes.
"Notes" means the Asset-Backed Promissory Notes of the Company issued
pursuant to this Indenture.
"Officer" means the Chairman of the Board, the President, any Vice
President, the Treasurer, or the Secretary of the Company.
"Officer's Certificate" means a certificate signed by an Officer or by
an Assistant Treasurer or Assistant Secretary of the Company.
"Payment Date" means the fifteenth (15th) day of each month beginning
with the first full calendar month following the issuance of a Note, and upon
maturity, that payments of interest and/or principal shall be made.
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"Redemption Date" means such Payment Date, after January 1, 2003, that
the Notes may be redeemed at the option of the Company.
"Redemption Price" means the price, equal to 100% of the principal
amount to be redeemed, to paid to Noteholders upon redemption of the Notes.
"SEC" means the Securities and Exchange Commission.
"Security Documents" means the Security Agreement which provides that
the Collateral is pledged as security for the Notes.
"Servicer" means U.S. Automobile Acceptance Corporation, a Texas
corporation, with which the Company has contracted to provide purchasing and
collecting services, or any substitute servicer with which the Company may
contract.
"Servicing Agreement" means the agreement between the Company and the
Servicer pursuant to which the Contracts will be serviced on behalf of the
Company.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Sections 77
aaa, et seq.) as in effect on the date of this Indenture.
"Trust Estate" means all of the Company's right, title and interest in
(a) the Contracts, together with all payments and instruments received with
respect thereto, (b) the Servicing Agreement, (c) the Master Collections
Accounts, the Master Operating Account, the Note Redemption Account and all
funds (including investments) therein, (d) all repossessed or returned Financed
Vehicles, and (e) all proceeds of the conversion, voluntary or involuntary, of
any of the foregoing into cash or other liquid property.
"Trust Officer" means any officer or assistant officer of the Trustee
assigned by the Trustee to administer its corporate trust matters.
"Trustee" means the party named as such in this Indenture until a
successor replaces it and thereafter means the successor.
SECTION 1.02. OTHER DEFINITIONS.
TERM DEFINED IN SECTION
---- ------------------
"Bankruptcy Law" 5.01
"Legal Holiday" 7.10
"Paying Agent" 2.03
"Registrar" 2.03
"Receiver" 5.01
SECTION 1.03. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT.
Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following meanings:
"Commission" means the SEC.
"Indenture Securities" means the Notes.
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"Indenture Security Holder" means a Noteholder.
"Indenture to be Qualified" means this Indenture.
"Indenture Trustee" or "Institutional Trustee" means the Trustee.
"Obligor" on the Indenture Securities means the Company.
All other TIA terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute, or defined by SEC rule have
the meanings assigned to them.
SECTION 1.04. RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(a) a term has the meaning assigned to it;
(b) an accounting term not otherwise defined has the meaning
assigned to it in accordance with generally accepted
accounting principles;
(c) "or" is not exclusive; and
(d) words in the singular include the plural and in the plural
include the singular.
ARTICLE 2
THE SECURITIES
SECTION 2.01. FORM AND DATING.
The Notes shall be substantially in the form of Exhibit "A" to this
Indenture. The Notes may have notations, legends, or endorsements required by
law or usage. The Company shall approve the form of the Notes and any
notation, legend, or endorsement on them. Each Note shall be dated the date of
its issuance.
SECTION 2.02. EXECUTION AND AUTHENTICATION.
An Officer shall sign and authenticate the Notes. Execution of the
Notes is permitted by the manual or facsimile signature of the obligor and
authentication may be made by manual signature. The signature shall be
conclusive evidence that the Note has been authenticated under this Indenture.
If an Officer who signed a Note no longer holds that office at a later date,
the Note shall be valid nevertheless.
The aggregate principal amount of Notes outstanding at any time may
not exceed $40,000,000. Note denominations of $1,000 or any multiple thereof
are authorized.
SECTION 2.03. REGISTRATION AND PAYMENT
Chase Bank of Texas, or the successor Trustee, shall act as Registrar
and Paying Agent for purposes of registration or transfer of the Notes and for
payment of interest and principal on the Notes. The Registrar shall keep a
register of the Notes and of their transfer and exchange. Notes shall be
presented to the Paying Agent for payment.
SECTION 2.04. NOTEHOLDER LISTS.
The Trustee shall preserve the most recent list provided to it by the
Registrar of the names and addresses of Noteholders. At the end of each month
during the offering to the end of each six months after the close of the
offering, the Registrar shall furnish to the Trustee and at such other times as
the Trustee may request in writing a
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list in such form and as of such date of the names and addresses of
Noteholders. The Trustee may conclusively rely on such list.
SECTION 2.05. REGISTRATION, TRANSFER, AND EXCHANGE.
When a Note is presented to the Registrar or a Co-registrar with a
request to register transfer, the Registrar shall register the transfer as
requested. To permit transfer and exchanges of the type provided for in
Section 6.05, an Officer shall authenticate Notes at the Registrar's request.
The Company may charge a reasonable fee for any transfer, but not for any
exchange pursuant to Section 6.05.
ARTICLE 3
TRUSTEE
SECTION 3.01. ACCEPTANCE OF TRUST.
The Trustee hereby accepts the appointment as Trustee under the terms
and conditions hereof.
SECTION 3.02. DUTIES OF TRUSTEE.
(a) Upon the occurrence of an Event of Default, the Trustee shall
obtain and hold the Collateral under the Security Documents in trust for the
benefit of the Noteholders and exercise any rights granted to it under the
Security Documents.
(b) If an Event of Default has occurred and is continuing, the
Trustee shall exercise its rights and powers and use the same degree of care
and skill in their exercise as a prudent man would exercise or use under the
circumstances in the conduct of his own affairs. Except during the continuance
of an Event of Default, the Trustee shall perform only those duties that are
specifically set forth in this Indenture and no others.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that the Trustee shall not be liable for any error of
judgment made in good faith unless it is proved that the Trustee was negligent
in ascertaining the pertinent facts.
(d) The Trustee may refuse to perform any duty or exercise any
right or power unless it receives indemnity satisfactory to it against any
loss, liability, or expense.
(e) The Trustee shall not be liable for interest on any money
received by it except as otherwise agreed with the Company.
(f) The Trustee is authorized and directed to enter into the
Security Agreements on behalf of the Noteholders solely in its capacity as
Trustee under the Indenture.
SECTION 3.03. RIGHTS OF TRUSTEE.
(a) The Trustee may rely on any document believed by it to be
genuine and to have been signed or presented by the proper person. The Trustee
need not investigate any fact or matter stated in the document.
(b) The Trustee shall not be liable for any action it takes or
omits to take in good faith in reliance on the Officer's Certificate or
opinion. The Trustee may consult with counsel and any advice or opinion of
counsel shall be full and complete protection in respect of any action taken or
not taken by it hereunder in reliance upon such advice or opinion of counsel.
(c) The Trustee may act through agents and attorneys and shall not
be responsible for the misconduct or negligence of any agent or attorney
appointed with due care.
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(d) The Trustee shall not be liable for any action it takes or
omits to take in good faith which it believes to be authorized or within its
rights or powers.
SECTION 3.04. TRUSTEE'S DISCLAIMER.
The Trustee makes no representation as to the validity or adequacy of
this Indenture, the Security Documents or the Notes. The recitals contained
herein and in the Notes shall be taken as statements of the Company and the
Trustee assumes no responsibility for their correctness. The Trustee shall not
be accountable for the Company's use of the proceeds from the Notes, and it
shall not be responsible for any statement in the Notes or in any prospectus
used in the sale of the Notes.
SECTION 3.05. INDIVIDUAL RIGHTS OF TRUSTEE, ETC.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Notes and may otherwise deal with the Company with the same
rights it would have if it were not Trustee. Any Paying Agent, Registrar, or
Co-registrar may do the same with like rights.
SECTION 3.06. REPORTS BY TRUSTEE TO HOLDERS.
If required under the provisions of TIA Section 313(a), within 60 days
after each December 31st beginning with the December 31st following the date of
this Indenture, the Trustee shall provide to the Noteholders specified in TIA
Section 313(c) a brief report dated as of such December 31st that complies with
TIA Section 313(a). The Trustee also shall comply with TIA Section 313(b).
Within the time period provided for in TIA Section 313(b), the Trustee shall
provide to those Noteholders specified in TIA Section 313(c) the brief reports
required by TIA Section 313(b).
SECTION 3.07. COMPENSATION AND INDEMNITY.
The Company agrees:
(a) to pay the Trustee from time to time, in its capacity as
Trustee, Registrar and Paying Agent, reasonable compensation for all services
rendered by it hereunder, including extraordinary services such as default
administration (which compensation shall not be limited by a provision of law
in regard to the compensation of the trustee of an express trust);
(b) to reimburse the Trustee, in its capacity as Trustee,
Registrar and Paying Agent, upon its request for all reasonable expenses,
disbursements and advances incurred or made by the Trustee (including the
reasonable compensation, disbursements and expenses of its agents and counsel),
except any such expenses or disbursements as may be attributable to its
negligence or bad faith; and
(c) to indemnify the Trustee, in its capacity as Trustee,
Registrar and Paying Agent, for, and to hold it harmless against any loss,
cost, liability, claim or expense incurred without negligence or bad faith on
its part related to or arising out of the acceptance of and administration of
the duties of the Trustee, in its capacity as Trustee, Registrar and Paying
Agent, hereunder, including, without limitation, the costs and expenses of
defending itself against any claim or liability in connection with the exercise
or performance of any of its powers or duties hereunder. The Company shall
reimburse the Trustee upon its request for any legal expenses in connection
with the foregoing.
To secure the Company's payment obligations in this Section, the
Trustee shall have a lien prior to the Notes on all money or property of the
Company. The obligations of the Company in this Section shall survive the
discharge of this Indenture or resignation or removal of the Trustee.
When the Trustee incurs expenses or renders services after the
occurrence of an Event of Default, the expenses and the compensation for
services are intended to constitute expenses of administration under any
Bankruptcy Law.
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SECTION 3.08. REPLACEMENT OF TRUSTEE.
The Trustee, in its capacity as Trustee, Registrar and Paying Agent,
may resign by so notifying the Company. The Holders of a majority in principal
amount of the Notes may remove the Trustee, in its capacity as Trustee,
Registrar and Paying Agent, by so notifying the removed Trustee and may appoint
a successor Trustee, Registrar, and/or Paying Agent with the Company's consent.
The Company may remove the Trustee if:
(a) the Trustee fails to comply with Section 3.10;
(b) the Trustee is adjudged a bankrupt or an insolvent;
(c) a receiver or other public officer takes charge of the Trustee
or its property;
(d) the Trustee otherwise becomes incapable of acting; or
(e) the Trustee is sold or otherwise liquidates.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee, Registrar or Paying Agent for any reason, the Company shall
promptly appoint a successor Trustee, Registrar or Paying Agent.
A successor Trustee, Registrar or Paying Agent shall deliver a written
acceptance of its appointment to the retiring Trustee, Registrar or Paying
Agent and to the Company. Immediately after that, the retiring Trustee,
Registrar or Paying Agent shall transfer all property held by it as Trustee,
Registrar or Paying Agent to the successor Trustee, Registrar or Paying Agent,
the resignation or removal of the retiring Trustee, Registrar or Paying Agent
shall become effective, and the successor Trustee, Registrar or Paying Agent
shall have the rights, powers, and duties of the Trustee, Registrar or Paying
Agent under this Indenture. A successor Trustee, Registrar or Paying Agent
shall give notice of its succession to each Noteholder as provided in Section
7.02.
If a successor Trustee, Registrar or Paying Agent does not take office
within 60 days after the retiring Trustee, Registrar or Paying Agent resigns or
is removed, the retiring Trustee, Registrar or Paying Agent, the Company, or
the Holders of a majority in principal amount of the Notes may petition any
court of competent jurisdiction for the appointment of a successor Trustee,
Registrar or Paying Agent.
If the Trustee, Registrar or Paying Agent fails to comply with Section
3.10, any Noteholder may petition any court of competent jurisdiction for the
removal of the Trustee, Registrar or Paying Agent and the appointment of a
successor Trustee, Registrar or Paying Agent.
SECTION 3.09. SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates with, merges or converts into, or
transfers all or substantially all of its corporate trust business to another
corporation, the resulting, surviving, or transferee corporation upon approval
of the Company shall be the successor Trustee, Registrar and Paying Agent. The
Company shall notify the Trustee whether such approval will be granted within
30 days after the Company receives written notice of such consolidation,
merger, conversion, or transfer of corporate trust business by the Trustee.
SECTION 3.10. ELIGIBILITY; DISQUALIFICATION.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA Section 310(a)(1). The Trustee shall have a combined
capital and surplus of at least $150,000 as set forth in its most recent
published annual report of condition. The Trustee shall comply with TIA
Section 310(b).
SECTION 3.12. PREFERENTIAL COLLECTION OF CLAIMS AGAINST CORPORATION.
The Trustee shall comply with TIA Section 311(a), excluding any
creditor relationship listed in TIA Section 311(b). A Trustee who has resigned
or been removed shall be subject to TIA Section 311(a) to the extent indicated
therein.
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SECTION 3.13 CO-TRUSTEE.
At any time for the purpose of meeting any legal requirements of any
jurisdiction, including in case of the exercise of any rights or remedies of
the Trustee upon an Event of Default hereunder, the Company and the Trustee
acting jointly shall have the power to appoint an additional institution or
individual as a separate or co-trustee and to vest in such separate or
co-trustee such powers, duties, obligations and rights as the Trustee and the
Company may consider necessary or desirable. If the Company shall not join in
such appointment within fifteen days after receipt of a request of the Trustee
to do so, or if an Event of Default shall have occurred and be continuing, the
Trustee alone shall have the power to make such appointment.
Upon the appointment of a separate or co-trustee, all rights, powers,
duties and obligations conferred or imposed upon the Trustee may be exercised
and performed by the Trustee and such separate or co-trustee jointly except to
the extent that under any law in any jurisdiction in which any act or acts are
to be performed the Trustee shall not be permitted or qualified to perform such
act or acts in which event such act or acts shall be exercised and performed by
the separate or co-trustee at the written direction of the Trustee.
ARTICLE 4
COVENANTS
SECTION 4.01. PAYMENT OF NOTES.
(a) The Paying Agent shall cause the Paying Agent to promptly pay
the principal of and interest on the Notes on the dates and in the manner
provided in the Notes; provided, however, that the Paying Agent shall be
required to pay the Notes only from and to the extent of the moneys transferred
by the Company to the Paying Agent pursuant to Sections 4.01(b) and 4.01(c).
(b) To facilitate payment of the Notes, the Company shall transfer
to the Paying Agent at least one (1) business day prior to the Payment Date or
Redemption Date for the Notes sufficient money to make the required principal
and interest payments.
(c) Redemption of the Notes may occur at the option of the Company
on any Payment Date and may be in whole or from time to time in part. Any
redemption of Notes will be at 100% of the principal amount thereof being
redeemed, together with Interest accrued to the redemption date, without any
premium or penalty. Notice will be mailed to all Noteholders setting forth (i)
the Redemption Date, (ii) the Redemption Price, (iii) the name and address of
the Paying Agent, (iv) a statement that the Notes must be delivered to the
Paying Agent, and (v) a statement that interest on the Notes, or portion
thereof being redeemed, ceases to accrue on and after the Redemption Date. In
the case of notice to the holder of any Note to be redeemed in part, a new Note
or Notes in principal amount equal to the unredeemed portion of such Note will
be issued. In the event of partial redemption of the Notes, the Notes to be
redeemed in whole or in part will be selected on a random basis, by lot.
SECTION 4.02. COMPLIANCE CERTIFICATE.
The Company shall deliver to the Trustee within 120 days after the end
of each fiscal year of the Company an Officers' Certificate stating whether or
not the signers know of any Default by the Company in performing its covenants
under the Indenture. If they do know of such Default, the Officer's
Certificate shall describe the Default.
SECTION 4.03. SEC REPORTS.
The Company shall file with the Trustee within 15 days after it files
them with the SEC copies of the annual reports and of the information,
documents, and other reports (or copies of such portions of any of the
foregoing as the SEC may by rules and regulations prescribe). The Company also
shall comply with the other provisions of TIA Section 314(a).
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ARTICLE 5
DEFAULTS AND REMEDIES
SECTION 5.01. EVENTS OF DEFAULT.
Subject to the limitations set forth in this Article 5, an Event of
Default occurs if and when:
(1) the Company fails to cause the interest payments on the Notes
to be paid when due;
(2) the Company fails to cause the principal of any Notes to be
paid when due;
(3) the Company fails to comply with any of its other agreements
in the Notes, the Security Documents, or this Indenture and
the Default continues for the period and after the notice
specified below;
(4) the Company, pursuant to or within the meaning of any
Bankruptcy Law:
(a) commences a voluntary case,
(b) consents to the entry of an order for relief against
it in any involuntary case,
(c) consents to the appointment of a Receiver of it or
for any substantial part of its property,
(d) makes a general assignment for the benefit of its
creditors, or
(e) fails generally to pay its debts as they become due;
or
(5) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that:
(a) is for relief against the Company in an involuntary
case,
(b) appoints a Receiver of the Company or for any
substantial part of its property, or
(c) orders the liquidation of the Company,
and the order or decree remains unstayed and in effect for 90
days.
The term "Bankruptcy Law" means Title 11, United States Code, or any
similar federal or state law for the relief of debtors. The term "Receiver"
means any receiver, trustee, assignee, liquidator, or similar official under
any Bankruptcy Law.
A default under section 5.01 (3) is not an Event of Default until the
Trustee or the Holders of at least a majority in principal amount of the Notes
notify the Company of the default and the Company does not cure the default
within 90 days after receipt of the notice. The notice must specify the
default, demand that it be remedied, and state that the notice is a "Notice of
Default."
SECTION 5.02. ACCELERATION.
If an Event of Default occurs and is continuing as provided in Section
5.01, the Trustee may, at the direction of Holders of at least twenty-five
percent (25%) in principal amount of the Notes by written notice to the
Company, declare the principal of and accrued interest on all the Notes to be
due and payable immediately. After a declaration such principal and interest
shall be due and payable immediately.
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SECTION 5.03. OTHER REMEDIES; LIMITATION.
Subject to the provisions of the preceding paragraph, if an Event of
Default occurs and is continuing, as provided in Section 5.01, the Trustee may
pursue any available remedy by proceeding at law or in equity to collect the
payment of principal and interest on the Notes or to enforce the performance of
any provision of the Notes, the Security Documents or this Indenture.
Notwithstanding anything to the contrary in this Agreement, the
Trustee is required to proceed against and liquidate all Collateral before
looking to any other assets of the Debtor.
SECTION 5.04. POSTPONEMENT OF INTEREST PAYMENT; WAIVER OR DEFAULT.
The Holders of not less than seventy-five percent (75%) of the Notes
at the time outstanding may consent on behalf of the Holders of all such Notes
to the postponement of any interest payment for a period not exceeding three
years from its due date. The Holders of a majority of the Notes may consent to
the waiver of any past Default and its consequences, except a Default in
payment of principal and interest or any other waiver prohibited under Section
6.02.
SECTION 5.05. CONTROL BY MAJORITY.
The Holders of a majority in principal amount of the Notes may direct
the time, method, and place of conducting any proceeding for any remedy
available to the Trustee or exercising any trust or power conferred on it. The
Trustee, however, may refuse to follow any direction that conflicts with law or
this Indenture, that is unduly prejudicial to the rights of other Noteholders,
or that may subject the Trustee to personal liability.
SECTION 5.06. LIMITATION ON SUITS.
A Noteholder may not use this Indenture to prejudice the rights of
another Noteholder or to obtain a preference or priority over the other
Noteholder.
A Noteholder may not institute any suit if and to the extent that the
institution or prosecution thereof or the entry of judgment therein would,
under applicable law, result in the surrender, impairment, waiver, or loss of
the lien of the Indenture upon any property subject to such lien.
SECTION 5.07. PRIORITIES.
If the Trustee collects any money pursuant to this Article, it shall
pay out the money in the following order:
First: to the Trustee, in its capacity as Trustee,
Registrar and Paying Agent, for amounts due
under Section 3.07;
Second: to the payment of Allowed Expenses as defined
in the registration statement (except in an
Event of Default, payments of Allowed
Expenses to affiliates will be subordinated
to the payment of principal and Interest to
Noteholders);
Third: to Noteholders for amounts due and unpaid on
the Notes for interest, then principal,
ratably, without preference or priority of
any kind, according to the amounts due and
payable on the Notes for principal and
interest; and
Fourth: to the Company as a payment of amounts in
excess of Trustee fees and costs, allowed
expenses, and interest and principal due on
the Notes.
The Trustee may fix a record date and payment date for any payment to
Noteholders.
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ARTICLE 6
AMENDMENTS, SUPPLEMENTS, AND WAIVERS
SECTION 6.01. WITHOUT CONSENT OF HOLDERS.
The Company may amend or supplement this Indenture or the Notes
without notice to or consent of any Noteholder to cure any ambiguity, omission,
defect, or inconsistency, or to make any change that does not adversely affect
the rights of any Noteholder.
SECTION 6.02. WITH CONSENT OF HOLDERS.
The Company may amend or supplement this Indenture, the Security
Documents, or the Notes without notice to any Noteholder but with the written
consent of the Holders of not less than a majority in principal amount of the
Notes. The Holders of a majority in principal amount of the Notes may waive
compliance by the Company with any provision of this Indenture, the Security
Documents, or the Notes without notice to any Noteholder. Without the consent
of each Noteholder affected, however, an amendment, supplement, or waiver,
except the waiver pursuant to Section 5.04, may not:
(1) reduce the amount of Notes whose Holders must consent to an
amendment, supplement or waiver,
(2) reduce the rate or extend the time for payment of interest on
any Note;
(3) reduce the principal of or extend the fixed maturity of any
Note;
(4) make any Note payable in money other than that stated in the
Note; or
(5) waive a default on payment of principal or of interest on any
Note.
(6) impair the right to institute suite to enforce payments due on
any Note on or after the respective due dates.
SECTION 6.03. COMPLIANCE WITH TRUST INDENTURE ACT
The terms hereof provide that it will comply with provisions of the
TIA. Every amendment to or supplement of this Indenture, the Security
Documents, or the Notes shall comply with the TIA as then in effect.
SECTION 6.04. REVOCATION AND EFFECT OF CONSENTS.
A consent to an amendment, supplement, or waiver by a Holder of a Note
shall bind the Holder and every subsequent Holder of a Note or portion of a
Note that evidences the same debt as the consenting Holder's Note, even if
notation of the consent is not made on any Note. Any such Holder or subsequent
Holder, however, may revoke the consent as to his Note or portion of the Note.
The Trustee must receive the notice of revocation before the date the
amendment, supplement or waiver becomes effective.
After an amendment, supplement, or waiver becomes effective, it shall
bind every Noteholder unless it makes a change described in Sections 6.02(2)
through (5). In that case the amendment, supplement, or waiver shall bind each
Holder of a Note who has consented to it and every subsequent Holder of a Note
or portion of a Note that evidences the same debt as the consenting Holder's
Note.
SECTION 6.05. NOTATION ON OR EXCHANGE OF SECURITIES.
If an amendment, supplement, or waiver changes the terms of a Note,
the Company may require the Holder of the Note to deliver it to the Company.
The Company may place an appropriate notation on the Note about the changed
terms and return it to the Holder. Alternatively, if the Company so
determines, the Company in exchange for the Note shall issue and the Company
shall authenticate a new Note that reflects the changed terms.
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SECTION 6.06. TRUSTEE TO SIGN AMENDMENTS, ETC.
The Trustee shall sign any amendment, supplement, or waiver authorized
pursuant to this Article if the amendment, supplement, or waiver does not
adversely affect the rights of the Trustee. If it does, the Trustee may but
need not sign it.
The Trustee may rely upon an Officer's Certificate and an opinion of
counsel as conclusive evidence that any amendment, supplement or waiver
complies with the provisions of this Indenture.
ARTICLE 7
MISCELLANEOUS
SECTION 7.01. TRUST INDENTURE ACT CONTROLS.
If any provision of this Indenture limits, qualifies, or conflicts
with another provision which is required to be included in this Indenture by
the TIA, the required provision shall control.
SECTION 7.02. NOTICES.
Any notice or communication shall be sufficiently given if in writing
and delivered in person or mailed by first-class mail addressed as follows:
If to the Company: U.S. Automobile Acceptance SNP-IV, Inc.
1120 N.W. 63rd, Suite G-106
Oklahoma City, Oklahoma 73116
If to the Trustee: Chase Bank of Texas
2200 Ross Avenue
Dallas, Texas 75201
Attn: Corporate Trust Department
The Company or the Trustee by notice to the other may designate
additional or different addresses for subsequent notices or communications.
Any notice or communication to Noteholders shall be sufficiently given
if mailed by first-class mail to each Registered Noteholder.
Any notice or communication mailed to a Noteholder shall be mailed to
him at his address as it appears on the lists or registration books of the
Registrar and shall be sufficiently given to him if so mailed within the time
prescribed.
Failure to give notice or communication to a Noteholder or any defect
in it shall not affect its sufficiency with respect to other Noteholders. If a
notice or communication is mailed, it is duly given, whether or not the
Noteholder receives or reads it.
SECTION 7.03. COMMUNICATION BY HOLDERS WITH OTHER HOLDERS.
Within five business days after the receipt by the Trustee of a
written application by any three or more Noteholders stating that the
applicants desire to communicate with other Noteholders with respect to their
rights under this Indenture or under the Notes, and accompanied by a copy of
the form of proxy or other communication which such applicants propose to
transmit, and by reasonable proof that each such applicant has owned a Note for
a period of at least six months preceding the date of such application, the
Trustee shall, at its election, either (1) afford to such applicants access to
all information so furnished to or received by the Trustee, or (2) inform such
applicants as to the approximate number of Noteholders according to the most
recent information so furnished to or received by the Trustee, and as to the
approximate cost of mailing to such Noteholders the form of proxy or
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other communication, if any, specified in such application. If the Trustee
shall elect not to afford to such applicants access to such information, the
Trustee shall, upon the written request of such applicants, mail to all such
Noteholders copies of the form of proxy or other communication which is
specified in such request, with reasonable promptness after a tender to the
Trustee of the material to be mailed and of payment or provision for payment,
of the reasonable expenses of such mailing, unless within five days after such
tender, the Trustee shall mail to such applicants, and file with the SEC
together with a copy of the material to be mailed, a written statement to the
effect that, in the opinion of Trustee, such mailing would be contrary to the
best interests of the Noteholders or would be in violation of applicable law.
Such written statement shall specify the basis of such opinion. After
opportunity for bearing upon the objections specified in the written statement
so filed, the SEC may, and if demanded by the Trustee or by such applicants
shall, enter an order either sustaining one or more of such objections or
refusing to sustain any of them. If the SEC shall enter an order refusing to
sustain any of such objections, or if, after the entry of an order sustaining
one or more of such objections, the SEC shall find, after notice and
opportunity for hearing, that all objections so sustained have been met, and
shall enter an order so declaring, the Trustee shall mail copies of such
material to all such Noteholders with reasonable promptness after the entry of
such order and the renewal of such tender.
SECTION 7.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application to take any action under this
Indenture, the Company shall furnish to the Trustee an Officer's Certificate
stating that, in the opinion of the signers, all conditions precedent, if any,
provided for in this Indenture relating to the proposed action have been
complied with.
SECTION 7.05. CERTIFICATES OF FAIR VALUE.
The Company shall furnish to the Trustee a certificate or opinion of
an appraiser or other expert as to the fair value of any property or securities
to be released from the lien of the Security Documents, which certificate or
opinion shall state that in the opinion of the person making the same the
proposed release will not impair the security under the Security Documents in
contravention of the provisions thereof, and requiring further that such
certificate or opinion shall be made by an independent appraiser, or other
expert, if the fair value of such property or securities and of all other
property or securities released since the commencement of the then current
calendar year, as set forth in the certificates or opinions required by this
Section 7.06, is 40% or more of the aggregate principal amount of the Notes at
the time outstanding; but such a certificate or opinion of an independent
appraiser or other expert shall not be required in the case of any release of
property or securities, if the fair value thereof as set forth in the
certificate or opinion required by this paragraph is less than $25,000 or less
than 1% of the aggregate principal amount of the Notes at the time outstanding.
Any such certificate or opinion may be made by an officer or employee
of the Company who is duly authorized to make such certificate or opinion by
the Company from time to time except in cases in which this Section requires
that such certificate or opinion be made by an independent person, in which
case, the certificate or opinion shall be made by an independent appraiser, or
other expert selected or approved by the Trustee in the exercise of reasonable
care. The Trustee shall not be liable for any such expense or for the actions
or omissions of such independent appraiser or other expert.
SECTION 7.06. STATEMENTS REQUIRED IN CERTIFICATE AND OPINION.
Each certificate or opinion with respect to compliance with a
condition or covenants in this Indenture shall include:
(1) a statement the person making such certificate has read such
covenant or condition;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements contained in such
certificate or opinion are based;
B-12
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(3) a statement that, in the opinion of such person, he has made
such examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
complied with; and
(4) a statement as to whether or not, in the opinion of such
person, such condition or covenant has been complied with.
SECTION 7.07. WHEN TREASURY SECURITIES DISREGARDED.
In determining whether the Holders of the required principal amount of
Notes have concurred in any direction, waiver, or consent, Notes owned by the
Company or by any person directly or indirectly controlling or controlled by or
under direct or indirect common control with the Company shall be disregarded,
except that for the purposes of determining whether the Trustee shall be
protected in relying on any such direction, waiver, or consent, only Notes
which the Trustee knows are so owned shall be disregarded. Also, subject to
the foregoing, only Notes outstanding at the time shall be considered in any
such determination.
SECTION 7.08. ACTION BY NOTEHOLDERS.
Whenever in this Indenture it is provided that the Holders of a
specified percentage in aggregate principal amount of the Notes may take any
action (including the making of any demand or request, the giving of any
notice, consent, or waiver, or the taking of any other action), the fact that
at the time of taking any such action the Holders of such specified percentage
have joined therein may be evidenced by any instrument or any number of
instruments of similar tenor executed by Noteholders in person or by agent or
proxy appointed in writing.
SECTION 7.09. LEGAL HOLIDAYS.
A "Legal Holiday" is a Saturday, a Sunday, a legal holiday, or a day
on which banking institutions are not required to be open. If a payment date
is a Legal Holiday at a place of payment, payment may be made at that place on
the next succeeding day that is not a Legal Holiday.
SECTION 7.10. GOVERNING LAW.
This Indenture, the Security Documents, and the Notes shall be
governed by the laws of the State of Texas provided the duties and
responsibilities of the Trustee shall be construed under the laws of the
jurisdiction of its organization or incorporation applied without giving effect
to any conflicts-of-law principles.
SECTION 7.11. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret another indenture, loan,
or debt agreement of the Company. Any such indenture, loan, or debt agreement
may not be used to interpret this Indenture.
SECTION 7.12. NO RECOURSE AGAINST OTHERS.
All liability of any director, officer, employee, or stockholder, as
such, of the Company is waived and released.
SECTION 7.13. SUCCESSORS.
All agreements of the Company in this Indenture, the Security
Documents, and the Notes shall bind its successors. All agreements of the
Trustee in this Indenture shall bind its successors.
SECTION 7.14. DUPLICATE ORIGINALS.
The parties may sign any number of copies of this Indenture. Each
signed copy shall be an original, but all of them together represent the same
agreement.
B-13
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IN WITNESS WHEREOF, the parties have signed this Indenture as of the
day and year first above written.
U.S. AUTOMOBILE ACCEPTANCE SNP-IV, INC.,
a Texas Corporation
By:
---------------------------------------
Its:
--------------------------------------
CHASE BANK OF TEXAS
By:
---------------------------------------
Its:
--------------------------------------
B-14
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Exhibit A
U.S. AUTOMOBILE ACCEPTANCE SNP-IV, INC.
ASSET-BACKED PROMISSORY NOTE DUE DECEMBER 31, 2003
$ No.
-------------- ---------------
U.S. Automobile Acceptance SNP-IV, Inc., a Texas corporation (herein
referred to as the "Company"), for value received, hereby promises to pay to
_______________________________________________________________________ or
registered assigns, the principal sum of _____________________________ Dollars
on December 31, 2003 (the "Stated Maturity" of such principal), and to pay
interest (computed on the basis of the unpaid portion of said principal sum
outstanding from time to time from the date of issue), until the principal
amount of this Note is paid in full at the rate of _______ percent (___%) per
annum, which interest shall be due and payable upon the fifteenth day of each
calendar month (for such interest accruing during the prior month or months)
commencing with the first calendar month after the issuance hereof and upon the
Stated Maturity (each a "Payment Date"). Interest is calculated on the basis
of a 365-day year but is paid in 12 equal monthly installments, regardless of
the number of days in each month. The Interest rate will be established by the
Company from time to time; however, once determined, the rate of Interest
payable on this Note will remain fixed for the term of the Note.
This Note is one of a duly authorized issue of Notes of the Company,
designated as its Asset-Backed Promissory Notes Due December 31, 2003 (herein
called the "Notes"), all issued and to be issued under an Indenture (herein
called the "Indenture"), between the Company and Chase Bank of Texas (the
"Trustee", which term includes any successor Trustee under the Indenture), to
which Indenture and all indentures supplemental thereto reference is hereby
made for a statement of the respective rights thereunder of the Company, the
Trustee and the Holders of the Notes.
The principal of and interest on this Note are payable in such
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the
Company with respect to this Note shall be applied first to interest due and
payable on this Note as provided above and then to the unpaid principal of this
Note. Any installment of interest which is not paid when and as due shall bear
interest, at the lesser of fifteen percent (15%) or the maximum amount allowed
by law, from the date due to the date of payment thereof.
Monthly payment of interest shall be made by check mailed to the
person whose name appears as the Holder of this Note on the Note Register as of
the first day of the month in which such Payment Date occurs (the "Record
Date") without requiring that this Note be submitted for notation of payment.
Checks returned undelivered will be held by the Company or its designee for
payment to the person entitled thereto. Payment of the outstanding principal
of and accrued interest on this Note at the Stated Maturity or of the
Redemption Price (as hereinafter defined) payable on any Redemption Date (as
hereinafter defined) as of which this Note or any portion hereof has been
called for redemption shall be made upon presentation of this Note to the
Paying Agent appointed by the Company for such purpose.
The payment of principal and accrued interest on the Notes, when due,
is secured by the Trust Estate, which consists of, among other things, a first
security interest in specific motor vehicle retail installment contracts and
the funds in the Master Collections Accounts, the Master Operating Account, and
the Note Redemption Account (as such terms are defined in the Indenture).
If an Event of Default shall occur and be continuing with respect to
the Notes, the Notes, and all principal and unpaid accrued interest, may be
declared due and payable in the manner and with the effect provided in the
Indenture.
The Notes will be redeemed beginning after January 1, 2003, and, at
the option of the Company, may be redeemed or partially redeemed any time
during the term of the Notes on any Payment Date (the "Redemption Date"), at a
redemption price of 100% of the principal amount being redeemed (the
"Redemption Price"), together
B-15
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with accrued and unpaid interest on the unpaid principal amount thereof to the
date fixed for redemption. Notice of such redemption shall be mailed by the
Company not later than the twentieth day, and not earlier than the sixtieth
day, before the date fixed for redemption to the Holders of the Notes so to be
redeemed.
If provision is made for the redemption and payment of this Note or
any portion, this Note or such portion shall thereupon cease to bear interest
from and after the Redemption Date. In the event of redemption of any Note in
part only, a new Note or Notes for the unredeemed portion thereof shall be
issued in the name of the registered holder thereof upon surrender thereof.
The transfer of this Note may be registered on the Note Register of
the Company, upon surrender of this Note for registration of transfer at the
office or agency designated by the Company, duly endorsed by, or accompanied by
a written instrument of transfer in form satisfactory to the Company and the
Trustee duly executed by, the Holder hereof or his attorney duly authorized in
writing, and thereupon one or more new Notes of authorized denominations and
for the same aggregate principal amount will be issued to the designated
transferee or transferees.
Prior to the due presentment for registration of transfer of this
Note, the Company, the Trustee and any agent of the Company or the Trustee may
treat the person in whose name this Note is registered as the owner thereof for
all purposes, whether or not this Note be overdue, and neither the Company, the
Trustee nor any such agent shall be affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Notes under the Indenture at any
time by the Company with the consent of the Holders of Notes representing more
than 50% of the principal amount of all Notes at the time outstanding. The
Indenture also contains provisions permitting the Holders of Notes representing
specified percentages of the principal amount of the Notes at the time
outstanding, on behalf of the Holders of all the Notes, to waive compliance by
the Company with certain provisions of the Indenture and certain past defaults
under the Indenture and their consequences. Any such consent or waiver by the
Holder of this Note shall be conclusive and binding upon such Holder and upon
all future holders of this Note and of any Note issued upon the registration of
transfer hereof or in exchange hereof or in lieu hereof whether or not notation
of such consent or waiver is made upon this Note. The Indenture also permits
the Trustee to amend or waive certain terms and conditions set forth in the
Indenture without the consent of Holders of the Note issued thereunder.
The term "Company" as used in this Note includes any successor to the
Company under the Indenture.
The Notes are exchangeable for a like aggregate principal amount of a
different authorized denomination, as requested by the Holder.
This Note shall be construed in accordance with, and governed by, the
laws of the State of Texas applicable to agreements made and to be performed
therein.
IN WITNESS WHEREOF, U.S. Automobile Acceptance SNP-IV, Inc. has caused
this instrument to be duly executed under its corporate seal.
Dated:
----------------------------
U.S. AUTOMOBILE ACCEPTANCE SNP-IV,
INC., a Texas Corporation
By:
--------------------------------
Authorized Officer
[SEAL]
Attest:
---------------------------
Authorized Officer
B-16
56
EXHIBIT C
U.S. AUTOMOBILE ACCEPTANCE SNP-IV, INC.
SUBSCRIPTION AGREEMENT - ASSET-BACKED NOTES
The Investor named below, by payment of the purchase price for such
Asset-Backed Notes, by the delivery of a check payable to U.S. AUTOMOBILE
ACCEPTANCE SNP-IV, INC.- Escrow Account/Chase Bank of Texas hereby subscribes
for Asset- Backed Notes indicated below (minimum purchase of $2000) of U.S.
Automobile Acceptance SNP-IV, Inc. Notes may be purchased in increments of
$1,000. By such payment, the named Investor further acknowledges receipt of
the Prospectus and any Supplement and the Subscription Agreement, the terms of
which govern the investment in the Asset-Backed Notes being subscribed for
hereby.
A. INVESTMENT: (1) Amount of Asset-Backed Notes Purchased $
-----------------
(2) Initial Purchase [ ] Additional Purchase [ ] Date of Investor's check
-----------------
B. REGISTRATION: Mr. Mr.
Mrs. Mrs.
(4) Registered Owner: Ms. Co-Owner: Ms.
----------------------- ---------------------------------------------
(5) Mailing Address: City, State & Zip:
-------------------------- -----------------------------------------
(6) Residence Address (if different from above):
--------------------------------------------------------------
(7) Birth Date: / / (8) Birth Date Co-Owner: / /
---------- --------- --------- --------- -------- -------
(9) Please indicate Citizenship Status: (10) Social Security #: / /
--------- -------- -------
U.S. Citizen [ ] Other [ ] Co-Owner SS #: / /
--------- -------- -------
(11) Telephone #: (H) ( ) Corporate or Custodial:
---------- ------------------------------------------
(0) ( ) Taxpayer ID #: - -
---------- ------------------------------------------- --------- --- ---------
C. OWNERSHIP: [ ] Individual Ownership [ ] IRA or Keogh [ ] Joint Tenants with Rights of Survivorship
[ ] Trust/Date of Trust Established Pension/Trust / / (S.E.P.) [ ] Tenants in Common [ ] Tenants by the Entirety
--- ---- ----
[ ] Corporate Ownership [ ]Partnership [ ] Other
----------------------------
D. SIGNATURES: By signing below, I/we represent that I/we meet the suitability standards set forth in the Prospectus under
"Suitability Standards."
Signatures - Registered Owner: Co-Owner
--------------------------------- -------------------------------------------------
E. Print Names of Custodian or Trustee: Authorized Signature
-------------------------------- --------------------------
Date: Witness Signature
-------------------------------------------- -----------------------------------------------
F. PAYMENT SHOULD BE SENT TO (IF DIFFERENT THAN REGISTERED OWNER):
Name: c/o
-------------------------------------------------------------------------------- ------------------------------
Address: Account Number:
----------------------------------------------------------------------------- ------------------
City, State & Zip: Telephone Number:
------------------------------------------------------------------- ----------------
G. BENEFICIAL OWNER(S): All reports and financial statements will normally be sent to the registered owner at the address in
Section B. If reports and financial statements are to be sent to the Beneficial Owner of an IRA or Keogh, insert name of the
Beneficial Owner.
Name of Beneficial Owner Only: Telephone Number:
---------------------------------------------------- -------------------
Address: City, State & Zip:
---------------------------------------------------------------------------- ------------------
H. BROKER-DEALER/REGISTERED REPRESENTATIVE DATA: ALL LINES MUST BE COMPLETED. ANY MISSING SIGNATURES MAY DELAY PROCESSING OF
THIS ORDER.
Broker-Dealer NASD Firm Name: Date: Telephone Number:
---------------------------------- ------------- -----------------
Main Office Address: City, State & Zip:
--------------------------------------------------------------- ----------------
Print or Type name of Broker-Dealer, Principal or other Authorized Signator:
---------------------------------------------
Authorized Signature:
----------------------------------------------------------------------------------------------------
Print or Type Name of Registered Representative: Telephone Number:
-------------------------------------- -----------------
Signature:
---------------------------------------------------------------------------------------------------------------
Branch Office Address: City, State & Zip
-------------------------------------- ------------------------------------------
================================================================================
MAIL TO: U.S. Automobile Acceptance SNP-IV, Inc., 1120 N.W. 63rd, Suite G-106,
Oklahoma City, OK 73116 (405) 843-3135 FAX (405) 848-7777
================================================================================
ALL CHECKS FROM INVESTORS MUST BE TRANSMITTED TO THE ESCROW AGENT
BY NOON OF THE NEXT BUSINESS DAY FOLLOWING RECEIPT
C-1
57
No dealer, salesman or any other person has been authorized to give any
information or to make any representations in connection with the offering
described herein, other than those contained in this Prospectus. If given or
made, such other information or representations must not be relied upon as
having been authorized by the Company or by any Underwriter. This Prospectus
does not constitute an offer to sell, or a solicitation of an offer to buy any
securities offered hereby in any person to whom it is unlawful to make such an
offer or solicitation in such jurisdiction to any person to whom it is unlawful
to make such an offer or solicitation in such jurisdiction. The delivery of
this Prospectus at any time does not imply that the information herein is
correct as of any item subsequent to its date.
TABLE OF CONTENTS
PAGE
Summary 3
Risk Factors 6
Capitalization 10
Use of Proceeds 10
Plan of Distribution 11
Description of the Notes 11
Security for the Notes 13
Allowed Expenses and Flow of Contract
Proceeds 15
The Company 16
Purchase and Collection of Contracts 17
Security Ownership of Certain
Beneficial Owners and Management 19
Management 20
Management's Discussion and Analysis
of Financial Condition 22
Indenture of Trust Provisions 23
Certain Legal Aspects of the Contracts 25
Certain Federal Income Tax Considerations 28
Experts 29
Legal Matters 29
Financial Statements 30
Exhibits
Form of Asset-Backed Promissory
Note Due December 31, 2003 A-1
Indenture of Trust B-1
Subscription Agreement C-1
Until termination of this offering, all dealers effecting
transactions in the registered securities, whether or not
participating in this distribution, are required to deliver
a prospectus.
$40,000,000
ASSET-BACKED PROMISSORY NOTES
DUE DECEMBER 31, 2003
U.S.
AUTOMOBILE
ACCEPTANCE
SNP-IV,
INC.
58
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
All expenses, including all allocated general administrative
and overhead expenses, related to the offering or the organization of the
Company will be borne by U.S. Automobile Acceptance Corporation ("USAAC"), an
affiliate of the Company. The Company will reimburse USAAC for all or a part
of such expenses through a payment by the Company to USAAC of a fee of 5% of
the gross proceeds from any sales of the Notes.
The following table sets forth a reasonable itemized statement
of all anticipated out-of-pocket and overhead expenses (subject to future
contingencies) to be incurred in connection with the distribution of the
securities being registered, reflecting the minimum and maximum subscription
amounts.
Minimum Maximum
------- -------
SEC Registration Fee $ 11,800 $ 11,800
Printing and Engraving Expenses 5,000 90,000
Legal Fees and Expenses 35,000 80,000
Trustee Fees 15,000 35,000
Escrow Fees 10,000 15,000
Marketing and Due Diligence Expenses 3,000 600,000
Accounting Fees and Expenses 10,000 30,000
Blue Sky Fees and Expenses 10,000 75,000
Miscellaneous 4,200 63,200
--------------- -------------
TOTAL $ 104,000 $ 1,000,000
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Articles of Incorporation of the Company ("Articles")
provide for indemnification of Directors in accordance with the Texas Business
Corporation Act. Article Six of the Articles provides as follows:
A director of the Corporation is not liable to the Corporation
or its shareholders for monetary damages for an act or omission in the
director's capacity as a director, except that this Article Six does
not eliminate or limit the liability of a director for:
(a) a breach of a director's duty of loyalty to the
Corporation or its shareholders;
(b) an act or omission not in good faith or that involves
intentional misconduct or a knowing violation of the
law;
(c) a transaction from which a director received an
improper benefit, whether or not the benefit resulted
from an action taken within the scope of the
director's office;
(d) an act or omission for which the liability of a
director is expressly provided for by statute; or
(e) an act related to an unlawful stock repurchase or
payment of a dividend.
The Broker-Dealer Selling Agreement also provides for
indemnification of the Company, and its officers, directors and employees
against certain liabilities.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
In January 1998, the Company issued 1,000 shares of Common
Stock to Michael R. Marshall, an individual and resident of Oklahoma, at $50.00
per share, for cash in the amount of $50,000, to commence business.
The issuance of these shares was exempt from registration
under Section 4(2) of the Securities Act of 1933 as a transaction not involving
a public offering. No commissions were paid in connection with this
transaction.
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ITEM 16. EXHIBITS
The following Exhibits are filed as part of the Registration
Statement:
EXHIBIT NO. IDENTIFICATION OF EXHIBIT
- ----------- -------------------------
3.1 - Articles of Incorporation
3.2 - By-Laws
4.1 - The Indenture is Exhibit B to the Prospectus.
4.2 - The Form of 11% Secured Promissory Note is Exhibit A to the Prospectus.
5.1(*) - Opinion of Amy Waters, Attorney at Law, regarding validity of Notes
8.1 - Opinion of Tyson Hopkins, CPA, regarding tax matters
10.1 - Form of Security Agreement among U.S. Automobile Acceptance SNP-IV, Inc., the Noteholder, and Chase
Bank of Texas, as Trustee
10.2 - Form of Custodian Agreement among U.S. Automobile Acceptance SNP-IV, Inc., Chase Bank of Texas, as
Trustee, and U.S. Automobile Acceptance Corporation, a Texas corporation
10.3 - Form of Servicing Agreement between U.S. Automobile Acceptance SNP-IV, Inc. and U.S. Automobile
Acceptance Corporation
10.4 - Form of Subscription Escrow Agreement
10.5(*) - Form of Broker-Dealer Selling Agreement
10.6 - Form of Subscription Agreement is Exhibit C to the Prospectus.
23.1(*) - Consent of Amy Waters, Attorney at Law (included in her opinion as Exhibit 5.1)
23.2 - Consent of Tyson Hopkins, CPA
- ----------------------------------
*To be filed by amendment
ITEM 17. UNDERTAKINGS
The Registrant hereby undertakes to:
(1) File, during any period in which it offers or sells
securities, a post-effective amendment to this Registration Statement to:
(i) Include any prospectus required by section 10(a)(3)
of the Securities Act;
(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the information in
the Registration Statement; and
(iii) Include any additional or changed material
information of the plan of distribution.
(2) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial bona
fide offering.
(3) File a post-effective amendment to remove from registration
any of the securities that remain unsold at the end of the offering.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to directors, officers and
controlling persons of the small business issuer pursuant to the foregoing
provisions, or otherwise, the small business issuer has been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets
the requirements for filing on Form S-1 and authorizes this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Oklahoma City, State of Oklahoma, on the 9th day of
January, 1998.
U.S. AUTOMOBILE ACCEPTANCE SNP-IV, INC.
By: /s/ Michael R. Marshall
---------------------------------------
Michael R. Marshall, President
-------------------------------------
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following person in the
capacity and on the date indicated:
SIGNATURE TITLE DATE
- --------- ----- ----
/s/ Michael R. Marshall President; Secretary; January 9, 1998
- ------------------------------ Treasurer; Sole Director
Michael R. Marshall
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INDEX TO EXHIBITS
EXHIBIT NO. IDENTIFICATION OF EXHIBIT
- ----------- -------------------------
3.1 - Articles of Incorporation
3.2 - By-Laws
4.1 - The Indenture is Exhibit B to the Prospectus.
4.2 - The Form of Asset-Backed Promissory Note is Exhibit A to the Prospectus.
5.1(*) - Opinion of Amy Waters, Attorney at Law, regarding validity of Notes
8.1 - Opinion of Tyson Hopkins, CPA, regarding tax matters
10.1 - Form of Security Agreement among U.S. Automobile Acceptance SNP-IV, Inc., the Noteholder, and Chase
Bank of Texas, as Trustee
10.2 - Form of Custodian Agreement among U.S. Automobile Acceptance SNP-IV, Inc., Chase Bank of Texas, as
Trustee, and U.S. Automobile Acceptance Corporation
10.3 - Form of Servicing Agreement between U.S. Automobile Acceptance SNP-IV, Inc. and U.S. Automobile
Acceptance Corporation
10.4 - Form of Subscription Escrow Agreement
10.5(*) - Form of Broker-Dealer Selling Agreement
10.6 - Form of Subscription Agreement is Exhibit C to the Prospectus.
23.1(*) - Consent of Amy Waters, Attorney at Law (included in her opinion as Exhibit 5.1)
23.2 - Consent of Tyson Hopkins, CPA
- ------------------------------
(*) To be filed by amendment