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As filed with the Securities and Exchange Commission on July 9, 1998
Registration No. 333-44189
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMENDMENT NO. 1 TO
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-108 200 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 area code
Registrant's principal executive office) 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, 2000,
December 31, 2001,
December 31, 2002,
December 31, 2003,
December 31, 2004, and
December 31, 2005
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The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the
registrant shall file a further amendment which specifically states that this
registration statement shall thereafter become effective in
accordance with Section 8(a) of the Securities Act of 1933 or until the
registration statement shall become effective on such date as the 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 Data *
(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
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Initial Interest Rate Class Maturity Date
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7.75% A-1 December 31, 2000
8.75 A-2 December 31, 2001
9.50 A-3 December 31, 2002
10.00 A-4 December 31, 2003
10.40 A-5 December 31, 2004
10.80 A-6 December 31, 2005
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"). The Notes bear interest at an initial annual rate ranging
from 7.75% to 10.8%, paid monthly (the "Interest"). The Interest rates and
amounts available for each class of the Promissory Notes 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 $ 5,000. Purchasers of
multiple classes of Promissory Notes shall be subject to a minimum purchase
requirement of $2,000 for each class purchased.
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 , automobile sale
divisions of national rental car companies and finance companies (the
"Sellers"), often at a discount, using (a) the net proceeds from the sale of the
Notes offered hereby, and (b) the net collection proceeds from previously
purchased Contracts. The Company has contracted with U.S. 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
Sellers will provide the Company some form of recourse, which will provide
additional collateral support for the Notes.
The offering will terminate on February 29, 2000, unless sooner
terminated by the Company for certain reasons. (See "Plan of Distribution.")
(Continued at page 2)
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" AT PAGE 8. 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.
DELINQUENCY AND REPOSSESSION RATES FOR THE CLASS OF RETAIL INSTALLMENT
SALES CONTRACTS COMPRISED OF USED MOTOR VEHICLES ARE EXPECTED TO BE HIGHER THAN
FOR CONTRACTS RESULTING FROM THE SALE OF NEW VEHICLES. OBLIGATIONS UNDER THE
CONTRACTS ARE ANTICIPATED TO BE NON-PRIME CREDITS.
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)(3) Company(2)(3)
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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 expense
allowance, and a portion of such fee (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.
(3) Broker-dealer commissions will range from 3-7%. Minimum proceeds to the
Company has been calculated assuming the maximum commission is paid.
This Prospectus is dated , 1998
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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 BancFirst,
Oklahoma City, Oklahoma, 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 expenses will be deducted from the escrowed funds, and no interest will
be paid on such funds. When the Minimum Subscription Amount has been raised, the
escrowed 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.
AVAILABLE INFORMATION
The Company has filed a Registration Statement on Form S-1 (together
with all exhibits and schedules thereto, the "Registration Statement") with the
Securities and Exchange Commission (the "Commission") under the Securities Act
of 1933, as amended, with respect to the registration of 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 may be inspected and copied at the public reference
facilities maintained by the Commission at its Public Reference Section, Room
1024, 450 Fifth Street, N.W., Washington, D. C. 20549, and at its regional
offices located as follows: Chicago Regional Office, Citicorp Center, 500 W.
Madison Street, Suite 1400, Chicago, Illinois 60661; and New York Regional
Office, 7 World Trade Center, Suite 1300, New York, New York 10048; at
prescribed rates. The Commission maintains a Web site that contains reports,
proxy and information statements and other information regarding registrants
that file electronically with the Commission. The address of such site is
http://www.sec.gov. 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 STANDARDS
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.
IOWA INVESTORS: ALL IOWA INVESTORS MUST MEET THE FOLLOWING MINIMUM
SUITABILITY STANDARDS: (i) $40,000 NET
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WORTH (EXCLUSIVE OF HOME, HOME FURNISHINGS, AND PERSONAL AUTOMOBILES) AND
$40,000 GROSS ANNUAL INCOME, OR (ii) $125,000 NET WORTH (EXCLUSIVE OF HOME, HOME
FURNISHINGS, AND PERSONAL AUTOMOBILES).
(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 dealers, automobile sale divisions of
national rental car companies, and finance companies
(the "Sellers") retail installment finance contracts
secured by used automobiles and light trucks (the
"Contracts"). The Contracts will generally be
purchased at discounts ranging from 0% 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 Seller.
These 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
enforcement and administration of 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 . 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 a master collection bank account (the
"Master Collection Account"). 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 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, often 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 ranging from 7.75% to 10.8% .
All unpaid principal and accrued Interest are payable
at each respective class maturity date (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."
CLASSES OF NOTES;
MATURITY Asset-Backed Promissory Notes (the "Notes") issued to
each Noteholder. Six classes of Notes will be issued
pursuant to the Indenture of Trust between the
Company and Sterling Trust Company, as Trustee (see
"Indenture of Trust"): Class A-1 Notes, due December
31, 2000, will bear interest at an initial rate of
7.75%;
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Class A-2 Notes, due December 31, 2001, will bear
interest at an initial rate of 8.75%; Class A-3
Notes, due December 31, 2002, will bear interest at
an initial rate of 9.5%; Class A-4 Notes, due
December 31, 2003, will bear interest at an initial
rate of 10%; Class A-5 Notes, due December 31, 2004,
will bear interest at an initial rate of 10.4%; and
Class A-6 Notes, due December 31, 2005, will bear
interest at an initial rate of 10.8%.
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 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 Sterling Trust Company 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 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
Sellers. 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- 108, 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 rates will range from 7.75% to
10.8% per annum on the outstanding principal balance
of each Note. Interest is payable on the fifteenth
(l5th) 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."
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EFFECTIVE YIELD Although the initial stated Interest rate on the
Notes is 7.75% to 10.8% per annum, the effective
Interest rate will be 7.747% to 10.796%, because each
payment of Interest will be paid 15 days after the
month over which it accrued.
PRINCIPAL PAYMENTS No principal payments will be required to be made on
TO NOTEHOLDERS 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."
SECURITY FOR THE THE CONTRACTS. The Notes will be secured by specified
NOTES motor 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, automobile sale divisions of
national rental car companies, and finance companies
(the "Sellers"), 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
Sellers will often provide some form of 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
Company has no arrangements or agreements with any
Sellers at this time with respect to the purchase of
Contracts. 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 a master collection account
maintained by the Company (the "Master Collection
Account"). The amounts in the Master Collection
Account 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 non-prime credit individuals and
will be somewhat less credit-worthy than prime credit
purchasers of automobiles.
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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.
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- 108, 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 , including
those secured by automobiles. USAAC may subcontract
with third parties to provide certain of these
services . 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 " Federal Income
Tax Consequences."
USE OF PROCEEDS The Company intends to use no less than 88% of the
net proceeds from the sale of the Notes for the
purchase of Contracts and no more than 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, does not intend to seek,
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 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. No interest will be
paid to investors on escrowed funds. Upon receipt of
the Minimum Subscription Amount, the escrowed funds
will be released to the Company. See "Plan of
Distribution."
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RISK FACTORS
An investment in the Notes entails risks. In considering a purchase of
these securities, prospective investors should carefully consider the risks
involved.
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.
POSSIBLE LACK OF AVAILABILITY OF CONTRACTS
The success of the Company, in large part, depends on its ability to
keep its assets continuously invested in Contracts. 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 addition, there can be no assurances that the same
quality of Contracts will be available for purchase with the net collection
proceeds of the original Contracts purchased.
EARLY 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 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-I, Inc. ("USAA 1995-I"), 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. Management
anticipates that it will devote approximately 50% of its time initially to the
business of the Company. After the initial purchase of Contracts, management
anticipates spending approximately 25% of its time on the Company's business. If
necessary, additional staff will be employed to take care of the business of the
Company. Expenses will be apportioned on a pro rata basis. However, 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-I, and SNP-III have
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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.
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. See "Management."
RELIANCE ON LOCAL ECONOMY DUE TO GEOGRAPHIC CONCENTRATION OF CONTRACTS
The Company anticipates that most Contracts that will be purchased will
originate in the States of Oklahoma and Texas. This practice may subject the
Company to the risk that a downturn in the economy in such region of the country
would more greatly affect the Company than if its business were more
geographically diversified. See "The Company - Business of the Company."
PROBLEMS WITH COLLECTIONS AND REPOSSESSIONS; POSSIBILITY OF POOR 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% - 100% 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 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
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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 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 COULD ADVERSELY AFFECT BUSINESS OF COMPANY
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. The
Company may only invest such funds in bank accounts, bank money-market accounts,
short-term certificates of deposit issued by a bank, or short-term securities
issued or guaranteed by the U.S. Government.
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 recourse agreements are insufficient may
adversely affect the ability of the Company to repay the Notes.
In the event that USAAC 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.
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DIFFICULTIES IN COMPLYING WITH 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.
SALE OF SMALL AMOUNT OF NOTES COULD ADVERSELY AFFECT PROFITS
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.
YEAR 2000 ISSUES HAVE NOT BEEN DETERMINED
Many existing computer programs use only two digits to identify a year
in the date field. These programs were designed and developed without
considering the impact of the upcoming change in the century. If not corrected,
many computer applications could fail or create erroneous results by or at the
Year 2000. The Company has not, at this time, made an assessment of the
consequences to its business of Year 2000 issues, including costs associated
with such issues.
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CAPITALIZATION
The following table sets forth the capitalization of the Company as of
June 19, 1998.
SHAREHOLDERS' EQUITY
Common Stock, $1.00 par value, $ 1,000
authorized 3,000 shares, issued
and outstanding 1,000 shares
Paid-in Capital $499,000
--------
TOTAL SHAREHOLDERS' EQUITY $500,000
USE OF PROCEEDS
The Company intends to apply a minimum of 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 up to 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(2) 7,000 2,800,000
Legal, Accounting & Printing Expenses(3) 5,000 200,000
Trustee and Escrow Fees(3)(4) -0- 50,000
Other Offering Expenses(3)(4)(5) -0- 350,000
Marketing Expenses & Due Diligence(3)(4)(6) -0- 600,000
Compensation to USAAC(3)(4)(7) -0- 800,000
----------- -----------
TOTAL $ 100,000 $40,000,000
- -------------------------
(1) To be paid to automobile contract suppliers.
(2) Broker-dealer commissions are assumed to the maximum of 7% for
presentation purposes in this table.
(3) To be paid or reimbursed to an affiliate.
(4) 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.
(5) Includes SEC registration fee, Blue Sky fees and miscellaneous
expenses.
(6) Anticipated to be paid to registered broker-dealers as a
non-accountable expense allowance and due diligence expense
reimbursement.
(7) 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.
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The Company has agreed to pay to soliciting broker-dealers, in
consideration for their services, a sales commission of 3% to 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 up to 7% for
sales commissions, 1% for a non-accountable expense allowance, and 0.5% for due
diligence and expanses. 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 $ 5,000.
Investor subscriptions are to be made payable to, and will be held in
an escrow account by BancFirst, Oklahoma City, Oklahoma, 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. No interest will be paid to investors
on escrowed funds. 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 February 29, 2000, 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, does not intend to seek, 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 Sterling Trust Company, as trustee (the
"Trustee"). The following summaries of certain provisions of the Indenture and
the summaries included under "The Indenture of Trust Provisions" do not purport
to be complete and are subject to, and qualified 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.
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CLASSES OF NOTES
Six classes of Notes will be issued pursuant to the Indenture of Trust
between the Company and Sterling Trust Company, as Trustee (see "Indenture of
Trust"): Class A-1 Notes, due December 31, 2000, will bear interest at an
initial rate of 7.75%; Class A-2 Notes, due December 31, 2001, will bear
interest at an initial rate of 8.75%; Class A-3 Notes, due December 31, 2002,
will bear interest at an initial rate of 9.5%; Class A-4 Notes, due December 31,
2003, will bear interest at an initial rate of 10%; Class A-5 Notes, due
December 31, 2004, will bear interest at an initial rate of 10.4%; and Class A-6
Notes, due December 31, 2005, will bear interest at an initial rate of 10.8%.
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 $ 5,000. Purchasers of
multiple classes of Promissory Notes shall be subject to a minimum purchase
requirement of $2,000 for each class purchased. 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 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.
Each Note will accrue Interest from the date of issuance. The initial
Interest rates will range from 7.75% to 10.8% 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 . 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 7.75% to 10.8% 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, or by
electronic transfer, 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 Collection Account
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 Collection
Account. On a periodic basis, the funds in the Master Collection Account will
be transferred to a Master Operating Account maintained by the Company.
Payments 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
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the Note Redemption Account, is sufficient to pay the accrued Interest due on
the outstanding Notes on such Payment Date. Prior to collection of the
Contracts, funds to pay Interest will be advanced by USAAC and reimbursed as
Contracts are collected.
REDEMPTION
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 Collection Account, 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 Seller will provide the Company
some form of recourse, such as contract repurchase agreements, limited guaranty
agreements, cash hold-back arrangements, or contract replacement guarantees.
These recourse agreements will be additional collateral securing the notes.
Pursuant to the
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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.
THE CONTRACTS
Each of the Contracts will be a retail installment sales contract and
will be secured by a used automobile or light-duty truck (a "Financed Vehicle").
The title to each Financed Vehicle will reflect the security interest of the
Company. 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 Company has no
arrangements or agreements with any Sellers at this time with respect to the
purchase of Contracts.
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
Collection Account," into which all payments made on or with respect to the
Contracts will be deposited. The Master Collection Account will be an account at
a financial institution where all remittance checks, drafts and other
instruments for the Contracts will be deposited. Servicing subcontractors will
be required under their subcontracts to promptly remit payments collected by
them to the Master Collection Account. USAAC has also agreed to deposit in the
Master Collection Account 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 Collection Account 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
Collection Account or the Master Operating 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.
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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 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 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 $8,000 per year
Note Payments and Registrar Services $12 per year per Note(2)
Note Certificate Corrections $10 each(2)
Bank Fees
Master Collection Account $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
- -----------------
(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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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
Contract Purchase Fees(3) 1% - 3% per Contract(2)
Repossession, Repair and Liquidation Expenses Estimated to average from $500 to $3,000 for
each repossessed vehicle
Costs of Enforcement of Recourse Enforcement of 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 Collection Account. 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 Servicer Company Transfers Company Utilizes Funds
Collects Installments Deposits Installment Funds From Master in Master Operating
Collections Into Master Collection Account To Account as Follows(1)
Collection Account 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-108, 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
- -----------------
(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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remaining principal balance thereof and will be secured by used automobiles and
light trucks (the "Financed Vehicles"). The Contracts will generally be from
residents of Texas and Oklahoma and will be purchased from motor vehicle
dealers, national rental car companies, and finance companies , and Sellers will
in many instances provide some form of recourse. The Company may expand its
Seller 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
credit-worthy than prime credit purchasers of automobiles.
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 $ 4,000 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, 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 enforcement and administration of
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 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
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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 Seller a
copy of the credit 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
0% 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 Sellers.
* In many instances, the Seller will be required to provide some form of
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 $ 4,000 and less than $25,000. The Company believes that $ 4,000
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.
SELLER CRITERIA
Contracts may 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 and 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.
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* Sellers including automobile sale divisions of national rental car
companies and finance companies must meet the same net worth criterion
utilized for automobile dealers.
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. USAAC may, in some instances, subcontract its collecting functions to
qualified third parties . Funds collected by the subcontracting servicers will
be required to be deposited directly to the Master Collection Account 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 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 chargeoff 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 Account, 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 $ 18,000
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 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.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth information, as of May 31, 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 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-108
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 49, 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"), and U.S. Automobile Acceptance 1995-I, Inc. ("USAA 1995-I") , both
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.
PERSONNEL
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
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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.
SERVICER
U.S. Automobile Acceptance Corporation, a Texas corporation and
affiliate of the Company (the "Servicer") was formed in January 1995 to begin to
consolidate management and operations of Michael R. Marshall's automobile
finance activities. All of the outstanding stock of U.S. Automobile Acceptance
Corporation is owned by Mr. Marshall. As of May 31, 1998, the Servicer's 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.
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 recourse agreements, and the repossession and sale of repossessed
vehicles. USAAC may subcontract a portion of the required services to third
parties.
PRIOR ACTIVITIES OF SIMILAR BUSINESSES UNDER COMMON CONTROL
U.S. Automobile SNP-I, Inc. ("SNP-I"), 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
approximately $2,400,000 . 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 redeemed all its outstanding
notes payable in November 1997.
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 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 December 31, 1997, USAA 1995-I had purchased
approximately 1200 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
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during the "development stage of USAA 1995-I 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 year ended December
31, 1997 was approximately $250,000. Credit losses in 1996 and 1997 approximated
5% 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 commenced in
late 1996. As of April 15, 1998, the note offering was completed. SNP-III has
incurred initial operating losses of approximately $ 500,000 during the period
from November 1996 through December 31, 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.
SNP-III expects to incur continued negative interest spread until the initial
purchase of the finance contract portfolio is substantially completed, in the
third or fourth quarter of 1998. Accordingly, SNP-III expects finance operations
will become profitable in the third or fourth quarter of 1998. As of April 15,
1998 SNP-III has received note subscriptions totaling $23,998,000 and has
purchased contracts with aggregate balance receivables totaling approximately $
20,000,000. SNP-III has incurred only nominal credit losses through April 15,
1998.
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, USAA 1995-I, and SNP-III.
Operations and activities of USAA 1995-I and SNP-III are similar to the planned
activities and operations of the Company.
The Company, 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).
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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.
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 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, Sterling Trust Company, 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 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,
and such failure to pay continues for a period of more than five days;
(2) the Company fails to pay principal of any Notes when due, and such
failure to pay continues for a period of more than five days;
(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,
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(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 twenty-five percent (25%) 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 , the Trustee shall, 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.
If an Event of Default occurs , the Trustee may pursue any available
remedy by proceeding at law or in equity, upon receipt of sufficient indemnity,
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 Company.
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 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
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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 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 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.
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
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to indicate the security interest therein of the Company. ln 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.
Upon the purchase of the Contracts, the Seller is required to assign
the Contracts (and the security interests arising thereunder in the Financed
Vehicles) to the Company. The Seller 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 Oklahoma and 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 Seller 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 several 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 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
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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.
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
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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.
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.
FEDERAL INCOME TAX CONSEQUENCES
The following discussion of federal income tax consequences 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.
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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.
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.
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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 "
Federal Income Tax Consequences."
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 consequences relating to the Notes has been
passed upon by Tyson Hopkins, independent certified public accountant, Oklahoma
City, Oklahoma.
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[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 June 19, 1998, and the related statement of stockholders' equity
for the period from the date of incorporation on January 2, 1998 through June
19, 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 June
19, 1998, in conformity with generally accepted accounting principles.
TYSON HOPKINS
Certified Public Accountant
Oklahoma City, Oklahoma
June 22, 1998
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U.S. AUTOMOBILE ACCEPTANCE SNP-IV, INC.
(a development stage enterprise)
BALANCE SHEET
As of June 19, 1998
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 500,000
OTHER ASSETS
Note offering costs 74,100
Organization costs 700
----------
TOTAL ASSETS $ 574,800
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
COMMITMENTS (Notes B and C)
LIABILITIES:
Due to affiliate $ 74,800
STOCKHOLDERS' EQUITY
Common stock - $1.00 par value,
3,000 shares authorized, 1,000
shares issued and outstanding 1,000
Paid-in capital 499,000
----------
Total stockholders' equity 500,000
----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 574,800
==========
See accompanying notes to financial statements
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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 June 19, 1998
Common Stock Paid-In
Shares Amount Capital Total
-------- -------- -------- --------
Balance prior to
incorporation on
January 2, 1998 -0- -0- -0- -0-
Issuance of common stock
for cash, par value
$1.00, sales price
$500.00 per share 1,000 $ 1,000 $499,000 $500,000
-------- -------- -------- --------
Balances, June 19, 1998 1,000 $ 1,000 $499,000 $500,000
======== ======== ======== ========
See accompanying notes to financial statements
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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 has to filed 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 from 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 an escrow bank account
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 Notes
will be secured by the Contracts and proceeds thereof.
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U.S. AUTOMOBILE ACCEPTANCE SNP-IV, INC.
(a development stage enterprise)
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 $500,000.
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 June 19, 1998 is approximately $75,000. These costs have
been recorded as a liability and capitalized as an asset on the balance sheet of
the Company. Upon the completion of the offering, Note offering costs will be
amortized
37
40
U.S. AUTOMOBILE ACCEPTANCE SNP-IV, INC.
(a development stage enterprise)
NOTES TO FINANCIAL STATEMENTS
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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41
EXHIBIT A
U.S. AUTOMOBILE ACCEPTANCE SNP-IV, INC.
ASSET-BACKED PROMISSORY NOTE
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 sums as set forth below:
$_________________ Class A-1 Promissory Notes Interest rate: _________
Due December 31, 2000
$_________________ Class A-2 Promissory Notes Interest Rate: _________
Due December 31, 2001
$_________________ Class A-3 Promissory Notes Interest Rate: _________
Due December 31, 2002
$_________________ Class A-4 Promissory Notes Interest rate: _________
Due December 31, 2003
$_________________ Class A-5 Promissory Notes Interest Rate: _________
Due December 31, 2004
$_________________ Class A-6 Promissory Notes Interest Rate: _________
Due December 31, 2005
TOTAL:
$________________
Each of the above dates represents the stated maturity date of the
principal of such Note(s) (the "Stated Maturity"). The Company further agrees
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 per annum stated herein,
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.
This Note is one of a duly authorized issue of Notes of the Company,
designated as its Asset-Backed Promissory Notes (herein called the "Notes"),
all issued and to be issued under an Indenture (herein called the "Indenture"),
between the Company and Sterling Trust Company (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 or electronic
transfer, mailed or transferred 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
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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
priority, perfected security interest in specific motor vehicle retail
installment contracts and the funds in the Master Collection Account, 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 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 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.
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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 .
Dated: _____________
U.S. AUTOMOBILE ACCEPTANCE SNP-IV,
INC., a Texas Corporation
By:
----------------------------------
Authorized Officer
Authenticated by:
- ------------------------------
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 Sterling Trust Company (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, Series A-1 through A-6.
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.
"Allowed Expenses" means expenses to be paid from collection proceeds
from the Contracts, which include Contract acquisition fees, Contract servicing
and administration expenses, 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.
"Collateral" means the collateral as described in the Security
Agreement, which includes all of the following: (i) any and all Contracts
acquired with the funds constituting the indebtedness or with funds received
from the repayment of the Contracts or the replacement contracts received to
replace any of the Contracts (the "Replacement Contracts"), which Contracts or
Replacement Contracts are originated in connection with the financing of new
and used automobiles and light-duty trucks (the "Vehicles"), including all
rights to receive payments thereunder and security interests in and instruments
of title to the Vehicles, whether now owned or hereafter acquired; (ii) all
funds in the Debtor bank accounts styled Master Collection Account, Master
Operating Account and Note Redemption Account; (iii) all proceeds of an
offering pursuant to the Registration Statement of the Company filed with the
Securities and Exchange Commission (the "Registration Statement"); and (iv) all
products thereof and all cash and noncash proceeds of any of the foregoing, in
any form, including, without limitation, proceeds of insurance policies from
the loss thereof, all titles to the Vehicles and all assignment of liens, all
Contracts, Vehicle titles, assignments, recourse agreements, other documents
and instruments in the possession of the Company, and any documents or
instruments in the possession, custody and control of the Servicer, any
substitute servicer, or any independent custodian.
"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.
"Default" means any event which is, or after notice or lapse of time
or both would be, an Event of Default pursuant to Section 5.01 of this
Indenture of Trust.
"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.
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"Master Collection Account" means the bank account 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 Collection
Account attributable to the Contracts will be directly transferred.
"Net Collection Proceeds" means collection proceeds remaining from the
Contracts after deduction for payments of interest and Allowed Expenses.
"Note Redemption Account" the interest-bearing account into which the
Company will deposit the net collection proceeds, from the Contracts 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.
"Paying Agent" means U.S. Automobile Acceptance Corporation, or its
designee.
"Payment Date" means the fifteenth (l5th) day of each month beginning
with the first full calendar month following the issuance of a Note, that
payments of interest shall be made, and upon maturity, when the final payment
consisting of principal and accrued interest shall be made.
"Redemption Date" means such Payment Date 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, and any accrued but unpaid interest, to be paid to
Noteholders upon redemption of the Notes.
"Registrar" means U.S. Automobile Acceptance Corporation, or its
designee.
"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. All of the outstanding stock of both the Servicer and the Company is
owned by Michael R. Marshall.
"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 and the Replacement Contracts, together with all payments and
instruments received with respect thereto, (b) the Servicing Agreement, (c) the
Master Collection Account, 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.
B-2
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"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.
"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.
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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.
The Trustee shall 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
U.S. Automobile Acceptance Corporation, or its designee, 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 final 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 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. Such fee, if any, shall not be paid through
the Trustee.
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, and upon receipt
of notice of such Event of Default by the Trustee, 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 , the Trustee shall
exercise its rights and powers, as set forth in this Section 3.02 and in
Section 3.03 below, 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.
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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
grossly negligent action, its own grossly negligent failure to act, or its own
willful misconduct or breach of contract, except that the Trustee shall not be
liable for any error of judgment made in good faith and/or in reliance upon
opinion of counsel, unless it is proved that the Trustee was grossly 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.
(f) The Trustee is authorized and directed to enter into the
Security Agreement on behalf of the Noteholders solely in its capacity as
Trustee under this 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 any such 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
of counsel. 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.
(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).
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SECTION 3.07. COMPENSATION AND INDEMNITY.
The Company agrees:
(a) to pay the Trustee from time to time 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, upon its request for all reasonable
expenses and disbursements 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 for, and to hold it harmless against
any loss, cost, liability, claim or expense incurred without gross negligence
or bad faith on its part related to or arising out of the acceptance of and
administration of the duties of the Trustee 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 and Noteholders, the Custodian,
and the Servicer 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.
SECTION 3.08. REPLACEMENT OF TRUSTEE.
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 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. The resignation or removal of the
Trustee shall not be effective until a successor Trustee has been appointed.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Immediately after
that, the retiring Trustee shall transfer all property held by it as Trustee to
the successor Trustee and the resignation or removal of the retiring Trustee
shall become effective. The successor Trustee shall have the rights, powers,
and duties of the Trustee under Sections 3.02 and 3.03 of this Indenture. A
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successor Trustee shall give notice of its succession to each Noteholder as
provided in Section 7.02.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, 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.
If the Trustee fails to comply with Section 3.10, any Noteholder may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
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. 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.
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 promptly pay the principal of and
interest on the Notes on the dates and in the manner provided in the Notes,
from funds in the Note Redemption Account; provided, however, that the Paying
Agent shall be required to pay the Notes only from and to the extent of the
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moneys transferred by the Company to the Note Redemption Account pursuant to
Sections 4.01(b) and 4.01(c).
(b) To facilitate payment of the Notes, the Company shall transfer
to the Note Redemption Account 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 as of 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, as
solely determined by the Company.
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 Company or the signers know of any Default by the Company in performing
its covenants under the Indenture, the Security Agreement, or the Custodian
Agreement. 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
such documents 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).
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, and such failure to pay continues for a
period of more than five days;
(2) the Company fails to cause the principal of any Notes to be
paid when due, and such failure to pay continues for a period
of more than five days;
(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,
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(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 twenty-five percent (25%) 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 as provided in Section 5.01, the
Trustee shall, 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.
SECTION 5.03. OTHER REMEDIES; LIMITATION.
Subject to the provisions of the preceding paragraph, if an Event of
Default occurs, as provided in Section 5.01, the Trustee may pursue any
available remedy by proceeding at law or in equity, upon receipt of sufficient
indemnity, 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 Company.
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 or 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 liability.
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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 for amounts due under Section
3.07;
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 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.
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
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(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.
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.
SECTION 6.06. TRUSTEE TO SIGN AMENDMENTS, ETC.
The Trustee shall sign any amendment, supplement, or waiver authorized
pursuant to this Article.
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
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If to the Trustee: Sterling Trust Company
P.O. Box 2526
Waco, Texas 76710
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 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 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 hearing 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 Company and 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
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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;
(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.
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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. Venue shall lie in the County of Dallas.
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. 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 7.13. 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.
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:
-----------------------------------
STERLING TRUST COMPANY
By:
-----------------------------------
Its:
-----------------------------------
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Exhibit A
U.S. AUTOMOBILE ACCEPTANCE SNP-IV, INC.
ASSET-BACKED PROMISSORY NOTE
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 sums as set forth below:
$_________________ Class A-1 Promissory Notes Interest rate: _________
Due December 31, 2000
$_________________ Class A-2 Promissory Notes Interest Rate: _________
Due December 31, 2001
$_________________ Class A-3 Promissory Notes Interest Rate: _________
Due December 31, 2002
$_________________ Class A-4 Promissory Notes Interest rate: _________
Due December 31, 2003
$_________________ Class A-5 Promissory Notes Interest Rate: _________
Due December 31, 2004
$_________________ Class A-6 Promissory Notes Interest Rate: _________
Due December 31, 2005
TOTAL:
$________________
Each of the above dates represents the stated maturity date of the
principal of such Note(s) (the "Stated Maturity"). The Company further agrees 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 per annum stated herein, 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.
This Note is one of a duly authorized issue of Notes of the Company,
designated as its Asset-Backed Promissory Notes (herein called the "Notes"),
all issued and to be issued under an Indenture (herein called the "Indenture"),
between the Company and Sterling Trust Company (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 or electronic
transfer, mailed or transferred 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
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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
priority, perfected security interest in specific motor vehicle retail
installment contracts and the funds in the Master Collection Account, 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 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 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.
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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 .
Dated: _______________
U.S. AUTOMOBILE ACCEPTANCE SNP-IV, INC.,
a Texas Corporation
By:
-----------------------------------
Authorized Officer
Authenticated by:
- --------------------------------
Authorized Officer
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EXHIBIT C
U.S. AUTOMOBILE ACCEPTANCE SNP-IV, INC.
SUBSCRIPTION AGREEMENT - ASSET-BACKED PROMISSORY NOTES
The Investor named below, by payment of the purchase price for such
Asset-Backed Promissory Notes ("Notes"), by the delivery of a check payable to
U.S. AUTOMOBILE ACCEPTANCE SNP-IV, INC. hereby subscribes for the Notes
indicated below (minimum purchase of $ 5,000) with additional increments of
$1,000. Purchasers of multiple classes of Notes shall be subject to the
minimum purchase requirements of $2,000 for each class purchased. 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 Notes being subscribed for hereby.
A. INVESTMENT:
Class Amount
Purchased Class Maturity Date
----------- ----- -------------
$________________ A-1 December 31, 2000
$________________ A-2 December 31, 2001
$________________ A-3 December 31, 2002
$________________ A-4 December 31, 2003
$________________ A-5 December 31, 2004
$________________ A-6 December 31, 2005
TOTAL: $________________
Initial Purchase [ ] Additional Purchase [ ] Date of Investor's check
_____
B. REGISTRATION:
Registered Owner: ____________________________________ Co-Owner:_____________________________________________
Mailing Address: __________________________________________________________________________________________________
City, State & Zip: _________________________________________________________________________________________________
Residence Address (if different from above): _______________________________________________________________________
Birth Date Owner: __________ / _________ / _________ Birth Date Co-Owner: _______ / _______ / ______________
Social Security No. Owner: ___________________________ Social Security No. Co-Owner:___________________________
U.S. Citizen [ ] Other [ ]
Corporate or Custodial Tax ID ______________________________________________________________________________________
Telephone #: (H) (__________) __________________________________________
(0) (__________) __________________________________________ _____ - ______ - ______________
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" AND AM/ARE INVESTING NO MORE THAN 10% OF MY/OUR NET WORTH (AS DEFINED IN THE
PROSPECTUS).
Signatures - Registered Owner: _________________________________ Co-Owner ______________________________________________
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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: _________________________________ 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-108,
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
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63
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 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 time subsequent to its date.
TABLE OF CONTENTS
Page
----
Summary 3
Risk Factors 8
Capitalization 12
Use of Proceeds 12
Plan of Distribution 12
Description of the Notes 13
Security for the Notes 15
Allowed Expenses and Flow of Contract
Proceeds 17
The Company 18
Purchase and Collection of Contracts 19
Security Ownership of Certain
Beneficial Owners and Management 22
Management 22
Management's Discussion and Analysis
of Financial Condition 24
Indenture of Trust Provisions 25
Certain Legal Aspects of the Contracts 27
Federal Income Tax
Consequences 30
Experts 32
Legal Matters 32
Financial Statements 33
Exhibits
Form of Asset-Backed Promissory
Note 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
U.S.
AUTOMOBILE
ACCEPTANCE
SNP-IV,
INC.
64
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 1998, the Company issued 1,000 shares of Common Stock to
Michael R. Marshall, an individual and resident of Oklahoma, for cash in the
amount of $500,000, 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.
ITEM 16. EXHIBITS
The following Exhibits are filed as part of the Registration
Statement:
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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 Sterling
Trust Company, as Trustee
10.2* - Form of Custodian Agreement among U.S. Automobile Acceptance SNP-IV, Inc., Sterling Trust Company, 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.
10.7* - Form of Continuing Purchase and Sale Agreement
23.1* - Consent of Amy Waters, Attorney at Law (included in her opinion as Exhibit 5.1)
23.2* - Consent of Tyson Hopkins, CPA
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*Filed with this 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 registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer
or controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
(4) The undersigned registrant hereby undertakes to file an
application for the purpose of determining the eligibility of the trustee to
act under subsection (a) of section 310 of the Trust Indenture Act ("Act") in
accordance with the rules and regulations prescribed by the Commission under
section 305(b)(2) of the Act.
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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 Amendment No. 1 to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Waxahachie, State of Texas, on the
30th day of June, 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; June 30, 1998
- ------------------------------ Treasurer; Sole Director;
Michael R. Marshall Chief Accounting Officer
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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 Sterling
Trust Company, as Trustee
10.2* - Form of Custodian Agreement among U.S. Automobile Acceptance SNP-IV, Inc., Sterling Trust Company, 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.
10.7* - Form of Continuing Purchase and Sale Agreement
23.1* - Consent of Amy Waters, Attorney at Law (included in her opinion as Exhibit 5.1)
23.2* - Consent of Tyson Hopkins, CPA
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*Filed with this amendment