<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 9, 1997
REGISTRATION NO. 333-18095
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------
HONDA AUTO RECEIVABLES 1997-A GRANTOR TRUST
(Issuer with respect to the Certificates)
AMERICAN HONDA RECEIVABLES CORP.
(Originator of the Trust described herein)
(Exact name of Registrant as specified in its charter)
CALIFORNIA 6146 33-0526079
(State or other (Primary Standard (I.R.S. Employer
Jurisdiction of Industrial Identification Number)
Incorporation or Classification Code
Organization) Number)
700 VAN NESS AVENUE
TORRANCE, CALIFORNIA 90501
(310) 781-4100
(Address, including zip code, and telephone number, including
area code, of Originator's principal executive offices)
Y. KOHAMA
PRESIDENT
700 VAN NESS AVENUE
TORRANCE, CALIFORNIA 90501
(310) 781-4100
(Name, address, including zip code, and telephone number, including
area code, of agent for service with respect to the Registrant)
----------------
COPIES TO:
<TABLE>
<S> <C>
C. Thomas Kunz, Esq.
Dale W. Lum, Esq. Skadden, Arps, Slate,
Brown & Wood LLP Meagher & Flom LLP
555 California Street 919 Third Avenue
San Francisco, California 94104 New York, New York 10022
</TABLE>
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Approximate date of commencement of proposed sale to the public:
As soon as practicable after this Registration Statement becomes effective.
----------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
- -------------
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
- -------------
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
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CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
PROPOSED TITLE OF AMOUNT TO OFFERING AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED PRICE PER UNIT OFFERING PRICE REGISTRATION FEE
<S> <C> <C> <C> <C>
% Asset Backed Certificates, Class
A.................................. $1,000,000.00 100%(1) $1,000,000.00(1) $303.03(2)
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee on the
basis of the proposed maximum offering price per unit.
(2) Previously paid.
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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, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
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- --------------------------------------------------------------------------------
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION, DATED JULY 9, 1997
$
Honda Auto Receivables 1997-A Grantor Trust
% Asset Backed Certificates, Class A
-----------
American Honda Receivables Corp.
Seller
American Honda Finance Corporation
Servicer
--------------
THE % ASSET BACKED CERTIFICATES (THE "CERTIFICATES") WILL CONSIST OF ONE
CLASS OF SENIOR CERTIFICATES (THE "CLASS A CERTIFICATES") AND ONE
CLASS OF SUBORDINATED CERTIFICATES (THE "CLASS B CERTIFICATES"). THE CLASS
A CERTIFICATES ARE THE ONLY CERTIFICATES OFFERED HEREBY AND WILL
EVIDENCE IN THE AGGREGATE AN UNDIVIDED OWNERSHIP INTEREST OF %
OF THE HONDA AUTO RECEIVABLES 1997-A GRANTOR TRUST (THE "TRUST").
THE TRUST WILL BE FORMED PURSUANT TO A POOLING AND SERVICING
AGREEMENT AMONG AMERICAN HONDA RECEIVABLES CORP., AS SELLER
(THE "SELLER"), AMERICAN HONDA FINANCE CORPORATION, AS
SERVICER ("AHFC" OR THE "SERVICER"), AND BANK OF TOKYO -
MITSUBISHI TRUST COMPANY, AS TRUSTEE. THE CLASS B
CERTIFICATES, WHICH INITIALLY WILL BE RETAINED BY THE
SELLER, WILL EVIDENCE IN THE AGGREGATE AN UNDIVIDED
OWNERSHIP INTEREST OF % OF THE TRUST. THE
RIGHTS OF THE CLASS B CERTIFICATEHOLDERS TO
RECEIVE DISTRIBUTIONS WITH RESPECT TO THE
ASSETS OF THE TRUST WILL BE SUBORDINATED
TO THE RIGHTS OF THE CLASS A
CERTIFICATEHOLDERS TO THE LIMITED
EXTENT DESCRIBED HEREIN. SEE
"THE CERTIFICATES --
SUBORDINA TION OF THE CLASS
B CERTIFICATES; RESERVE
FUND".
PRINCIPAL, AND INTEREST TO THE EXTENT OF THE PASS-THROUGH RATE OF % PER
ANNUM, WILL BE DISTRIBUTED TO CERTIFICATEHOLDERS ON THE FIFTEENTH DAY OF
EACH MONTH (OR, IF SUCH DAY IS NOT A BUSINESS DAY, THE NEXT SUCCEEDING
BUSINESS DAY), BEGINNING AUGUST 15, 1997 (EACH, A "DISTRIBUTION
DATE"). THE FINAL SCHEDULED DISTRIBUTION DATE WILL BE 15,
20 . THE ASSETS OF THE TRUST WILL PRIMARILY INCLUDE A POOL OF
RETAIL INSTALLMENT SALE CONTRACTS (THE "RECEIVABLES")
SECURED BY THE NEW OR USED AUTOMOBILES, SPORT
UTILITY VEHICLES AND MINIVANS FINANCED THEREBY
(THE "FINANCED VEHICLES"), CERTAIN MONIES DUE
OR RECEIVED UNDER THE RECEIVABLES ON AND
AFTER JULY 1, 1997 AND SECURITY
INTERESTS IN THE FINANCED VEHICLES.
SEE "PROPERTY OF THE TRUST".
THE CLASS A CERTIFICATES INITIALLY WILL BE REPRESENTED BY CERTIFICATES
REGISTERED IN THE NAME OF CEDE & CO., AS NOMINEE OF THE DEPOSITORY TRUST
COMPANY ("DTC"). THE INTERESTS OF BENEFICIAL OWNERS OF THE CLASS A
CERTIFICATES WILL BE REPRESENTED BY BOOK ENTRIES ON THE
RECORDS OF PARTICIPATING MEMBERS OF DTC. DEFINITIVE CLASS A
CERTIFICATES WILL BE AVAILABLE ONLY UNDER CERTAIN
LIMITED CIRCUMSTANCES. SEE "THE CERTIFICATES --
BOOK-ENTRY REGISTRATION" AND "-- DEFINITIVE
CERTIFICATES".
THERE CURRENTLY IS NO SECONDARY MARKET FOR THE CLASS A CERTIFICATES AND THERE IS
NO ASSURANCE THAT ONE WILL DEVELOP. THE UNDERWRITERS EXPECT, BUT WILL
NOT BE OBLIGATED, TO MAKE A MARKET IN THE CLASS A
CERTIFICATES. THERE IS NO ASSURANCE THAT ANY SUCH
MARKET WILL DEVELOP, OR IF ONE DOES
DEVELOP, THAT IT WILL CONTINUE.
------------------
THE CLASS A CERTIFICATES WILL REPRESENT INTERESTS IN THE TRUST AND WILL NOT
REPRESENT INTERESTS IN OR OBLIGATIONS OF AMERICAN HONDA RECEIVABLES CORP.,
AMERICAN HONDA FINANCE CORPORATION OR ANY OF THEIR RESPECTIVE
AFFILIATES.
--------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR AD-
EQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO THE
PUBLIC(1) COMMISSIONS SELLER(1)(2)
------------------ ------------------ ------------------
<S> <C> <C> <C>
PER CLASS A CERTIFICATE............................... % % %
TOTAL................................................. $ $ $
</TABLE>
(1) PLUS ACCRUED INTEREST AT THE PASS-THROUGH RATE FROM , 1997.
(2) BEFORE DEDUCTING EXPENSES PAYABLE BY THE SELLER ESTIMATED AT $ .
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THE CLASS A CERTIFICATES ARE OFFERED BY THE UNDERWRITERS WHEN, AS AND IF
ISSUED BY THE TRUST, DELIVERED TO AND ACCEPTED BY THE UNDERWRITERS AND SUBJECT
TO THEIR RIGHT TO REJECT ORDERS IN WHOLE OR IN PART. IT IS EXPECTED THAT
DELIVERY OF THE CLASS A CERTIFICATES, IN BOOK-ENTRY FORM, WILL BE MADE THROUGH
THE FACILITIES OF DTC ON OR ABOUT , 1997, AGAINST PAYMENT IN
IMMEDIATELY AVAILABLE FUNDS.
Credit Suisse First Boston
THE DATE OF THIS PROSPECTUS IS , 1997.
<PAGE>
Certain persons participating in this offering may engage in transactions
that stabilize, maintain or otherwise affect the price of the Class A
Certificates. Such transactions may include stabilizing. For a description of
these activities, See "UNDERWRITING".
--------------
AVAILABLE INFORMATION
The Seller has filed with the Securities and Exchange Commission (the
"Commission") on behalf of the Trust a Registration Statement on Form S-1
(together with all amendments and exhibits thereto, the "Registration
Statement"), of which this Prospectus is a part, under the Securities Act of
1933, as amended (the "Securities Act") with respect to the Class A Certificates
being offered hereby. This Prospectus does not contain all of the information
set forth in the Registration Statement, certain parts of which have been
omitted in accordance with the rules and regulations of the Commission. For
further information, reference is made to the Registration Statement which is
available for inspection without charge at the public reference facilities of
the Commission at Judiciary Plaza, Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and the regional offices of the Commission at Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511, and
Seven World Trade Center, Suite 1300, New York, New York 10048. Copies of such
information can be obtained from the Public Reference Section of the Commission
at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. The Commission maintains a Web Site that contains reports,
proxy and information statements and other information regarding registrants
that file electronically with the Commission at http: //www.sec.gov. The
Servicer, on behalf of the Trust, will also file or cause to be filed with the
Commission such periodic reports as are required under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and the rules and regulations of
the Commission thereunder. The filing with the Commission of periodic reports
with respect to the Trust will cease following completion of the reporting
period required by Rule 15d-1 of Regulation 15D under the Exchange Act.
REPORTS TO CLASS A CERTIFICATEHOLDERS BY THE TRUSTEE
Bank of Tokyo - Mitsubishi Trust Company, as Trustee, will provide to Class
A Certificateholders (which is expected to be Cede & Co. as the nominee of DTC
unless Definitive Certificates are issued under the limited circumstances
described herein) unaudited monthly and annual reports concerning the
Receivables. See "The Certificates -- Statements to Class A Certificateholders"
and "-- Evidence as to Compliance".
2
<PAGE>
SUMMARY
The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus. Certain capitalized
terms used and not otherwise defined herein shall have the meanings ascribed
thereto elsewhere in this Prospectus. See the Index of Capitalized Terms at page
51 for the location herein of defined terms.
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<S> <C>
Trust............... Honda Auto Receivables 1997-A Grantor Trust.
Seller.............. American Honda Receivables Corp. (the "Seller"), a wholly
owned, limited purpose subsidiary of American Honda
Finance Corporation.
Servicer............ American Honda Finance Corporation ("AHFC" or, in its
capacity as Servicer, the "Servicer"), a wholly owned
subsidiary of American Honda Motor Co., Inc. ("AHMC").
AHMC is the exclusive distributor of Honda, Acura and
Odyssey motor vehicles and Honda power equipment in the
United States and is a wholly owned subsidiary of Honda
Motor Co., Ltd., a Japanese corporation.
Securities The % Asset Backed Certificates (the "Certificates")
Offered............ will consist of one class of senior certificates (the
"Class A Certificates") and one class of subordinated
certificates (the "Class B Certificates"). Only the Class
A Certificates are being offered hereby. Each Certificate
will represent a fractional undivided interest in the
Trust. The assets of the Trust will primarily include a
pool of retail installment sale contracts (the
"Receivables") secured by the new or used Honda and Acura
automobiles and sport utility vehicles and Odyssey
minivans financed thereby (the "Financed Vehicles"), with
respect to Precomputed Receivables, certain monies due
under the Receivables on and after July 1, 1997 (the
"Cutoff Date"), and, with respect to Simple Interest
Receivables, certain monies received thereunder on or
after the Cutoff Date, security interests in the Financed
Vehicles, certain bank accounts and the proceeds thereof,
proceeds from claims under certain insurance policies in
respect of individual Financed Vehicles or Obligors and
certain rights under the Receivables Purchase Agreement,
to be dated as of July 1, 1997 (the "Receivables Purchase
Agreement"), among the Seller, the Servicer and Bank of
Tokyo - Mitsubishi Trust Company, as trustee (the
"Trustee"). See "Property of the Trust". The Trust will be
formed and the Certificates will be issued pursuant to the
Pooling and Servicing Agreement, to be dated as of July 1,
1997 (the "Agreement"), among the Seller, the Servicer and
the Trustee. The Class A Certificates will be offered in
minimum denominations of $1,000 and integral multiples
thereof.
The Class A Certificates will evidence in the aggregate an
undivided ownership interest (the "Class A Percentage") of
% of the Trust (initially representing $ )
and the Class B Certificates will evidence in the
aggregate an undivided ownership interest (the "Class B
Percentage") of % of the Trust (initially representing
$ ). The Class B Certificates will be subordinated
to the Class A Certificates to the limited extent
described under "Summary -- Subordination of the Class B
Certificates; Reserve Fund" and "The
</TABLE>
3
<PAGE>
<TABLE>
<S> <C>
Certificates -- Distributions on the Certificates" and "--
Subordination of the Class B Certificates; Reserve Fund".
The Class B Certificates are not being offered hereby and
initially will be held by the Seller.
Registration of the
Class A
Certificates....... The Class A Certificates will initially be represented by
certificates registered in the name of Cede & Co.
("Cede"), the nominee of The Depository Trust Company
("DTC"). No beneficial owner of a acquiring an interest
Class A Certificates (each, a "Certificate Owner") will be
entitled to receive a definitive certificate representing
such person's interest, except in the event that
Definitive Certificates are issued under the limited
circumstances described under "The Certificates --
Definitive Certificates". Unless and until Class A
Certificates are issued in definitive form, all references
herein to distributions, notices, reports and statements
to and to actions by and to effects upon Class A
Certificateholders will refer to distributions, notices,
reports and statements to and to the same actions and
effects with respect to DTC or Cede, as the case may be,
for the benefit of the Certificate Owners in accordance
with DTC procedures. See "The Certificates -- General" and
"-- Book-Entry Registration".
Pass-Through Rate... % per annum.
Distribution The fifteenth day of each month (or, if such day is not a
Dates.............. Business Day, the next succeeding Business Day), beginning
August 15, 1997. The final scheduled Distribution Date
(the "Final Scheduled Distribution Date") will be
15, 20 , the Distribution Date in the sixth
month following the maturity of the Receivable having the
latest maturity as of the Cutoff Date. A "Business Day"
means any day other than a Saturday, a Sunday or a day on
which banking institutions in New York, New York or Los
Angeles, California are authorized or obligated by law,
executive order or governmental decree to be closed.
Interest............ On each Distribution Date, the Trustee will distribute, to
the extent of available funds, pro rata to the holders of
record of the Class A Certificates (the "Class A
Certificateholders") as of the day immediately preceding
such Distribution Date or, if Definitive Certificates are
issued, the last day of the immediately preceding calendar
month (each such date, a "Record Date"), interest in an
amount equal to one-twelfth of the product of the
Pass-Through Rate, calculated on the basis of a 360-day
year consisting of twelve 30-day months, and the Class A
Certificate Balance as of the immediately preceding
Distribution Date (after giving effect to distributions of
principal made on such immediately preceding Distribution
Date) or, in the case of the first Distribution Date, the
Original Class A Certificate Balance. The "Class A
Certificate Balance" will initially equal $ (the
"Original Class A Certificate Balance") and on each
Distribution Date will equal the Original Class A
Certificate Balance, reduced by all principal distri-
butions made on or prior to such Distribution Date on the
Class A Certificates.
Principal........... On each Distribution Date, the Trustee will distribute, to
the extent of available funds, pro rata to Class A
Certificateholders of record as of
</TABLE>
4
<PAGE>
<TABLE>
<S> <C>
the related Record Date, an amount equal to the Class A
Percentage of (i) the principal portion of all scheduled
monthly payments (each, a "Scheduled Payment") on
Precomputed Receivables due during the immediately
preceding calendar month (each, a "Collection Period") and
the principal portion of all Scheduled Payments on Simple
Interest Receivables actually received during such
Collection Period; (ii) the principal portion of all
prepayments in full on the Receivables and all partial
prepayments on Simple Interest Receivables, in each case
received by the Servicer during such Collection Period;
(iii) the principal balance of each Receivable that was
purchased by the Servicer or repurchased by the Seller, in
either case under an obligation that arose during such
Collection Period; and (iv) the principal balance of each
Receivable that became a Defaulted Receivable during such
Collection Period. See "The Certificates -- Distributions
on the Certificates -- Calculation of Distributable
Amounts".
The Yield Supplement On the date of initial issuance of the Certificates (the
Account............ "Closing Date") a yield supplement account will be
established with the Trustee for the benefit of the
Certificateholders (the "Yield Supplement Account"). The
Yield Supplement Account is designed solely to supplement
the interest collections on those Receivables (the
"Discount Receivables") that have APRs which are less than
the sum of (i) the Pass-Through Rate and (ii) the
Servicing Fee Rate (the sum of such rates, the "Required
Rate"). The Yield Supplement Account will not be part of
or otherwise includible in the Trust and will be a
segregated trust account held by the Trustee for the
benefit of the Certificateholders.
The Yield Supplement Account will be funded on the Closing
Date by the Seller in an amount (the "Yield Supplement
Account Deposit") to be specified in the Agreement. The
Yield Supplement Account Deposit will equal the aggregate
amount as of the Cutoff Date by which interest on the
Principal Balance of each Discount Receivable for the
remaining term of such Receivable (assuming no prepayments
or delinquencies) at a rate equal to the Required Rate
exceeds interest on such Principal Balance at the APR of
such Receivable; provided, that such aggregate amount may
be discounted at a rate to be specified in the Agreement.
On each Distribution Date, the Trustee shall withdraw from
monies on deposit in the Yield Supplement Account, for
distribution to Certificateholders, the aggregate amount
by which one month's interest on the Principal Balance as
of the first day of the related Collection Period of each
Discount Receivable (other than a Discount Receivable that
is a Defaulted Receivable) at a rate equal to the Required
Rate, exceeds one month's interest on such Principal
Balance at the APR of each such Receivable (the "Yield
Supplement Deposit Amount").
Amounts on deposit on any Distribution Date in the Yield
Supplement Account in excess of the Maximum Yield
Supplement Amount, after giving effect to all
distributions to be made on such Distribution Date, will
be paid to the Seller and the Certificateholders will have
no further
</TABLE>
5
<PAGE>
<TABLE>
<S> <C>
rights in, or claims to, such amounts. The Maximum Yield
Supplement Amount will be calculated as described under
"The Certificates -- The Yield Supplement Account".
Subordination of the
Class B
Certificates;
Reserve Fund....... The rights of the holders of record of the Class B
Certificates (the "Class B Certificateholders" and,
together with the Class A Certificateholders, the
"Certificateholders") to receive distributions with
respect to the Receivables will be subordinated to the
rights of the Class A Certificateholders, to the limited
extent described herein. This subordination is intended to
enhance the likelihood of timely receipt by Class A
Certificateholders of the full amount of interest and
principal required to be paid to them, and to afford such
Class A Certificateholders limited protection against
losses in respect of the Receivables.
No distribution will be made to the Class B
Certificateholders on any Distribution Date in respect of
(i) interest until the full amount of interest on the
Class A Certificates payable on such Distribution Date has
been distributed to the Class A Certificateholders and
(ii) principal until the full amount of interest on and
principal of the Class A Certificates payable on such
Distribution Date has been distributed to the Class A
Certificateholders. Distributions of interest on the Class
B Certificates, to the extent of collections on or in
respect of the Receivables allocable to interest and
certain available amounts on deposit in the Reserve Fund,
will not be subordinated to the payment of principal on
the Class A Certificates.
The protection afforded to the Class A Certificateholders
by the subordination feature described above will be
effected both by the preferential right of the Class A
Certificateholders to receive, to the limited extent
described herein, current distributions from collections
on or in respect of the Receivables and by the
establishment of a segregated trust account held by the
Trustee for the benefit of the Certificateholders (the
"Reserve Fund"). The Reserve Fund will provide credit
enhancement and liquidity to Certificateholders that will
be available to the extent described herein in the event
that, as a result of defaults or delinquencies,
collections on the Receivables are insufficient to make
distributions on the Certificates. The Reserve Fund will
not be part of or otherwise includible in the Trust and
will be a segregated trust account held by the Trustee for
the benefit of the Certificateholders.
The Reserve Fund will be funded by the Seller on the
Closing Date in an amount equal to $ . Thereafter,
all Excess Amounts will be deposited from time to time in
the Reserve Fund to the extent necessary to maintain the
amount on deposit in the Reserve Fund at the Specified
Reserve Fund Balance. Excess Amounts in respect of a Dis-
tribution Date generally will consist of all interest
collections on or in respect of the Receivables on deposit
in the Certificate Account in respect of such Distribution
Date, after the Servicer has been reimbursed for any
outstanding Advances and has been paid the Servicing Fee
with respect to the related Collection Period (including
any unpaid Servicing Fees with respect to one or more
prior Collection Periods) and after giving effect to all
distributions of interest and principal
</TABLE>
6
<PAGE>
<TABLE>
<S> <C>
required to be made to the Class A and Class B
Certificateholders on such Distribution Date and deposits
required to be made to the Payahead Account. The
"Specified Reserve Fund Balance" for the first
Distribution Date will be $ and on any
Distribution Date thereafter will be calculated as
described under "The Certificates -- Subordination of the
Class B Certificates; Reserve Fund". On each Distribution
Date, funds will be withdrawn from the Reserve Fund for
distribution, first to Class A Certificateholders to the
extent of shortfalls in the amounts available to make
required distributions of interest on the Class A
Certificates, second to Class B Certificateholders to the
extent of shortfalls in the amounts available to make
required distributions of interest on the Class B
Certificates, third to Class A Certificateholders to the
extent of shortfalls in the amounts available to make
required distributions of principal on the Class A
Certificates and fourth to Class B Certificateholders to
the extent of shortfalls in the amounts available to make
required distributions of principal on the Class B
Certificates. If on any Distribution Date the Class B
Certificate Balance has been reduced to zero and amounts
on deposit in the Reserve Fund have been depleted as a
result of losses in respect of the Receivables, the
protection afforded to the Class A Certificateholders by
the subordination of the Class B Certificates and by the
Reserve Fund will be exhausted and the Class A
Certificateholders will bear directly the risks associated
with ownership of the Receivables. Amounts on deposit in
the Yield Supplement Account will not be available to
Certificateholders in the event that defaults or
delinquencies in collections on the Receivables result in
shortfalls in amounts due to Certificateholders (even in
the circumstance described in the preceding sentence) or
for any other purpose other than withdrawals of the Yield
Supplement Deposit Amount on each Distribution Date.
On each Distribution Date, after giving effect to all
distributions made on such Distribution Date, any amounts
in the Reserve Fund in excess of the Specified Reserve
Fund Balance will be distributed to the Seller and upon
such distribution the Certificateholders will have no
further rights in, or claims to, such amounts. See "The
Certificates -- Subordination of the Class B Certificates;
Reserve Fund".
Advances............ On the Business Day immediately preceding each
Distribution Date, the Servicer will advance to the Trust,
in respect of each (i) Precomputed Receivable, that
portion, if any, of the related Scheduled Payment that was
not timely made (each, a "Precomputed Advance") and (ii)
Simple Interest Receivable, an amount equal to the product
of the principal balance of such Receivable as of the
first day of the related Collection Period and one-twelfth
of its annual percentage rate ("APR"), minus the amount of
interest actually received on such Receivable during such
Collection Period (each, a "Simple Interest Advance" and,
together with Precomputed Advances, the "Advances"). If
such calculation in respect of a Simple Interest
Receivable results in a negative number, an amount equal
to such negative number shall be
</TABLE>
7
<PAGE>
<TABLE>
<S> <C>
paid to the Servicer out of interest collections in
respect of the Receivables during the related Collection
Period in reimbursement of outstanding Simple Interest
Advances. The Servicer will be required to make an Advance
only to the extent that it determines that such Advance
will be recoverable from future payments and collections
on or in respect of such Receivable. Upon the
determination by the Servicer that such reimbursement is
unlikely, the Servicer will be entitled to recover
Advances from payments and collections on or in respect of
other Receivables. See "The Certificates -- Advances".
Servicing Fee....... The Servicer will receive a monthly fee, payable on each
Distribution Date (the "Servicing Fee"), equal to
one-twelfth of the product of 1.00% (the "Servicing Fee
Rate") and the Pool Balance as of the first day of the
related Collection Period. The Servicer will be entitled
to receive additional servicing compensation in the form
of investment earnings on the amounts on deposit in the
Certificate Account and the Payahead Account plus any late
fees, prepayment charges and other administrative fees and
expenses or similar charges received by the Servicer
during such Collection Period. See "The Certificates --
Servicing Compensation".
Optional The Seller or the Servicer, or any successor to the
Termination........ Servicer, may purchase all the Receivables remaining in
the Trust on the Distribution Date following the last day
of any Collection Period as of which the aggregate unpaid
principal balance of the Receivables is 10% or less of the
Pool Balance as of the Cutoff Date (the "Cutoff Date Pool
Balance"), at a purchase price determined as described
under "The Certificates -- Termination".
Ratings............. It is a condition to the issuance of the Class A
Certificates that they be rated Aaa by Moody's Investors
Service, Inc. ("Moody's") and AAA by Standard & Poor's
Ratings Services, a division of The McGraw-Hill Companies,
Inc. ("Standard & Poor's" and, together with Moody's, the
"Rating Agencies"). A security rating is not a
recommendation to buy, sell or hold securities and may be
subject to revision or withdrawal at any time by the
assigning rating agency. The ratings on the Class A
Certificates do not address the timing of distributions of
principal of the Class A Certificates prior to the Final
Scheduled Distribution Date. See "Rating of the Class A
Certificates".
Tax Status.......... In the opinion of counsel to the Seller, the Trust will be
classified as a grantor trust for federal income tax
purposes and not as an association taxable as a
corporation. For federal income tax purposes, the Certifi-
cateholders will be considered to own stripped bonds. See
"Federal Income Tax Consequences". Class A
Certificateholders should consult their own tax advisors
as to the proper treatment of original issue discount with
respect to the Receivables and the application of the
stripped bond rules.
ERISA Subject to the conditions described herein, the Class A
Considerations..... Certificates may be purchased by employee benefit plans
subject to the Employee Retirement Income Security Act of
1974, as amended. See "ERISA Considerations".
</TABLE>
8
<PAGE>
FORMATION OF THE TRUST
The Seller will establish the Trust by selling and assigning the assets of
the Trust to the Trustee in exchange for the Certificates. The Servicer will
service the Receivables pursuant to the Agreement and will be compensated for
such services. See "The Certificates -- Servicing Compensation". To facilitate
servicing and to minimize administrative burden and expense, the Servicer will
be appointed custodian for the Receivables and documents relating thereto by the
Trustee, but will not stamp the Receivables to reflect the sale and assignment
of the Receivables to the Trust, nor amend the certificates of title to the
Financed Vehicles to reflect the assignment of the security interest in the
Financed Vehicles to the Trustee. In the absence of such an amendment, the
Trust's security interest in the Financed Vehicles may not be perfected in all
states. See "The Certificates -- Sale and Assignment of the Receivables" and
"Certain Legal Aspects of the Receivables--Security Interests in the Financed
Vehicles".
If the protection provided to the Class A Certificateholders by the
subordination of the Class B Certificates and by the Reserve Fund is
insufficient, the Class A Certificateholders will have to look to payments made
by or on behalf of the Obligors on or in respect of the Receivables, the
proceeds from the repossession and sale of Financed Vehicles which secure
defaulted Receivables and the proceeds of any Dealer Recourse, more fully
described under "Property of the Trust", to make distributions on the Class A
Certificates. In such event, certain factors, such as the possibility that the
Trustee may not have a perfected security interest in the Financed Vehicles in
all states, may affect the Trust's ability to repossess and sell the collateral
securing the Receivables or may limit the amount realized to less than the
amount due by the related Obligors. Class A Certificateholders may thus be
subject to delays in payment and may incur losses on their investment in the
Class A Certificates as a result of defaults or delinquencies by Obligors and
because of depreciation in the value of the related Financed Vehicles. See "The
Certificates -- Subordination of the Class B Certificates; Reserve Fund" and "--
Insurance on Financed Vehicles" and "Certain Legal Aspects of the Receivables".
PROPERTY OF THE TRUST
Each Certificate will represent a fractional undivided interest in the
Trust. The property of the Trust will include, among other things, a pool of
retail installment sale contracts for new and used Honda and Acura automobiles
and sport utility vehicles and Odyssey minivans between dealers (the "Dealers")
and retail purchasers (the "Obligors") and certain monies due thereunder on and
after the Cutoff Date. The Receivables were originated by Dealers in accordance
with AHFC's requirements and subsequently purchased by AHFC. The Receivables
evidence the indirect financing made available by AHFC to the related Obligors.
On or before the Closing Date, AHFC will sell the Receivables to the Seller
pursuant to the Receivables Purchase Agreement. The Seller will, in turn, sell
the Receivables to the Trust on the Closing Date pursuant to the Agreement.
During the term of the Agreement, neither the Seller nor AHFC may substitute
any other retail installment sale contract for any Receivable sold to the Trust.
The assets of the Trust will also include: (i) such amounts as from time to time
may be held in the Certificate Account and the Payahead Account to be
established and initially maintained by the Servicer with the Trustee pursuant
to the Agreement; (ii) security interests in the Financed Vehicles and any
accessions thereto; (iii) the rights to proceeds from physical damage, credit
life and disability insurance policies, if any, covering individual Financed
Vehicles or Obligors, as the case may be; (iv) the right to receive proceeds of
Dealer Recourse, if any; (v) the rights of the Seller under the Receivables
Purchase Agreement; (vi) the right to realize upon any property (including the
right to receive future proceeds of the liquidation of Defaulted Receivables)
that shall have secured a Receivable and have been repossessed by or on behalf
of the Trustee; and (vii) any and all proceeds of the foregoing. The Reserve
Fund and the Yield Supplement Account will be maintained for the benefit of the
Certificateholders, but will not be part of the Trust.
Pursuant to agreements between AHFC and the Dealers, each Dealer is
obligated, after purchase by AHFC of retail installment sale contracts from such
Dealer, to repurchase from AHFC such contracts which
9
<PAGE>
do not meet certain representations and warranties made by such Dealer (such
Dealer repurchase obligations, "Dealer Recourse"). Such representations and
warranties relate primarily to the origination of the contracts and the
perfection of the security interests in the related financed vehicles, and do
not typically relate to the creditworthiness of the related obligors or the
collectability of such contracts. Although the Dealer agreements with respect to
the Receivables will not be assigned to the Trustee, the Agreement will require
that any recovery by AHFC pursuant to any Dealer Recourse be deposited in the
Certificate Account in satisfaction of AHFC's repurchase obligations under the
Agreement. It is expected that the sales by the Dealers of installment sale
contracts to AHFC do not generally provide for recourse to the Dealer for unpaid
amounts in the event of a default by an obligor thereunder, other than in
connection with the breach of the foregoing representations and warranties.
THE RECEIVABLES
PAYMENTS ON THE RECEIVABLES
Except as otherwise described under "Selection Criteria", the Scheduled
Payment on each Receivable is a fixed level monthly payment which will amortize
the full amount of the Receivable over its term. Each Receivable provides for
allocation of payments according to (i) the "sum of periodic balances" or "sum
of monthly payments" method (each, a "Rule of 78s Receivable"), (ii) the
"actuarial" method (each, an "Actuarial Receivable" and, together with Rule of
78s Receivables, the "Precomputed Receivables") or (iii) the simple interest
method (each, a "Simple Interest Receivable").
Each Rule of 78s Receivable provides for the payment by the Obligor of a
specified total amount of payments, payable in monthly installments on the
related due date, which total represents the principal amount financed and
finance charges in an amount calculated on the basis of a stated APR for the
term of such Receivable. The rate at which such amount of finance charges is
earned and, correspondingly, the amount of each Scheduled Payment allocated to
reduction of the outstanding principal balance of the related Receivable are
calculated in accordance with the Rule of 78s. Under the "Rule of 78s", the
portion of each payment allocable to interest is higher during the early months
of the term of a Rule of 78s Receivable and lower during later months than that
under a constant yield method for allocating payments between interest and
principal.
An Actuarial Receivable provides for amortization of the loan over a series
of fixed level monthly installments. Each Scheduled Payment is deemed to consist
of an amount of interest equal to 1/12 of the stated APR of the Receivable
multiplied by the scheduled principal balance of the Receivable and an amount of
principal equal to the remainder of the Scheduled Payment.
All payments received by the Servicer on or in respect of Precomputed
Receivables will be allocated pursuant to the Agreement on an actuarial basis,
under which each Scheduled Payment, including the final Scheduled Payment on a
Precomputed Receivable, consists of an amount of interest equal to 1/12 of the
APR of such Receivable multiplied by the unpaid principal balance of such
Receivable, and an amount of principal equal to the remainder of the Scheduled
Payment. No adjustment will be made in the event of early or late payments,
although in the latter case the Obligor will be subject to a late charge.
Payments on Simple Interest Receivables will be applied first to interest
accrued through the date immediately preceding the date of payment and then to
unpaid principal. Accordingly, if an Obligor pays an installment before its due
date, the portion of the payment allocable to interest for the payment period
will be less than if the payment had been made on the due date, the portion of
the payment applied to reduce the principal balance will be correspondingly
greater and the principal balance will be amortized more rapidly than scheduled.
Conversely, if an Obligor pays an installment after its due date, the portion of
the payment allocable to interest for the payment period will be greater than if
the payment had been made on the due date, the portion of the payment applied to
reduce the principal balance will be correspondingly less, and the principal
balance will be amortized more slowly than scheduled, in which case a larger
portion of the principal balance may be due on the final scheduled payment date.
10
<PAGE>
In the event of a prepayment in full (voluntarily or by acceleration) of a
Precomputed Receivable, a "rebate" will be made to the related Obligor of that
portion of the total amount of payments under such Receivable allocable to
"unearned" finance charges. In the event of the prepayment in full (voluntarily
or by acceleration) of a Simple Interest Receivable, a "rebate" will not be made
to such Obligor, but the Obligor will be required to pay interest only to the
date immediately preceding the date of prepayment. The amount of a rebate under
a Precomputed Receivable will always be less than or equal to the remaining
scheduled payments of interest that would have been due under a Simple Interest
Receivable for which all remaining payments were made on schedule.
The amount of a rebate under a Rule of 78s Receivable calculated in
accordance with the Rule of 78s will always be less than had such rebate been
calculated on an actuarial basis. However, Rule of 78s Receivables originated in
certain states, including New York and Maryland, require rebates based on the
actuarial method. Distributions to Class A Certificateholders will not be
affected by Rule of 78s rebates under the Rule of 78s Receivables because
pursuant to the Agreement such distributions will be determined using the
actuarial method.
SELECTION CRITERIA
The Receivables were purchased by AHFC from Dealers through its nationwide
branch system in the ordinary course of business in accordance with AHFC's
underwriting standards. See "American Honda Finance Corporation--Underwriting of
Motor Vehicle Loans". The Receivables were randomly selected from AHFC's
portfolio of retail installment sale contracts that met the selection criteria
described herein and under "The Certificates -- Sale and Assignment of the
Receivables". Such selection criteria included that (i) each Receivable is
secured by a new or used Honda or Acura automobile or sport utility vehicle or
Odyssey minivan; (ii) each Receivable was originated in the United States; (iii)
each Receivable provides for level monthly Scheduled Payments that fully
amortize the amount financed over its original term, except that the payment in
the first or last month in the life of the Receivable may be minimally different
from the level payment; (iv) each Receivable was originated prior to
; (v) each Receivable has an original term of 12 to 60 months
and, as of the Cutoff Date, had a remaining term to maturity of not less than 6
months and not more than 60 months; (vi) each Receivable provides for the
payment of a finance charge based on (a) the Rule of 78s at an APR ranging from
% to %, (b) the actuarial method at an APR ranging from % to %, or
(c) the simple interest method at an APR ranging from % to %; (vii) each
Receivable shall not have a payment that is more than 30 days past due as of the
Cutoff Date, provided, that no payment shall be considered past due if 60% or
more of the amount thereof has been paid; (viii) to the best knowledge of the
Seller, no Receivable shall be due from any Obligor who is presently the subject
of a bankruptcy proceeding or is bankrupt or insolvent; and (ix) no Financed
Vehicle has been repossessed without reinstatement as of the Cutoff Date. This
Prospectus contains a summary of the material terms of the Receivables.
The Receivables represent financing of new and used Honda and Acura
automobiles and sport utility vehicles and Odyssey minivans. Based on the Cutoff
Date Pool Balance, %, %, % and % of the Receivables represented
financing of Honda automobiles, Acura automobiles, Odyssey minivans and sport
utility vehicles, respectively. All of the Financed Vehicles were manufactured
by Honda Motor Co., Ltd. and its affiliates. Based on the Cutoff Date Pool
Balance, % and % of the Receivables represented financing of new and
used vehicles, respectively. Based on the addresses of the originating Dealers,
the Receivables were originated in states. Except in the case of any breach of
representations and warranties by the related Dealer, as described under
"Property of the Trust", less than % of the Receivables by principal balance as
of the Cutoff Date provide for recourse to the Dealer who originated the related
Receivable.
11
<PAGE>
The composition, distribution by APR and geographical distribution of the
Receivables are as set forth in the following tables.
COMPOSITION OF THE RECEIVABLES
<TABLE>
<CAPTION>
Cutoff Date Pool Balance.................................... $
<S> <C>
Number of Receivables.......................................
Average Cutoff Date Principal Balance....................... $
Average Original Amount Financed............................ $
Range of Original Amounts Financed........................ $ to $
Weighted Average APR (1).................................... %
Range of APRs............................................. % to %
Weighted Average Original Maturity (1)...................... months
Range of Original Maturities.............................. months to months
Weighted Average Remaining Maturity (1)..................... months
Range of Remaining Maturities as of the Cutoff Date....... months to months
</TABLE>
------------------
(1) Weighted by Principal Balance as of the Cutoff Date.
DISTRIBUTION OF THE RECEIVABLES BY APR
<TABLE>
<CAPTION>
PERCENTAGE OF PERCENTAGE OF
AGGREGATE CUTOFF DATE CUTOFF DATE
NUMBER OF NUMBER OF PRINCIPAL POOL
RANGE OF APRS RECEIVABLES RECEIVABLES BALANCE BALANCE
- ----------------------------- ----------- ---------------- ----------------- -------------
<S> <C> <C> <C> <C>
7.500% to 7.999%...........
8.000% to 8.999%...........
9.000% to 9.999%...........
10.000% to 10.999%...........
11.000% to 11.999%...........
12.000% to 12.999%...........
13.000% to 13.999%...........
14.000% to 14.999%...........
15.000% to 15.999%...........
16.000% to 16.999%...........
17.000% to 17.999%...........
18.000% to 18.999%...........
19.000% to 19.999%...........
20.000% to 20.999%...........
----------- ------ ----------------- ------
Total...................... 100.00% $ 100.00%
----------- ------ ----------------- ------
----------- ------ ----------------- ------
</TABLE>
12
<PAGE>
DISTRIBUTION OF THE RECEIVABLES BY STATE
<TABLE>
<CAPTION>
PERCENTAGE OF
CUTOFF DATE CUTOFF DATE
PRINCIPAL POOL
STATE(1) BALANCE BALANCE
- ---------------------------------------- ---------------- -------------
<S> <C> <C>
Alabama.................................
Alaska..................................
Arizona.................................
Arkansas................................
California..............................
Colorado................................
Connecticut.............................
Delaware................................
Florida.................................
Georgia.................................
Hawaii..................................
Idaho...................................
Illinois................................
Indiana.................................
Iowa....................................
Kansas..................................
Kentucky................................
Louisiana...............................
Maine...................................
Maryland................................
Massachusetts...........................
Michigan................................
Minnesota...............................
Mississippi.............................
Missouri................................
Montana.................................
Nebraska................................
Nevada..................................
New Hampshire...........................
New Jersey..............................
New Mexico..............................
New York................................
North Carolina..........................
North Dakota............................
Ohio....................................
Oklahoma................................
Oregon..................................
Pennsylvania............................
Rhode Island............................
South Carolina..........................
South Dakota............................
Tennessee...............................
Texas...................................
Utah....................................
Vermont.................................
Virginia................................
Washington..............................
West Virginia...........................
Wisconsin...............................
Wyoming.................................
---------------- ------
Total................................. $ 100.00%
---------------- ------
---------------- ------
</TABLE>
- ----------------
(1) Based on the addresses of the originating Dealers.
13
<PAGE>
MATURITY AND PREPAYMENT CONSIDERATIONS
All of the Receivables are prepayable at any time without any penalty.
However, partial prepayments on Precomputed Receivables made by Obligors will
not be distributed on the Distribution Date following the Collection Period in
which they were received but will be retained and applied towards payments due
in one or more future Collection Periods. See "The Certificates -- Collections".
If prepayments in full are received on Precomputed Receivables or if full or
partial prepayments are received on Simple Interest Receivables, the actual
weighted average life of the Receivables can be shorter than the scheduled
weighted average life, which is calculated based on the assumption that payments
will be made as scheduled and that no such prepayments in full will be made. For
this purpose the term "prepayments in full" includes, among other items,
voluntary prepayments in full by Obligors, liquidations due to default, proceeds
from physical damage, credit life and credit disability insurance policies and
repurchases by the Seller or the Servicer, as the case may be, of certain
Receivables as described herein. Weighted average life means the average amount
of time during which each dollar of principal of a Receivable is outstanding.
The rate of prepayments on the Receivables may be influenced by a variety of
economic, social and other factors, including the fact that an Obligor may not
sell or transfer a Financed Vehicle without the consent of the Servicer. Any
reinvestment risk resulting from the rate of prepayments of the Receivables and
the distribution of such prepayments to Class A Certificateholders will be borne
entirely by the Class A Certificateholders. In addition, early retirement of the
Certificates may be effected by the exercise of the option of the Seller or the
Servicer, or any successor to the Servicer, to purchase all of the Receivables
remaining in the Trust when the Pool Balance is 10% or less of the Cutoff Date
Pool Balance. See "The Certificates -- Termination".
No prediction can be made as to the rate of prepayments on the Receivables
in either stable or changing interest rate environments. AHFC maintains limited
records of the historical prepayment experience of the retail installment sale
contracts included in its portfolio and its experience with respect to the
retail installment sale contracts included in its portfolio is insufficient to
draw any specific conclusions with respect to the expected rates of prepayments
in full on the Receivables. AHFC is not aware of any publicly available
statistics for the entire auto finance industry on an aggregate basis that set
forth principal prepayment experience for retail installment sale contracts
similar to the Receivables over an extended period of time.
YIELD CONSIDERATIONS
Interest on the Receivables will be passed through to Class A
Certificateholders on each Distribution Date to the extent of one-twelfth of the
Pass-Through Rate multiplied by the Class A Certificate Balance as of the
immediately preceding Distribution Date (after giving effect to distributions of
principal made on such immediately preceding Distribution Date) or, in the case
of the first Distribution Date, the Original Class A Certificate Balance.
The Receivables have different APRs, and the APR of some of the Receivables
may be less than the sum of (i) the Pass-Through Rate and (ii) the Servicing Fee
Rate. Because the Yield Supplement Account will be created with a deposit of an
amount equal to the Maximum Yield Supplement Amount in respect of the
Receivables, disproportionate rates of prepayments between Receivables with
higher and lower APRs should not affect the yield to Class A Certificateholders
on the outstanding principal balance of the Class A Certificates.
CLASS A POOL FACTOR AND TRADING INFORMATION
The "Class A Pool Factor" will be a seven-digit decimal which the Servicer
will compute each month indicating the Class A Certificate Balance as of the
close of business on the Distribution Date in such month as a fraction of the
Original Class A Certificate Balance. The Class A Pool Factor will initially be
1.0000000; thereafter, the Class A Pool Factor will decline to reflect
reductions in the Class A Certificate Balance. The portion of the Class A
Certificate Balance for a given month allocable to a Class A Certificateholder
can be
14
<PAGE>
determined by multiplying the original denomination of the holder's Class A
Certificate by the Class A Pool Factor for that month. The Class A Pool Factor
will be provided to Class A Certificateholders of record on each Distribution
Date.
Pursuant to the Agreement, the Class A Certificateholders will receive
monthly reports concerning the payments received on the Receivables, the Pool
Balance, the Class A Pool Factor and various other items of information. Class A
Certificateholders during each calendar year will be furnished information for
tax reporting purposes not later than the latest date permitted by law. See "The
Certificates -- Statements to Class A Certificateholders".
USE OF PROCEEDS
The net proceeds from the sale of the Class A Certificates (I.E., the
proceeds of the public offering of the Class A Certificates minus expenses
relating thereto) will be applied by the Seller to the purchase of the
Receivables from AHFC pursuant to the Receivables Purchase Agreement.
THE SELLER
The Seller was incorporated in the State of California in August 1992 as a
wholly owned, limited purpose finance subsidiary of AHFC. The principal
executive offices of the Seller are located at 700 Van Ness Avenue, Torrance,
California 90501 and its telephone number is (310) 781-4100.
The Seller was organized primarily for the purpose of acquiring installment
sale contracts similar to the Receivables and associated rights from AHFC,
causing the issuance of certificates similar to the Certificates and engaging in
related transactions. The Seller's articles of incorporation limit the
activities of the Seller to the foregoing purposes and to any activities
incidental to and necessary for such purposes.
AMERICAN HONDA FINANCE CORPORATION
GENERAL
AHFC was incorporated in the State of California in February 1980. AHFC
provides wholesale and retail financing to authorized dealers of Honda and Acura
automobiles and sport utility vehicles, Odyssey minivans, motorcycles (including
scooters and all terrain vehicles) and Honda power equipment, such as lawn and
utility tractors, lawnmowers, snow throwers, water pumps, portable outboard
moters, outboard marine engines and generators, and their customers in the
United States and Canada. AHFC also offers retail leasing for Honda and Acura
automobiles throughout the United States and Canada, and administers the sale of
vehicle service contracts for AHMC throughout the United States.
AHFC is a wholly owned subsidiary of AHMC, a California corporation that is
the sole authorized distributor of Honda, Acura and Odyssey motor vehicles,
power parts and accessories and power equipment in the United States. AHMC is a
wholly owned subsidiary of Honda Motor Co., Ltd., a Japanese corporation which
is a worldwide manufacturer of motorcycles, automobiles and a variety of power
products.
The principal executive offices of AHFC are located at 700 Van Ness Avenue,
Torrance, California 90501. Its telephone number is (310) 781-4100.
UNDERWRITING OF MOTOR VEHICLE LOANS
AHFC purchases retail installment sale contracts and conditional sales
agreements (collectively, "installment sale contracts") secured by new and used
Honda, Acura and Odyssey motor vehicles from approximately 1,257 Dealers located
throughout the United States. In keeping with the practice of AHFC, the
Receivables were originated by Dealers in accordance with AHFC's requirements
under existing agreements with such Dealers. The Receivables were purchased in
accordance with AHFC's underwriting standards, which emphasize the prospective
purchaser's ability to pay and creditworthiness, as well as the asset value of
the automobile to be financed.
15
<PAGE>
Applications submitted to AHFC must list sufficient information to process
the application, including the applicant's income, residential status, monthly
mortgage or rent payment and other personal information. Upon receipt of an
application, AHFC obtains a credit report from an independent credit bureau. The
credit report is reviewed by AHFC to determine the applicant's current credit
status and past credit performance. Factors considered negative generally
include past due credit, repossessions, loans charged off by other lenders and
previous bankruptcy. Positive factors such as amount of credit and favorable
payment history are also considered.
The credit decision is made utilizing a credit scoring system and other
considerations. The credit scoring system includes an assessment of residence
and employment stability and credit bureau information. Other considerations
include income requirements and the ratio of income to total debt. An assessment
is made of the relative degree of credit risk indicated by these criteria
pursuant to AHFC's automated processing system. The system will recommend
approval of applicants scoring above a predetermined threshold and will
recommend rejection for scores below that level, although the underwriting staff
for the appropriate region has the ultimate approval or rejection authority.
AHFC's retail installment sale contract requires that obligors maintain
specific levels and types of insurance coverage, including physical damage
insurance, to protect the related financed vehicle against loss. At the time of
purchase, an obligor signs a statement which indicates that he either has or
will have the necessary insurance, and which shows the name and address of the
insurance company along with a description of the type of coverage. Obligors are
generally required to provide AHFC with evidence of compliance with the
foregoing insurance requirements; however, AHFC performs no ongoing verification
of such insurance coverage.
The amount of a retail installment sale contract secured by a new or used
Honda or Acura automobile generally will not exceed 120% of the dealer invoice
cost of the related vehicle plus optional features at the dealer cost, sales
tax, title and registration fees, insurance premiums for credit life and credit
disability insurance and certain fees for extended service contracts.
SERVICING OF MOTOR VEHICLE LOANS
AHFC considers a retail installment sale contract to be past due or
delinquent when the obligor fails to make at least 60% of a scheduled payment by
the related due date; any portion of a scheduled payment not paid on the related
due date automatically becomes due with the next scheduled payment. A computer
generated delinquency notice is mailed to the obligor on each of the eleventh
and twenty-first day of delinquency. If the delinquent contract cannot be
brought current or completely collected within approximately 60 days, AHFC
generally attempts to repossess the related vehicle. Repossessed vehicles are
held in inventory to comply with statutory requirements and then are sold
(generally within 60 days after repossession). Any deficiencies remaining after
repossession and sale of the vehicle or after the full charge-off of the related
contract are pursued by AHFC to the extent practicable and legally permitted.
See "Certain Legal Aspects of the Receivables -- Deficiency Judgments and Excess
Proceeds". Obligors are contacted and, when warranted by individual
circumstances, repayment schedules are established and monitored until the
deficiencies are either paid in full or become impractical to pursue.
DELINQUENCIES, REPOSSESSIONS AND NET LOSSES
Set forth below is certain information concerning AHFC's experience with
respect to its portfolio of new and used Honda, Acura and Odyssey motor vehicle
retail installment sale contracts. Credit losses are an expected cost in the
business of extending credit and are considered in AHFC's rate-setting process.
AHFC's strategy is to minimize credit losses while providing financing support
for the sale of Honda, Acura and Odyssey motor vehicles. Losses and
delinquencies are affected by, among other things, general and regional economic
conditions and the supply of and demand for motor vehicles.
16
<PAGE>
AHFC establishes an allowance for expected credit losses and deducts amounts
reflecting charged-off installment sale contracts against such allowance. For
retail financing, the account balance related to an installment sale contract is
charged against the allowance for credit losses when the contract has been
delinquent for 120 days unless AHFC has repossessed the collateral associated
with the contract. In such cases, the account balances are not charged against
the allowance for credit losses until either AHFC has sold the repossessed
collateral or has held it in repossession inventory for more than 90 days. Any
recoveries from charged off related to an installment sale contracts are
credited to the allowance.
The data presented in the following tables are for illustrative purposes
only. There is no assurance that AHFC's delinquency, credit loss and
repossession experience with respect retail installment sale contracts in the
future, or the experience of the Trust with respect to the Receivables, will be
similar to that set forth below.
HISTORICAL DELINQUENCY EXPERIENCE (1)(2)
<TABLE>
<CAPTION>
AT MARCH 31,
-------------------------------------------------------------
1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Loan Balance Outstanding (2).................... $ 2,895,566 $ 2,236,736 $ 1,396,919 $ 1,027,492 $ 811,804
Delinquencies (3)
30-59 Days.................................... $ 40,712 $ 19,627 $ 12,727 $ 7,158 $ 6,248
60-89 Days.................................... 6,516 3,037 1,573 748 607
90-119 Days................................... 2,453 1,103 555 297 307
Over 119 Days................................. 492 241 81 4 10
Repossessions (4)............................... 17,583 6,603 3,933 2,677 2,105
Total Delinquencies and Repossessions........... 67,756 30,612 18,870 10,884 9,277
Total Delinquencies and Repossessions as a
Percentage of Loan Balance Outstanding........ 2.34% 1.37% 1.35% 1.06% 1.14%
</TABLE>
- ----------------
(1) Includes contracts that have been sold but are still being serviced by AHFC.
(2) Remaining principal balance and unearned finance charges for all outstanding
contracts.
(3) The period of delinquency is based on the number of days scheduled payments
are contractually past due.
(4) Amounts shown represent the outstanding principal and unearned finance
charges for contracts for which the related vehicle had been repossessed and
not yet liquidated.
17
<PAGE>
NET CREDIT LOSS AND REPOSSESSION EXPERIENCE (1)
<TABLE>
<CAPTION>
AT OR FOR THE YEAR ENDED MARCH 31,
-----------------------------------------------------------
1997 1996 1995 1994 1993
----------- ----------- ----------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Principal Amount Outstanding (2).................. $ 2,807,319 $ 2,167,172 $ 1,270,943 $ 875,740 $ 796,339
Average Principal Amount Outstanding (3).......... $ 2,697,485 $ 1,785,837 $ 1,054,826 $ 857,419 $ 751,900
Number of Contracts Outstanding................... 257,889 194,927 126,046 97,783 86,684
Average Number of Contracts Outstanding (3)....... 241,062 165,203 109,144 92,871 78,468
Number of Repossessions........................... 3,721 2,186 1,647 1,382 1,247
Number of Repossessions as a Percentage of the
Average Number of Contracts Outstanding)........ 1.54% 1.32% 1.51% 1.49% 1.59%
Gross Charge-Offs (4)............................. $ 26,679 $ 14,799 $ 7,912 $ 5,577 $ 4,551
Recoveries (5).................................... $ 6,078 $ 3,906 $ 2,935 $ 1,973 1,528
Net Losses........................................ $ 20,601 $ 10,893 $ 4,977 $ 3,604 3,023
Net Losses as a Percentage of Average Principal
Amount Outstanding.............................. 0.76% 0.61% 0.47% 0.42% 0.40%
</TABLE>
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(1) Includes contracts that have been sold but are still being serviced by AHFC.
(2) Net remaining principal balance of all outstanding contracts.
(3) Average of the principal amounts or number of contracts, as the case may be,
outstanding at the beginning and end of period.
(4) Amount charged-off is the remaining principal balance, excluding any
expenses associated with collection, repossession or disposition of the
related vehicle, plus earned but not yet received finance charges, net of
any proceeds collected prior to charge-off.
(5) Proceeds received on previously charged-off contracts.
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THE CERTIFICATES
The Class A Certificates offered hereby will be issued pursuant to the
Agreement, a form of which, together with a form of the Receivables Purchase
Agreement, has been filed as an exhibit to the Registration Statement of which
this Prospectus is a part. Copies of the Agreement (without exhibits) may be
obtained by Class A Certificateholders upon request in writing to the Trustee at
its Corporate Trust Office. Citations to the relevant sections of the Agreement
appear below in parentheses. The following summary describes the material terms
of the Agreement. The summary does not purport to be complete and is subject to,
and qualified in its entirety by, reference to all of the provisions of the
Agreement. Where particular provisions or terms used in the Agreement are
referred to, the actual provisions (including definitions of terms and section
references) are incorporated by reference as part of such summaries.
GENERAL
The Certificates will evidence fractional undivided interests in the Trust
created pursuant to the Agreement. The Class A Certificates will evidence in the
aggregate an undivided ownership interest of % of the Trust and the Class B
Certificates will evidence in the aggregate an undivided ownership interest of
% of the Trust. The Class B Certificates, which are not being offered hereby,
will initially be held by the Seller. (Sections 1.01 and 15.03).
The Class A Certificates will be offered for purchase in minimum
denominations of $1,000 and integral multiples thereof in book-entry form. The
Class A Certificates will initially be represented by certificates registered in
the name of Cede, the nominee of DTC. No beneficial owner of a Class A
Certificate (a "Certificate Owner") will be entitled to receive a certificate
representing such owner's interest, except as set forth below. Unless and until
Class A Certificates are issued in fully registered certificated form
("Definitive Certificates") under the limited circumstances described below, all
references herein to distributions, notices, reports and statements to Class A
Certificateholders will refer to the same actions made with respect to DTC or
Cede, as the case may be, for the benefit of Certificate Owners in accordance
with DTC procedures. (Section 15.09). See "Book-Entry Registration" and
"Definitive Certificates".
BOOK-ENTRY REGISTRATION
DTC, New York, New York, will act as securities depository for the Class A
Certificates. The Class A Certificates will be issued as fully registered
securities registered in the name of Cede, the nominee of DTC. One fully
registered Class A Certificate will be issued with respect to each $200 million
in principal amount of Class A Certificates and an additional Class A
Certificate will be issued with respect to the remaining principal amount of
Class A Certificates, other than a minimal amount. As such, it is anticipated
that the only "Class A Certificateholder" will be Cede, the nominee of DTC.
Certificate Owners will not be recognized by the Trustee as "Class A
Certificateholders", as such term will be used in the Agreement, and Certificate
Owners will only be permitted to exercise the rights of Class A
Certificateholders indirectly through DTC and its Participants, as further
described below.
DTC is a limited-purpose trust company organized under the laws of the State
of New York, a "banking organization" within the meaning of the New York Banking
Law, a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the Uniform Commercial Code (the "UCC") in effect in the State of New
York and a "clearing agency" registered pursuant to the provisions of Section
17A of the Exchange Act. DTC was created to hold securities for its
participating members ("Participants") and to facilitate the clearance and
settlement of securities transactions between Participants through electronic
book-entry changes in accounts of its Participants, thereby eliminating the need
for physical movement of certificates. Participants include securities brokers
and dealers (including the Underwriters), banks, trust companies and clearing
corporations. Indirect access to the DTC system also is available to banks,
brokers, dealers and trust companies that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly (the "Indirect
Participants"). The rules applicable to DTC and its Participants are on file
with the Commission.
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Certificate Owners that are not Participants or Indirect Participants but
desire to purchase, sell or otherwise transfer ownership of, or an interest in,
Class A Certificates may do so only through Participants and Indirect
Participants. Participants will receive a credit for the Class A Certificates on
DTC's records. The ownership interest of each Certificate Owner will in turn be
recorded on the respective records of Participants and Indirect Participants.
Certificate Owners will not receive written confirmation from DTC of their
purchase of Class A Certificates, but Certificate Owners are expected to receive
written confirmations providing details of the transaction, as well as periodic
statements of their holdings, from the Participant or Indirect Participant
through which the Certificate Owner entered into the transaction. Transfers of
ownership interests in the Class A Certificates will be accomplished by entries
made on the books of Participants acting on behalf of Certificate Owners.
To facilitate subsequent transfers, all Class A Certificates deposited by
Participants with DTC will be registered in the name of Cede, the nominee of
DTC. The deposit of Class A Certificates with DTC and their registration in the
name of Cede will effect no change in beneficial ownership. DTC will have no
knowledge of the actual Certificate Owners and its records will reflect only the
identity of the Participants to whose accounts such Class A Certificates are
credited, which may or may not be the Certificate Owners. Participants and
Indirect Participants will remain responsible for keeping account of their
holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Participants, by
Participants to Indirect Participants and by Participants and Indirect
Participants to Certificate Owners will be governed by arrangements among them,
subject to any statutory or regulatory requirements as may be in effect from
time to time.
DTC's practice is to credit Participants' accounts on each Distribution Date
in accordance with their respective holdings of Class A Certificates shown on
DTC's records unless DTC has reason to believe that it will not receive payment
on such Distribution Date. Payments by Participants and Indirect Participants to
Certificate Owners will be governed by standing instructions and customary
practices, as is the case with securities held for the accounts of customers in
bearer form or registered in "street name", and will be the responsibility of
such Participants and not of DTC, the Trustee or the Seller, subject to any
statutory or regulatory requirements as may be in effect from time to time.
Payment of principal of and interest on the Class A Certificates to DTC will be
the responsibility of the Trustee, disbursement of such payments to Participants
will be the responsibility of DTC and disbursement of such payments to
Certificate Owners will be the responsibility of Participants and Indirect
Participants. As a result, under the book-entry format, Certificate Owners may
experience some delay in their receipt of payments. DTC will forward such
payments to its Participants which thereafter will forward them to Indirect
Participants or Certificate Owners.
Because DTC can only act on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of a Certificate
Owner to pledge Class A Certificates to persons or entities that do not
participate in the DTC system, or otherwise take actions with respect to such
Class A Certificates, may be limited due to the lack of a physical certificate
for such Class A Certificates.
Neither DTC nor Cede will consent or vote with respect to the Class A
Certificates. Under its usual procedures, DTC will mail an omnibus proxy to the
Trustee as soon as possible after each applicable record date for such a consent
or vote. The omnibus proxy will assign Cede's consenting or voting rights to
those Participants to whose accounts the Class A Certificates will be credited
on that record date (identified in a listing attached to the omnibus proxy).
None of the Servicer, the Seller or the Trustee will have any liability for
any aspect of the records relating to or payments made on account of beneficial
ownership interests of the Class A Certificates held by Cede, as nominee for
DTC, or for maintaining, supervising or reviewing any records relating to such
beneficial ownership interests.
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<PAGE>
DEFINITIVE CERTIFICATES
Definitive Certificates will be issued in fully registered, certificated
form to Certificate Owners rather than to DTC, only if (i) DTC is no longer
willing or able to discharge its responsibilities as depository with respect to
the Class A Certificates, and neither the Trustee nor the Seller is able to
locate a qualified successor, (ii) the Seller, at its option, elects to
terminate the book-entry system through DTC or (iii) after an Event of Default,
Certificate Owners representing in the aggregate not less than 51% of the Voting
Interests of the Class A Certificates advise the Trustee through DTC and its
Participants in writing that the continuation of a book-entry system through DTC
or its successor is no longer in the best interest of Certificate Owners.
(Section 15.11).
Upon the occurrence of any of the events described in the immediately
preceding paragraph, the Trustee will be required to notify all Certificate
Owners, through Participants, of the availability through DTC of Definitive
Certificates. Upon surrender by DTC of the certificates representing all Class A
Certificates and the receipt of instructions for re-registration, the Trustee
will issue Definitive Certificates to Certificate Owners, who thereupon will
become Class A Certificateholders for all purposes of the Agreement.
Distributions on the Class A Certificates will thereafter be made by the
Trustee directly to holders of Definitive Certificates in accordance with the
procedures set forth herein and to be set forth in the Agreement. Interest and
principal payments on the Class A Certificates on each Distribution Date will be
made to holders in whose names the Definitive Certificates were registered at
the close of business on the Record Date with respect to such Distribution Date.
Distributions will be made by check mailed to the address of such holders as
they appear on the register for effecting registration, transfers and exchanges
of Certificates (the "Certificate Register"). The final payment on any Class A
Certificates (whether Definitive Certificates or certificates registered in the
name of Cede representing the Class A Certificates), however, will be made only
upon presentation and surrender of such Class A Certificates or certificates at
the office or agency specified in the notice of final distribution to Class A
Certificateholders. The Trustee or a paying agent will provide such notice to
registered Class A Certificateholders not more than 30 days and not less than 15
days prior to the date on which such final distribution is expected to occur.
(Section 20.01).
Definitive Certificates will be transferable and exchangeable at the offices
of the Trustee or the Certificate Registrar to be set forth in the Agreement. No
service charge will be imposed for any registration of transfer or exchange, but
the Trustee may require payment of a sum sufficient to cover any tax or other
governmental charge imposed in connection therewith. (Section 15.03).
SALE AND ASSIGNMENT OF THE RECEIVABLES
On or prior to the Closing Date, pursuant to the Receivables Purchase
Agreement, AHFC will sell and assign to the Seller, without recourse, its entire
interest in the Receivables, including the security interests in the Financed
Vehicles. On the Closing Date, the Seller will sell and assign to the Trustee,
without recourse, all of its right, title and interest in and to the
Receivables, including its interest in AHFC's security interests in the Financed
Vehicles. (Section 12.01). Each Receivable will be identified in a schedule
referred to in the Receivables Purchase Agreement and the Agreement and on file
with the Trustee (the "Schedule of Receivables"). The Trustee will, concurrently
with such sale and assignment, execute, authenticate and deliver the
Certificates to or upon the order of the Seller in exchange for the Receivables.
(Section 15.02). Thereafter, the Seller will sell the Class A Certificates to
the Underwriters.
As more fully described under "The Receivables -- Selection Criteria", AHFC,
pursuant to the Receivables Purchase Agreement, and the Seller, pursuant to the
Agreement, will make certain representations and warranties with respect to the
Receivables and the Financed Vehicles. In the Receivables Purchase Agreement,
AHFC will additionally represent and warrant to the Seller, and in the
Agreement, the Seller will additionally represent and warrant to the Trustee,
among other things, that (i) the information set forth in the Schedule of
Receivables is true and correct in all material respects; (ii) at the time of
origination of
21
<PAGE>
each Receivable, the related Obligor was required to maintain physical damage
insurance in accordance with AHFC's normal requirements; (iii) on the Cutoff
Date, to the best of its knowledge, the Receivables are free and clear of all
prior security interests, liens, charges and encumbrances and no offsets,
defenses or counterclaims have been asserted or threatened; (iv) on the Cutoff
Date, each of the Receivables is secured by a first priority perfected security
interest in the related Financed Vehicle in favor of AHFC; and (v) each
Receivable at the time it was originated complied, and on the Cutoff Date
complies, in all material respects with applicable state and federal laws,
including, without limitation, consumer credit, truth-in-lending, equal credit
opportunity and disclosure laws. (Section 12.04).
As of the last day of the second Collection Period (or, if the Seller so
elects, the last day of the first Collection Period) following the Collection
Period in which the Seller, the Servicer or the Trustee discovers a breach of
any representation or warranty of the Seller that materially and adversely
affects the interests of the Certificateholders in a Receivable, the Seller,
unless the breach is cured, will repurchase such Receivable (a "Warranty
Receivable") from the Trustee and, pursuant to the Receivables Purchase
Agreement, AHFC will purchase such Receivable from the Seller, at a price equal
to the Warranty Purchase Payment for such Receivable. The "Warranty Purchase
Payment" (1) for a Precomputed Receivable will be equal to (a) the sum of (i)
all remaining Scheduled Payments, (ii) all past due Scheduled Payments for which
an Advance has not been made, (iii) all outstanding Advances made by the
Servicer in respect of such Precomputed Receivable and (iv) an amount equal to
any reimbursements of outstanding Advances made to the Servicer with respect to
such Precomputed Receivable from collections made on or in respect of other
Receivables, minus (b) the sum (i) of all Payments Ahead in respect of such
Precomputed Receivable held by the Servicer or on deposit in the Payahead
Account, (ii) the rebate, calculated on an actuarial basis, that would be
payable to the Obligor on such Precomputed Receivable were the Obligor to prepay
such Precomputed Receivable in full on such day and (iii) any proceeds of the
liquidation of such Precomputed Receivable previously received (to the extent
applied to reduce the Principal Balance of such Precomputed Receivable) and (2)
for a Simple Interest Receivable, will be equal to its unpaid principal balance,
plus interest thereon at a rate equal to the Required Rate to the last day of
the Collection Period relating to such repurchase. This repurchase obligation
will constitute the sole remedy available to the Certificateholders or the
Trustee for any such uncured breach by the Seller. The obligation of the Seller
to repurchase a Receivable will not be conditioned on performance by AHFC of its
obligation to purchase such Receivable from the Seller pursuant to the
Receivables Purchase Agreement. (Sections 12.04 and 12.05).
To assure uniform quality in servicing both the Receivables and the
Servicer's own portfolio of retail installment sale contracts, as well as to
reduce administrative costs, pursuant to the Agreement, the Trustee will appoint
the Servicer as custodian of the Receivables and all documents related thereto.
(Section 12.02). The Receivables will not be physically segregated from other
installment sale contracts of the Servicer, or those which the Servicer services
for others, to reflect the transfer to the Trust. However, UCC financing
statements reflecting the sale and assignment of the Receivables by AHFC to the
Seller and by the Seller to the Trustee will be filed, and the respective
accounting records and computer files of AHFC and the Seller will reflect such
sale and assignment. Because the Receivables will remain in the possession of
the Servicer and will not be stamped or otherwise marked to reflect the
assignment thereof to the Trustee, if a subsequent purchaser were able to take
physical possession of the Receivables without knowledge of the assignment, the
Trustee's interest in the Receivables could be defeated. See "Certain Legal
Aspects of the Receivables -- General" and "-- Security Interests in the
Financed Vehicles". In addition, under certain circumstances the Trustee's
security interest in collections that have been received by the Servicer but not
yet remitted to the Certificate Account could be defeated. See "Collections".
SERVICING PROCEDURES
The Servicer will make reasonable efforts to collect all payments due with
respect to the Receivables and, in a manner consistent with the Agreement, will
continue such collection procedures as it follows with respect to comparable
retail installment sale contracts it services for itself and others. (Section
13.01). The Servicer will be authorized to grant certain rebates, adjustments or
extensions with respect to a Receivable.
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<PAGE>
See "American Honda Finance Corporation -- Servicing of Motor Vehicle Loans".
However, if any such modification of a Receivable alters the APR or the amount
financed or extends the maturity of a Receivable beyond six months after the
scheduled maturity of the Receivable with the latest scheduled maturity as of
the Cutoff Date, the Servicer will be obligated to purchase such Receivable as
described in the immediately succeeding paragraph. (Sections 13.07 and 13.08).
In the Agreement, the Servicer will covenant that except as otherwise
contemplated therein, (i) it will not release any Financed Vehicle from the
security interest created by the related Receivable, (ii) it will do nothing to
impair the rights of the Certificateholders in the Receivables and (iii) except
as otherwise provided in the Agreement, it will not amend any Receivable such
that the total number of Scheduled Payments, the amount financed or the APR is
altered or the maturity of a Receivable is extended beyond six months after the
scheduled maturity of the Receivable with the latest scheduled maturity as of
the Cutoff Date. As of the last day of the second Collection Period (or, if the
Servicer so elects, the last day of the first Collection Period) following the
Collection Period in which the Seller, the Servicer or the Trustee discovers a
breach of any such covenant that materially and adversely affects the interests
of the Certificateholders in a Receivable, the Servicer, unless the breach is
cured, will purchase the Receivable (an "Administrative Receivable") from the
Trustee at a price equal to the Administrative Purchase Payment for such
Receivable. The "Administrative Purchase Payment" (1) for a Precomputed
Receivable will be equal to (a) the sum of (i) all remaining Scheduled Payments,
(ii) an amount equal to any reimbursements of outstanding Advances made by the
Servicer with respect to such Precomputed Receivable from the proceeds of other
Receivables and (iii) all past due Scheduled Payments for which an Advance has
not been made, minus (b) the sum of (i) all Payments Ahead in respect of such
Precomputed Receivable held by the Servicer or on deposit in the Payahead
Account and (ii) the rebate, calculated on an actuarial basis, that would be
payable to the Obligor on such Precomputed Receivable were the Obligor to prepay
such Precomputed Receivable in full on such day of purchase and (2) for a Simple
Interest Receivable, will be equal to its unpaid principal balance, plus
interest thereon at a rate equal to the Required Rate to the last day of the
Collection Period relating to such repurchase. Upon the repurchase of any
Administrative Receivable, the Servicer shall for all purposes of the Agreement
be deemed to have released all claims for the reimbursement of outstanding
Advances made in respect of such Receivable. This repurchase obligation will
constitute the sole remedy available to the Certificateholders or the Trustee
for any such uncured breach by the Servicer. (Sections 13.07 and 13.08).
If the Servicer determines that eventual payment in full of a Receivable is
unlikely, the Servicer will follow its normal practices and procedures to
recover all amounts due upon such Receivable, including the repossession and
disposition of the related Financed Vehicle at a public or private sale, or the
taking of any other action permitted by applicable law. (Section 13.04).
INSURANCE ON FINANCED VEHICLES
Each Receivable requires the related Obligor to maintain insurance covering
physical damage to the Financed Vehicle in an amount not less than the unpaid
principal balance of such Receivable pursuant to which AHFC is named as a loss
payee. Since the Obligors may select their own insurers to provide the requisite
coverage, the specific terms and conditions of their policies may vary. AHFC
does not monitor the maintenance of such insurance. A failure by an Obligor to
maintain such physical damage insurance will constitute a default under the
related Receivable. See "American Honda Finance Corporation -- Underwriting of
Motor Vehicle Loans". In the event that the failure of an Obligor to maintain
any such required insurance results in a shortfall in amounts to be distributed
to Class A Certificateholders and such shortfall is not covered by amounts
otherwise payable to the Class B Certificateholders pursuant to the
subordination of the Class B Certificates or from amounts on deposit in the
Reserve Fund, Class A Certificateholders could suffer a loss on their
investment.
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COLLECTIONS
The Servicer will establish two accounts in the name of the Trustee on
behalf of the Certificateholders, the first into which payments made on or in
respect of the Receivables will be deposited and from which all distributions
with respect to the Receivables and the Certificates will be made (the
"Certificate Account") and the second into which, to the extent required by the
Agreement, payments made by Obligors in respect of Precomputed Receivables in
excess of the related Scheduled Payments (each, a "Payment Ahead"), to the
extent that such payments do not constitute a prepayment in full of the related
Precomputed Receivable, will be deposited until the Collection Period in which
such payments become due (the "Payahead Account" and, together with the
Certificate Account, the "Accounts"). The Certificate Account and the Payahead
Account will be maintained with a depository institution or a trust company
(which may include the Trustee) so long as (i) the commercial paper or other
short-term unsecured debt obligations of the Trustee have a rating of Prime-1 by
Moody's and a rating of at least A-1+ by Standard & Poor's (the "Required
Rating") or (ii) such Accounts are maintained in a segregated trust account for
the benefit of the Certificateholders, located in the corporate trust department
of a depository institution or trust company having corporate trust powers
(which may include the Trustee) and a long-term deposit rating from Moody's of
at least Baa3 (or such lower rating as Moody's shall approve in writing).
Initially, the Accounts will be maintained in segregated trust accounts with
Bank of Tokyo - Mitsubishi Trust Company.
Funds on deposit in the Accounts may, at the direction of the Servicer, be
invested in Permitted Investments that mature on the Business Day immediately
preceding the Distribution Date next succeeding the date of investment (other
than instruments of the entity at which the Accounts are located, which may
mature on such Distribution Date). All income or other gain from such
investments, net of investment expenses and any loss resulting from such
investment, shall be paid to the Servicer as additional servicing compensation.
Investment expenses and net loss resulting from such investments shall be
charged to the related Account and will be borne by the Certificateholders.
"Permitted Investments" will be (i) obligations of, and obligations guaranteed
by, the United States or any agency thereof, backed by full faith and credit of
the United States, (ii) securities issued or guaranteed by the Federal National
Mortgage Association or any state rated in the highest applicable rating
category of each Rating Agency (the "Required Investment Rating"), (iii)
securities bearing interest or sold at a discount of any corporation
incorporated in any state or under federal law the unsecured debt or commercial
paper of which has the Required Investment Rating, (iv) certificates of deposit
fully insured by the FDIC or otherwise issued by a federal or state institution
the short term unsecured debt of which has the Required Investment Rating, (v)
certain repurchase obligations with respect to any security described in clause
(i) or (ii) above or (vi) any other investment approved by each Rating Agency.
The Servicer will deposit all payments received on or in respect of the
Receivables and all proceeds of Receivables collected into the Certificate
Account not later than two Business Days after receipt. However, the Servicer
may retain such amounts until the Business Day immediately preceding the related
Distribution Date so long as (i) AHFC is the Servicer, (ii) no Event of Default
exists and is continuing and (iii) either (a) the short-term unsecured debt of
AHFC is rated at least Prime-1 by Moody's and A-1 by Standard & Poor's, or (b)
AHFC obtains a letter of credit (the "Servicer Letter of Credit") as provided in
the Agreement under which demands for payment will be made to secure timely
remittance of monthly collections to the Certificate Account. The Servicer
expects to obtain a Servicer Letter of Credit from on the Closing
Date and, accordingly, will be permitted to make remittances of collections to
the Certificate Account on a monthly basis. Pending deposit into the Certificate
Account, collections may be invested by the Servicer at its own risk and for its
own benefit and will not be segregated from its own funds. The Seller or the
Servicer, as the case may be, will remit the aggregate Warranty Purchase
Payments and Administrative Purchase Payments of any Receivables to be purchased
from the Trust into the Certificate Account on or before the Business Day
immediately preceding the related Distribution Date. (Section 14.02).
Collections on or in respect of a Receivable made during a Collection Period
(including Warranty Purchase Payments and Administrative Purchase Payments)
which are not late fees, prepayment charges,
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<PAGE>
extension fees or certain other similar fees or charges will be applied first to
any outstanding Advances made by the Servicer with respect to such Receivable,
and then to the related Scheduled Payment. Any collections on or in respect of a
Receivable remaining after such applications will be considered an "Excess
Payment". Excess Payments constituting a prepayment in full of Precomputed
Receivables and any Excess Payments relating to Simple Interest Receivables will
be applied as a prepayment of such Receivable (each, a "Prepayment"). All other
Excess Payments in respect of Precomputed Receivables will be held by the
Servicer (or if the Servicer has not satisfied the conditions in clauses (i)
through (iii) in the immediately preceding paragraph, deposited in the Payahead
Account) as a Payment Ahead. (Sections 14.02 and 14.03).
ADVANCES
If the Scheduled Payment due on a Precomputed Receivable is not received in
full by the end of the month in which it is due, whether as the result of any
extension granted to the Obligor or otherwise, the amount of Payments Ahead, if
any, not previously applied with respect to such Precomputed Receivable shall be
applied by the Servicer to the extent of the shortfall and the Payahead Account
shall be reduced accordingly. If any shortfall remains, the Servicer will make a
Precomputed Advance to the Trust in an amount equal to the amount of such
shortfall. In addition, if the Scheduled Payment on a Simple Interest Receivable
is not received in full by the end of the month in which it is due, the Servicer
will be required, subject to the limitations set forth below, to make a Simple
Interest Advance to the Trust in an amount equal to the product of the Principal
Balance of such Simple Interest Receivable as of the first day of the related
Collection Period and one-twelfth of its APR minus the amount of interest
actually received on such Simple Interest Receivable during the related
Collection Period. If such a calculation results in a negative number, an amount
equal to such negative amount shall be paid to the Servicer in reimbursement of
outstanding Simple Interest Advances. In addition, in the event that a Simple
Interest Receivable becomes a Liquidated Receivable, the amount of accrued and
unpaid interest thereon (but not including interest for the current Collection
Period) shall, up to the amount of all outstanding Simple Interest Advances in
respect thereof, be withdrawn from the Collection Account and paid to the
Servicer in reimbursement of such outstanding Simple Interest Advances. No
advances of principal will be made with respect to Simple Interest Receivables.
The obligation of the Servicer to make an Advance (other than a Simple
Interest Advance in respect of an interest shortfall arising from the prepayment
of a Simple Interest Receivable) will be limited to the extent that it
determines, in its sole discretion, that such Advance will be recovered from
subsequent collections on or in respect of such Receivable. In making Advances,
the Servicer will endeavor to maintain monthly payments of interest at the
Pass-Through Rate to Certificateholders rather than to guarantee or insure
against losses. Accordingly, all Advances shall be reimbursable to the Servicer,
without interest, if and when a payment relating to a Receivable with respect to
which an Advance has previously been made is subsequently received. Upon the
determination by the Servicer that reimbursement from the preceding source is
unlikely, it will be entitled to recover unreimbursed Advances from collections
on or in respect of other Receivables. (Section 14.04).
The Servicer will make all Advances by depositing into the Certificate
Account any amount equal to the aggregate of the Precomputed Advances and Simple
Interest Advances due in respect of a Collection Period on the Business Day
immediately preceding the related Distribution Date.
NET DEPOSITS
The Servicer will be permitted to deposit in the Certificate Account only
the net amount distributable to Certificateholders on the related Distribution
Date. The Servicer, however, will account to the Trustee and to the
Certificateholders as if all deposits and distributions were made individually.
(Section 14.08). Similarly, so long as the Seller is the only holder of the
Class B Certificates, it will be entitled to net its payment obligations to the
Trustee against any amounts distributable on the Class B Certificates on the
related Distribution Date.
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<PAGE>
SERVICING COMPENSATION
On each Distribution Date, the Servicer will receive the Servicing Fee for
the related Collection Period equal to one-twelfth of the Servicing Fee Rate
multiplied by the Pool Balance as of the first day of such Collection Period or,
in the case of the first Collection Period, the Cutoff Date Pool Balance. The
Servicing Fee will be calculated and paid based upon a 360-day year consisting
of twelve 30-day months. The Servicer will be entitled to collect and retain as
additional servicing compensation in respect of each Collection Period any late
fees, prepayment charges and other administrative fees and expenses or similar
charges collected during such Collection Period, plus any interest earned during
such Collection Period from the investment of monies on deposit in the Accounts,
net of investment expenses and any losses from such investments. See
"Collections".
The Servicing Fee will compensate the Servicer for performing the functions
of a third party servicer of the Receivables as an agent for the Trustee,
including collecting and posting payments, responding to inquiries of Obligors,
investigating delinquencies, sending payment statements and reporting tax
information to Obligors, paying costs of collections and policing the
collateral. The Servicing Fee will also compensate the Servicer for
administering the Receivables, including making Advances, accounting for
collections, furnishing monthly and annual statements to the Trustee with
respect to distributions and generating federal income tax information and
certain taxes, accounting fees, outside auditor fees, data processing costs and
other costs incurred in connection with administering the Receivables. (Sections
13.01 and 13.09).
The "Pool Balance" will equal the aggregate Principal Balance of the
Receivables (other than Defaulted Receivables). The "Principal Balance" of a
Receivable as of any date will equal the original principal balance of each
Receivable minus the sum of (i) in the case of a Precomputed Receivable, that
portion of all Scheduled Payments due on or prior to such date allocable to
principal, computed in accordance with the actuarial method, (ii) in the case of
a Simple Interest Receivable, that portion of all Scheduled Payments actually
received on or prior to such date allocable to principal, (iii) any Warranty
Purchase Payment or Administrative Purchase Payment with respect to such
Receivable allocable to principal (to the extent not included in clauses (i) and
(ii) above) and (iv) any Prepayments or other payments applied to reduce the
unpaid principal balance of such Receivable (to the extent not included in
clauses (i), (ii) and (iii) above).
DISTRIBUTIONS ON THE CERTIFICATES
On the tenth calendar day of each month or, if such day is not a Business
Day, the immediately succeeding Business Day (each, a "Determination Date"), the
Servicer will inform the Trustee of, among other things, the amount of funds
collected on or in respect of the Receivables, the Yield Supplement Deposit
Amount, if any, the amount of Advances to be made by the Servicer and the
Servicing Fee and other servicing compensation payable to the Servicer, in each
case with respect to the immediately preceding Collection Period. On or prior to
each Determination Date, the Servicer will also determine the Class A
Distributable Amount, the Class B Distributable Amount and, based on the
available funds and other amounts available for distribution on the related
Distribution Date as described below, the amount to be distributed to the Class
A Certificateholders and the Class B Certificateholders.
On each Distribution Date, the Trustee will cause Payments Ahead previously
deposited in the Payahead Account or held by the Servicer in respect of the
related Collection Period to be transferred to the Certificate Account and the
aggregate Yield Supplement Deposit Amount, if any, to be withdrawn from the
Yield Supplement Account and deposited in the Certificate Account. (Sections
14.01 and 14.06).
The Trustee shall make distributions to the Certificateholders out of the
amounts on deposit in the Certificate Account. The amount to be distributed to
the Certificateholders shall be determined in the manner described below.
DETERMINATION OF AVAILABLE AMOUNTS. The amount of funds available for
distribution on a Distribution Date will generally equal the sum of Available
Interest and Available Principal.
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"Available Interest" for a Distribution Date will equal the sum of the
following amounts allocable to interest received or allocated by the Servicer on
or in respect of the Receivables during the related Collection Period (computed,
in the case of Precomputed Receivables, by the actuarial method and, in the case
of Simple Interest Receivables, by the simple interest method): all (i)
collections on or in respect of the Receivables other than Defaulted Receivables
(including Payments Ahead being applied in such Collection Period but excluding
Payments Ahead to be applied in one or more future Collection Periods); (ii)
proceeds of the liquidation of Defaulted Receivables, net of expenses incurred
by the Servicer in accordance with its customary servicing procedures in
connection with such liquidation ("Net Liquidation Proceeds"); (iii) Advances
made by the Servicer; (iv) Warranty Purchase Payments with respect to Warranty
Receivables repurchased by the Seller and Administrative Purchase Payments with
respect to Administrative Receivables purchased by the Servicer, in either case
in respect of such Collection Period; and (v) the Yield Supplement Deposit
Amount for the related Distribution Date.
"Available Principal" for a Distribution Date will equal the sum of the
amounts described in clauses (i) through (iv) of the immediately preceding
paragraph received or allocated by the Servicer in respect of principal on or in
respect of the Receivables during the related Collection Period (computed, in
the case of Precomputed Receivables, by the actuarial method and, in the case of
Simple Interest Receivables, by the simple interest method).
Available Interest and Available Principal on any Distribution Date will
exclude (i) amounts received on a particular Receivable (other than a Defaulted
Receivable) to the extent that the Servicer has previously made an unreimbursed
Advance in respect of such Receivable and (ii) Net Liquidation Proceeds with
respect to a particular Receivable to the extent of unreimbursed Advances in
respect of such Receivable. A "Defaulted Receivable" will be a Receivable (other
than an Administrative Receivable or a Warranty Receivable) as to which (a) all
or any part of a Scheduled Payment is 120 or more days past due and the Servicer
has not repossessed the related Financed Vehicle or (b) the Servicer has, in
accordance with its customary servicing procedures, determined that eventual
payment in full is unlikely and has either repossessed and liquidated the
related Financed Vehicle or repossessed and held the related Financed Vehicle in
its repossession inventory for 90 days, whichever occurs first.
CALCULATION OF DISTRIBUTABLE AMOUNTS. The "Class A Distributable Amount"
with respect to a Distribution Date will equal the sum of (i) the "Class A
Principal Distributable Amount", consisting of the Class A Percentage of the
following items: (a) in the case of Precomputed Receivables, the principal
portion of all Scheduled Payments due during the related Collection Period,
computed in accordance with the actuarial method, (b) in the case of Simple
Interest Receivables, the principal portion of all Scheduled Payments actually
received during such Collection Period, (c) the principal portion of all
Prepayments received during the related Collection Period (to the extent such
amounts are not included in clauses (a) and (b) above) and (d) the Principal
Balance of each Receivable that the Servicer became obligated to purchase, the
Seller became obligated to repurchase or that became a Defaulted Receivable
during the related Collection Period (to the extent such amounts are not
included in clauses (a), (b) or (c) above) and (ii) the "Class A Interest
Distributable Amount", consisting of one month's interest at the Pass-Through
Rate on the Class A Certificate Balance as of the immediately preceding
Distribution Date (after giving effect to distributions of principal made on
such immediately preceding Distribution Date) or, in the case of the first
Distribution Date, the Original Class A Certificate Balance.
The "Class B Distributable Amount" with respect to a Distribution Date will
be an amount equal to the sum of (i) the "Class B Principal Distributable
Amount", consisting of the Class B Percentage of the amounts set forth under
clauses (i)(a) through (i)(d) in the second preceding paragraph with respect to
the Class A Principal Distributable Amount and (ii) the "Class B Interest
Distributable Amount", consisting of one month's interest at the Pass-Through
Rate on the Class B Certificate Balance as of the immediately preceding
Distribution Date (after giving effect to distributions of principal made on
such immediately preceding Distribution Date) or, in the case of the first
Distribution Date, the Original Class B Certificate Balance.
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<PAGE>
The "Class B Certificate Balance" will initially equal $ (the
"Original Class B Certificate Balance") and, on any Distribution Date, will
equal the amount by which the Pool Balance on the last day of the preceding
Collection Period exceeds the Class A Certificate Balance on such Distribution
Date.
PAYMENT OF DISTRIBUTABLE AMOUNTS. Prior to each Distribution Date, the
Servicer will calculate the amount to be distributed to the Certificateholders.
On each Distribution Date, the Trustee will distribute to Certificateholders of
record the following amounts in the following order of priority, to the extent
of funds available for distribution on such Distribution Date:
(i) to the Class A Certificateholders, an amount equal to the Class A
Interest Distributable Amount and any unpaid Class A Interest Carryover
Shortfall, such amount to be paid from Available Interest (as Available
Interest has been reduced by reimbursing the Servicer for the interest
component of any outstanding Advances and paying the Servicer the Servicing
Fee, including any unpaid Servicing Fees with respect to one or more prior
Collection Periods and any additional servicing compensation as described
under "Servicing Compensation"); and if such Available Interest is
insufficient, the Class A Certificateholders will be entitled to receive
such deficiency first from the Class B Percentage of Available Principal and
second, if such amounts are still insufficient, from monies on deposit in
the Reserve Fund;
(ii) to the Class B Certificateholders, an amount equal to the Class B
Interest Distributable Amount and any unpaid Class B Interest Carryover
Shortfall, such amount to be paid from Available Interest (after giving
effect to the reduction in Available Interest described in clause (i)
above); and if such Available Interest is insufficient, the Class B
Certificateholders will be entitled to receive such deficiency from monies
on deposit in the Reserve Fund;
(iii) to the Class A Certificateholders, an amount equal to the Class A
Principal Distributable Amount and any unpaid Class A Principal Carryover
Shortfall, such amount to be paid from Available Principal (as Available
Principal has been reduced by reimbursing the Servicer for the principal
component of any outstanding Precomputed Advances and any reduction in
Available Principal described in clause (i) above); and if such Available
Principal is insufficient, the Class A Certificateholders will be entitled
to receive such deficiency first from Available Interest (after giving
effect to the reduction in Available Interest described in clauses (i) and
(ii) above) and second, if such amounts are still insufficient, from monies
on deposit in the Reserve Fund; and
(iv) to the Class B Certificateholders, an amount equal to the Class B
Principal Distributable Amount and any unpaid Class B Principal Carryover
Shortfall, such amount to be paid from Available Principal (after giving
effect to the reduction in Available Principal described in clauses (i) and
(iii) above); and if such Available Principal is insufficient, the Class B
Certificateholders will be entitled to receive such deficiency first from
Available Interest (after giving effect to the reduction in Available
Interest described in clauses (i), (ii) and (iii) above) and second, if such
amounts are still insufficient, from monies on deposit in the Reserve Fund.
(Section 14.06).
The "Class A Interest Carryover Shortfall" with respect to any Distribution
Date will mean the excess, if any, of the Class A Interest Distributable Amount
for such Distribution Date plus any outstanding Class A Interest Carryover
Shortfall with respect to the immediately preceding Distribution Date, plus
interest on such outstanding Class A Interest Carryover Shortfall, to the extent
permitted by law, at the Pass-Through Rate from such immediately preceding
Distribution Date to but not including the current Distribution Date, over the
amount of interest actually received by the Class A Certificateholders on such
current Distribution Date. The "Class A Principal Carryover Shortfall" with
respect to any Distribution Date will mean the excess, if any, of the Class A
Principal Distributable Amount plus any outstanding Class A Principal Carryover
Shortfall with respect to one or more prior Distribution Dates over the amount
of principal that the holders of the Class A Certificates actually received on
such current Distribution Date. The "Class B Interest Carryover Shortfall" and
the "Class B Principal Carryover Shortfall" shall have meanings correlative to
the foregoing.
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Any excess amounts in the Certificate Account with respect to any
Distribution Date, after giving effect to the distributions described in clauses
(i) through (iv) of the second preceding paragraph ("Excess Amounts"), will be
distributed in the following amounts and in the following order of priority: (i)
to the Reserve Fund until the amount on deposit therein equals the Specified
Reserve Fund Balance and (ii) to the Seller.
THE YIELD SUPPLEMENT ACCOUNT
The Yield Supplement Account is designed solely to supplement interest
collections on the Discount Receivables. The Yield Supplement Account will not
be part of or otherwise includible in the Trust and will be a segregated trust
account held by the Trustee for the benefit of the Certificateholders.
On each Distribution Date, the Trustee will transfer to the Certificate
Account from monies on deposit in the Yield Supplement Account an amount equal
to the Yield Supplement Deposit Amount in respect of the Discount Receivables
for such Distribution Date. See "Distributions on the Certificates". All or a
portion of the monies on deposit in the Yield Supplement Account may be invested
in Permitted Investments. All income and gain realized on such investments shall
be deposited in the Yield Supplement Account and shall be distributed as
required to the Certificate Account. Amounts on deposit on any Distribution Date
in the Yield Supplement Account in excess of the Maximum Yield Supplement
Amount, after giving effect to all distributions to be made on such Distribution
Date, will be paid to the Seller and the Certificateholders will have no further
rights in, or claims to, such amounts. The "Maximum Yield Supplement Amount" for
any Distribution Date will equal the aggregate amount, as of the last day of the
related Collection Period, by which interest on the Principal Balance of each
Discount Receivable (other than any such Receivable that is a Defaulted
Receivable) for the remaining term of such Receivable (assuming no prepayments
or delinquencies) at the Required Rate exceeds interest on such Principal
Balance at the APR of each such Receivable; provided, that such amount may be
discounted at a rate to be specified in the Agreement. Monies on deposit in the
Yield Supplement Account may be invested in Permitted Investments. Any monies
remaining on deposit in the Yield Supplement Account upon the termination of the
Trust pursuant to its terms will be paid to the Seller (Section 14.06).
SUBORDINATION OF THE CLASS B CERTIFICATES; RESERVE FUND
The rights of the Class B Certificateholders to receive distributions with
respect to the Receivables will be subordinated to the rights of the Servicer
(to the extent that the Servicer is paid the Servicing Fee with respect to the
related Collection Period, including any unpaid Servicing Fees with respect to
one or more prior Collection Periods and any additional servicing compensation
as described under "Servicing Compensation", and to the extent the Servicer is
reimbursed for certain unreimbursed Advances) and the Class A Certificateholders
to the extent described above. This subordination is intended to enhance the
likelihood of timely receipt by Class A Certificateholders of the full amount of
interest and principal required to be paid to them, and to afford such
Certificateholders limited protection against losses in respect of the
Receivables.
No distribution will be made to the Class B Certificateholders on any
Distribution Date in respect of (i) interest until the full amount of interest
on the Class A Certificates payable on such Distribution Date has been
distributed to the Class A Certificateholders and (ii) principal until the full
amount of interest on and principal of the Class A Certificates payable on such
Distribution Date has been distributed to the Class A Certificateholders.
Distributions of interest on the Class B Certificates, to the extent of
collections on or in respect of the Receivables allocable to interest and
certain available amounts on deposit in the Reserve Fund, will not be
subordinated to the payment of principal on the Class A Certificates.
In the event of delinquencies or losses on the Receivables, the protection
afforded to the Class A Certificateholders will be effected by the application
of Available Interest and Available Principal on each Distribution Date in the
priorities specified under "Distributions on the Certificates -- Payment of
Distributable Amounts", and by the establishment of the Reserve Fund. The
Reserve Fund will not be a part of or otherwise includible in the Trust and will
be a segregated trust account held by the Trustee for the benefit of
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<PAGE>
the Certificateholders. The Reserve Fund will be funded by the Seller on the
Closing Date in an amount equal to $ . Thereafter, all Excess Amounts
will be deposited from time to time in the Reserve Fund to the extent necessary
to maintain the amount in the Reserve Fund at the Specified Reserve Fund
Balance.
The "Specified Reserve Fund Balance" with respect to any Distribution Date
will be $ , except that, if on any Distribution Date (i) the average of
the Charge-off Rates for the three preceding Collection Periods exceeds 1.25% or
(ii) the average of the Delinquency Percentages for the three preceding
Collection Periods exceeds 1.25%, then the Specified Reserve Fund Balance will
be an amount equal to a specified percentage of the Pool Balance as of the last
day of the immediately preceding Collection Period. Such percentage shall be
determined by deducting from % the following fraction, expressed as a
percentage: (a) one minus (b) a fraction, the numerator of which is the Class A
Certificate Balance with respect to such Distribution Date and the denominator
of which is such Pool Balance. Notwithstanding the foregoing, in no event will
the Specified Reserve Fund Balance be more than $ or less than
$ . As of any Distribution Date, the amount of funds actually on deposit
in the Reserve Fund may, in certain circumstances, be less than the Specified
Reserve Fund Balance. Notwithstanding the foregoing, on any Distribution Date as
to which the Pool Balance as of the last day of the related Collection Period is
$ or less, the Specified Reserve Fund Balance will be the greater of
the applicable balance determined as described above or $ .
The "Charge-off Rate" with respect to a Collection Period will equal the
Aggregate Net Losses with respect to the Receivables expressed, on an annualized
basis, as a percentage of the average of (i) the Pool Balance on the last day of
the immediately preceding Collection Period and (ii) the Pool Balance on the
last day of such current Collection Period. "Aggregate Net Losses" with respect
to a Collection Period will equal the Principal Balance of all Receivables newly
designated during such Collection Period as Defaulted Receivables minus Net
Liquidation Proceeds collected during such Collection Period with respect to all
Defaulted Receivables. The "Delinquency Percentage" with respect to a Collection
Period will equal the number of (a) all outstanding Receivables 61 days or more
delinquent (after taking into account permitted extensions) as of the last day
of such Collection Period, determined in accordance with the Servicer's normal
practices, plus (b) the number of Receivables the related Financed Vehicles of
which have been repossessed but have not been liquidated (to the extent the
related Receivable is not otherwise reflected in clause (a) above or is not a
Defaulted Receivable), expressed as a percentage of the aggregate number of
Current Receivables on the last day of such Collection Period. A "Current
Receivable" will be a Receivable that is not a Defaulted Receivable or a
Liquidated Receivable. A "Liquidated Receivable" will be a Receivable that has
been the subject of a Prepayment in full or otherwise has been paid in full or,
in the case of a Defaulted Receivable, a Receivable as to which the Servicer has
determined that the final amounts in respect thereof have been paid.
The Servicer may, from time to time after the date of this Prospectus,
request each Rating Agency to approve a formula for determining the Specified
Reserve Fund Balance that is different from the one described above and would
result in a decrease in the amount of the Specified Reserve Fund Balance or
change the manner by which the Reserve Fund is funded. If each Rating Agency
delivers a letter to the Trustee to the effect that the use of any such new
formulation will not result in the qualification, reduction or withdrawal of its
then-current rating of the Class A Certificates, then the Specified Reserve Fund
Balance will be determined in accordance with such new formula. The Agreement
will accordingly be amended to reflect such new calculation without the consent
of any Certificateholder.
On each Distribution Date, funds will be withdrawn from the Reserve Fund as
described above for distribution first to Class A Certificateholders to the
extent of shortfalls in the amounts available to make required distributions of
interest on the Class A Certificates, second to Class B Certificateholders to
the extent of shortfalls in the amounts available to make required distributions
of interest on the Class B Certificates, third to Class A Certificateholders to
the extent of shortfalls in the amounts available to make
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<PAGE>
required distributions of principal on the Class A Certificates and fourth to
Class B Certificateholders to the extent of shortfalls in the amounts available
to make required distributions of principal on the Class B Certificates.
On each Distribution Date, the Trustee will deposit all Excess Amounts into
the Reserve Fund until the amount on deposit therein equals the Specified
Reserve Fund Balance. If the amount on deposit in the Reserve Fund on such
Distribution Date (after giving effect to all deposits thereto or withdrawals
therefrom on such Distribution Date) is greater than the Specified Reserve Fund
Balance, the Trustee will release and distribute such excess, together with any
Excess Amounts not required to be deposited into the Reserve Fund, to the
Seller. Upon any such release of amounts from the Reserve Fund, the
Certificateholders will have no further rights in, or claims to, such amounts.
Any monies remaining on deposit in the Reserve Fund upon the termination of the
Trust pursuant to its terms will be paid to the Seller. (Section 14.06).
Amounts held from time to time in the Reserve Fund will continue to be held
for the benefit of holders of the Certificates. Funds on deposit in the Reserve
Fund may be invested in Permitted Investments. Investment income on monies on
deposit in the Reserve Fund, net of investment expenses and losses on such
investments, will not be available for distribution to Certificateholders or
otherwise subject to any claims or rights of the Certificateholders and will be
paid to the Seller. Investment losses and any loss on such investments will be
charged to the Reserve Fund. (Section 14.07).
If on any Distribution Date the Class B Certificate Balance has been reduced
to zero and amounts on deposit in the Reserve Fund have been depleted as a
result of losses in respect of the Receivables, the protection afforded to the
Class A Certificateholders by the subordination of the Class B Certificates and
by the Reserve Fund will be exhausted and the Class A Certificateholders will
bear directly the risks associated with ownership of the Receivables. Amounts on
deposit in the Yield Supplement Account will not be available to
Certificateholders in the event that defaults or delinquencies in collections on
the Receivables result in shortfalls in amounts due to Certificateholders (even
in the circumstance described in the preceding sentence) or for any other
purpose other than withdrawals of the Yield Supplement Deposit Account on each
Distribution Date.
Neither the Class B Certificateholders, the Seller nor the Servicer will be
required to refund any amounts properly distributed or paid to them, whether or
not there are sufficient funds on any subsequent Distribution Date to make full
distributions to the Class A Certificateholders.
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EXAMPLE OF DISTRIBUTIONS
The following chart sets forth an example of the application of the
foregoing provisions to the first monthly distribution in respect of the
Certificates:
<TABLE>
<S> <C>
July 1.............. CUTOFF DATE. The Pool Balance will equal the aggregate
Principal Balance of the Receivables as of the opening of
business on this date.
July 1 - 31......... COLLECTION PERIOD. The Servicer will receive Scheduled
Payments, Prepayments, Payments Ahead and other payments
made on or in respect of the Receivables.
August 10........... DETERMINATION DATE. On this date, the Servicer will notify
the Trustee of, among other things, the amounts to be
distributed on the Distribution Date.
August 14........... RECORD DATE. Distributions on the Distribution Date will
be made to Certificateholders of record at the close of
business on this date.
August 15........... DISTRIBUTION DATE. On this date, the Trustee will make the
distributions described above.
</TABLE>
STATEMENTS TO CLASS A CERTIFICATEHOLDERS
On each Distribution Date, the Trustee will include with each distribution
to each Class A Certificateholder as of the close of business on the related
Record Date (which shall be Cede as the nominee for DTC unless Definitive
Certificates are issued under the limited circumstances described herein) a
statement, setting forth with respect to the related Collection Period or such
Distribution Date, as the case may be, among other things, the following
information:
(i) the amount of the Class A Certificateholder's distribution allocable
to principal;
(ii) the amount of the Class A Certificateholder's distribution
allocable to interest;
(iii) the Pool Balance as of the close of business on the last day of
such Collection Period;
(iv) the Class A Certificateholder's pro rata portion of the Servicing
Fee and any additional servicing compensation paid to the Servicer with
respect to the related Collection Period;
(v) the amount of the Class A Interest Carryover Shortfall and Class A
Principal Carryover Shortfall, if any, on such Distribution Date and the
change in such amounts from those with respect to the immediately preceding
Distribution Date;
(vi) the Class A Pool Factor as of such Distribution Date;
(vii) the amount otherwise distributable to the Class B
Certificateholders that is being distributed to the Class A
Certificateholders on such Distribution Date;
(viii) the balance on deposit in the Reserve Fund on such Distribution
Date after giving effect to distributions made on such Distribution Date,
the change in such balance from the immediately preceding Distribution Date
and the Specified Reserve Fund Balance;
(ix) the aggregate amount of Payments Ahead on deposit in the Payahead
Account or held by the Servicer and the change in such amount from the
immediately preceding Distribution Date;
(x) the amount of Advances made in respect of such Collection Period and
the amount of unreimbursed Advances on such Distribution Date;
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(xi) the Yield Supplement Deposit Amount, the Maximum Yield Supplement
Amount and the amount on deposit in the Yield Supplement Account after
giving effect to distributions made on such Distribution Date; and
(xii) the amount available under the Servicer Letter of Credit, if any,
and such amount as a percentage of the Pool Balance as of the last day of
such Collection Period.
Each amount set forth pursuant to subclauses (i), (ii), (iv) and (v) above
will be expressed in the aggregate and as a dollar amount per $1,000 of original
principal balance of a Class A Certificate. Copies of such statements may be
obtained by Certificate Owners by a request in writing addressed to the Trustee.
In addition, within the prescribed period of time for tax reporting purposes
after the end of each calendar year during the term of the Agreement, the
Trustee will mail to each person who at any time during such calendar year shall
have been a Class A Certificateholder a statement containing the sum of the
amounts described in clauses (i), (ii), (iv) and (v) above for the purposes of
such Class A Certificateholder's preparation of federal income tax returns.
(Section 14.10). See "Federal Income Tax Consequences -- Information Reporting
and Backup Withholding".
EVIDENCE AS TO COMPLIANCE
The Agreement will provide that a firm of nationally recognized independent
accountants will furnish to the Trustee on or before June 30 of each year,
beginning June 30, 1998, a statement as to compliance by the Servicer during the
preceding twelve months ended March 31 (or shorter period in the case of the
first such statement) with certain standards relating to the servicing of the
Receivables, the Servicer's accounting records and computer files with respect
thereto and certain other matters. (Section 13.12).
The Agreement will also provide for delivery to the Trustee, on or before
June 30 of such year, beginning June 30, 1998, of a certificate signed by an
officer of the Servicer stating that the Servicer has fulfilled its obligations
under the Agreement throughout the preceding twelve months ended March 31 (or
shorter period in the case of the first such certificate) or, if there has been
a default in the fulfillment of any such obligation, describing each such
default. (Section 13.11).
Copies of such statements and certificates may be obtained by Class A
Certificateholders by a request in writing addressed to the Trustee at 100
Broadway, 6th Floor, New York, New York 10005, Attention: Corporate Trust
Services.
CERTAIN MATTERS REGARDING THE SERVICER
The Agreement will provide that the Servicer may not resign from its
obligations and duties as the Servicer thereunder, except upon determination
that its performance of such duties is no longer permissible under applicable
law. No such resignation will become effective until the Trustee or a successor
servicer has assumed the Servicer's servicing obligations and duties under the
Agreement. (Section 17.05).
The Agreement will further provide that neither the Servicer nor any of its
directors, officers, employees or agents will be under any liability to the
Trust or the Certificateholders for taking any action or for refraining from
taking any action required or prohibited by the Agreement, or for errors in
judgment; provided, however, that neither the Servicer nor any such person will
be protected against any liability that would otherwise be imposed by reason of
willful misfeasance, bad faith or negligence in the performance of duties or by
reason of reckless disregard of its obligations and duties thereunder. The
Servicer will be under no obligation to appear in, prosecute or defend any legal
action that is not incidental to its servicing responsibilities under the
Agreement and that, in its opinion, may cause it to incur any expense or
liability. (Section 17.04).
Any corporation into which the Servicer may be merged or consolidated, any
corporation resulting from any merger or consolidation to which the Servicer is
a party or any corporation succeeding to all or substantially all of the
business of the Servicer will be the successor to the Servicer under the
Agreement. (Section 17.03).
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EVENTS OF DEFAULT
"Events of Default" under the Agreement will consist of (i) failure by the
Servicer (or the Seller, so long as AHFC is the Servicer) to deliver to the
Trustee for distribution to the Certificateholders any required payment, which
failure continues unremedied for three Business Days after discovery of such
failure by an officer of the Servicer (or the Seller, so long as AHFC is the
Servicer), or written notice of such failure, requiring the same to be remedied,
is given (a) to the Seller or the Servicer, as the case may be, by the Trustee
or (b) to the Seller or the Servicer, as the case may be, and to the Trustee by
holders of Certificates evidencing not less than 25% of the Voting Interests of
the Class A Certificates and the Class B Certificates, voting together as a
single class; (ii) failure by the Servicer (or the Seller, so long as AHFC is
the Servicer) duly to observe or perform in any material respect any other
covenants or agreements in the Certificates or the Agreement which failure
materially and adversely affects the rights of Certificateholders and which
continues unremedied for 90 days after written notice of such failure, requiring
the same to be remedied, is given (a) to the Seller or the Servicer, as the case
may be, by the Trustee or (b) to the Seller or the Servicer, as the case may be,
and to the Trustee by holders of Certificates evidencing not less than 25% of
the Voting Interests of the Class A Certificates and the Class B Certificates,
voting together as a single class; or (iii) certain events of bankruptcy,
insolvency, readjustment of debt, marshalling of assets and liabilities or
similar proceedings and certain actions by the Servicer (or the Seller, so long
as AHFC is the Servicer) indicating its insolvency, reorganization pursuant to
bankruptcy proceedings or inability to pay its obligations. (Section 18.01).
RIGHTS UPON EVENT OF DEFAULT
As long as an Event of Default remains unremedied, the Trustee or holders of
Certificates evidencing not less than 51% of the Voting Interests of the Class A
Certificates and the Class B Certificates, voting together as a single class,
may terminate all of the rights and obligations of the Servicer under the
Agreement, whereupon the Trustee will succeed, without further action, to all
the responsibilities, duties and liabilities of the Servicer in its capacity as
such under the Agreement and will be entitled to similar compensation
arrangements. If, however, a bankruptcy trustee or similar official has been
appointed for the Servicer and no Event of Default other than such appointment
has occurred, such trustee or official may have the power to prevent the Trustee
or such Certificateholders from effecting a transfer of servicing. In the event
that the Trustee is unwilling or unable so to act, then it may appoint, or
petition a court of competent jurisdiction for the appointment of, a successor
with a net worth of at least $50,000,000 whose regular business includes the
servicing of motor vehicle receivables. The Trustee and such successor Servicer
may agree upon the servicing compensation to be paid, which in no event may be
greater than the servicing compensation to the Servicer under the Agreement.
(Sections 18.02 and 18.03). Notwithstanding such termination, the Servicer shall
be entitled to payment of certain amounts payable to it prior to such
termination for services rendered prior to such termination.
WAIVER OF PAST DEFAULTS
The holders of Certificates evidencing not less than 51% of the Voting
Interests of the Class A Certificates and the Class B Certificates, voting
together as a single class, may waive any default by the Servicer in the
performance of its obligations under the Agreement and its consequences, except
a default in making any required deposits to or payments from the Accounts or
the Reserve Fund in accordance with the Agreement or in respect of a covenant or
provision of the Agreement that cannot be modified or amended without the
consent of each Certificateholder (in which event the related waiver will
require the approval of holders of all of the Certificates). No such waiver will
impair the Certificateholders' rights with respect to subsequent defaults.
(Section 18.05).
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VOTING INTERESTS
The "Voting Interests" of the (i) Class A Certificates will be allocated
among the Class A Certificateholders or Certificate Owners, as the case may be,
in accordance with the Class A Certificate Balance represented thereby and (ii)
Class B Certificates will be allocated among the Class B Certificateholders in
accordance with the Class B Certificate Balance represented thereby; provided,
that, where the Voting Interests are relevant to determine whether the vote of
the requisite percentage of Certificateholders necessary to effect a consent,
waiver, request or demand shall have been obtained, any Class A Certificates or
Class B Certificates, as the case may be, held by the Seller, the Servicer or
any of their respective affiliates shall be excluded from such determination
except in the case of an amendment to the Agreement requiring the consent of the
holders of all of the relevant Class of Certificates as described under
"Amendment".
AMENDMENT
The Agreement may be amended by the Seller, the Servicer and the Trustee,
without the consent of the Certificateholders or the bank issuing the Servicer
Letter of Credit (the "Letter of Credit Bank"), to cure any ambiguity, to
correct or supplement any provision therein which may be inconsistent with any
other provision therein, to add, change or eliminate any other provisions with
respect to matters or questions arising under the Agreement which are not
inconsistent with the provisions of the Agreement, to add or amend any provision
therein in connection with permitting transfers of the Class B Certificates or
to add or provide credit enhancement for the Class B Certificates, to permit
certain changes with respect to the Specified Reserve Fund Balance, the funding
of the Reserve Fund and the remittance schedule with respect to collections to
be deposited into the Accounts, or the Servicer Letter of Credit or the
acquisition thereof; provided that any such action will not, in the opinion of
counsel satisfactory to the Trustee, materially and adversely affect the
interest of any Certificateholder and provided, further, that in the case of a
change with respect to the Specified Reserve Fund Balance or any Servicer Letter
of Credit, the Trustee receives a letter from each Rating Agency to the effect
that its then-current rating of the Class A Certificates will not be qualified,
reduced or withdrawn due to such amendment. See "Subordination of the Class B
Certificates; Reserve Fund".
The Agreement may also be amended from time to time by the Seller, the
Servicer and the Trustee with the consent of the holders of Certificates
evidencing not less than 51% of the Voting Interests of all Certificates, voting
together as a single class, for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of the Agreement or
of modifying in any manner the rights of either Class of Certificateholders or
the Letter of Credit Bank; provided, however, that no such amendment may (i)
except as described above, increase or reduce in any manner the amount of, or
accelerate or delay the timing of, collections of payments on or in respect of
the Receivables or distributions to be made to Certificateholders or to or by
the Letter of Credit Bank or (ii) reduce the aforesaid percentage of the Voting
Interests of which the holders of either Class of Certificates are required to
consent to any such amendment, without the consent of the holders of all of the
relevant Class of Certificates and provided, further, that in the case of any
such amendment, the Trustee receives a letter from each Rating Agency to the
effect that its then-current rating of the Class A Certificates will not be
qualified, reduced or withdrawn due to such amendment. (Section 21.01).
LIST OF CERTIFICATEHOLDERS
Upon a written request of the Servicer, the Trustee, as Certificate
Registrar, will provide to the Servicer within 15 days after receipt of such
request a list of the names and addresses of all Certificateholders. In
addition, upon written request by three or more Certificateholders or holders of
either Class of Certificates evidencing not less than 25% of the Voting
Interests of such Class, and upon compliance by such Certificateholders with
certain provisions of the Agreement, such Certificateholders may request that
the Trustee, as
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Certificate Registrar, afford such Certificateholders access during business
hours to the current list of Certificateholders for purposes of communicating
with other Certificateholders with respect to their rights under the Agreement.
(Section 15.06).
The Agreement will not provide for the holding of any annual or other
meetings of Certificateholders.
TERMINATION
The respective obligations and responsibilities of the Seller, the Servicer
and the Trustee created by the Agreement will terminate upon the earliest to
occur of (i) the maturity or other liquidation of the last Receivable and the
disposition of any amounts received upon liquidation of any property remaining
in the Trust, (ii) the payment to Certificateholders of all amounts required to
be paid to them pursuant to the Agreement and (iii) the occurrence of the event
described below. In order to avoid excessive administrative expenses, the Seller
or the Servicer, or any successor to the Servicer, will be permitted at its
option to purchase from the Trust, on the Distribution Date following the last
day of any Collection Period as of which the Pool Balance is 10% or less of the
Cutoff Date Pool Balance, the corpus of the Trust at a price equal to the
aggregate Administrative Purchase Payments as of such last day for the
Receivables (including Receivables that became Defaulted Receivables in the
Collection Period preceding the Distribution Date on which such purchase is
effected) plus the appraised value of any other property held as part of the
Trust (less liquidation expenses); provided, however, that the purchase option
may not be exercised if the resulting final distribution on the Class A
Certificates would not equal the sum of the Class A Certificate Balance, the
Class A Interest Distributable Amount and any Class A Interest Carryover
Shortfall for such final Distribution Date. Exercise of such right will effect
early retirement of the Certificates. In the event that both the Seller and the
Servicer, or any successor to the Servicer, elect to purchase the Receivables as
described above, the party first notifying the Trustee (based on the Trustee's
receipt of such notice) shall be permitted to purchase the Receivables. The
Trustee will give written notice of termination to each Certificateholder of
record.
The final distribution to any Certificateholder will be made only upon
surrender and cancellation of such Certificateholder's Certificate at an office
or agency of the Trustee specified in the notice of termination. Any funds
remaining in the Trust, after the Trustee has taken certain measures to locate a
Certificateholder and such measures have failed, will be distributed to the
United Negro College Fund. (Sections 20.01 and 20.02).
DUTIES OF THE TRUSTEE
The Trustee will make no representations as to the validity or sufficiency
of the Agreement, the Certificates (other than the execution and authentication
thereof) or of any Receivables or related documents, and will not be accountable
for the use or application by the Seller or the Servicer of any funds paid to
the Seller or the Servicer in respect of the Certificates or the Receivables, or
the investment of any monies by the Servicer before such monies are deposited
into the Certificate Account or the Payahead Account. The Trustee will not
independently verify the Receivables. If no Event of Default has occurred and is
continuing, the Trustee will be required to perform only those duties
specifically required of it under the Agreement. Generally, those duties will be
limited to the receipt of the various certificates, reports or other instruments
required to be furnished to the Trustee under the Agreement, in which case the
Trustee will only be required to examine them to determine whether they conform
to the requirements of the Agreement. The Trustee will not be charged with
knowledge of a failure by the Servicer or the Seller to perform its duties under
the Agreement which failure constitutes an Event of Default unless the Trustee
obtains actual knowledge of such failure as will be specified in the Agreement.
(Sections 19.01 and 19.05).
The Trustee will be under no obligation to exercise any of the rights or
powers vested in it by the Agreement or to make any investigation of matters
arising thereunder or to institute, conduct or defend any litigation thereunder
or in relation thereto at the request, order or direction of any of the
Certificateholders, unless such Certificateholders have offered to the Trustee
reasonable security or indemnity against the costs,
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expenses and liabilities that may be incurred therein or thereby. No
Certificateholder will have any right under the Agreement to institute any
proceeding with respect to the Agreement, unless such holder previously has
given to the Trustee written notice of default and (i) the Event of Default
arises from the Servicer's failure to remit payments when due or (ii) the
holders of Certificates evidencing not less than 25% of the Voting Interests of
the Class A Certificates and the Class B Certificates, voting together as a
single class, have made written request upon the Trustee to institute such
proceeding in its own name as the Trustee thereunder and have offered to the
Trustee reasonable indemnity and the Trustee for 30 days has neglected or
refused to institute any such proceedings. (Section 21.03).
THE TRUSTEE
Bank of Tokyo - Mitsubishi Trust Company will be the Trustee under the
Agreement. The Trustee and any of its affiliates may hold Certificates in their
own names or as pledgees. (Section 19.06). For the purpose of meeting the legal
requirements of certain jurisdictions, the Servicer and the Trustee acting
jointly (or in some instances, the Trustee acting alone) will have the power to
appoint co-trustees or separate trustees of all or any part of the Trust. In the
event of such an appointment, all rights, powers, duties and obligations
conferred or imposed upon the Trustee by the Agreement will be conferred or
imposed upon the Trustee and each such separate trustee or co-trustee jointly,
or, in any jurisdiction in which the Trustee will be incompetent or unqualified
to perform certain acts, singly upon such separate trustee or co-trustee who
will exercise and perform such rights, powers, duties and obligations solely at
the direction of the Trustee. (Section 19.13).
The Trustee may resign at any time, in which event the Servicer will be
obligated to appoint a successor Trustee. The Servicer and the Seller may also
remove the Trustee if the Trustee ceases to be eligible to continue as such
under the Agreement, becomes legally unable to act or becomes insolvent. In such
circumstances, the Servicer will be obligated to appoint a successor Trustee.
Any resignation or removal of the Trustee and appointment of a successor Trustee
will not become effective until acceptance of the appointment by such successor
Trustee. (Section 19.10).
The Agreement will provide that the Servicer will pay the Trustee's fees and
expenses in connection with its duties under the Agreement. (Section 19.07). The
Agreement will further provide that the Trustee will be entitled to
indemnification by the Servicer for, and will be held harmless against, any
loss, liability or expense incurred by the Trustee not resulting from its own
willful misfeasance, bad faith or negligence (other than by reason of a breach
of any of its representations or warranties to be set forth in the Agreement).
(Sections 17.02 and 19.08).
The Trustee's Corporate Trust Office is located at 100 Broadway, 6th Floor,
New York, New York 10005.
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES
GENERAL
The transfer of the Receivables to the Trustee, the perfection of the
security interests in the Receivables and the enforcement of rights to realize
on the Financed Vehicles as collateral for the Receivables are subject to a
number of federal and state laws, including the UCC as in effect in various
states. The Servicer and the Seller will take such action as is required to
perfect the rights of the Trustee in the Receivables. If, through inadvertence
or otherwise, another party purchases (including the taking of a security
interest in) the Receivables for new value in the ordinary course of its
business, without actual knowledge of the Trust's interest, and takes possession
of the Receivables, such purchaser would acquire an interest in the Receivables
superior to the interest of the Trust.
SECURITY INTERESTS IN THE FINANCED VEHICLES
GENERAL. Retail installment sale contracts such as the Receivables evidence
the credit sale of motor vehicles by dealers to obligors; the contracts also
constitute personal property security agreements and
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include grants of security interests in the related vehicles under the UCC.
Perfection of security interests in motor vehicles is generally governed by
state certificate of title statutes or by the motor vehicle registration laws of
the state in which each vehicle is located. In most states (including California
and Texas, the states in which the largest number of Financed Vehicles are
located), a security interest in a motor vehicle is perfected by notation of the
secured party's lien on the vehicle's certificate of title.
All retail installment sale contracts that AHFC acquires from Dealers name
AHFC as obligee or assignee and as the secured party. AHFC also takes all
actions necessary under the laws of the state in which the related vehicles are
located to perfect its security interest in such vehicles, including, where
applicable, having a notation of its lien recorded on the related certificate of
title and obtaining possession of the certificate of title.
PERFECTION. Pursuant to the Receivables Purchase Agreement, AHFC will sell
and assign its security interests in the Financed Vehicles to the Seller and,
pursuant to the Agreement, the Seller will sell and assign its security
interests in the Financed Vehicles to the Trustee. However, because of the
administrative burden and expense, neither AHFC, the Seller nor the Trustee will
amend any certificate of title to identify the Trustee as the new secured party
on the certificates of title relating to the Financed Vehicles. In the absence
of such an amendment and vehicle reregistration, the Trustee may not have a
perfected security interest in the Financed Vehicles in all states. However, UCC
financing statements with respect to the transfer to the Seller of AHFC's
security interest in the Financed Vehicles and the transfer to the Trustee of
the Seller's security interest in the Financed Vehicles will be filed. In
addition, the Servicer will continue to hold all certificates of title relating
to the Financed Vehicles in its possession as custodian for the Trustee pursuant
to the Agreement. See "The Certificates -- Sale and Assignment of the
Receivables".
In most states, assignments such as those under the Receivables Purchase
Agreement and the Agreement are an effective conveyance of a security interest
without amendment of any lien noted on a vehicle's certificate of title, and the
assignee succeeds thereby to the assignor's rights as secured party. In such
states, although reregistration of the vehicle is not necessary to convey a
perfected security interest in the Financed Vehicles to the Trustee, because the
Trustee will not be listed as legal owner on the certificates of title to the
Financed Vehicles, its security interest could be defeated through fraud or
negligence. Moreover, in certain other states, in the absence of such amendment
and reregistration, a perfected security interest in the Financed Vehicles may
not have been effectively conveyed to the Trustee. Except in such event,
however, in the absence of fraud, forgery or administrative error, the notation
of AHFC's lien on the certificates of title will be sufficient to protect the
Trust against the rights of subsequent purchasers of a Financed Vehicle or
subsequent creditors who take a security interest in a Financed Vehicle. In the
Receivables Purchase Agreement, AHFC will represent and warrant, and in the
Agreement, the Seller will represent and warrant, that all action necessary for
AHFC to obtain a perfected security interest in each Financed Vehicle has been
taken. If there are any Financed Vehicles as to which AHFC failed to obtain a
first perfected security interest, its security interest would be subordinate
to, among others, subsequent purchasers of such Financed Vehicles and holders of
perfected security interests therein. Such a failure, however, would constitute
a breach of AHFC's representations and warranties under the Receivables Purchase
Agreement and the Seller's representations and warranties under the Agreement.
Accordingly, pursuant to the Agreement, the Seller would be required to
repurchase the related Receivable from the Trustee and, pursuant to the
Receivables Purchase Agreement, AHFC would be required to purchase such
Receivable from the Seller, in each case unless the breach were cured. See "The
Certificates -- Sale and Assignment of the Receivables". The Seller will assign
its rights under the Receivables Purchase Agreement to the Trustee.
CONTINUITY OF PERFECTION. Under the laws of most states, a perfected
security interest in a vehicle continues for four months after the vehicle is
moved to a new state from the one in which it is initially registered and
thereafter until the owner re-registers such vehicle in the new state. A
majority of states require surrender of the related certificate of title to
re-register a vehicle. In those states (such as California) that require a
secured party to hold possession of the certificate of title to maintain
perfection of the security interest, the secured party would learn of the
re-registration through the request from the obligor under the
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related installment sale contract to surrender possession of the certificate of
title. In the case of vehicles registered in states providing for the notation
of a lien on the certificate of title but not possession by the secured party
(such as Texas), the secured party would receive notice of surrender from the
state of re-registration if the security interest is noted on the certificate of
title. Thus, the secured party would have the opportunity to re-perfect its
security interest in the vehicles in the state of relocation. However, these
procedural safeguards will not protect the secured party if through fraud,
forgery or administrative error, the debtor somehow procures a new certificate
of title that does not list the secured party's lien. Additionally, in states
that do not require a certificate of title for registration of a vehicle,
re-registration could defeat perfection. In the ordinary course of servicing the
Receivables, AHFC will take steps to effect re-perfection upon receipt of notice
of re-registration or information from the Obligor as to relocation. Similarly,
when an Obligor sells a Financed Vehicle, AHFC must surrender possession of the
certificate of title or will receive notice as a result of its lien noted
thereon and accordingly will have an opportunity to require satisfaction of the
related Receivable before release of the lien. Under the Agreement, the Servicer
will be obligated to take appropriate steps, at its own expense, to maintain
perfection of security interests in the Financed Vehicles.
PRIORITY OF CERTAIN LIENS ARISING BY OPERATION OF LAW. Under the laws of
most states (including California and Texas), liens for repairs performed on a
motor vehicle and liens for unpaid taxes take priority over even a first
perfected security interest in such vehicle. The Internal Revenue Code of 1986,
as amended, also grants priority to certain federal tax liens over the lien of a
secured party. The laws of certain states and federal law permit the
confiscation of motor vehicles by governmental authorities under certain
circumstances if used in unlawful activities, which may result in the loss of a
secured party's perfected security interest in a confiscated vehicle. AHFC will
represent and warrant to the Seller in the Receivables Purchase Agreement and
the Seller will represent and warrant to the Trustee in the Agreement that, as
of the Closing Date, the security interest in each Financed Vehicle is prior to
all other present liens upon and security interests in such Financed Vehicle.
However, liens for repairs or taxes could arise at any time during the term of a
Receivable. No notice will be given to the Trustee or Certificateholders in the
event such a lien or confiscation arises and any such lien or confiscation
arising after the Closing Date would not give rise to the Seller's repurchase
obligation under the Agreement or AHFC's repurchase obligation under the
Receivables Purchase Agreement.
REPOSSESSION
In the event of default by an obligor under a retail installment sale
contract, the holder of such retail installment sale contract has all the
remedies of a secured party under the UCC, except where specifically limited by
other state laws. The UCC remedies of a secured party include the right to
repossession of the related motor vehicle, by self-help means, unless such means
would constitute a breach of the peace. Unless a vehicle is voluntarily
surrendered, self-help repossession is the method employed by AHFC in most cases
and is accomplished simply by taking possession of the related vehicle. In cases
where the obligor objects or raises a defense to repossession, or if otherwise
required by applicable state law, a court order must be obtained from the
appropriate state court, and the vehicle must then be recovered in accordance
with that order. In some jurisdictions, the secured party is required to notify
the debtor of the default and the intent to repossess the collateral and be
given a time period within which to cure the default prior to repossession. In
most states, under certain circumstances after the vehicle has been repossessed,
the obligor may reinstate the related contract by paying the delinquent
installments and other amounts due.
NOTICE OF SALE; REDEMPTION RIGHTS
In the event of default by an obligor under a retail installment sale
contract, some jurisdictions require that the obligor be notified of the default
and be given a time period within which to cure the default prior to
repossession of the related motor vehicle. Generally, this right of cure may
only be exercised on a limited number of occasions during the term of the
related contract.
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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
and/or the date after which any private sale of the collateral may be held. In
most states, the obligor has the right to redeem the collateral prior to actual
sale by paying the secured party the unpaid principal balance of the obligation,
accrued interest thereon, plus reasonable expenses for repossessing, holding and
preparing the collateral for disposition and arranging for its sale, plus, in
some jurisdictions, reasonable attorneys' fees. In some states, the obligor has
the right to redeem the collateral prior to actual sale by payment of all
delinquent installments or the unpaid balance of the related contract.
DEFICIENCY JUDGMENTS AND EXCESS PROCEEDS
The proceeds of resale of repossessed vehicles generally will be applied
first to the expenses of resale and repossession and then to the satisfaction of
the indebtedness. While some states impose prohibitions or limitations on
deficiency judgments if the net proceeds from resale do not cover the full
amount of the indebtedness, a deficiency judgment can be sought in those states
that do not prohibit or limit such judgments. In addition to the notice
requirement, the UCC requires that every aspect of the sale or other
disposition, including the method, manner, time, place and terms, be
"commercially reasonable". Generally, courts have held that when a sale is not
"commercially reasonable", the secured party loses its right to a deficiency
judgment. In addition, the UCC permits the debtor or other interested party to
recover for any loss caused by noncompliance with the provisions of the UCC.
Also, prior to a sale, the UCC permits the debtor or other interested person to
prohibit the secured party from disposing of the collateral if it is established
that the secured party is not proceeding in accordance with the "default"
provisions under the UCC. However, the deficiency judgment would be a personal
judgment against the obligor for the shortfall, and a defaulting obligor can be
expected to have very little capital or sources of income available following
repossession. Therefore, in many cases, it may not be useful to seek a
deficiency judgment or, if one is obtained, it may be settled at a significant
discount or be uncollectible.
Occasionally, after resale of a repossessed vehicle and payment of all
expenses and indebtedness, there is a surplus of funds. In that case, the UCC
requires the creditor to remit the surplus to any holder of a subordinate lien
with respect to such vehicle or if no such lienholder exists, the UCC requires
the creditor to remit the surplus to the obligor.
CERTAIN BANKRUPTCY CONSIDERATIONS
The Seller has taken steps in structuring the transactions contemplated
hereby that are intended to make it unlikely that the voluntary or involuntary
application for relief by AHFC under the United States Bankruptcy Code or
similar applicable state laws (collectively, "Insolvency Laws") will result in
consolidation of the assets and liabilities of the Seller with those of AHFC.
These steps include the creation of the Seller as a wholly owned, limited
purpose subsidiary pursuant to articles of incorporation containing certain
limitations (including requiring that the Seller must have at least two
independent directors and restrictions on the nature of the Seller's business
and on its ability to commence a voluntary case or proceeding under any
Insolvency Law without the affirmative vote of a majority of its directors,
including each independent director). In addition, to the extent that the Seller
granted a security interest in the Receivables to the Trust, and that interest
was validly perfected before the bankruptcy or insolvency of AHFC and was not
taken or granted in contemplation of insolvency or with the intent to hinder,
delay or defraud AHFC or its creditors, that security interest should not be
subject to avoidance, and payments to the Trust with respect to the Receivables
should not be subject to recovery by a creditor or trustee in bankruptcy of
AHFC. If, notwithstanding the foregoing, (i) a court concluded that the assets
and liabilities of the Seller should be consolidated with those of AHFC in the
event of the application of applicable Insolvency Laws to AHFC or following the
bankruptcy or insolvency of AHFC the security interest in the Receivables
granted by the Seller to the Trustee should be avoided, (ii) a filing were made
under any Insolvency Law by or against the Seller, or (iii) an attempt were made
to litigate any of the foregoing issues, delays in payments on the Certificates
and possible reductions in the amount of such payments could occur. On the
Closing Date,
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Brown & Wood LLP, counsel to AHFC and the Seller, will render an opinion which
concludes that following the bankruptcy of AHFC, a court, applying the
principles set forth in such opinion, should not allow a creditor or trustee in
bankruptcy to consolidate the assets and liabilities of AHFC and the Seller on
the basis of any applicable legal theory theretofore recognized by a court of
competent jurisdiction so as to adversely affect the ultimate payment of all
amounts owing under the Class A Certificates.
AHFC will warrant in the Receivables Purchase Agreement that the sale of the
Receivables by it to the Seller is a valid sale. Notwithstanding the foregoing,
if AHFC were to become a debtor in a bankruptcy case and a creditor or
trustee-in-bankruptcy of such debtor or such debtor itself were to take the
position that the sale of Receivables to the Seller should instead be treated as
a pledge of such Receivables to secure a borrowing of such debtor, then delays
in payments of collections of Receivables to the Seller could occur or (should
the court rule in favor of any such trustee, debtor or creditor) reductions in
the amount of such payments could result. If the transfer of Receivables to the
Seller is treated as a pledge instead of a sale, a tax or government lien on the
property of AHFC arising before the transfer of a Receivable to the Seller may
have priority over the Seller's interest in such Receivable. If the transactions
contemplated herein are treated as a sale, the Receivables would not be part of
AHFC's bankruptcy estate and would not be available to AHFC's creditors, except
under certain limited circumstances. In addition, while AHFC is the Servicer,
cash collections on the Receivables may, under certain circumstances, be
commingled with the funds of AHFC and, in the event of the bankruptcy of AHFC,
the Trust may not have a perfected interest in such collections.
A case (OCTAGON GAS SYSTEMS, INC. V. RIMMER, 995 F.2d 948 (10th Cir.), CERT.
DENIED 114 S.Ct. 554 (1993)) decided by the United States Court of Appeals for
the Tenth Circuit contains language to the effect that under the UCC, accounts
sold by a debtor would remain property of the debtor's bankruptcy estate,
whether or not the sale of accounts was perfected under the UCC. UCC Article 9
applies to the sale of chattel paper as well as the sale of accounts and
although the Receivables constitute chattel paper under the UCC rather than
accounts, perfection of a security interest in both chattel paper and accounts
may be accomplished by the filing of a UCC-1 financing statement. If, following
a bankruptcy of AHFC, a court were to follow the reasoning of the Tenth Circuit
reflected in the case described above, then the Receivables would be included in
the bankruptcy estate of AHFC and delays in payments of collections on or in
respect of the Receivables could occur.
CONSUMER PROTECTION LAWS
Numerous federal and state consumer protection laws and related regulations
impose substantial requirements upon creditors and servicers involved in
consumer finance. These laws include the Truth-in-Lending Act, the Equal Credit
Opportunity Act, the Federal Trade Commission Act, the Fair Credit Billing Act,
the Fair Credit Reporting Act, the Fair Debt Collection Practices Act, the
Magnuson-Moss Warranty Act, the Federal Reserve Board's Regulations B and Z,
state adaptations of the National Consumer Act and of the Uniform Consumer
Credit Code and state motor vehicle retail installment sale acts, retail
installment sales acts and other similar laws. Also, the laws of certain states
impose finance charge ceilings and other restrictions on consumer transactions
and require contract disclosures in addition to those required under federal
law. These requirements impose specific statutory liabilities upon creditors who
fail to comply with their provisions. In some cases, this liability could affect
the ability of an assignee such as the Trustee to enforce consumer finance
contracts such as the Receivables.
The so-called "Holder-in-Due-Course Rule" of the Federal Trade Commission
(the "FTC Rule"), has the effect of subjecting a seller (and certain related
lenders and their assignees) in a consumer credit transaction to all claims and
defenses which the obligor in the transaction could assert against the seller of
the goods. Liability under the FTC Rule is limited to the amounts paid by the
obligor under the contract, and the holder of the contract may also be unable to
collect any balance remaining due thereunder from the obligor. The FTC Rule is
generally duplicated by the Uniform Consumer Credit Code, other state statutes
or the common law in certain states.
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Most of the Receivables will be subject to the requirements of the FTC Rule.
Accordingly, the Trustee, as holder of the Receivables, will be subject to any
claims or defenses that the purchaser of a 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 Receivable.
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Any such loss, to the extent not covered by amounts otherwise payable to the
Class B Certificateholders as described herein pursuant to the subordination of
the Class B Certificates or from amounts on deposit in the Reserve Fund, could
result in losses to the Class A Certificateholders. In addition, if an Obligor
were successful in asserting any such claim or defense as described in the two
immediately preceding paragraphs, such claim or defense would constitute a
breach of a representation and warranty under the Receivables Purchase Agreement
and the Agreement and would create an obligation of AHFC and the Seller to
repurchase such Receivable unless the breach were cured. See "The Certificates
- -- Sale and Assignment of the Receivables".
Courts have applied general equitable principles to secured parties pursuing
repossession or litigation involving deficiency balances. These equitable
principles may have the effect of relieving an Obligor from some or all of the
legal consequences of a default.
In several cases, consumers have asserted that the self-help remedies of
secured parties under the UCC and related laws violate the due process
protection of the Fourteenth Amendment to the Constitution of the United States.
Courts have generally either upheld the notice provisions of the UCC and related
laws as reasonable or have found that the creditor's repossession and resale do
not involve sufficient state action to afford constitutional protection to
consumers.
From time to time, AHFC has been involved in litigation under consumer
protection laws. In addition, substantially all of the Receivables originated in
California (the "California Receivables") after 1990, having an aggregate
Principal Balance as of the Cutoff Date of approximately $ million, provide
that the Receivable may be rescinded by the related Dealer if such Dealer is
unable to assign the Receivable to a lender within ten days of the date of such
Receivable. As of the date of this Prospectus, the ten day rescission period had
run in respect of all of the California Receivables in which the rescission
provision appears. Although there is authority, which is not binding upon any
court, providing that a conditional sale contract containing such a provision
does not comply with California law and would render the Receivable
unenforceable, to the knowledge of AHFC and the Seller, the issue has not been
presented before any California court. On the Closing Date, the Seller will
receive an opinion of counsel to the effect that all of the California
Receivables are enforceable under California law and applicable federal laws.
AHFC and the Seller will represent and warrant under the Receivables
Purchase Agreement and the Agreement, respectively, that each Receivable
complies with all requirements of law in all material respects. Accordingly, if
an Obligor has a claim against the Trustee for violation of any law or claims
that the related Receivable is unenforceable and such claim materially and
adversely affects the Trustee's interest in a Receivable, such violation would
constitute a breach of such representation and warranty under the Receivables
Purchase Agreement and the Agreement and will create an obligation of AHFC and
the Seller to repurchase such Receivable unless the breach were cured. The
foregoing repurchase obligations would similarly apply in the event that a court
found a California Receivable containing a rescission provision described above
to be unenforceable. See "The Certificates -- Sale and Assignment of the
Receivables".
OTHER LIMITATIONS
In addition to the laws limiting or prohibiting deficiency judgments,
numerous other statutory provisions, including federal bankruptcy laws and
related state laws, may interfere with or affect the ability of a creditor 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
creditor from repossessing a motor vehicle, and, as part of the rehabilitation
plan, reduce the amount of the secured indebtedness to the market value of the
motor vehicle at the time of bankruptcy (as determined by the court), leaving
the party providing financing as a general unsecured creditor for the remainder
of the indebtedness. A bankruptcy court may also reduce the monthly payments due
under the related contract or change the rate of interest and time of repayment
of
43
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the indebtedness. Any such shortfall, to the extent not covered by amounts
otherwise payable to the Class B Certificateholders pursuant to the
subordination of the Class B Certificates as described herein or from amounts on
deposit in the Reserve Fund, could result in losses to the Class A
Certificateholders.
FEDERAL INCOME TAX CONSEQUENCES
The following is a general discussion of all material federal income tax
consequences of the purchase, ownership and disposition of the Class A
Certificates. This summary is based upon laws, regulations, rulings and
decisions currently in effect, all of which are subject to change. The
discussion below addresses all material federal income tax consequences of the
purchase, ownership and disposition of the Class A Certificates generally
applicable to investors. However, it does not purport to deal with the federal
income tax consequences applicable to an investor which result from that
investor's own particular federal income tax status or situation. In addition,
this summary is generally limited to investors who will hold the Class A
Certificates as "capital assets" (generally, property held for investment)
within the meaning of Section 1221 of the Internal Revenue Code of 1986, as
amended (the "Code"). Investors should consult their own tax advisors to
determine the federal, state, local and other tax consequences of the purchase,
ownership and disposition of the Class A Certificates. Prospective investors
should note that no rulings have been or will be sought from the Internal
Revenue Service (the "IRS") with respect to any of the federal income tax
consequences discussed below, and no assurance can be given that the IRS will
not take contrary positions.
TAX STATUS OF THE TRUST
In the opinion of Brown & Wood LLP, counsel to the Seller, the Trust will be
classified as a grantor trust under subpart E, part I of subchapter J of the
Code and not as an association taxable as a corporation for federal income tax
purposes. Class A Certificateholders will be treated as the owners of the Trust,
except as described below.
In the opinion of Brown & Wood LLP, counsel to the Seller, each Class A
Certificateholder will be required to report on its federal income tax return,
in a manner consistent with its method of accounting, its pro rata share of the
entire gross income of the Trust, including interest or finance charges earned
on the Receivables, and any gain or loss upon collection or disposition of the
Receivables. In computing its federal income tax liability, a Class A
Certificateholder will be entitled to deduct, consistent with its method of
accounting, its pro rata share of reasonable fees payable to the Servicer that
are paid or incurred by the Trust as provided in Sections 162 or 212 of the
Code. If a Class A Certificateholder is an individual, estate or trust, the
deduction for its pro rata share of such fees will be allowed only to the extent
that all of its miscellaneous itemized deductions, including its share of such
fees, exceed 2% of its adjusted gross income. In addition, Code Section 68
provides that itemized deductions otherwise allowable for a taxable year of an
individual taxpayer will be reduced by the lesser of (i) 3% of the excess, if
any, of adjusted gross income over a specified amount or (ii) 80% of the amount
of itemized deductions otherwise allowable for such year. As a result, such
investors holding Class A Certificates, directly or indirectly through a
pass-through entity, may have aggregate taxable income in excess of the
aggregate amount of cash received on such Class A Certificates with respect to
interest at the Pass-Through Rate. A Class A Certificateholder using the cash
method of accounting must take into account its pro rata share of income and
deductions as and when collected by or paid by the Trust. A Class A
Certificateholder using the accrual method of accounting must take into account
its pro rata share of income and deductions as and when such amounts become due
to or payable by the Trust.
Guidance by the IRS suggests that a servicing fee in excess of reasonable
servicing will cause the Receivables to be treated under the stripped bond rules
promulgated by the IRS. It is expected that for federal income tax purposes, the
Seller will be viewed as having retained a portion of each interest payment on
each Receivable sold to the Trust. As a result, the Class A Certificates would
be treated under Code
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<PAGE>
Section 1286 as "stripped bonds". For purposes of Code Section 1271 through
1288, Code Section 1286 treats a stripped bond or a stripped coupon as an
obligation issued on the date that such stripped interest is created.
STRIPPED BONDS AND STRIPPED COUPONS
Although the tax treatment of stripped bonds is not entirely clear, based on
guidance by the IRS, each purchaser of a Class A Certificate will be treated as
the purchaser of a stripped bond which generally should be treated as a single
debt instrument issued on the day it is purchased for purposes of calculating
any original issue discount. Generally, under Treasury regulations (the "Section
1286 Treasury Regulations"), if the discount on a stripped bond is larger than a
DE MINIMIS amount (as calculated for purposes of the original issue discount
rules of the Code) such stripped bond will be considered to have been issued
with original issue discount. See "Accrual of Original Issue Discount". Based on
the preamble to the Section 1286 Treasury Regulations, Brown & Wood LLP, counsel
to the Seller, is of the opinion that, although the matter is not entirely
clear, the interest income on the Class A Certificates at the sum of the
Pass-Through Rate and the portion of the Servicing Fee Rate that does not
constitute excess servicing will be treated as "qualified stated interest"
within the meaning of the Section 1286 Treasury Regulations and such income will
be so treated in the Trustee's tax information reporting. The effect of income
being characterized as "qualified stated interest" is described below under
"Accrual of Original Issue Discount".
ACCRUAL OF ORIGINAL ISSUE DISCOUNT
Under the foregoing rules, because the interest income on the Class A
Certificates constitutes qualified stated interest, it is likely that the Class
A Certificates in the hands of an initial purchaser will be considered to be
issued with DE MINIMIS original issue discount, which will therefore be
considered to be zero. If the Class A Certificates are issued with original
issue discount, because the interest income on the Class A Certificates does not
constitute qualified stated interest, the rules described in this paragraph
would apply. Generally, the owner of a stripped bond issued or acquired with
original issue discount must include in gross income the sum of the "daily
portions", as defined below, of the original issue discount on such Class A
Certificate for each day on which it owns a Class A Certificate, including the
date of purchase but excluding the date of disposition. In the case of an
original Class A Certificateholder, the daily portions of original issue
discount with respect to a Class A Certificate generally would be determined as
follows. A calculation will be made of the portion of original issue discount
that accrues on the Class A Certificate during each successive monthly accrual
period (or shorter period in respect of the date of original issue or the final
Distribution Date). This will be done, in the case of each full monthly accrual
period, by adding (i) the present value, as of the close of such accrual period,
of all remaining payments to be received on the Class A Certificate under the
prepayment assumption used in respect of the Class A Certificates and (ii) any
payments received during such accrual period, and subtracting from that total
the "adjusted issued price" of the Class A Certificate at the beginning of such
accrual period. No representation is made, nor is Brown & Wood LLP, counsel to
the Seller, able to give an opinion, that the Receivables will prepay at any
prepayment assumption. The "adjusted issue price" of a Class A Certificate at
the beginning of the first accrual period is its issue price (as determined for
purposes of the original issue discount rules of the Code) and the "adjusted
issue price" of a Class A Certificate at the beginning of a subsequent accrual
period is the "adjusted issued price" at the beginning of the immediately
preceding accrual period plus the amount of original issue discount allocable to
that accrual period and reduced by the amount of any payment made at the end of
or during that accrual period. The original issue discount accruing during such
accrual period will then be divided by the number of days in the period to
determine the daily portion of original issue discount for each day in the
period. With respect to an initial accrual period shorter than a full monthly
accrual period, the daily portions of original issue discount must be determined
using any reasonable method, provided that such method is consistent with the
method used to determine the yield to maturity of the Class A Certificates.
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<PAGE>
With respect to the Class A Certificates, the method of calculating original
issue discount as described above will cause the accrual of original issue
discount to either increase or decrease (but never below zero) in any given
accrual period to reflect the fact that prepayments are occurring at a rate
faster or slower than the prepayment assumption used in respect of the Class A
Certificates.
Subsequent purchasers that purchase Class A Certificates at more than a DE
MINIMIS discount should consult their tax advisors with respect to the proper
method to accrue such original issue discount.
PREMIUM
The purchase of a Class A Certificate at more than its adjusted principal
amount will result in the creation of a premium with respect to the interest in
the underlying Receivables of the Trust represented by such Class A Certificate.
A purchaser (who does not hold the Class A Certificate for sale to customers or
in inventory) may elect under Section 171 of the Code to amortize such premium.
Under the Code, premium is allocated among the interest payments on the
Receivables to which it relates and is considered as an offset against (and thus
a reduction of) such interest payments. Such election would apply to all debt
instruments held or subsequently acquired by the electing holder. Absent such an
election, the premium (to the extent attributable to Receivables with respect to
which the Obligor is an individual) will only be deductible as an ordinary loss
pro rata as principal is paid on such Receivables.
Holders of Class A Certificates acquired at a premium are urged to consult
with their own tax advisors regarding the proper treatment of the Class A
Certificates for federal income tax purposes.
SALE OF A CLASS A CERTIFICATE
If a Class A Certificate is sold, gain or loss will be recognized equal to
the difference between the amount realized on the sale (exclusive of amounts
attributable to accrued and unpaid interest, which will be treated as ordinary
interest income) and the Class A Certificateholder's adjusted basis in the Class
A Certificate. A Class A Certificateholder's adjusted basis will equal the Class
A Certificateholder's cost for the Class A Certificate, increased by any
discount previously included in income, and decreased (but not below zero) by
any previously amortized premium and by the amount of payments (other than
qualified stated interest) previously received on the Receivables. Any gain or
loss will be capital gain or loss if the Class A Certificate was held as a
capital asset. A capital gain or loss will be long-term or short-term depending
on whether or not the Class A Certificates have been owned for more than one
year.
INFORMATION REPORTING AND BACKUP WITHHOLDING
The Trustee will furnish or make available, within the prescribed period of
time for tax reporting purposes after the end of each calendar year, to each
Class A Certificateholder or each person holding an Class A Certificate on
behalf of a Class A Certificateholder at any time during such year, such
information as the Trustee deems necessary or desirable to assist Class A
Certificateholders in preparing their federal income tax returns. Payments made
on the Class A Certificates and proceeds from the sale of the Class A
Certificates will not be subject to a "backup" withholding tax of 31% unless, in
general, a Class A Certificateholder fails to comply with certain reporting
procedures and is not an exempt recipient under applicable provisions of the
Code.
FOREIGN CLASS A CERTIFICATEHOLDERS
Interest attributable to Receivables which is received by a foreign Class A
Certificateholder will generally not be subject to the normal 30% withholding
tax imposed with respect to such payments; provided that (i) the foreign Class A
Certificateholder does not own, directly or indirectly, 10% or more of, and is
not a controlled foreign corporation related to, the Seller and (ii) such holder
fulfills certain certification requirements. Under such requirements, the holder
must certify, under penalty of perjury, that is it not a "United States person"
and provide its name and address. Such certification would generally be made on
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IRS Form W-8, although in certain cases it may be possible to submit other
documentary evidence. For this purpose, "United States person" means a citizen
or resident of the United States, a corporation, partnership or other entity
created or organized in or under the laws of the United States or any political
subdivision thereof or an estate the income of which is includible in gross
income for United States federal income tax purposes, regardless of its source
or a trust if a court within the United States is able to exercise primary
supervision of the administration of the trust and one or more United States
fiduciaries have the authority to control all substantial decisions of the
trust. Gain realized upon the sale of a Class A Certificate by a foreign Class A
Certificateholder generally will not be subject to United States withholding
tax. If, however, such interest or gain is effectively connected to the conduct
of a trade or business within the United States by such foreign Class A
Certificateholder, such holder will be subject to United States federal income
tax thereon at regular rates. Potential investors who are not United States
persons should consult their own tax advisors regarding the specific tax
consequences to them of owing a Class A Certificate.
ERISA CONSIDERATIONS
Section 406 of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), and Section 4975 of the Code prohibit (i) pension, profit
sharing or other "employee benefit plans" (as defined in Section 3(3) of ERISA)
subject to Title I of ERISA, (ii) "plans" (as defined in Section 4975 (e)(1) of
the Code) subject to Section 4975 of the Code and (iii) entities deemed to be
investing "plan assets" (including but not limited to an insurance company
general account) (each, a "Benefit Plan") from engaging in certain transactions
with persons that are "parties in interest" under ERISA or "disqualified
persons" under the Code with respect to such Benefit Plans. ERISA also imposes
certain duties on persons who are fiduciaries of Benefit Plans subject to ERISA.
Under ERISA, any person who exercises any authority or control with respect to
the management or disposition of the assets of a Benefit Plan is considered to
be a fiduciary of such Benefit Plan (subject to certain exceptions not here
relevant). A violation of these "prohibited transaction" rules may result in
liability under ERISA and the Code for such persons.
Neither ERISA nor the Code defines the terms "plan assets". Under Section
2510.3-101 of the United States Department of Labor ("DOL") regulations (the
"Regulation"), a Plan's assets may include an interest in the underlying assets
of an entity (such as a trust) for certain purposes, including the prohibited
transaction provisions of ERISA and the Code, if the Plan acquires an "equity
interest" in such entity. The Seller believes that the Certificates will give
Certificateholders an equity interest in the Trust for purposes of the
Regulation. Under the Regulation, when a Plan acquires an equity interest that
is neither a "publicly offered security" nor a security issued by an investment
company registered under the Investment Company Act of 1940, as amended (the
"Investment Company Act"), the underlying assets of the entity will be
considered "plan assets" unless the entity is an "operating company" or equity
participation in the entity by benefit plan investors is not "significant". For
this purpose, such participation is significant if immediately after the most
recent acquisition of any equity interest in the entity, whether or not from an
issuer or an underwriter, 25% or more of the value of any class of equity
interest is held by "benefit plan investors", which are defined to include both
Benefit Plans and employee benefit plans not subject to Title I of ERISA (E.G.,
governmental plans).
The Trust will not be an "operating company" as defined in the Regulation,
and it will not be an investment company registered under the Investment Company
Act. The Seller anticipates that the Certificates will not be considered
publicly offered securities within the meaning of the Regulation. Accordingly,
if at any time immediately after the most recent acquisition of any Class A
Certificate, 25% or more of the value of either Class of Certificates is held by
benefit plan investors, then all or some portion of the Receivables and other
assets of the Trust may constitute plan assets. There can be no assurance that
less than 25% of the value of each Class of Certificates will be held by benefit
plan investors.
The DOL has granted to Credit Suisse First Boston Corporation an
administrative exemption (Prohibited Transaction Exemption 89-90, as amended and
as supplemented by an advisory opinion issued by the DOL to CS First Boston
Corporation on November 22, 1994, in response to their Exemption Application
47
<PAGE>
No. D-09887) (the "Exemption"), from certain of the prohibited transaction rules
of ERISA with respect to the initial purchase, the holding and the subsequent
resale by Benefit Plans of certificates representing interests in asset backed
pass-through trusts that consist of certain receivables, loans and other
obligations that meet the conditions and requirements of the Exemption. The
receivables covered by the Exemption include motor vehicle installment
obligations such as the Receivables. The Seller believes that the Exemption will
apply to the acquisition, holding and resale of the Class A Certificates by a
Benefit Plan, provided that specified conditions (certain of which are described
below) are met.
Among the conditions that must be satisfied for the Exemption to apply to
the acquisition by a Benefit Plan of Class A Certificates are the following
(each of which, other than those within the control of the investors, the Seller
believes has been or will be met in connection with the Class A Certificates):
(i) The acquisition of the Class A Certificates by a Benefit Plan is on
terms (including the price for the Class A Certificates) that are at least
as favorable to the Benefit Plan as they would be in an arm's-length
transaction with an unrelated party.
(ii) The rights and interests evidenced by the Class A Certificates
acquired by the Benefit Plan are not subordinated to the rights and
interests evidenced by other certificates of the Trust.
(iii) The Class A Certificates acquired by the Benefit Plan have received
a rating at the time of such acquisition that is in one of the three highest
generic rating categories from Standard & Poor's, Moody's, Duff & Phelps
Inc. or Fitch Investors Service, Inc.
(iv) The Trustee is not an affiliate of any other member of the
"Restricted Group" which consists of the Underwriters, the Seller, the
Servicer, the Trustee and any Obligor with respect to the Receivables
included in the Trust constituting more than 5% of the aggregate unamortized
principal balance of the assets of the Trust as of the date of initial
issuance of the Class A Certificates (I.E., the initial principal amount of
the Certificates), and any affiliate of such parties.
(v) The sum of all payments made to the Underwriters in connection with
the distribution of the Class A Certificates represents not more than
reasonable compensation for underwriting the Class A Certificates. The sum
of all payments made to and retained by the Seller pursuant to the sale of
the Receivables to the Trust represents not more than the fair market value
of such Receivables. The sum of all payments made to and retained by the
Servicer represents not more than reasonable compensation for the Servicer's
services under the Agreement and reimbursement of the Servicer's reasonable
expenses in connection therewith.
(vi) The Benefit Plan investing in the Class A Certificates is an
"accredited investor" as defined in Rule 501(a)(1) of Regulation D of the
Commission under the Securities Act.
Because the rights and interests evidenced by the Class A Certificates acquired
by a Benefit Plan are not subordinated to the rights and interests evidenced by
other Certificates of the Trust, the second general condition set forth above is
satisfied. It is a condition of the issuance of the Class A Certificates that
they be rated in the highest rating category by Standard & Poor's and Moody's. A
fiduciary of a Benefit Plan contemplating purchasing a Class A Certificate
(other than pursuant to the original issuance of the Class A Certificates) must
make its own determination that at the time of such acquisition, the Class A
Certificates continue to satisfy the third general condition set forth above.
The Seller and the Servicer expect that the fourth general condition set forth
above will be satisfied with respect to the Class A Certificates. A fiduciary of
a Benefit Plan contemplating purchasing a Class A Certificate must make its own
determination that the first, fifth and sixth general conditions set forth above
will be satisfied with respect to the Class A Certificates.
The Trust must also meet the following requirements:
(a) The corpus of the Trust must consist solely of assets of the type
that have been included in other investment pools.
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<PAGE>
(b) Certificates in such other investment pools must have been rated in
one of the three highest rating categories of Standard & Poor's, Moody's,
Duff & Phelps Inc. or Fitch Investors Service, Inc. for at least one year
prior to the Benefit Plan's acquisition of certificates.
(c) Certificates evidencing interests in such other investment pools
must have been purchased by investors other than Benefit Plans for at least
one year prior to any Benefit Plan's acquisition of certificates.
If the general conditions of the Exemption are satisfied, the Exemption
should provide relief from the restrictions imposed by Sections 406(a) and
407(a) of ERISA as well as the excise taxes imposed by Sections 4975(a) and (b)
of the Code by reason of Section 4975(c)(1)(A) through (D) of the Code, in
connection with the direct or indirect purchase, exchange, transfer or holding
of the Class A Certificates by a Benefit Plan. However, no exemption is provided
from the restrictions of Sections 406(a)(1)(E), 406(a)(2) and 407 of ERISA for
the acquisition or holding of a Class A Certificate on behalf of an Excluded
Plan by any person who has discretionary authority or renders investment advice
with respect to the assets of such Excluded Plan. For purposes of the Class A
Certificates, an "Excluded Plan" is a Benefit Plan sponsored by any member of
the Restricted Group.
If certain other specific conditions of the Exemption are also satisfied,
the Exemption should provide relief from the restrictions imposed by Sections
406(b)(1) and (b)(2) of ERISA and the taxes imposed by Section 4975(a) and (b)
of the Code by reason of Section 4975(c)(1)(E) of the Code in connection with
the direct or indirect sale, exchange, transfer or holding of Class A
Certificates in the initial issuance of Class A Certificates between the Seller
or Underwriter and a Benefit Plan other than an Excluded Plan when the person
who has discretionary authority or renders investment advice with respect to the
investment of Benefit Plan assets in the Class A Certificates is (a) an Obligor
with respect to 5% or less of the fair market value of the Receivables or (b) an
affiliate of such person. Such conditions include, among other requirements,
that (i) a Benefit Plan's investment in the Class A Certificates does not exceed
25% of all of the Class A Certificates outstanding at the time of the
acquisition and (ii) immediately after the acquisition, no more than 25% of the
assets of a Benefit Plan with respect to which a person has discretionary
authority or renders investment advice are invested in certificates representing
interests in trusts containing assets sold or serviced by the same entity. The
Seller expects such specific conditions to be satisfied with respect to the
issuance of the Class A Certificates.
The Exemption also applies to transactions in connection with the servicing,
management and operation of the Trust, provided that, in addition to the general
requirements described above, (a) such transactions are carried out in
accordance with the terms of a binding pooling and servicing agreement and (b)
the pooling and servicing agreement is provided to, or described in all material
respects in the prospectus provided to, investing Benefit Plans before their
purchase of Class A Certificates issued by the Trust. The Agreement is a pooling
and servicing agreement as defined in the Exemption. All transactions relating
to the servicing, management and operations of the Trust will be carried out in
accordance with the Agreement. See "The Certificates -- Servicing Procedures"
and " -- Servicing Compensation".
Due to the complexities of these rules and the penalties imposed upon
persons involved in prohibited transactions, it is important that the fiduciary
of a Benefit Plan considering the purchase of Class A Certificates consult with
its counsel regarding the applicability of the prohibited transaction provisions
of ERISA and the Code to such investment. Benefit Plan fiduciaries should also
take into account, among other considerations, whether the fiduciary has the
authority to make the investment; the tax effects of the investment; and whether
under the general fiduciary standards of investment procedure and
diversification an investment in the Class A Certificates is appropriate for the
Benefit Plan, taking into account the overall investment policy of the Benefit
Plan and the composition of the Benefit Plan's investment portfolio.
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UNDERWRITING
Under the terms and subject to the conditions contained in an Underwriting
Agreement dated July , 1997 (the "Underwriting Agreement"), the Underwriters
named below (the "Underwriters"), for whom Credit Suisse First Boston
Corporation, is acting as representative (the "Representative"), have severally
but not jointly agreed to purchase from the Seller the following respective
principal amounts of the Class A Certificates.
<TABLE>
<CAPTION>
PRINCIPAL
UNDERWRITER AMOUNT
- --------------------------------------------------------------------------------- ----------
<S> <C>
Credit Suisse First Boston Corporation........................................... $
----------
Total...................................................................... $
----------
----------
</TABLE>
The Underwriting Agreement provides that the obligations of the Underwriters
are subject to certain conditions precedent and that the Underwriters will be
obligated to purchase all the Class A Certificates if any are purchased. The
Underwriting Agreement provides that, in the event of a default by an
Underwriter, in certain circumstances the purchase commitments of the
non-defaulting Underwriters may be increased or the Underwriting Agreement may
be terminated.
The Seller and AHFC have been advised by the Representative that the
Underwriters propose to offer the Class A Certificates to the public initially
at the public offering price set forth on the cover page of this Prospectus and,
through the Representative, to certain dealers at such price less a concession
of % of the principal amount per Class A Certificate, and the Underwriters and
such dealers may allow a discount of % of such principal amount per Class A
Certificate on sales to certain other dealers. After the initial public
offering, the public offering price and concession and discount to dealers may
be changed by the Representative.
In the ordinary course of their respective businesses, the Underwriters and
their respective affiliates have engaged and may in the future engage in
investment banking or commercial banking transactions with the Seller, AHFC and
their affiliates.
The Seller and AHFC have agreed to indemnify, jointly and severally, the
Underwriters against certain liabilities, including civil liabilities under the
Securities Act, or contribute to payments that the Underwriter may be required
to make in respect thereof.
Upon receipt of a request by an investor who has received an electronic
Prospectus from an Underwriter or a request by such investor's representative
within the period during which there is an obligation to deliver a Prospectus,
the Seller or the Underwriter will promptly deliver, or cause to be delivered,
without charge, a paper copy of the Prospectus.
Until the distribution of the Certificates is completed, rules of the
Commission may limit the ability of the Underwriters to bid for and purchase the
Certificates. As an exemption to these rules, the Underwriters are permitted to
engage in certain transactions that stabilize the price of the Certificates.
Such transactions may consist of bids or purchases for the purpose of pegging,
fixing or maintaining the price of the Certificates.
Neither the Seller, AHFC nor any of the Underwriters makes any
representation or prediction as to the direction or magnitude of any effect that
the transactions described above may have on the price of the Certificates. In
addition, neither the Seller, AHFC nor any of the Underwriters makes any
representation that the related Underwriters will engage in such transactions or
that such transactions, once commenced, will not be discontinued without notice.
50
<PAGE>
NOTICE TO CANADIAN RESIDENTS
RESALE RESTRICTIONS
The distribution of the Class A Certificates in Canada is being made only on
a private placement basis exempt from the requirement that the Seller, on behalf
of the Trust, prepare and file a prospectus with the securities regulatory
authorities in each province where trades of Class A Certificates are effected.
Accordingly, any resale of Class A Certificates in Canada must be made in
accordance with applicable securities laws which will vary depending on the
relevant jurisdiction, and which may require resales to be made in accordance
with available statutory exemptions or pursuant to a discretionary exemption
granted by the applicable Canadian securities regulatory authority. Purchasers
are advised to seek legal advice prior to any resale of the Class A
Certificates.
REPRESENTATIONS OF PURCHASERS
Each purchaser of Class A Certificates in Canada who receives a purchase
confirmation will be deemed to represent to the Seller, AHFC, the Trustee, the
Trust and the dealer from whom such purchase confirmation is received that (i)
such purchaser is entitled under applicable provincial securities laws to
purchase such Class A Certificates without the benefit of a prospectus qualified
under such securities laws, (ii) where required by law, that such purchaser is
purchasing as principal and not as agent, and (iii) such purchaser has reviewed
the text above under "Resale Restrictions".
RIGHTS OF ACTION AND ENFORCEMENT
The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
section 32 of the Regulation under the SECURITIES ACT (Ontario). As a result,
Ontario purchasers must rely on other remedies that may be available, including
common law rights of action for damages or rescission or rights of action under
the civil liability provisions of the U.S. federal securities laws.
All of the issuer's directors and officers as well as the experts named
herein may be located outside of Canada and, as a result, it may not be possible
for Ontario purchasers to effect service of process within Canada upon the
issuer or such persons. All or a substantial portion of the assets of the issuer
and such persons may be located outside of Canada and, as a result, it may not
be possible to satisfy a judgment against the issuer or such persons in Canada
or to enforce a judgment obtained in Canadian courts against such issuer or
persons outside of Canada.
NOTICE TO BRITISH COLUMBIA RESIDENTS
A purchaser of Class A Certificates to whom the SECURITIES ACT (British
Columbia) applies is advised that such purchaser is required to file with the
British Columbia Securities Commission a report within ten days of the sale of
any Class A Certificates acquired by such purchaser pursuant to this offering.
Such report must be in the form attached to British Columbia Securities
Commission Blanket Order BOR #95/17, a copy of which may be obtained from the
Seller. Only one such report must be filed in respect of Class A Certificates
acquired on the same date and under the same prospectus exemption.
RATING OF THE CLASS A CERTIFICATES
It is a condition to issuance of the Class A Certificates that the Class A
Certificates will have been rated Aaa by Moody's and AAA by Standard & Poor's.
The rating of the Class A Certificates will be based primarily on the value of
the Receivables and the terms of the Class B Certificates and the Reserve Fund.
The ratings of the Class A Certificates should be evaluated independently from
similar ratings on other types of securities. A security rating is not a
recommendation to buy, sell or hold securities and may be subject to
51
<PAGE>
revision or withdrawal at any time by the assigning rating agency. The ratings
on the Class A Certificates do not address the timing of distributions of
principal of the Class A Certificates prior to the Final Scheduled Distribution
Date.
There can be no assurance as to whether any rating agency other than the
Rating Agencies will rate the Class A Certificates, or, if one does, what rating
will be assigned by any such other rating agency.
LEGAL MATTERS
Certain legal matters with respect to the Class A Certificates, including
certain federal income tax consequences with respect thereto, will be passed
upon for the Seller by Brown & Wood LLP, San Francisco, California. Skadden,
Arps, Slate, Meagher & Flom LLP, New York, New York, will act as counsel for the
Underwriters.
52
<PAGE>
INDEX OF CAPITALIZED TERMS
Set forth below is a list of the capitalized or defined terms used in this
Prospectus and the pages on which the definitions of such terms may be found.
<TABLE>
<CAPTION>
TERM PAGE
- ------------------------------------------------------------------------ ------
<S> <C>
Accounts................................................................ 24
Actuarial Receivable.................................................... 10
Administrative Purchase Payment......................................... 23
Administrative Receivable............................................... 23
Advances................................................................ 7
Aggregate Net Losses.................................................... 30
Agreement............................................................... 3
AHFC.................................................................... 1,3
AHMC.................................................................... 3
APR..................................................................... 7
Available Interest...................................................... 27
Available Principal..................................................... 27
Benefit Plan............................................................ 46
Business Day............................................................ 4
California Receivables.................................................. 42
Cede.................................................................... 4
Certificate Account..................................................... 24
Certificate Owner....................................................... 4
Certificate Register.................................................... 21
Certificateholders...................................................... 6
Certificates............................................................ 1,3
Charge-off Rate......................................................... 30
Class A Certificate..................................................... 1,3
Class A Certificate Balance............................................. 27
Class A Certificateholders.............................................. 4
Class A Distributable Amount............................................ 27
Class A Interest Carryover Shortfall.................................... 29
Class A Interest Distributable Amount................................... 27
Class A Percentage...................................................... 3
Class A Pool Factor..................................................... 14
Class A Principal Carryover Shortfall................................... 29
Class A Principal Distributable Amount.................................. 27
Class B Certificate..................................................... 1,3
Class B Certificate Balance............................................. 28
Class B Certificateholders.............................................. 6
Class B Distributable Amount............................................ 28
Class B Interest Distributable Amount................................... 28
Class B Percentage...................................................... 3
Class B Principal Distributable Amount.................................. 28
Closing Date............................................................ 5
Code.................................................................... 43
Collection Period....................................................... 5
Commission.............................................................. 2
Current Receivable...................................................... 30
Cutoff Date............................................................. 3
Cutoff Date Pool Balance................................................ 8
<CAPTION>
TERM PAGE
- ------------------------------------------------------------------------ ------
<S> <C>
Dealer Recourse......................................................... 10
Dealers................................................................. 9
Defaulted Receivable.................................................... 27
Definitive Certificates................................................. 19
Delinquency Percentage.................................................. 30
Determination Date...................................................... 26
Discount Receivables.................................................... 5
Distribution Date....................................................... 1,4
DOL..................................................................... 46
DTC..................................................................... 1,4
ERISA................................................................... 46
Events of Default....................................................... 34
Excess Amounts.......................................................... 29
Excess Payment.......................................................... 25
Exchange Act............................................................ 2
Excluded Plan........................................................... 48
Exemption............................................................... 47
Final Scheduled Distribution Date....................................... 4
Financed Vehicles....................................................... 1,3
FTC Rule................................................................ 41
Indirect Participants................................................... 19
Insolvency Laws......................................................... 40
Installment sale contracts.............................................. 15
Investment Company Act.................................................. 46
IRS..................................................................... 43
Letter of Credit Bank................................................... 35
Liquidated Receivable................................................... 30
Maximum Yield Supplement Amount......................................... 29
Moody's................................................................. 8
Net Liquidation Proceeds................................................ 27
Obligors................................................................ 9
Original Class A Certificate Balance.................................... 4
Original Class B Certificate Balance.................................... 28
Participants............................................................ 19
Pass-Through Rate....................................................... 4
Payahead Account........................................................ 24
Payment Ahead........................................................... 24
Permitted Investments................................................... 24
Pool Balance............................................................ 26
Precomputed Advance..................................................... 7
Precomputed Receivables................................................. 10
Prepayment.............................................................. 25
Principal Balance....................................................... 26
Rating Agencies......................................................... 8
Receivables............................................................. 1,3
Receivables Purchase Agreement.......................................... 3
</TABLE>
53
<PAGE>
<TABLE>
<CAPTION>
TERM PAGE
- ------------------------------------------------------------------------ ------
Record Date............................................................. 4
<S> <C>
Registration Statement.................................................. 2
Regulation.............................................................. 46
Representative.......................................................... 49
Required Investment Rating.............................................. 24
Required Rate........................................................... 5
Required Rating......................................................... 24
Reserve Fund............................................................ 6
Restricted Group........................................................ 47
Rule of 78s............................................................. 10
Rule of 78s Receivable.................................................. 10
Schedule of Receivables................................................. 21
Scheduled Payment....................................................... 5
Section 1286 Treasury Regulations....................................... 44
Securities Act.......................................................... 2
Seller.................................................................. 1,3
Servicer................................................................ 1,3
Servicer Letter of Credit............................................... 24
<CAPTION>
TERM PAGE
- ------------------------------------------------------------------------ ------
<S> <C>
Servicing Fee........................................................... 8
Servicing Fee Rate...................................................... 8
Simple Interest Advance................................................. 7
Simple Interest Receivable.............................................. 10
Specified Reserve Fund Balance.......................................... 30
Standard & Poor's....................................................... 8
Trust................................................................... 1,3
Trustee................................................................. 3
UCC..................................................................... 19
Underwriters............................................................ 49
Underwriting Agreement.................................................. 49
Voting Interests........................................................ 34
Warranty Purchase Payment............................................... 22
Warranty Receivable..................................................... 22
Yield Supplement Account................................................ 5
Yield Supplement Account Deposit........................................ 5
Yield Supplement Deposit Amount......................................... 5
</TABLE>
54
<PAGE>
- -------------------------------------------
-------------------------------------------
No dealer, salesperson or other person has been authorized to give any
information or to make any representation not contained in this Prospectus in
connection with the offering covered by this Prospectus and, if given or made,
such information or representation must not be relied upon as having been
authorized by the Seller, the Servicer or any Underwriter. This Prospectus does
not constitute an offer to sell or a solicitation of an offer to buy any of the
securities offered hereby in any jurisdiction to any person to whom it is
unlawful to make such offer in such jurisdiction. Neither the delivery of this
Prospectus nor any sale made hereunder shall, under any circumstances, create
any implication that the information herein is correct as of any time subsequent
to the date hereof or that there has been no change in the affairs of the Seller
or the Servicer since such date.
--------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Available Information..................................................... 2
Reports to Class A Certificateholders by the Trustee...................... 2
Summary................................................................... 3
Formation of the Trust.................................................... 9
Property of the Trust..................................................... 9
The Receivables........................................................... 10
Yield Considerations...................................................... 14
Class A Pool Factor and Trading Information............................... 14
Use of Proceeds........................................................... 15
The Seller................................................................ 15
American Honda Finance Corporation........................................ 15
The Certificates.......................................................... 19
Certain Legal Aspects of the Receivables.................................. 37
Federal Income Tax Consequences........................................... 43
ERISA Considerations...................................................... 46
Underwriting.............................................................. 49
Notice to Canadian Residents.............................................. 50
Rating of the Class A Certificates........................................ 50
Legal Matters............................................................. 50
Index of Capitalized Terms................................................ 51
</TABLE>
--------------
Until , 1997, all dealers effecting transactions in the Class A
Certificates, whether or not participating in this distribution, may be required
to deliver a Prospectus. This is in addition to the obligation of dealers to
deliver a Prospectus when acting as underwriters and with respect to their
unsold allotments or subscriptions. Upon receipt of a request by an investor, or
such investor's representative, within the period during which there is a
Prospectus delivery obligation, the Seller or the Underwriters will transmit or
cause to be transmitted promptly, without charge and in addition to any such
delivery requirements, a paper copy of the Prospectus or a Prospectus encoded in
an electronic format.
Honda Auto Receivables
1997-A Grantor Trust
$
% Asset Backed Certificates,
Class A
American Honda
Receivables Corp.
Seller
American Honda
Finance Corporation
Servicer
P R O S P E C T U S
Credit Suisse First Boston
- -------------------------------------------
-------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Expenses in connection with the offering of the Class A Certificates being
registered hereby are estimated as follows:
<TABLE>
<S> <C>
SEC registration fee.............................................. $ *
Legal fees and expenses........................................... *
Accounting fees and expenses...................................... *
Blue sky fees and expenses........................................ *
Rating agency fees................................................ *
Trustee's fees and expenses....................................... *
Printing.......................................................... *
Miscellaneous..................................................... *
-----------
Total........................................................... $ *
-----------
-----------
</TABLE>
- --------------
* To be completed by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 317(b) of the California Corporations Code (the "Corporations Code")
provides that a corporation may indemnify any person who was or is a party or is
threatened to be made a party to any "proceeding" (as defined in Section 317(a)
of the Corporations Code), other than an action by or in the right of the
corporation to procure a judgment in its favor, by reason of the fact that such
person is or was a director, officer, employee or other agent of the corporation
(collectively, an "Agent"), against expenses, judgments, fines, settlements and
other amounts actually and reasonably incurred in connection with such
proceeding if the Agent acted in good faith and in a manner the Agent reasonably
believed to be in the best interest of the corporation and, in the case of a
criminal proceeding, had no reasonable cause to believe the conduct was
unlawful.
Section 317(c) of the Corporations Code provides that a corporation shall
have power to indemnify any Agent who was or is a party or is threatened to be
made a party to any threatened, pending or completed action by or in the right
of the corporation to procure a judgment in its favor by reason of the fact that
such person is or was an Agent, against expenses actually and reasonably
incurred by the Agent in connection with the defense or settlement of such
action if the Agent acted in good faith and in a manner such Agent believed to
be in the best interest of the corporation and its shareholders.
Section 317(c) further provides that no indemnification may be made
thereunder for any of the following: (i) in respect of any matter as to which an
Agent shall have been adjudged to be liable to the corporation, unless the court
in which such proceeding is or was pending shall determine that such Agent is
fairly and reasonably entitled to indemnity for expenses, (ii) amounts paid in
settling or otherwise disposing of a pending action without court approval and
(iii) expenses incurred in defending a pending action which is settled or
otherwise disposed of without court approval.
Section 317(d) of the Corporations Code requires that an Agent be
indemnified against expenses actually and reasonably incurred to the extent the
Agent has been successful on the merits in the defense of proceedings referred
to in subdivisions (b) or (c) of Section 317.
Except as provided in Section 317(d), and pursuant to Section 317(e),
indemnification under Section 317 shall be made by the corporation only if
specifically authorized and upon a determination that indemnification is proper
in the circumstances because the Agent has met the applicable standard of
conduct, by any of the following: (i) a majority vote of a quorum consisting of
directors who are not parties to
II-1
<PAGE>
the proceeding, (ii) if such a quorum of directors is not obtainable, by
independent legal counsel in a written opinion, (iii) approval of the
shareholders, provided that any shares owned by the Agent may not vote thereon,
or (iv) the court in which such proceeding is or was pending.
Pursuant to Section 317(f) of the Corporations Code, the corporation may
advance expenses incurred in defending any proceeding upon receipt of an
undertaking by the Agent to repay such amount if it is ultimately determined
that the Agent is not entitled to be indemnified.
Section 317(h) provides, with certain exceptions, that no indemnification
shall be made under Section 317 where it appears that it would be inconsistent
with a provision of the corporation's articles, bylaws, a shareholder resolution
or an agreement which prohibits or otherwise limits indemnification, or where it
would be inconsistent with any condition expressly imposed by a court in
approving a settlement.
Section 317(i) authorizes a corporation to purchase and maintain insurance
on behalf of an Agent for liabilities arising by reason of the Agent's status,
whether or not the corporation would have the power to indemnify the Agent
against such liability under the provisions of Section 317.
Reference is also made to Section 7 of the Underwriting Agreement among
Credit Suisse First Boston Corporation, as representative of the several
Underwriters, the Registrant and American Honda Finance Corporation (see Exhibit
1.1), which provides for indemnification of the Registrant under certain
circumstances.
Article IX of the Articles of Incorporation of the Registrant provides for
the indemnification of the directors of the Registrant to the fullest extent
permissible under California law.
Article IV, Section 4.01 of the Bylaws of the Registrant (see Exhibit 3.2)
requires that the Registrant indemnify, and, in certain instances, advance
expenses to, its agents, with respect to certain costs, expenses, judgments,
fines, settlements and other amounts incurred in connection with any proceeding,
to the full extent permitted by applicable law.
In addition, Article IV, Section 4.03 of the Bylaws of the Registrant
authorizes the Registrant to purchase and maintain insurance to the extent
provided by Section 3.17(i) of the Corporations Code.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Not applicable.
II-2
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
a. Exhibits:
<TABLE>
<C> <S>
1.1 Form of Underwriting Agreement*
3.1 Articles of Incorporation of American Honda Receivables Corp.
3.2 Bylaws of American Honda Receivables Corp.
4.1 Form of Pooling and Servicing Agreement among American Honda
Receivables Corp., as Seller, American Honda Finance Corporation, as
Servicer, and Bank of Tokyo - Mitsubishi Trust Company, as Trustee
(including forms of Class A and Class B Certificates and Servicer
Letter of Credit)*
4.2 Form of Standard Terms and Conditions of Pooling and Servicing
Agreement*
5.1 Opinion of Brown & Wood LLP with respect to legality*
8.1 Opinion of Brown & Wood LLP with respect to tax matters*
10.1 Form of Receivables Purchase Agreement*
23.1 Consent of Brown & Wood LLP (included as part of Exhibit 5.1)*
23.2 Consent of Brown & Wood LLP (included as part of Exhibit 8.1)*
24.1 Power of Attorney **
24.2 Power of Attorney for M. Yoshimi
</TABLE>
- --------------
* To be filed by amendment.
**Previously filed
b. Financial Statement Schedules:
Not applicable.
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes as follows:
(a) To provide to the Underwriters at the closing date specified in the
Underwriting Agreement certificates in such denominations and registered in
such names as required by the Underwriters to provide prompt delivery to
each purchaser.
(b) 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 payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of such 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.
(c) For purposes of determining any liability under the Act, the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Act will be deemed to be part of this registration
statement as of the time it was declared effective.
(d) For purposes of determining any liability under the Act, each
post-effective amendment that contains a form of prospectus will be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time will be deemed to
be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 1 to Registration Statement on Form S-1 to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Torrance and State of California, on the 9 day of July, 1997.
AMERICAN HONDA RECEIVABLES CORP.
By: /s/ Y. KOHAMA
------------------------------------------
Y. Kohama
PRESIDENT
II-4
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned Director of American
Honda Receivables Corp., a California corporation (the "Corporation"), hereby
constitutes and appoints Y. Kohama and John I. Weisickle, each with full power
of substitution and resubstitution, his true and lawful attorneys and agents to
sign the name of the undersigned Director in the capacity indicated below to the
registration statement Form S-1 (CIK No. 333-18095) to which this Power of
Attorney is filed as an exhibit, and all amendments (including post-effective
amendments) and supplements thereto, and all instruments or documents filed as a
part thereof or in connection therewith, with the Securities and Exchange
Commission; and the undersigned hereby ratifies and confirms all that said
attorneys, agents, or either of them, shall do or cause to be done by virtue
hereof.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------------------ --------------------------------- ----------------------
<C> <S> <C>
/s/ M. YOSHIMI
------------------------------------------- Director June 23, 1997
M. Yoshimi
</TABLE>
II-5
<PAGE>
REGISTRATION NO. 333-18095
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------
AMERICAN HONDA RECEIVABLES CORP.
(EXACT NAME OF REGISTRANT AS SPECIFIED
IN GOVERNING INSTRUMENTS)
--------------
EXHIBIT
VOLUME
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBERED
EXHIBIT DESCRIPTION PAGE
- ----------- -------------------------------------------------------------------------------------------- -------------
<C> <S> <C>
1.1 Form of Underwriting Agreement*
3.1 Articles of Incorporation of American Honda Receivables Corp................................
3.2 Bylaws of American Honda Receivables Corp...................................................
4.1 Form of Pooling and Servicing Agreement among American Honda Receivables Corp., as Seller,
American Honda Finance Corporation, as Servicer, and Bank of Tokyo - Mitsubishi Trust
Company, as Trustee (including forms of Class A and Class B Certificates and Servicer
Letter of Credit)*.........................................................................
4.2 Form of Standard Terms and Conditions of Pooling and Servicing Agreement*...................
5.1 Opinion of Brown & Wood LLP with respect to legality*
8.1 Opinion of Brown & Wood LLP with respect to tax matters*
10.1 Form of Receivables Purchase Agreement*.....................................................
23.1 Consent of Brown & Wood LLP (included as part of Exhibit 5.1)*
23.2 Consent of Brown & Wood LLP (included as part of Exhibit 8.1)*
24.1 Power of Attorney**
24.2 Power of Attorney for M. Yoshimi
</TABLE>
- --------------
* To be filed by amendment.
**Previously filed.
<PAGE>
CERTIFICATE OF AMENDMENT
OF
ARTICLES OF INCORPORATION
OF
AMERICAN HONDA RECEIVABLES CORP.,
a CALIFORNIA corporation
------------------------------------
Y. Kohama and R. Nakamura hereby certify that:
1. They are the duly elected and acting president and secretary,
respectively, of AMERICAN HONDA RECEIVABLES CORP., a California Corporation.
2. The Articles of Incorporation of this corporation are amended and
restated in full to read as set forth in Exhibit A hereto, which is incorporated
herein by this reference and made a part hereof.
3. The foregoing amendment and restatement of the Articles of
Incorporation has been duly approved by the Board of Directors of the
Corporation.
4. The foregoing amendment and restatement of the Articles of
Incorporation has been duly approved by the required vote of Shareholders in
accordance with Section 902 of the California General Corporation Law; the
total number of outstanding shares of each class entitled to vote with
respect to the amendment and restatement of the Articles of Incorporation was
1,000; and the number of shares of each class voting in favor of the
amendment and restatement equaled or exceeded the vote required, such
required vote being a majority of the outstanding shares of the Corporation.
We further declare under penalty of perjury under the laws of the State of
California that the matters set forth in this certificate are true and
correct of our own knowledge.
Dated: July 5, 1995
/s/ Y. Kohama
---------------------------------
Y. Kohama, President
/s/ R. Nakamura
---------------------------------
R. Nakamura, Secretary
<PAGE>
Exhibit A
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
AMERICAN HONDA RECEIVABLES CORP.
----------------------------------
ARTICLE I
NAME
The name of the corporation is American Honda Receivables Corp.
ARTICLE II
PURPOSE OF CORPORATION
(a) Subject to paragraph (b) below, the purpose of the corporation (the
"Corporation") is to engage in any lawful act or activity for which a
corporation may be organized under the General Corporation Law of California
other than the banking business, the trust company business or the practice
of a profession permitted to be incorporated by the California Corporations
Code.
(b) Notwithstanding paragraph (a) above, the purpose of the Corporation
is limited to the following purposes, and activities incident to and
necessary or convenient to accomplish the following purposes: (i) to acquire,
own, hold, sell, transfer, assign, pledge, finance, refinance and otherwise
deal with, new and used automobiles, light duty trucks and minivans (the
"Receivables"); (ii) to authorize, issue, sell and deliver one or more series
of obligations, consisting of one or more classes of certificates or notes or
other evidence of indebtedness (the "Securities") that are collateralized by
or evidence an interest in the Receivables; and (iii) negotiate, authorize,
execute, deliver and assume the obligations of any agreement relating to the
activities set forth in clauses (i) and (ii) above, including but not limited
to any pooling and servicing agreement, indenture, reimbursement agreement,
credit support agreement, receivables purchase agreement or underwriting
agreement and to engages in any lawful activity which is incidental to the
activities contemplated by any such agreement. So long as any outstanding
debt of the Corporation or Securities are rated by any nationally recognized
statistical rating organization, the Corporation shall not issue notes or
otherwise borrow money unless (A) the Corporation has made a written request
to the related nationally recognized statistical rating organization to issue
notes or incur borrowings which notes or borrowings are rated by the related
nationally recognized statistical rating organization the same as or higher
than the rating afforded such rated debt or Securities, or (B) such notes or
borrowings (I) are fully subordinated (and which shall provide for payment
1
<PAGE>
only after payment in respect of all outstanding rated debt and/or
Securities) or are nonrecourse against any assets of the Corporation other
than the assets pledged to secure such notes or borrowings, (2) do not
constitute a claim against the Corporation in the event such assets are
insufficient to pay such notes or borrowings, and (3) where such notes or
borrowings are secured by the rated debt or Securities, are fully
subordinated (and which shall provide for payment only after payment in
respect of all outstanding rated debt and/or Securities) to such rated debt
or Securities.
ARTICLE III
Reserved
ARTICLE IV
CAPITAL STOCK
The Corporation shall have one class of stock designated as Common
Stock, and the total number of shares of stock of that class that the
Corporation shall have authority to issue is 1,000 shares of no par stock. No
shareholder shall have any preemptive right to acquire additional shares of
the Corporation.
ARTICLE V
INDEPENDENT DIRECTORS
The Corporation shall at all times, except as noted hereafter, have at
least two Directors (each, an "Independent Director") who is not (a) a
director, officer or employee of any affiliate of the Corporation; (b) a
person related to any officer or director of any affiliate of the
Corporation; (c) a holder (directly or indirectly) of more than 10% of any
voting securities of any affiliate of the Corporation; or (d) a person
related to a holder (directly or indirectly) of more than 10% of any voting
securities of any affiliate of the Corporation. In the event of the death,
incapacity, resignation or removal of all Independent Directors, the Board of
Directors shall promptly appoint an Independent Director for each Independent
Director whose death, incapacity, resignation or removal caused the related
vacancy on the Board of Directors; provided, however, that the Board of
Directors shall not vote on any matter unless and until at least two
Independent Directors have been duly appointed to serve on the Board.
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ARTICLE VI
LIMITATIONS ON ACTIONS BY THE CORPORATION
Notwithstanding any other provision of these Articles and any provision
of law, the Corporation shall not do any of the following:
(a) engage in any business or activity other than as set forth in
Article II hereof;
(b) without the affirmative vote of a majority of the members of the
Board of Directors of the Corporation (which must include the affirmative
vote of all duly appointed Independent Directors), (i) dissolve or liquidate,
in whole or in part, or institute proceedings to be adjudicated bankrupt or
insolvent, (ii) consent to the institution of bankruptcy or insolvency
proceedings against it, (iii) file a petition seeking or consent for
reorganization or relief under any applicable federal or state law relating
to bankruptcy, (iv) consent to the appointment of a receiver, liquidator,
assignee, trustee, sequestrator or other similar official of the Corporation
or a substantial part of its property, (v) make a general assignment for the
benefit of creditors, (vi) admit in writing its inability to pay its debts
generally as they become due, or (vii) take any corporate action in
furtherance of the actions set forth in clauses (i) through (vi) of this
paragraph; provided, however, that no director may be required by any
shareholder of the Corporation to consent to the institution of bankruptcy or
insolvency proceedings against the Corporation so long as it is solvent; or
(c) without the unanimous affirmative vote of the members of the Board
of Directors of the Corporation, merge or consolidate with any other
corporation, company or entity or sell all or substantially all of its assets
or acquire all or substantially all of the assets or capital stock or other
ownership interest of any other corporation, company or entity, except for the
acquisition of Receivables of American Honda Finance Corporation ("American
Honda") and the sale of Receivables to one or more trusts in accordance with
the terms of Article II(b) hereof, on which there shall be no such
restriction.
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ARTICLE VII
INTERNAL AFFAIRS
The Corporation shall insure at all times that (a) it maintains separate
corporate records and books of account from those of American Honda, and (b)
except as permitted by contract between the Corporation and American Honda
with respect to deposits in certain accounts of collections of trade
receivables of American Honda that were not sold to the Corporation pursuant
to an agreement between them, which will be promptly remitted to the owner
thereof, none of the Corporation's assets will be commingled with those of
American Honda or any of their affiliates.
ARTICLE VIII
AMENDMENTS
The Corporation reserves the right to amend, alter, change or repeal any
provision contained in these Articles in any manner now or hereafter provided
herein or by statute; and, except as provided with respect to the
indemnification of directors, all rights, preferences and privileges
conferred by these Articles upon shareholders, directors or any other person
are granted subject to such right; provided, however, that the Corporation
shall not amend, alter, change or repeal any provision of Articles II and V
through VIII (the "Restricted Articles") without the unanimous vote of the
full Board of Directors and provided, further, that the Corporation shall not
amend or change any Article so as to be inconsistent with the Restricted
Articles.
ARTICLE IX
LIABILITY OF DIRECTORS FOR MONETARY DAMAGES; INDEMNIFICATION
(a) The liability of the Directors of the Corporation for monetary
damages shall be eliminated to the fullest extent permissible under
California law.
(b) The Corporation is authorized to provide indemnification of the
Directors and other agents of the Corporation (as defined in Section 317 of
the California General Corporation Law) through Bylaw provisions, agreements
with agents, vote of shareholders or disinterested directors, or otherwise,
in excess of the indemnification otherwise permitted by Section 317 of the
California General Corporation Law, subject only to the applicable limits set
forth in Section 204 of the California General Corporation Law.
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AMENDED AND RESTATED BYLAWS
OF
AMERICAN HONDA RECEIVABLES CORP.
(a California corporation)
__________________________________
ARTICLE I
OFFICES
Section 1.01. PRINCIPAL EXECUTIVE OFFICE. The principal executive office
of American Honda Receivables Corp. (the "Corporation") shall be at 700 Van Ness
Avenue, Torrance, California 90501 or such other location that the Board of
Directors (the "Board") shall fix from time to time.
Section 1.02. OTHER OFFICES. The Corporation may also have offices at
such other places both within and without the State of California as the Board
or the President may from time to time determine or the business of the
Corporation may require.
ARTICLE II
SHAREHOLDERS
Section 2.01. ANNUAL MEETING AND ELECTION OF DIRECTORS. The Annual
Meeting of Shareholders shall be held on such date and at such time as the Board
determines. The Directors shall be elected and any other proper business may be
transacted at each Annual Meeting of Shareholders.
Section 2.02. SPECIAL MEETINGS. Special Meetings of Shareholders may be
called by the Board, the Chairman of the Board, if any, the President or the
holders of shares entitled to cast not less than ten percent (10%) of the votes
at such Special Meeting. Each Special Meeting shall be held at such date and
time as is requested by the person or persons calling such Special Meeting
within the limits fixed by law.
Section 2.03. PLACE OF MEETINGS. Each Annual or Special Meeting of
Shareholders shall be held at such location as may be determined by the Board,
or if no such determination is made, at such place as may be determined by the
President. If no location is so determined, any Annual or Special Meeting shall
be held at the principal executive office of the Corporation.
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Section 2.04. NOTICE OF MEETINGS. Notice of each Annual or Special
Meeting of Shareholders shall contain such information, and shall be given to
such persons at such time, and in such manner, as the Board shall determine, or
if no such determination is made, as the President shall determine, subject to
the requirements of applicable law.
Section 2.05. CONDUCT OF MEETINGS. Subject to the requirements of
applicable law, all Annual and Special Meetings of Shareholders shall be
conducted in accordance with such rules and procedures as the Board may
determine and, as to matters not governed by such rules and procedures, as the
chairman of such Annual or Special Meetings shall determine.
Section 2.06. QUORUM. The holders of a majority of the shares issued and
outstanding and entitled to vote at an Annual or Special Meeting of the
Shareholders shall be requisite and shall constitute a quorum thereat for the
transaction of business except as otherwise provided by statute, by the Articles
of Incorporation (the "Articles") or by these Bylaws. If a quorum is not
present or represented at a meeting of the Shareholders, the Shareholders
entitled to vote shall have power to adjourn such meeting from time to time,
without notice other than an announcement at such meeting, until a quorum is
present or represented. At any such adjourned meeting at which a quorum is
present or represented, any business may be transacted that might have been
transacted at the meeting as originally notified.
Section 2.07. PROXIES. Every person entitled to vote or to execute
consents may do so either in person or by written proxy filed with the Secretary
of the Corporation authorizing another person or persons to vote with respect to
such shares. The proxy shall not be valid after the expiration of eleven (11)
months from the date thereof unless otherwise provided in the proxy. Every
proxy continues in full force and effect until revoked by the person executing
it prior to the vote pursuant thereto, except as otherwise provided in the
applicable law.
Section 2.08. ACTION WITHOUT MEETING. Any action required by statute to
be taken at any Annual or Special Meeting of the Shareholders, or any action
that may be taken at any Annual or Special Meeting of the Shareholders, may be
taken without a meeting, without prior notice if a consent in writing setting
forth the action so taken, shall be signed by the holders of the outstanding
shares having not less than the minimum number of votes that would be necessary
to authorize or take such action at a meeting at which all shares entitled to
vote thereon were present and voted. The signed consent or a signed copy shall
be placed in the Minute Book of the Corporation and prompt notice of the taking
of the corporate action shall be given to those Shareholders who have not
consented in writing.
ARTICLE III
DIRECTORS
Section 3.01. NUMBER. The authorized number of Directors on the Board
shall not be less than four nor more than six unless changed by a duly adopted
Bylaw amending this Section 3.01, as provided by these Bylaws and pursuant to
applicable law. The Board shall
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initially be comprised of five Directors. The exact number of Directors
shall be fixed, from time to time within the limits specified, by resolution
duly adopted either by the Board or the Shareholders.
Section 3.02. QUALIFICATION-INDEPENDENT DIRECTOR; ELECTION; TERM.
(a) Of the authorized number of Directors provided in Section 3.01; the
Corporation shall at all times, except as noted hereafter, have at least two
Directors (each, an "Independent Director") who is not (i) a director, officer
or employee of any affiliate of the Corporation; (ii) a person related to any
officer or director of any affiliate of the Corporation; (iii) a holder
(directly or indirectly) of more than ten percent (10%) of any voting securities
of any affiliate of the Corporation; or (iv) a person related to a holder
(directly or indirectly) of more than ten percent (10%) of any voting securities
of any affiliate of the Corporation. In the event of the death, incapacity,
resignation or removal of all Independent Directors, the Board shall promptly
appoint an Independent Director for each Independent Director whose death,
incapacity, resignation or removal caused the related vacancy on the Board;
provided, however, that the Board shall not vote on any matter unless and until
at least two Independent Directors have been duly appointed to serve on the
Board.
(b) Except as otherwise provided by Sections 3.03 and 3.04 herein, the
Directors shall be elected at the Annual Meeting of Shareholders.
(c) Each Director elected shall hold office until the next Annual Meeting
of Shareholders and until his successor has been elected and qualified or until
his death, resignation, retirement, disqualification or removal.
Section 3.03. REMOVAL OF DIRECTORS. Except as otherwise provided by
applicable law, a director may only be removed by the Shareholders.
Section 3.04. VACANCIES ON THE BOARD. Vacancies on the Board, excluding
vacancies created by removal of Directors, may be filled by approval of the
Board or, if the number of Directors then in office is less than a quorum, by
(1) the unanimous written consent of the Directors then in office, (2) the
affirmative vote of a majority of the remaining Directors, or (3) a sole
remaining Director. The Shareholders may at any time elect a Director or
Directors to fill any vacancy or vacancies not filled by the Board and shall
have the right to fill any vacancy or vacancies created by the removal of one or
more Directors.
Section 3.05. POWERS. Subject to limitations of the Articles, the Bylaws,
and applicable law relating to actions required to be approved by the
Shareholders or by the outstanding shares, the business and affairs of the
Corporation shall be managed and all corporate powers shall be exercised by or
under the direction of the Board. The Board may delegate the management of the
day-to-day operation of the business of the Corporation to the officers of the
Corporation or other persons provided that the business and affairs of the
Corporation shall be managed by and all corporate powers shall be exercised
under the ultimate direction of the Board.
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Section 3.06. QUORUM. A majority of the members of the Board shall
constitute a quorum of the Board for the transaction of business. Every act or
decision done or made by a majority of the members of the Board present at a
meeting duly held at which a quorum is present shall constitute the act of the
Board. In the absence of a quorum, a majority of the members of the Board
present at the time and place of any meeting may adjourn such meeting from time
to time until a quorum is present. Notice of any adjourned meeting need not be
given.
Section 3.07. MEETINGS OF THE BOARD. The Board may designate any place,
within or without the State of California, for the holding of any meeting. If
no such designation is made, the meeting shall be held at the Corporation's
principal executive office. Subject to the requirements of applicable law, all
meetings of the Board shall be conducted in accordance with such rules and
procedures as the Board may approve and, as to matters not governed by such
rules and procedures, as the chairman of such meeting shall determine.
The Board by resolution may provide for the holding of regular meetings,
with or without notice, and may fix the times and places within or outside the
State of California at which such meetings shall be held.
Section 3.08. ACTION WITHOUT MEETING. Any action required or permitted to
be taken at any meeting of the Board or of any committee thereof may be taken
without a meeting if a written consent setting forth the action so taken is
signed by all members of the Board or of such committee, as the case may be, and
such written consent is filed with the Secretary of the Corporation and placed
in the Minute Book. Such consent shall have the same force and effect as a
unanimous vote at a meeting of such Board or committee.
Section 3.09. COMMITTEE. The Board may, by resolution adopted by a
majority of the whole Board, designate one or more committees, each committee to
consist of two or more of the Directors of the Corporation. Any such committee,
to the extent provided in the resolution of the Board, shall have and may
exercise all the powers and authority of the Board in the management of the
business and affairs of the Corporation, and may authorize the seal of the
Corporation to be affixed to all papers which may require it; but no such
committee shall have any powers or authority in reference to:
(a) the approval of any action for which the California General
Corporation Law also requires approval of the Shareholders or approval of the
outstanding shares;
(b) amending the Articles;
(c) approving an agreement of merger or consolidation;
(d) recommending to the Shareholders the sale, lease or exchange of all or
substantially all of the Corporation's property and assets otherwise than in the
usual and regular course of its business;
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(e) recommending to the Shareholders a dissolution of the Corporation or a
revocation thereof;
(f) amending or repealing the Bylaws of the Corporation or adopting new
Bylaws of the Corporation;
(g) amending or repealing any resolution of the Board which by its express
terms is not so amendable or repealable;
(h) appointing other committees of the Board or the members thereof;
(i) filling vacancies in or removing members of the Board or on any
committee appointed by the Board;
(j) fixing the compensation of the Directors for serving on the Board or
for serving as a member of any committee thereof; or
(k) a "distribution", as such term is defined in Section 166 of the
California General Corporation Law, except at a rate, in a periodic amount or
within a specific price range determined by the Board, and, unless the
resolution of the Board expressly so provides, no such committee shall have the
power or authority to otherwise declare a dividend or to authorize the issuance
of stock.
Any such committee shall report on its meetings to the Board at the next meeting
of the Board.
Section 3.10. EXECUTIVE COMMITTEE OF THE BOARD. Subject to these Bylaws,
including Sections 3.07, 3.08 and 3.09, the Articles and the provisions of
applicable law, the Executive Committee of the Board (the "Executive Committee")
is authorized by unanimous written consent of all its Executive Committee
members to bind this Corporation without the consent of other members of the
Board and shall have and may exercise all of the authority of the Board in the
management of the business and affairs of the Corporation, including the power
to authorize the seal of the Corporation to be affixed to all papers which may
require it. Upon the unanimous consent of all members of the Executive
Committee, the Executive Committee is also authorized by these Bylaws to
authorize the future purchase and sale of Receivables as defined and provided
for in the Articles.
Section 3.11. REMOVAL OF COMMITTEE MEMBERS. Any member of the Executive
Committee and other committees may be removed by the Board by the affirmative
vote of a majority of the whole Board, whenever in its judgment the best
interests of the Corporation will be served thereby.
Section 3.12. VACANCIES IN COMMITTEES. A vacancy occurring in the
Executive Committee or any other committee of the Board (by death, resignation,
retirement, disqualification, removal or otherwise) may be filled by the Board
in the manner provided for original designation in Section 3.09.
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Section 3.13. COMPENSATION. Members of the Board, the Executive Committee
or any other committee may, by resolution of the Board, be allowed compensation
for attending Board and committee meetings.
Section 3.14. TELEPHONE AND SIMILAR MEETINGS. Members of the Board and
committee members may participate in and hold a meeting by means of conference
telephone or similar communications equipment, so long as all persons
participating in the meeting can hear each other. Participation in such meeting
shall constitute presence in person at the meeting, unless a person authorized
to participate in such meeting participates in the meeting for the express
purpose of objecting to the transaction of any business on the ground that the
meeting was not lawfully called or convened.
Section 3.15. WRITTEN ACTION OR MINUTES. The Board, the Executive
Committee, and any other committees shall keep either a record of action taken
or Minutes of their proceedings and, in the case of any committee, report the
same to the Board when required. The Minutes of the proceedings of the Board,
the Executive Committee, and other committees shall be placed in the Minute Book
of the Corporation.
ARTICLE IV
INDEMNIFICATION OF DIRECTORS,
OFFICERS AND OTHER CORPORATE AGENTS
Section 4.01. INDEMNIFICATION. This Corporation shall, to the maximum
extent and in the manner permitted by the California General Corporation Law,
indemnify and hold harmless each of the directors and other "agents" of the
Corporation, as the term "agent" is defined in Section 317(a) of the California
General Corporation Law, as amended from time to time, from and against any
"expenses" as defined in Section 317(a), judgments, fines, settlements, and
other amounts actually and reasonably incurred in connection with any
"proceeding" (as defined in said Section 317(a)) arising by reason of the fact
that such person is or was a director of the Corporation acting in good faith
and in a manner reasonably believed by such director to be in the best interests
of the Corporation. The Corporation shall advance to its directors and other
agents expenses incurred in defending any proceeding prior to the final
disposition thereof to the full extent and in the manner permitted by applicable
law.
Section 4.02. RIGHT TO INDEMNIFICATION. This section shall create a right
of indemnification for each person referred to in Section 4.01, whether or not
the proceeding to which the indemnification relates arose in whole or in part
prior to adoption of such section and in the event of death such right shall
extend to such person's legal representatives. The right of indemnification
hereby given shall not be exclusive of any other rights such person may have
whether by law or under any agreement, insurance policy, vote of Directors or
Shareholders, or otherwise.
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Section 4.03. INSURANCE. Subject to the requirements of applicable law,
the Corporation shall have power to purchase and maintain insurance on behalf of
any agent of the corporation against any liability asserted against or incurred
by the agent in such capacity or arising out of the agent's status as such
whether or not the Corporation would have the power to indemnify the agent
against such liability.
ARTICLE V
OFFICERS
Section 5.01. PRINCIPAL OFFICERS. The principal officers of the
Corporation shall be a President, a Secretary and a Treasurer, each of whom
shall have the authority to perform the duties provided in these Bylaws or as
may from time to time be assigned by the Board. One person may hold two or more
offices, except that the Secretary may not also hold the office of President.
Section 5.02. SUBORDINATE OFFICERS. The Corporation may also have, at the
discretion of the Board, one or more Vice Presidents, one or more Assistant
Secretaries, one or more Assistant Treasurers and such other officers as the
business of the Corporation may require, each of whom shall have the authority
and perform the duties as may be provided in these Bylaws or as may from time to
time be assigned by the Board.
Section 5.03. APPOINTMENT OF THE CORPORATION'S OFFICERS. The Board or the
Executive Committee shall appoint the officers of the Corporation, each such
officer to hold his office until the earlier of his death, resignation,
retirement, disqualification or removal. Thereafter, the Board or the Executive
Committee may, from time to time, appoint other officers of the Corporation to
fill a vacancy in any office or otherwise, each such officer to hold his office
until the earlier of his death, resignation, disqualification or removal from
office.
Section 5.04. REMOVAL AND RESIGNATION.
(a) Any officer may be removed, either with or without cause, by the
unanimous written consent of the Executive Committee or by a majority of the
members of the Board at the time in office, at any regular or Special Meeting of
the Board.
(b) Any officer may resign at any time by giving written notice to the
Corporation. Any such resignation shall take effect at the date of the receipt
of such notice or at any later time specified therein; and unless otherwise
specified therein, the acceptance of such resignation shall not be necessary in
order to make such resignation effective.
Section 5.05. PRESIDENT. The President, unless a Chairman of the Board is
elected by the Board, shall, if present, preside at all meetings of the
Shareholders or the Board.
The President shall, subject to the ultimate direction of the Board, have
general supervision, direction and control of the business and affairs of the
Corporation. He shall have the general powers and duties of management usually
vested in the chief executive officer of a corporation.
The President shall provide the general and active management of the
business operations of the Corporation and shall see that all orders and
resolutions of the Board are carried into effect. He shall
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develop and issue or cause to be issued such operating policies, procedures
and guidelines respecting the conduct of the business of the Corporation and
of its officers, employees and agents as he shall deem appropriate; and shall
possess the power and authority to authorize exceptions to and deviations
from such policies, procedures and guidelines where he, in good faith,
determines that such exceptions or deviations serve the best interests of the
Corporation and would neither violate applicable law nor do damage to the
reputation of the Corporation or its Shareholders.
The President shall execute bonds, mortgages and other contracts requiring
a seal, under the seal of the Corporation, except where required or permitted by
law to be otherwise signed and executed and except where the signing and
execution thereof shall be delegated by the Board to some other officer or agent
of the Corporation.
Section 5.06. SECRETARY.
(a) The Secretary shall keep, or cause to be kept, the Minute Book of the
Corporation at the principal executive office of the Corporation, or such other
place as the Board may order, of all meetings of Shareholders, the Board and its
committees, with the time and place of holding, whether regular or special and
if special, how authorized and the notice thereof given, the names of those
present at Board and committee meetings, the number of shares present or
represented at meetings of the Shareholders and the proceedings thereof.
(b) The Secretary shall keep, or cause to be kept, at the principal
executive office of the Corporation or at the office of the Corporation's
transfer agent, a share register, or a duplicate share register, showing the
names of the shareholders and their addresses; the number and classes of shares
held by each; the number and date of certificates issued for the same; and the
number and date of cancellation of every certificate surrendered for
cancellation.
(c) The Secretary shall give, or cause to be given, notice of all the
meetings of the Shareholders and of the Board and of any committees thereof
required by these Bylaws or by applicable law to be given, and he shall keep the
seal of the Corporation in safe custody.
(d) The Secretary shall be under the supervision of the President. He
shall perform such other duties and have such other authority and powers as the
Board may from time to time prescribe or as the President may from time to time
delegate.
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Section 5.07. TREASURER.
(a) The Treasurer shall deposit or cause the deposit of all monies and
other valuables in the name and to the credit of the Corporation with such
depositories as may be designated by the Board.
(b) The Treasurer shall have custody of the corporate funds and securities
and shall keep full and accurate accounts of receipts and disbursements of the
Corporation.
(c) The Treasurer shall be responsible for effecting the properly
authorized disbursement of funds of the Corporation and shall provide
appropriate and timely accounting of his transactions as Treasurer to the
President and the Board.
(d) The Treasurer shall keep and maintain, or cause to be kept and
maintained, adequate and correct accounts of the properties and business
transactions of the Corporation, including accounts of its assets, liabilities,
receipts, disbursements, gains, losses, capital, additional paid-in capital and
retained earnings. Capital and additional paid-in capital shall be classified
according to source and shown in separate accounts.
(e) The Treasurer shall provide appropriate and timely reports on the
financial condition of and the results of operations of the Corporation to the
President and the Board.
(f) The Treasurer shall perform such other duties and may have such other
authority and powers as the Board may from time to time prescribe or as the
President may from time to time delegate.
Section 5.08. VICE PRESIDENTS. The Vice Presidents, if any, shall
exercise and perform such powers and duties with respect to the administration
of the business affairs and operations of the Corporation as may from time to
time be assigned to each of them by the President or by the Board, or if not
ranked, the Vice President designated by the Board may perform all of the duties
of the President and when so acting shall have all of the powers of and be
subject to all the restrictions upon the President.
Section 5.09. ASSISTANT SECRETARIES. The Assistant Secretaries, if any,
may, in the absence or disability of the Secretary, perform all of the duties of
the Secretary and when so acting shall have all the powers of and be subject to
all the restrictions upon the Secretary.
Section 5.10. ASSISTANT TREASURER. The Assistant Treasurers, if any, may,
in the absence or disability of the Treasurer, perform all of the duties of the
Treasurer and when so acting shall have all the powers of and be subject to all
the restrictions upon the Treasurer.
Section 5.11. COMPENSATION. The compensation, if any, of the officers and
agents of the Corporation shall be fixed from time to time by the Board or the
Executive Committee.
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ARTICLE VI
AMENDMENTS
Section 6.01. BYLAWS. Subject to applicable law and the limitations set
forth in the Articles, new Bylaws may be adopted or these Bylaws may be amended,
restated or repealed by the Shareholders or the Board, except that Sections 3.01
and 3.02 may only be amended, restated or repealed by the Shareholders.
ARTICLE VII
GENERAL PROVISIONS
Section 7.01. SEAL. The Board shall adopt a corporate seal, which shall
be in the form of a circle and shall bear the name of the Corporation and words
and figures showing that the Corporation was incorporated in the State of
California and the date of incorporation.
Section 7.02. METHOD OF NOTICE. Whenever by statute, the Articles, these
Bylaws, or otherwise, notice is required to be given to a Director, committee
member or Shareholder, and no provision is made therein as to how the notice
shall be given, it shall not be construed to mean personal notice, but any such
notice may be given:
(a) in writing by mail, first-class postage prepaid, addressed to the
Director, committee member, or Shareholder and the address appearing on the
books of the Corporation;
(b) by facsimile transmission; or
(c) in any other method permitted by law.
Any such notice required or permitted to be given by mail shall be deemed
given at the time when the same is deposited in accordance with the terms of
this Section in the United States mails.
Section 7.03. WAIVER OF NOTICE. Except as otherwise provided by
applicable law, whenever notice is required to be given by these Bylaws or the
Articles or by law, the person entitled to said notice may waive such notice in
writing, either before or after the time stated therein, and such waiver shall
be deemed equivalent to notice. All such waivers shall be filed in the Minute
Book of the Corporation or made a part of the minutes of the meeting.
Section 7.04. FISCAL YEAR. The fiscal year of the Corporation shall end
on the last day of March in each year.
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Section 7.05. CONSTRUCTION. Whenever the context so requires, the
masculine gender shall include the feminine and neuter genders and the singular
shall include the plural, and conversely. If any portion of these Bylaws shall
be invalid or inoperative, then, so far as is reasonable and possible:
(a) the remainder of these Bylaws shall be considered valid and operative,
and
(b) effect shall be given to the intent manifested by the portion held
invalid or inoperative.
Section 7.06. HEADINGS. The headings set forth in these Bylaws are for
organization, convenience and clarity. In interpreting these Bylaws, the
headings shall be subordinated in importance to other written material.
Section 7.07. RELATION TO THE ARTICLES. These Bylaws are subject to and
are governed by the Articles, the provisions of applicable law, and any written
agreement by a majority in interest of the Shareholders filed with the
Corporation at its principal place of business.
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