<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER , 1996
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
BAY VIEW AUTO TRUSTS
(ISSUER WITH RESPECT TO THE SECURITIES)
BAY VIEW SECURITIZATION CORPORATION
(ORIGINATOR OF THE TRUSTS DESCRIBED HEREIN)
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE APPLIED FOR
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
2121 SOUTH EL CAMINO REAL
SAN MATEO, CALIFORNIA 94403
(415) 573-7300
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL PLACE OF BUSINESS)
----------------
ROBERT J. FLAX
BAY VIEW SECURITIZATION CORPORATION
2121 SOUTH EL CAMINO REAL
SAN MATEO, CALIFORNIA 94403
(415) 573-7300
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
COPIES TO:
CHRISTOPHER R. KELLY, P.C. RICHARD M. SCHETMAN, ESQ.
DAVE M. MUCHNIKOFF, P.C. CADWALADER, WICKERSHAM & TAFT
SILVER, FREEDMAN & TAFF, L.L.P. 100 MAIDEN LANE
1100 NEW YORK AVENUE NEW YORK, NEW YORK 10038
WASHINGTON, D.C. 20005
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after the effective date of this Registration Statement as determined
by market conditions.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [_]
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, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
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 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
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<TABLE>
<CAPTION>
TITLE OF EACH CLASS AMOUNT PROPOSED PROPOSED MAXIMUM AMOUNT OF
OF SECURITIES TO BE TO BE MAXIMUM OFFERING AGGREGATE OFFERING REGISTRATION
REGISTERED(1) REGISTERED PRICE PER UNIT(1) PRICE(1) FEE
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<S> <C> <C> <C> <C>
Asset Backed
Certificates.......... $500,000,000 100% $500,000,000 $151,516
</TABLE>
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(1) Estimated solely for the purpose of calculating the registration fee.
(2) Determined pursuant to Section 6(b) of the Securities Act.
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
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<PAGE>
INTRODUCTORY NOTE
This Registration Statement contains a form of Prospectus relating to the
offering of Series of Asset Backed Certificates by various Bay View Auto
Trusts created from time to time by Bay View Securitization Corporation and
two forms of Prospectus Supplement relating to the offering by Bay View 199--
Auto Trust of the particular Series of Asset Backed Certificates described
therein. Each form of Prospectus Supplement relates only to the securities
described therein and is a form that may be used, among others, by Bay View
Securitization Corporation to offer Asset Backed Certificates under this
Registration Statement.
<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 SUPPLEMENT AND THE ACCOMPANYING 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. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION DATED NOVEMBER , 1996
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED , 1996)
$ [LOGO HERE]
BAY VIEW 199 - AUTO TRUST
$ % CLASS A AUTOMOBILE RECEIVABLE PASS-THROUGH CERTIFICATES
CLASS I INTEREST ONLY AUTOMOBILE RECEIVABLE PASS-THROUGH CERTIFICATES
BAY VIEW SECURITIZATION CORPORATION
DEPOSITOR
CALIFORNIA THRIFT & LOAN
SERVICER
----------
Principal, and interest at the applicable Pass-Through Rate shown above, will
be distributed to Class A Certificateholders on the third business day after
the 5th day of each month (the "Distribution Date"), beginning , 199 . The
final scheduled Distribution Date of the Class A Certificates will be , 199
(the "Final Scheduled Distribution Date"). The Class I Certificates will not
receive principal payments, but interest at the Class I Pass-Through Rate of %
per annum on the Notional Principal Amount (as defined herein) of the Class I
Certificates will be distributed to Class I Certificateholders on each
Distribution Date. The Original Notional Principal Amount will be $ and will
decrease on each Distribution Date. Each Certificate offered hereby will
represent an undivided interest in the Bay View 199 - Auto Trust (the "Trust")
to be formed by Bay View Securitization Corporation, a Delaware corporation,
having its principal office and place of business in San Mateo, California (the
"Depositor"). The Trust property will include a pool of simple and precomputed
interest installment sale and installment loan contracts originated in various
states in the United States of America, secured by new and used automobiles,
light trucks and vans (the "Receivables"), certain monies due thereunder as of
and after , 199 (the "Cutoff Date"), security interests in the vehicles
financed thereby and certain other property. The Trust Property will also
include an irrevocable surety bond guaranteeing payments of interest and
principal on the Class A Certificates and Class I Monthly Interest (the "Surety
Bond") issued by and a Spread Account for the benefit of the Class A and
the Class I Certificateholders, as well as the surety bond issuer.
Concurrently with the issuance of the Class A Certificates and the Class I
Certificates, the Trust will issue a Class IC Automobile Receivable Pass-
Through Certificate (the "Class IC Certificate"). The Class IC Certificate will
be issued to Bay View Securitization Corporation, the Depositor, and will not
be offered hereby. The Class A Certificates and the Class I Certificates are
together sometimes referred to herein as the "Offered Certificates."
Prior to their issuance there has been no market for the Offered Certificates
nor can there be any assurance that one will develop, or if it does develop,
that it will provide the holders of the Offered Certificates with liquidity or
will continue for the life of the Offered Certificates. The Underwriters
intend, but are not obligated, to make a market in the Offered Certificates.
The yield to maturity of the Class I Certificates will be sensitive to the
rate and timing of principal payments (including prepayments) on the
Receivables. Investors in the Class I Certificates should fully consider the
associated risks, including the risk that a rapid rate of principal payments
could result in the failure of such investors to recoup their initial
investments. See "Risk Factors--Prepayment Risks Associated with Class I
Certificates" and "Termination Upon Insolvency Event of the Class IC
Certificateholder", "Yield and Prepayment Considerations" and "The Offered
Certificates--The Class I Certificates--Calculation of Notional Principal
Amount" herein.
Prospective investors should consider, among other things, the information
set forth under "Risk Factors" on page S- hereof and page of the Prospectus.
THE CERTIFICATES DO NOT REPRESENT INTERESTS IN OR OBLIGATIONS OF BAY VIEW
SECURITIZATION CORPORATION OR ANY AFFILIATE THEREOF. NEITHER THESE SECURITIES
NOR THE UNDERLYING RECEIVABLES WILL BE INSURED OR GUARANTEED BY ANY GOVERNMENTAL
AGENCY OR INSTRUMENTALITY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS
PUBLIC DISCOUNTS(1) TO DEPOSITOR(2)
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<S> <C> <C> <C>
Per Class A Certificate..................
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Per Class I Certificate..................
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Total...................................
</TABLE>
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(1) With respect to the Class I Certificates, the Price to Public and Proceeds
to Depositor are expressed as a percentage of the Notional Principal Amount
(initially $ ), and the Underwriting Discounts are expressed as a
percentage of the related Price to Public.
(2) Before deducting expenses, estimated to be $ .
The Offered Certificates are offered, subject to prior sale, when, as and if
accepted by the Underwriters, and subject to approval of certain legal matters
by Cadwalader, Wickersham & Taft, counsel for the Underwriters. It is expected
that delivery of the Offered Certificates in book-entry form will be made on or
about , 199 through the facilities of The Depository Trust Company, against
payment therefor in immediately available funds.
The date of this Prospectus Supplement is , 199 .
<PAGE>
THIS PROSPECTUS SUPPLEMENT DOES NOT CONTAIN COMPLETE INFORMATION ABOUT THE
OFFERING OF THE CERTIFICATES. ADDITIONAL INFORMATION IS CONTAINED IN THE
PROSPECTUS, AND PROSPECTIVE INVESTORS ARE URGED TO READ BOTH THIS PROSPECTUS
SUPPLEMENT AND THE PROSPECTUS IN FULL. SALES OF THE CERTIFICATES MAY NOT BE
CONSUMMATED UNLESS THE PURCHASER HAS RECEIVED BOTH THIS PROSPECTUS SUPPLEMENT
AND THE PROSPECTUS. THIS PROSPECTUS SUPPLEMENT CONTAINS INFORMATION THAT IS
SPECIFIC TO THE TRUST AND THE CERTIFICATES AND, TO THAT EXTENT, SUPPLEMENTS
AND REPLACES THE MORE GENERAL INFORMATION PROVIDED IN THE PROSPECTUS.
INFORMATION CONTAINED IN THIS PROSPECTUS SUPPLEMENT MAY ALSO REFLECT LEGAL,
ECONOMIC AND OTHER DEVELOPMENTS SINCE THE DATE OF THE PROSPECTUS. TO THE
EXTENT INFORMATION IN THIS PROSPECTUS SUPPLEMENT CONFLICTS WITH INFORMATION IN
THE PROSPECTUS, THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT SHALL CONTROL.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE CERTIFICATES
AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
Until 90 days after the date of this Prospectus Supplement, all dealers
effecting transactions in the Offered Certificates, whether or not
participating in this distribution, may be required to deliver this Prospectus
Supplement and the Prospectus. This is in addition to the obligation of
dealers to deliver this Prospectus Supplement and the Prospectus when acting
as underwriters and with respect to their unsold allotments or subscriptions.
REPORTS TO CERTIFICATEHOLDERS
Unless and until definitive certificates are issued (which will occur only
under the limited circumstances described herein), , as Trustee, will
provide to Cede & Co., the nominee of The Depository Trust Company, as
registered holder of the Class A Certificates, monthly and annual statements
concerning the Trust and the Class A Certificates. Such statements will also
be provided to the registered holders of the Class I Certificates. Such
statements will not constitute financial statements prepared in accordance
with generally accepted accounting principles. A copy of the most recent
monthly or annual statement concerning the Trust and the Offered Certificates
may be obtained by contacting the Servicer at California Thrift & Loan, 818
Oakpark Road, Covina, California 91724, ( ) - .
<PAGE>
SUMMARY OF TERMS
This Summary is qualified in its entirety by reference to the detailed
information appearing elsewhere in this Prospectus Supplement and the
Prospectus. Certain capitalized terms used in this Summary are defined
elsewhere in this Prospectus Supplement on the pages indicated in the "Index of
Principal Terms" or, to the extent not defined herein, have the meanings
assigned to such terms in the Prospectus.
Issuer........................ Bay View 199 - Auto Trust.
Depositor..................... Bay View Securitization Corporation (the
"Depositor").
Servicer...................... California Thrift & Loan (in its capacity as
servicer, the "Servicer," otherwise "CTL").
Trustee....................... .
The Certificates.............. The Trust will be formed and will issue the
Certificates on or about (the "Closing
Date") pursuant to a pooling and servicing
agreement (the "Pooling and Servicing
Agreement"). The Certificates will consist of:
(i) % Class A Automobile Receivable Pass-
Through Certificates in the aggregate principal
amount of $ ; (ii) the Class I Interest Only
Automobile Receivable Pass-Through
Certificates; and (iii) the Class IC Automobile
Receivable Pass-Through Certificate. The Class
I Certificates are interest only certificates
and will not receive distributions of
principal. The Class IC Certificate will be
issued to the Depositor on the Closing Date and
is not being offered hereby. Each of the
Certificates will represent a fractional
undivided interest in the Trust. The Trust
assets will include the Receivables, certain
monies due thereunder as of and after the
Cutoff Date, security interests in the related
Financed Vehicles, monies on deposit in the
Certificate Account and the proceeds thereof,
any proceeds from claims on certain insurance
policies relating to the Financed Vehicles or
the related Obligors, any lender's insurance
policy, the Spread Account for the benefit of
the Class A and Class I Certificateholders and
the surety bond issuer, the Surety Bond for the
benefit of the Class A and Class I
Certificateholders and certain rights under the
Pooling and Servicing Agreement. Interest paid
to the Certificateholders on the first
Distribution Date will be based upon the amount
of interest accruing from the Closing Date, and
will therefore not include a full month's
interest.
The Class A Certificates...... Interest. Interest will be distributable on
each Distribution Date beginning , 199 ,
to holders of record as of the last day of the
calendar month immediately preceding the
calendar month in which such Distribution Date
occurs (the "Record Date") of the Class A
Certificates (the "Class A Certificateholders")
in a maximum amount equal to the product of
1/12th of % (the "Class A Pass-Through Rate")
and the aggregate outstanding principal balance
of the Class A
S-1
<PAGE>
Certificates (the "Certificate Balance") as of
the preceding Distribution Date (after giving
effect to all distributions to
Certificateholders on such date) or, in the
case of the first Distribution Date, as of the
Closing Date. Interest on the Class A
Certificates will be calculated on basis of a
360-day year consisting of twelve 30-day months
or, in the case of the first Distribution Date,
the number of days from the Closing Date
remaining in the month of the closing (assuming
a 30-day month). See "The Offered
Certificates--Distributions on the Offered
Certificates". The effective yield on the Class
A Certificates will be below that otherwise
produced by the applicable Pass-Through Rate
because the distribution of Monthly Principal
(as defined below) and Class A Monthly Interest
in respect of any given month will not be made
until the third business day after the fifth
calendar day of the following month (the
"Distribution Date"). See "Yield and Prepayment
Considerations" herein.
Principal. On each Distribution Date, the
Trustee will distribute as principal to the
Class A Certificateholders in a maximum
aggregate amount equal to the aggregate
outstanding principal amount of the Receivables
(the "Pool Balance") on the last day of the
second preceding calendar month (or, in the
case of the first Distribution Date, as of the
Cutoff Date) less the Pool Balance on the last
day of the immediately preceding calendar month
("Monthly Principal"). For the purpose of
determining Monthly Principal, the unpaid
principal balance of a Defaulted Receivable or
a Purchased Receivable will be deemed to be
zero on and after the last day of the calendar
month in which such Receivable became a
Defaulted Receivable or a Purchased Receivable,
as applicable.
The weighted average life of the Offered
Certificates will be reduced by full or partial
prepayments on the Receivables (except certain
prepayments in respect of Precomputed
Receivables). See "The Offered Certificates--
Distributions on the Offered Certificates"
herein.
The Class I Certificate ...... Interest. The Class I Certificates are interest
only certificates which will not be entitled to
any principal distributions. Interest will
accrue on the Notional Principal Amount
(defined below) of the Class I Certificates at
the rate of % per annum (the "Class I Pass-
Through Rate"). The Notional Principal Amount
represents a designated principal component of
the Receivables, originally $ (the "Original
Notional Principal Amount").
Interest with respect to the Class I
Certificates will accrue on the basis of a 360-
day year consisting of twelve 30-day months or,
in the case of the first Distribution Date, the
number of days from the Closing Date remaining
in the month of the closing (assuming
S-2
<PAGE>
a 30-day month). On each Distribution Date,
except the first Distribution Date, the Trustee
shall distribute pro rata to holders of Class I
Certificates (the "Class I Certificateholders")
of record as of the preceding Record Date,
Class I Monthly Interest at the Class I Pass-
Through Rate on the Notional Principal Amount
outstanding on the immediately preceding
Distribution Date (after giving effect to any
reduction of the Notional Principal Amount on
such Distribution Date) or, in the case of the
first Distribution Date, as of the Closing
Date. Holders of the Class I Certificates will
not be entitled to any distributions after the
Notional Principal Amount thereof has been
reduced to zero.
Planned Amortization Feature; Calculation of
the Class I Notional Principal Amount. The
Class I Certificates represent an interest-only
planned amortization class. The planned
amortization feature is intended to reduce the
uncertainty to investors in the Class I
Certificates with respect to prepayments.
Because the Class I Certificates will receive
interest based on their Notional Principal
Amount, this is accomplished by basing the
reduction in the Notional Principal Amount on a
principal paydown schedule rather than on the
reduction in the actual principal balances of
the Receivables, as described below. The amount
which will be paid to the Class I
Certificateholders will come from the excess of
interest earned on the Receivables over the
Class A Monthly Interest and the monthly
Servicing Fee to the Servicer (the "Monthly
Servicing Fee").
Solely for the purpose of calculating the
amount payable with respect to the Class I
Certificates, the Certificate Balance will be
divided into two principal components, the "PAC
Component" and the "Companion Component." The
sum of the PAC Component and the Companion
Component will at all times equal the then
aggregate unpaid Certificate Balance. The
"Notional Principal Amount" of the Class I
Certificates at any time will be equal to the
principal balance of the PAC Component as
calculated based on the allocations of
principal payments described below, originally
$ .
The Pooling and Servicing Agreement establishes
a schedule (a "Planned Notional Principal
Amount Schedule") which is set forth herein
under "The Offered Certificates--Class I
Certificates--Calculation of Notional Principal
Amount." On each Distribution Date, the Monthly
Principal will be allocated first to the PAC
Component in an amount up to the amount
necessary to reduce the amount thereof to the
Planned Notional Principal Amount for such
Distribution Date, as set forth in the Planned
Notional Principal Amount Schedule, second, to
the Companion Component until the outstanding
amount thereof is reduced to zero and third, to
the PAC Component, without regard to the
Planned Notional Principal Amount. As described
above, the
S-3
<PAGE>
Notional Principal Amount of the Class I
Certificates will be equal to the outstanding
amount of the PAC Component and thus will be
reduced as the PAC Component is reduced.
The Planned Notional Principal Amount Schedule
has been prepared on the basis of the
assumption, among other things, that the
Receivables prepay at a constant rate between
% and % ABS (as defined herein), an assumed
annualized constant rate of prepayments and the
prepayment model used in this Prospectus. The
yield to maturity of the Class I Certificates
will be sensitive to the rate and the timing of
principal payments (including prepayments) on
the Receivables and may fluctuate significantly
from time to time. If the Receivables prepay at
a constant rate within the range assumed in
preparing the Planned Notional Principal Amount
Schedule, the PAC Component (and the Notional
Principal Amount of the Class I Certificates)
will be reduced in accordance with the Planned
Notional Principal Amount Schedule. If the
Receivables prepay at a constant rate higher
than % ABS, the amount of the Companion
Component will be reduced to zero more quickly,
and the amount of the PAC Component (and the
Notional Principal Amount of the Class I
Certificates) will be reduced more quickly than
provided in the Planned Notional Principal
Amount Schedule, thereby reducing the yield to
holders of the Class I Certificates. In
general, a rapid rate of principal prepayments
(including liquidations due to losses,
repurchases and other dispositions) will have a
material negative effect on the yield to
maturity of the Class I Certificates.
The Planned Notional Principal Amount Schedule
is set forth herein under "The Certificates--
The Class I Certificates--Calculation of
Notional Principal Amount." The Planned
Notional Principal Amount Schedule has been
prepared on the basis of certain assumptions,
which are described herein under "The
Certificates--Class I Yield Considerations."
Prospective investors in the Class I
Certificates should fully consider the
associated risks, including the risk that a
rapid rate of prepayments could result in the
failure of investors in the Class I
Certificates to recoup their initial
investment. See "Risk Factors--Prepayment Risks
Associated with Class I Certificates," "Yield
and Prepayment Considerations--The Class I
Certificates" and "The Certificates--
Termination Upon Insolvency Event of the Class
IC Certificateholder" herein.
Subordination; Spread
Account....................... The Depositor will establish an account (the
"Spread Account") on the Closing Date. On each
Distribution Date thereafter, the Servicer will
deposit into the Spread Account any amounts
remaining in the Certificate Account after the
payment on such date of all amounts owing
pursuant to the Pooling and Servicing Agreement
to the Certificateholders (other than the Class
IC Certificateholder), the Surety Bond Issuer
and the Servicer for the
S-4
<PAGE>
Monthly Servicing Fee. In the event that
Available Funds are insufficient on any
Distribution Date prior to the termination of
the Trust (after payment on the Monthly
Servicing Fee) to pay Monthly Principal and
Class A and Class I Monthly Interest to the
Class A and Class I Certificateholders, draws
will be made on the Spread Account to the
extent of the balance thereof and, if
necessary, the Surety Bond, in the manner and
to the extent described herein. The Spread
Account is solely for the benefit of the Class
A and Class I Certificateholders and the Surety
Bond Issuer. In the event the amount on deposit
in the Spread Account is zero after giving
effect to any draws thereon for the benefit of
the Class A and Class I Certificateholders, and
there is a default under the Surety Bonds,
losses on the Receivables will be borne
directly pro rata by the Class A
Certificateholders and Class I
Certificateholders, as described here. Any such
reduction of the principal balance of the
Receivables due to losses on the Receivables
will also result in a reduction of the Class I
Notional Principal Amount. See "The Offered
Certificates--Distributions on the Offered
Certificates" and "--Accounts" herein.
The Class A Certificates and Class I
Certificates will be senior in right and
interest to the Class IC Certificate. The Class
A Certificateholders and the Class I
Certificateholders will have equal rights with
respect to amounts collected on or with respect
to the Receivables and other assets of the
Trust in the event of a shortfall. The Trustee
will first withdraw funds from the Spread
Account on each Distribution Date to the extent
of any shortfall in the Class A and Class I
Monthly Interest and the Monthly Principal as
described above. Any amount on deposit in the
Spread Account on any Distribution Date in
excess of the Required Spread Amount (defined
below) after all other required deposits
thereto and withdrawals therefrom have been
made, and after payment therefrom of all
amounts due the Surety Bond Issuer will be
distributed to the holder of the Class IC
Certificate (the "Class IC Certificateholder").
Any amount so distributed to the Class IC
Certificateholder will no longer be an asset of
the Trust. While it is intended that the amount
on deposit in the Spread Account will grow over
time, through the deposit thereof of the excess
collections, if any, on the Receivables, to the
Required Spread Amount, there can be no
assurance that such growth will actually occur.
The "Required Spread Amount "with respect to
any Distribution Date will equal % of the
initial Pool Balance. If the average aggregate
yield of the Receivables Pool in excess of
losses falls below a prescribed level set forth
in the Insurance Agreement, the Required Spread
Amount will be increased to % of the Pool
Balance. Upon and during the continuance of an
Event of Default or upon the occurrence of
certain other events described in the Insurance
Agreement generally involving a failure of
performance by the Servicer or a material
misrepresentation made by the Servicer or
S-5
<PAGE>
a material misrepresentation made by the
Servicer under the Pooling and Servicing
Agreement or the Insurance Agreement, the
required Spread Amount shall be equal to the
Surety Bond Amount, as further described below.
See "The Offered Certificates--Accounts" and
"--The Surety Bond" herein.
Surety Bond................... The Depositor shall obtain an irrevocable
surety bond (the "Surety Bond") issued by the
Surety Bond Issuer (as specified below), for
the benefit of the Trustee on behalf of the
Class A and Class I Certificateholders. The
Trustee shall draw on the Surety Bond in the
event that sufficient funds are not available
(after payment of the Monthly Servicing Fee and
after withdrawals from the Spread Account to
pay the Class A and Class I Certificateholders
on any Distribution Date in accordance with the
Pooling and Servicing Agreement) to distribute
Class A and Class I Monthly Interest and
Monthly Principal, up to the Surety Bond
Amount. See "The Offered Certificates--The
Surety Bond."
Surety Bond Amount............ The term "Surety Bond Amount" means with
respect to any Distribution Date: (x) the sum
of (A) the lesser of (i) the Certificate
Balance (after giving effect to any
distribution of Available Funds and any funds
withdrawn from the Spread Account to pay
Monthly Principal on such Distribution Date)
and (ii) the Net Principal Surety Bond Amount,
plus (B) Class A Monthly Interest, plus (C)
Class I Monthly Interest, plus (D) the Monthly
Servicing Fee; less (y) all amounts on deposit
in the Spread Account on such Distribution
Date. "Net Principal Surety Bond Amount" means
the Certificate Balance as of the first
Distribution Date minus all amounts previously
drawn on the Surety Bond or from the Spread
Account with respect to Monthly Principal.
Surety Bond Issuer............ .
Optional Sale................. The Class IC Certificateholder has the right to
cause the Trustee to sell all the Receivables
(referred to herein as an "Optional Sale") as
of the last day of any Collection Period, at a
purchase price equal to the fair market value
of the Receivables (but not less than the sum
of (i) their aggregate outstanding principal
balance plus accrued and unpaid interest
thereon and (ii) any amounts due the Surety
Bond Issuer), if (i) the Certificate Balance as
of the following Distribution Date will equal
10% or less of the initial Certificate Balance
and (ii) the Class I Notional Principal Amount
has been reduced to zero.
Tax Status.................... In the opinion of special tax counsel to the
Depositor, the Trust will not be treated as an
association taxable as a corporation or as a
"publicly traded partnership" taxable as a
corporation. The Trustee and the
Certificateholders will agree to treat the
Trust as a partnership for federal income tax
purposes, which will not be subject to federal
income tax at the Trust level. See "Certain
Federal Income Tax Consequences" in the
Prospectus.
S-6
<PAGE>
Ratings....................... As a condition to the issuance of the Offered
Certificates, the Class A and Class I
Certificates must be rated in one of the four
highest rating categories by at least one
nationally recognized rating agency. The rating
of the Class I Certificates does not address
the possibility that rapid rates of principal
prepayments, including prepayments resulting
from a sale of the Receivables upon an
Insolvency Event with respect to the Class IC
Certificateholder, could result in a failure of
the holders of the Class I Certificates to
fully recover their investment. 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. See "Certificate Rating".
ERISA Considerations.......... Subject to the considerations discussed under
"ERISA Considerations" herein and in the
Prospectus, the Class A Certificates and the
Class I Certificates may be eligible for
purchase by employee benefit plans subject to
the Employee Retirement Income Security Act of
1974, as amended ("ERISA"). Any benefit plan
fiduciary considering the purchase of an
Offered Certificate should, among other things,
consult with experienced legal counsel in
determining whether all required conditions for
such purchase have been satisfied. See "ERISA
Considerations" herein and in the Prospectus.
S-7
<PAGE>
RISK FACTORS
Investors should carefully consider the information set forth below as well
as the other investment considerations described in this prospectus.
LIMITED LIQUIDITY
There is currently no secondary market for the Offered Certificates. The
Underwriters currently intend to make a market in the Offered Certificates,
but are under no obligation to do so. There can be no assurance that a
secondary market will develop or, if one does develop, that it will provide
Certificateholders with liquidity of investment or that it will continue for
the life of the Offered Certificates.
CERTIFICATES SOLELY OBLIGATIONS OF THE TRUST
The Offered Certificates are interests in the Trust only and do not
represent the obligation of any other person. The Class A and Class I
Certificateholders are senior in right and interest to the Class IC
Certificateholder (as described under "The Offered Certificates--Distributions
on the Offered Certificates"). The Trustee will withdraw funds from the Spread
Account, up to the full balance of the funds on deposit in such account, only
in the event that Available Funds are insufficient in accordance with the
Pooling and Servicing Agreement to distribute Class A and Class I Monthly
Interest and Monthly Principal (after payment of the Monthly Servicing Fee).
The amount on deposit in the Spread Account is intended to increase over time
to an amount equal to the Required Spread Amount. There is no assurance that
such growth will occur or that the balance in the Spread Account will always
be sufficient to assure payment in full of Monthly Principal and Monthly
Interest. If the amount on deposit in the Spread Account is reduced to zero
after giving effect to all amounts to be deposited to and withdrawn from the
Spread Account pursuant to the Pooling and Servicing Agreement, on any
Distribution Date prior to termination of the Trust, the Trustee will draw on
the Surety Bond, in an amount equal to the shortfall in respect of Class A and
Class I Monthly Interest and Monthly Principal, up to the Surety Bond Amount.
If the Spread Account is reduced to zero and there is a default under the
Surety Bond, the Trust will depend solely on current distributions on the
Receivables to make distributions on the Certificates. See "The Receivables
Pool--Delinquencies, Repossessions and Net Losses" and "The Offered
Certificates--Accounts" herein.
PREPAYMENT RISKS ASSOCIATED WITH THE CLASS I CERTIFICATES
If the Receivables prepay at a constant rate within the range assumed in
preparing the Planned Notional Principal Amount Schedule, the PAC Component
and the Class I Notional Principal Amount will be reduced in accordance with
the Planned Notional Principal Amount Schedule. If the Receivables prepay at a
constant rate higher than % ABS, the Class I Notional Principal Amount will
be reduced more quickly than provided in the Planned Notional Principal Amount
Schedule, thereby reducing the yield to holders of the Class I Certificates.
In general, a rapid rate of principal prepayments (including liquidations due
to losses, repurchases and other dispositions and prepayments resulting from
any sale of the Receivables upon an Insolvency Event with respect to the Class
IC Certificateholder) will have a material negative effect on the yield to
maturity of the Class I Certificates. Prospective investors should fully
consider the associated risks, including the risk that a rapid rate of
prepayments could result in the failure of investors in the Class I
Certificates to recoup their initial investment. See "Yield and Prepayment
Considerations" herein.
TERMINATION UPON INSOLVENCY EVENT OF THE CLASS IC CERTIFICATEHOLDER
The Depositor will be the initial Class IC Certificateholder. If an
Insolvency Event occurs with respect to the Class IC Certificateholder, the
Receivables will be sold and the Trust will be liquidated unless, within the
period specified herein, holders of more than 51% of the Certificate Balance
and holders of more than 51% of
S-8
<PAGE>
the Class I Notional Principal Balance instruct the Trustee not to sell the
Receivables and liquidate the Trust or unless such sale and liquidation is
otherwise prohibited by applicable law. The Surety Bond will not be available
to pay any shortfalls upon sale of the Receivables on liquidation of the
Trust. See "The Offered Certificates--Termination Upon Insolvency Event of the
Class IC Certificateholder" herein. The Depositor is a special purpose
corporation the activities of which are circumscribed by its charter with a
view to reducing any risk of its bankruptcy; however no representation is made
concerning the financial condition of the Class IC Certificateholder or the
likelihood of an Insolvency Event with respect to such holder. In the event of
the sale of the Receivables and liquidation of the Trust following an
Insolvency Event, the proceeds may not be sufficient to pay all accrued and
unpaid amounts owing on the Certificates. The Surety Bond will not be
available to cover any such shortfall. Following such a sale, the Class I
Certificateholders may be entitled to receive a portion of the proceeds of
sale based upon the amount originally paid for the Class I Certificates (as
reduced by prior returns of such amount) as provided in the Pooling and
Servicing Agreement. Furthermore, any distributions of such proceeds will have
an effect similar to a prepayment of the Receivables and could affect the
yield on the Class A Certificates and may significantly affect the yield on
the Class I Certificates. See "Yield and Prepayment Considerations" herein.
CERTIFICATE RATING
It is a condition of issuance of the Offered Certificates that the Class A
Certificates and the Class I Certificates be rated in one of the four the
highest categories by at least one nationally recognized rating agency. Such
ratings will reflect only the views of the relevant rating agency. There is no
assurance that any such rating will continue for any period of time or that it
will not be revised or withdrawn entirely by such rating agency if, in its
judgment, circumstances so warrant. A revision or withdrawal of such rating
may have an adverse effect on the market price of the Offered Certificates.
The rating of the Class I Certificates does not address the possibility that
rapid rates of principal prepayments, including prepayments resulting from a
sale of the Receivables upon an Insolvency Event with respect to the Class IC
Certificateholder, could result in a failure of the holders of the Class I
Certificates to fully recover their investment. A security rating is not a
recommendation to buy, sell or hold securities.
FORMATION OF THE TRUST
The Depositor will establish the Trust by selling and assigning the Trust
property, as described below, to the Trustee in exchange for the Offered
Certificates. The Depositor will retain the Class IC Certificate. CTL will be
responsible for servicing the Receivables pursuant to the Pooling and
Servicing Agreement and will be compensated for acting as the Servicer. See
"Description of the Transfer and Servicing Agreements--Servicing Compensation
and Payment of Expenses" in the Prospectus. To facilitate servicing and to
minimize administrative burden and expense, the Servicer will be appointed
custodian of the Receivables by the Trustee, but will not stamp the
Receivables to reflect the sale and assignment of the Receivables to the Trust
or make any notation of the Trust's lien on the certificates of title of the
Financed Vehicles. In the absence of such notation on the certificates of
title, the Trustee may not have perfected security interests in the Financed
Vehicles securing the Receivables. See "Certain Legal Aspects of the
Receivables" in the Prospectus. Under the terms of the Pooling and Servicing
Agreement, CTL may delegate its duties as Servicer and custodian; however, any
such delegation will not relieve CTL of its liability and responsibility with
respect to such duties.
The Depositor will establish, for the benefit of the Class A and Class I
Certificateholders and the Surety Bond Issuer, the Spread Account and will
obtain the Surety Bond. Withdrawals from the Spread Account and, only after
such withdrawals, draws on the Surety Bond will be made in accordance with the
Pooling and Servicing Agreement in the event that sufficient funds are not
available (after payment of the Monthly Servicing Fee) to distribute, in the
case of Class I Monthly Interest, Class A Monthly Interest and Monthly
Principal, up to the Surety Bond Amount. If the Spread Account is exhausted
and there is a default under the Surety Bond, the Trust will look only to the
Obligors on the Receivables and the proceeds from the repossession and sale of
S-9
<PAGE>
Financed Vehicles that secure Defaulted Receivables for distributions of
interest and principal on the Certificates. In such event, certain factors,
such as the Trustee's not having perfected security interests in some of the
Financed Vehicles, may affect the Trust's ability to realize on the collateral
securing the Receivables, and thus may reduce the proceeds to be distributed
to Certificateholders. See "The Offered Certificates--Accounts" herein and
"Certain Legal Aspects of the Receivables" in the Prospectus.
THE RECEIVABLES POOL
The Receivables were selected from CTL's portfolio for purchase by the
Depositor by several criteria, including that each Receivable: (i) has an
original number of payments of not more than payments and not less than
payments, (ii) has a remaining maturity of not more than months and
not less than months, (iii) provides for level monthly payments that fully
amortize the amount financed over the original term, and (iv) has a Contract
Rate (exclusive of prepaid finance charges) of not less than %. The weighted
average remaining maturity of the Receivables will be approximately months
as of the Cutoff Date.
Approximately % of the Receivables as of the cutoff date are simple
interest contracts which provide for equal monthly payments. Approximately %
of the aggregate principal balance of the Receivables as of the Cutoff Date
are Precomputed Receivables (as defined in the Prospectus) originated in
California. All of such Precomputed Receivables are Rule of 78's Receivables
(as defined in the Prospectus). Approximately % of the aggregate principal
balance of the Receivables as of the Cutoff Date represent financing of new
vehicles; the remainder of the Receivables represent financing of used
vehicles.
Receivables representing more than 10% of the aggregate principal balance of
the Receivables as of the Cutoff Date were originated in metropolitan areas in
each of the States of , and . The performance of the Receivables in
the aggregate could be adversely affected in particular by the development of
adverse economic conditions in such metropolitan areas.
COMPOSITION OF THE RECEIVABLES AS OF THE CUTOFF DATE
<TABLE>
<CAPTION>
AGGREGATE ORIGINAL WEIGHTED
NUMBER OF PRINCIPAL PRINCIPAL AVERAGE
RECEIVABLES BALANCE BALANCE RATE
----------- --------- --------- --------
<S> <C> <C> <C> <C>
New automobiles and light-duty
trucks.............................. $ $ . %
Used automobiles and light-duty
trucks..............................
New vans(1)..........................
Used vans(1).........................
Motorcycles..........................
All receivables......................
</TABLE>
- --------
(1) References to vans include minivans and van conversions.
<TABLE>
<CAPTION>
WEIGHTED WEIGHTED PERCENT OF
AVERAGE AVERAGE AGGREGATE
REMAINING ORIGINAL PRINCIPAL
TERM(2) TERM(2) BALANCE(3)
--------- -------- ----------
<S> <C> <C> <C>
New automobiles and light-duty trucks............. months months . %
Used automobiles and light-duty trucks............
New vans(1).......................................
Used vans(1)......................................
Motorcycles.......................................
All receivables...................................
</TABLE>
- --------
(1) References to vans include minivans and van conversions.
(2) Based on scheduled maturity and assuming no prepayments of the
receivables.
(3) Sum may not equal 100% due to rounding.
S-10
<PAGE>
GEOGRAPHIC DISTRIBUTION OF THE RECEIVABLES AS OF THE CUTOFF DATE
<TABLE>
<CAPTION>
PERCENT OF
AGGREGATE
PRINCIPAL
STATE(1)(2) BALANCE(3)
- ----------- ----------
<S> <C>
.............................................................
.............................................................
.............................................................
.............................................................
.............................................................
.............................................................
.............................................................
.............................................................
.............................................................
.............................................................
.............................................................
.............................................................
.............................................................
</TABLE>
- --------
(1) Based on address of the Dealer selling the related Financed Vehicle.
(2) $ of Receivables were originated by Dealers and purchased from such
Dealers by CTL.
(3) Sum may not equal to 100% due to rounding.
DISTRIBUTION OF RECEIVABLES VEHICLES BY MODEL YEAR
<TABLE>
<CAPTION>
PRINCIPAL
MODEL NUMBER OF PERCENTAGE BALANCE AS OF PERCENTAGE
YEAR RECEIVABLES OF TOTAL(1) CUT OFF DATE OF TOTAL(1)
- ----- ----------- ----------- ------------- -----------
<S> <C> <C> <C> <C>
19 .......................... . % $ . %
19 ..........................
19 ..........................
19 ..........................
19 ..........................
19 ..........................
19 ..........................
19 ..........................
19 ..........................
19 ..........................
19 ..........................
19 ..........................
19 ..........................
19 ..........................
19 ..........................
19 ..........................
19 ..........................
19 ..........................
Total.......................
</TABLE>
- --------
(1) Sum may not equal 100% due to rounding.
S-11
<PAGE>
DISTRIBUTION OF THE RECEIVABLES BY NOTE RATE AS OF THE CUTOFF DATE
<TABLE>
<CAPTION>
PERCENTAGE
AGGREGATE OF AVERAGE AGGREGATE
NUMBER OF PRINCIPAL PRINCIPAL PRINCIPAL
NOTE RATE RANGE RECEIVABLES BALANCE BALANCE BALANCE(1)
- --------------- ----------- --------- ---------- ----------
<S> <C> <C> <C> <C>
to %............................... $ . % $
to %...............................
to %...............................
to %...............................
to %...............................
to %...............................
to %...............................
to %...............................
to %...............................
to %...............................
to %...............................
to %...............................
to %...............................
to %...............................
to %...............................
to %...............................
to %...............................
to %...............................
to %...............................
Total.............................
</TABLE>
- --------
(1) Sum may not equal 100% due to rounding.
DISTRIBUTION OF THE RECEIVABLES BY REMAINING TERM AS OF THE CUTOFF DATE
<TABLE>
<CAPTION>
PERCENTAGE
REMAINING AGGREGATE AVERAGE OF AGGREGATE
SCHEDULED NUMBER OF PRINCIPAL PRINCIPAL PRINCIPAL
TERM RANGE RECEIVABLES BALANCE BALANCE BALANCE(1)
---------- ----------- --------- --------- ------------
<S> <C> <C> <C> <C>
0 to 6 months..................... $ . % $
7 to 12 months....................
13 to 24 months...................
25 to 36 months...................
37 to 48 months...................
49 to 60 months...................
61 to 66 months...................
67 to 84 months...................
Total...........................
</TABLE>
- --------
(1) Sum may not equal 100% due to rounding.
S-12
<PAGE>
DELINQUENCIES, REPOSSESSIONS AND NET LOSSES
Set forth below is certain information concerning the experience of CTL
pertaining to delinquencies, repossessions, and net losses on its prime fixed
rate retail automobile, light truck and van receivables serviced by CTL. There
can be no assurance that the delinquency, repossession, and net loss
experience on the Receivables will be comparable to that set forth below.
<TABLE>
<CAPTION>
AT SEPTEMBER 30, AT DECEMBER 31,
------------------------------------- --------------------------------------------------------
1996 1995 1995 1994 1993
------------------ ------------------ ------------------ ------------------ ------------------
NUMBER OF NUMBER OF NUMBER OF NUMBER OF NUMBER OF
RECEIVABLES AMOUNT RECEIVABLES AMOUNT RECEIVABLES AMOUNT RECEIVABLES AMOUNT RECEIVABLES AMOUNT
----------- ------ ----------- ------ ----------- ------ ----------- ------ ----------- ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Servicing portfolio.... $ $ $ $ $
Delinquencies
30-59 days............
60-89 days............
90 days or more.......
Total delinquencies....
--- ---- --- ---- --- ---- --- ---- --- ----
Total delinquencies as
a percent of servicing
portfolio..............
=== ==== === ==== === ==== === ==== === ====
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, YEAR ENDED DECEMBER 31,
------------------------------------- --------------------------------------------------------
1996 1995 1995 1994 1993
------------------ ------------------ ------------------ ------------------ ------------------
NUMBER OF NUMBER OF NUMBER OF NUMBER OF NUMBER OF
RECEIVABLES AMOUNT RECEIVABLES AMOUNT RECEIVABLES AMOUNT RECEIVABLES AMOUNT RECEIVABLES AMOUNT
----------- ------ ----------- ------ ----------- ------ ----------- ------ ----------- ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Average servicing
portfolio(2)........... $ $ $ $ $
Gross charge-offs......
--- ---- --- ---- --- ---- --- ---- --- ----
Recoveries.............
=== ==== === ==== === ==== === ==== === ====
Gross charge-offs as a
percent of average
servicing portfolio ...
Net losses.............
Recoveries as a percent
of gross charge-offs... % % % % %
Net losses as a
percentage of average
servicing portfolio.... % % % % %
</TABLE>
- ----
(1) There is generally no recourse to Dealers under any of the receivables in
the portfolio serviced by CTL, except to the extent of representations and
warranties made by Dealers in connection with such receivables.
(2) Equals the monthly arithmetic average.
(3) Variation in the size of the portfolio serviced by CTL will affect the
percentages in "Gross Charge-Offs as a Percentage of Average Servicing
Portfolio" and "Net Losses as a Percentage of Average Servicing
Portfolio."
S-13
<PAGE>
[DISCUSSION TO COME FOR EACH ISSUANCE]
YIELD AND PREPAYMENT CONSIDERATIONS
GENERAL
Monthly Interest (as defined herein) on the Receivables will be distributed
to Certificateholders on each Distribution Date to the extent of the Pass-
Through Rate applied to the Certificate Balance or Notional Principal Amount,
as applicable, as of the preceding Distribution Date or the Closing Date, as
applicable (after giving effect to distributions of principal on such
preceding Distribution Date). See "The Offered Certificates--Distributions on
the Offered Certificates" herein. In the event of a full or partial prepayment
on a Receivable, Certificateholders will receive interest for the full month
of such prepayment either through the distribution of interest paid on other
Receivables or withdrawal from the Spread Account.
Although the Receivables will have different Contract Rates, each
Receivable's Contract Rate generally will exceed the sum of (a) the Class A
Pass-Through Rate (b) the per annum rate used to calculate the Surety Bond Fee
(c) the Class I Pass-Through Rate and (d) the per annum rate used to calculate
the Servicing Fee. The Contract Rate on a small percentage of the Receivables,
however, will be less than the foregoing sum. Disproportionate rates of
prepayments between Receivables with higher and lower Contract Rates could
affect the ability of the Trust to distribute Monthly Interest to
Certificateholders.
The effective yield to Certificateholders will be below the yield otherwise
produced by the Pass-Through Rate because the distribution of Monthly
Principal and Monthly Interest in respect of any given month will not be made
until the related Distribution Date, which will not be earlier than the eighth
day of the following month.
THE CLASS I CERTIFICATES
The Class I Certificates are interest only certificates. Although the
planned amortization feature of the Class I Certificates is intended to reduce
the uncertainty of prepayments with respect to the Class I Certificates, if
the Receivables prepay sufficiently quickly, the Notional Principal Amount of
the Class I Certificates may be reduced more quickly than provided in the
Planned Notional Principal Amount Schedule, thereby reducing the yield to the
holders of the Class I Certificates. The yield to maturity on the Class I
Certificates will therefore be very sensitive to the rate of prepayments,
including voluntary prepayments, prepayments due to liquidations, repurchases
and losses and prepayments resulting from any sale of the Receivables upon an
Insolvency Event relating to the Class IC Certificateholder. Prospective
investors should fully consider the associated risks, including the risk that
a rapid rate of prepayments could result in the failure of investors in the
Class I Certificates to recoup their initial investment. See "Risk Factors"
and "The Offered Certificates--The Class I Certificates--Calculation of
Notional Principal Amount", "--Termination Upon Insolvency Event of the Class
IC Certificateholder" and "--Class I Yield Considerations".
THE DEPOSITOR AND CTL
CTL currently acquires loans from over manufacturer franchised
automobile dealerships and used car dealers in eight states. CTL is a
California industrial loan company, formed in 1959. In addition to the
indirect automobile finance business, CTL underwrites and purchases
residential real estate loans and commercial equipment leases. For the fiscal
years ended December 31, 1995, 1994 and 1993 and for the nine months ended
September 30, 1996, CTL acquired automobile loans aggregating $ million,
$156.2 million and $142.6 million and $ million, respectively. Of the $
million of loans in the automobile servicing portfolio of CTL (consisting of
the principal balance of loans held for sale) at September 30, 1996,
approximately % represented loans on used cars and approximately %
represented loans on new cars. CTL began to offer its motor vehicle loan
products to an increased number of selected used car dealerships in 1994. In
years prior, the amount of Receivables secured by used cars was immaterial.
S-14
<PAGE>
Additional information regarding CTL and the Depositor is set forth under
"California Thrift & Loan and Affiliates" in the Prospectus.
THE SURETY BOND ISSUER
[INFORMATION TO BE PROVIDED BY SURETY BOND ISSUER]
S-15
<PAGE>
THE OFFERED CERTIFICATES
The Offered Certificates will be issued pursuant to the Pooling and
Servicing Agreement. Copies of the Pooling and Servicing Agreement (without
exhibits) may be obtained by Certificateholders upon request in writing to the
Servicer at the address set forth herein under "Reports to
Certificateholders". Citations to the relevant sections of the Pooling and
Servicing Agreement appear below in parentheses. The following summary does
not purport to be complete and is subject to and qualified in its entirety by
reference to the Pooling and Servicing Agreement.
DISTRIBUTIONS
In general, it is intended that the Trustee distribute to the Class A
Certificateholders on each Distribution Date beginning , 199 , the
aggregate principal payments, including full and partial prepayments (except
certain prepayments in respect of Precomputed Receivables as described below
under "--Accounts") received on the Receivables during the related Collection
Period, plus a full month's interest at the Class A Pass-Through Rate. It is
also intended that the Trustee distribute to the Class I Certificateholders,
on each Distribution Date beginning on , 199 and continuing until the
Distribution Date on which the Class I Notional Principal Amount is reduced to
zero, a full month's interest at the Class I Pass-Through Rate on the Class I
Notional Principal Amount. (Section 9.04.) See "--Distributions on the Offered
Certificates". Interest to Certificateholders may be provided by a payment
made by or on behalf of the Obligor, by an Advance made by the Servicer to
cover interest due on a defaulted Receivable or by a withdrawal from the
Spread Account. If such interest represents Class A or Class I Monthly
Interest it may be provided by a draw on the Surety Bond if there are not
sufficient funds (after payment of the Monthly Servicing Fee and after giving
effect to any withdrawals from the Spread Account for the benefit of the Class
A and Class I Certificateholders) to pay Class I Monthly Interest, Class A
Monthly Interest and Monthly Principal. Draws on the Surety Bond to pay Class
A and Class I Monthly Interest and Monthly Principal will be limited to the
Surety Bond Amount. See "--Sale and Assignment of Receivables" and "--
Accounts" herein.
THE CLASS I CERTIFICATES--CALCULATION OF NOTIONAL PRINCIPAL AMOUNT
The Class I Certificates are interest-only planned amortization securities.
The Class I Certificates are entitled to receive interest at the Class I Pass-
Through Rate on the Notional Principal Amount of the Class I Certificates,
initially $ . The planned amortization feature is intended to reduce the
uncertainty to investors in the Class I Certificates with respect to
prepayments because the Class I Certificates will receive interest based on
their Notional Principal Amount on a principal paydown schedule rather than on
the reduction in the actual Certificate Balance as a result of principal
payments and prepayments, as described below. Solely for the purpose of
calculating the amount payable with respect to the Class I Certificates, the
Certificate Balance will be divided into two principal components, the "PAC
Component" and the "Companion Component". The Notional Principal Amount will
be equal to the PAC Component, originally $ . The sum of the PAC Component
and the Companion Component will at all times equal the then aggregate unpaid
Certificate Balance.
The Agreement establishes a schedule (the "Planned Notional Principal Amount
Schedule") pursuant to which principal will be allocated to the PAC Component
and the Companion Component, as described below. As the PAC Component is
reduced, the Notional Principal Amount of the Class I Certificates, and so
payments to the holders of the Class I Certificates, will also be reduced.
On each Distribution Date, the Monthly Principal will be allocated first to
the PAC Component up to the amount necessary to reduce the PAC Component to
its Planned Notional Principal Amount for such Distribution Date, as set forth
in the Planned Notional Principal Amount Schedule, second, to the Companion
Component until the balance thereof is reduced to zero and third, to the PAC
Component, without regard to the Planned Notional Principal Amount for such
Distribution Date. The foregoing allocations will be made solely for purposes
of calculating the Notional Principal Amount of the Class I Certificates and
correspondingly, the amount of interest payable with respect to the Class I
Certificates. The Class I Certificates are not entitled to receive any
principal payments. The foregoing calculations will not affect distributions
of principal with respect to the Class A Certificates.
S-16
<PAGE>
PLANNED NOTIONAL PRINCIPAL AMOUNT SCHEDULE
<TABLE>
<CAPTION>
PLANNED NOTIONAL
DISTRIBUTION DATE PRINCIPAL AMOUNT
----------------- ----------------
<S> <C>
[Initial]...................................................
.........................................................
.........................................................
.........................................................
.........................................................
.........................................................
.........................................................
.........................................................
.........................................................
.........................................................
</TABLE>
The Class I Certificates will not be entitled to any distributions after the
Notional Principal Amount of the Class I Certificates has been reduced to
zero.
CLASS I YIELD CONSIDERATIONS
Although the planned amortization feature of the Class I Certificates is
intended to reduce the uncertainty relating to prepayments of the Receivables
with respect to the Class I Certificates, the yield to maturity of the Class I
Certificates will remain extremely sensitive to the prepayment experience of
the Receivables, including voluntary prepayments, prepayments due to
liquidations, repurchases and losses and prepayments resulting from any sale
of the Receivables upon an Insolvency Event relating to the Class IC
Certificateholder. Prospective investors should fully consider the associated
risks, including the risk that such investors may not fully recover their
initial investment. In particular, investors in the Class I Certificates
should note that they will not be entitled to any distributions after the
Class I Notional Principal Amount has been reduced to zero, and that
Receivables may be repurchased due to breaches of representations. See also
"--Termination Upon Insolvency Event of the Class IC Certificateholder" and
"Risk Factors" herein.
The following table illustrates the significant effect that prepayments on
the Receivables have upon the yield to maturity of the Class I Certificates.
The table shows the approximate hypothetical pre-tax yields to maturity of the
Class I Certificates, stated on a corporate bond equivalent basis, under
different prepayment assumptions based on the assumed purchase price and the
ABS prepayment model described below. The following table also assumes that
the Receivables have been aggregated into hypothetical pools having the
following characteristics and that the level scheduled monthly payment for
each of the four pools (which is based on its principal balance, weighted
average Contract Rate and weighted average remaining term as of the Cutoff
Date and its weighted average original term) will be such that such pool will
be fully amortized by the end of its weighted average remaining term.
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
REMAINING TERM TO ORIGINAL TERM
CUTOFF DATE WEIGHTED WEIGHTED AVERAGE MATURITY TO MATURITY
POOL PRINCIPAL BALANCE NOTE RATE (IN MONTHS) (IN MONTHS)
- ---- ----------- -------- ---------------- ----------------- -------------
<S> <C> <C> <C> <C> <C>
1........ $ . %
2........
3........
4........
</TABLE>
For purposes of the table, it is also assumed that (i) the purchase price of
the Class I Certificates is as set forth below, (ii) the Receivables have the
characteristics set forth under "--The Class I Certificates--Calculation of
Notional Principal Amount" above, (iii) the Receivables prepay monthly at the
specified percentages of ABS as set forth in the table below, (iv) prepayments
representing prepayments in full of individual Receivables are
S-17
<PAGE>
received on the last day of the month and include a full month's interest
thereon, (v) the Closing Date for the Offered Certificates is , 199 ,
(vi) distributions on the Offered Certificates are made, in cash, on the
eighth day of each month, commencing in , 1996, (vii) no defaults or
delinquencies in the payment of the Receivables are experienced, and (viii) no
Receivable is repurchased for breach of representation and warranty or
otherwise.
SENSITIVITY OF THE CLASS I CERTIFICATES TO PREPAYMENTS
<TABLE>
<CAPTION>
1.0% 1.6% 1.8% 2.5% 3.0%
PRICE(1) ABS ABS ABS ABS ABS
- -------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
..................................................
</TABLE>
- --------
(1) Expressed as a percentage of the original Notional Principal Amount.
Based on the assumptions described above and assuming a purchase price of %
at approximately % ABS, the pre-tax yield to maturity of the Class I
Certificates would be approximately %.
It is highly unlikely that the Receivables will prepay at a constant rate
until maturity or that all of the Receivables will prepay at the same rate.
The foregoing table assumes that each Receivable bears interest at its
specified Contract Rate, has the same remaining amortization term, and prepays
at the same rate. In fact, receivables will prepay at different rates and have
different terms.
The yields set forth in the preceding table were calculated by determining
the monthly discount rates which, when applied to the assumed stream of cash
flows to be paid on the Class I Certificates, would cause the discounted
present value of such assumed cash flows to equal the assumed purchase price
of such Class I Certificates and by converting such monthly rates to corporate
bond equivalent rates. Such calculations do not take into account variations
that may occur in the interest rates at which investors may be able to
reinvest funds received by them as distributions on the Class I Certificates
and consequently do not purport to reflect the return on any investment in the
Class I Certificates when such reinvestment rates are considered.
The Receivables will not necessarily have the characteristics assumed above,
and there can be no assurance that (i) the Receivables will prepay at any of
the rates shown in the table or at any other particular rate or will prepay
proportionately, (ii) the pre-tax yield on the Class I Certificates will
correspond to any of the pre-tax yields shown above or (iii) the aggregate
purchase price of the Class I Certificates will be equal to the purchase price
assumed. Because the Receivables will include Receivables that have remaining
terms to stated maturity shorter or longer than those assumed and Contract
Rates higher or lower than those assumed, the pre-tax yield on the Class I
Certificates may differ from those set forth above, even if all of the
Receivables prepay at the indicated constant prepayment rates.
As used herein, "ABS" refers to a prepayment model which assumes a constant
percentage of the original number of contracts in a pool prepay each month.
ABS does not purport to be either an historical description of the prepayment
experience of any pool of receivables or a prediction of the anticipated rate
of prepayments of any pool of receivables, including the Receivables.
SALE AND ASSIGNMENT OF RECEIVABLES
Certain information with respect to the conveyance of the Receivables (i)
from CTL to the Depositor pursuant to the Purchase Agreement dated as of
, 199 , and (ii) from the Depositor to the Trust pursuant to the Pooling
and Servicing Agreement is set forth under "The Transfer and Servicing
Agreements--Sale and Assignment of the Receivables" in the Prospectus.
S-18
<PAGE>
ACCOUNTS
In addition to the Certificate Account, the property of the Trust will
include the Spread Account and the Payahead Account.
Spread Account. On the Closing Date, the Depositor will establish the Spread
Account. Thereafter, the amount held in the Spread Account will be increased
up to the Required Spread Amount by the deposit thereto of payments on the
Receivables not utilized to make payments to the Certificateholders (other
than the Class IC Certificateholder), the Surety Bond Issuer or the Servicer
on any Distribution Date. While it is intended that the Spread Account will
grow over time to equal the Required Spread Amount through monthly deposits of
excess collections on the Receivables, if any, there can be no assurance that
such growth will actually occur. The Spread Account will be established for
the benefit of the Class A and Class I Certificateholders and the Surety Bond
Issuer. On each Distribution Date, any amounts on deposit in the Spread
Account after the payment of any amounts owed to the Surety Bond Issuer in
excess of the Required Spread Amount will be withdrawn from the Spread Account
and distributed to the Class IC Certificateholder.
Under the terms of the Pooling and Servicing Agreement, the Trustee will
withdraw funds from the Spread Account and transfer them to the Certificate
Account for any deficiency of Monthly Interest or Monthly Principal as further
described below under "--Distributions on the Offered Certificates", to the
extent available, prior to making any draw on the Surety Bond.
In the event that the balance of the Spread Account is reduced to zero and
there is a default under the Surety Bond on any Distribution Date, the Trust
will depend solely on current distributions on the Receivables to make
distributions of principal and interest on the Certificates. Any reduction in
the principal balance of the Receivables due to losses on the Receivables will
also result in a reduction of the Notional Principal Amount of the Class I
Certificates. In addition, because the market value of motor vehicles
generally declines with age and because of difficulties that may be
encountered in enforcing motor vehicle contracts as described in the
Prospectus under "Certain Legal Aspects of the Receivables," the Servicer may
not recover the entire amount due on such Receivables in the event of a
repossession and resale of a Financed Vehicle securing a Receivable in
default. In such event, the Certificateholders may suffer a corresponding
loss. Any such losses would be borne pro rata by the Class A
Certificateholders and Class I Certificateholders.
Payahead Account. The Servicer will establish an additional account (the
"Payahead Account"), in the name of the Trustee and for the benefit of
Obligors on the Receivables, into which, to the extent required by the
Agreement, early payments by or on behalf of Obligors on Precomputed
Receivables will be deposited until such time as the payment becomes due.
Until such time as payments are transferred from the Payahead Account to the
Certificate Account, they will not constitute collected interest or collected
principal and will not be available for distribution to Certificateholders.
The Payahead Account will initially be maintained with the Trustee. Interest
earned on the balance in the Payahead Account will be remitted to the Servicer
monthly. Collections on a Precomputed Receivable made during a Collection
Period shall be applied first to any overdue scheduled payment on such
Receivable, then to the scheduled payment on such Receivable due in such
Collection Period. If any collections remaining after the scheduled payment is
made are insufficient to prepay the Precomputed Receivable in full, then
generally such remaining collections shall be transferred to and kept in the
Payahead Account until such later Collection Period as the collections may be
retransferred to the Certificate Account and applied either to a later
scheduled payment or to prepay such Receivable in full.
ADVANCES
With respect to each Receivable delinquent more than 30 days at the end of a
Collection Period, the Servicer will make an Advance in an amount equal to 30
days of interest, but only to the extent that the Servicer in its sole
discretion, expects to recoup the Advance from subsequent collections on the
Receivable. The Servicer will deposit the Advance in the Certificate Account
on or before the fifth calendar day of the month following the Collection
Period. The Servicer will recoup its Advance from subsequent payments by or on
behalf of the respective Obligor, from insurance proceeds or, upon the
Servicer's determination that reimbursement from the preceding sources is
unlikely, will recoup its Advance from any collections made on other
Receivables. (Section 9.05.)
S-19
<PAGE>
DISTRIBUTIONS ON THE CLASS IC CERTIFICATE
The Class IC Certificate will be initially issued to the Depositor and will
entitle it to receive monthly all funds held in the Spread Account in excess
of the Required Spread Amount after payment of all amounts owed to the Surety
Bond Issuer. Upon termination of the Trust the Class IC Certificateholder is
entitled to receive any amounts remaining in the Spread Account (only after
all required payments to the Surety Bond Issuer are made) after the payment of
expenses and distributions to Certificateholders. See "--Accounts" above.
DISTRIBUTIONS ON THE OFFERED CERTIFICATES
The Servicer will deposit in the Certificate Account the amount of payments
on all Receivables received with respect to the preceding Collection Period.
All such payments on the Simple Interest Receivables, the scheduled payments
on Precomputed Receivables, plus the net amount to be transferred from the
Payahead Account for the related Distribution Date, all Advances for such
Collection Period, and the Purchase Amount for all Receivables that became
Purchased Receivables during the preceding Collection Period, will be
available for distribution pursuant to the terms of the Pooling and Servicing
Agreement on the next succeeding Distribution Date ("Available Funds") and
will determine the amount of funds necessary to make distributions of Monthly
Principal and Monthly Interest to the Certificateholders and the Monthly
Servicing Fee to the Servicer. If there is a deficiency with respect to Class
A or Class I Monthly Interest or Monthly Principal on any Distribution Date
after giving effect to payments of the Monthly Servicing Fee on such
Distribution Date, the Servicer will withdraw amounts, to the extent
available, from the Spread Account in the amount of such deficiency and notify
the Trustee of any remaining deficiency, whereupon the Trustee will draw on
the Surety Bond to pay Class A and Class I Monthly Interest and Monthly
Principal on any Distribution Date, up to the Surety Bond Amount. Moreover, if
the Available Funds for a Distribution Date are insufficient to pay current
and past due Surety Bond Fees, and other amounts owed to the Surety Bond
Issuer, pursuant to the Insurance Agreement, plus accrued interest thereon, to
the Surety Bond Issuer, the Servicer will notify the Trustee of such
deficiency, and the amount, if any, then on deposit in the Spread Account
(after giving effect to any withdrawal to satisfy a deficiency described in
the two preceding sentences) will be available to cover such deficiency.
If acceptable to each Rating Agency without a reduction in the rating of any
class of Offered Certificates, the Servicing Fee due to the Servicer in
respect of each Collection Period will be distributed to the Servicer during
such Collection Period from Collections for such Collection Period.
On each such Distribution Date, the Trustee will apply or cause to be
applied the Available Funds (plus, to the extent required for payment of
Monthly Interest or Monthly Principal any amounts withdrawn from the Spread
Account or drawn on the Surety Bond, as applicable) to make the following
payments in the following priority:
(a) the aggregate amount of outstanding Advances on all Receivables (x)
that became Defaulted Receivables during the prior Collection Period
and (y) that the Servicer determines to be unrecoverable, to the
Servicer;
(b) the Servicing Fee, including any overdue Servicing Fee, to the
Servicer, to the extent not previously distributed to the Servicer;
(c) pro rata, (y) Monthly Principal and Class A Monthly Interest, including
any overdue Monthly Principal and Class A Monthly Interest, to the
Class A Certificateholders and (z) Class I Monthly Interest, including
any overdue Class I Monthly Interest, to the Class I
Certificateholders;
(d) the Surety Bond Fee to the Surety Bond Issuer;
(e) the amount of recoveries of Advances (to the extent such recoveries
have not previously been reimbursed to the Servicer pursuant to clause
(a) above), to the Servicer;
(f) the amount of Liquidation Proceeds on Purchased Receivables purchased
by the Servicer, to the Servicer;
S-20
<PAGE>
(g) the amount of Liquidation Proceeds on Purchased Receivables repurchased
by the Depositor, to the Depositor;
(h) the aggregate amount of any unreimbursed draws on the Surety Bond
payable to the Surety Bond Issuer, under the Insurance Agreement, for
Class A Monthly Interest, Class I Monthly Interest and Monthly
Principal, plus accrued interest thereon and any other amounts owing to
the Surety Bond Issuer under the Insurance Agreement; and
(i) the balance into the Spread Account.
After all distributions pursuant to clauses (a) through (i) above have been
made for each Distribution Date, the amount of funds remaining in the Spread
Account on such date, if any, in excess of the Required Spread Amount, will be
distributed by the Trustee to the Class IC Certificateholder. Any amounts so
distributed to the Class IC Certificateholder will no longer be property of
the Trust and Certificateholders will have no rights with respect thereto.
If on any Distribution Date there are not sufficient Available Funds to pay
the distribution required by (c) above, the Available Funds distributable
thereunder shall be distributed proportionately on the basis of the ratio of
the required distribution due each of the Class A and Class I
Certificateholders, respectively, to the sum of the distributions required by
(c) to the Class A Certificateholders and the Class I Certificateholders. The
amount so distributed to the Class A Certificateholders hereunder shall be
allocated first to Class A Monthly Interest, and second to Monthly Principal.
"Monthly Interest" for any Distribution Date will equal the sum of the Class
A Monthly Interest and the Class I Monthly Interest.
"Class A Monthly Interest" for any Distribution Date will equal (i) for the
first Distribution Date, the product of the following: (one-twelfth of the
Class A Pass-Through Rate) multiplied by (the number of days remaining in the
month of the Closing Date (assuming a 30 day month) from the Closing Date
divided by 30) multiplied by (the Certificate Balance at the Closing Date) and
(ii) with respect to each subsequent Distribution Date, the product of one-
twelfth of the Class A Pass-Through Rate and the Certificate Balance on the
preceding Distribution Date (after giving effect to any distribution of
Monthly Principal required to be made on such preceding Distribution Date).
"Monthly Principal" for any Distribution Date will equal the amount
necessary to reduce the Certificate Balance to the aggregate unpaid principal
balance of the Receivables on the last day of the preceding Collection Period;
provided, however, that Monthly Principal on the Final Scheduled Distribution
Date will equal the Certificate Balance on such date. For the purpose of
determining Monthly Principal, the unpaid principal balance of a Defaulted
Receivable or a Purchased Receivable is deemed to be zero on and after the
last day of the Collection Period in which such Receivable became a Defaulted
Receivable or a Purchased Receivable.
"Class I Monthly Interest" for any Distribution Date will equal (i) for the
first Distribution Date, the product of the following: (one-twelfth of the
Class I Pass-Through Rate) multiplied by (the number of days remaining in the
month of the Closing Date (assuming a 30 day month) from the Closing Date
divided by 30) multiplied by (the Class I Notional Principal Amount at the
Closing Date) and (ii) with respect to each subsequent Distribution Date, the
product of one-twelfth of the Class I Pass-Through Rate and the Notional
Principal Amount on the preceding Distribution Date (after giving effect to
any application of Monthly Principal on such preceding Distribution Date).
"Surety Bond Fee" for any Distribution Date will equal one-twelfth of the
product of the Surety Bond per annum fee rate set forth in the Insurance
Agreement and the Certificate Balance calculated as of the first day of the
Collection Period to which such Distribution Date relates and payable monthly
in arrears.
"Defaulted Receivable" will mean, for any Collection Period, a Receivable as
to which any of the following has occurred: (i) the Receivable is 120 days or
more delinquent as of the last day of such Collection
S-21
<PAGE>
Period; (ii) the Financed Vehicle that secures the Receivable has been
repossessed; or (iii) the Receivable has been determined to be uncollectable
in accordance with the Servicer's customary practices on or prior to the last
day of such Collection Period; provided, however, that any Receivable which
the Depositor or the Servicer is obligated to repurchase or purchase pursuant
to the Pooling and Servicing Agreement shall be deemed not to be a Defaulted
Receivable.
As an administrative convenience, the Servicer will be permitted to make the
deposit of Collections and aggregate Advances and Purchase Amounts for or with
respect to the Collection Period, net of distributions to be made to the
Servicer or Depositor with respect to the Collection Period. The Servicer,
however, will account to the Trustee and to the Certificateholders as if all
deposits and distributions were made individually. (Section 9.06.)
The following chart sets forth an example of the application of the
foregoing provisions to a monthly distribution:
.... Collection Period. The Servicer receives monthly payments,
prepayments, and other proceeds in respect of the Receivables and
deposits them in the Certificate Account. The Servicer may deduct the
Servicing Fee from such deposits.
.... Record Date. Distributions on the Distribution Date are made to
Certificateholders of record at the close of business on this date.
.... On the fifth calendar day after the end of the Collection Period (the
""Determination Date'') the Servicer notifies the Trustee of the
amounts to be distributed on the Distribution Date and of any
deficiencies.
.... On the third business day after the Determination Date (the
""Distribution Date'') the Trustee withdraws funds from the Spread
Account and/or draws on the Surety Bond, if necessary, to pay Monthly
Principal and Monthly Interest to Certificateholders as described
herein. The Trustee distributes to Certificateholders amounts payable
in respect of the Offered Certificates, and pays the Servicing Fee to
the extent not previously paid, the Surety Bond Fee and any amounts
owing to the Surety Bond Issuer.
THE SURETY BOND
On or before the Closing Date, the Depositor and CTL, in its individual
capacity and as Servicer, and the Surety Bond Issuer will enter into an
Insurance and Reimbursement Agreement (the "Insurance Agreement") pursuant to
which the Surety Bond Issuer will issue the Surety Bond. Under the terms of
the Pooling and Servicing Agreement, after withdrawal of any amounts in the
Spread Account with respect to a Distribution Date to pay a deficiency in
Class A or Class I Monthly Interest or Monthly Principal, the Trustee will be
authorized to draw on the Surety Bond for the benefit of the Class A and Class
I Certificateholders and credit the Certificate Account for such draws as
described under "Description of the Offered Certificates--Distributions in
Offered Certificates." The maximum amount that may be drawn under the Surety
Bond on any Distribution Date is limited to the Surety Bond Amount for such
Distribution Date. The Surety Bond Amount, with respect to any Distribution
Date, shall equal (x) the sum of (A) the lesser of (i) the Certificate Balance
(after giving effect to any distribution of Available Funds and any funds
withdrawn from the Spread Account to pay Monthly Principal on such
Distribution Date) and (ii) the Net Principal Surety Bond Amount, plus (B)
Class A Monthly Interest, plus (C) Class I Monthly Interest, plus (D) the
Monthly Servicing Fee; less (y) all amounts on deposit in the Spread Account
on such Distribution Date. "Net Principal Surety Bond Amount" means the
Certificate Balance as of the first Distribution Date minus all amounts
previously drawn on the Surety Bond or from the Spread Account with respect to
Monthly Principal.
The Surety Bond Issuer will be entitled to receive the Surety Bond Fee and
certain other amounts on each Distribution Date as described under
"Distributions on Certificates" and to receive amounts on deposit in the
Spread Account as described above under "The Spread Account." The Surety Bond
Issuer will not be entitled to reimbursement of any amounts from the
Certificateholders. The Surety Bond Issuer's obligation under the Surety Bond
is irrevocable. The Surety Bond Issuer will have no obligation other than its
obligations under the Surety Bond to the Certificateholders or the Trustee.
S-22
<PAGE>
In the event that the balance in the Spread Account is reduced to zero and
there has been a default under the Surety Bond, the Trust may depend solely on
current distributions on the Receivables to make distributions of principal
and interest on the Offered Certificates. Any reduction in the principal
balance of the Receivables due to losses on the Receivables may also result in
a reduction of the Notional Principal Amount of the Class I Certificates. In
addition, because the market value of motor vehicles generally declines with
age and because of difficulties that may be encountered in enforcing motor
vehicle contracts as described in the Prospectus under "Certain Legal Aspects
of the Receivables," the Servicer may not recover the entire amount due on
such Receivables in the event of a repossession and resale of a Financed
Vehicle securing a Receivable in default. In such event, the
Certificateholders may suffer a corresponding loss. Any such losses would be
borne pro rata by the Class A Certificateholders and Class I
Certificateholders.
UNLIMITED LIABILITY OF THE CLASS IC CERTIFICATEHOLDER
The Class IC Certificateholder has agreed to assume unlimited personal
liability to any creditor of the Trust (other than the Trustee and the
Certificateholders in certain circumstances). Third party creditors may rely
on such agreement as third-party beneficiaries. (Section 7.08.)
TERMINATION UPON INSOLVENCY EVENT OF THE CLASS IC CERTIFICATEHOLDER
If an Insolvency Event (as defined below) occurs with respect to the Class
IC Certificateholder, the Class IC Certificateholder will promptly give notice
to the Trustee of such event. Under the terms of the Pooling and Servicing
Agreement, within 15 days of such notice, the Trustee shall (i) publish a
notice of such Insolvency Event stating that the Trustee intends to sell,
dispose of, or otherwise liquidate the Receivables in a commercially
reasonable manner and (ii) send written notice to the Certificateholders
requesting instructions from such holders. Unless instructed otherwise within
a specified period by holders of more than 51% of the Certificate Balance and
holders of more than 51% of the Class I Notional Principal Amount or unless
otherwise prohibited by applicable law, the Trustee will sell, dispose of or
otherwise liquidate the Receivables in a commercially reasonable manner and on
commercially reasonable terms. The proceeds from the sale, disposition or
liquidation of the Receivables will be distributed to Class A and Class I
Certificateholders each in respect of their remaining capital investment, and
the Trustee will then distribute amounts owing the Surety Bond Issuer and the
Class IC Certificateholder and proceed to wind up and terminate the Trust. If
such proceeds are not sufficient to pay any accrued and unpaid Class A Monthly
Interest, Monthly Principal, the remaining Pool Balance and any accrued but
unpaid Class I Monthly Interest and the Surety Bond Issuer in full, the Spread
Account may not be available to cover such deficiency, and the Offered
Certificateholders could incur a loss. The Surety Bond is not available to pay
such shortfall. Furthermore, any distributions of such proceeds will have the
same effect as a prepayment of the Receivables and would affect the yield on
the Class A Certificates and could significantly affect the yield on the Class
I Certificates. (Section 16.03.)
An "Insolvency Event" means, with respect to the Class IC Certificateholder,
(i) the entry of a decree or order by a court or agency or supervisory
authority having jurisdiction in the premises for the appointment of a trustee
in bankruptcy for the Class IC Certificateholder in any insolvency,
readjustment of debt, marshalling of assets and liabilities, or similar
proceedings, or for the winding up or liquidation of the Class IC
Certificateholder's affairs, and the continuance of any such decree or order
unstayed and in effect for a period of 60 consecutive days; or (ii) the
consent by the Class IC Certificateholder to the appointment of a trustee in
bankruptcy in any insolvency, readjustment of debt, marshalling of assets and
liabilities, or similar proceedings of or relating to the Class IC
Certificateholder or of or relating to substantially all of its property; or
(iii) the Class IC Certificateholder admits in writing its inability to pay
its debts generally as they become due, files a petition to take advantage of
any applicable insolvency or reorganization statute, makes an assignment for
the benefit of its creditors, or voluntarily suspends payment of its
obligations. The Depositor, the initial Class IC Certificateholder, is a
special purpose corporation the activities of which are circumscribed by its
charter with a view to reducing any risk of its bankruptcy.
In the event of a liquidation of the Trust due to an Insolvency Event with
respect to the Class IC Certificateholder, the Surety Bonds will not be
available to pay a deficiency if the liquidation proceeds are less than the
Certificate Balance of the Receivables at the time of such liquidation.
S-23
<PAGE>
RIGHTS OF THE SURETY BOND ISSUER UPON EVENTS OF DEFAULT, AMENDMENT OR WAIVER
Upon the occurrence of an Event of Default, the Surety Bond Issuer, or the
Trustee upon the consent of the Surety Bond Issuer, will be entitled to
appoint a successor Servicer. In addition to the events constituting an Event
of Default as described in the Prospectus, the Pooling and Servicing Agreement
will also permit the Surety Bond Issuer to appoint a successor Servicer and to
redirect payments made under the Receivables to the Trustee upon the
occurrence of certain additional events involving a failure of performance by
the Servicer or a material misrepresentation made by the Servicer under the
Insurance Agreement.
The Pooling and Servicing Agreement cannot be amended or any provisions
thereof waived without the consent of the Surety Bond Issuer if such amendment
or waiver would have a materially adverse effect upon the rights of the Surety
Bond Issuer.
ERISA CONSIDERATIONS
[SUBJECT TO THE CONSIDERATIONS SET FORTH UNDER "ERISA CONSIDERATIONS" IN THE
PROSPECTUS, THE CLASS A CERTIFICATES AND THE CLASS I CERTIFICATES MAY BE
ELIGIBLE FOR PURCHASE BY AN EMPLOYEE BENEFIT PLAN OR AN INDIVIDUAL RETIREMENT
ACCOUNT (A "PLAN") SUBJECT TO ERISA OR SECTION 4975 OF THE INTERNAL REVENUE
CODE OF 1986, AS AMENDED (THE "CODE"). A FIDUCIARY OF A PLAN MUST DETERMINE
THAT THE PURCHASE OF A CLASS A CERTIFICATE OR OF A CLASS I CERTIFICATES IS
CONSISTENT WITH ITS FIDUCIARY DUTIES UNDER ERISA AND DOES NOT RESULT IN A
NONEXEMPT PROHIBITED TRANSACTION AS DEFINED IN SECTION 406 OF ERISA OR SECTION
4975 OF THE CODE. FOR ADDITIONAL INFORMATION REGARDING TREATMENT OF THE CLASS
A CERTIFICATES AND THE CLASS I CERTIFICATES UNDER ERISA, SEE "ERISA
CONSIDERATIONS" IN THE PROSPECTUS.] [TO BE REVISED FOR EACH ISSUANCE]
UNDERWRITING
Under the terms and subject to the conditions set forth in the underwriting
agreement for the sale of the Offered Certificates, dated 199 , the
Depositor has agreed to sell and each of the underwriters named below (the
"Underwriters") severally agreed to purchase the principal amount of the
Offered Certificates set forth opposite its name below:
<TABLE>
<CAPTION>
NOTIONAL PRINCIPAL
-------------------------
PRINCIPAL
AMOUNT AMOUNT OF
OF CLASS A CLASS I
UNDERWRITERS CERTIFICATES CERTIFICATES
------------ ------------ ------------
<S> <C> <C>
............................................. $ $
.............................................
.............................................
.............................................
.............................................
</TABLE>
In the underwriting agreement, the Underwriters have agreed, subject to the
terms and conditions set forth therein, to purchase all the Offered
Certificates offered hereby if any of the Offered Certificates are purchased.
The Underwriters propose to offer part of the Offered Certificates directly
to the public at the prices set forth on the cover page hereof, and part to
certain dealers at a price that represents a concession not in excess of % of
the denominations of the Class A Certificates or % of the gross proceeds of
the Class I Certificates. The Underwriters may allow and such dealers may
reallow a concession not in excess of % of the denominations of the Class A
Certificates or % of the gross proceeds of the Class I Certificates to
certain other dealers.
The Depositor, Bay View and CTL have agreed to indemnify the Underwriters
against certain liabilities, including liabilities under the Securities Act.
S-24
<PAGE>
The Depositor has been advised by the Underwriters that the Underwriters
presently intend to make a market in the Offered Certificates, as permitted by
applicable laws and regulations. The Underwriters are not obligated, however,
to make a market in the Offered Certificates and any such market-making may be
discontinued at any time at the sole discretion of the Underwriters.
Accordingly, no assurance can be given as to the liquidity of, or trading
markets for, the Offered Certificates.
LEGAL OPINIONS
Certain legal matters relating to the Offered Certificates will be passed
upon for the Depositor by Silver, Freedman & Taff, L.L.P., Washington, D.C.,
and for the Underwriters by Cadwalader, Wickersham & Taft, New York, New York.
Certain federal income tax consequences with respect to the Offered
Certificates will be passed upon for the Depositor by Silver, Freedman & Taff,
L.L.P.
EXPERTS
[TO BE COMPLETED]
S-25
<PAGE>
INDEX OF PRINCIPAL TERMS
<TABLE>
<CAPTION>
TERM PAGE
- ---- ----
<S> <C>
ABS........................................................................
Bay View...................................................................
Available Funds............................................................
Certificates...............................................................
Certificate Balance........................................................
Class A Certificateholders.................................................
Class A Certificates.......................................................
Class A Monthly Interest...................................................
Class A Pass-Through Rate..................................................
Class I Certificateholders.................................................
Class I Certificates.......................................................
Class I Monthly Interest...................................................
Class I Pass-Through Rate..................................................
Class IC Certificate.......................................................
Class IC Certificateholder.................................................
Closing Date...............................................................
Code.......................................................................
Companion Component........................................................
CTL........................................................................
Cutoff Date................................................................
Defaulted Receivable.......................................................
Depositor..................................................................
Determination Date.........................................................
Distribution Date..........................................................
Duff & Phelps..............................................................
ERISA......................................................................
Final Scheduled Distribution Date..........................................
Holdings...................................................................
Insolvency Event...........................................................
Insurance Agreement........................................................
Moody's....................................................................
Monthly Interest...........................................................
Monthly Principal..........................................................
Monthly Servicing Fee......................................................
Net Principal Surety Bond Amount...........................................
Notional Principal Amount..................................................
Offered Certificates.......................................................
</TABLE>
S-26
<PAGE>
<TABLE>
<CAPTION>
TERM PAGE
- ---- ----
<S> <C>
Optional Sale..............................................................
Original Notional Principal Amount.........................................
PAC Component..............................................................
Payahead Account...........................................................
Planned Notional Principal Amount Schedule.................................
Plan.......................................................................
Pool Balance...............................................................
Pooling and Servicing Agreement............................................
Receivables................................................................
Record Date................................................................
Required Spread Amount.....................................................
Servicer...................................................................
Spread Account.............................................................
Standard & Poor's..........................................................
Surety Bond................................................................
Surety Bond Amount.........................................................
Surety Bond Fee............................................................
Surety Bond Issuer.........................................................
Trust......................................................................
Trustee....................................................................
Underwriters...............................................................
</TABLE>
S-27
<PAGE>
[SURETY BOND FINANCIAL INFORMATION]
S-28
<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 SUPPLEMENT AND THE ACCOMPANYING 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. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION DATED NOVEMBER , 1996
PROSPECTUS SUPPLEMENT TO PROSPECTUS
DATED , 1996
BAY VIEW 199 - AUTO TRUST
$ % CLASS A AUTOMOBILE RECEIVABLE PASS-THROUGH CERTIFICATES
$ % CLASS B AUTOMOBILE RECEIVABLE PASS-THROUGH CERTIFICATES
BAY VIEW SECURITIZATION CORPORATION
DEPOSITOR
CALIFORNIA THRIFT & LOAN
SERVICER
-----------
The Bay View 199 --Auto Trust (the "Trust") will be formed and will issue its
% Class A Automobile Receivable Pass-Through Certificates (the "Class A
Certificates") and the % Class B Automobile Receivable Pass-Through
Certificates (the "Class B Certificates" and, with the Class A Certificates,
the "Certificates") pursuant to a pooling and servicing agreement dated as of
, 199 (the "Pooling and Servicing Agreement") among Bay View Securitization
Corporation, as Depositor, California Thrift & Loan, as Servicer, and , as
Trustee.
Principal and interest will be distributed to holders of the Certificates on
the third business day after the fifth day of each month (each, a "Distribution
Date"), in the manner and to the extent described herein. The Class A
Certificates will evidence in the aggregate an undivided ownership interest in
approximately % of the Trust, and the Class B Certificates will evidence in
the aggregate an undivided ownership interest in approximately % of the Trust.
Principal and interest at the applicable Pass-Through Rate generally will be
distributed to Certificateholders on the day of each month, commencing ,
199 . The rights of the Class B Certificateholders to receive distributions are
subordinated to the rights of the Class A Certificateholders to the extent
described herein. The outstanding principal amount, if any, of the Certificates
will be due and payable on (the "Final Scheduled Distribution Date").
Prospective investors should consider, among other things, the information
set forth under "Risk Factors" on page S- of this Prospectus Supplement and
page of the Prospectus.
THE CERTIFICATES REPRESENT BENEFICIAL INTERESTS IN THE TRUST ONLY AND DO NOT
REPRESENT INTERESTS IN OR OBLIGATIONS OF BAY VIEW SECURITIZATION CORPORATION OR
ANY AFFILIATE THEREOF. NEITHER THE CERTIFICATES NOR THE RECEIVABLES ARE INSURED
OR GUARANTEED BY BAY VIEW SECURITIZATION CORPORATION, ANY OF ITS AFFILIATES OR
ANY GOVERNMENTAL AGENCY OR INSTRUMENTALITY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
UNDERWRITING
DISCOUNTS AND
PRICE TO PUBLIC COMMISSIONS PROCEEDS TO DEPOSITOR(1)
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Class A Certifi-
cate.................. % % %
- -------------------------------------------------------------------------------
Per Class B Certifi-
cate.................. % % %
- -------------------------------------------------------------------------------
Total................ $ $ $
</TABLE>
- --------------------------------------------------------------------------------
(1) Before deducting expenses, estimated to be $ .
The Certificates are offered, subject to prior sale, when, as and if accepted
by the Underwriters, and subject to approval of certain legal matters by
Cadwalader, Wickersham & Taft, counsel for the Underwriters. It is expected
that delivery of the Certificates in book-entry form will be made on or about
, 199 through the facilities of The Depository Trust Company, against
payment therefor in immediately available funds.
, 199
<PAGE>
The Certificates represent undivided interests in the Trust, the property of
which will include a pool of simple interest and precomputed interest
installment sale and installment loan contracts originated in various states
of the United States (the "Receivables"), security interests in the new and
used automobiles, light trucks and vans financed thereby and certain monies
due thereunder after , 199 (the "Cutoff Date"). The Trustee will also hold
monies on deposit in a Pre-Funding Account, which will be used to purchase
additional Receivables from the Depositor from time to time on or before ,
199 . The Trust may also draw on funds on deposit in a Yield Supplement
Account and a Cash Collateral Account, to the extent described herein, to meet
shortfalls in amounts due to Certificateholders on any Distribution Date. The
Yield Supplement Account and the Cash Collateral Account will be maintained
with the Trustee for the benefit of the Certificateholders, but will not be
part of the Trust.
THIS PROSPECTUS SUPPLEMENT DOES NOT CONTAIN COMPLETE INFORMATION ABOUT THE
OFFERING OF THE CERTIFICATES. ADDITIONAL INFORMATION IS CONTAINED IN THE
PROSPECTUS, AND PROSPECTIVE INVESTORS ARE URGED TO READ BOTH THIS PROSPECTUS
SUPPLEMENT AND THE PROSPECTUS IN FULL. SALES OF THE CERTIFICATES MAY NOT BE
CONSUMMATED UNLESS THE PURCHASER HAS RECEIVED BOTH THIS PROSPECTUS SUPPLEMENT
AND THE PROSPECTUS. THIS PROSPECTUS SUPPLEMENT CONTAINS INFORMATION THAT IS
SPECIFIC TO THE TRUST AND THE CERTIFICATES AND, TO THAT EXTENT, SUPPLEMENTS
AND REPLACES THE MORE GENERAL INFORMATION PROVIDED IN THE PROSPECTUS.
INFORMATION CONTAINED IN THIS PROSPECTUS SUPPLEMENT MAY ALSO REFLECT LEGAL,
ECONOMIC AND OTHER DEVELOPMENTS SINCE THE DATE OF THE PROSPECTUS. TO THE
EXTENT INFORMATION IN THIS PROSPECTUS SUPPLEMENT CONFLICTS WITH INFORMATION IN
THE PROSPECTUS, THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT SHALL CONTROL.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICE OF THE CERTIFICATES
AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
Until 90 days after the date of this Prospectus Supplement, all dealers
effecting transactions in the Certificates, whether or not participating in
this distribution, may be required to deliver this Prospectus Supplement and
the Prospectus. This is in addition to the obligation of dealers to deliver
this Prospectus Supplement and the Prospectus when acting as underwriters and
with respect to their unsold allotments or subscriptions.
REPORTS TO CERTIFICATEHOLDERS
Unless and until definitive certificates are issued (which will occur only
under the limited circumstances described herein), , as Trustee, will
provide to Cede & Co., the nominee of The Depository Trust Company, as
registered holder of the Certificates, monthly and annual statements
concerning the Trust and the Certificates. Such statements will not constitute
financial statements prepared in accordance with generally accepted accounting
principles. A copy of the most recent monthly or annual statement concerning
the Trust and the Certificates may be obtained by contacting the Servicer at
California Thrift & Loan, 818 Oakpark Road, Covina, California 91724,
( ) - .
ii
<PAGE>
SUMMARY OF TERMS
This Summary is qualified in its entirety by reference to the detailed
information appearing elsewhere in this Prospectus Supplement and the
Prospectus. Certain capitalized terms used in this Summary are defined
elsewhere in this Prospectus Supplement on the pages indicated in the "Index of
Principal Terms" or, to the extent not defined herein, have the meanings
assigned to such terms in the Prospectus.
Issuer........................ Bay View 199 --Auto Trust.
Depositor..................... Bay View Securitization Corporation (the
"Depositor").
Servicer...................... California Thrift & Loan (in its capacity as
servicer, the "Servicer," otherwise "CTL").
Trustee.......................
The Certificates.............. The Trust will be formed and will issue the
Certificates on , 199 (the "Closing Date")
pursuant to the Pooling and Servicing
Agreement. The Certificates will consist of the
% Class A Automobile Receivable Pass-Through
Certificates in the aggregate principal amount
of $ and the % Class B Automobile
Receivable Pass-Through Certificates in the
aggregate principal amount of $ . The Class A
Certificates will evidence in the aggregate an
undivided ownership interest in approximately
% of the Trust (the "Class A Percentage"),
and the Class B Certificates will evidence in
the aggregate an undivided ownership interest
in approximately % of the Trust (the "Class B
Percentage"). The Class B Certificates will be
subordinated to the Class A Certificates to the
extent described herein. See "The Certificates"
herein.
Each of the Certificates will represent a
fractional undivided interest in the Trust. The
Trust assets will include the Receivables,
certain monies due thereunder after the Cutoff
Date, security interests in the related
Financed Vehicles, monies on deposit in the
Yield Supplement Account, the Certificate
Account and the proceeds thereof, any proceeds
from claims on certain insurance policies
relating to the Financed Vehicles or the
related Obligors, any lender's insurance
policy, the Cash Collateral Account, and
certain rights under the Pooling and Servicing
Agreement.
Class A Pass-Through Rate..... % per annum, payable monthly at one-twelfth
the annual rate.
Class B Pass-Through Rate..... % per annum, payable monthly at one-twelfth
the annual rate.
Distribution Date............. The third business day after the fifth day of
the month following the Record Date, commencing
, 199 .
S-1
<PAGE>
Monthly Interest.............. Interest will be distributable on each
Distribution Date beginning , 199 , to
holders of record as of the last day of the
calendar month immediately preceding the
calendar month in which such Distribution Date
occurs (the "Record Date") of (i) the Class A
Certificates (the "Class A Certificateholders")
in a maximum amount equal to the product of
1/12th of % (the "Class A Pass-Through
Rate") and the aggregate outstanding principal
balance of the Class A Certificates (the "Class
A Principal Balance") as of the preceding
Distribution Date (after giving effect to all
distributions to Certificateholders on such
date) and (ii) the Class B Certificates (the
"Class B Certificateholders") in a maximum
amount equal to the product of 1/12th of %
(the "Class B Pass-Through Rate") and the
aggregate outstanding principal balance of the
Class B Certificates (the "Class B Principal
Balance") as of the preceding Distribution Date
(after giving effect to all distributions to
Certificateholders on such date). Interest on
the Class A Certificates and the Class B
Certificates will be calculated on the basis of
a 360-day year consisting of twelve 30-day
months. See "The Certificates--Distributions".
The effective yield on the Class A Certificates
and the Class B Certificates will be below that
otherwise produced by the Class A Pass-Through
Rate and the Class B Pass-Through Rate,
respectively, because the distribution of
Monthly Principal and Monthly Interest in
respect of any given month will not be made
until on or about the day of the following
month. See "Yield and Prepayment
Considerations" herein.
Monthly Principal............. On each Distribution Date, the Trustee will
distribute to the Class A Certificateholders
and the Class B Certificateholders
(collectively, the "Certificateholders") all
principal payments on the Receivables,
including full and partial prepayments received
by the Trustee during the preceding calendar
month. Monthly Principal will be passed through
to Certificateholders on each Distribution Date
in a maximum amount equal to the aggregate
outstanding principal amount of the Receivables
(the "Pool Balance") on the last day of the
second preceding calendar month (or, in the
case of the first Distribution Date, as of the
Cutoff Date) less the Pool Balance on the last
day of the immediately preceding calendar
month. For the purpose of determining Monthly
Principal, the unpaid principal balance of a
Defaulted Receivable or a Purchased Receivable
will be deemed to be zero on and after the last
day of the calendar month in which such
Receivable becomes a Defaulted Receivable or a
Purchased Receivable, as applicable.
The weighted average life of the Certificates
will be reduced by full or partial prepayments
on the Receivables (except certain prepayments
in respect of Precomputed Receivables). Neither
the Servicer nor the Depositor nor any of their
affiliates maintains
S-2
<PAGE>
specific statistical data regarding the
historical prepayment experience of its
automobile receivable portfolio. See "The
Certificates--Distributions" herein.
The Receivables............... On the Closing Date, the Depositor will convey
Receivables to the Trust (the "Initial
Receivables") having an aggregate principal
balance of approximately $ as of , 199
(the "Initial Cutoff Date"). The Trust will
acquire the Initial Receivables from the
Depositor pursuant to the Pooling and Servicing
Agreement. In addition, the Depositor will be
obligated under the terms of the Pooling and
Servicing Agreement to sell additional
Receivables (the "Subsequent Receivables") to
the Trust (subject only to the availability
thereof) having an aggregate principal balance
equal to approximately $ (the "Pre-Funded
Amount"), and the Trust will be obligated to
purchase the Subsequent Receivables from the
Depositor (subject to the satisfaction of
certain conditions set forth in the Pooling and
Servicing Agreement) prior to the end of the
Funding Period. The Depositor will designate as
a cutoff date (each, a "Subsequent Cutoff
Date") each date as of which particular
Subsequent Receivables are conveyed to the
Trust. Each date during the Funding Period on
which Subsequent Receivables will be conveyed
to the Trust is referred to herein as a
"Subsequent Transfer Date". See "The
Certificates--Sale and Assignment of
Receivables; Subsequent Receivables" and "The
Receivables Pool" herein and "The Receivables
Pools" in the Prospectus.
The Depositor will acquire the Initial
Receivables on or prior to the Closing Date
from California Thrift & Loan ("CTL") pursuant
to a purchase agreement dated as of , 199
(the "Purchase Agreement") among the Depositor
and CTL. CTL also will be obligated under the
Purchase Agreement to sell the Subsequent
Receivables to the Depositor, for resale by the
Depositor to the Trust. In the Purchase
Agreement, CTL will make certain
representations and warranties with respect to
the Receivables and CTL will undertake to
repurchase any Receivable with respect to which
an uncured breach of any such representation or
warranty exists if such breach materially and
adversely affects the rights of the Depositor
or its assignee in such Receivable and if such
breach is not cured by CTL in a timely manner.
Pursuant to the Pooling and Servicing
Agreement, the Depositor will assign its rights
against CTL with respect to any Receivable of
which there exists a breach of any
representation and warranty that materially and
adversely affects the rights of the
Certificateholders. See "The Certificates--Sale
and Assignment of Receivables; Subsequent
Receivables" herein. Neither CTL nor the
Depositor will have any other obligation with
respect to the Receivables or the Certificates.
The Receivables arise, or will arise, from
Contracts originated or acquired, directly or
indirectly, by CTL from Dealers located in
S-3
<PAGE>
various states of the United States. The
Initial Receivables have been selected, and the
Subsequent Receivables will be selected, from
the Contracts owned by CTL based on the
criteria specified in the Pooling and Servicing
Agreement and described herein under "The
Receivables Pool" and in the Prospectus under
"The Receivables Pools". As of the Initial
Cutoff Date, the weighted average Contract Rate
of the Initial Receivables was approximately
%, the weighted average remaining term to
maturity of the Initial Receivables was
approximately months, and the weighted average
original term to maturity of the Initial
Receivables was approximately months. No
Initial Receivable has, and no Subsequent
Receivable will have, a scheduled maturity
later than , 199 (the "Final Scheduled
Maturity Date").
Subsequent Receivables may be originated or
acquired by CTL at a later date using credit
criteria that differ from those that were
applied to the Initial Receivables and may be
of a different credit quality and seasoning. In
addition, following the transfer of Subsequent
Receivables to the Trust, the characteristics
of the entire pool of Receivables included in
the Trust may vary significantly from those of
the Initial Receivables. For a description of
provisions for the transfer of Subsequent
Receivables and verification that Subsequent
Receivables conform to the requirements of the
Pooling and Servicing Agreement, see "Risk
Factors--The Pre-Funding Account", "--
Conveyance of Subsequent Receivables to the
Trust", "The Receivables Pool" and "The
Certificates--Sale and Assignment of
Receivables; Subsequent Receivables" herein.
See also "Risk Factors--Sale of Subsequent
Receivables," and "Description of the Transfer
and Servicing Agreements--Sale and Assignment
of Receivables" in the Prospectus.
Pre-Funding Account........... During the period (the "Funding Period") from
and including the Closing Date until the
earliest to occur of (a) the date on which the
amount on deposit in the Pre-Funding Account is
equal to $ or less, (b) the occurrence of an
Event of Default under the Pooling and
Servicing Agreement, (c) the occurrence of
certain events of insolvency with respect to
the Depositor or the Servicer or (d) the
[third] Distribution Date, the Pre-Funded
Amount will be maintained in an account (the
"Pre-Funding Account") in the name of the
Trustee. The Funding Period will not be more
than three calendar months. The Pre- Funded
Amount initially will equal $ and, during
the Funding Period, will be reduced by the
amount thereof used to purchase Subsequent
Receivables in accordance with the Pooling and
Servicing Agreement. See "Description of the
Transfer and Servicing Agreements--Trust
Accounts--Pre-Funding Account" in the
Prospectus and "The Certificates--Sale and
Assignment of Receivables; Subsequent
Receivables" herein.
S-4
<PAGE>
Funds on deposit in the Pre-Funding Account
during the Funding Period will be invested by
the Trustee in Eligible Investments, provided,
however, that such funds will not be invested
in money market funds unless the Trustee
receives an opinion of counsel to the effect
that such an investment in money market funds
would not require the Trust to register as an
investment company under the Investment Company
Act of 1940. Eligible Investments held in the
Pre-Funding Account will be required to mature
not later than the business day preceding the
next scheduled Distribution Date or the next
Subsequent Transfer Date within the Funding
Period identified by the Depositor. Any
Investment Income with respect to such Eligible
Investments will be transferred from the Pre-
Funding Account to the Certificate Account on
each Distribution Date and will be included in
Available Funds for such Distribution Date. Any
Pre-Funded Amount remaining at the end of the
Funding Period will be payable to the
Certificateholders. The Certificates will be
prepaid, in part, pro rata on the basis of
their initial principal amounts, on the
Distribution Date on or immediately following
the last day of the Funding Period in the event
that any amount remains on deposit in the Pre-
Funding Account after giving effect to the
purchase of all Subsequent Receivables,
including any such purchase on such date. The
aggregate principal amount of Certificates to
be prepaid will be an amount equal to the
amount then on deposit in the Pre-Funding
Account. Such prepayment will reduce the
Certificateholders' outstanding principal
balance and anticipated yield. See "Risk
Factors--The Pre-Funding Account" and "The
Certificates--Sale and Assignment of
Receivables; Subsequent Receivables" herein.
See also "Description of the Transfer and
Servicing Agreements--Accounts" in the
Prospectus.
Subordination................. The rights of the Class B Certificateholders to
receive distributions to which they otherwise
will be entitled to with respect to the
Receivables are subordinated to the rights of
the Class A Certificateholders, as described
more fully herein. See "The Certificates--
Distributions" and "--Subordination of the
Class B Certificates; Cash Collateral Account"
herein.
Cash Collateral Account....... The Depositor will establish the Cash
Collateral Account on the Closing Date and will
deposit in such account an amount equal to %
of the sum of the initial Class A Principal
Balance and the Class B Principal Balance
(collectively, the "Certificate Principal
Balance"). On each Distribution Date
thereafter, the Servicer will deposit into the
Cash Collateral Account any amounts remaining
in the Certificate Account after the payment on
such date of every other obligation of the
Trust. The Trustee will withdraw funds from the
Cash Collateral Account on each Distribution
Date to the extent of any shortfall in the
Monthly Interest and Monthly Principal. Any
amount on deposit in the
S-5
<PAGE>
Cash Collateral Account on any Distribution
Date in excess the Required Cash Collateral
Amount after all other required deposits
thereto and withdrawals therefrom have been
made, will be distributed to the Depositor. Any
amount so distributed to the Depositor will no
longer be an asset of the Trust. The "Required
Cash Collateral Amount" with respect to any
Distribution Date will equal % of the
Certificate Principal Balance.
While it is intended that the amount on deposit
in the Cash Collateral Account grow over time,
through the deposit thereto of the excess
collections, if any, on the Receivables, to the
Required Cash Collateral Amount, there can be
no assurance that such growth will actually
occur. See "The Certificates--Accounts" herein.
The Cash Collateral Account will be maintained
with the Trustee as a segregated trust account
for the benefit of Certificateholders, but will
not be part of the Trust.
Optional Purchase............. The Servicer may purchase all of the
Receivables (referred to herein as an "Optional
Purchase") as of the last day of any Collection
Period, at a purchase price equal to the fair
market value of the Receivables (but not less
than their aggregate outstanding principal
balance plus accrued and unpaid interest
thereon), if the Certificate Principal Balance
as of the following Distribution Date will
equal 10% or less of the initial Certificate
Principal Balance.
Tax Status.................... In the opinion of Federal Tax Counsel, the
Trust will be treated as a grantor trust for
federal income tax purposes and will not be
subject to federal income tax. Owners of
beneficial interests in the Certificates will
report their pro rata share of all income
earned on the Receivables (other than amounts,
if any, treated as "stripped coupons") and,
subject to certain limitations in the case of
such owners who are individuals, trusts or
estates, may deduct their pro rata share of
reasonable servicing and other fees.
See "Certain Federal Income Tax Consequences"
in the Prospectus for additional information
concerning the application of federal income
tax laws to the Trust and the Certificates.
ERISA Considerations.......... Subject to the considerations discussed under
"ERISA Considerations" herein and in the
Prospectus, the Class A Certificates may be
eligible for purchase by employee benefit plans
subject to the Employee Retirement Income
Security Act of 1974, as amended. See "ERISA
Considerations" herein and in the Prospectus.
Because the Class B Certificates are
subordinated to the Class A Certificates, the
Class B Certificates may not be purchased by
Plans.
S-6
<PAGE>
Ratings of the Certificates... It is a condition to the issuance of the
Certificates that the Class A Certificates and
the Class B Certificates each be rated in one
of the four highest rating categories by at
least one nationally recognized statistical
rating agencies. A rating is not a
recommendation to purchase, hold or sell the
Certificates, inasmuch as such rating does not
comment as to market price or suitability for a
particular investor. The ratings address the
likelihood that principal of and interest on
the Certificates will be paid pursuant to their
terms. There can be no assurance that a rating
will not be lowered or withdrawn by a rating
agency if circumstances so warrant. See "Risk
Factors--Ratings of the Certificates" herein.
S-7
<PAGE>
RISK FACTORS
In addition to the other information contained in this Prospectus Supplement
and the Prospectus, prospective investors should carefully consider the
following risk factors and those discussed in the Prospectus under the heading
"Risk Factors" before investing in the Certificates.
THE PRE-FUNDING ACCOUNT
On the Closing Date, the Depositor will deposit the Pre-Funded Amount to the
Pre-Funding Account. The Pre-Funding Account will be maintained as an Eligible
Deposit Account. The Pre-Funded Amount will be used only to purchase
Subsequent Receivables. Prior to their withdrawal from the Pre-Funding Account
as payment for Subsequent Receivables, funds on deposit in the Pre-Funding
Account will be invested in Eligible Investments, and any investment income
thereon will be included on the following Distribution Date as part of
Available Funds. Any amounts remaining in the Pre-Funding Account at the end
of the Funding Period will be distributed pro rata to Certificateholders as a
prepayment of principal of the Certificates. Such prepayment will reduce the
Certificateholder's outstanding principal balance and anticipated yield. See
"Yield and Prepayment Considerations--Mandatory Repurchase" herein and
"Description of the Transfer and Servicing Agreements--Pre-Funding Account" in
the Prospectus. The amounts on deposit may be invested in Eligible
Investments, provided, however, that such funds will not be invested in money
market funds unless the Trustee receives an opinion of counsel to the effect
that such an investment in money market funds would not require the Trust to
register as an investment company under the Investment Company Act of 1940.
CONVEYANCE OF SUBSEQUENT RECEIVABLES TO THE TRUST
On the Closing Date, the Depositor will convey to the Trust approximately
$ of Initial Receivables and the approximately $ Pre-Funded Amount on
deposit in the Pre-Funding Account. If the principal amount of eligible
Receivables originated or acquired by CTL prior to the termination of the
Funding Period is less than the Pre-Funded Amount, CTL will have insufficient
Receivables to sell to the Depositor, and the Depositor will have insufficient
Receivables to sell to the Trust, thereby resulting in a prepayment of
principal to the Certificateholders as described below. In addition, any
conveyance of Subsequent Receivables is subject to the satisfaction, on or
before the related Subsequent Transfer Date, of the following conditions,
among others: (i) each such Subsequent Receivable shall satisfy the
eligibility criteria specified in the Pooling and Servicing Agreement and
shall not have been selected from among such eligible Receivables in a manner
that CTL or the Depositor deems adverse to the interests of the
Certificateholders; (ii) as of the related Subsequent Cutoff Date, the
Receivables in the Trust at that time, including the Subsequent Receivables to
be conveyed by the Depositor to the Trust as of such Subsequent Cutoff Date,
must satisfy the parameters described under "The Receivables Pool" herein and
under "The Receivables Pools" in the Prospectus; (iii) CTL shall have executed
and delivered to the Depositor, and the Depositor shall have executed and
delivered to the Trustee, a written assignment (including a schedule
identifying such Subsequent Receivables) conveying such Subsequent Receivables
to the Depositor and the Trust, respectively. In addition, the conveyance of
the Subsequent Receivables to the Trust will also be subject to the
satisfaction of the following requirements within days after the termination
of the Funding Period: (a) the Depositor shall deliver certain opinions of
counsel to the Trustee and the Rating Agencies with respect to the validity of
the conveyance of the Subsequent Receivables to the Trust; (b) the Trustee
shall receive written confirmation from a firm of certified public accountants
that the Receivables, including the Subsequent Receivables, meet the criteria
described herein under "The Receivables Pool" and in the Prospectus under "The
Receivables Pools"; and (c) the Rating Agencies shall have notified the
Depositor in writing that, following the conveyance of the Subsequent
Receivables to the Trust, the Certificates will continue to be rated by such
Rating Agencies in the same rating categories in which they were rated on the
Closing Date. Such confirmation of the ratings of the Certificates may depend
on factors other than the characteristics of the Subsequent Receivables,
including the delinquency, repossession and net loss experience on the
automobile, light truck and van receivables in the portfolio serviced by CTL.
CTL will immediately repurchase from the Trust any Subsequent Receivable
that fails to satisfy the conditions listed in the preceding paragraph, at a
purchase price equal to the Purchase Amount therefor.
S-8
<PAGE>
To the extent that amounts on deposit in the Pre-Funding Account have not
been fully applied to the purchase of Subsequent Receivables by the Trust by
the end of the Funding Period, the Certificateholders will receive a
prepayment of principal in an amount equal to the Pre-Funded Amount remaining
in the Pre-Funding Account following the purchase of all Subsequent
Receivables. It is anticipated that the principal amount of the Subsequent
Receivables sold to the Trust will not be exactly equal to the amount on
deposit in the Pre-Funding Account and, therefore, that there will be at least
a nominal amount of principal prepaid to the Certificateholders. See "Yield
and Prepayment Considerations--Mandatory Repurchase".
Each Subsequent Receivable, at the time it is conveyed to the Trust, must
satisfy the eligibility criteria specified in the Pooling and Servicing
Agreement. However, Subsequent Receivables may have been originated or
acquired by CTL at a later date using credit criteria different from those
that were applied to the Initial Receivables and may be of a different credit
quality and seasoning. Therefore, following the transfer of Subsequent
Receivables to the Trust, the characteristics of the entire Receivables Pool
included in the Trust may vary significantly from those of the Initial
Receivables. See "The Receivables Pool" and "The Certificates--Sale and
Assignment of Receivables; Subsequent Receivables" herein and "The Receivables
Pools" in the Prospectus.
CERTIFICATES SOLELY OBLIGATIONS OF THE TRUST
The Certificates are interests in the Trust only and do not represent the
obligation of any other person. The Trustee will withdraw funds from the Cash
Collateral Account, up to the full balance of the funds on deposit in such
account, in the event that sufficient funds are not available in accordance
with the Pooling and Servicing Agreement to distribute Monthly Interest and
Monthly Principal and to pay the Servicing Fee on any Distribution Date. The
Cash Collateral Account is initially % of the Certificate Principal Balance
and is intended to increase over time to % of the Certificate Principal
Balance. There is no assurance that such growth will occur or that the balance
in the Cash Collateral Account will always be sufficient to assure payment in
full of Monthly Principal and Monthly Interest on the Certificates. In the
event the amount on deposit in the Cash Collateral Account is reduced to zero,
losses on the Receivables will be borne directly first by Class B
Certificateholders until the Class B Principal Balance is reduced to zero, and
then by Class A Certificateholders. See "The Receivables Pool--Delinquencies,
Repossession and Net Losses" and "The Certificates--Cash Collateral Account".
LIMITED OBLIGATIONS OF THE DEPOSITOR, CTL AND THE SERVICER
None of the Depositor, CTL or the Servicer is generally obligated to make
any payments in respect of the Certificates or the Receivables; however, if
CTL were to cease acting as Servicer, delays in processing payments on the
Receivables and information in respect thereof could occur and result in
delays in payment to the Certificateholders. In addition, CTL makes certain
representations and warranties with respect to the Receivables and, in the
event of a breach of any such representation or warranty that materially and
adversely affects the rights of the Certificateholders in a Receivable, CTL is
obligated under the Purchase Agreement and the Pooling and Servicing Agreement
to repurchase such Receivable from the Trust at a repurchase price equal to
the Purchase Amount thereof. See "The Certificates--Sale and Assignment of
Receivables; Subsequent Receivables" herein and "Description of the Transfer
and Servicing Agreements--Sale and Assignment of Receivables" in the
Prospectus.
RATINGS OF THE CERTIFICATES
As a condition to the issuance of the Offered Certificates, the Class A
Certificates and the Class B Certificates must be rated in at least one of the
four highest rating categories by a nationally recognized rating agency. A
rating is not a recommendation to purchase, hold or sell the Certificates,
inasmuch as a rating does not comment as to market price or suitability for a
particular investor. The ratings of the Certificates address the likelihood of
the timely payment of interest on, and the ultimate repayment of principal of,
the Certificates pursuant to their terms. There can be no assurance that a
rating will remain for any given period of time or that a
S-9
<PAGE>
rating will not be lowered or withdrawn entirely by a Rating Agency if in its
judgment circumstances in the future so warrant. In the event that a rating is
subsequently lowered or withdrawn, no person or entity will be required to
provide any additional credit enhancement. The ratings of the Class A
Certificates are based primarily on the credit quality of the Receivables, the
subordination of the Class B Certificates and the availability of funds in the
Cash Collateral Account, and the ratings of the Class B Certificates are based
primarily on the credit quality of the Receivables and the availability of
funds in the Cash Collateral Account.
FORMATION OF THE TRUST
GENERAL
The Depositor will establish the Trust by selling and assigning the Trust
property, as described below, to the Trustee in exchange for the Certificates.
The Servicer will service the Receivables pursuant to the Pooling and
Servicing Agreement and will be compensated for acting as the Servicer. See
"Description of the Transfer and Servicing Agreements--Servicing Compensation
and Payment of Expenses" in the Prospectus. To facilitate servicing and to
minimize administrative burden and expense, the Servicer will be appointed
custodian of the Receivables and the related documents by the Trustee, but
will not stamp the Receivables to reflect the sale and assignment of the
Receivables to the Trust or amend the certificates of title of the Financed
Vehicles. In the absence of amendments to the certificates of title, the
Trustee may not have perfected security interests in the Financed Vehicles
securing the Receivables in some states. See "Risk Factors--Certain Legal
Aspects--Security Interests in Financed Vehicles" and "Certain Legal Aspects
of the Receivables" in the Prospectus. Under the terms of the Pooling and
Servicing Agreement, CTL may delegate its duties as Servicer and custodian;
however, any such delegation will not relieve CTL of its liability and
responsibility with respect to such duties.
If the protection provided to Certificateholders by the Cash Collateral
Account and, in the case of the Class A Certificateholders, the subordination
of the Class B Certificates is insufficient, the Trust will look only to the
Obligors on the Receivables and the proceeds from the repossession and sale of
Financed Vehicles that secure defaulted Receivables to fund distributions of
principal and interest on the Certificates. In such event, certain factors,
such as the Trust's not having first priority perfected security interests in
some of the Financed Vehicles, may affect the Trust's ability to realize on
the collateral securing the Receivables and thus may reduce the proceeds to be
distributed to Certificateholders with respect to the Certificates. See "The
Certificates--Distributions" and "--Subordination of the Class B Certificates;
Cash Collateral Account" herein and "Certain Legal Aspects of the Receivables"
in the Prospectus.
Each Certificate represents a fractional undivided ownership interest in the
Trust. The Trust property includes the Contracts transferred by the Depositor
to the Trust and certain payments due thereunder after the Cutoff Date. The
Trust property also includes (i) such amounts as from time to time may be held
in the Certificate Account; (ii) the right to draw on funds on deposit in the
Cash Collateral Account, the Payahead Account and the Yield Supplement
Account, to the extent described herein, (iii) security interests in the
Financed Vehicles and any accessions thereto; (iv) the rights to proceeds with
respect to the Receivables from claims on physical damage, credit life and
disability insurance policies covering the Financed Vehicles or the Obligors,
as the case may be, and any lender's insurance policy; (v) any property that
shall have secured a Receivable and that shall have been acquired by the
Trustee; (vi) the Pre-Funding Account; and (vii) any and all proceeds of the
foregoing. The Cash Collateral Account and the Yield Supplement Account will
be maintained by the Trustee for the benefit of the Certificateholders, but
will not be part of the Trust. The assets of the Trust will not include, and
the Certificateholders will have no interest in, any contract between CTL and
any Dealer establishing "dealer reserves" or any right pursuant to any such
contract to recapture dealer reserves.
THE TRUSTEE
is Trustee under the Pooling and Servicing Agreement. is a
banking corporation, and its principal offices are located at . The
Depositor and its affiliates may maintain normal commercial banking relations
with the Trustee and its affiliates.
S-10
<PAGE>
THE RECEIVABLES POOL
The pool of Receivables conveyed to the Trust (the "Receivables Pool") will
include the Initial Receivables purchased as of the Initial Cutoff Date and
any Subsequent Receivables purchased as of the applicable Subsequent Cutoff
Dates.
The Initial Receivables were, and the Subsequent Receivables were or will
be, selected from CTL's portfolio for purchase by the Depositor by several
criteria, including that each Receivable: (i) had or will have an original
number of payments of not more than payments and not less than
payments, (ii) had or will have a remaining maturity of not more than
months and not less than months, (iii) provided or will provide for level
monthly payments that fully amortize the amount financed over the original
term, (iv) had or will have a Contract Rate (exclusive of prepaid finance
charges) of not less than %, and (v) was not or will not be more than days
past due as of the Cutoff Date. The weighted average remaining maturity of the
Initial Receivables will be months as of the Initial Cutoff Date.
Approximately % of the Initial Receivables are simple interest contracts
which provide for equal monthly payments. Approximately % of the aggregate
principal balance of the Initial Receivables as of the Initial Cutoff Date are
Precomputed Receivables (as defined in the Prospectus) originated in . All
of such Precomputed Receivables are Rule of 78's Receivables (as defined in
the Prospectus). Approximately % of the aggregate principal balance of the
initial Cutoff Date represent financing of new vehicles; the remainder of the
Initial Receivables represent financing of used vehicles.
Initial Receivables representing more than 10% of the aggregate principal
balance of the Receivables as of the Cutoff Date were originated in
metropolitan areas in each of the States of , and . The performance
of the Receivables in the aggregate could be adversely affected in particular
by the development of adverse economic conditions in such metropolitan areas.
The obligation of the Trust to purchase Subsequent Receivables on a
Subsequent Transfer Date will be subject to the following criteria: [SPECIFY
APPLICABLE CRITERIA]. In addition, such obligation will be subject to the
Receivables (including the Subsequent Receivables to be transferred to the
Trust on such Subsequent Transfer Date) having a weighted average remaining
term not greater than months. Such criteria will be based on the
characteristics of the Initial Receivables on the Initial Cutoff Date and any
Subsequent Receivables on the related Subsequent Cutoff Date.
The Initial Receivables will represent approximately % of the aggregate
initial principal balance of the Certificates. However, except for the
criteria described in the preceding paragraphs, there will be no required
characteristics of the Subsequent Receivables. Therefore, following the
transfer of Subsequent Receivables to the Trust, the aggregate characteristics
of the entire Receivables Pool, including the composition of the Receivables,
the distribution by Contract Rate and the geographic distribution, may vary
significantly from those of the Initial Receivables. The composition,
distribution by Contract Rate and geographic distribution of the Initial
Receivables as of the Initial Cutoff Date are as set forth in the following
tables.
S-11
<PAGE>
COMPOSITION OF THE INITIAL RECEIVABLES AS OF
THE INITIAL CUTOFF DATE
<TABLE>
<CAPTION>
AGGREGATE ORIGINAL
NUMBER OF PRINCIPAL PRINCIPAL WEIGHTED
RECEIVABLES BALANCE BALANCE AVERAGE RATE
----------- --------- ------------- ------------
<S> <C> <C> <C> <C>
New Automobiles and Light-
Duty Trucks.................
Used Automobiles and Light-
Duty Trucks.................
New Vans(1)..................
Used Vans(1).................
Motorcycles..................
--- --- --- ---
All Receivables..............
=== === === ===
<CAPTION>
WEIGHTED WEIGHTED PERCENTAGE OF SCHEDULED
AVERAGE AVERAGE AGGREGATE WEIGHTED
REMAINING ORIGINAL PRINCIPAL AVERAGE
TERM(2) TERM(2) BALANCE(3) LIFE(2)
----------- --------- ------------- ------------
<S> <C> <C> <C> <C>
New Automobiles and Light-
Duty Trucks.................
Used Automobiles and Light-
Duty Trucks.................
New Vans(1)..................
Used Vans(1).................
Motorcycles..................
--- --- --- ---
All Receivables..............
=== === === ===
</TABLE>
- --------
(1) References to vans include minivans and van conversions.
(2) Based on scheduled maturity and assuming no prepayments of the Receivables.
(3) Sum may not equal 100% due to rounding.
GEOGRAPHIC DISTRIBUTION OF THE INITIAL RECEIVABLES
AS OF THE INITIAL CUTOFF DATE
<TABLE>
<CAPTION>
PERCENT OF AGGREGATE
STATE(1)(2) PRINCIPAL BALANCE(3)
- ----------- --------------------
<S> <C>
</TABLE>
- --------
(1) Based on address of the Dealer selling the related Financed Vehicle.
(2) $ of receivables were originated by Dealers and purchased from such
Dealers by CTL.
(3) Percentages may not add to 100% because of rounding.
S-12
<PAGE>
DISTRIBUTION OF INITIAL RECEIVABLES VEHICLES BY MODEL YEAR
<TABLE>
<CAPTION>
PRINCIPAL
NUMBER OF PERCENTAGE OF BALANCE AS OF PERCENTAGE OF
MODEL YEAR RECEIVABLES TOTAL(1) CUTOFF DATE TOTAL(1)
- ---------- ----------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
199 ......................
199 ......................
199 ......................
199 ......................
199 ......................
199 ......................
199 ......................
199 ......................
199 ......................
199 ......................
199 ......................
199 ......................
199 ......................
--- --- --- ---
Total...................
=== === === ===
</TABLE>
- --------
(1) Sum may not equal 100% due to rounding.
DISTRIBUTION OF THE INITIAL RECEIVABLES BY
CONTRACT RATE AS OF THE INITIAL CUTOFF DATE
<TABLE>
<CAPTION>
PERCENTAGE OF
AGGREGATE AVERAGE AGGREGATE
NUMBER OF PRINCIPAL PRINCIPAL PRINCIPAL
CONTRACT RATE RANGE RECEIVABLES BALANCE BALANCE BALANCE(1)
- ------------------- ----------- --------- --------- -------------
<S> <C> <C> <C> <C>
to %.......................
to %.......................
to %.......................
to %.......................
to %.......................
to %.......................
to %.......................
to %.......................
to %.......................
--- --- --- ---
Total...........................
=== === === ===
</TABLE>
- --------
(1) Sum may not equal 100% due to rounding.
S-13
<PAGE>
DISTRIBUTION OF THE INITIAL RECEIVABLES BY REMAINING
TERM AS OF THE INITIAL CUTOFF DATE
<TABLE>
<CAPTION>
PERCENTAGE OF
AGGREGATE AVERAGE AGGREGATE
REMAINING SCHEDULED NUMBER OF PRINCIPAL PRINCIPAL PRINCIPAL
TERM RANGE RECEIVABLES BALANCE BALANCE BALANCE(1)
- ------------------- ----------- --------- --------- -------------
<S> <C> <C> <C> <C>
to months.................
to months.................
to months.................
to months.................
to months.................
to months.................
to months.................
to months.................
to months.................
--- --- --- ---
Total...........................
=== === === ===
</TABLE>
- --------
(1) Sum may not equal 100% due to rounding.
S-14
<PAGE>
DELINQUENCIES, REPOSSESSIONS AND NET LOSSES
Set forth below is certain information concerning the experience of CTL and
the pertaining to delinquencies, repossessions, and net losses on fixed rate
retail automobile, light truck, motorcycle and van receivables serviced by
CTL. There can be no assurance that the delinquency, repossession, and net
loss experience on the Receivables will be comparable to that set forth below.
<TABLE>
<CAPTION>
AT SEPTEMBER 30, AT DECEMBER 31,
------------------------------------- --------------------------------------------------------
1996 1995 1995 1994 1993
------------------ ------------------ ------------------ ------------------ ------------------
NUMBER OF NUMBER OF NUMBER OF NUMBER OF NUMBER OF
RECEIVABLES AMOUNT RECEIVABLES AMOUNT RECEIVABLES AMOUNT RECEIVABLES AMOUNT RECEIVABLES AMOUNT
----------- ------ ----------- ------ ----------- ------ ----------- ------ ----------- ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Servicing portfolio.... $ $ $ $ $
Delinquencies
30-59 days............
60-89 days............
90 days or more.......
Total delinquencies....
--- ---- --- ---- --- ---- --- ---- --- ----
Total delinquencies as
a percent of servicing
portfolio..............
=== ==== === ==== === ==== === ==== === ====
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, YEAR ENDED DECEMBER 31,
------------------------------------- --------------------------------------------------------
1996 1995 1995 1994 1993
------------------ ------------------ ------------------ ------------------ ------------------
NUMBER OF NUMBER OF NUMBER OF NUMBER OF NUMBER OF
RECEIVABLES AMOUNT RECEIVABLES AMOUNT RECEIVABLES AMOUNT RECEIVABLES AMOUNT RECEIVABLES AMOUNT
----------- ------ ----------- ------ ----------- ------ ----------- ------ ----------- ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Average servicing
portfolio(2)........... $ $ $ $ $
Gross charge-offs......
Recoveries(4)..........
---- ---- ---- ---- ----
Net losses.............
==== ==== ==== ==== ====
Gross charge-offs as a
percentage of average
servicing portfolio(3).. % % % % % % % % % %
Recoveries as a
percentage of
gross charge-offs...... % % % % %
Net losses as a
percentage of average
servicing portfolio.... % % % % %
</TABLE>
- ----
(1) There is generally no recourse to Dealers under any of the receivables in
the portfolio serviced by CTL, except to the extent of representations and
warranties made by Dealers in connection with such receivables.
(2) Equals the monthly arithmetic average.
(3) Variation in the size of the portfolio serviced by CTL will affect the
percentages in "Gross Charge-Offs as a percentage of average servicing
portfolio" and "Net Losses as a percentage of average servicing
portfolio".
S-15
<PAGE>
[DISCUSSION TO COME FOR EACH ISSUANCE]
YIELD AND PREPAYMENT CONSIDERATIONS
GENERAL
Monthly Interest (as defined herein) on the Receivables will be distributed
to Certificateholders on each Distribution Date to the extent of the Pass-
Through Rate applied to the Class A Certificate Principal Balance or Class B
Certificate Principal Balance, as applicable, as of the preceding Distribution
Date or the Closing Date, as applicable (after giving effect to distributions
of principal on such preceding Distribution Date). See "The Certificates--
Distributions". In the event of a full or partial prepayment on a Receivable,
Certificateholders will receive interest for the full month of such prepayment
either through the distribution of interest paid on other Receivables or
withdrawal from the Cash Collateral Account.
Although the Receivables will have different Contract Rates, each
Receivable's Contract Rate generally will exceed the sum of (a) the initial
weighted average of the Class A Pass-Through Rate and the Class B Pass-Through
Rate and (b) the per annum rate used to calculate the Servicing Fee. The
Contract Rate on certain of the Receivables, however, will be less than the
weighted average of the Class A Pass-Through Rate and the Class B Pass-Through
Rate plus the per annum rate used to calculate the Servicing Fee. For such
Receivables, amounts on deposit in the Yield Supplement Account will be used
to cover resulting shortfalls with respect to Monthly Interest and the
Servicing Fee. See "The Certificates--Accounts". The availability of amounts
on deposit in the Yield Supplement Account reduces the likelihood that
disproportionate rates of prepayments between Receivables with higher and
lower Contract Rates will affect the ability of the Trust to distribute
Monthly Interest to Certificateholders.
The effective yield to Certificateholders will be below the yield otherwise
produced by the Pass-Through Rate because the distribution of Monthly
Principal and Monthly Interest in respect of any given month will not be made
until the related Distribution Date, which will not be earlier than the day of
the following month.
MANDATORY REPURCHASE
Cash distributions to Certificateholders will be made, on a pro rata basis,
on the Distribution Date on or immediately following the last day of the
Funding Period in the event that funds remain on deposit in the Pre-Funding
Account after giving effect to the purchase of all Subsequent Receivables,
including any such purchase on such date.
THE DEPOSITOR AND CTL
CTL currently acquires loans from over manufacturer franchised automobile
dealerships and used car dealers in metropolitan areas in eight states.
CTL is a California industrial loan company, formed in 1959. In addition to
the indirect automobile finance business, CTL underwrites and purchases
residential real estate loans and commercial equipment leases. For the fiscal
years ended December 31, 1995, 1994 and 1993 and for the nine months ended
September 30, 1996, CTL acquired automobile loans aggregating $ million,
$156.2 million and $142.6 million and $ million, respectively. Of the $
million of loans in the automobile servicing portfolio of CTL (consisting of
the principal balance of loans held for sale) at September 30, 1996,
approximately % represented loans on used cars and approximately %
represented loans on new cars. CTL began to offer its motor vehicle loan
products to an increased number of selected used car dealerships in 1994. In
years prior, the amount of Receivables secured by used cars was immaterial.
Additional information regarding CTL and the Depositor is set forth under
"California Thrift & Loan" in the Prospectus.
S-16
<PAGE>
THE CERTIFICATES
GENERAL
The Certificates will be issued pursuant to the Pooling and Servicing
Agreement. Copies of the Pooling and Servicing Agreement (without exhibits)
may be obtained by Certificateholders upon request in writing to the Servicer
at the address set forth herein under "Reports to Certificateholders".
Citations to the relevant sections of the Pooling and Servicing Agreement
appear below in parentheses. The following summary does not purport to be
complete and is subject to and qualified in its entirety by reference to the
Pooling and Servicing Agreement.
DISTRIBUTIONS
In general, it is intended that the Trustee distribute to the Class A
Certificateholders and the Class B Certificateholders on each Distribution
Date the aggregate principal payments, including full and partial prepayments
(except certain prepayments in respect of Precomputed Receivables as described
below under "--Accounts") received on the Receivables during the related
Collection Period, plus a full month's interest at the Class A Pass-Through
Rate or the Class B Pass-Through Rate, as applicable, payable monthly at one-
twelfth the annual rate, calculated on the basis of a 360-day year consisting
of twelve 30-day months. (Section .) The Class A Certificates are entitled
to a certain priority, relative to the Class B Certificates, in right of
distributions on the Receivables. See "--Distributions on the Certificates".
Interest to Certificateholders may be provided by a payment made by or on
behalf of the Obligor, by an Advance made by the Servicer to cover an Interest
Shortfall, by a withdrawal from the Cash Collateral Account to cover an
Interest Shortfall, and, in respect of certain Receivables, by the withdrawal
of the Yield Supplement Amount from the Yield Supplement Account. See "--Sale
and Assignment of Receivables; Subsequent Receivables" and "--Accounts"
herein.
SALE AND ASSIGNMENT OF RECEIVABLES; SUBSEQUENT RECEIVABLES
Certain information with respect to the conveyance of the Initial
Receivables from CTL to the Depositor, and from the Depositor to the Trust, on
the Closing Date pursuant to the Purchase Agreement and the Pooling and
Servicing Agreement, respectively, is set forth under "The Transfer and
Servicing Agreements--Sale and Assignment of the Receivables" in the
Prospectus. In addition, during the Funding Period, pursuant to the Pooling
and Servicing Agreement, CTL will be obligated to sell to the Depositor and
the Depositor will be obligated to sell to the Trust, Subsequent Receivables
having an aggregate principal balance equal to approximately $ (such amount
being equal to the initial Pre-Funded Amount) to the extent that such
Subsequent Receivables are available.
During the Funding Period on each Subsequent Transfer Date, subject to the
conditions described below, CTL will sell and assign to the Depositor, and the
Depositor will sell and assign to the Trust, without recourse, their
respective interests in the Subsequent Receivables. The Subsequent Receivables
will be designated by CTL as of the related Subsequent Cutoff Date and
identified in a schedule attached to a subsequent transfer assignment relating
to such Subsequent Receivables, which will be executed and delivered on such
date by the Depositor for delivery to the Trustee pursuant to the Pooling and
Servicing Agreement.
Any conveyance of Subsequent Receivables is subject to the satisfaction, on
or before the related Subsequent Transfer Date, of the following conditions
precedent, among others: (i) each such Subsequent Receivable must satisfy the
eligibility criteria specified in the Pooling and Servicing Agreement and
shall not have been selected from among such eligible Receivables in a manner
that CTL or the Depositor deems adverse to the interests of the
Certificateholders; (ii) as of the related Subsequent Cutoff Date, the
Receivables in the Trust at that time, including the Subsequent Receivables to
be conveyed by the Depositor as of such Subsequent Cutoff Date, will satisfy
the parameters described under "The Receivables Pool" herein and under "The
Receivables Pools" in the Prospectus; and (iii) CTL shall have executed and
delivered to the Depositor, and the Depositor shall have executed and
delivered to the Trustee, a written assignment conveying such Subsequent
Receivables to the Depositor and the Trust, respectively (including a schedule
identifying such Subsequent Receivables). Moreover, any such conveyance of
Subsequent Receivables will also be subject to the satisfaction
S-17
<PAGE>
of the following requirements within days after the termination of the Funding
Period: (a) the Depositor must deliver certain opinions of counsel to the
Trustee and the Rating Agencies with respect to the validity of the conveyance
of the Subsequent Receivables to the Trust; (b) the Trustee shall have
received written confirmation from a firm of certified independent public
accountants that the Receivables, including the Subsequent Receivables,
satisfy the parameters described under "The Receivables Pool" herein and under
"The Receivables Pools" in the Prospectus; and (c) the Rating Agencies shall
have notified the Depositor in writing that, following the addition of the
Subsequent Receivables to the Trust, the Certificates will continue to be
rated by such Rating Agencies in the same rating categories in which they were
rated on the Closing Date. Such confirmation of the ratings of the
Certificates may depend on factors other than the characteristics of the
Subsequent Receivables, including the delinquency, repossession and net loss
experience on the automobile, light duty truck and minivan receivables in the
portfolio serviced by the Servicer. CTL will immediately repurchase from the
Trustee, at a price equal to the Purchase Amount thereof, any Subsequent
Receivable that fails to satisfy any of the foregoing conditions subsequent.
Subsequent Receivables may have been originated or acquired by CTL at a
later date using credit criteria different from those that were applied to the
Initial Receivables. See "Risk Factors--Conveyance of Subsequent Receivables
to the Trust" and "The Receivables Pool" herein.
ACCOUNTS
In addition to the Certificate Account (as described in the Prospectus), the
Servicer will establish with the Trustee for the benefit of the
Certificateholders [the Yield Supplement Account,] the Cash Collateral Account
[and the Payahead Account].
Yield Supplement Account. For each Receivable on which the Contract Rate is
less than the sum of (a) the initial weighted average of the Class A Pass-
Through Rate and the Class B Pass-Through Rate and (b) the annual percentage
rate at which the Servicing Fee is calculated with respect to the Certificate
Principal Balance for such Receivable, on the Closing Date the Depositor will
deposit into the Yield Supplement Account an amount equal to the aggregate of
such shortfall over the term of such Receivables (the "Total Yield Supplement
Deposit") based on the scheduled payments of the Receivables. On each
Determination Date, the Servicer shall withdraw an amount to apply to
distributions on the Certificates on the related Distribution Date equal to
the scheduled shortfall for the previous Collection Period (the "Yield
Supplement Amount"). The Yield Supplement Account will be maintained by the
Trustee for the benefit of the Certificateholders, but will not form part of
the Trust. (Section .)
Cash Collateral Account. On the Closing Date, the Depositor will deposit an
amount equal to % of the initial Certificate Principal Balance into the
Cash Collateral Account. Thereafter, the amount held in the Cash Collateral
Account will be increased up to the Required Cash Collateral Amount by the
deposit thereto of payments on the Receivables not utilized to make payments
to the Certificateholders or the Servicer on any Distribution Date. While it
is intended that the Cash Collateral Account will grow over time to equal the
Required Cash Collateral Amount through monthly deposits of excess collections
on the Receivables, if any, there can be no assurance that such growth will
actually occur.
Under the terms of the Pooling and Servicing Agreement, the Trustee will
withdraw funds from the Cash Collateral Account and transfer them to the
Certificate Account for any deficiency as described above under "--
Distributions on the Certificates", to the extent available. Amounts available
for deficiencies on any Distribution Date will be limited to the sum of
amounts on deposit in the Cash Collateral Account on such Distribution Date.
In the event that the balance of the Cash Collateral Account is reduced to
zero on any Distribution Date, the Trust will depend solely on current
distributions on the Receivables to make distributions of principal and
interest on the Certificates. In addition, because the market value of motor
vehicles generally declines with age and because of difficulties that may be
encountered in enforcing motor vehicle contracts as described in the
Prospectus under "Certain Legal Aspects of the Receivables," the Servicer may
not recover the entire amount
S-18
<PAGE>
due on such Receivables in the event of a repossession and resale of a
Financed Vehicle securing a Receivable in default. In such event, the
Certificateholders may suffer a corresponding loss. Any such losses would also
be borne first by the Class B Certificateholders, up to the Class B Principal
Balance, and then by the Class A Certificateholders.
Payahead Account. On the Closing Date, the Depositor will establish the
Payahead Account, into which payments on Precomputed Receivables will be
deposited and held until they are withdrawn and applied as payments on the
Certificates. [DESCRIBE MECHANISM FOR DETERMINING THE PRECOMPUTED PAYMENT
SCHEDULE.]
SUBORDINATION OF THE CLASS B CERTIFICATES
The rights of the Class B Certificateholders to receive distributions with
respect to the Receivables will be subordinated to such rights of the Class A
Certificateholders to the extent described herein. This subordination is
intended to enhance the likelihood of timely receipt by the Class A
Certificateholders of the full amount of interest and principal distributable
to them on each Distribution Date, and to afford the Class A
Certificateholders limited protection against losses in respect of the
Receivables.
No distribution of interest will be made to the Class B Certificateholders
on any Distribution Date until the full amount of interest payable on the
Class A Certificates on such Distribution Date has been distributed to the
Class A Certificateholders and no distribution of principal will be made to
the Class B Certificateholders on any Distribution Date 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 will not be subordinated
to distributions of principal of the Class A Certificates. Because the rights
of the Class B Certificateholders to receive distributions of principal will
be subordinated to the rights of the Class A Certificateholders to receive
distributions of interest and principal, the Class B Certificates will be more
sensitive than the Class A Certificates to losses on the Receivables. If the
aggregate amount of losses on the Receivables exceeds the amount on deposit in
the Cash Collateral Account, Class B Certificateholders may not recover their
initial investment in the Class B Certificates.
In the event of delinquencies or losses on the Receivables, the protection
afforded to the Class A Certificateholders will be effected both by the
preferential right of the Class A Certificateholders to receive distributions
on the Receivables in the manner and to the extent described above and by the
establishment of the Cash Collateral Account.
ADVANCES
To the extent that interest collected on a Receivable during a Collection
Period falls short of the scheduled interest payment, the Servicer will make
an Advance of the resulting Interest Shortfall, but only to the extent that
the Servicer in its sole discretion, expects to recoup the Advance from
subsequent collections on the Receivable, or withdrawals from the Cash
Collateral Account. The Servicer will deposit the Advance in the Certificate
Account on or before the calendar day of the month following the Collection
Period. The Servicer will recoup its Advance from subsequent payments by or on
behalf of the respective Obligor, from insurance proceeds or, upon the
Servicer's determination that reimbursement from the preceding sources is
unlikely, will recoup its Advance from any collections made on other
Receivables. (Section 14.05.)
DISTRIBUTIONS ON THE CERTIFICATES
The Servicer will deposit in the Certificate Account the amount of payments
on all Receivables received with respect to the preceding Collection Period,
the Yield Supplement Amount for the related Distribution Date, all Advances
for such Collection Period, and the Purchase Amount for all Receivables that
became Purchased Receivables during the preceding Collection Period, all of
which amounts will be available for distribution pursuant to the terms of the
Pooling and Servicing Agreement on the next succeeding Distribution Date
("Available Funds") and will determine the amount of funds necessary to make
distributions of Monthly
S-19
<PAGE>
Principal and Monthly Interest to the Certificateholders and the Servicing Fee
to the Servicer. If there is a deficiency with respect to the foregoing, the
Servicer will withdraw amounts, to the extent available, from the Cash
Collateral Account in the amount of such deficiency and notify the Trustee of
any remaining deficiency.
If acceptable to each Rating Agency without a reduction in the rating of any
class of Certificates, the Servicing Fee due to the Servicer in respect of
each Collection Period will be distributed to the Servicer at the beginning of
such Collection Period from collections during such Collection Period.
On each such Distribution Date, the Trustee will apply or cause to be
applied the Available Funds plus any amounts withdrawn from the Cash
Collateral Account to make the following payments in the following priority:
(a) the aggregate amount of outstanding Advances on all Receivables (x)
that became Defaulted Receivables during the prior Collection Period, and
(y) that the servicer determines to be unrecoverable, to the Servicer;
(b) the Servicing Fee, including any overdue Servicing Fee, to the
Servicer, to the extent not previously distributed to the Servicer;
(c) pro rata, Class A Monthly Interest, including any overdue Class A
Monthly Interest, to the Class A Certificateholders;
(d) Class B Monthly Interest, including any overdue Class B Monthly
Interest, to the Class B Certificateholders;
(e) Class A Monthly Principal, to the Class A Certificateholders;
(f) Class B Monthly Principal, to the Class B Certificateholders;
(g) the amount of recoveries of Advances (to the extent such recoveries
have not previously been reimbursed to the Servicer pursuant to clause (a)
above), to the Servicer;
(h) the amount of Liquidation Proceeds on Purchased Receivables purchased
by the Servicer, to the Servicer;
(i) the amount of Liquidation Proceeds on Purchased Receivables
repurchased by the Depositor, to the Depositor; and
(j) the balance into the Cash Collateral Account.
After all distributions pursuant to clauses (a) through (j) above have been
made on each Distribution Date, the amount of funds remaining in the Cash
Collateral Account on such date, if any, in excess of the Required Cash
Collateral Amount, will be distributed by the Trustee to CTL. Any amounts so
distributed to CTL will no longer be available for distribution to
Certificateholders, and the Certificateholders will have no rights with
respect thereto.
"Monthly Interest" for any Distribution Date will equal the sum of the Class
A Monthly Interest and the Class B Monthly Interest.
"Monthly Principal" for any Distribution Date will equal the sum of the
Class A Monthly Principal and the Class B Monthly Principal.
"Class A Monthly Interest" for any Distribution Date will equal (i) for the
first Distribution Date, the product of the following: (one-twelfth of the
Class A Pass-Through Rate) multiplied by (the number of days remaining in the
month of the Closing Date from the Closing Date divided by 30) multiplied by
(the Class A Principal Balance at the Closing Date) and (ii) with respect to
each subsequent Distribution Date, the product of one-twelfth of the Class A
Pass-Through Rate and the Class A Principal Balance on the preceding
Distribution Date (after giving effect to any distribution of Monthly
Principal required to be made on such preceding Distribution Date).
"Class A Monthly Principal" for any Distribution Date will equal the amount
necessary to reduce the Class A Principal Balance to % of the aggregate
unpaid principal balances of the Receivables on the last day of
S-20
<PAGE>
the preceding Collection Period; provided, however, that Class A Monthly
Principal on the final scheduled Distribution Date will equal the Class A
Principal Balance on such date. For the purpose of determining Class A Monthly
Principal, the unpaid principal balance of a Defaulted Receivable or a
Purchased Receivable is deemed to be zero on and after the last day of the
Collection Period in which such Receivable became a Defaulted Receivable or a
Purchased Receivable.
"Class B Monthly Interest" for any Distribution Date will equal (i) for the
first Distribution Date, the product of the following: (one-twelfth of the
Class B Pass-Through Rate) multiplied by (the number of days remaining in the
month of the Closing Date from the Closing Date divided by 30) multiplied by
(the Class B Principal Balance at the Closing Date) and (ii) with respect to
each subsequent Distribution Date, the product of one-twelfth of the Class B
Pass-Through Rate and the Class B Principal Balance on the preceding
Distribution Date (after giving effect to any distribution of Monthly
Principal required to be made on such preceding Distribution Date).
"Class B Monthly Principal" for any Distribution Date will equal the amount
necessary to reduce the Class B Principal Balance to % of the sum of the
aggregate unpaid principal balances of the Receivables on the last day of the
preceding Collection Period; provided, however, that Class B Monthly Principal
on the final scheduled Distribution Date will equal the Class B Principal
Balance on such date. For the purpose of determining Class B Monthly
Principal, the unpaid principal balance of a Defaulted Receivable or a
Purchased Receivable is deemed to be zero on and after the last day of the
Collection Period in which such Receivable became a Defaulted Receivable or a
Purchased Receivable.
"Defaulted Receivable" will mean, for any Collection Period, a Receivable as
to which any of the following has occurred: (i) the Receivable is 90 days or
more delinquent as of the last day of such Collection Period; (ii) the
Financed Vehicle that secures the Receivable has been repossessed; or (iii)
the Receivable has been determined to be uncollectible in accordance with the
Servicer's customary practices on or prior to the last day of such Collection
Period; provided, however, that any Receivable which the Depositor or the
Servicer is obligated to repurchase or purchase pursuant to the Pooling and
Servicing Agreement shall be deemed not to be a Defaulted Receivable.
As an administrative convenience, the Servicer will be permitted to make the
deposit of collections and aggregate Advances and Purchase Amounts for or with
respect to the Collection Period, net of distributions to be made to the
Servicer or Depositor with respect to the Collection Period. The Servicer,
however, will account to the Trustee and to the Certificateholders as if all
deposits and distributions were made individually. (Section .)
The following chart sets forth an example of the application of the
foregoing provisions to a monthly distribution:
<TABLE>
<C> <S>
........................ Collection Period. The Servicer receives monthly
payments, prepayments, and other proceeds in respect
of the Receivables and deposits them in the
Certificate Account. [The Servicer may deduct
Servicing Fees from such deposits.]
........................ Record Date. Distributions on the Distribution Date
are made to Certificateholders of record at the close
of business on this date.
........................ Fifth calendar day. On or before this date, the
Servicer notifies the Trustee of the amounts to be
distributed on the Distribution Date.
........................ The Trustee withdraws funds from the Cash Collateral
Account, if necessary.
........................ Distribution Date. The Trustee distributes to
Certificateholders amounts payable in respect of the
Certificates[, and pays the Servicing Fee].
</TABLE>
S-21
<PAGE>
ERISA CONSIDERATIONS
[SUBJECT TO THE CONSIDERATIONS SET FORTH UNDER "ERISA CONSIDERATIONS--SENIOR
CERTIFICATES ISSUED BY GRANTOR TRUSTS" IN THE PROSPECTUS, THE CLASS A
CERTIFICATES MAY BE ELIGIBLE FOR PURCHASE BY AN EMPLOYEE BENEFIT PLAN OR AN
INDIVIDUAL RETIREMENT ACCOUNT (A "PLAN") SUBJECT TO ERISA OR SECTION 4975 OF
THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"). A FIDUCIARY OF A
PLAN MUST DETERMINE THAT THE PURCHASE OF A CLASS A CERTIFICATE IS CONSISTENT
WITH ITS FIDUCIARY DUTIES UNDER ERISA AND DOES NOT RESULT IN A NONEXEMPT
PROHIBITED TRANSACTION AS DEFINED IN SECTION 406 OF ERISA OR SECTION 4975 OF
THE CODE. FOR ADDITIONAL INFORMATION REGARDING TREATMENT OF THE CLASS A
CERTIFICATES UNDER ERISA, SEE "ERISA CONSIDERATIONS" IN THE PROSPECTUS.
BECAUSE THE CLASS B CERTIFICATES ARE SUBORDINATED TO THE CLASS A
CERTIFICATES, THE CLASS B CERTIFICATES MAY NOT BE PURCHASED BY PLANS.] [TO BE
REVISED FOR EACH ISSUANCE]
UNDERWRITING
Under the terms and subject to the conditions set forth in the underwriting
agreement for the sale of the Certificates, dated, 199 , the Depositor
has agreed to sell and each of the underwriters named below (the
"Underwriters") severally agreed to purchase the principal amount of the
Certificates set forth opposite its name below:
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT OF PRINCIPAL AMOUNT OF
UNDERWRITERS CLASS A CERTIFICATES CLASS B CERTIFICATES
------------ -------------------- --------------------
<S> <C> <C>
................................ $ $
................................
----- -----
Total............................. $ $
===== =====
</TABLE>
In the underwriting agreement, the Underwriters have agreed, subject to the
terms and conditions set forth therein, to purchase all the Certificates
offered hereby if any of the Certificates are purchased.
The Underwriters propose to offer part of the Certificates directly to the
public at the prices set forth on the cover page hereof, and part to certain
dealers at a price that represents a concession not in excess of % of the
denominations of the Class A Certificates or % of the denominations of the
Class B Certificates. The Underwriters may allow and such dealers may reallow
a concession not in excess of % of the denominations of the Class A
Certificates or % of the denominations of the Class B Certificates.
The Depositor, Bay View and CTL have agreed to indemnify the Underwriters
against certain liabilities, including liabilities under the Securities Act.
The Depositor has been advised by the Underwriters that the Underwriters
presently intend to make a market in the Certificates, as permitted by
applicable laws and regulations. The Underwriters are not obligated, however,
to make a market in the Certificates and any such market-making may be
discontinued at any time at the sole discretion of the Underwriters.
Accordingly, no assurance can be given as to the liquidity of, or trading
markets for, the Certificates.
LEGAL OPINIONS
Certain legal matters relating to the Certificates will be passed upon for
the Depositor by Silver, Freedman & Taff, L.L.P., Washington, D.C., and for
the Underwriters by Cadwalader, Wickersham & Taft, New York, New York. Certain
federal income tax consequences with respect to the Certificates will be
passed upon for the Depositor by Silver, Freedman & Taff, L.L.P.
S-22
<PAGE>
INDEX OF PRINCIPAL TERMS
<TABLE>
<CAPTION>
TERM PAGE
---- ----
<S> <C>
Available Funds............................................................
Bay View...................................................................
Certificate Principal Balance..............................................
Certificateholders.........................................................
Certificates...............................................................
Class A Principal Balance..................................................
Class A Certificateholders.................................................
Class A Certificates.......................................................
Class A Monthly Interest...................................................
Class A Monthly Principal..................................................
Class A Pass-Through Rate..................................................
Class A Percentage.........................................................
Class B Principal Balance..................................................
Class B Certificateholders.................................................
Class B Certificates.......................................................
Class B Monthly Interest...................................................
Class B Monthly Principal..................................................
Class B Pass-Through Rate..................................................
Class B Percentage.........................................................
Closing Date...............................................................
Code.......................................................................
CTL........................................................................
Cutoff Date................................................................
Defaulted Receivable.......................................................
Depositor..................................................................
Distribution Date..........................................................
Final Scheduled Distribution Date..........................................
Final Scheduled Maturity Date..............................................
Funding Period.............................................................
Initial Cutoff Date........................................................
Initial Receivables........................................................
Monthly Interest...........................................................
Monthly Principal..........................................................
Optional Purchase..........................................................
Plan.......................................................................
Pooling and Servicing Agreement............................................
Pre-Funded Amount..........................................................
Pre-Funding Account........................................................
Purchase Agreement.........................................................
Receivables................................................................
Receivables Pool...........................................................
Record Date................................................................
Required Cash Collateral Amount............................................
Servicer...................................................................
Subsequent Cutoff Date.....................................................
Subsequent Receivables.....................................................
Subsequent Transfer Date...................................................
Total Yield Supplement Deposit.............................................
Trust......................................................................
Underwriters...............................................................
Yield Supplement Amount....................................................
</TABLE>
S-23
<PAGE>
[SURETY BOND FINANCIAL INFORMATION]
S-24
<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. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION DATED NOVEMBER , 1996
PROSPECTUS
BAY VIEW AUTO TRUSTS
ASSET BACKED CERTIFICATES
-----------
BAY VIEW SECURITIZATION CORPORATION
DEPOSITOR
CALIFORNIA THRIFT & LOAN
SERVICER
The asset backed certificates described herein (the "Certificates") may be
sold from time to time in one or more series (each, a "Series"), in amounts, at
prices and on terms to be determined at the time of sale and to be set forth in
a supplement to this Prospectus (a "Prospectus Supplement"). Each Series of
Certificates will be issued by a trust (each, a "Trust") to be formed with
respect to such Series and will include one or more classes of Certificates.
The property of each Trust will include a pool of motor vehicle installment
sale or installment loan contracts secured by new and used automobiles, light
trucks, motorcycles and vans (the "Receivables"), certain monies received
thereunder after the applicable cutoff date, security interests in the vehicles
financed thereby and certain other property, as more fully described herein and
in the related Prospectus Supplement. If so specified in the related Prospectus
Supplement, the property of a Trust will include monies on deposit in a trust
account, which will be used to purchase additional Receivables after the
related closing date. California Thrift & Loan will act as servicer (in such
capacity, the "Servicer") of the Receivables for each Trust. Except as
otherwise specified in the related Prospectus Supplement, each class of
Certificates of any Series will represent the right to receive a specified
amount of payments of principal and interest on the related Receivables, at the
rates, on the dates and in the manner described herein and in the related
Prospectus Supplement. If so provided in the related Prospectus Supplement, a
Series of Certificates may include one or more classes of Certificates entitled
to interest distributions with disproportionate, nominal or no distributions in
respect of principal, or to principal distributions with disproportionate,
nominal or no distributions in respect of interest. As more fully described
herein and in the related Prospectus Supplement, distributions on any class of
Certificates may be senior or subordinate to distributions on one or more other
classes of Certificates of the same Series. Prospective investors should
consider the factors set forth under "Risk Factors" on page of this
Prospectus and in the related Prospectus Supplement.
-----------
EXCEPT AS OTHERWISE SPECIFIED IN THE RELATED PROSPECTUS SUPPLEMENT, THE
CERTIFICATES OF A SERIES WILL REPRESENT BENEFICIAL INTERESTS IN THE RELATED
TRUST ONLY, AND WILL NOT REPRESENT OBLIGATIONS OF OR INTERESTS IN, AND ARE NOT
GUARANTEED OR INSURED BY, BAY VIEW SECURITIZATION CORPORATION, ANY AFFILIATE
THEREOF OR ANY GOVERNMENTAL INSTRUMENTALITY.
THESE CERTIFICATES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
-----------
Retain this Prospectus for future reference. This Prospectus may not be used
to consummate sales of Certificates of any Series unless accompanied by the
related Prospectus Supplement.
-----------
, 1996
<PAGE>
AVAILABLE INFORMATION
The Depositor, as originator of the Trusts, has filed with the Securities
and Exchange Commission (the "Commission") a Registration Statement on Form S-
3 (together with all amendments and exhibits thereto, the "Registration
Statement") under the Securities Act of 1933, as amended, with respect to the
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, 450 Fifth Street,
N.W., Washington, D.C. 20549, and the regional offices of the Commission at
5670 Wilshire Boulevard, 11th Floor, Los Angeles, California 90036-3648, 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. In addition, the Commission maintains a Web site that
contains reports, proxy and information statements and other information
regarding the Depositor's electronic filings with the Commission. The address
of the Commission's Web site is "http://www.sec.gov".
Upon receipt of a request by an investor who has received an electronic
Prospectus Supplement and 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 Supplement and Prospectus, the Depositor or
such Underwriter will promptly deliver, or cause to be delivered, without
charge, to such investor a paper copy of the Prospectus Supplement and
Prospectus.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All documents filed by the Servicer or the Depositor on behalf of the Trust
referred to in the accompanying Prospectus Supplement with the Commission
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), after the date of this Prospectus
and prior to the termination of the offering of the Certificates offered by
such Trust shall be deemed to be incorporated by reference in this Prospectus
and to be a part hereof from the dates of filing of such documents. Any
statement contained herein or in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained
herein (or in the accompanying Prospectus Supplement) or in any subsequently
filed document that also is or is deemed to be incorporated by reference
herein modifies or supersedes such statement. Any such statement so modified
or superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
The Servicer on behalf of any Trust will provide without charge to each
person to whom a copy of this Prospectus is delivered, on the written or oral
request of such person, a copy of any or all of the documents incorporated
herein by reference. Requests to the Servicer for such copies should be
addressed to California Thrift & Loan, 818 Oakpark Road, Covina, California
91724, ( ) - .
3
<PAGE>
SUMMARY OF TERMS
This Summary is qualified in its entirety by reference to the detailed
information appearing elsewhere in this Prospectus and by reference to the
information with respect to each Series of Certificates contained in the
related Prospectus Supplement to be prepared and delivered in connection with
the offering of such Certificates. Certain capitalized terms used in this
summary are defined elsewhere in this Prospectus on the pages indicated in the
"Index of Terms."
Issuer........................ With respect to any Series of Certificates, a
Trust formed pursuant to a pooling and
servicing agreement (each, a "Pooling and
Servicing Agreement") among the Depositor, the
Servicer and the Trustee for such Trust.
Depositor..................... Bay View Securitization Corporation, a Delaware
corporation having its principal office and
place of business in San Mateo, California (the
"Depositor"). The Depositor's principal
executive offices are located at 2121 South El
Camino Real, San Mateo, California 94403, and
its telephone number is (415) 573-7300.
Servicer...................... California Thrift & Loan, a California
corporation having its principal office and
place of business in Santa Barbara, California
(in its capacity as servicer, the "Servicer",
otherwise "CTL") The Servicer's operations are
located at 818 Oakpark Road, Covina, California
91724, and its telephone number is ( ) -
.
Trustee....................... With respect to each Trust, the trustee
specified in the related Prospectus Supplement
(the "Trustee").
Securities Offered............ Each Series of asset backed securities issued
by a Trust will consist of one or more classes
of Certificates. Each class of Certificates of
a Series will be issued pursuant to the related
Pooling and Servicing Agreement. The related
Prospectus Supplement will specify which class
or classes of Certificates of the related
Series are being offered thereby.
Unless otherwise specified in the related
Prospectus Supplement, each class of
Certificates will have a stated certificate
balance (the "Class Certificate Balance") and
will accrue interest on such Class Certificate
Balance at a specified rate (with respect to
each class of Certificates, the "Pass-Through
Rate"). If so specified in the related
Prospectus Supplement, one or more classes of
Certificates ("Strip Certificates") may be
entitled to (i) interest distributions with
disproportionate, nominal or no principal
distributions or (ii) principal distributions
with disproportionate, nominal or no interest
distributions. See "Description of the
Certificates--Distributions of Principal and
Interest".
4
<PAGE>
Each class of Certificates may have a different
Pass-Through Rate, which may be a fixed,
variable or adjustable Pass-Through Rate, or
any combination of the foregoing. The related
Prospectus Supplement will specify the Pass-
Through Rate, or the method for determining the
applicable Pass-Through Rate, for each class of
Certificates.
A Series of Certificates may include two or
more classes of Certificates that differ as to
timing and/or priority distributions,
seniority, allocations of losses, Pass-Through
Rate, amount of distributions in respect of
principal or interest, or any combination of
the foregoing. Additionally, distributions in
respect of principal or interest in respect of
any such class or classes may or may not be
made upon the occurrence of specified events or
on the basis of collections from designated
portions of the related Receivables Pool.
Unless otherwise specified in the related
Prospectus Supplement, Certificates will be
available in book-entry form only and will be
available for purchase in minimum denominations
of $1,000 and integral multiples thereof,
except that one Certificate of each class may
be issued in such denomination as is required
to include any residual amount.
Certificateholders will not be able to receive
physical delivery of the Certificates
beneficially owned by book-entry registration
except in the limited circumstances described
herein or in the related Prospectus Supplement.
See "Description of the Certificates--
Definitive Certificates" and "--Book-Entry
Registration."
If so provided in the related Prospectus
Supplement, the Servicer or one or more other
entities may be entitled to purchase the
Receivables of a Trust or to cause such
Receivables to be purchased by another entity,
in the manner and subject to the conditions
described in such Prospectus Supplement. If the
Servicer or any such other entity exercises any
such option to purchase the Receivables or to
cause the Receivables to be purchased, the
Certificates will be prepaid as set forth in
the related Prospectus Supplement. See
"Description of the Transfer and Servicing
Agreements--Termination" herein. In addition,
if the related Prospectus Supplement provides
that the property of a Trust will include a
Pre-Funding Account, one or more classes of
Certificates may be subject to a partial
prepayment of principal following the end of
the Funding Period, in the manner and to the
extent specified in the related Prospectus
Supplement. See "Description of the Transfer
and Servicing Agreements--Accounts--Pre-Funding
Account" herein.
The Trust Property............ The property of each Trust will include a pool
of simple interest and/or precomputed interest
installment sale and installment loan contracts
secured by new and used automobiles, light
trucks,
5
<PAGE>
motorcycles and vans (the "Receivables"),
certain monies due or received thereunder after
the date specified in the related Prospectus
Supplement (each, a "Cutoff Date"), security
interests in the vehicles financed thereby (the
"Financed Vehicles"), any right to recourse the
purchaser of the Receivables may have against
the dealers who sold the Financed Vehicles (the
"Dealers"), proceeds from claims on certain
insurance policies, and certain rights under
the purchase agreement (each, a "Purchase
Agreement") among CTL and the Depositor
pursuant to which the Depositor will purchase
the related Receivables from CTL. The property
of each Trust also will include amounts on
deposit in, or certain rights with respect to,
certain accounts, including the related
Certificate Account and any Pre-Funding
Account, Cash Collateral Account, Yield
Supplement Account or any other account or
assets identified in the applicable Prospectus
Supplement. See "Description of the Transfer
and Servicing Agreements--Accounts".
Unless otherwise specified in the related
Prospectus Supplement, the Receivables arise,
or will arise, from motor vehicle installment
sale contracts that were originated by new and
used car dealers for assignment to CTL or motor
vehicle loan contracts that were solicited by
dealers for origination by CTL (the
"Contracts"). Payment of the amount due under
each Contract is secured by a first perfected
security interest in the related Financed
Vehicle. Unless otherwise specified in the
related Prospectus Supplement, CTL is the
registered lienholder on the certificate of
title of each of the Financed Vehicles. The
Receivables for each Receivables Pool will be
selected from the Contracts owned by CTL based
on the criteria specified in the related
Pooling and Servicing Agreement and described
herein under "The Receivables Pools" and
"Description of the Transfer and Servicing
Agreement--Sale and Assignment of Receivables"
and in the related Prospectus Supplement under
"The Receivables Pool".
On the date of issuance of a Series of
Certificates (each, a "Closing Date"), the
Depositor will convey Receivables to the
related Trust in the aggregate principal amount
provided in the related Prospectus Supplement
and, if so provided in such Prospectus
Supplement, will deposit the amount specified
in such Prospectus Supplement (the "Pre-Funded
Amount") into a trust account established in
the name of the Trustee for the benefit of the
Certificateholders (the "Pre-Funding Account").
The Pre-Funded Amount with respect to any Trust
will not exceed 25% of the initial aggregate
Class Certificate Balances for the related
Series (the "Certificate Balance").
If the property of a Trust includes a Pre-
Funding Account, CTL will be obligated under
the related Purchase Agreement to sell
additional Receivables (the "Subsequent
Receivables") to the
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Depositor from time to time during the period
provided in the related Prospectus Supplement
(the "Funding Period") having an aggregate
principal balance approximately equal to the
Pre-Funded Amount. The Depositor, in turn, will
be obligated under the Pooling and Servicing
Agreement to sell such Subsequent Receivables
to the related Trust, and the Trust will be
obligated to purchase the Subsequent
Receivables, subject to the satisfaction of
certain conditions set forth in the Pooling and
Servicing Agreement and described herein under
"Description of the Transfer and Servicing
Agreements--Sale and Assignment of
Receivables". As used in this Prospectus, the
term Receivables will include the Receivables
transferred to a Trust on the related Closing
Date as well as any Subsequent Receivables
transferred to such Trust during the related
Funding Period.
Amounts on deposit in any Pre-Funding Account
during the Funding Period will be invested by
the Trustee (as directed by the Servicer) in
Eligible Investments, and any resultant
investment income (less any related investment
expenses) will be included, on the Distribution
Date immediately following the date on which
such investment income is paid to the Trust, in
the Available Funds for such Distribution Date.
Any funds remaining in a Pre-Funding Account at
the end of the related Funding Period will be
distributed to holders of the related Series of
Certificates (the "Certificateholders") as a
prepayment of principal of the Certificates, in
the amounts and priority described in the
related Prospectus Supplement. No Funding
Period will continue for more than three
calendar months after the related Closing Date.
See "Description of the Transfer and Servicing
Agreements--Accounts--Pre-Funding Account".
In each Purchase Agreement, CTL will make
certain representations and warranties with
respect to the related Receivables and will
undertake to repurchase from the Depositor at
the Purchase Amount (as defined herein) any
Receivable with respect to which there exists
an uncured breach of any of its representations
or warranties, if such breach materially and
adversely affects the rights of the Depositor,
or the Depositor's assignee, in such
Receivable. Unless otherwise provided in the
related Prospectus Supplement, in each Pooling
and Servicing Agreement, the Depositor will
assign to the related Trust certain rights
under the related Purchase Agreement, including
the right to cause CTL to repurchase any
Receivable in respect of which there is an
uncured breach of a representation or warranty
that materially and adversely affects the
interest of the Trust in such Receivable. The
repurchase obligation pursuant to each Purchase
Agreement and Pooling and Servicing Agreement
will constitute the sole remedy available to
the related Certificateholders or Trustee for
any uncured breach of a representation or
warranty. See "Description of the Transfer and
Servicing Agreements--Sale and Assignment of
Receivables".
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Credit and Cash Flow
Enhancement.................. If, and to the extent, specified in the related
Prospectus Supplement, credit enhancement with
respect to a Trust or any class or classes of
Certificates may include any one or more of the
following: subordination of one or more other
classes of Certificates of the same Series,
Cash Collateral Accounts, yield supplement
accounts, spread accounts, surety bonds,
insurance policies, letters of credit, credit
or liquidity facilities, over-
collateralization, guaranteed investment
contracts, swaps or other interest rate
protection agreements, repurchase obligations,
other agreements with respect to third-party
payments or other support, cash deposits, or
other arrangements. To the extent specified in
the related Prospectus Supplement, a form of
credit enhancement with respect to a Trust or
class or classes of Certificates may be subject
to certain limitations and exclusions from
coverage thereunder.
Transfer and Servicing
Agreements................... Unless otherwise provided in the related
Prospectus Supplement, pursuant to each
Purchase Agreement, CTL will sell the related
Receivables to the Depositor without recourse
and, if so stated in the related Prospectus
Supplement, will undertake to sell Subsequent
Receivables, in the aggregate amount specified
therein, to the Depositor during the related
Funding Period. The Depositor, in turn, will
sell such Receivables to the related Trust,
without recourse, and will undertake to sell
any such Subsequent Receivables to the related
Trust during the related Funding Period. In
addition, the Servicer will agree in each
Pooling and Servicing Agreement to be
responsible for servicing, managing,
maintaining custody of and making collections
on the related Receivables.
Unless otherwise provided in the related
Prospectus Supplement, the Servicer will
advance funds (each, an "Advance") on the
Receivables made during the preceding calendar
month (the "Collection Period") to cover 30
days of interest due on a Receivable that is
more than 30 days delinquent (each, an
"Interest Shortfall"), but only to the extent
that the Servicer, in its sole discretion,
expects to be able to recoup such Advance from
subsequent payments on the Receivable. Advances
by the Servicer will add to the funds available
for distributions to Certificateholders on a
Distribution Date, but the Servicer will be
entitled to reimbursement for such Advances
from subsequent payments of the Receivables or,
to the extent set forth in the related
Prospectus Supplement, from insurance proceeds
or withdrawals from any Cash Collateral Account
or similar form of credit enhancement. See
"Description of the Transfer and Servicing
Agreements--Advances".
Unless otherwise provided in the related
Prospectus Supplement, CTL will be obligated to
repurchase from the Trust any Receivable in
which the interest of such Trust is materially
and
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adversely affected as a result of a breach of
any representation or warranty made by CTL in
the related Purchase Agreement if such breach
is not cured in a timely manner following the
discovery by or notice to CTL. In addition,
unless otherwise provided in the related
Prospectus Supplement, the Servicer will be
obligated under each Pooling and Servicing
Agreement to purchase any Receivable at the
Purchase Amount (as defined herein) if (i)
among other things, the Servicer reduces the
rate of interest under the related Contract
(the "Contract Rate"), reduces the amount of
the scheduled monthly payments or reduces the
amount financed or if the Servicer fails to
maintain a perfected security interest in the
related Financed Vehicle and (ii) the interest
of the Certificateholders in such Receivable is
materially and adversely affected by such
action or failure to act of the Servicer. If
the Servicer extends the date for final payment
by the obligor on the related Contract (each,
an "Obligor") so that the Receivable remains
outstanding on the final scheduled maturity
date with respect to a Series of Certificates
specified in the related Prospectus Supplement
(the "Final Scheduled Maturity Date"), the
Servicer will be obligated to purchase the
Receivable at the Purchase Amount as of the
last day of the Collection Period preceding
such Final Scheduled Maturity Date.
Unless otherwise specified in the related
Prospectus Supplement, the Servicer will
receive a fee for servicing the Receivables of
each Trust equal to the Servicing Fee Rate
times the aggregate outstanding principal
balance of the related Receivables (the "Pool
Balance"), plus certain late fees, prepayment
charges and other administrative fees or
similar charges. Unless otherwise provided in
the related Prospectus Supplement, the Servicer
may also receive investment earnings from
certain accounts and other cash flows with
respect to a Trust. See "Description of the
Transfer and Servicing Agreements--Servicing
Compensation and Payment of Expenses."
Certain Legal Aspects of the
Receivables; Repurchase
Obligations.................. In connection with each sale of Receivables by
CTL to the Depositor and by the Depositor to a
Trust, security interests in the related
Financed Vehicles will be assigned by CTL to
the Depositor and by the Depositor to the
Trust; due to administrative burden and
expense, however, the certificates of title to
such Financed Vehicles will not be amended to
reflect the assignment either to the Depositor
or to the Trust. In the absence of such an
amendment, the Trust may not have a perfected
security interest in the Financed Vehicles
securing the Receivables in some states.
Unless otherwise specified in the related
Prospectus Supplement, CTL will be obligated to
repurchase from a Trust any Receivable sold to
such Trust as to which all action necessary to
secure a first perfected security interest in
the name of the Trust in the
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Financed Vehicle securing such Receivable shall
not have been taken as of the date such
Receivable is purchased by such Trust, if such
breach materially and adversely affects the
interest of the related Certificateholders in
such Receivable and if such failure or breach
is not cured by the last day of the month
following the discovery by or notice to the
Servicer of such breach. If a Trust does not
have a perfected security interest in a
Financed Vehicle, its ability to realize on
such Financed Vehicle in the event of a default
may be adversely affected. To the extent the
security interest is perfected, a Trust will
have a prior claim over subsequent purchasers
of the Financed Vehicle and holders of
subsequently perfected security interests.
However, as against liens for repairs of
Financed Vehicles or for taxes unpaid by the
related Obligor, or through fraud or
negligence, a Trust could lose its security
interest or the priority of its security
interest in a Financed Vehicle. Neither the
Depositor nor CTL will be obligated to
repurchase a Receivable with respect to which a
Trust loses its security interest or the
priority of its security interest in the
related Financed Vehicle after the Closing Date
as the result of any such tax lien or
mechanic's lien or the fraud or negligence of a
third party.
Federal and state consumer protection laws
impose requirements on creditors in connection
with extensions of credit and collections of
retail installment loans, and certain of these
laws make an assignee of such a loan liable to
the obligor thereon for any violation by the
lender. Unless otherwise specified in the
related Prospectus Supplement, CTL will be
required to repurchase from the Trust any
Receivable that fails to comply with the
requirements of such consumer protection laws
on or before the last day of the month
following discovery by or notice to the
Servicer of such failure, if such failure
materially and adversely affects the interests
of the related Certificateholders in such
Receivable. See "Risk Factors--Certain Legal
Aspects--Security Interests in Financed
Vehicles" and "Certain Legal Aspects of the
Receivables".
Tax Considerations............ If a Prospectus Supplement specifies that the
related Trust is a grantor trust and except as
otherwise provided in such Prospectus
Supplement, upon the issuance of the related
Series of Certificates, special federal tax
counsel to the Trust identified in the related
Prospectus Supplement (the "Federal Tax
Counsel") will deliver an opinion to the effect
that such Trust will be treated as a grantor
trust for federal income tax purposes and will
not be subject to federal income tax.
If a Prospectus Supplement does not specify
that the related Trust is a grantor trust, upon
the issuance of the related Series of
Certificates, Federal Tax Counsel will deliver
an opinion to the effect that such Trust will
not be treated as an association taxable
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as a corporation or as a "publicly traded
partnership" taxable as a corporation. See
"Certain Federal Income Tax Consequences" for
additional information regarding the
application of federal tax laws to a Trust and
the related Series of Certificates.
ERISA Considerations.......... Subject to the considerations discussed under
"ERISA Considerations" herein and in the
related Prospectus Supplement and unless
otherwise provided therein, any Certificates
that meet certain United States Department of
Labor requirements are eligible for purchase by
employee benefit plans and other retirement
arrangements subject to Title I of the Employee
Retirement Income Security Act of 1974, as
amended ("ERISA") or Section 4975 of the
Internal Revenue Code of 1986, as amended (the
"Code"). Unless otherwise specified in the
related Prospectus Supplement, any class of
Certificates that is subordinated to any other
class of Certificates of the same Series may
not be acquired by any such employee benefit
plan or retirement arrangement. See "ERISA
Considerations" herein and in the related
Prospectus Supplement.
Ratings....................... It is a condition to the issuance of the
Certificates to be offered hereunder that they
be rated in one of the four highest rating
categories by at least one nationally
recognized statistical rating organization
(each, a "Rating Agency"). A rating is not a
recommendation to purchase, hold or sell
Certificates inasmuch as a rating does not
comment as to market price or suitability for a
particular investor. Ratings of Certificates
will address the likelihood of the payment of
principal of and interest on the Certificates
pursuant to their terms. There can be no
assurance that a rating will remain for a given
period of time or that a rating will not be
lowered or withdrawn entirely by a Rating
Agency if in its judgment circumstances in the
future so warrant. See "Risk Factors--Ratings
of the Certificates" herein. For more detailed
information regarding the ratings assigned to
any class of Certificates of a particular
Series, see "Summary of Terms--Ratings" and
"Risk Factors--Ratings of the Certificates" in
the related Prospectus Supplement.
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RISK FACTORS
In addition to the other information contained in this Prospectus and in the
related Prospectus Supplement to be prepared and delivered in connection with
the offering of any Series of Certificates, prospective investors should
carefully consider the following risk factors before investing in any class or
classes of Certificates of any such Series.
PRE-FUNDING ACCOUNTS
If so provided in the related Prospectus Supplement, on the Closing Date the
Depositor will deposit the Pre-Funded Amount specified in such Prospectus
Supplement into the Pre-Funding Account. In no event will the Pre-Funded
Amount exceed 25% of the initial Certificate Balance of the related Series of
Certificates. The Pre-Funded Amount will be used to purchase Subsequent
Receivables from the Depositor (which, in turn, will acquire such Subsequent
Receivables from CTL) from time to time during the Funding Period. During the
Funding Period and until such amounts are applied by the Trustee to purchase
Subsequent Receivables, amounts on deposit in the Pre-Funding Account will be
invested by the Trustee (as instructed by the Servicer) in Eligible
Investments, and any investment income with respect thereto (net of any
related investment expenses) will be distributed on each Distribution Date
during the Funding Period as part of the Available Funds for the related
Collection Period. No Funding Period will end more than three calendar months
after the related Closing Date.
To the extent that the entire Pre-Funded Amount has not been applied to the
purchase of Subsequent Receivables by the end of the related Funding Period,
any amounts remaining in the Pre-Funded Account will be distributed as a
prepayment of principal to Certificateholders following the end of the Funding
Period, in the amounts and pursuant to the priorities set forth in the related
Prospectus Supplement. Such prepayment will reduce the outstanding principal
balance of one or more classes of the related Series of Certificates and may
reduce the anticipated yield thereon.
SALES OF SUBSEQUENT RECEIVABLES
If so provided in the related Prospectus Supplement, (i) CTL will be
obligated pursuant to the Purchase Agreement to sell Subsequent Receivables
(subject only to the availability thereof) to the Depositor from time to time
during the Funding Period in an aggregate principal amount approximately equal
to the Pre-Funded Amount, (ii) the Depositor, in turn, will be obligated
pursuant to the Pooling and Servicing Agreement to sell such Subsequent
Receivables to the Trust and (iii) the Trust will be obligated to purchase
such Subsequent Receivables, subject only to the satisfaction of certain
conditions set forth in the Pooling and Servicing Agreement and described in
the related Prospectus Supplement. If the principal amount of eligible
Subsequent Receivables originated or acquired by CTL during a Funding Period
is less than the Pre-Funded Amount, CTL and the Depositor may have
insufficient Subsequent Receivables to transfer to a Trust, and holders of one
or more classes of the related Series of Certificates may receive a full or
partial prepayment of principal at the end of the Funding Period as described
above under "--Pre-Funding Accounts".
CERTAIN LEGAL ASPECTS--SECURITY INTERESTS IN FINANCED VEHICLES
Simultaneously with each sale of Receivables, CTL will assign to the
Depositor, and the Depositor will assign to the related Trust, security
interests in the related Financed Vehicles; due to administrative burden and
expense, however, the certificates of title to such Financed Vehicles will not
be amended to reflect the assignment to either the Depositor or the Trust. In
the absence of such amendments, a Trust may not have a perfected security
interest in such Financed Vehicles in some states. Except as otherwise
provided in the related Prospectus Supplement, CTL will be obligated to
repurchase from the related Trust any Receivable sold to a Trust as to which
all actions necessary to secure a first perfected security interest in the
name of the Trust in the Financed Vehicle securing such Receivable shall not
have been taken as of the date such Receivable is transferred to such Trust,
if such breach materially and adversely affects the interest of the
Certificateholders in such Receivable and if such failure or breach is not
timely cured following discovery by or notice thereof to the Depositor or CTL.
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If a Trust does not have a perfected security interest in a Financed
Vehicle, its ability to realize on such Financed Vehicle in the event of a
default may be adversely affected. To the extent the security interest is
perfected, the Trust will have a prior claim over subsequent purchasers of
such Financed Vehicle and holders of subsequently perfected security
interests; however, the Trust could lose its security interest or the priority
of its security interest in a Financed Vehicle as against liens for repairs of
such Financed Vehicle or for taxes unpaid by the related Obligor or through
fraud or negligence. Neither the Depositor nor CTL will have any obligation to
repurchase a Receivable in respect of which a Trust loses its security
interest or the priority of its security interest in the related Financed
Vehicle as the result of any such mechanic's or tax lien or the fraud or
negligence of a third party occurring after the date such security interest
was conveyed to the Trust. See "Certain Legal Aspects of the Receivables--
Security Interests in Vehicles".
SECURITY INTERESTS--TRANSFER OF RECEIVABLES
Generally each Receivable generally will be "chattel paper" as defined in
the Uniform Commercial Code ("UCC") as in effect in California (where CTL's
and the Depositor's chief executive offices are located) and the jurisdiction
in which the related Financed Vehicle was located at origination. Under the
UCC as in effect in each such jurisdiction, the sale of chattel paper is
treated in a manner similar to perfection of a security interest in chattel
paper. Each of CTL and the Depositor will make appropriate filings of UCC-1
financing statements in the Office of the Secretary of State of the State of
California to give notice of the sale of the Receivables. These steps may not
be sufficient to protect the Trust's interest in the Receivables against the
claims of CTL's creditors or a trustee of CTL in bankruptcy to the extent that
the Receivables do not constitute "chattel paper" within the meaning of the
UCC as in effect in California. The Trust's interest in the Receivable could
also be defeated if a subsequent purchaser were able to take physical
possession of the Receivables without notice of such assignment. Pursuant to
the Purchase Agreement, however, CTL will be obligated to repurchase a
Receivable if its representation and warranties with respect to the Receivable
are not true and correct.
CERTAIN LEGAL ASPECTS
Consumer Protection Laws. Federal and state consumer protection laws impose
requirements on creditors in connection with extensions of credit and
collections of retail installment loans, and certain of these laws make an
assignee of such a loan (such as a Trust) liable to the obligor thereon for
any violation by the lender. To the extent specified herein and in the related
Prospectus Supplement, CTL will be obligated to make certain indemnities and
to repurchase from the related Trust any Receivable that fails to comply with
such requirements. See "Certain Legal Aspects of the Receivables--Consumer
Protection Laws".
Insolvency Considerations. The Depositor has been established as a special
purpose subsidiary of Bay View Capital Corporation ("Bay View"), the holding
company of CTL, to reduce the risk of bankruptcy of the Depositor and its
resulting effect on the Certificates of each Series. In addition, the
Depositor has undertaken to follow certain procedures to preserve its
corporate separateness, with a view to maintaining the assets of the Depositor
separate from the assets of Bay View, with the result that the assets of the
Depositor would not be available directly to creditors of Bay View or its
affiliates, to the representative of any bankruptcy estate of Bay View or to
any receiver or conservator which may be appointed with respect to Bay View.
There can be no assurance, however, that, despite the bankruptcy remote nature
of the Depositor and the procedures described above, an appropriate party in
interest would not seek to consolidate the assets and liabilities of the
Depositor with those of Bay View or any of its affiliates or that the
appointment of the Federal Deposit Insurance Corporation ("FDIC") as receiver
or conservator of Bay View would not have an adverse impact on one or more
Series of Certificates.
CTL will warrant to the Depositor in each Purchase Agreement (the benefit of
which warranty will be assigned by the Depositor to each Trust in the related
Pooling and Servicing Agreement), that the sale of the related Receivables by
CTL to the Depositor is a sale, and not a financing, of the Receivables to the
Depositor. Likewise, the Depositor will warrant to the Trustee under the
related Pooling and Servicing Agreement that the sale of the related
Receivables by the Depositor to the Trustee is a sale, and not a financing, of
the Receivables
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to such Trust. Notwithstanding the foregoing, if CTL were to become the
subject of receivership or conservatorship proceedings, or the Depositor were
to become a debtor in a bankruptcy case, and an appropriate party in interest
were to take the position that the sale of Receivables to the Depositor or
such Trust, as applicable, should be treated as a pledge of such Receivables
to secure a borrowing of CTL or the Depositor, then delays in payments of
collections of Receivables to Certificateholders could occur or (should the
court rule in favor of any such trustee, creditor or debtor) reductions in the
amounts of such payments could result. If the transfer of Receivables to the
Depositor or any Trust is treated as a pledge instead of a sale, a tax or
government lien on the property of CTL or the Depositor, as applicable,
arising before the transfer of such Receivables to such Trust may have
priority over such Trust's interest in such Receivables. If the transactions
contemplated herein are treated as a sale, the Receivables would not be part
of CTL's or the Depositor's insolvency estate and would not be available to
creditors of CTL or the Depositor.
The decision of the U.S. Court of Appeals for the Tenth Circuit, Octagon Gas
Systems, Inc. v. Rimmer (In re Meridian Reserve, Inc.) (decided May 27, 1993),
contains language to the effect that accounts sold by a debtor would remain
property of the debtor's bankruptcy estate under the UCC, whether or not the
sale of the accounts was perfected. Although the Receivables constitute
chattel paper under the UCC, rather than accounts, Article 9 of the UCC
applies to the sale of chattel paper as well as the sale of accounts, and
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 an
insolvency proceeding in respect of CTL or the Depositor, a court were to
follow the reasoning of the Tenth Circuit, then the Receivables could be
included in the insolvency estate of CTL or the Depositor, as applicable, and
delays in payments of collections on or in respect of the Receivables could
occur.
LIMITED OBLIGATIONS OF CTL AND THE DEPOSITOR
Neither CTL nor the Depositor will be generally obligated to make any
payments to a Trust in respect of the related Certificates or Receivables.
However, in connection with the sale of the Receivables, CTL will make
representations and warranties regarding the characteristics of such
Receivables and, in certain circumstances, CTL will be required to repurchase
from the Trust any Receivables with respect to which such representations and
warranties have been breached. See "Description of the Transfer and Servicing
Agreements--Sale and Assignment of Receivables". In addition, CTL, as
Servicer, may be required to purchase Receivables from a Trust under certain
circumstances set forth in the Pooling and Servicing Agreement. See
"Description of the Transfer and Servicing Agreements--Servicing Procedures".
SUBORDINATION OF CERTAIN CLASSES OF CERTIFICATES
To the extent specified in the related Prospectus Supplement, distributions
of interest and principal on one or more classes of Certificates may be
subordinated in priority of payment to interest and principal due on one or
more other classes of Certificates of the same Series.
LIMITED ASSETS OF EACH TRUST
None of the Trusts will have, nor will any such Trust be permitted or
expected to have, any significant assets or sources of funds other than the
related Receivables and, to the extent provided in the related Prospectus
Supplement, a Pre-Funding Account or Cash Collateral Account, yield supplement
account or other form of credit enhancement. Subject to the foregoing, the
Certificates of each Series will represent interests solely in the related
Trust and will not represent obligations of or interests in, or be insured or
guaranteed by, CTL, the Depositor, the Trustee or any other entity.
Consequently, holders of the Certificates of any Series must rely for
repayment upon payments on the related Receivables and, if and to the extent
available, amounts available under any available form of credit enhancement,
all as specified in the related Prospectus Supplement.
RISKS ASSOCIATED WITH AUTOMOBILE LOANS
Automobiles rapidly depreciate. As a consequence, the Obligor's continuing
financial stability rather than the value of the vehicle is generally relied
upon for the repayment of the related receivable. This is especially
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true with respect to Receivables purchased by CTL, because CTL's underwriting
procedures are primarily based on the ability of the Obligor to repay. As a
result, subject to the credit score, CTL may permit the origination of a loan
in excess of the manufacturer's suggested retail price, in the case of new
vehicles, or the value established by used car reference publications.
Therefore, a repossessed automobile may not provide an adequate source of
repayment of the outstanding loan balance. See "The Receivables Pools--
Underwriting Procedures." Furthermore, the application of various federal and
state laws, including bankruptcy and insolvency laws, may limit the amount
which can be recovered on such loans. See "The Receivables Pools--
Delinquencies, Repossessions and Net Losses."
MATURITY AND PREPAYMENT CONSIDERATIONS
All of the Receivables are prepayable at any time by the related Obligor. As
used herein with respect to any Receivable, the term prepayment includes
prepayments in full, partial prepayments (including those related to rebates
of extended warranty contract costs and insurance premiums) and liquidations
due to defaults, as well as receipts of proceeds from physical damage, credit
life and disability insurance policies and any lender's insurance policy, and
Purchase Amounts with respect to certain other Receivables repurchased by CTL
as a result of a breach of a representation or warranty or purchased by the
Servicer for administrative reasons. 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 generally may not sell or transfer
the Financed Vehicle securing a Receivable without the consent of CTL. The
rate of prepayment on the Receivables may also be influenced by the structure
of the underlying loans. To the extent prepayments on the Receivables are more
rapid than expected, Certificateholders' anticipated yield may be reduced to
the extent the Certificates were purchased at a premium. See "Weighted Average
Life of the Certificates". In addition, if so provided in the related
Prospectus Supplement, the Servicer or one or more other entities may be
entitled to purchase, or to cause another person or entity to purchase, the
Receivables of a given Receivables Pool under the circumstances described in
such Prospectus Supplement. See "Description of the Transfer and Servicing
Agreements--Termination".
In addition, a Series of Certificates may include one or more classes of
interest-only or other Strip Certificates that may be more sensitive than
other classes of Certificates of such Series to the rate of payment on the
related Receivables. Prospective investors in any such class of Certificates
should carefully consider the information provided with respect to such
Certificates under "Risk Factors" and elsewhere in the related Prospectus
Supplement.
RATINGS OF THE CERTIFICATES
It is a condition of the issuance of the Certificates to be offered
hereunder that they be rated in one of the four highest rating categories by
at least one nationally recognized statistical rating organization. A rating
is not a recommendation to purchase, hold or sell Certificates inasmuch as a
rating does not comment as to market price or suitability for a particular
investor. The ratings of the Certificates will address the likelihood of the
payment of principal and interest thereon pursuant to their terms. There can
be no assurance that a rating will remain in effect for any given period of
time or that a rating will not be lowered or withdrawn entirely by a Rating
Agency if in its judgment circumstances in the future so warrant. For more
detailed information regarding the ratings assigned to any class of a
particular Series of Certificates, see "Summary of Terms--Ratings" and "Risk
Factors--Ratings of the Certificates" in the related Prospectus Supplement.
BOOK-ENTRY REGISTRATION
Unless otherwise specified in the related Prospectus Supplement, each class
of the Certificates of a given Series initially will be represented by one or
more certificates registered in the name of Cede & Co. ("Cede"), or any other
nominee of The Depository Trust Company ("DTC") set forth in the related
Prospectus Supplement, and will not be registered in the names of the holders
of such Certificates or their nominees. Because of this, unless and until
Definitive Certificates for such Series are issued, the beneficial owners of
such Certificates will not be recognized by the Trustee as
"Certificateholders" (as such term is used herein or in the
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related Pooling and Servicing Agreement). Hence, until Definitive Certificates
are issued, beneficial owners of the Certificates will be able to exercise the
rights of Certificateholders only indirectly through DTC and its participating
organizations. See "Description of the Certificates--Book-Entry Registration"
and "--Definitive Certificates".
LIMITED LIQUIDITY
There can be no assurance that a secondary market will develop for the
Certificates or, if it does develop, that it will provide the holders of the
Certificates with liquidity of investment or that it will remain for the term
of the Certificates. The issuance of the Certificates in book-entry form may
reduce the liquidity of such Certificates in the secondary trading market
since investors may be unwilling to purchase Certificates in the secondary
trading market for which they cannot obtain physical certificates. See
"Description of the Certificates--Book-Entry Registration."
DIFFICULTY IN PLEDGING
Since transactions in Certificates can be effected only through DTC,
participating organizations, indirect participants and certain banks, the
ability of a beneficial Owner to pledge a Certificate to persons or entities
that do not participate in the DTC system, or otherwise to take actions in
respect of such Certificates, may be limited due to the lack of a physical
certificate representing the Certificates. See "Description of the
Certificates--Book-Entry Registration."
THE TRUSTS
Each Series of Certificates will be issued by a separate Trust established
by the Depositor pursuant to a Pooling and Servicing Agreement for the
transactions described herein and in the related Prospectus Supplement. The
property of each Trust will include a pool (a "Receivables Pool") of simple
interest and/or precomputed interest retail installment sale or installment
loan contracts secured by new or used automobiles, light trucks, motorcycles
or vans and certain payments due or received thereunder after the applicable
Cutoff Date. Unless otherwise specified in the related Prospectus Supplement,
the Receivables in each Receivables Pool were or will be either (a) originated
by Dealers for assignment to CTL or (b) solicited by Dealers for origination
by CTL. Unless otherwise specified in the related Prospectus Supplement, CTL
is the registered lienholder listed on the certificates of title of the
Financed Vehicles. The Receivables will continue to be serviced by CTL as the
initial Servicer under each Pooling and Servicing Agreement.
On or prior to the applicable Closing Date, CTL will sell to the Depositor,
pursuant to the Purchase Agreement, Receivables in the aggregate principal
amount specified in the related Prospectus Supplement. Thereafter, on such
Closing Date, the Depositor will convey such Receivables and, if so provided
in the related Prospectus Supplement, the Pre-Funded Amount to the related
Trust in exchange for the delivery to the Depositor of the Series of
Certificates issued on such date by such Trust. If the Prospectus Supplement
provides for the conveyance of a Pre-Funded Amount to the related Trust, CTL
will also be required under the Purchase Agreement, and the Depositor will be
required under the related Pooling and Servicing Agreement, to convey to the
Depositor and the Trust, respectively, Subsequent Receivables from time to
time during the Funding Period in an aggregate principal amount approximately
equal to such Pre-Funded Amount. Any Subsequent Receivables so conveyed to a
Trust will also be assets of such Trust. Except as otherwise provided in the
related Prospectus Supplement, the property of each Trust will also include
(i) interests in certain amounts that may from time to time be held in
separate trust accounts established and maintained pursuant to the related
Pooling and Servicing Agreement and, if so provided in the related Prospectus
Supplement, the proceeds of such accounts; (ii) security interests in the
Financed Vehicles and any other interest of CTL and the Depositor in such
Financed Vehicles; (iii) any recourse rights of CTL against Dealers; (iv) any
rights of CTL to proceeds from claims on or refunds of premiums with respect
to certain physical damage, credit life and disability insurance policies
covering the Financed Vehicles or the Obligors, as the case may be, including
any lender's insurance policy; (v) any property
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that secures a Receivable and that has been acquired by the Trust; (vi)
certain rights under the related Purchase Agreement; and (vii) any and all
proceeds of the foregoing. CTL will not convey to the Depositor, and the
Depositor will not convey to a Trust, and the related Certificateholders will
have no interest in, any contract with a Dealer establishing "dealer reserves"
or any rights to recapture dealer reserves pursuant to such a contract. To the
extent specified in the related Prospectus Supplement, a Pre-Funding Account
or a Cash Collateral Account, a yield supplement account, surety bond, swap or
other interest rate protection, or any other form of credit enhancement may be
a part of the property of a Trust or may be held by the Trustee for the
benefit of holders of the related Certificates.
CTL, as initial Servicer under each Pooling and Servicing Agreement, will
continue to service the Receivables held by each Trust and will receive fees
for such services. See "Description of the Transfer and Servicing Agreements--
Servicing Compensation and Payment of Expenses" herein. To facilitate the
servicing of the Receivables, the Depositor and each Trustee will designate
the Servicer as custodian of the Receivables and the related documents for the
related Trust; due to the administrative burden and expense, however, the
certificates of title to the Financed Vehicles will not be amended to reflect
the sale and assignment of the security interest in the Financed Vehicles to
either the Depositor or the Trust. In the absence of such an amendment, a
Trust may not have a perfected security interest in certain of the Financed
Vehicles in some states. See "Certain Legal Aspects of the Receivables" and
"Description of the Transfer and Servicing Agreements--Sale and Assignment of
Receivables".
If the protection provided to the holders of the Certificates of any Series
(the "Certificateholders") by the subordination, if any, of one or more
classes of Certificates of such Series and by any Cash Collateral Account,
yield supplement account or other available form of credit enhancement for
such Series is insufficient, such Certificateholders will have to look to
payments by or on behalf of Obligors on the related Receivables and the
proceeds from the repossession and sale of Financed Vehicles that secure
defaulted Receivables for distributions of principal of and interest on the
related Certificates. In such event, certain factors, such as the Trust's not
having perfected security interests in all of the Financed Vehicles, may limit
the ability of a Trust to realize on the collateral securing the related
Receivables or may limit the amount realized to less than the amount due
thereunder. Certificateholders may thus be subject to delays in payment on, or
may incur losses on their investment in, such Certificates as a result of
defaults or delinquencies by Obligors and depreciation in the value of the
related Financed Vehicles. See "Description of the Transfer and Servicing
Agreements--Credit and Cash Flow Enhancement" and "Certain Legal Aspects of
the Receivables".
THE TRUSTEE
The Trustee for each Trust will be specified in the related Prospectus
Supplement. The Trustee's liability in connection with the issuance and sale
of the related Certificates is limited solely to the express obligations of
such Trustee set forth in the related Pooling and Servicing Agreement. A
Trustee may resign at any time, in which event the Servicer will be obligated
to appoint a successor Trustee. The Servicer may also remove a Trustee if such
Trustee ceases to be eligible to continue as Trustee under the related Pooling
and Servicing Agreement or if such Trustee becomes insolvent. If the Servicer
so removes a Trustee, the Servicer will be obligated to appoint a successor to
such Trustee. Any resignation or removal of a Trustee and appointment of a
successor Trustee will not become effective until acceptance of the
appointment by the successor Trustee.
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THE RECEIVABLES POOLS
GENERAL
Unless otherwise specified in the related Prospectus Supplement, the
Receivables arise, or will arise, from motor vehicle installment sale
contracts that were originated by new and used car dealers for assignment to
CTL or motor vehicle loan contracts that were solicited by dealers for
origination by CTL in the ordinary course of business. Unless otherwise
specified in the related Prospectus Supplement, CTL is the registered
lienholder on the certificates of title to each of the Financed Vehicles.
Unless otherwise provided in the related Prospectus Supplement, the
Receivables to be sold to each Trust will be selected from CTL's portfolio for
inclusion in a Receivables Pool based on several criteria, including that,
each Receivable (i) is secured by a new or used vehicle, (ii) provides for
level monthly payments (except for the last payment, which may be different
from the level payments) that fully amortize the amount financed over the
original term to maturity of the Receivable, (iii) is a Precomputed Receivable
or a Simple Interest Receivable (each as defined herein) and (iv) satisfies
the other criteria, if any, set forth in the related Prospectus Supplement. No
selection procedures believed by CTL or the Depositor to be adverse to
Certificateholders were or will be used in selecting the Receivables.
UNDERWRITING PROCEDURES
CTL uses the degree of the applicant's creditworthiness as the basic
criterion when originating an installment sales contract or purchasing such a
contract from a Dealer. Each credit application requires that the applicant
provide current information regarding the applicant's employment history, bank
accounts, debts, credit references, and other factors that bear on
creditworthiness. CTL generally applies uniform underwriting standards when
originating loans on new and used vehicles. CTL also typically obtains a
credit report from a major credit reporting agency summarizing the applicant's
credit history and paying habits, including such items as open accounts,
delinquent payments, bankruptcies, repossessions, lawsuits, and judgments.
Information relating to the applicant and supplied by the applicant on the
loan application combined with information provided by credit reporting
agencies is used to generate the borrower's credit score.
The credit score generated is used as the basic determinant for loan
approval. CTL's credit scoring model was developed by an independent firm
experienced in developing such models and utilizes extensive historical data
related to CTL's origination and servicing experience as well as the
experience of CTL's senior management. CTL's credit scoring model evaluates an
applicant's credit profile along with certain applicant specific
characteristics to arrive at an estimate of the associated credit risk.
Additionally, CTL's credit analysts may also verify an applicant's employment
income and/or residency or where appropriate, verify an applicant's payment
history directly with the applicant's creditors. CTL will also generally
verify receipt of the automobile and other information directly with the
borrower. Based on these procedures, a credit decision is considered and
approved by CTL personnel at various levels of authority, depending on a
variety of factors including the amount of the loan and the applicant's credit
score.
CTL's underwriting guidelines adhere to no specific loan-to-value ratios
because the primary focus is on the ability of the borrower to repay the loan
rather than the value of underlying collateral. The amount financed by CTL
will generally be up to the full sales price of the vehicle plus sales tax,
dealer preparation fees, license fees and title fees, plus the cost of service
and warranty contracts and premiums for physical damage, credit life and
disability insurance obtained in connection with the vehicle or the financing
(such amounts in addition to the sales price, collectively the "Additional
Vehicle Costs"). Accordingly, the amount financed by CTL under an installment
contract generally may exceed, depending on the credit score, in the case of
new vehicles, the manufacturer's suggested retail price of the financed
vehicle and the Additional Vehicle Costs. In the case of used vehicles, if the
applicant meets CTL's creditworthiness criteria, the amount financed may
exceed the vehicle's value as assigned by one of the three standard reference
sources for dealers of used cars and the Additional Vehicle Costs. Depending
on the dealer's location, CTL will use the "Kelley Blue Book," "NADA Official
Used Car Guide" or the "Black Book" published by National Auto Research to
obtain a value to assign to a used vehicle for underwriting purposes.
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CTL believes that the resale value of a new vehicle purchased by an obligor
will generally decline below the manufacturer's suggested retail price and, in
some cases, may decline for a period of time below the principal balance
outstanding on the related installment contract. CTL also believes that the
resale value of a used vehicle purchased by an obligor will generally decline,
but believes that the percentage of such decline generally will be less than
the percentage of decline in the resale value of a new vehicle. CTL regularly
reviews the quality of the Contracts purchased from Dealers and periodically
conducts quality control audits to ensure compliance with its established
policies and procedures. See also "California Thrift & Loan and Affiliates"
herein.
ALLOCATION OF PAYMENTS
The Receivables will be either Simple Interest Receivables or Precomputed
Receivables. "Simple Interest Receivables" provide for equal monthly payments
that are applied, first, to collection fees, if any, then to applicable late
charges, then to pay interest accrued to the date of such payment, then to
principal due on such date, and then to further reduce the outstanding
principal balance. Accordingly, if an Obligor pays a fixed monthly installment
before its due date under a Simple Interest Receivable, the portion of the
payment allocable to interest for the period since the preceding payment will
be less than it would have been had the payment been made on the contractual
due date, and the portion of the payment applied to reduce the principal
balance of the Receivable will be correspondingly greater. Conversely, if an
Obligor pays a fixed monthly installment under a Simple Interest Receivable
after its contractual due date, the portion of such payment allocable to
interest for the period since the preceding payment will be greater than it
would have been had the payment been made when due, and the portion of such
payment applied to reduce the principal balance of the Receivable will be
correspondingly less, in which case a larger portion of the principal balance
may be due on the final scheduled payment date.
"Precomputed Receivables" consist of either (i) monthly actuarial
receivables ("Actuarial Receivables") or (ii) receivables that provide for
allocation of payments according to the "sum of periodic balances" method,
similar to the Rule of 78's ("Rule of 78's Receivables"). An Actuarial
Receivable provides for amortization of the loan over a series of fixed level
payment monthly installments. Each monthly installment, including the monthly
installment representing the final payment of the receivable, consists of an
amount of interest equal to 1/12 of the annual percentage rate of the loan
multiplied by the unpaid principal balance of the loan, and an amount of
principal equal to the remainder of the monthly payment. A Rule of 78's
Receivable provides for the payment by the Obligor of a specified total amount
of payments, payable in equal monthly installments on each due date, which
total represents the principal amount financed and add-on interest for the
term of the receivable. The rate at which the amount of add-on interest is
earned and, correspondingly, the amount of each fixed monthly payment
allocated to reduction of the outstanding principal amount of the Receivable
are calculated in accordance with the sum of the periodic time balances or the
"Rule of 78's". If a Precomputed Receivable is prepaid in full (voluntarily or
by liquidation, acceleration or otherwise), under the terms of the Contract a
"refund" or "rebate" will be made to the Obligor of the portion of the total
amount of payments then due and payable under the Contract allocable to
"unearned" interest. Unearned interest is calculated in accordance with the
sum of the periodic time balances method, the Rule of 78's or an equivalent
method. The amount of any such rebate under a Precomputed Receivable generally
will 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
payments were made on schedule and generally will be significantly less than
such amount.
Unless otherwise stated in the related Prospectus Supplement, all of the
Receivables that are Precomputed Receivables will be Rule of 78's Receivables;
however, the Trust will account for all Rule of 78's Receivables as if such
Receivables were Actuarial Receivables. Except as otherwise indicated in the
related Prospectus Supplement, early payments on Precomputed Receivables
("Payaheads") will be deposited to the Payahead Account as described under
"Description of the Transfer and Servicing Agreements--Accounts". Amounts
received upon prepayment in full of a Rule of 78's Receivable in excess of the
then outstanding principal balance of such Receivable (computed on an
actuarial basis) will not be passed through to Certificateholders, except to
the extent necessary to pay interest and principal on the Certificates.
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In the event of the liquidation of a Receivable or the repossession of a
Financed Vehicle, amounts recovered are applied first to the expenses of
repossession, and then to unpaid interest (to the extent not previously
written off) and principal and any related payment or other fee.
DELINQUENCIES, REPOSSESSIONS AND NET LOSSES
Certain information concerning the experience of CTL pertaining to
delinquencies, repossessions and net losses with respect to new and used
retail automobile, light truck, motorcycle and van receivables will be set
forth in each Prospectus Supplement. There can be no assurance that the
delinquency, repossession and net loss experience with respect to any
Receivables Pool will be comparable to prior experience or to such
information.
WEIGHTED AVERAGE LIFE OF THE CERTIFICATES
The weighted average life of the Certificates of any Series generally will
be influenced by the rate at which the principal balances of the related
Receivables are paid, which payment may be in the form of scheduled
amortization or prepayments. For this purpose, the term prepayments includes
prepayments in full, partial prepayments (including those related to rebates
of extended warranty contract costs and insurance premiums), liquidations due
to defaults, as well as receipts of proceeds, if any, from physical damage,
credit life and disability and/or any lender's insurance policies, and the
amount of Receivables repurchased by CTL due to a breach of a representation
or warranty or purchased by the Servicer for administrative purposes. All of
the Receivables are prepayable at any time without penalty (or with a de
minimis charge) to the Obligor. The rate of prepayment of automotive
receivables is influenced by a variety of economic, social and other factors,
including the fact that an Obligor generally may not sell or transfer the
Financed Vehicle securing a Receivable without the consent of the registered
lienholder (or the Servicer on behalf of such lienholder). The rate of
prepayment on the Receivables may also be influenced by the structure of the
loan. In addition, under certain circumstances, CTL will be obligated to
repurchase Receivables from a Trust pursuant to the related Purchase Agreement
and Pooling and Servicing Agreement as a result of breaches of representations
and warranties, and the Servicer will be obligated to purchase Receivables
from a Trust pursuant to the related Pooling and Servicing Agreement as a
result of breaches of certain covenants. See "Description of the Transfer and
Servicing Agreements--Sale and Assignment of Receivables" and "--Servicing
Procedures". See also "Description of the Transfer and Servicing Agreements--
Termination" regarding the option of the Servicer or any other entity to
purchase or cause the Receivables to be purchased from a Trust.
A Series of Certificates may include one or more classes of Strip
Certificates that are more sensitive than certain other classes of
Certificates of the same Series to the rate of payment of the related
Receivables. Prospective investors in any such Strip Certificates should
consider carefully the information regarding such Certificates in the related
Prospectus Supplement.
In light of the above considerations, there can be no assurance as to the
amount of principal payments to be made on the Certificates of a Series on any
Distribution Date since such amount will depend, in part, on the amount of
principal collected on the related Receivables Pool during the applicable
Collection Period. Any reinvestment risks resulting from a faster or slower
incidence of prepayment of Receivables will be borne entirely by the
Certificateholders. The related Prospectus Supplement may set forth certain
additional information with respect to the maturity and prepayment
considerations applicable to the particular Receivables Pool and the related
Series of Certificates or particular classes of Certificates.
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POOL FACTORS AND OTHER CERTIFICATE INFORMATION
The "Certificate Pool Factor" for each class of Certificates will be a
seven-digit decimal which the Servicer will compute prior to each distribution
with respect to such class of Certificates and which will indicate the
remaining Class Certificate Balance of such class of Certificates, as of the
applicable Distribution Date (after giving effect to distributions to be made
on such Distribution Date), as a fraction of the initial Class Certificate
Balance of such class of Certificates. Each Certificate Pool Factor will be
1.0000000 as of the related Closing Date and thereafter will decline to
reflect reductions in the applicable Class Certificate Balance. A
Certificateholder's portion of the aggregate outstanding Class Certificate
Balance will equal the product of (a) the original denomination of such
Certificateholder's Certificate and (b) the applicable Certificate Pool Factor
at the time of determination.
Unless otherwise provided in the related Prospectus Supplement, the
Certificateholders will receive reports on or about each Distribution Date
concerning payments received on the Receivables, the Pool Balance and each
Certificate Pool Factor. In addition, Certificateholders of record during any
calendar year will be furnished information for tax reporting purposes not
later than the latest date permitted by law. See "Description of the
Certificates--Statements to Certificateholders".
USE OF PROCEEDS
On each Closing Date, the Depositor will convey the Receivables and, if so
provided in the related Prospectus Supplement, the applicable Pre-Funded
Amount to the related Trust in exchange for the related Series of
Certificates. Unless otherwise provided in the related Prospectus Supplement,
the Depositor will apply the net proceeds from the sale of the Certificates to
the purchase of the Receivables from CTL and, if so provided in the related
Prospectus Supplement, to fund the Pre-Funding Account. CTL will use the
portion of such proceeds paid to it to repay deposits, short-term borrowings
and for general corporate purposes.
CALIFORNIA THRIFT & LOAN AND AFFILIATES
CTL is a 38 year-old, FDIC-insured California thrift and loan. CTL's
business is the underwriting and purchasing of high yield consumer loans
(primarily retail installment sales contracts secured by new and used
automobiles and light-duty trucks), residential real estate loans and
commercial equipment leases for small and medium sized businesses. CTL
conducts its business primarily in the States of California, Arizona,
Colorado, Illinois, New Mexico, Nevada, Oregon and Texas.
On June 14, 1996 Bay View acquired CTL Credit, Inc., the holding company of
CTL. CTL is now a wholly-owned subsidiary of Bay View.
The Depositor is a wholly-owned subsidiary of Bay View, formed in November
1996 as a Delaware corporation, and is organized for the limited purpose of
purchasing, acquiring owning and holding vehicle installment sale and
installment loan contracts, reselling such receivables and conducting
activities incidental thereto.
The Depositor has taken steps in structuring the transactions contemplated
hereby that are intended to ensure that the voluntary or involuntary
application for relief by CTL under the United States Bankruptcy Code or
similar applicable state laws ("Insolvency Laws") will not result in the
consolidation of the assets and liabilities of the Depositor with those of Bay
View or CTL. These steps include the creation of the Depositor as a separate,
limited-purpose subsidiary pursuant to a certificate of incorporation
containing certain limitations (including restrictions on the nature of the
Depositor's business, as described above, and restrictions on the Depositor's
ability to commence a voluntary case or proceeding under any Insolvency Law
without the unanimous affirmative vote of all its directors). However, there
can be no assurance that the activities of the Depositor would
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not result in a court concluding that the assets and liabilities of the
Depositor should be consolidated with those of Bay View or CTL in a proceeding
under an Insolvency Law. See "Certain Legal Aspects of the Receivables--
Bankruptcy Matters".
In addition, tax and certain other statutory liabilities, such as
liabilities to the Pension Benefit Guaranty Corporation, if any, relating to
the underfunding of pension plans of Bay View or its affiliates can by
asserted against the Depositor. To the extent that any such liabilities arise
after the transfer of Receivables to a Trust, the Trust's interest in the
Receivables would be prior to the interest of the claimant with respect to any
such liabilities. However, the existence of a claim against the Depositor
could permit the claimant to subject the Depositor to an involuntary
proceeding under the Bankruptcy Code or other Insolvency Laws. See "Certain
Legal Aspects of the Receivables--Bankruptcy Matters."
DESCRIPTION OF THE CERTIFICATES
GENERAL
Each Trust will issue a Series of Certificates pursuant to a Pooling and
Servicing Agreement. A form of the Pooling and Servicing Agreement has been
filed as an exhibit to the Registration Statement of which this Prospectus
forms a part. The following summary does not purport to be complete and is
subject to, and is qualified in its entirety by reference to, the provisions
of the related Certificates and Pooling and Servicing Agreement.
Unless otherwise specified in the related Prospectus Supplement, the
Certificates will be available for purchase in minimum denominations of $1,000
and integral multiples in excess thereof in book-entry form only.
DISTRIBUTIONS OF PRINCIPAL AND INTEREST
The timing and priority of distributions, seniority, allocations of losses,
Pass-Through Rate and amount of or method of determining distributions with
respect to principal and interest on each class of Certificates of a Series
will be described in the related Prospectus Supplement. Distributions on such
Certificates will be made on the dates specified in the related Prospectus
Supplement (the "Distribution Date") and may be made prior to distributions
with respect to principal of such Certificates. To the extent provided in the
related Prospectus Supplement, a Series of Certificates may include one or
more classes of Strip Certificates entitled to (i) interest distributions with
disproportionate, nominal or no principal distributions or (ii) principal
distributions with disproportionate, nominal or no interest distributions.
Each class of Certificates may have a different Pass-Through Rate, which may
be a fixed, variable or adjustable Pass-Through Rate (and which may be zero
for certain classes of Strip Certificates) or any combination of the
foregoing. The related Prospectus Supplement will specify the Pass-Through
Rate for each class of Certificates of a Series or the method for determining
such Pass-Through Rate.
To the extent specified in any Prospectus Supplement, one or more classes of
Certificates of a given Series may have fixed principal and/or interest
distribution schedules, as set forth in such Prospectus Supplement.
In the case of a Series of Certificates that includes two or more classes of
Certificates, the timing, sequential order, priority of payment or amount of
distributions in respect of interest and principal, and any schedule or
formula or other provisions applicable to the determination thereof, of each
such class shall be as set forth in the related Prospectus Supplement. Unless
otherwise specified in the related Prospectus Supplement, distributions in
respect of interest on and principal of any class of Certificates will be made
on a pro rata basis among all holders of Certificates of such class.
BOOK-ENTRY REGISTRATION
Unless otherwise specified in the related Prospectus Supplement, each class
of Certificates initially will be represented by one or more certificates, in
each case registered in the name of the nominee of DTC. Unless
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another nominee is specified in the related Prospectus Supplement, the nominee
of DTC will be Cede. Accordingly, such nominee is expected to be the holder of
record of the Certificates of each Series, except for Certificates, if any,
retained by the Depositor. Unless and until Definitive Certificates are issued
under the limited circumstances described herein or in the related Prospectus
Supplement, no Certificateholder will be entitled to receive a physical
certificate representing a Certificate; all references herein and in the
related Prospectus Supplement to actions by Certificateholders will refer to
actions taken by DTC upon instructions from its participating members
("Participants"), and all references herein and in the related Prospectus
Supplement to distributions, notices, reports and statements to
Certificateholders will refer to distributions, notices, reports and
statements to DTC or its nominee, as the case may be, as the registered holder
of the Certificates, for distribution to Certificateholders in accordance with
DTC's procedures with respect thereto. Beneficial owners of the Certificates
("Certificate Owners") will not be recognized as "Certificateholders" by the
related Trustee, as such term is used in each Pooling and Servicing Agreement,
and Certificate Owners will be permitted to exercise the rights of
Certificateholders only indirectly through DTC and its Participants.
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 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 the Participants and to
facilitate the clearance and settlement of securities transactions between
Participants through electronic book-entries, thereby eliminating the need for
physical movement of certificates. Participants include securities brokers and
dealers, 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").
Unless otherwise specified in the related Prospectus Supplement, Certificate
Owners that are not Participants or Indirect Participants but desire to
purchase, sell or otherwise transfer ownership of, or an interest in, the
Certificates may do so only through Participants and Indirect Participants. In
addition, all Certificate Owners will receive all distributions of principal
and interest from the related Trustee through Participants. Under a book-entry
format, Certificate Owners may experience some delay in their receipt of
payments, since such payments will be forwarded by the Trustee to DTC's
nominee. DTC will then forward such payments to the Participants, which
thereafter will forward them to Indirect Participants or Certificate Owners.
Under the rules, regulations and procedures creating and affecting DTC and
its operations (the "Rules"), DTC is required to make book-entry transfers
among Participants on whose behalf it acts with respect to the Certificates
and to receive and transmit distributions of principal of and interest on the
Certificates. Participants and Indirect Participants with which Certificate
Owners have accounts with respect to the Certificates similarly are required
to make book-entry transfers and to receive and transmit such payments on
behalf of their respective Certificate Owners. Accordingly, although
Certificate Owners will not possess physical certificates representing the
Certificates, the Rules provide a mechanism by which Participants and Indirect
Participants will receive payments and transfer interests, directly or
indirectly, on behalf of Certificate Owners.
Because DTC can act only on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of a
Certificate Owner to pledge Certificates to persons or entities that do not
participate in the DTC system, or otherwise take actions with respect to such
Certificates, may be limited due to the lack of a physical certificate
representing such Certificates.
DTC may take any action permitted to be taken by a Certificate Owner under
the Pooling and Servicing Agreement only at the direction of one or more
Participants to whose account with DTC the Certificates are credited. DTC may
take conflicting actions with respect to other undivided interests to the
extent that such actions are taken on behalf of Participants whose holdings
include such undivided interests.
Except as required by law, the related Trustee will not have any liability
for any aspect of the records relating to or payments made on account of
beneficial ownership interests of Certificates of any Series held by
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DTC's nominee, or for maintaining, supervising or reviewing any records
relating to such beneficial ownership interests.
DEFINITIVE CERTIFICATES
Unless otherwise stated in the related Prospectus Supplement, the
Certificates of a given Series will be issued in fully registered,
certificated form ("Definitive Certificates") to Certificateholders or their
respective nominees, rather than to DTC or its nominee, only if (i) the
related Trustee determines that DTC is no longer willing or able to discharge
properly its responsibilities as depository with respect to the related
Certificates and such Trustee is unable to locate a qualified successor, (ii)
the Trustee elects, at its option, to terminate the book-entry system through
DTC or (iii) after the occurrence of an Event of Default or Servicer Default,
Certificate Owners representing at least a majority of the outstanding
principal amount of the Certificates of such Series, advise the related
Trustee through DTC that the continuation of a book-entry system through DTC
(or a successor thereto) is no longer in the best interests of the related
Certificate Owners.
Upon the occurrence of any of the events described in the immediately
preceding paragraph, the related Trustee will be required to notify the
related Certificate Owners, through Participants, of the availability of
Definitive Certificates. Upon surrender by DTC of the certificates
representing all Certificates of any affected class and the receipt of
instructions for re-registration, the Trustee will issue Definitive
Certificates to the related Certificate Owners. Distributions on the related
Definitive Certificates will be made thereafter by the related Trustee
directly to the holders in whose name the related Definitive Certificates are
registered at the close of business on the applicable record date, in
accordance with the procedures set forth herein and in the related Pooling and
Servicing Agreement. Distributions will be made by check mailed to the address
of such holders as they appear on the register specified in the related
Pooling and Servicing Agreement.
Definitive Certificates will be transferable and exchangeable at the offices
of the related Trustee (or any security registrar appointed thereby). No
service charge will be imposed for any registration of transfer or exchange,
but such Trustee may require payment of a sum sufficient to cover any tax or
other governmental charge imposed in connection therewith.
STATEMENTS TO CERTIFICATEHOLDERS
With respect to each Series of Certificates, on or prior to each
Distribution Date, the Servicer (to the extent applicable to such
Certificateholder) will prepare and forward to the related Trustee to be
included with the distribution to each Certificateholder of record a statement
setting forth for the related Collection Period the following information (and
any other information specified in the related Prospectus Supplement):
(i) the amount of the distribution allocable to principal of each class
of Certificates of such Series;
(ii) the amount of the distribution allocable to interest on each class
of Certificates of such Series;
(iii) the amount of the Servicing Fee paid to the Servicer with respect
to the related Collection Period;
(iv) the Class Certificate Balance and Certificate Pool Factor for each
class of Certificates of such Series as of the related record date;
(v) the balance of any Cash Collateral Account or other form of credit
enhancement, after giving effect to any additions thereto or withdrawals
therefrom or reductions thereto to be made on the following Distribution
Date;
(vi) with respect to any Series of Certificates as to which a Pre-Funding
Account has been established, for Distribution Dates during the Funding
Period, the remaining Pre-Funded Amount; and
(vii) for the Distribution Date that falls on or immediately after the
end of the Funding Period, if any, the amount of the Pre-Funded Amount that
has not been used to purchase Subsequent Receivables.
Dollar amounts described in items (i), (ii) and (iv) above will be expressed
as a dollar amount per $1,000 of initial Class Certificate Balance of such
Certificates.
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In addition, within the prescribed period of time for tax reporting purposes
after the end of each calendar year during the term of each Trust, the related
Trustee will mail to each person who at any time during such calendar year
shall have been a registered Certificateholder a statement containing certain
information for the purposes of such Certificateholder's preparation of
federal income tax returns. See "Certain Federal Income Tax Consequences".
LIST OF CERTIFICATEHOLDERS
Unless otherwise specified in the related Prospectus Supplement, each
Trustee, within 15 days after receipt of written request of the Servicer, will
provide the Servicer with a list of the names and addresses of all holders of
record as of the most recent record date of the related Series of
Certificates. In addition, three or more holders of the Certificates of any
Series or one or more holders of such Certificates evidencing not less than
25% of the applicable Certificate Balance may, by written request to the
related Trustee, obtain access to the list of all Certificateholders
maintained by such Trustee for the purpose of communicating with other
Certificateholders with respect to their rights under the related Pooling and
Servicing Agreement or under such Certificates.
DESCRIPTION OF THE TRANSFER AND SERVICING AGREEMENTS
The following summary describes certain terms of each Purchase Agreement and
Pooling and Servicing Agreement (collectively, the "Transfer and Servicing
Agreements") pursuant to which the Depositor will purchase Receivables from
CTL, a Trust will purchase Receivables from the Depositor, and the Servicer
will agree to service such Receivables. Forms of the Purchase Agreement and
Pooling and Servicing Agreement have been filed as exhibits to the
Registration Statement of which this Prospectus forms a part. The following
summary does not purport to be complete and is subject to, and is qualified in
its entirety by reference to, the provisions of the related Transfer and
Servicing Agreements.
SALE AND ASSIGNMENT OF RECEIVABLES
On the related Closing Date, (i) CTL will sell and assign to the Depositor
pursuant to the related Purchase Agreement, without recourse, its entire right
in the related Receivables, including its security interests in the related
Financed Vehicles and (ii) the Depositor will sell and assign to the related
Trust pursuant to the related Pooling and Servicing Agreement, without
recourse, (a) its entire right in such Receivables and all of its right, title
and interest under the Purchase Agreement, including the security interests in
the Financed Vehicles, and (b) if so provided in the related Prospectus
Supplement, the applicable Pre-Funded Amount. Each Receivable will be
identified in a schedule appearing as an exhibit to the related Purchase
Agreement and Pooling and Servicing Agreement. The Trustee will, concurrently
with such sale and assignment of the Receivables and, if applicable, the Pre-
Funded Amount, to the related Trust, execute, authenticate and deliver the
related Series of Certificates to the Depositor in exchange for such
Receivables and such Pre-Funded Amount, if any. The related Prospectus
Supplement will specify whether the property of a Trust will include the Pre-
Funded Amount and, if so, the terms, conditions and manner under which
Subsequent Receivables will be sold and assigned by the Depositor to the
related Trust.
In each Purchase Agreement, CTL will represent and warrant to the Depositor,
among other things, that (i) the information provided with respect to the
related Receivables is correct in all material respects; (ii) the Obligor on
each such Receivable has obtained or agreed to obtain and maintain physical
damage insurance covering the Financed Vehicle in accordance with CTL's normal
requirements; (iii) at the Closing Date, with respect to Receivables conveyed
to a Trust on the Closing Date, and on the applicable Subsequent Transfer Date
with respect to any Subsequent Receivables, the Receivables are free and clear
of all security interests, liens, charges and encumbrances, other than the
lien of the Depositor, and no offsets, defenses or counterclaims against the
Depositor or CTL have been asserted or threatened with respect to the related
Receivables; (iv) at the Closing Date or Subsequent Transfer Date, as
applicable, each of the related Receivables is secured by a first perfected
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security interest in the related Financed Vehicle in favor of the Trust or all
necessary action has been taken by CTL to secure such a first perfected
security interest; and (v) each of the related Receivables, at the time it was
originated, complied and, at the Closing Date or Subsequent Transfer Date, as
applicable, complies, in all material respects with applicable federal and
state laws, including, without limitation, consumer credit, truth in lending,
equal credit opportunity and disclosure laws. As of the last day of any
Collection Period following the discovery by or notice to CTL of a breach of
any such representation or warranty that materially and adversely affects the
interests of the Depositor or its assignee in a Receivable (or as of the last
day of the preceding Collection Period, if CTL so elects), CTL, unless it has
cured such breach, will repurchase the Receivable at a price equal to the
unpaid principal balance owed by the Obligor thereon plus, accrued interest
thereon at the applicable Contract Rate to the date of purchase (the "Purchase
Amount"), and such Receivable will be considered a "Purchased Receivable" as
of such date. In each Pooling and Servicing Agreement, the Depositor will
assign certain rights under the related Purchase Agreement to the related
Trust, including the right to cause CTL to repurchase Receivables with respect
to which it is in breach of any such representation and warranty. The
repurchase obligation of CTL pursuant to each Purchase Agreement and Pooling
and Servicing Agreement will constitute the sole remedy available to the
related Certificateholders or Trustee for any uncured breach of a
representation or warranty.
If the related Prospectus Supplement provides that the property of a Trust
will include a Pre-Funding Account, CTL will be obligated to sell and assign
to the Depositor pursuant to the related Purchase Agreement, and the Depositor
will be obligated to sell and assign to the related Trust pursuant to the
related Pooling and Servicing Agreement, Subsequent Receivables from time to
time during the Funding Period in an aggregate outstanding principal amount
approximately equal to the Pre-Funded Amount. Any conveyance of Subsequent
Receivables to a Trust is subject to the satisfaction, on or before the
related transfer date (each, a "Subsequent Transfer Date"), of the following
conditions precedent, among others: (i) each such Subsequent Receivable must
satisfy the eligibility criteria specified in the related Pooling and
Servicing Agreement; (ii) the Subsequent Receivables shall have been selected
based on the criteria specified in the applicable Prospectus Supplement and
neither CTL nor the Depositor shall have selected such Subsequent Receivables
in a manner that it deems is adverse to the interests of holders of the
related Certificates; (iii) as of the respective Cutoff Date for such
Subsequent Receivables, all of the Receivables in the Trust, including the
Subsequent Receivables to be conveyed to the Trust as of such date, must
satisfy the parameters described under "The Receivables Pools" herein and "The
Receivables Pool" in the related Prospectus Supplement; (iv) any required
deposit to any Cash Collateral Account or other similar account shall have
been made; and (v) CTL must execute and deliver to the Depositor, and the
Depositor must execute and deliver to such Trust, a written assignment
conveying such Subsequent Receivables to the Depositor or such Trust, as
applicable. In addition, the conveyance of Subsequent Receivables to a Trust
is subject to the satisfaction of the following conditions subsequent, among
others, each of which must be satisfied within the applicable time period
specified in the related Prospectus Supplement: (a) the Depositor must deliver
certain opinions of counsel to the related Trustee with respect to the
validity of the conveyance of the Subsequent Receivables to the Trust; (b) the
Trustee must receive written confirmation from a firm of certified independent
public accountants that, as of the end of the period specified therein, the
Receivables in the Trust, including the Subsequent Receivables, satisfied the
parameters described under "The Receivables Pools" herein and "The Receivables
Pool" in the related Prospectus Supplement; and (c) each of the Rating
Agencies must notify the Depositor in writing that, following the conveyance
of the Subsequent Receivables to the Trust, each class of Certificates will
have the same rating assigned to it by such Rating Agency that it had on the
Closing Date. Such confirmation of the ratings of the Certificates may depend
on factors other than the characteristics of the Subsequent Receivables,
including the delinquency, repossession and net loss experience on the
automobile, light truck, motorcycle and van receivables in the portfolio
serviced. If any such conditions precedent or conditions subsequent are not
met with respect to any Subsequent Receivables within the time period
specified in the related Prospectus Supplement, CTL will be required under the
related Purchase Agreement and Pooling and Servicing Agreement to repurchase
such Subsequent Receivables from the related Trust, at a purchase price equal
to the related Purchase Amounts therefor. See "Risk Factors--Sales of
Subsequent Receivables."
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CUSTODY OF RECEIVABLE FILES
Unless otherwise specified in the related Prospectus Supplement, CTL
initially will be appointed to act as custodian for the Receivable files of
each Trust. Unless otherwise specified in the related Prospectus Supplement,
pursuant to the related Pooling and Servicing Agreement, CTL or such other
institution will agree to hold the Receivable files on behalf of the related
Trust. Any such custodial arrangement may be terminated by the Trust or any
credit enhancer upon the terms set forth therein.
If, through inadvertence or otherwise, any of the Receivables were sold to
another party (or a security interest therein were granted to another party)
that purchased (or took such security interest in) any of such Receivables in
the ordinary course of its business and took possession of such Receivables,
the purchaser (or secured party) would acquire an interest in the Receivables
superior to the interest of the related Trust if the purchaser (or secured
party) acquired (or took a security interest in) the Receivables for new value
and without actual knowledge of such Trust's interest. See "Risk Factors--
Security Interests--Transfer of Receivables."
ACCOUNTS
Certificate Account. With respect to each Trust, the Servicer will establish
and maintain with the related Trustee one or more accounts, in the name of the
Trustee on behalf of the related Certificateholders, into which all payments
made on or in respect of the related Receivables will be deposited and from
which all distributions with respect to the related Certificates will be made
(the "Certificate Account"). The amounts on deposit in the Certificate Account
will be invested by the Trustee in Eligible Investments.
Payahead Account. If so provided in the related Prospectus Supplement, the
Servicer will establish an additional account (the "Payahead Account"), in the
name of the Trustee and for the benefit of Obligors on the Receivables, into
which, to the extent required by the Pooling and Servicing Agreement,
Payaheads on Precomputed Receivables will be deposited until such time as the
payment becomes due. Until such time as payments are transferred from the
Payahead Account to the Certificate Account, they will not constitute
collected interest or collected principal and will not be available for
distribution to Certificateholders. The Payahead Account will initially be
maintained with the Trustee. Interest earned on the balance in the Payahead
Account will be remitted to the Servicer monthly. Collections on a Precomputed
Receivable made during a Collection Period shall be applied first to any
overdue scheduled payment on such Receivable, then to the scheduled payment on
such Receivable due in such Collection Period. If any collections remaining
after the scheduled payment is made are insufficient to prepay the Precomputed
Receivable in full, then generally such remaining collections shall be
transferred to and kept in the Payahead Account until such later Collection
Period as the collections may be retransferred to the Certificate Account and
applied either to a later scheduled payment or to prepay such Receivable in
full.
Pre-Funding Account. If so provided in the related Prospectus Supplement,
the Servicer will establish and maintain an account, in the name of the
related Trustee on behalf of the related Certificateholders, into which the
Depositor will deposit the Pre-Funded Amount on the related Closing Date (the
"Pre-Funding Account"). In no event will the Pre-Funded Amount exceed 25% of
the aggregate Certificate Balance of the related Series of Certificates. The
Pre-Funded Amount will be used by the related Trustee to purchase Subsequent
Receivables from the Depositor from time to time during the Funding Period.
The amounts on deposit in the Pre-Funding Account during the Funding Period
will be invested by the Trustee in Eligible Investments. Any investment income
received on the Eligible Investments during a Collection Period (such amounts,
net of any related investment expenses, "Investment Income") will be included
in the interest distribution amount on the following Distribution Date. The
Funding Period, if any, for a Trust will begin on the related Closing Date and
will end on the date specified in the related Prospectus Supplement, which in
no event will be later than the date that is three calendar months after the
related Closing Date. Any amounts remaining in the Pre-Funding Account at the
end of the Funding Period will be distributed to the related
Certificateholders, in the manner and priority specified in the related
Prospectus Supplement, as a prepayment of principal of the related
Certificates.
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Any other accounts to be established with respect to a Trust, including any
Cash Collateral Account or yield supplement account, will be described in the
related Prospectus Supplement.
For each Series of Certificates, funds in the Certificate Account, Pre-
Funding Account and any other account identified as such in the related
Prospectus Supplement (collectively, the "Trust Accounts") will be invested as
provided in the related Pooling and Servicing Agreement in Eligible
Investments and any related Investment Income will be distributed as described
herein and in the related Prospectus Supplement. "Eligible Investments"
generally will be limited to investments acceptable to the Rating Agencies as
being consistent with the rating of the related Certificates. Except as may be
otherwise indicated in the applicable Prospectus Supplement, Eligible
Investments will include (i) direct obligations of, and obligations guaranteed
by, the United States of America, the Federal National Mortgage Association,
or any instrumentality of the United States of America; (ii) demand and time
deposits in or similar obligations of any depository institution or trust
company (including the Trustee or any agent of the Trustee, acting in their
respective commercial capacities) rated P-1 by Moody's or A-1+ by Standard &
Poor's (an "Approved Rating") or any other deposit which is fully insured by
the FDIC; (iii) repurchase obligations with respect to any security issued or
guaranteed by an instrumentality of the United States of America entered into
with a depository institution or trust company having an Approved Rating
(acting as principal); (iv) short-term corporate securities bearing interest
or sold at a discount issued by any corporation incorporated under the laws of
the United States of America or any State, the short-term unsecured
obligations of which have an Approved Rating, or higher, at the time of such
investment; (v) commercial paper having an Approved Rating at the time of such
investment; (vi) a guaranteed investment contract issued by any insurance
company or other corporation acceptable to the Rating Agencies; (vii)
interests in any money market fund having a rating of Aaa by Moody's or AAAm
by Standard & Poor's; and (viii) any other investment approved in advance in
writing by the Rating Agencies.
Except as described herein or in the related Prospectus Supplement, Eligible
Investments will be limited to obligations or securities that mature on or
before the date of the next scheduled distribution to Certificateholders of
such Series; provided, however, that, unless the related Prospectus Supplement
requires otherwise, each Pooling and Servicing Agreement will generally permit
the investment of funds in any Cash Collateral Account or similar type of
credit enhancement account to be invested in Eligible Investments without the
limitation that such Eligible Investments mature not later than the business
day prior to the next succeeding Distribution Date if (i) the Servicer obtains
a liquidity facility or similar arrangement with respect to such Cash
Collateral Account or other account and (ii) each rating agency that initially
rated the related Certificates confirms in writing that the ratings of such
Certificates will not be lowered or withdrawn as a result of eliminating or
modifying such limitation.
The Trust Accounts will be maintained as Eligible Deposit Accounts.
"Eligible Deposit Account" means either (a) a segregated account with an
Eligible Institution or (b) a segregated trust account with the corporate
trust department of a depository institution organized under the laws of the
United States of America or any one of the states thereof or the District of
Columbia (or any domestic branch of a foreign bank), having corporate trust
powers and acting as trustee for funds deposited in such account, so long as
any of the securities of such depository institution has a credit rating from
each Rating Agency in one of its generic rating categories that signifies
investment grade. "Eligible Institution" means, with respect to a Trust, (a)
the corporate trust department of the related Trustee or (b) a depository
institution organized under the laws of the United States of America or any
one of the states thereof or the District of Columbia (or any domestic branch
of a foreign bank) (i) that has either (A) a long-term unsecured debt rating
of at least Baa3 from Moody's Investor's Service, Inc. or (B) a long-term
unsecured debt rating, a short-term unsecured debt rating or a certificate of
deposit rating acceptable to the Rating Agencies and (ii) whose deposits are
insured by the FDIC.
SERVICING PROCEDURES
The Servicer will make reasonable efforts to collect all payments due with
respect to the Receivables and will, consistent with the related Pooling and
Servicing Agreement, follow such collection procedures as it follows with
respect to comparable automotive installment contracts that it owns or
services for others. The Servicer will
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continue to follow such normal collection practices and procedures as it deems
necessary or advisable to realize upon any Receivables with respect to which
the Servicer determines that eventual payment in full is unlikely. The
Servicer may sell the Financed Vehicle securing such Receivables at a public
or private sale, or take any other action permitted by applicable law.
Consistent with its normal procedures, the Servicer may, in its discretion,
arrange with the Obligor on a Receivable to extend or modify the payment
schedule; if, however, the extension of a payment schedule causes a Receivable
to remain outstanding on the Final Scheduled Maturity Date the Servicer will
purchase such Receivable at the Purchase Amount as of the last day of the
Collection Period preceding such Final Scheduled Distribution Date. In
addition, unless otherwise provided in the related Prospectus Supplement, the
Servicer will be obligated under each Pooling and Servicing Agreement to
purchase any Receivable at the Purchase Amount if (i) among other things, the
Servicer reduces the Contract Rate, reduces the amount of the scheduled
monthly payments or reduces the amount financed or fails to maintain a
perfected security interest in the related Financed Vehicle and (ii) the
interest of the Certificateholders in such Receivable is materially and
adversely affected by such action or failure to act of the Servicer. The
Servicer's purchase obligation will constitute the sole remedy available to
the related Certificateholders or Trustee for any such modification of a
Contract.
COLLECTIONS
With respect to each Trust, the Servicer will deposit all payments (from
whatever source) on and all proceeds of the related Receivables collected
during a Collection Period into the related Certificate Account not later than
two business days after receipt thereof. However, at any time that and for so
long as (i) CTL is the Servicer, (ii) no Event of Default shall have occurred
and be continuing with respect to the Servicer and (iii) each other condition
to making deposits less frequently than daily as may be specified by the
Rating Agencies or set forth in the related Prospectus Supplement is
satisfied, the Servicer will not be required to deposit such amounts into the
Certificate Account until on or before the applicable Distribution Date.
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. If the Servicer were unable to remit such
funds, Certificateholders might incur a loss. To the extent set forth in the
related Prospectus Supplement, the Servicer may, in order to satisfy the
requirements described above, obtain a letter of credit or other security for
the benefit of the related Trust to secure timely remittances of collections
on the related Receivables and payment of the aggregate Purchase Amounts with
respect to Receivables purchased by the Servicer.
Unless otherwise provided in the applicable Prospectus Supplement, Payaheads
on Precomputed Receivables will be transferred from the Certificate Account
and deposited into the Payahead Account for subsequent transfer to the
Certificate Account, as described above under "--Accounts".
ADVANCES
Unless otherwise provided in the related Prospectus Supplement, if a
Receivable is delinquent more than 30 days at the end of a Collection Period,
the Servicer will make an Advance in the amount of 30 days of interest due on
such Receivable, but only to the extent that the Servicer, in its sole
discretion, expects to recoup the Advance from subsequent collections on the
Receivable or from withdrawals from any Cash Collateral Account or other form
of credit enhancement. The Servicer will deposit Advances in the Certificate
Account on or prior to the date specified therefor in the related Prospectus
Supplement. If the Servicer determines that reimbursement of an Advance from
subsequent payments on or with respect to the related Receivable is unlikely,
the Servicer may recoup such Advance from insurance proceeds, collections made
on other Receivables or from any other source specified in the related
Prospectus Supplement.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
Unless otherwise specified in the related Prospectus Supplement, the
Servicer will be entitled to receive a fee with respect to each Trust (the
"Servicing Fee"), equal to one percent (1.00%) per annum (the "Servicing
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Fee Rate"), payable monthly at one-twelfth the annual rate, of the related
aggregate Pool Balance. Unless otherwise provided in the related Prospectus
Supplement, the Servicer also will collect and retain any late fees,
prepayment charges, other administrative fees or similar charges allowed by
applicable law with respect to the Receivables and will be entitled to
reimbursement from each Trust for certain liabilities.
The Servicing Fee will compensate the Servicer for performing the functions
of a third-party servicer of automotive receivables as an agent for the
related Trust, including collecting and posting all payments, making Advances,
responding to inquiries of Obligors on the Receivables, investigating
delinquencies, sending payment coupons to Obligors, and overseeing the
collateral in cases of Obligor default. The Servicing Fee will also compensate
the Servicer for administering the related Receivables Pool, including
accounting for collections and furnishing monthly and annual statements to the
related Trustee with respect to distributions, and generating federal income
tax information for such Trust and for the related Certificateholders. The
Servicing Fee also will reimburse the Servicer for certain taxes, accounting
fees, outside auditor fees, data processing costs, and other costs incurred in
connection with administering the applicable Receivables Pool.
DISTRIBUTIONS
With respect to each Series of Certificates, beginning on the Distribution
Date specified in the related Prospectus Supplement, distributions of
principal and interest (or, where applicable, of interest only or principal
only) on each class of Certificates entitled thereto will be made by the
related Trustee to the related Certificateholders. The timing, calculation,
allocation, order, source and priorities of, and requirements for, all
distributions to the holders of each class of Certificates will be set forth
in the related Prospectus Supplement.
With respect to each Trust, collections on or with respect to the related
Receivables will be deposited into the related Certificate Account for
distribution to the related Certificateholders on each Distribution Date to
the extent and in the priority provided in the related Prospectus Supplement.
Credit enhancement, such as a Cash Collateral Account or yield supplement
account or other arrangement, may be available to cover shortfalls in the
amount available for distribution on such date to the extent specified in the
related Prospectus Supplement. As more fully described in the related
Prospectus Supplement, and unless otherwise specified therein, distributions
in respect of principal of a class of Certificates of a Series will be
subordinate to distributions in respect of interest on such class, and
distributions in respect of one or more classes of Certificates of a Series
may be subordinate to payments in respect of other classes of Certificates.
Distributions of principal on the Certificates of a Series may be based on the
amount of principal collected or due, or the amount of realized losses
incurred, in a Collection Period.
CREDIT AND CASH FLOW ENHANCEMENT
The amounts and types of any credit and cash flow enhancement arrangements
and the provider thereof, if applicable, with respect to each class of
Certificates of a Series will be set forth in the related Prospectus
Supplement. To the extent provided in the related Prospectus Supplement,
credit or cash flow enhancement may be in the form of subordination of one or
more classes of Certificates, Cash Collateral Accounts, reserve accounts,
yield supplement accounts, spread accounts, letters of credit, surety bonds,
insurance policies, over-collateralization, credit or liquidity facilities,
guaranteed investment contracts, swaps or other interest rate protection
agreements, repurchase obligations, other agreements with respect to third-
party payments or other support, cash deposits, or such other arrangements as
may be described in the related Prospectus Supplement, or any combination of
the foregoing. If specified in the applicable Prospectus Supplement, credit or
cash flow enhancement for a class of Certificates may cover one or more other
classes of Certificates of the same Series, and credit enhancement for a
Series of Certificates may cover one or more other Series of Certificates.
The existence of a Cash Collateral Account or other form of credit
enhancement for the benefit of any class or Series of Certificates is intended
to enhance the likelihood of receipt by the Certificateholders of such class
or Series of the full amount of principal and interest due thereon and to
decrease the likelihood that such Certificateholders will experience losses.
Unless otherwise specified in the related Prospectus Supplement, the
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credit enhancement for a class or Series of Certificates will not provide
protection against all risks of loss and will not guarantee repayment of all
principal and interest thereon. If losses occur which exceed the amount
covered by such credit enhancement or which are not covered by such credit
enhancement, Certificateholders will bear their allocable share of such
losses, as described in the related Prospectus Supplement. In addition, if a
form of credit enhancement covers more than one Series of Certificates,
Certificateholders of any such Series will be subject to the risk that such
credit enhancement may be exhausted by the claims of Certificateholders of
other Series.
Cash Collateral Account. If so provided in the related Prospectus
Supplement, pursuant to the related Pooling and Servicing Agreement the
Depositor will establish an account (a "Cash Collateral Account") for a Series
or class or classes of Certificates, which will be maintained with the related
Trustee. Unless otherwise provided in the related Prospectus Supplement, a
Cash Collateral Account will be funded by an initial deposit by the Depositor
on the Closing Date in the amount set forth in the related Prospectus
Supplement and, if the related Series has a Funding Period, may also be funded
on each Subsequent Transfer Date to the extent described in the related
Prospectus Supplement. As further described in the related Prospectus
Supplement, the amount on deposit in the Cash Collateral Account may be
increased or reinstated on each Distribution Date, to the extent described in
the related Prospectus Supplement, by the deposit thereto of the amount of
collections on the related Receivables remaining on such Distribution Date
after the payment of all other required payments and distributions on such
date. The related Prospectus Supplement will describe the circumstances under
which and the manner in which distributions may be made out of any such Cash
Collateral Account, either to holders of the Certificates covered thereby or
to the Depositor or to any other entity.
EVIDENCE AS TO COMPLIANCE
Each Pooling and Servicing Agreement will provide that a firm of independent
public accountants will furnish annually to the related Trustee a statement as
to compliance by the Servicer during the preceding twelve months with certain
standards relating to the servicing of the Receivables.
Each Pooling and Servicing Agreement will also provide for delivery to the
related Trustee each year of a certificate signed by an officer of the
Servicer stating that the Servicer has fulfilled its obligations under the
related Pooling and Servicing Agreement throughout the preceding twelve months
or, if there has been a default in the fulfillment of any such obligation,
describing each such default. The Servicer has agreed or will agree to give
each Trustee notice of Events of Defaults under the related Pooling and
Servicing Agreement. Copies of the foregoing statements and certificates may
be obtained by Certificateholders by a request in writing addressed to the
related Trustee at the Corporate Trust Office for such Trustee specified in
the related Prospectus Supplement.
CERTAIN MATTERS REGARDING THE SERVICER
Each Pooling and Servicing Agreement will provide that CTL may not resign
from its obligations and duties as Servicer thereunder, except upon
determination that CTL's performance of such duties is no longer permissible
under applicable law. Under certain circumstances, CTL may transfer its
obligations and duties as Servicer to a qualified affiliate of Bay View. No
such assignment or resignation will become effective until the related Trustee
or a successor servicer has assumed CTL's servicing obligations and duties
under the related Pooling and Servicing Agreement.
Each Pooling and Servicing Agreement will further provide that neither the
Servicer nor any of its directors, officers, employees and agents will be
under any liability to the related Trust or Certificateholders for taking any
action or for refraining from taking any action pursuant to the related
Pooling and Servicing 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 the Servicer's duties or by
reason of reckless disregard of its obligations and duties thereunder. In
addition, each Pooling and Servicing Agreement will provide that the Servicer
is under no obligation to appear in, prosecute or defend any legal action that
is not incidental to its servicing responsibilities under such Pooling and
Servicing Agreement and that, in its opinion, may cause it to incur any
expense or liability.
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Under the circumstances specified in each Pooling and Servicing Agreement,
any entity into which CTL may be merged or consolidated, or any entity
resulting from any merger or consolidation to which CTL is a party, or any
entity succeeding to the indirect automobile financing or receivable servicing
business of CTL, which corporation or other entity assumes the obligations of
the Servicer, will be the successor to the Servicer under the related Pooling
and Servicing Agreement.
CTL has a contract with Norwest Financial Inc., pursuant to which Norwest
Financial Inc. will provide CTL data processing and communication system
services through October, 2001.
EVENTS OF DEFAULT
Unless otherwise provided in the related Prospectus Supplement, "Events of
Default" under each Pooling and Servicing Agreement will consist of: (i) any
failure by the Servicer or CTL to deliver to the related Trustee for
distribution to the related Certificateholders any required payment, which
failure continues unremedied for five business days after written notice to
the Servicer of such failure from the Trustee or holders of the related
Certificates evidencing not less than 25% of the aggregate Certificate Balance
(or notional principal amount, if applicable); (ii) any failure by the
Servicer, CTL or the Depositor duly to observe or perform in any material
respect any covenant or agreement in the related Pooling and Servicing
Agreement, which failure materially and adversely affects the rights of the
related Certificateholders and which continues unremedied for 60 days after
written notice of such failure is given (1) to the Servicer, CTL or the
Depositor, as the case may be, by the related Trustee or (2) to the Servicer,
CTL or the Depositor, as the case may be, and to the related Trustee by
holders of the related Certificates evidencing not less than 25% of the
related Certificate Balance (or notional principal amount, if applicable); and
(iii) certain events of insolvency, readjustment of debt, marshalling of
assets and liabilities, or similar proceedings with respect to the Servicer
and certain actions by the Servicer indicating its insolvency, reorganization
pursuant to bankruptcy proceedings or inability to pay its obligations.
RIGHTS UPON EVENT OF DEFAULT
Unless otherwise provided in the related Prospectus Supplement, as long as
an Event of Default under the related Pooling and Servicing Agreement remains
unremedied, the related Trustee or holders of Certificates of the related
Series evidencing not less than 25% of the Certificate Balance (or notional
principal amount, if applicable) may terminate all the rights and obligations
of the Servicer under such Pooling and Servicing Agreement, whereupon a
successor Servicer appointed by the related Trustee or such Trustee will
succeed to all the responsibilities, duties and liabilities of the Servicer
under such Pooling and Servicing Agreement and will be entitled to similar
compensation arrangements, provided, however, that if the Trustee becomes the
successor Servicer it will not be subject to all of the indemnification
obligations of the Servicer. 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 related Trustee or the related Certificateholders from
effecting a transfer of servicing. In the event that the related Trustee is
unwilling or unable to act as successor to the Servicer, such Trustee may
appoint, or may petition a court of competent jurisdiction to appoint, a
successor with assets of at least $50,000,000 and whose regular business
includes the servicing of automotive receivables. The related Trustee may
arrange for compensation to be paid to such successor Servicer, which in no
event may be greater than the servicing compensation paid to the Servicer
under the related Pooling and Servicing Agreement.
WAIVER OF PAST DEFAULTS
Unless otherwise provided in the related Prospectus Supplement, holders of
Certificates evidencing not less than a majority of the related aggregate
Certificate Balance (or notional principal amount, if applicable) may, on
behalf of all such Certificateholders, waive any default by the Servicer in
the performance of its obligations under the related Pooling and Servicing
Agreement and its consequences, except a default in making any required
deposits to or payments from any Account in accordance with the Pooling and
Servicing Agreement. No such waiver will impair the Certificateholders' rights
with respect to subsequent Events of Default.
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AMENDMENT
Unless otherwise specified in the related Prospectus Supplement, each
Pooling and Servicing Agreement may be amended from time to time by the
Depositor, the Servicer and the related Trustee, without the consent of the
related Certificateholders, to cure any ambiguity, correct or supplement any
provision therein that may be inconsistent with other provisions therein, or
to make any other provisions with respect to matters or questions arising
under such Pooling and Servicing Agreement that are not inconsistent with the
provisions of the Pooling and Servicing Agreement; provided that such action
shall not, in the opinion of counsel satisfactory to the related Trustee,
materially and adversely affect the interests of any related
Certificateholder. Each Pooling and Servicing Agreement may also be amended by
the Depositor, the Servicer and the related Trustee with the consent of the
holders of the related Certificates evidencing not less than 51% of the
related aggregate Certificate Balance (and notional principal amount, if
applicable) for the purpose of adding any provisions to or changing in any
manner or eliminating any of the provisions of such Pooling and Servicing
Agreement or of modifying in any manner the rights of such Certificateholders;
provided, however, that no such amendment may (i) 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 related Receivables or distributions that are
required to be made for the benefit of such Certificateholders or (ii) reduce
the aforesaid percentage of the Certificate Balance of such Series that is
required to consent to any such amendment, without the consent of the holders
of all of the outstanding Certificates of such Series. Unless otherwise
provided in the related Prospectus Supplement, any provision in a Pooling and
Servicing Agreement that imposes unlimited liability on the holder of a Class
IC Certificate and provides for the termination of the related Trust upon the
occurrence of an "Insolvency Event" (as described in the related Prospectus
Supplement) with respect to such holder of the Class IC Certificate, shall not
be amended without the unanimous consent of the Trustee and all holders of
outstanding Certificates of such Series. No amendment of a Pooling and
Servicing Agreement shall be permitted unless an opinion of counsel is
delivered to the Trustee to the effect that such amendment will not adversely
affect the tax status of the Trust.
TERMINATION
Unless otherwise specified in the related Prospectus Supplement, the
obligations of the Servicer, the Depositor and the related Trustee pursuant to
the related Pooling and Servicing Agreement will terminate upon the earliest
to occur of (i) the maturity or other liquidation of the last Receivable in
the related Receivables Pool and the disposition of any amounts received upon
liquidation of any such remaining Receivables and (ii) the payment to the
related Certificateholders of all amounts required to be paid to them pursuant
to the Pooling and Servicing Agreement and (iii) the occurrence of certain
Insolvency Events, to the extent set forth in the related Prospectus
Supplement.
Unless otherwise specified in the related Prospectus Supplement, in order to
avoid excessive administrative expenses, the Servicer or one or more other
entities identified in the related Prospectus Supplement, will be permitted,
at its option, to purchase from each Trust or to cause such Trust to sell all
remaining Receivables in the related Receivables Pool as of the end of any
Collection Period, if the Certificate Balance as of the Distribution Date
following such Collection Period would be less than or equal to 10% of the
initial aggregate Certificate Balance, at a purchase price equal to the fair
market value of such Receivables, but not less than the sum of (x) the
outstanding Pool Balance and (y) accrued and unpaid interest on such amount
computed at a rate equal to the weighted average Contract Rate, minus any
amount representing payments received on the Receivables and not yet applied
to reduce the principal balance thereof or interest related thereto.
If and to the extent provided in the related Prospectus Supplement, the
related Trustee may, within ten days following a Distribution Date as of which
the Pool Balance is equal to or less than 10% of the original Pool Balance,
solicit bids for the purchase of the Receivables remaining in such Trust, in
the manner and subject to the terms and conditions set forth in such
Prospectus Supplement. If such Trustee receives satisfactory bids as described
in such Prospectus Supplement, then the Receivables remaining in such Trust
will be sold to the highest bidder.
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CERTAIN LEGAL ASPECTS OF THE RECEIVABLES
SECURITY INTEREST IN VEHICLES
Installment sale contracts such as those included in the Receivables
evidence the credit sale of automobiles, light trucks, motorcycles and vans by
dealers to obligors; the contracts and the installment loan and security
agreements also constitute personal property security agreements and include
grants of security interests in the vehicles under the UCC. Perfection of
security interests in the vehicles is generally governed by the motor vehicle
registration laws of the state in which the vehicle is located. In all of the
States where CTL currently acquires or originates Receivables, a security
interest in a vehicle is perfected by notation of the secured party's lien on
the vehicle's certificate of title. Unless otherwise specified in the related
Prospectus Supplement, with respect to the Receivables, the lien is or will be
perfected in the name of CTL. Each Receivable prohibits the sale or transfer
of the Financed Vehicle without the lienholder's consent.
Pursuant to each Purchase Agreement, CTL will assign its security interests
in the Financed Vehicles to the Depositor along with the Receivables. Pursuant
to each Pooling and Servicing Agreement, the Depositor will assign its
security interests in the Financed Vehicles to the related Trustee along with
the Receivables. Because of the administrative burden and expense, neither the
Depositor nor the related Trustee will amend any certificate of title to
identify itself as the secured party.
In most states, an assignment such as that under a Pooling and Servicing
Agreement is 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 certain other
states, the laws governing certificates of title are silent on the question of
the effect of an assignment on the continued validity and perfection of a
security interest in vehicles. However, with respect to security interests
perfected by a central filing, the UCC in these states provides that a
security interest continues to be valid and perfected even though the security
interest has been assigned to a third party and no amendments or other filings
are made to reflect the assignment. An official comment to the UCC states that
this rule should control a security interest in a vehicle which is perfected
by the notation of the lien on the certificate of title. Although the comment
does not have the force of law, official comments are typically given
substantial weight by the courts.
Other states have statutory provisions that address or could be interpreted
as addressing assignments. However, nearly all of these statutory provisions
either do not require compliance with the procedure outlined to insure the
continued validity and perfection of the lien or are ambiguous on the issue of
whether the procedure must be followed. Under the official comment noted
above, if these procedures for noting an assignee's name on a certificate of
title are determined to be merely permissive in nature, the procedures would
not have to be followed as a condition to the continued validity and
perfection of the security interest.
By not identifying the Trust as the secured party on the certificate of
title, the security interest of the Trust in the vehicle could be defeated
through fraud or negligence. In the absence of fraud or forgery by the vehicle
owner or CTL, or administrative error by state or local agencies, the notation
of CTL's lien on the certificates should be sufficient to protect the Trust
against the right of subsequent purchasers of a vehicle or subsequent lenders
who take a security interest in a vehicle securing a Receivable. If there are
any vehicles as to which CTL failed to obtain a perfected security interest,
its security interest would be subordinate to, among others, subsequent
purchasers of the vehicles and holders of perfected security interests. Such a
failure, however, would constitute a breach of warranties under the related
Pooling and Servicing Agreement and Purchase Agreement and would create an
obligation of CTL to repurchase the related Receivable, unless such breach
were cured in a timely manner. See "Description of the Transfer and Servicing
Agreements--Sale and Assignment of Receivables."
Under the laws of most states, the perfected security interest in a vehicle
continues for four months after a vehicle is moved to a state other than the
state which issued the certificate of title and thereafter until the vehicle
owner re-registers the vehicle in the new state. A majority of states require
surrender of a certificate of title to re-register a vehicle. Since CTL will
have its lien noted on the certificates of title and the Servicer will retain
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possession of the certificates issued by most states in which Receivables were
or will be originated, the Servicer would ordinarily learn of an attempt at
re-registration through the request from the obligor to surrender possession
of the certificate of title or would receive notice of surrender from the
state of re-registration since the security interest would be noted on the
certificate of title. Thus, the secured party would have the opportunity to
re-perfect its security interest in the vehicle in the state of relocation. In
states that do not require a certificate of title for registration of a motor
vehicle, re-registration could defeat perfection.
In the ordinary course of servicing receivables, the Servicer takes 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 vehicle,
the Servicer must surrender possession of the certificate of title or will
receive notice as a result of CTL's lien noted thereon and accordingly will
have an opportunity to require satisfaction of the related Receivable before
release of the lien. Under each Pooling and Servicing Agreement, the Servicer
is obligated to take appropriate steps, at its own expense, to maintain
perfection of security interests in the Financed Vehicles.
Under the laws of most states, liens for repairs performed on a motor
vehicle and liens for unpaid taxes would take priority over even a perfected
security interest in a Financed Vehicle. In some states, a perfected security
interest in a Financed Vehicle may take priority over liens for repairs.
CTL will represent and warrant in each Purchase Agreement and Pooling and
Servicing Agreement that, as of the date of issuance of the Certificates, each
security interest in a Financed Vehicle is or will be prior to all other
present liens (other than tax liens and liens that arise by operation of law)
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 arises.
REPOSSESSION
In the event of a default by vehicle purchasers, the holder of a retail
installment sale contract or an installment loan and security agreement has
all of the remedies of a secured party under the UCC, except where
specifically limited by other state laws. The remedy employed by the Servicer
in most cases of default is self-help repossession and is accomplished simply
by taking possession of the Financed Vehicle. The self-help repossession
remedy is available under the UCC in most of the states in which Receivables
have been or will be originated as long as the repossession can be
accomplished without a breach of the peace.
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. The vehicle must then be repossessed in
accordance with that order.
NOTICE OF SALE; REDEMPTION RIGHTS
In the event of default by an obligor, some jurisdictions require that the
obligor be notified of the default and be given a time period within which the
obligor may cure the default prior to repossession. Generally, this right of
reinstatement may be exercised on a limited number of occasions in any one-
year period.
The UCC and other state laws require the secured party to provide an obligor
with reasonable notice of the date, time and place of any public sale and/or
the date after which any private sale of the collateral may be held. The
obligor generally has the right to redeem the collateral prior to actual sale
by paying the secured party the unpaid principal balance of the obligation
plus reasonable expenses for repossessing, holding, and preparing the
collateral for disposition and arranging for its sale, and, to the extent
provided in the related retail installment sale contract, and, as permitted by
law, reasonable attorneys' fees.
DEFICIENCY JUDGMENTS AND EXCESS PROCEEDS
The proceeds of resale of the vehicles generally will be applied first to
the expenses of resale and repossession and then to the satisfaction of the
indebtedness. If the net proceeds from resale do not cover the full
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amount of the indebtedness, a deficiency judgment may be sought. 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.
Occasionally, after resale of a vehicle and payment of all expenses and all
indebtedness, there is a surplus of funds. In that case, the UCC requires the
lender to remit the surplus to any holder of a lien with respect to the
vehicle or if no such lienholder exists, the UCC requires the lender to remit
the surplus to the former owner of the vehicle.
CONSUMER PROTECTION LAWS
Numerous federal and state consumer protection laws and related regulations
impose substantial requirements upon lenders and servicers involved in
consumer finance. These laws include the Truth-in-Lending Act, the Equal
Credit Opportunity Act, the Federal Trade Commission Act, the Fair Credit
Billing Act, the Fair Credit Reporting Act, the Fair Debt Collection Practices
Act, the Magnuson-Moss Warranty Act, the Federal Reserve Board's Regulations B
and Z, state adaptations of the National Consumer Act and of the Uniform
Consumer Credit Code and state motor vehicle retail installment sales acts,
and other similar laws. Also, state laws impose finance charge ceilings and
other restrictions on consumer transactions and require contract disclosures
in addition to those required under federal law. Those requirements impose
specific statutory liabilities upon creditors who fail to comply with their
provisions. In some cases, this liability could affect an assignee's ability
to enforce consumer finance contracts such as the Receivables.
The so-called "Holder-in-Due-Course" Rule of the Federal Trade Commission
(the "FTC Rule"), the provisions of which are generally duplicated by the
Uniform Consumer Credit Code, other state statutes, or the common laws in
certain states, has the effect of subjecting a seller (and certain related
lenders and their assignees) in a consumer credit transaction and any assignee
of the seller to all claims and defenses that 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. 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
the related financed vehicle may assert against the seller of the vehicle.
Such claims are limited to a maximum liability equal to the amounts paid by
the Obligor on the Receivable.
Under most state motor vehicle dealer licensing laws, dealers of motor
vehicles are required to be licensed to sell motor vehicles at retail sale. In
addition, with respect to used vehicles, the Federal Trade Commission's Rule
on Sale of Used Vehicles requires that all sellers of used vehicles prepare,
complete and display a "Buyer's Guide" which explains the warranty coverage
for such vehicles. Furthermore, Federal Odometer Regulations promulgated under
the Motor Vehicle Information and Cost Savings Act requires that all sellers
of used vehicles furnish a written statement signed by the seller certifying
the accuracy of the odometer reading. If a seller is not properly licensed or
if either a Buyer's Guide or Odometer Disclosure Statement was not provided to
the purchaser of the related financed vehicle, the obligor may be able to
assert a defense against the seller of the vehicle. If an Obligor were
successful in asserting any such claim or defense, such claim or defense would
constitute a breach of CTL's representations and warranties under each
Purchase Agreement and Pooling and Servicing Agreement and would create an
obligation of CTL to make certain indemnities and repurchase the Receivable
unless such breach were cured in a timely manner. See "Description of the
Transfer and Servicing Agreements--Sale and Assignment of 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
protections provided under the 14th Amendment to the Constitution of the
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United States. Courts have generally upheld the notice provisions of the UCC
and related laws as reasonable or have found that the repossession and resale
by the creditor do not involve sufficient state action to afford
constitutional protection to consumers.
CTL will represent and warrant in each Purchase Agreement that each
Receivable complies with all requirements of law in all material respects.
Accordingly, if an Obligor has a claim against a Trust for violation of any
law and such claim materially and adversely affects the Trust's interest in a
Receivable, such violation would constitute a breach of CTL's representations
and warranties under the Purchase Agreement and would create an obligation of
CTL to repurchase such Receivable unless the breach were cured. See
"Description of the Transfer and Servicing Agreements--Sale and Assignment of
Receivables."
OTHER LIMITATIONS
In addition to the laws limiting or prohibiting deficiency judgments,
numerous other statutory provisions, including federal bankruptcy laws and
related state laws, may interfere with or affect the ability of a lender to
realize upon collateral or enforce a deficiency judgment. For example, in a
Chapter 13 proceeding under the federal bankruptcy law, a court may prevent a
lender from repossessing an automobile, and, as part of the rehabilitation
plan, reduce the amount of the secured indebtedness to the market value of the
automobile at the time of bankruptcy (as determined by the court), leaving the
party providing financing as a general unsecured creditor for the remainder of
the indebtedness. A bankruptcy court may also reduce the monthly payments due
under a contract or change the rate of interest and time of repayment of the
indebtedness.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a general summary of certain federal income tax
consequences of the purchase, ownership and disposition of Certificates. The
summary does not purport to deal with federal income tax consequences
applicable to all categories of holders, some of which may be subject to
special rules. For example, its does not discuss the tax treatment of
Certificateholders that are insurance companies, regulated investment
companies or dealers in securities. Prospective investors are urged to consult
their own tax advisors in determining the federal, state, local, foreign and
any other tax consequences to them of the purchase, ownership and disposition
of the Certificates.
The following summary is based upon current provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), the Treasury regulations
promulgated thereunder and judicial or ruling authority, all of which are
subject to change, which change may be retroactive. Each Trust will be
provided with an opinion of federal tax counsel regarding certain federal
income tax matters discussed below. Such opinions, however, are not binding on
the IRS or the courts. No ruling on any of the issues discussed below will be
sought from the IRS. For purposes of the following summary, references to the
Trust, the Certificates and related terms, parties and documents shall be
deemed to refer, unless otherwise specified herein, to each Trust and the
Certificates and the related terms, parties and documents applicable to such
Trust.
The federal income tax consequences to Certificateholders will vary
depending on whether an election is made to treat the Trust as a partnership
under the Code or whether the Trust will be treated as a grantor trust. The
Prospectus Supplement for each Series of Certificates will specify whether a
partnership election will be made or whether the Trust will be treated as a
grantor trust.
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TRUSTS FOR WHICH A PARTNERSHIP ELECTION IS MADE
TAX CHARACTERIZATION OF THE TRUST AS A PARTNERSHIP
Federal Tax Counsel will deliver its opinion that a Trust for which a
partnership election is made will not be an association (or publicly traded
partnership) taxable as a corporation for federal income tax purposes. This
opinion will be based on the assumption that the terms of the Pooling and
Servicing Agreement and related documents will be complied with, and on such
counsel's conclusions that (i) the Trust will not have certain characteristics
necessary for a business trust to be classified as an association taxable as a
corporation and (ii) the nature of the income of the Trust will exempt it from
the rule that certain publicly traded partnerships are taxable as
corporations.
If a Trust were taxable as a corporation for federal income tax purposes, it
would be subject to corporate income tax on its taxable income. The Trust's
taxable income would include all of its income on the related Receivables,
less servicing fees and other deductible expenses. Any such corporate income
tax could materially reduce cash available to make distributions on the
Certificates, and Certificate Owners could be liable for any such tax that is
unpaid by the Trust.
On May 9, 1996, the Department of Treasury issued proposed regulations
regarding entity classification that contain an elective "check-the-box"
procedure under which partnership (as opposed to association) status may be
elected by an unincorporated entity for federal income tax purposes without
lacking some or all of the characteristics distinguishing such entities
described in clause (i) of the second preceding paragraph. The application of
these proposed regulations to any particular Trust, particularly those formed
prior to the issuance of applicable temporary or final regulations, is
uncertain. If applicable temporary or final regulations are issued, the
related Pooling and Servicing Agreement will require that any eligible Trust
must make a partnership election thereunder. Moreover, any such Trust may be
amended to remove one or more of the distinguishing characteristics described
in this paragraph if permitted by such applicable temporary or final
regulations. In such event, it is not expected that there would be any
material adverse effect on Certificate Owners.
TAX CONSEQUENCES TO HOLDERS OF THE CERTIFICATES
Treatment of the Trust as a Partnership. The Depositor and the Servicer will
agree, and the related Certificate Owners will agree by their purchase of
Certificates, to treat the Trust as a partnership for purposes of federal and
state income tax, franchise tax and any other tax measured in whole or in part
by income, with the assets of the partnership being the assets held by the
Trust, the partners of the partnership being the Certificate Owners (including
the holder of the Class IC Certificate). However, the proper characterization
of the arrangement involving the Trust, the Certificates, the Depositor and
the Servicer is not certain because there is no authority on transactions
closely comparable to that contemplated herein.
If the proposed regulations containing the "check-the-box" procedure
described above under "Tax Characterization of the Trust as a Partnership"
become applicable as temporary or final regulations, the related Pooling and
Servicing Agreement will provide that an election to treat the Trust as a
partnership shall be made thereunder.
Partnership Taxation. As a partnership, the Trust will not be subject to
federal income tax. Rather, each Certificate Owner will be required to
separately take into account such holder's allocated share of income, gains,
losses, deductions and credits of the Trust. The Trust's income will consist
primarily of interest and finance charges earned on the related Receivables
(including appropriate adjustments for market discount, original issue
discount ("OID") and bond premium) and any gain upon collection or disposition
of such Receivables. The Trust's deductions will consist primarily of
servicing and other fees, and losses or deductions upon collection or
disposition of Receivables.
The tax items of a partnership are allocable to the partners in accordance
with the Code, Treasury regulations and the partnership agreement (i.e., the
Pooling and Servicing Agreement and related documents).
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The Pooling and Servicing Agreement will provide, in general, that the
Certificate Owners will be allocated taxable income of the Trust for each
month equal to the sum of: (i) the interest that accrues on the Certificates
in accordance with their terms for such month, including interest accruing at
the related Pass-Through Rate for such month and interest, if any, on amounts
previously due on the Certificates but not yet distributed; (ii) any Trust
income attributable to discount on the related Receivables that corresponds to
any excess of the principal amount of the Certificates over their initial
issue price; (iii) any other amounts of income payable to the Certificate
Owners for such month; and (iv) in the case of an individual, such Certificate
Owner's share of income corresponding to the miscellaneous itemized deductions
described in the next paragraph. Such allocation will be reduced by any
amortization by the Trust of premium on Receivables that corresponds to any
excess of the issue price of Certificates over their principal amount. Unless
otherwise provided in the related Prospectus Supplement, all remaining taxable
income of the Trust will be allocated to the Class IC Certificateholder. In
the event the Trust issues interest-only Class I Certificates, the amount
allocated to such Certificate Owners will equal the excess of (i) the Class I
Pass-Through Rate times the Notional Principal Amount for such month over (ii)
the portion of the amount distributed with respect to the Class I Certificates
for such month that would constitute a return of basis if the Class I
Certificates constituted an instrument described in Section 860G(a)(1)(B)(ii)
of the Code, applying the principles of Section 1272(a)(6) of the Code and
employing the constant yield method of accrual (utilizing the appropriate
prepayment assumption); provided, that no negative accruals shall be
permitted, and, provided further, that other deductions derived by the Trust
equal to the aggregate remaining capital account balances of the Class I
Certificate Owners will be allocated to the Class I Certificates in proportion
to the respective capital account balances immediately before the final
redemption.
An individual taxpayer's share of expenses of the Trust (including fees to
the Servicer, but not interest expense) would be miscellaneous itemized
deductions. Such deductions might be disallowed to the individual in whole or
in part and might result in such holder being taxed on an amount of income
that exceeds the amount of cash actually distributed to such holder over the
life of the Trust. Any net loss of the Trust will be allocated first to the
Class IC Certificateholder to the extent of its adjusted capital account and
then to the other Certificate Owners in the priorities set forth in the
Pooling and Servicing Agreement to the extent of their respective adjusted
capital accounts, and thereafter to the Class IC Certificateholder.
The Trust intends to make all calculations relating to market discount
income and amortization of premium with respect to both Simple Interest
Receivables and Precomputed Receivables on an aggregate basis rather than a
Receivable-by-Receivable basis. If the IRS were to require that such
calculations be made separately for each Receivable, the Trust might be
required to incur additional expense, but it is believed that there would not
be a material adverse effect on Certificate Owners.
Discount and Premium. Except as otherwise provided in the related Prospectus
Supplement, it is believed that the Receivables were not issued with OID, and,
therefore, the Trust should not have OID income. However, the purchase price
paid by the Trust for the related Receivables may be greater or less than the
remaining principal balance of the Receivables at the time of purchase. If so,
the Receivables will have been acquired at a premium or discount, as the case
may be. (As indicated above, the Trust will make this calculation on an
aggregate basis, but might be required to recompute it on a Receivable-by-
Receivable basis.)
If the Trust acquires the related Receivables at a market discount or
premium, it will elect to include any such discount in income currently as it
accrues over the life of such Receivables or to offset any such premium
against interest income on such Receivables. As indicated above, a portion of
such market discount income or premium deduction may be allocated to
Certificate Owners.
Section 708 Termination. Under Section 708 of the Code, the Trust will be
deemed to terminate for federal income tax purposes if 50% or more of the
capital and profits interests in the Trust are sold or exchanged within a 12-
month period. If such a termination occurs, the Trust will be considered to
distribute its assets to the partners, who would then be treated as
recontributing those assets to the Trust, as a new partnership. The Trust will
not comply with certain technical requirements that might apply when such a
constructive termination occurs. As a result, the Trust may be subject to
certain tax penalties and may incur additional expenses if it is
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required to comply with those requirements. Furthermore, the Trust might not
be able to comply due to lack of data. Under proposed Treasury regulations,
the foregoing treatment would be replaced by new rules under which a 50% or
greater transfer, as described above, would cause a deemed contribution of the
assets of the Trust to a new partnership in exchange for interests in the
Trust. Such interests in a new partnership would be deemed distributed to the
partners of the Trust in liquidation thereof, which would not constitute a
sale or exchange. It is not known when or whether such proposed Treasury
regulations will become effective.
Disposition of Certificates. Generally, capital gain or loss will be
recognized on a sale of Certificates in an amount equal to the difference
between the amount realized and the seller's tax basis in the Certificates
sold. A Certificate Owner's tax basis in a Certificate will generally equal
the holder's cost increased by the holder's share of Trust income (includible
in income) and decreased by any distributions received with respect to such
Certificate. In addition, both the tax basis in the Certificates and the
amount realized on a sale of a Certificate would include the holder's share of
the liabilities of the Trust. A holder acquiring Certificates at different
prices may be required to maintain a single aggregate adjusted tax basis in
such Certificates and, upon sale or other disposition of some of the
Certificates, to allocate a portion of such aggregate tax basis to the
Certificates sold (rather than maintaining a separate tax basis in each
Certificate for purposes of computing gain or loss on a sale of that
Certificate).
Any gain on the sale of a Certificate attributable to the holder's share of
unrecognized accrued market discount on the related Receivables would
generally be treated as ordinary income to the holder and would give rise to
special tax reporting requirements. The Trust does not expect to have any
other assets that would give rise to such special reporting requirements.
Thus, to avoid those special reporting requirements, the Trust will elect to
include market discount in income as it accrues.
If a Certificate Owner is required to recognize an aggregate amount of
income (not including income attributable to disallowed itemized deductions
described above) over the life of the Certificates that exceeds the aggregate
cash distributions with respect thereto, such excess will generally give rise
to a capital loss upon the retirement of the Certificates.
Allocations Between Transferors and Transferees. In general, the Trust's
taxable income and losses will be determined monthly and the tax items for a
particular calendar month will be apportioned among the Certificate Owners in
proportion to the principal amount of Certificates (or notional principal
amount, in the case of any interest only Certificates) owned by them as of the
close of the last day of such month. As a result, a holder purchasing
Certificates may be allocated tax items (which will affect its tax liability
and tax basis) attributable to periods before the actual transaction.
The use of such a monthly convention may not be permitted by existing
regulations. If a monthly convention is not allowed (or only applies to
transfers of less than all of the partner's interest), taxable income or
losses of the Trust might be reallocated among the Certificate Owners. The
Class IC Certificateholder, acting as tax matters partner for the Trust, will
be authorized to revise the Trust's method of allocation between transferors
and transferees to conform to a method permitted by future regulations.
Section 754 Election. In the event that a Certificate Owner sells its
Certificates at a profit (loss), the purchasing Certificate Owner will have a
higher (lower) basis in the Certificates than the selling Certificate Owner
had. The tax basis of the Trust's assets will not be adjusted to reflect that
higher (or lower) basis unless the Trust were to file an election under
Section 754 of the Code. In order to avoid the administrative complexities
that would be involved in keeping accurate accounting records, as well as
potentially onerous information reporting requirements, the Trust will not
make such election. As a result, Certificate Owners might be allocated a
greater or lesser amount of Trust income than would be appropriate based on
their own purchase price for Certificates.
Administrative Matters. The Trustee is required to keep or have kept
complete and accurate books of the Trust. Such books will be maintained for
financial reporting and tax purposes on an accrual basis, and the fiscal
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year of the Trust is expected to be the calendar year. The Trustee will file a
partnership information return (IRS Form 1065) with the IRS for each taxable
year of the Trust and will report each Certificate Owner's allocable share of
items of Trust income and expense to holders and the IRS on Schedule K-1. The
Trust will provide the Schedule K-l information to nominees that fail to
provide the Trust with the information statement described below and such
nominees will be required to forward such information to the beneficial owners
of the Certificates. Generally, holders must file tax returns that are
consistent with the information return filed by the Trust or be subject to
penalties unless the holder notifies the IRS of all such inconsistencies.
Under Section 6031 of the Code, any person that holds Certificates as a
nominee at any time during a calendar year is required to furnish the Trust
with a statement containing certain information on the nominee, the beneficial
owners and the Certificates so held. Such information includes (i) the name,
address and taxpayer identification number of the nominee and (ii) as to each
beneficial owner (a) the name, address and identification number of such
person, (b) whether such person is a United States person, a tax-exempt entity
or a foreign government, an international organization, or any wholly owned
agency or instrumentality of either of the foregoing, and (c) certain
information on Certificates that were held, bought or sold on behalf of such
person throughout the year. In addition, brokers and financial institutions
that hold Certificates through a nominee are required to furnish directly to
the Trust information as to themselves and their ownership of Certificates. A
clearing agency registered under Section 17A of the Exchange Act is not
required to furnish any such information statement to the Trust. The
information referred to above for any calendar year must be furnished to the
Trust on or before the following January 31. Nominees, brokers and financial
institutions that fail to provide the Trust with the information described
above may be subject to penalties.
Unless otherwise specified in the related Prospectus Supplement, the Class
IC Certificateholder will be designated as the tax matters partner for each
Trust in the related Pooling and Servicing Agreement and, as such, will be
responsible for representing the Certificate Owners in any dispute with the
IRS. The Code provides for administrative examination of a partnership as if
the partnership were a separate and distinct taxpayer. Generally, the statute
of limitations for partnership items does not expire before three years after
the date on which the partnership information return is filed. Any adverse
determination following an audit of the return of the Trust by the appropriate
taxing authorities could result in an adjustment of the returns of the
Certificate Owners, and, under certain circumstances, a Certificate Owner may
be precluded from separately litigating a proposed adjustment to the items of
the Trust. An adjustment could also result in an audit of a Certificate
Owner's returns and adjustments of items not related to the income and losses
of the Trust.
Tax Consequences to Foreign Certificate Owners. It is not clear whether the
Trust would be considered to be engaged in a trade or business in the United
States for purposes of federal withholding taxes with respect to non-U.S.
persons because there is no clear authority dealing with that issue under
facts substantially similar to those described herein. Although it is not
expected that the Trust would be engaged in a trade or business in the United
States for such purposes, the Trust will withhold as if it were so engaged in
order to protect the Trust from possible adverse consequences of a failure to
withhold. The Trust expects to withhold on the portion of its taxable income
that is allocable to foreign Certificate Owners pursuant to Section 1446 of
the Code, as if such income were effectively connected to a U.S. trade or
business, at a rate of 35% for foreign holders that are taxable as
corporations and 39.6% for all other foreign holders. Subsequent adoption of
Treasury regulations or the issuance of other administrative pronouncements
may require the Trust to change its withholding procedures. In determining a
holder's withholding status, the Trust may rely on IRS Form W-8, IRS Form W-9
or the holder's certification of nonforeign status signed under penalties of
perjury.
Each foreign holder might be required to file a U.S. individual or corporate
income tax return (including, in the case of a corporation, the branch profits
tax) on its share of the Trust's income. Each foreign holder must obtain a
taxpayer identification number from the IRS and submit that number to the
Trust on Form W-8 in order to assure appropriate crediting of the taxes
withheld. A foreign holder generally would be entitled to file with the IRS a
claim for refund with respect to taxes withheld by the Trust, taking the
position that no taxes were due because the Trust was not engaged in a U.S.
trade or business. However, interest payments made (or accrued) to a
Certificate Owner who is a foreign person generally will be considered
guaranteed payments to the extent such
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payments are determined without regard to the income of the Trust. If these
interest payments are properly characterized as guaranteed payments, then the
interest will not be considered "portfolio interest". As a result, Certificate
Owners will be subject to United States federal income tax and withholding tax
at a rate of 30 percent, unless reduced or eliminated pursuant to an
applicable treaty. In such case, a foreign holder would only be entitled to
claim a refund for that portion of the taxes in excess of the taxes that
should be withheld with respect to the guaranteed payments.
Backup Withholding. Distributions made on the Certificates and proceeds from
the sale of the Certificates will be subject to a "backup" withholding tax of
31% if, in general, the Certificate Owner fails to comply with certain
identification procedures, unless the holder is an exempt recipient under
applicable provisions of the Code.
TRUSTS TREATED AS GRANTOR TRUSTS
TAX CHARACTERIZATION OF GRANTOR TRUSTS
If specified in the related Prospectus Supplement, Federal Tax Counsel will
deliver its opinion that the Trust will not be classified as an association
taxable as a corporation and that such Trust will be classified as a grantor
trust under subpart E, Part I of subchapter J of the Code. In this case,
beneficial owners of Certificates (referred to herein as "Grantor Trust
Certificateholders") will be treated for federal income tax purposes as owners
of a portion of the Trust's assets as described below. The Certificates issued
by a Trust that is treated as a grantor trust are referred to herein as
"Grantor Trust Certificates".
Characterization. Each Grantor Trust Certificateholder will be treated as
the beneficial owner of a pro rata undivided interest in the interest and
principal portions of the Trust represented by the Grantor Trust Certificates
and will be considered the equitable owner of a pro rata undivided interest in
each of the Receivables in the Trust. Any amounts received by a Grantor Trust
Certificateholder in lieu of amounts due with respect to any Receivable
because of a default or delinquency in payment will be treated for federal
income tax purposes as having the same character as the payments they replace.
To the extent a particular Series provides for a Yield Supplement Account,
each Grantor Trust Certificateholder will also be treated as the beneficial
owner of a pro rata undivided interest in a contractual obligation of the
Depositor to pay interest at the applicable Pass-Through Rates on the Grantor
Trust Certificateholders' respective undivided interests in the Receivables
for which the Note Rate is less than the sum of (i) the initial weighted
average of the applicable Pass-Through Rates and (ii) the per annum rate used
to calculate the Monthly Servicing Fee (such obligation, the "Yield Supplement
Agreement"). In such case, however the Service could assert that the
Certificates represent indebtedness of the Depositor either in their entirety
or in an amount corresponding to the principal amount of the Receivables that
are covered by the Yield Supplement Agreement for federal income tax purposes.
The Depositor believes that, except as noted below, such a determination would
not have a materially different effect on the timing or character of taxable
income to Grantor Trust Certificateholders.
Each Grantor Trust Certificateholder must allocate the amount it pays for
its Grantor Trust Certificate between its interest in the Receivables and its
interest in the other assets of the Trust, including, in particular, the Yield
Supplement Agreement. Such allocation must be made based on the relative fair
market values of the Receivables and the Yield Supplement Agreement. Because
the Yield Supplement Deposit is not expected to be significant relative to the
Certificate Principal Balance as of the Cutoff Date and because of the
expected amortization method of reporting amounts received pursuant to the
Yield Supplement Agreement (described below under "Yield Supplement
Agreement"), such allocation will not be provided separately in reports to
Grantor Trust Certificateholders. As further described below, a Grantor Trust
Certificateholder would calculate separately its income realized with respect
to the Receivables and its income with respect to the Yield Supplement
Agreement.
Each Grantor Trust Certificateholder will be required to report on its
federal income tax return in accordance with such Grantor Trust
Certificateholder's method of accounting its pro rata share of the entire
income from the
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Receivables in the Trust represented by Grantor Trust Certificates, including
interest, OID, if any, prepayment fees, assumption fees, any gain recognized
upon an assumption and late payment charges received by the Servicer, and its
share of the income portion of payments on the Yield Supplement Agreement (as
discussed below under "Yield Supplement Agreement"). The portion of each
monthly payment to a Grantor Trust Certificateholder that is allocable to
principal on the Receivables will represent a return of capital (other than
accrued market discount not yet reported as income), and there will be a
corresponding reduction in the tax basis of such Grantor Trust
Certificateholder's undivided interest in the Receivables. Grantor Trust
Certificateholders also will be entitled to amortize their basis in the
Grantor Trust Certificates allocated to the Yield Supplement Agreement under
one of the methods described below under "Yield Supplement Agreement."
Under Code Sections 162 or 212, each Grantor Trust Certificateholder will be
entitled to deduct, consistent with its method of accounting, its pro rata
share of servicing fees, prepayment fees, assumption fees and late payment
charges retained by the Servicer, provided that such amounts are reasonable
compensation for services rendered to the Trust. Code Section 67 provides,
however, that if a Grantor Trust 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 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 $100,000 ($50,000 in the case of a married
individual filing a separate return) (subject to adjustment for inflation) or
(ii) 80% of the amount of itemized deductions otherwise allowable for such
year. To the extent either of such limitations apply, such Grantor Trust
Certificateholder may have gross income in excess of interest received in cash
without a corresponding deduction.
A Grantor Trust 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 to the Servicer. A Grantor Trust Certificateholder using
an accrual method of accounting must take into account its pro rata share of
income and deductions as they become due or are paid to the Servicer,
whichever is earlier. If the servicing fees paid to the Servicer are deemed to
exceed reasonable servicing compensation, the amount of such excess could be
considered as an ownership interest retained by the Servicer (or any person to
whom the Servicer assigned for value all or a portion of the servicing fees)
in a portion of the interest payments on the Receivables. The Receivables
would then be subject to the "coupon stripping" rules of the Code discussed
below.
For federal income tax purposes, the outstanding principal balance of each
Rule of 78's Receivable as of the Cutoff Date is based on the Rule of 78's
(the "Cutoff Date Scheduled Balance"). Because the Rule of 78's allocates a
greater portion of the early payments on a Rule of 78's Receivable to interest
than the actuarial method, the Cutoff Date Scheduled Balance of each Rule of
78's Receivable exceeds the amount that would have been its principal balance
as of the Cutoff Date if each Rule of 78's Receivable had been amortized from
origination under the actuarial method (such amount, the "Cutoff Date
Actuarial Balance"). The purchase price paid by Grantor Trust
Certificateholders for each Rule of 78's Receivable will reflect the Cutoff
Date Actuarial Balance.
The proper tax method for accounting for the Rule of 78's Receivables is
uncertain. As described above, the Servicer and the Trustee intend to report
income to Grantor Trust Certificateholders based on the actuarial method.
However, prospective investors should consult their tax advisors as to whether
they may be required or permitted to use the Rule of 78's method to account
for interest on the Rule of 78's Receivables. A Grantor Trust
Certificateholder will be furnished information for federal income tax
purposes enabling him to report interest on the Rule of 78's Receivables,
under the Rule of 78's method of accounting only upon written request to the
Trustee, and payment of the costs of producing such information. In the event
that a Grantor Trust Certificateholder reports taxable income based on the
Rule of 78's method, such Grantor Trust Certificateholder should consult his
or her tax advisor as to the application of the original issue and market
discount rules with respect to the Rule of 78's Receivables.
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If a Rule of 78's Receivable is prepaid in full, any amount collected from
the Obligor pursuant to the Rule of 78's Receivable in excess of the principal
balance thereof and accrued interest thereon, computed using an actuarial
method, will be paid to the Servicer. Such amount may be treated as additional
income in the nature of a prepayment penalty to a Grantor Trust
Certificateholder who had reported income with respect to the Rule of 78's
Receivables on the actuarial method, and would be deductible only to the
extent described above. Alternatively, such amount might be treated as an
interest in the Rule of 78's Receivables retained by the Servicer, in which
event it would not be included in a Grantor Trust Certificateholder's income.
STRIPPED BONDS AND STRIPPED COUPONS
Original Issue Discount. Although the tax treatment of stripped bonds is not
entirely clear, based on guidance by the IRS, it appears that each purchaser
of a Grantor Trust 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 applicable 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 OID rules of the Code) such
stripped bond will be considered to have been issued with OID. For these
purposes, OID is the excess of the "stated redemption price at maturity"
(generally, principal and any interest which is not "qualified stated
interest") of a debt instrument over its issue price. Based on the preamble to
the Section 1286 Treasury Regulations, although the matter is not entirely
clear, the interest income on the Certificates at the sum of the Pass-Through
Rate and the portion of the Servicing Fee Rate that does not constitute excess
servicing should 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. It is possible that the treatment
described in this paragraph will apply only to that portion of the Receivables
in a particular trust as to which there is "excess servicing" and that the
remainder of such Receivables will not be treated as stripped bonds, but as
undivided interests as described above.
If the allocable purchase price paid by a Grantor Trust Certificateholder
who purchases a Grantor Trust Certificate in its original public offering
equals the portion of the principal balance of the Receivables that is
allocable to its Grantor Trust Certificate, or is less than such principal
balance by a statutorily defined de minimis amount, then there would be no
original issue discount with respect to its interest in the Receivables.
Furthermore, the allocation of a portion of the purchase price of a Grantor
Trust Certificate to a Grantor Trust Certificateholder's undivided interest in
the Yield Supplement Agreement will result in the Grantor Trust
Certificateholder's acquisition of the related Receivables at a greater
discount, and the purchase price so allocated may not be recovered at the same
time or over the same period than if it had been allocated to such
Receivables. See "The Yield Supplement Agreement" below. Although the Service
could assert that a Grantor Trust Certificateholder's basis in the Receivables
should be determined on a Receivable-by-Receivable basis, a Grantor Trust
Certificateholder will not have sufficient information with respect to the
Receivables to allocate its basis in this manner. In addition, although the
Service could assert that the income derived by a Grantor Trust
Certificateholder from the Receivables should be determined on a Receivable-
by-Receivable basis, income will be reported to Grantor Trust
Certificateholders on an aggregate basis. If the Service were to require
reporting on a Receivable-by-Receivable basis, a Grantor Trust
Certificateholder's recognition of income could be accelerated or decelerated.
Moreover, because the interest rates of the Receivables vary significantly,
the allocation of basis and computation of income on a Receivable-by-
Receivable basis could have a more significant effect on the income of a
Grantor Trust Certificateholder than it would if the Receivables had more
uniform characteristics. Unless indicated otherwise in the applicable
Prospectus Supplement, it is not anticipated that Grantor Trust Certificates
will be issued with greater than de minimis OID.
To the extent the rules of the Code relating to OID (Sections 1271 though
1273 and 1275) are applicable to a person comparable to a Grantor Trust
Certificateholder that acquires an undivided interest in a stripped bond
issued or acquired with OID, such person must include in gross income the sum
of the "daily portions," as defined below, of the OID on such stripped bond
for each day on which it owns a Certificate, including the date of purchase
but excluding the date of disposition. It is not clear whether such OID will
be determined under Code Section 1272(a)(6), applicable to debt instruments
whose payments may be accelerated by prepayments on
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underlying obligations. Unless indicated otherwise in the applicable
Prospectus Supplement, it is anticipated that such approach will be used, with
OID accruals based on a constant interest method and a prepayment assumption
indicated in such Prospectus Supplement. In the case of an original Grantor
Trust Certificateholder, the daily portions of OID generally would be
determined as follows. A calculation will be made of the portion of OID that
accrues on the stripped bond 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 of all remaining payments to
be received on the stripped bond under the prepayment assumption used in
respect of the Grantor Trust Certificates and (ii) any payments received
during such accrual period, and subtracting from the total the "adjusted issue
price" of the stripped bond at the beginning of such accrual period. No
representation is made that the Grantor Trust Certificates will prepay at any
prepayment assumption. The "adjusted issue price" of a stripped bond at the
beginning of the first accrual period is its issue price (as determined for
purposes of the OID rules of the Code) and the "adjusted issue price" of a
stripped bond at the beginning of a subsequent accrual period is the "adjusted
issue price" at the beginning of the immediately preceding accrual period plus
the amount of OID allocable to that accrual period and reduced by the amount
of any payment (other than "qualified stated interest") made at the end of or
during that accrual period. The OID accruing during such accrual period will
then be divided by the number of days in the period to determine the daily
portion of OID for each day in the period. A subsequent Grantor Trust
Certificateholder will be required to adjust its OID accrual to reflect its
purchase price, the remaining period to maturity and, possibly, a new
prepayment assumption. The Servicer will report to all Grantor Trust
Certificateholders as if they were original holders.
With respect to the Receivables, the method of calculating OID as described
above will cause the accrual of OID to either increase or decrease (but never
below zero) in any given accrual period to reflect the fact that prepayments
are occurring at a faster or slower rate than the prepayment assumption used
in respect of the Receivables. Subsequent purchasers that purchase Grantor
Trust Certificates at more than a de minimis discount should consult their tax
advisors with respect to the proper method to accrue such OID.
Market Discount. A Grantor Trust Certificateholder that acquires an
undivided interest in Receivables may be subject to the market discount rules
of Sections 1276 though 1278 to the extent an undivided interest in a
Receivable or stripped bond is considered to have been purchased at a "market
discount". Generally, the amount of market discount is equal to the excess of
the portion of the principal amount of such Receivable or stripped bond
allocable to such holder's undivided interest over such holder's tax basis in
such interest. Market discount with respect to a Grantor Trust Certificate
will be considered to be zero if the amount allocable to the Grantor Trust
Certificate is less than 0.25% of the Grantor Trust Certificate's stated
redemption price at maturity multiplied by the weighted average maturity
remaining after the date of purchase. Treasury regulations implementing the
market discount rules have not yet been issued; therefore, investors should
consult their own tax advisors regarding the application of these rules and
the advisability of making any of the elections allowed under Code Section
1276 and 1278.
The Code provides that any principal payment (whether a scheduled payment or
a prepayment) or any gain or disposition of a market discount bond shall be
treated as ordinary income to the extent that it does not exceed the accrued
market discount at the time of such payment. The amount of accrued market
discount for purposes of determining the tax treatment of subsequent principal
payments or dispositions of the market discount bond is to be reduced by the
amount so treated as ordinary income.
The Code also grants the Treasury Department authority to issue regulations
providing for the computation of accrued market discount on debt instruments,
the principal of which is payable in more than one installment. While the
Treasury Department has not yet issued regulations, rules described in the
relevant legislative history will apply. Under those rules, the holder of a
market discount bond may elect to accrue market discount either on the basis
of a constant interest rate or according to one of the following methods. If a
Grantor Trust Certificate is issued with OID, the amount of market discount
that accrues during any accrual period would be equal to the product of (i)
the total remaining market discount and (ii) a fraction, the numerator of
which is the OID accruing
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during the period and the denominator of which is the total remaining OID at
the beginning of the accrual period. For Grantor Trust Certificates issued
without OID, the amount of market discount that accrues during a period is
equal to the product of (i) the total remaining market discount and (ii) a
fraction, the numerator of which is the amount of stated interest paid during
the accrual period and the denominator of which is the total amount of stated
interest remaining to be paid at the beginning of the accrual period. For
purposes of calculating market discount under any of the above methods in the
case of instruments (such as the Grantor Trust Certificates) that provide for
payments that may be accelerated by reason of prepayments of other obligations
securing such instruments, the same prepayment assumption applicable to
calculating the accrual of OID will apply. Because the regulations described
above have not been issued, it is impossible to predict what effect those
regulations might have on the tax treatment of a Grantor Trust Certificate
purchased at a discount or premium in the secondary market.
A holder who acquired a Grantor Trust Certificate at a market discount also
may be required to defer a portion of its interest deductions for the taxable
year attributable to any indebtedness incurred or continued to purchase or
carry such Grantor Trust Certificate purchased with market discount. For these
purposes, the de minimis rule referred to above applies. Any such deferred
interest expense would not exceed the market discount that accrues during such
taxable year and is, in general, allowed as a deduction not later than the
year in which such market discount is includible in income. If such holder
elects to include market discount in income currently as it accrues on all
market discount instruments acquired by such holder in that taxable year or
thereafter, the interest deferral rule described above will not apply.
Premium. To the extent a Grantor Trust Certificateholder is considered to
have purchased an undivided interest in a Receivable or stripped bond for an
amount that is greater than its stated redemption price at maturity of such
Receivable or stripped bond, such Grantor Trust Certificateholder will be
considered to have purchased the Receivable with "amortizable bond premium"
equal in amount to such excess. A Grantor Trust Certificateholder (who does
not hold the Certificate for sale to customers or in inventory) may elect
under Section 171 of the Code to amortize such premium. Under the Code, the
premium is allocated among the interest payments on the Receivables or
stripped bonds to which it relates and is considered as an offset against (and
thus a reduction of) such interest payments. With certain exceptions, such an
election would apply to all debt instruments held or subsequently acquired by
the electing holder. Absent such an election, the premium will be deductible
as an ordinary loss only upon disposition of the Certificate or pro rata as
principal is paid on the Receivables or stripped bonds.
Election to Treat All Interest as OID. The OID regulations permit a Grantor
Trust Certificateholder to elect to accrue all interest, discount (including
de minimis market discount or original issue discount) and premium in income
as interest, based on a constant yield method. If such an election were to be
made with respect to a Grantor Trust Certificate with market discount, the
Certificate Owner would be deemed to have made an election to include in
income currently market discount with respect to all other debt instruments
having market discount that such Grantor Trust Certificateholder acquires
during the year of the election or thereafter. Similarly, a Grantor Trust
Certificateholder that makes this election for a Grantor Trust Certificate
that is acquired at a premium will be deemed to have made an election to
amortize bond premium with respect to all debt instruments having amortizable
bond premium that such Grantor Trust Certificateholder owns or acquires. See
"--Premium" herein. The election to accrue interest, discount and premium on a
constant yield method with respect to a Grantor Trust Certificate is
irrevocable.
THE YIELD SUPPLEMENT AGREEMENT
The manner in which income with respect to the Yield Supplement Agreement
should be accrued is not clear. Moreover, the sum of the income and deductions
properly reportable by a Grantor Trust Certificateholder in any taxable year
may not equal the amounts that would be reportable if a Grantor Trust
Certificateholder held, instead of an interest in the Receivables and in the
Yield Supplement Agreement, either (i) a debt instrument bearing interest at
the related Pass-Through Rate or (ii) an interest in a trust holding
Receivables each of which bears interest at a rate at least equal to the sum
of the related Pass-Through Rate plus the rate equivalent to the
46
<PAGE>
Monthly Servicing Fee. It is possible that a Grantor Trust Certificateholder
will be required to report as income on a current basis its pro rata share of
all amounts received by the Trust pursuant to the Yield Supplement Agreement.
In such event, the Grantor Trust Certificateholder should be entitled to
amortize in some manner the portion of the purchase price paid for its Grantor
Trust Certificate that is allocable to its pro rate interest in the Yield
Supplement Agreement. It is not clear whether such amortization deduction
would be computed in a manner reflecting a constant yield method, pro rata
method, straight-line method, or some other method of amortization. It is not
clear whether, and to what extent, the amounts includable in income or
amortizable under any of these methods would be adjusted to take account of
prepayments on the Receivables. In addition, to the extent that the amounts
payable pursuant to the Yield Supplement Agreement in respect of Receivables
for which the Note Rate is less than the sum of the initial weighted average
of the applicable Pass-Through Rates and the per annum rate used to calculate
the Monthly Servicing Fee decline during any period as a result of prepayments
on such Receivables, it is possible that a portion of the amount amortizable
by the Grantor Trust Certificateholder during such period would be treated as
a capital loss (which would not offset ordinary income) rather than as an
ordinary deduction. It is anticipated that the Servicer will employ an
amortization method in reporting to Grantor Trust Certificateholders that
results in net income with respect to the related Receivable at the applicable
Pass-Through Rate. Grantor Trust Certificateholders are advised to consult
their own tax advisors regarding the appropriate method of accounting for
income attributable to the Yield Supplement Agreement.
TREATMENT OF LOSSES
Grantor Trust Certificateholders on the accrual method of accounting will be
required to report income with respect to the Grantor Trust Certificates
without giving effect to delays or reductions in distributions attributable to
defaults or delinquencies on the Receivables, except to the extent it can be
established that such losses are uncollectible. Accordingly, the holder of a
Grantor Trust Certificate, particularly a subordinate Grantor Trust
Certificate, may have income or may incur a diminution in cash flow as a
result of a default or delinquency, but may not be able to take a deduction
(subject to the discussion below) for the corresponding loss until a
subsequent taxable year. To the extent the rules of Code Section 166 regarding
bad debts are applicable, it appears that Grantor Trust Certificateholders
that are corporations or that hold the Grantor Trust Certificates in
connection with a trade or business should in general be allowed to deduct as
an ordinary loss such loss with respect to principal sustained during the
taxable year on account of any such Grantor Trust Certificates becoming wholly
or partially worthless, and that, in general, Grantor Trust Certificateholders
that are not corporations and do not hold the Grantor Trust Certificates in
connection with a trade or business will be allowed to deduct as a short-term
capital loss any loss sustained during the taxable year on account of a
portion of any such Grantor Trust Certificates becoming wholly worthless.
Although the matter is not free from doubt, such non-corporate Grantor Trust
Certificateholders should be allowed a bad debt deduction at such time as the
principal balance of such Grantor Trust Certificates is reduced to reflect
losses resulting from any liquidated Receivables. The Service, however, could
take the position that if the "stripped bond" rules of the Code are
applicable, non-corporate holders will be allowed a bad debt deduction to
reflect such losses only after all the affected Receivables remaining in the
Trust have been liquidated or the applicable class of Grantor Trust
Certificates has been otherwise retired Grantor Trust Certificateholders are
urged to consult their own tax advisors regarding the appropriate timing,
amount and character of any loss sustained with respect to such Grantor Trust
Certificates. Losses attributable to interest previously reported as income
should be deductible as ordinary losses by both corporate and non-corporate
holders. Special loss rules are applicable to banks and thrift institutions,
including rules regarding reserves for bad debts. Such taxpayers are advised
to consult their tax advisors regarding the treatment of losses on Grantor
Trust Certificates.
SALE OR EXCHANGE OF A GRANTOR TRUST CERTIFICATE
Sale or exchange of a Grantor Trust Certificate prior to its maturity will
result in gain or loss equal to the difference, if any, between the amount
received and the owner's adjusted basis in the Grantor Trust Certificate. Such
adjusted basis generally will equal the seller's purchase price for the
Grantor Trust Certificate, increased by the OID and any market discount
included in the seller's gross income with respect to the Grantor Trust
Certificate, and reduced by any market premium amortized by the Depositor and
by principal payments on the Grantor Trust Certificate previously received by
the seller. Such gain or loss will be capital gain or loss to an
47
<PAGE>
owner for which a Grantor Trust Certificate is a "capital asset" within the
meaning of Section 1221 (except in the case of gain attributable to accrued
market discount, as noted above under "--Market Discount"), and will be long-
term or short-term depending on whether the Grantor Trust Certificate has been
owned for the long-term capital gain holding period (currently more than one
year).
Grantor Trust Certificates will be "evidences of indebtedness" within the
meaning of Section 582(c)(1), so that gain or loss recognized from the sale of
a Grantor Trust Certificate by a bank or a thrift institution to which such
section applies will be treated as ordinary income or loss.
FOREIGN GRANTOR TRUST CERTIFICATES
Non-U.S. Persons. Interest or OID paid to non-U.S. Owners of Grantor Trust
Certificates will be treated as "portfolio interest" for purposes of United
States withholding tax. Such interest (including OID, if any) attributable to
the underlying Receivables will not be subject to the normal 30% (or such
lower rate provided for by an applicable tax treaty) withholding tax imposed
on such amounts provided that (i) the Non-U.S. Certificate Owner is not a "10%
shareholder" (within the definition of Section 871(h)(3)) of any obligor on
the Receivables; and is not a controlled foreign corporation (within the
definition of Section 957) related to any Obligor on the Receivables and (ii)
such Certificate Owner fulfills certain certification requirements. Under
these requirements, the Certificate Owner must certify, under penalty of
perjury, that it is not a "United States person" and must provide its name and
address. For this purpose "United States person" means a citizen or resident
of the United States, a corporation, partnership other entity created or
organized in or under the laws of the United States or any political
subdivision thereof, an estate the income of which is includible in gross
income for United States federal income tax purposes, without regard to its
source or a trust if (i) for taxable years beginning after December 31, 1996
(or for taxable years ending after August 20, 1996, if the trustee has made an
applicable election), a court within the United States is able to exercise
primary supervision over the administration of such trust, and one or more
United States fiduciaries have the authority to control all substantial
decisions of such trust, or (ii) for all other taxable years, such trust is
subject to United States federal income tax regardless of the source of its
income. If, however, such interest or gain is effectively connected to the
conduct of a trade or business within the United States by such Certificate
Owner, such owner will be subject to United States federal income tax thereon
at graduated rates. Potential investors who are not United States persons
should consult their own tax advisors regarding the specific tax consequences
of owning a Certificate.
INFORMATION REPORTING AND BACKUP WITHHOLDING
The Servicer will furnish or make available, within a reasonable time after
the end of each calendar year, to each person who was a Grantor Trust
Certificateholder at any time during such year, such information as may be
deemed necessary or desirable to assist Grantor Trust Certificateholders in
preparing their federal income tax returns, or to enable holders to make such
information available to beneficial owners or financial intermediaries that
hold Grantor Trust Certificates as nominees on behalf of beneficial owners. If
a holder, beneficial owner, financial intermediary or other recipient of a
payment on behalf of a beneficial owner fails to supply a certified taxpayer
identification number or if the Secretary of the Treasury determines that such
person has not reported all interest and dividend income required to be shown
on its federal income tax return, a 31% backup withholding may be required
with respect to any payments. Any amounts deducted and withheld from a
distribution to a recipient would be allowed as a credit against such
recipient's federal income tax liability.
* * *
THE FEDERAL TAX DISCUSSIONS SET FORTH ABOVE ARE INCLUDED FOR GENERAL
INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A
CERTIFICATEHOLDER'S PARTICULAR TAX SITUATION. PROSPECTIVE PURCHASERS OF
CERTIFICATES SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE TAX
CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF
CERTIFICATES, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL AND FOREIGN
AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN FEDERAL OR OTHER TAX
LAWS.
48
<PAGE>
ERISA CONSIDERATIONS
Sections 404 and 406 of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), impose certain fiduciary and prohibited transaction
restrictions on employee pension and welfare benefit plans subject to ERISA
("ERISA Plans"). Section 4975 of the Code imposes essentially the same
prohibited transaction restrictions on tax-qualified retirement plans
described in Section 401(a) of the Code and on Individual Retirement Accounts
described in Section 408 of the Code (collectively, "Tax Favored Plan"). ERISA
and the Code prohibit a broad range of transactions involving assets of ERISA
Plans and Tax Favored Plans (collectively, "Plans") and persons who have
certain specified relationships to such Plans (so-called "parties in interest"
within the meaning of ERISA or "disqualified persons" within the meaning of
the Code) unless a statutory or administrative exemption is available. A
violation of these "prohibited transaction" rules may generate excise tax and
other liabilities under ERISA and the Code for such persons.
Certain employee benefit plans, such as governmental plans (as defined in
Section 3(32) of ERISA), and, if no election has been made under Section
410(d) of the Code, church plans (as defined in Section 3(33) of ERISA), are
not subject to the ERISA requirements discussed herein. Accordingly, assets of
such plans may be invested in Certificates without regard to the ERISA
considerations described herein, subject to the provisions of other applicable
federal, state and local law, and, before purchasing a Certificate, a
fiduciary of such a plan should itself confirm the compliance with such laws.
Any such plan that is qualified and exempt from taxation under Section 401(a)
and 501(a) of the Code, however, is subject to the prohibited transaction
rules set forth in Section 503 of the Code. Certain parties in interest or
disqualified persons that participate in a prohibited transaction may be
subject to a penalty or excise taxes, unless a statutory or administrative
exemption is available.
Certain transactions involving a Trust might be deemed to constitute
prohibited transactions under ERISA and the Code with respect to a Plan that
purchased Certificates if assets of the Trust were deemed to be assets of the
Plan. Under a regulation issued by the United States Department of Labor (the
"Plan Assets Regulations"), the assets of a Trust would be treated as plan
assets of a Plan for the purposes of ERISA and the Code only if the Plan
acquired an "equity interest" in the Trust and none of the exceptions
contained in the Plan Assets Regulation was applicable. An equity interest is
defined under the Plan Assets Regulation as an interest other than an
instrument that is treated as indebtedness under applicable local law and
which has no substantial equity features. The likely treatment in this context
of Certificates of a given Series will be discussed in the related Prospectus
Supplement.
A plan fiduciary considering the purchase of Certificates of a given Series
should consult its legal advisors regarding whether the assets of the related
Trust would be considered plan assets, the possibility of exemptive relief
from the prohibited transaction rules and other issues and their potential
consequences.
The United States Department of Labor has granted to the underwriter (or in
the case of series offered by more than one underwriter, the lead underwriter)
named in each Prospectus Supplement an exemption (the "Exemption") from
certain of the prohibited transaction rules of ERISA with respect to the
initial purchase, the holding and the subsequent resale by 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 sales contracts such as the
Receivables. The Exemption might apply to the acquisition, holding and resale
of nonsubordinated Certificates (referred to herein as "Senior Certificates")
by a Plan, provided that certain conditions and requirements set forth therein
(certain of which are described below) are met.
Among the conditions that must be satisfied for the Exemption to apply to
the Senior Certificates are the following:
(1) The Trust is considered to consist solely of obligations which bear
interest or are purchased at a discount and which are secured by motor
vehicles or equipment, or "qualified motor vehicle leases" (as
49
<PAGE>
defined in the Exemption), property that had secured such obligations or
qualified motor vehicle leases, cash or temporary investments maturing no
later than the next date on which distributions are to be made to the
Senior Certificate Owners, and rights of the Trustee under the Pooling and
Servicing Agreement and under credit support arrangements with respect to
such obligations or qualified motor vehicle leases.
(2) The acquisition of the Senior Certificates by a Plan is on terms
(including the price for the Senior Certificates) that are at least as
favorable to the Plan as they would be in an arm's length transaction with
an unrelated party;
(3) The rights and interests evidenced by the Senior Certificates
acquired by the Plan are not subordinated to the rights and interests
evidenced by other certificates of the Trust;
(4) The Senior Certificates acquired by the Plan have received a rating
at the time of such acquisition that is in one of the three highest generic
rating categories from either Standard & Poor's Ratings Group, Moody's
Investors Service, Inc., Duff & Phelps Credit Rating Co. or Fitch Investors
Service, L.P.;
(5) The related Trustee is not an affiliate of any other member of the
Restricted Group (as defined below);
(6) The sum of all payments made to the underwriters in connection with
the distribution of the Senior Certificates represents not more than
reasonable compensation for underwriting the Senior Certificates; the sum
of all payments made to and retained by the Depositor pursuant to the sale
of the Contracts to the related Trust represents not more than the fair
market value of such Contracts; and 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 related Pooling and Servicing
Agreement and reimbursement of the Servicer's reasonable expenses in
connection therewith; and
(7) The Plan investing in the Senior Certificates is an "accredited
investor" as defined in Rule 501(a)(1) of Regulation D of the Commission
under the Securities Act of 1933, as amended.
Moreover, the Exemption would provide relief from certain self-
dealing/conflict of interest or prohibited transactions only if, among other
requirements, (i) in the case of the acquisition of Senior Certificates in
connection with the initial issuance, at least 50% of the Senior Certificates
are acquired by persons independent of the Restricted Group (as defined
below), (ii) the Benefit Plan's investment in Senior Certificates does not
exceed 25% of all of the Senior Certificates outstanding at the time of the
acquisition and (iii) immediately after the acquisition, no more than 25% of
the assets of the benefit Plan are invested in certificates representing an
interest in one or more trusts containing assets sold or serviced by the same
entity. The Exemption does not apply to Plans sponsored by the Depositor, any
underwriter, the related Trustee, the Servicer, any obligor with respect to
Contracts included in the related Trust constituting more than 5% of the
aggregate unamortized principal balance of the assets in the Trust, or any
affiliate of such parties (the "Restricted Group").
Before purchasing a Senior Certificate, a fiduciary of a Plan should itself
confirm that (i) the Trust constitutes a "trust" for purposes of the
Exemption, (ii) the Senior Certificates constitute "certificates" for purposes
of the Exemption and (iii) the conditions and the other requirements set forth
in the Exemption would be satisfied. A fiduciary of an ERISA Plan should also
determine whether the purchase of Senior Certificates is consistent with
certain general fiduciary requirements imposed under Section 404 of ERISA,
including those of investment prudence and diversification and the requirement
that an ERISA Plan's investments be made in accordance with the documents
governing the ERISA Plan. The sale of Senior Certificates to a Plan is in no
way a representation by the Depositor or underwriter that this investment
meets all relevant legal requirements with respect to investments by Plans
generally or any particular Plan, or that this investment is appropriate for
Plans generally or any particular Plan.
Under current law, the purchase and holding of Certificates other than
Senior Certificates by or on behalf of a Plan may constitute or result in
prohibited transactions within the meaning of ERISA and the Code. Unless
otherwise provided in the related Prospectus Supplement, such Certificates may
not be acquired by Plans or by persons acting on behalf of or investing the
assets of Plans.
50
<PAGE>
PLAN OF DISTRIBUTION
On the terms and conditions set forth in an underwriting agreement with
respect to a given Series (the "Underwriting Agreement"), the Depositor will
agree to cause the related Trust to sell to the underwriters named therein and
in the related Prospectus Supplement, and each of such underwriters will
severally agree to purchase, the principal amount of each class of
Certificates of the related Series set forth therein and in the related
Prospectus Supplement.
In each Underwriting Agreement, the underwriter or several underwriters will
agree, subject to the terms and conditions set forth therein, to purchase all
of the Certificates described therein that are offered hereby and by the
related Prospectus Supplement if any of such Certificates are purchased.
Each Prospectus Supplement will either (i) set forth the price at which each
class of Certificates being offered thereby will be offered to the public and
any concessions that may be offered to certain dealers participating in the
offering of such Certificates or (ii) specify that the related Certificates
are to be resold by the underwriters in negotiated transactions at varying
prices to be determined at the time of such sale. After the initial public
offering of any such Certificates, such public offering prices and such
concessions may be changed.
Each Underwriting Agreement will provide that CTL, the Depositor and Bay
View will indemnify the related underwriters against certain civil
liabilities, including liabilities under the Securities Act, or contribute to
payments the several underwriters may be required to make in respect thereof.
Each Trust may, from time to time, invest the funds in the related Accounts in
Eligible Investments acquired from such underwriters. Pursuant to each
Underwriting Agreement, the closing of the sale of any class of Certificates
subject thereto will be conditioned on the closing of the sale of all other
classes of Certificates of such Series. The place and time of delivery for the
Certificates in respect of which this Prospectus is delivered will be set
forth in the related Prospectus Supplement.
LEGAL MATTERS
Certain legal matters relating to the Certificates of any Series will be
passed upon for the related Trust, the Depositor and the Servicer by Silver,
Freedman & Taff, L.L.P., Washington, D.C., and for the underwriters by
Cadwalader, Wickersham & Taft, New York, New York or such other firm as shall
be identified in the related Prospectus Supplement. Certain federal income tax
and other matters will be passed upon for each Trust by Silver, Freedman &
Taff, L.L.P. or such other firm as shall be identified in the related
Prospectus Supplement.
51
<PAGE>
INDEX OF PRINCIPAL TERMS
Set forth below is a list of certain of the more significant terms used in
this Prospectus and the pages on which the definitions of such terms may be
found herein.
<TABLE>
<CAPTION>
TERM PAGE
---- ----
<S> <C>
Actuarial Receivables......................................................
Additional Vehicle Costs...................................................
Advance....................................................................
Approved Rating............................................................
Bay View...................................................................
Cash Collateral Account....................................................
Cede.......................................................................
Certificate Account........................................................
Certificate Balance........................................................
Certificate Owners.........................................................
Certificate Pool Factor....................................................
Certificateholders.........................................................
Certificates...............................................................
Class Certificate Balance..................................................
Closing Date...............................................................
Code.......................................................................
Collection Period..........................................................
Commission.................................................................
Contracts..................................................................
Contract Rate..............................................................
CTL........................................................................
Cutoff Date................................................................
Cutoff Date Actuarial Balance..............................................
Cutoff Date Scheduled Balance..............................................
Dealers....................................................................
Definitive Certificates....................................................
Depositor..................................................................
Distribution Date..........................................................
DTC........................................................................
Eligible Deposit Account...................................................
Eligible Institution.......................................................
Eligible Investments.......................................................
ERISA......................................................................
ERISA Plan.................................................................
Events of Default..........................................................
Exchange Act...............................................................
Exemption..................................................................
FDIC.......................................................................
Federal Tax Counsel........................................................
Final Scheduled Distribution Date..........................................
Final Scheduled Maturity Date..............................................
Financed Vehicles..........................................................
FTC Rule...................................................................
Funding Period.............................................................
Grantor Trust Certificates.................................................
Grantor Trust Certificateholder............................................
</TABLE>
52
<PAGE>
<TABLE>
<CAPTION>
TERM PAGE
---- ----
<S> <C>
Indirect Participants......................................................
Insolvency Event...........................................................
Insolvency Laws............................................................
Interest Shortfall.........................................................
Investment Income..........................................................
IRS........................................................................
Obligor....................................................................
OID........................................................................
Participants...............................................................
Pass-Through Rate..........................................................
Payaheads..................................................................
Payahead Account...........................................................
Plan.......................................................................
Plan Asset Regulation......................................................
Pooling and Servicing Agreement............................................
Pool Balance...............................................................
Precomputed Receivables....................................................
Pre-Funded Amount..........................................................
Pre-Funding Account........................................................
Prospectus Supplement......................................................
Purchase Agreement.........................................................
Purchase Amount............................................................
Purchased Receivable.......................................................
Rating Agency..............................................................
Receivables................................................................
Receivables Pool...........................................................
Registration Statement.....................................................
Restricted Group...........................................................
Rules......................................................................
Rule of 78's Receivables...................................................
Section 1286 Treasury Regulations..........................................
Senior Certificates........................................................
Series.....................................................................
Servicer...................................................................
Servicing Fee..............................................................
Servicing Fee Rate.........................................................
Simple Interest Receivables................................................
Strip Certificates.........................................................
Subsequent Receivables.....................................................
Subsequent Transfer Date...................................................
Tax Favored Plans..........................................................
Transfer and Servicing Agreements..........................................
Trust......................................................................
Trust Accounts.............................................................
Trustee....................................................................
UCC........................................................................
Underwriting Agreement.....................................................
Yield Supplement Agreement.................................................
</TABLE>
53
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALESMAN, OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY IN-
FORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS SUPPLEMENT AND THE PROSPECTUS IN CONNECTION WITH THE OFFER CON-
TAINED HEREIN, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE DEPOSITOR, THE SERVICER OR
THE UNDERWRITERS. THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTI-
TUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURI-
TIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL
TO MAKE SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION. THE DELIVERY OF THIS
PROSPECTUS SUPPLEMENT AND THE PROSPECTUS AT ANY TIME DOES NOT IMPLY THAT THE
INFORMATION HEREIN OR THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Supplement
Reports to Certificateholders.............................................. S-
Summary of Terms...........................................................
Formation of the Trust.....................................................
The Receivables Pool.......................................................
Yield and Prepayment Considerations........................................
The Depositor and CTL......................................................
The Surety Bond Issuer.....................................................
The Offered Certificates...................................................
ERISA Considerations.......................................................
Underwriting...............................................................
Legal Opinions.............................................................
Experts....................................................................
Index of Principal Terms...................................................
Financial Statements of the Surety Bond Issuer............................. F-1
Prospectus
Available Information...................................................... 3
Incorporation of Certain Documents by Reference............................ 3
Summary of Terms........................................................... 4
Risk Factors............................................................... 12
The Trusts................................................................. 16
The Receivables Pools...................................................... 18
Weighted Average Life of the Certificates.................................. 20
Pool Factors and Other Certificate Information............................. 21
Use of Proceeds............................................................ 21
California Thrift & Loan and Affiliates.................................... 21
Description of the Certificates............................................ 22
Description of the Transfer and Servicing Agreements....................... 25
Certain Legal Aspects of the Receivables................................... 34
Certain Federal Income Tax Consequences.................................... 37
ERISA Considerations....................................................... 49
Plan of Distribution....................................................... 51
Legal Matters.............................................................. 51
Index of Principal Terms................................................... 52
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
$
BAY VIEW 199 -
AUTO TRUST
$
% CLASS A AUTOMOBILE RECEIVABLE PASS-THROUGH CERTIFICATES
CLASS I INTEREST ONLY AUTOMOBILE RECEIVABLE PASS-THROUGH CERTIFICATES
BAY VIEW SECURITIZATION
CORPORATION
DEPOSITOR
----------------
PROSPECTUS
----------------
, 1996
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Expenses in connection with the offering of the Certificates being
registered herein are estimated as follows:
<TABLE>
<S> <C>
SEC Registration................................................... $151,516
Legal fees and expenses............................................ $500,000
Accounting fees and expenses....................................... *
Rating agency fees................................................. *
Trustee's fees and expenses........................................ *
Printing........................................................... *
Miscellaneous...................................................... *
--------
Total............................................................ *
========
</TABLE>
- --------
* To be completed by amendment
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article Seventh of the Corporation's Certificate of Incorporation provides
for indemnification of directors and officers of the Corporation against any
and all liabilities, judgments, fines and reasonable settlements, costs,
expenses and attorneys' fees incurred in any actual, threatened or potential
proceeding, except to the extent that such indemnification is limited by
Delaware law and such law cannot be varied by contract or bylaw. Article
Seventh also provides for the authority to purchase insurance with respect
thereto.
Section 145 of the General Corporation Law of the State of Delaware
authorizes a corporation's Board of Directors to grant indemnity under certain
circumstances to directors and officers, when made, or threatened to be made,
parties to certain proceedings by reason of such status with the corporation,
against judgments, fines, settlements and expenses, including attorneys' fees.
In addition, under certain circumstances such persons may be indemnified
against expenses actually and reasonably incurred in defense of a proceeding
by or on behalf of the corporation. Similarly, the corporation, under certain
circumstances, is authorized to indemnify directors and officers of other
corporations or enterprises who are serving as such at the request of the
corporation, when such persons are made, or threatened to be made, parties to
certain proceedings by reason of such status, against judgments, fines,
settlements and expenses, including attorneys' fees; and under certain
circumstances, such persons may be indemnified against expenses actually and
reasonably incurred in connection with the defense or settlement of a
proceeding by or in the right of such other corporation or enterprise.
Indemnification is permitted where such person (i) was acting in good faith;
(ii) was acting in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation or other corporation or enterprise, as
appropriate; (iii) with respect to a criminal proceeding, has no reasonable
cause to believe his conduct was unlawful; and (iv) was not adjudged to be
liable to the corporation or other corporation or enterprise (unless the court
where the proceeding was brought determines that such person is fairly and
reasonably entitled to indemnity).
Unless ordered by a court, indemnification may be made only following a
determination that such indemnification is permissible because the person
being indemnified has met the requisite standard of conduct. Such
determination may be made (i) by a majority vote of the Board of Directors of
the Corporation who are not parties to such action, suit or proceeding, even
though such directors constitute less than a quorum, or (ii) if there are no
such directors, or if such directors so direct, by independent legal counsel
in a written opinion, or (iii) by the stockholders.
Section 145 also permits expenses incurred by directors and officers in
defending a proceeding to be paid by the corporation in advance of the final
disposition of such proceedings upon the receipt of an undertaking by the
director or officer to repay such amount if it is ultimately determined that
he is not entitled to be indemnified by the corporation against such expenses.
II-1
<PAGE>
ITEM 16. EXHIBITS.
<TABLE>
<C> <S>
1 Underwriting Agreement.*
3(i) Certificate of Incorporation of Bay View Securitization Corporation.
3(ii) Bylaws of Bay View Securitization Corporation.
4.1 Form of Pooling and Servicing Agreement for Grantor Trusts including
form of Certificates.*
4.2 Form of Standard Terms and Conditions of Bay View Grantor Trusts.*
4.3 Form of Pooling and Servicing Agreement for trusts other than
Grantor Trusts, including form of Certificates.*
5 Opinion of Silver, Freedman & Taff, L.L.P. with respect to legality
of the Certificates.*
8 Opinion of Silver, Freedman & Taff, L.L.P. with respect to tax
matters.*
10 Form of Purchase Agreement.*
23.1 Consent of Silver, Freedman & Taff, L.L.P. (included in Exhibit 5).
23.2 Consent of Silver, Freedman & Taff, L.L.P. (included in Exhibit 8).
24 Power of Attorney (set forth on signature page).
</TABLE>
- --------
* To be filed by amendment.
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes as follows:
(a) To file during any period in which offers or sales are being made, a
post-effective amendment to this registration statement to include any
material information with respect to the plan of distribution not previously
disclosed in the registration statement or any material change to such
information in the registration statement.
(b) That, for the purpose of determining any liability under the Securities
Act of 1933, as amended (the "Securities Act"), each such post-effective
amendment shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(c) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of
the offering.
(d) For purposes of determining any liability under the Securities Act, each
filing of the Registrant's annual reports pursuant to Section 13(a) or Section
15(d) of the Securities Exchange Act of 1934 that is incorporated by reference
in the registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(e) To provide to the Underwriters at the closing specified in the
Underwriting Agreements certificates in such denominations and registered in
such names as required by the Underwriters to provide prompt delivery to each
purchaser.
(f) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
(the "Commission") such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense
II-2
<PAGE>
of any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
(g) For purposes of determining any liability under the Securities Act, the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(h) For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-3, AND REASONABLY BELIEVES THAT THE SECURITY
RATING REQUIREMENT CONTAINED IN TRANSACTION REQUIREMENT B.5. OF FORM S-3 WILL
BE MET BY THE TIME OF THE SALE OF THE SECURITIES REGISTERED HEREUNDER AND HAS
DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED IN THE CITY OF SAN MATEO, STATE OF
CALIFORNIA, ON NOVEMBER 13, 1996.
Bay View Securitization Corporation,
a Delaware corporation, as
Depositor (Registrant)
/s/ Edward H. Sondker
By: _________________________________
EDWARD H. SONDKER, Director,
President and Chief Executive
Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Robert J. Flax his true and lawful attorney-in-
fact and agent, with full power of substitution and re-substitution, for him
and in his name, place and stead, in any and all capacities, to sign any and
all amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with all exhibits thereto, and all other
documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite and
necessary to be done, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming said attorney-in-fact and
agent or his substitutes or substitute may lawfully do or cause to be done by
virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
BAY VIEW SECURITIZATION CORPORATION
/s/ Edward H. Sondker Director and November 13, 1996
- --------------------------------- President
EDWARD H. SONDKER (Principal
Executive Officer)
/s/ David A. Heaberlin Director and November 13, 1996
- --------------------------------- Treasurer
DAVID A. HEABERLIN (Principal
Financial and
Accounting Officer)
/s/ Robert J. Flax Director and November 13, 1996
- --------------------------------- Corporate Secretary
ROBERT J. FLAX
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO.
-----------
<C> <S>
1 Underwriting Agreement.*
Certificate of Incorporation of Bay View Securitization
3(i) Corporation.
3(ii) Bylaws of Bay View Securitization Corporation.
Form of Pooling and Servicing Agreement for Grantor Trusts
4.1 including form of Certificates.*
4.2 Form of Standard Terms and Conditions of Bay View Grantor Trusts.*
4.3 Form of Pooling and Servicing Agreement for trusts other than
Grantor Trusts, including form of Certificates.*
Opinion of Silver, Freedman & Taff, L.L.P. with respect to
5 legality of the Certificates.*
Opinion of Silver, Freedman & Taff, L.L.P. with respect to tax
8 matters.*
10 Form of Purchase Agreement.*
Consent of Silver, Freedman & Taff, L.L.P. (included in Exhibit
23.1 5).
Consent of Silver, Freedman & Taff, L.L.P. (included in Exhibit
23.2 8).
24 Power of Attorney (set forth on signature page).
</TABLE>
- --------
* To be filed by amendment.
<PAGE>
EXHIBIT 3(i)
CERTIFICATE OF INCORPORATION
OF
BAY VIEW SECURITIZATION CORPORATION
ARTICLE I
NAME. The name of the Corporation is Bay View Securitization Corporation
(the "Corporation").
ARTICLE II
REGISTERED OFFICE AND AGENT. The address of the Corporation's registered
office in the State of Delaware is 1209 Orange Street, Wilmington, Delaware
19801, in the county of New Castle, Delaware. The name of its registered agent
at such address is The Corporation Trust Company.
ARTICLE III
BUSINESS AND PURPOSES. The nature of the business or purposes to be
conducted or promoted by the Corporation is to engage exclusively in the
following activities:
(a) To purchase, acquire, own and hold installment sale and
installment loan contracts and security interests, secured by autos, light
trucks, vans and motorcycles (the "Receivables"), and in connection with
the purchase or acquisition of the Receivables, the Corporation may
purchase and acquire property or assets related to the Receivables,
including the following (the "Related Property"):
(i) Security interests or collateral securing the Receivables;
(ii) Benefits of a letter of credit, surety bond or other credit
enhancement;
(iii) Any recourse rights related to the Receivables;
(iv) Any rights to proceeds from claims or refunds of premiums on
physical damage, lender's insurance of any type, credit life and
disability and hospitalization insurance policies; and
(v) Cash, investments or other deposits.
(b) To own, administer, hold, service or enter into agreements for
servicing of, sell, assign, pledge, collect amounts due on, and otherwise
deal with the Receivables and Related Property and any proceeds or rights
associated with the Receivables and the Related Property;
<PAGE>
(c) To enter into any agreement (including, without limitation, any
agreement creating a trust) providing for the authorization, issuance, sale
and delivery of notes, certificates or other securities, whether directly
or through a trust, secured or supported by Receivables or Related
Property;
(d) To lend money to any trust or trustee for the purpose of funding
cash collateral accounts or credit enhancement accounts to secure or
support any such notes, certificates or other securities;
(e) To hold, sell, pledge or distribute any class of notes,
certificates or other securities issued by the Corporation either directly
or through a trust;
(f) To lend or otherwise invest proceeds from Receivables and Related
Property, funds received in respect of any notes, certificates or other
securities, and any other income as determined by the Board of Directors of
the Corporation and not inconsistent with this Article III, including
investing in other Receivables and Related Property;
(g) To borrow money to facilitate any activity authorized herein; and
(h) To engage in any activity and exercise any powers permitted under
the General Corporation Law of the State of Delaware that are related to
any necessary, suitable and advisable to accomplish the business or
purposes described in clauses (a) through (g) above.
ARTICLE IV
INDEPENDENT DIRECTOR. The Corporation shall have at least one Independent
Director. An "Independent Director" shall mean an individual who is not and has
never been:
(a) A director, officer or employee of (i) a shareholder of the
Corporation, (ii) Bay View Capital Corporation, or (iii) any Affiliate
(other than another direct or indirect finance subsidiary of Bay View
Capital Corporation), or
(b) A beneficial owner of more than 5% of the common stock of (i) a
shareholder of the Corporation; (ii) Bay View Capital Corporation, or (iii)
any Affiliate.
An "Affiliate" shall mean any Person other than the Corporation (x) that
owns beneficially, directly or indirectly, 5% or more of the outstanding shares
of the common stock of the Corporation, or (y) of which 5% or more of the
outstanding shares of its common stock is owned beneficially, directly or
indirectly, by any Person described in Clause (x) above, or (z) which otherwise
controls or is controlled by a Person described in Clause (x) above. The term
"Control," when used with respect to any specified Person, means the power to
direct the
2
<PAGE>
management and policies of such Person, directly and indirectly, whether through
the ownership of voting securities, by contract or otherwise. The term "Person"
means any individual, corporation, partnership, joint venture, association,
joint stock company, trust (including any beneficiary thereof), unincorporated
organization, or government or any agency or political subdivision thereof.
ARTICLE V
LIMITATIONS. Notwithstanding any other provision of this Certificate of
Incorporation (any amendments thereto), the Bylaws of the Corporation, or any
provision of law that otherwise so empowers the Corporation, the Corporation
shall not, without (i) the affirmative vote of 100% of the members of the Board
of Directors of the Corporation, including the Independent Director on and after
the date on which the Independent Director required by Article IV has been
appointed and (ii) the affirmative vote of the holders of 100% of the issued and
outstanding common stock of the Corporation, do any of the following:
(a) Engage in any business or activity other than as set forth in
Article III;
(b) Dissolve, liquidate or lease or transfer all or substantially all
of its assets to any entity;
(c) Be a party to any merger or consolidation with any other entity;
(d) Institute proceedings to be adjudicated a bankrupt or insolvent,
or consent to the institution of bankruptcy or insolvency proceedings
against it, or file a petition or consent to a petition seeking
reorganization or relieve under any applicable federal or state law
relating to bankruptcy, or 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, or make any
assignment for the benefit of creditors, or except as required by law,
admit in writing its inability to pay its debts generally as they become
due or take any corporate action in furtherance of any such action; or
(e) Amend, alter, change or repeal any of the following Articles of
this Certificate of Incorporation: Article III, Article IV, Article VI,
Article XII and this Article V.
3
<PAGE>
ARTICLE VI
NONCONSOLIDATION OF CORPORATION. The Corporation shall conduct its affairs
in accordance with the following provisions:
(a) The Corporation's funds and other assets shall not be commingled
with those of any other entity or Person and collections on behalf of the
Corporation by any agent of the Corporation shall be identified as
belonging to the Corporation and segregated as promptly as practicable by
such agent.
(b) The Corporation shall maintain bank accounts in its own name
separate from any Affiliate.
(c) The Corporation shall maintain separate corporate records and
books of account from those of any other entity or Person.
(d) The Corporation shall establish an office separate and apart from
the offices of any of its shareholders or Affiliates, provided if such
office is leased from an Affiliate, such lease shall be on terms no more or
less favorable to the Corporation than would be obtained elsewhere and such
office shall be conspicuously identified as the Corporation's office so it
can be easily located by outsiders.
ARTICLE VII
INDEMNIFICATION.
(a) Each person who was or is made a party or is threatened to be made
a party to or is otherwise involved in any action, suit or proceeding,
whether civil, criminal, administrative or investigative (hereinafter a
"proceeding"), by reason of the fact that he or she is or was a director or
an officer of the Corporation or is or was serving at the request of the
Corporation as a director or officer of another corporation, including,
without limitation, any subsidiary corporation in which a majority of any
class of equity securities is owned, directly or indirectly by the
Corporation, partnership, joint venture, trust or other enterprise,
including service with respect to an employee benefit plan (hereinafter an
"indemnitee"), whether the basis of such proceeding is alleged action in an
official capacity as a director or officer or in any other capacity while
serving as a director or officer, shall be indemnified and held harmless by
the Corporation to the fullest extent authorized by the Delaware General
Corporation Law, as the same exists or may hereafter be amended (but, in
the case of any such amendment, only to the extent that such amendment
permits the Corporation to provide broader indemnification rights than such
law permitted the Corporation to provide prior to such amendment), against
all expense, liability and loss (including attorneys' fees, judgments,
fines, ERISA excise taxes or penalties and amounts paid in settlement)
reasonably incurred or suffered by such
4
<PAGE>
indemnitee in connection therewith; provided, however, that, except as
-------- -------
provided in Section (c) hereof with respect to proceedings to enforce
rights to indemnification, the Corporation shall indemnify any such
indemnitee in connection with a proceeding (or part thereof) initiated by
such indemnitee only if such proceeding (or part thereof) was authorized by
the Board of Directors of the Corporation.
(b) The right to indemnification conferred in Section (b) of this
Article shall include the right to be paid by the Corporation the expenses
incurred in defending any such proceeding in advance of its final
disposition (hereinafter an "advancement of expenses"); provided, however,
-------- -------
that, if the Delaware General Corporation Law requires, an advancement of
expenses incurred by an indemnitee in his or her capacity as a director or
officer (and not in any other capacity in which service was or is rendered
by such indemnitee, including, without limitation, service to an employee
benefit plan) shall be made only upon delivery to the Corporation of an
undertaking (hereinafter an "undertaking"), by or on behalf of such
indemnitee, to repay all amounts so advanced if it shall ultimately be
determined by final judicial decision from which there is no further right
to appeal (hereinafter a "final adjudication"), that such indemnitee is not
entitled to be indemnified for such expenses under this Section or
otherwise. The rights to indemnification and to the advancement of
expenses conferred in Sections (a) and (b) of this Article shall be
contract rights and such rights shall continue as to an indemnitee who has
ceased to be a director or officer and shall inure to the benefit of the
indemnitee's heirs, executors and administrators.
(c) If a claim under Section (a) or (b) of this Article is not paid in
full by the Corporation within sixty days after a written claim has been
received by the Corporation, except in the case of a claim for an
advancement of expenses, in which case the applicable period shall be
twenty days, the indemnitee may at any time thereafter bring suit against
the Corporation to recover the unpaid amount of the claim. If successful
in whole or in part in any such suit, or in a suit brought by the
Corporation to recover an advancement of expenses pursuant to the terms of
an undertaking, the indemnitee shall also be entitled to be paid the
expense of prosecuting or defending such suit. In (i) any suit brought by
the indemnitee to enforce a right to indemnification hereunder (but not in
a suit brought by the indemnitee to enforce a right to an advancement of
expenses) it shall be a defense that, and (ii) in any suit by the
Corporation to recover an advancement of expenses pursuant to the terms of
an undertaking the Corporation shall be entitled to recover such expenses
upon a final adjudication that, the indemnitee has not met any applicable
standard for indemnification set forth in the Delaware General Corporation
Law. Neither the failure of the Corporation (including its Board of
Directors, independent legal counsel, or its stockholders) to have made a
determination prior to the commencement of such suit that indemnification
of the indemnitee is proper in the circumstances because the indemnitee has
met the applicable standard of conduct set forth in the Delaware General
Corporation Law, nor an actual determination by the Corporation (including
its Board of Directors, independent legal counsel, or its stockholders)
that the indemnitee has not met such applicable standard of conduct, shall
create a presumption
5
<PAGE>
that the indemnitee has not met the applicable standard of conduct or, in
the case of such a suit brought by the indemnitee, be a defense to such
suit. In any suit brought by the indemnitee to enforce a right to
indemnification or to an advancement of expenses hereunder, or by the
Corporation to recover an advancement of expenses pursuant to the terms of
an undertaking, the burden of proving that the indemnitee is not entitled
to be indemnified, or to such advancement of expenses, under this Article
or otherwise shall be on the Corporation.
(d) The rights to indemnification and to the advancement of expenses
conferred in this Article shall not be exclusive of any other right which
any person may have or hereafter acquire under any statute, the
Corporation's Certificate of Incorporation, By-laws, agreement, vote of
stockholders or Disinterested Directors or otherwise.
(e) The Corporation may maintain insurance, at its expense, to protect
itself and any director, officer, employee or agent of the Corporation or
another corporation, partnership, joint venture, trust or other enterprise
against any expense, liability or loss, whether or not the Corporation
would have the power to indemnify such person against such expense,
liability or loss under the Delaware General Corporation Law.
(f) The Corporation may, to the extent authorized from time to time by
a majority vote of the disinterested directors, grant rights to
indemnification and to the advancement of expenses to any employee or agent
of the Corporation to the fullest extent of the provisions of this Article
with respect to the indemnification and advancement of expenses of
directors and officers of the Corporation.
ARTICLE VIII
EXCULPATION. A director of this Corporation shall not be personally liable
to the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the Corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the Delaware General
Corporation Law, or (iv) for any transaction from which the director derived an
improper personal benefit. If the Delaware General Corporation Law is hereafter
amended to further eliminate or limit the personal liability of directors, then
the liability of a director of the Corporation shall be eliminated or limited to
the fullest extent permitted by the Delaware General Corporation Law, as so
amended.
Any repeal or modification of the foregoing paragraph by the stockholders
of the Corporation shall not adversely affect any right or protection of a
director of the Corporation existing at the time of such repeal or modification.
6
<PAGE>
ARTICLE IX
COMMON STOCK. The total number of shares of stock which the Corporation
has the authority to issue is 3,000 shares of Common Stock, par value one cent
($.01) per share.
ARTICLE X
INCORPORATOR. The name and mailing address of the sole incorporator are as
follows:
Robert J. Flax
Bay View Securitization Corporation
2121 El Camino Real
San Mateo, California 94403
ARTICLE XI
PERPETUAL EXISTENCE. The Corporation is to have perpetual existence.
ARTICLE XII
The Corporation reserves the right to amend, alter or repeal the provisions
contained in this Certificate of Incorporation in the manner now or hereafter
prescribed by law, and all rights of shareholders are subject to this
reservation; provided, however, that this Article XII, and Article III, Article
IV, Article V and Article VI may be amended only in accordance with Article V of
this Certificate of Incorporation.
7
<PAGE>
I, the undersigned, for the purpose of forming a corporation pursuant to
the General Corporation Law of the State of Delaware, as amended, do make, file
and record this Certificate, and do certify that the facts herein stated are
true, and I have accordingly hereunto set my hand this 12th day of November,
1996.
/s/ Robert J. Flax
------------------------------------------
Robert J. Flax, Incorporator
8
<PAGE>
EXHIBIT 3(ii)
BYLAWS OF
BAY VIEW SECURITIZATION CORPORATION
ARTICLE I
IDENTIFICATION
SECTION 1. NAME. The name of the corporation shall be Bay View
Securitization Corporation (hereinafter referred to as the "Corporation").
ARTICLE II
CAPITAL STOCK
SECTION 1. TERMS OF SHARES. There shall be one class of capital stock,
consisting of common stock par value one cent ($.01) per share. The holder of
each share shall be entitled to one vote for each share held on all matters.
SECTION 2. CONSIDERATION FOR SHARES. The Board of Directors shall cause
the Corporation to issue the capital stock of the Corporation for such
consideration as has been fixed by such Board.
SECTION 3. PAYMENT OF SHARES. The consideration for the issuance of
shares of the capital stock of the Corporation may be paid, in whole or in part,
in money, in other property, tangible or intangible, or in labor actually
performed for or services actually rendered to, the Corporation; provided,
however, that the part of the surplus of the Corporation which is transferred to
capital upon the issuance of shares as a share dividend shall be deemed to be
the consideration for the issuance of such shares. When payment of the
consideration for which a share was authorized to be issued shall have been
received by the Corporation, or when surplus shall have been transferred to
capital upon the issuance of a share dividend, such share shall be declared and
taken to be fully paid and not liable to any further call or assessments, and
the holder thereof shall not be liable for any further payments thereon. In the
absence of actual fraud in the transaction, the judgment of the Board of
Directors as to the value of such property, labor or services received as
consideration, or the value placed by the Board of Directors upon the corporate
assets in the event of a share dividend shall be conclusive, subject to the
rights reserved herein and in the Certificate of Incorporation by the
shareholders. Promissory notes or future services shall not be accepted in
payment or part payment of any of the capital stock of the Corporation.
<PAGE>
SECTION 4. CERTIFICATES FOR SHARES. The Corporation shall issue to each
shareholder a certificate signed by the President and the Secretary of the
Corporation certifying the number of shares owned by him in the Corporation.
Where such certificate is also signed by a transfer agent or registrar, the
signatures of the President and the Secretary may be facsimiles. The
certificate shall state the name of the registered holder, the name of shares
represented thereby, the par value of each share or a statement that such shares
have no par value, and whether such shares have been fully paid up.
SECTION 5. FORM OF CERTIFICATES. The stock certificates to represent the
shares of the capital stock of this Corporation shall be in such form, not
inconsistent with the laws of the State of Delaware, as may be adopted by the
Board of Directors.
SECTION 6. TRANSFER OF STOCK. Title to a certificate and to the shares
represented thereby can be transferred only:
(1) By delivery of the certificate endorsed either in blank or to a
specified person by the person appearing by the certificate to be the owner
of the shares represented thereby; or
(2) By delivery of the certificate and a separate document containing
a written assignment of the certificate or a power of attorney to sell,
assign or transfer the same or the shares represented thereby, signed by
the person appearing by the certificate to be the owner of the shares
represented thereby. Such assignment or power of attorney may be either in
blank or to a specified person.
SECTION 7. CLOSING OF TRANSFER BOOKS. The transfer books shall be closed
for a period of ten days prior to the date set for any meeting of shareholders,
and during such period no new certificate of stock shall be issued by this
Corporation and no change or transfer shall be made upon the records thereof.
SECTION 8. EQUITABLE INTERESTS IN SHARES OR RIGHTS. The Corporation shall
be entitled to treat the person in whose name any share is registered on the
books of the Corporation as the owner thereof for all purposes, and shall not be
bound to recognize any equitable or other claim to, or interest in, such shares
or right on the part of any other person, whether or not the Corporation shall
have notice thereof.
2
<PAGE>
ARTICLE III
MEETINGS OF SHAREHOLDERS
SECTION 1. PLACE OF MEETINGS. All meetings of shareholders shall be held
within or without the State of Delaware at such place as the Board of Directors
may determine.
SECTION 2. ANNUAL MEETING. An annual meeting of the stockholders, for the
election of directors to succeed those whose terms expire and for the
transaction of such other business as may properly come before the meeting,
shall be held at such place, on such date, and at such time as the Board of
Directors shall each year fix.
SECTION 3. SPECIAL MEETINGS. Special meetings of stockholders of the
Corporation may be called only by the Board of Directors pursuant to a
resolution adopted by a majority of the total number of directors which the
Corporation would have if there were no vacancies on the Board of Directors
(hereinafter the "Whole Board").
SECTION 4. NOTICE OF MEETINGS. Written notice of the place, date, and
time of all meetings of the stockholders shall be given, not less than ten nor
more than 60 days before the date on which the meeting is to be held, to each
stockholder entitled to vote at such meeting, except as otherwise provided
herein or required by law (meaning, here and hereinafter, as required from time
to time by the Delaware General Corporation Law or the Certificate of
Incorporation of the Corporation).
When a meeting is adjourned to another place, date or time, written notice
need not be given of the adjourned meeting if the place, date and time thereof
are announced at the meeting at which the adjournment is taken; provided,
however, that if the date of any adjourned meeting is more than 30 days after
the date for which the meeting was originally noticed, or if a new record date
is fixed for the adjourned meeting, written notice of the place, date and time
of the adjourned meeting shall be given in conformity herewith. At any
adjourned meeting, any business may be transacted which might have been
transacted at the original meeting.
SECTION 5. VOTING AT MEETINGS. Except as otherwise provided by the
provisions of the Certificate of Incorporation, every shareholder shall have the
right at every shareholders' meeting of the Corporation to one vote for each
share of stock standing in his name on the books of the Corporation.
No share shall be voting at any meeting:
(1) Upon which an installment is due and unpaid; or
(2) Which shall have been transferred on the books of the Corporation
within ten days next preceding the date of the meeting; or
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(3) Which belongs to the Corporation that issued the share.
All voting, including on the election of directors but excepting where
otherwise required by law, may be by a voice vote; provided, however, that upon
demand therefore by a stockholder entitled to vote or his or her proxy, a stock
vote shall be taken. Every stock vote shall be taken by ballot, each of which
shall state the name of the stockholder or proxy voting and such other
information as may be required under the procedure established for the meeting.
Every vote taken by ballot shall be counted by an inspector or inspectors
appointed by the chairman of the meeting.
All elections shall be determined by a plurality of the votes cast, and
except as otherwise required by law or as provided in the Certificate of
Incorporation, all other matters shall be determined by a majority of the votes
cast.
SECTION 6. PROXIES. A shareholder may vote, either in person or by proxy
executed in writing by the shareholder or a duly authorized attorney-in-fact.
No proxy shall be valid after eleven (11) months from the date of its execution,
unless a longer time is expressly provided therein.
SECTION 7. QUORUM. At any meeting of the shareholders, a majority of the
shares of each class of the capital stock outstanding and entitled by the
Certificate of Incorporation to vote, represented in person or by proxy, shall
constitute a quorum.
SECTION 8. ORGANIZATION. The President, and in his absence, the
Secretary, and in their absence, any shareholder chosen by the shareholders
present shall call meetings of the shareholders to order and shall act as
Chairman of such meetings, and the Secretary of the Corporation shall act as
Secretary of all meetings of the shareholders. In the absence of the Secretary,
the presiding officer may appoint a shareholder to act as Secretary of the
meeting.
SECTION 9. STOCK LIST. The officer who has charge of the stock transfer
books of the Corporation shall prepare and make, in the time and manner required
by applicable law, a list of stockholders entitled to vote and shall make such
list available for such purposes, at such places, at such times and to such
persons as required by applicable law. The stock transfer books shall be the
only evidence as to the identity of the stockholders entitled to examine the
stock transfer books or to vote in person or by proxy at any meeting of
stockholders.
SECTION 10. CONSENT OF STOCKHOLDERS IN LIEU OF MEETING. Unless otherwise
restricted by the Certificate of Incorporation, any action required or permitted
to be taken at any annual or special meeting of the stockholders may be taken
without a meeting, without prior notice and without a vote, if a consent or
consents in writing, setting forth the action so taken, shall be signed by the
holders of outstanding stock 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 and shall be
delivered (by hand or by certified or registered mail, return receipt requested)
to the Corporation by delivery to its registered office
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in the State of Delaware, its principal place of business, or an officer or
agent of the corporation having custody of the book in which proceedings of
minutes of stockholders are recorded. Prompt notice of the taking of the
corporate action without a meeting by less than unanimous written consent shall
be given to those stockholders who have not consented in writing.
SECTION 11. INSPECTORS OF ELECTION. The Board of Directors shall, in
advance of any meeting of stockholders, appoint one or more persons as
inspectors of election, to act at the meeting or any adjournment thereof and
make a written report thereof, in accordance with applicable law.
ARTICLE IV
BOARD OF DIRECTORS
SECTION 1. BOARD OF DIRECTORS. The Board of Directors shall consist of
five (5) members who shall be elected annually by a majority of the shares
represented at the annual meeting of the shareholders, at least one (1) of whom
shall be an Independent Director as required by the Certificate of
Incorporation. The number of Directors may from time to time be changed by
proper amendment to the Bylaws of the Corporation. Subject to the terms of
Section 4 of this Article IV, such Directors shall hold office until the next
annual meeting of the shareholders and until their successors are elected and
qualified. Directors need not be shareholders. All Directors shall be over
eighteen years of age and shall be citizens and residents of the United States
of America, and at all times the Corporation shall have at least one (1)
Independent Director as required by the Certificate of Incorporation.
SECTION 2. DUTIES. The corporate power of this Corporation shall be
vested in the Board of Directors, who shall have the management and control of
the business of the Corporation, but subject to any limitations on the business
of the Corporation as provided in the Certificate of Incorporation. They shall
employ such agents and servants as they may deem advisable, and fix the rate of
compensation of all agents, employees and officers.
SECTION 3. RESIGNATIONS. A Director may resign at any time by filing his
or her written resignation with the Secretary.
SECTION 4. REMOVAL. A Director may be removed only by the shareholders
then having the right to elect Directors. Any Director may be removed at any
time, with or without cause, by a majority vote of the shareholders then having
the right to elect Directors, at the annual meeting or at a special meeting of
shareholders called for that purpose.
SECTION 5. VACANCIES. Any vacancy occurring in the Board, including a
vacancy resulting from an increase in the number of Directors, may be filled by
the Board, or, if the Directors remaining in office constitute fewer than a
quorum of the Board, they may fill the vacancy by the affirmative vote of a
majority of all the Directors remaining in office. Each
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Director so chosen shall hold office until the expiration of the term of the
Director, if any, whom he or she has been chosen to succeed, or, if none, until
the expiration of the term designated by the Board for the Directorship to which
he or she has been elected, or until his or her earlier removal, resignation,
death or other incapacity.
SECTION 6. REGULAR MEETING. Regular meetings of the Board of Directors
shall be held at such place or places, on such date or dates, and at such time
or times as shall have been established by the Board of Directors and publicized
among all directors. A notice of each regular meeting shall not be required.
SECTION 7. SPECIAL MEETINGS. Special meetings of the Board of Directors
may be called by one-third (1/3) of the directors then in office (rounded up to
the nearest whole number) or by the President and shall be held at such place,
on such date, and at such time as they or he or she shall fix. Notice of the
place, date, and time of each such special meeting shall be given to each
director by whom it is not waived by mailing written notice not less than five
days before the meeting or by telegraphing or telexing or by facsimile
transmission of the same not less than twenty-four (24) hours before the
meeting. Unless otherwise indicated in the notice thereof, any and all business
may be transacted at a special meeting.
SECTION 8. QUORUM. At any meeting of the Board of Directors, the presence
of a majority of Directors shall constitute a quorum for the transaction of any
business.
SECTION 9. ORGANIZATION. The Directors shall elect a Chairman from among
the Board of Directors who shall preside at meetings of the Board of Directors.
In the absence of the Secretary or Assistant Secretary, the Chairman shall
appoint a Director or other person present at the meeting to act as Secretary of
the meeting who shall record the proceedings of the Board of Directors at such
meeting.
SECTION 10. CONDUCT OF BUSINESS. At any meeting of the Board of
Directors, business shall be transacted in such order and manner as the Board
may from time to time determine, and all matters shall be determined by the vote
of a majority of the directors present, except as otherwise provided herein or
required by law.
SECTION 11. WRITTEN CONSENT. Any action required or permitted to be taken
at any meeting of the Board of Directors or of any Committee thereof may be
taken without a meeting, if prior to such action a written consent to such
action 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 Minutes of the proceedings of
the Board of Directors or Committee.
SECTION 12. MEETING BY TELEPHONE, ETC. Any or all of the members of the
Board or of any Committee designated by the Board may participate in a meeting
of the Board or the Committee, or conduct a meeting through the use of, any
means of communication by which all persons participating may simultaneously
hear each other during the meeting, and participation in a meeting using these
means constitutes presence in person at the meeting.
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SECTION 13. COMPENSATION OF DIRECTORS. Directors, as such, may receive,
pursuant to resolution of the Board of Directors, fixed fees and other
compensation for their services as directors, including, without limitation,
their services as members of committees of the Board of Directors.
ARTICLE V
COMMITTEES
SECTION 1. COMMITTEES OF THE BOARD OF DIRECTORS. The Board of Directors,
by a vote of a majority of the Board of Directors, may from time to time
designate committees of the Board, with such lawfully delegable powers and
duties as it thereby confers, to serve at the pleasure of the Board and shall,
for those committees and any others provided for herein, elect a director or
directors to serve as the member or members, designating, if it desires, other
directors as alternate members who may replace any absent or disqualified member
at any meeting of the committee. Any committee so designated may exercise the
power and authority of the Board of Directors to declare a dividend, to
authorize the issuance of stock or to adopt a certificate of ownership and
merger pursuant to Section 253 of the Delaware General Corporation Law if the
resolution which designated the committee or a supplemental resolution of the
Board of Directors shall so provide. In the absence or disqualification of any
member of any committee and any alternate member in his or her place, the member
or members of the committee present at the meeting and not disqualified from
voting, whether or not he or she or they constitute a quorum, may by unanimous
vote appoint another member of the Board of Directors to act at the meeting in
the place of the absent or disqualified member.
SECTION 2. CONDUCT OF BUSINESS. Each committee may determine the
procedural rules for meeting and conducting its business and shall act in
accordance therewith, except as otherwise provided herein or required by law.
Adequate provision shall be made for notice to members of all meetings; one-
third (1/3) of the members shall constitute a quorum unless the committee shall
consist of one or two members, in which event one member shall constitute a
quorum; and all matters shall be determined by a majority vote of the members
present. Action may be taken by any committee without a meeting if all members
thereof consent thereto in writing, and the writing or writings are filed with
the minutes of the proceedings of such committee.
SECTION 3. NOMINATING COMMITTEE. The Board of Directors may appoint a
Nominating Committee of the Board, consisting of not less than three members,
one of which shall be the President if, and only so long as, the President
remains in office as a member of the Board of Directors. The Nominating
Committee shall have authority (i) to review any nominations for election to the
Board of Directors made by a stockholder of the Corporation and (ii) to
recommend to the Whole Board nominees for election to the Board of Directors to
replace those directors whose terms expire at the annual meeting of stockholders
next ensuing.
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ARTICLE VI
OFFICERS OF THE CORPORATION
SECTION 1. GENERALLY.
(a) The Board of Directors as soon as may be practicable after the
annual meeting of stockholders shall choose a President, a Secretary and a
Treasurer and from time to time may choose such other officers as it may
deem proper. The President shall be chosen from among the directors. Any
number of offices may be held by the same person.
(b) The term of office of all officers shall be until the next annual
election of officers and until their respective successors are chosen, but
any officer may be removed from office at any time by the affirmative vote
of a majority of the authorized number of directors then constituting the
Board of Directors.
(c) All officers chosen by the Board of Directors shall each have such
powers and duties as generally pertain to their respective offices, subject
to the specific provisions of this Article IV. Such officers shall also
have such powers and duties as from time to time may be conferred by the
Board of Directors or by any committee thereof.
SECTION 2. PRESIDENT. The President shall be the chief executive
officer and, subject to the control of the Board of Directors, shall have
general power over the management and oversight of the administration and
operation of the Corporation's business and general supervisory power and
authority over its policies and affairs. The President shall see that all
orders and resolutions of the Board of Directors and of any committee thereof
are carried into effect.
Each meeting of the stockholders and of the Board of Directors shall be
presided over by such officer as has been designated by the Board of Directors
or, in his absence, by such officer or other person as is chosen at the meeting.
The Secretary or, in the Secretary's absence, the General Counsel of the
Corporation or such officer as has been designated by the Board of Directors or,
in his absence, such officer or other person as is chosen by the person
presiding, shall act as secretary of each such meeting.
SECTION 3. VICE PRESIDENT. The Vice President or Vice Presidents, if
any, shall perform the duties of the President in his absence or during his
disability to act. In addition, the Vice Presidents shall perform the duties
and exercise the powers usually incident to their respective offices and/or such
other duties and powers as may be properly assigned to them from time to time by
the Board of Directors, the Chairman of the Board or the President.
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SECTION 4. SECRETARY. The Secretary or an Assistant Secretary shall
issue notices of meetings, shall keep their minutes, shall have charge of the
seal and the corporate books, shall perform such other duties and exercise such
other powers as are usually incident to such offices and/or such other duties
and powers as are properly assigned thereto by the Board of Directors, the
Chairman of the Board or the President.
SECTION 5. TREASURER. The Treasurer shall have charge of all monies
and securities of the Corporation, other than monies and securities of any
division of the Corporation which has a treasurer or financial officer appointed
by the Board of Directors, and shall keep regular books of account. The funds
of the Corporation shall be deposited in the name of the Corporation by the
Treasurer with such banks or trust companies or other entities as the Board of
Directors from time to time shall designate. The Treasurer shall sign or
countersign such instruments as require his signature, shall perform all such
duties and have all such powers as are usually incident to such office and/or
such other duties and powers as are properly assigned to him by the Board of
Directors, the Chairman of the Board or the President, and may be required to
give bond, payable by the Corporation, for the faithful performance of his
duties in such sum and with such surety as may be required by the Board of
Directors.
SECTION 6. ASSISTANT SECRETARIES AND OTHER OFFICERS. The Board of
Directors may appoint one or more assistant secretaries and one or more
assistant treasurers, or one appointee to both such positions, which officers
shall have such powers and shall perform such duties as are provided in these
By-laws or as may be assigned to them by the Board of Directors, the Chairman of
the Board or the President.
SECTION 7. ACTION WITH RESPECT TO SECURITIES OF OTHER CORPORATIONS.
Unless otherwise directed by the Board of Directors, the President or any
officer of the Corporation authorized by the President shall have power to vote
and otherwise act on behalf of the Corporation, in person or by proxy, at any
meeting of stockholders of or with respect to any action of stockholders of any
other corporation in which this Corporation may hold securities and otherwise to
exercise any and all rights and powers which this Corporation may possess by
reason of its ownership of securities in such other Corporation.
ARTICLE VII
CORPORATE BOOKS
SECTION 1. PLACE OF KEEPING. Except as otherwise provided by the laws of
the State of Delaware, by the Certificate of Incorporation of the Corporation or
by these Bylaws, the books and records of the Corporation may be kept at such
place or places, as the Board of Directors may from time to time by resolution
determine.
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SECTION 2. STOCK REGISTER OR TRANSFER BOOK. The original or duplicate
stock register or transfer book shall contain a complete and accurate
shareholders list, alphabetically arranged, giving the names and addresses of
all shareholders, the number and classes of shares held by each, and shall be
kept at the principal office of the Corporation.
ARTICLE VIII
AMENDMENTS
SECTION 1. AMENDMENTS. These Bylaws, including this Article VIII, may be
adopted, amended or repealed at any meeting of the shareholders only upon (i)
recommendation by the Board of Directors; (ii) the affirmative vote of the
Independent Director(s); and (iii) upon the vote of holders of not less than a
majority of the outstanding shares of common stock of the Corporation.
ARTICLE IX
CONTRACTS WITH DIRECTORS AND AFFILIATES
SECTION 1. If this Corporation enters into contracts or transacts business
with one or more of its Directors, or with any firm of which one or more of its
Directors are members, or with any other Corporation or association of which one
or more of its Directors are shareholders, Directors or officers, such contract
or transaction shall not be invalidated or in any way affected by the fact that
such Director or Directors have or may have interests therein which are or might
be adverse to the interests of this Corporation, provided that such contract or
transaction is entered into in good faith in the usual course of business.
Notwithstanding the foregoing, the Corporation shall not engage in any
transaction with any direct or indirect parent corporation or any affiliate of a
parent corporation except (i) on terms and conditions comparable to transactions
on an arms-length basis with unaffiliated persons and (ii) with the approval of
the Board of Directors including at least one Independent Director. This
Article IX shall not be amended without the approval of all incumbent
Independent Directors.
ARTICLE X
NOTICES
SECTION 1. NOTICES. Except as otherwise specifically provided herein
or required by law, all notices required to be given to any stockholder,
director, officer, employee or agent shall be in writing and may in every
instance be effectively given by hand delivery to the recipient thereof, by
depositing such notice in the mail, postage paid, by sending such notice by
prepaid telegram or mailgram or by sending such notice by facsimile machine or
other electronic
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transmission. Any such notice shall be addressed to such stockholder, director,
officer, employee or agent at his or her last known address as the same appears
on the books of the Corporation. The time when such notice is received, if hand
delivered, or dispatched, if delivered through the mail, by telegram or mailgram
or by facsimile machine or other electronic transmission, shall be the time of
the giving of the notice.
SECTION 2. WAIVERS. A written waiver of any notice, signed by a
stockholder, director, officer, employee or agent, whether before or after the
time of the event for which notice is to be given, shall be deemed equivalent to
the notice required to be given to such stockholder, director, officer, employee
or agent. Neither the business nor the purpose of any meeting need be specified
in such a waiver.
ARTICLE XI
MISCELLANEOUS
SECTION 1. FACSIMILE SIGNATURES. In addition to the provisions for use
of facsimile signatures elsewhere specifically authorized in these By-laws,
facsimile signatures of any officer or officers of the Corporation may be used
whenever and as authorized by the Board of Directors or a committee thereof.
SECTION 2. CORPORATE SEAL. The Board of Directors may provide a
suitable seal, containing the name of the Corporation, which seal shall be in
the charge of the Secretary. If and when so directed by the Board of Directors
or a committee thereof, duplicates of the seal may be kept and used by the
Treasurer or by an Assistant Secretary or Assistant Treasurer.
SECTION 3. RELIANCE UPON BOOKS, REPORTS AND RECORDS. Each director,
each member of any committee designated by the Board of Directors, and each
officer of the Corporation shall, in the performance of his or her duties, be
fully protected in relying in good faith upon the books of account or other
records of the Corporation and upon such information, opinions, reports or
statements presented to the Corporation by any of its officers or employees, or
committees of the Board of Directors so designated, or by any other person as to
matters which such director or committee member reasonably believes are within
such other person's professional or expert competence and who has been selected
with reasonable care by or on behalf of the Corporation.
SECTION 4. FISCAL YEAR. The fiscal year of the Corporation shall be as
fixed by the Board of Directors.
SECTION 5. TIME PERIODS. In applying any provision of these By-laws
which requires that an act be done or not be done a specified number of days
prior to an event or that an act be done during a period of a specified number
of days prior to an event, calendar days shall be used, the day of the doing of
the act shall be excluded and the day of the event shall be included.
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