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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_________
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) December 6, 1996
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Chevy Chase Bank, F.S.B.
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(Exact Name of Registrant as Specified in Charter)
Maryland 333-15865 Not Yet Issued
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(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
8401 Connecticut Avenue, Chevy Chase, Maryland 20815
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(Address of Principal Executive Officer) Zip Code)
Registrant's telephone number, including area code (301) 986-7000
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(Former Name or Former Address, if Changed Since Last Report)
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ITEM 5. DESCRIPTION OF THE CERTIFICATES AND THE AUTO LOANS
Chevy Chase Auto Receivables Trust 1996-2 (the "Trust") and Chevy Chase
Bank, F.S.B., as seller, servicer, and originator of the Trust, have registered
$321,422,908.82 in aggregate principal amount of the Trust's 5.9% Auto
Receivables Backed Certificates (the "Certificates") with the Securities and
Exchange Commission (the "Commission") on Form S-3 (the "Registration
Statement"). Pursuant to the Registration Statement, the Trust issued
$321,422,908.82 in aggregate principal amount of the Certificates on December
17, 1996 (the "Closing Date"). This Current Report on Form 8-K is being filed
so that copies of certain agreements executed in connection with the issuance of
the Certificates, the forms of which were filed as exhibits to the Registration
Statement, may be filed with the Commission.
The Certificates were issued pursuant to a Pooling and Servicing Agreement
attached hereto, dated as of December 1, 1996, between Chevy Chase Bank, F.S.B.,
as Seller and Servicer, and First Bank National Association, as Trustee. The
Certificates evidence, in the aggregate, fractional undivided ownership
interests in the Trust which consists primarily of simple interest secured by
new and used automobiles, light duty trucks and vans financed thereby. As of
the Closing Date, the Receivables had the characteristics described in the
Prospectus dated December 10, 1996 filed with the Commission pursuant to Rule
424(b)(1) of the Securities Exchange Act of 1934.
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ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Not applicable
(b) Not applicable
(c) Exhibits
1.1 Underwriting Agreement, dated December 6, 1996, between Chevy Chase
Bank, F.S.B., as Seller and Servicer, and CS First Boston, as Representative of
the Underwriters
4.1 Pooling and Servicing Agreement, dated as of December 1, 1996, between
Chevy Chase Bank, F.S.B., as Seller and Servicer, and First Bank National
Association, as Trustee
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CHEVY CHASE AUTO RECEIVABLES TRUST 1996-2
By: Chevy Chase Bank, F.S.B., as Seller and Servicer
By: /s/ Joel A. Friedman
Joel A. Friedman
Senior Vice President and Controller
Date: December 23, 1996
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Exhibit 1.1
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EXECUTION COPY
$321,422,908.82
CHEVY CHASE AUTO RECEIVABLES TRUST 1996-2
5.90% Auto Receivables Backed Certificates
UNDERWRITING AGREEMENT
December 6, 1996
CS FIRST BOSTON CORPORATION
Park Avenue Plaza
55 East 52nd Street
New York, New York 10055
J.P. MORGAN SECURITIES INC.
60 Wall Street, 18th Floor
New York, NY 10260
SMITH BARNEY INC.
1345 Avenue of the Americas
New York, New York 10105
Dear Sirs:
1. INTRODUCTION. Chevy Chase Bank, F.S.B., a federally chartered stock
savings bank ("Chevy Chase"), has authorized the issuance and sale of 5.90%
Auto Receivables Backed Certificates (the "Certificates"), evidencing
interests in a trust (the "Trust") consisting, among other things, of (i) a
combination of simple interest retail installment sales contracts and
installment loans (the "Receivables") secured by new and used automobiles,
light duty trucks and vans (the "Vehicles") financed thereby, (ii) amounts
due or received thereunder on or after December 1, 1996, (the "Cut-Off
Date"), and (iii) security interests in the Vehicles financed thereby. The
Certificates will be issued under a Pooling and Servicing Agreement dated as
of December 1, 1996 (the "Pooling Agreement") between Chevy Chase as seller
and as servicer and First Bank National Association, as trustee (the
"Trustee").
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The Certificates will evidence fractional undivided interests in the
Trust. The Trustee, on behalf of the holders of the Certificates (the
"Certificateholders"), will have the benefit of a financial guaranty
insurance policy (the "Certificate Insurance Policy") from MBIA Insurance
Corporation (the "Certificate Insurer"). The Trustee will also have access
to a Reserve Account to be established for the benefit of the holders of the
Certificates and the Certificate Insurer. Each Certificateholder will also
purchase the right to receive a pro rata share of amounts payable under the
Yield Maintenance Account established pursuant to the Pooling Agreement. The
Certificates will be issued in an aggregate principal amount of
$321,422,908.82, which is equal to the original pool balance of the
Receivables, exclusive of accrued interest, as of the opening of business on
the Cut-Off Date. The forms of the Pooling Agreement, the Certificate
Insurance Policy and the Indemnification Agreement (as such term is
hereinafter defined) have been timely filed as exhibits to the Registration
Statement (as such term is hereinafter defined). Capitalized terms used but
not defined herein shall have the meanings given to them in the Pooling
Agreement.
Chevy Chase hereby agrees with the several Underwriters named in
Schedule 1 hereto (the "Underwriters") as follows:
2. REPRESENTATIONS AND WARRANTIES OF CHEVY CHASE. Chevy Chase
represents and warrants to, and agrees with, each of the Underwriters that:
(a) A Registration Statement on Form S-3 (Nos. 333-15865 and 333-15865-01)
relating to the Certificates, including a form of Prospectus, has been filed
with the Securities and Exchange Commission (the "Commission") and either (i)
has been declared effective under the Act of 1933 (the "Act") and is not
proposed to be amended or (ii) is proposed to be amended by amendment or
post-effective amendment. If Chevy Chase does not propose to amend such
Registration Statement or if any post-effective amendment to such
Registration Statement has been filed with the Commission prior to the
execution and delivery of this Agreement, such Registration Statement or such
post-effective amendment, as the case may be, has been declared effective by
the Commission. For purposes of this Agreement, "Effective Time" means (i)
if Chevy Chase has advised CS First Boston Corporation ("First Boston"), as
representative of the Underwriters (the "Representative"), that it does not
propose to amend such Registration Statement, the date and time as of which
such Registration Statement, or the most recent post-effective amendment
thereto (if any) filed prior to the execution and delivery of this Agreement,
was declared effective by the Commission, or (ii) if Chevy Chase has advised
the Representative that it proposes to file an amendment or post-effective
amendment to such Registration Statement, the date and time as of which such
Registration Statement, as amended by such amendment or post-effective
amendment, as the case may be, is declared effective by the Commission.
"Effective Date" means the date of the Effective Time. Such Registration
Statement, as amended at the Effective Time, including all material
incorporated by reference therein and including all information, if any,
deemed to be a part of such Registration Statement as of the Effective Time
pursuant to Rule 430A(b) under the Act, is referred to herein as the
"Registration Statement", and the form of prospectus relating to the
Certificates, as first filed with the Commission pursuant to and in
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accordance with Rule 424(b) under the Act or, if no such filing is required,
as included in the Registration Statement, including all material
incorporated by reference in such prospectus, is hereinafter referred to as
the "Prospectus."
(b) If the Effective Time is prior to the execution and
delivery of this Agreement: (i) on the Effective Date, the Registration
Statement conformed, and on the date of this Agreement the Registration
Statement conforms, in all material respects with the requirements of the Act
and the rules and regulations of the Commission ("Rules and Regulations") and
did not include any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading, and (ii) on the date of this Agreement,
the Prospectus conforms, and at the time of filing of the Prospectus pursuant
to Rule 424(b) and at the Closing Date, the Prospectus will conform, in all
material respects to the requirements of the Act and the Rules and
Regulations, and the Prospectus does not include and does not omit, and will
not include, any untrue statement of a material fact, and does not omit, to
state any material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading.
If the Effective Time is subsequent to the execution and delivery of this
Agreement: on the Effective Date, the Registration Statement and the
Prospectus will conform in all material respects to the requirements of the
Act and the Rules and Regulations, and (i) the Registration Statement will
not include any untrue statement of a material fact or will not omit to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading and (ii) the Prospectus will not include an
untrue statement of a material fact or will not omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. The two preceding
sentences do not apply to statements in or omissions from the Registration
Statement or Prospectus based upon written information furnished to Chevy
Chase by any Underwriters through the Representative specifically for use
therein, it being understood the only such information is that described as
such in Section 8(b). The conditions to the use by Chevy Chase of a
Registration Statement on Form S-3 under the Act, as set forth in the General
Instructions to Form S-3, have been satisfied with respect to the
Registration Statement and the Prospectus. There are no contracts or
documents which are required to be filed as exhibits to the Registration
Statement pursuant to the Act or the Rules and Regulations which have not
been so filed on or prior to the Effective Date.
(c) Since the respective dates as of which information is given in the
Prospectus, or the Prospectus as amended and supplemented, there has not been
any material adverse change in the general affairs, management, or results of
operations of Chevy Chase or of its subsidiaries otherwise than as set forth
or contemplated in the Prospectus or the Prospectus as amended and
supplemented, nor has there been any adverse change in the general affairs,
management, or results of operations of any other affiliate of Chevy Chase
which could have a material adverse effect on the general affairs, management
or results of operations of Chevy Chase or its subsidiaries, otherwise than
as set forth or contemplated in the Prospectus or the Prospectus as amended
and supplemented.
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(d) Chevy Chase is a federally chartered stock savings bank duly
organized and validly existing under the laws of the United States of
America, and has full corporate power, authority and legal right to own its
properties and conduct its business as such properties are presently owned
and such business is presently conducted, and to execute, deliver and perform
its obligations under this Agreement, the Pooling Agreement, the
Indemnification Agreement, and to cause the Certificates to be issued. Chevy
Chase has conducted and is conducting its business so as to comply in all
material respects with all applicable statutes and regulations, including,
without limitation, all regulations, decisions, directives and orders of the
Office of Thrift Supervision. Chevy Chase is duly qualified to do business
as a foreign corporation in good standing in all other jurisdictions in which
its ownership or lease of property or the conduct of its business requires
such qualification.
(e) (i) There are no legal, governmental or regulatory proceedings
pending to which Chevy Chase is a party or to which any of its property is
the subject, which, if determined adversely to Chevy Chase, would
individually or in the aggregate have a material adverse effect on the
performance by Chevy Chase of this Agreement, the Pooling Agreement, the
Indemnification Agreement or the consummation of the transactions
contemplated hereunder or thereunder and (ii) to the best of its knowledge,
no such proceedings are threatened or contemplated by governmental or
regulatory authorities or threatened by others.
(f) This Agreement has been duly authorized and validly executed and
delivered by Chevy Chase and constitutes a valid and binding agreement of
Chevy Chase, enforceable against Chevy Chase in accordance with its terms,
except to the extent that (i) the enforceability hereof may be subject to
insolvency, reorganization, moratorium, receivership, conservatorship, or
other similar laws, regulations or procedures of general applicability now or
hereafter in effect relating to or affecting creditors' or other obligees'
rights generally or the rights of creditors or obligees of federally
chartered stock savings banks, the deposits of which are insured by the
Federal Deposit Insurance Corporation (the "FDIC"), (ii) the remedy of
specific performance and injunctive and other forms of equitable relief may
be subject to equitable defenses and to the discretion of the court before
which any proceeding therefor may be brought and (iii) rights to
indemnification and contribution under this Agreement may be limited by state
or federal securities laws or the policies underlying such laws.
(g) The Pooling Agreement and the Indemnification Agreement have been
duly authorized by Chevy Chase and, when executed and delivered by Chevy
Chase and assuming the due authorization, execution and delivery of the
Pooling Agreement and the Indemnification Agreement by the other parties
thereto, will constitute valid and binding obligations of Chevy Chase
enforceable against Chevy Chase in accordance with their respective terms,
except to the extent that (i) the enforceability thereof may be subject to
insolvency, reorganization, moratorium, receivership, conservatorship, or
other similar laws, regulations or procedures of general applicability now or
hereafter in effect relating to or affecting creditors' or obligees' rights
generally or the rights of creditors or obligees of federally chartered stock
savings banks, the deposits of which are insured by the FDIC, and (ii) the
remedy of specific performance and injunctive and
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other forms of equitable relief may be subject to equitable defenses and to
the discretion of the court before which any proceeding therefor may be
brought.
(h) The issuance and delivery of the Certificates, the consummation
of any other of the transactions contemplated herein in the Pooling Agreement
and the Indemnification Agreement or the fulfillment of the terms of this
Agreement, the Pooling Agreement or the Indemnification Agreement, do not and
will not conflict with or violate any term or provision of the Charter or
By-Laws of Chevy Chase, any statute, order or regulation applicable to Chevy
Chase of any court, regulatory body, administrative agency or governmental
body having jurisdiction over Chevy Chase and do not and will not conflict
with, result in a breach or violation or the acceleration of or constitute a
default under or result in the creation or imposition of any lien, charge or
encumbrance upon any of the property or assets of Chevy Chase pursuant to the
terms of, any indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument to which Chevy Chase is a party or by which Chevy
Chase may be bound or to which any of the property or assets of Chevy Chase
may be subject except for conflicts, violations, breaches, accelerations and
defaults which would not, individually or in the aggregate, be materially
adverse to Chevy Chase or materially adverse to the transactions contemplated
by this Agreement.
(i) Arthur Andersen LLP is an independent public accountant with
respect to Chevy Chase as required by the Act and the Rules and Regulations.
(j) The direction by Chevy Chase to the Trustee to execute,
countersign, issue and deliver the Certificates has been duly authorized by
Chevy Chase, and, assuming the Trustee has been duly authorized to do so,
when executed, countersigned, issued and delivered by the Trustee in
accordance with the Pooling Agreement, the Certificates will be validly
issued and outstanding and will be entitled to the benefits of the Pooling
Agreement.
(k) No consent, approval, authorization, order, registration or
qualification of or with any court or governmental agency or body of the
United States is required for the issuance and sale of the Certificates, or
the consummation by Chevy Chase of the other transactions contemplated by
this Agreement, the Pooling Agreement or the Indemnification Agreement,
except the registration under the Act of the certificates and such consents,
approvals, authorizations, registrations or qualifications as may have been
obtained or effected or as may be required under securities or Blue Sky laws
in connection with the purchase and distribution of the Certificates by the
Underwriters.
(l) Chevy Chase possesses all material licenses, certificates,
authorizations or permits issued by the appropriate state, Federal or foreign
regulatory agencies or bodies necessary to conduct the business now conducted
by it and as described in the Prospectus and Chevy Chase has not received
notice of proceedings relating to the revocation or modification of any such
license, certificate, authorization or permit which, singly or in the
aggregate, if the subject of an unfavorable decision, ruling or finding,
would materially and adversely affect the conduct of its business,
operations, financial condition or income.
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(m) At the time of execution and delivery of the Pooling Agreement,
Chevy Chase (i) will not have assigned to any person any of its right, title
or interest in the Receivables or in the Pooling Agreement or the
Certificates and (ii) will have the power and authority to sell the
Receivables to the Trustee and to sell the Certificates to the Underwriters,
and upon execution and delivery of the Pooling Agreement by the Trustee, the
Trustee will have acquired beneficial ownership of all of Chevy Chase's
right, title and interest in and to the Receivables, and upon delivery to the
Underwriters of the Certificates the Underwriters will have good and
marketable title to the Certificates.
(n) As of the Cut-Off Date, the Receivables will meet the eligibility
criteria described in the Prospectus.
(o) The Trust created by the Pooling Agreement is not, and immediately
following the issuance and sale of the Certificates will not be, required to
be registered as an "investment company" under the Investment Company Act of
1940, as amended (the "1940 Act"), as in effect on the date hereof.
(p) Chevy Chase has authorized the conveyance of the Receivables to the
Trust, and Chevy Chase has authorized the Trust to issue the Certificates.
(q) Each of the Certificates, the Pooling Agreement and the Certificate
Insurance Policy conforms in all material respects to the descriptions
thereof contained in the Prospectus.
(r) Any taxes, fees and other governmental charges in connection with
the execution, delivery and issuance of this Agreement, the Pooling
Agreement, the Indemnification Agreement, the Certificate Insurance Policy
and the Certificates that are required to be paid by Chevy Chase at or prior
to the Closing Date have been paid or will be paid at or prior to the Closing
Date.
(s) Chevy Chase will not apply the proceeds of the sale of the
Certificates pursuant to this Agreement to purchase securities (which term
does not include the Receivables) within the meaning of Regulation T
promulgated by the Federal Reserve Board.
(t) As of the Closing Date, the representations and warranties of Chevy
Chase in the Pooling Agreement and the Indemnification Agreement will be true
and correct.
Any certificate signed by an officer of Chevy Chase and delivered
to the Underwriters or the Underwriters' counsel in connection with an
offering of the Certificates shall be deemed, and shall state that it is, a
representation and warranty as to the matters covered thereby to each person
to whom the representations and warranties in this Section 2 are made.
3. PURCHASE, SALE, DELIVERY AND PAYMENTS. The Underwriters commitment to
purchase the Certificates pursuant to this Agreement shall be deemed to have
been made on the basis of the representations and warranties herein contained
and shall be subject to the terms and
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conditions herein set forth. Chevy Chase agrees to instruct the Trustee to
issue and agrees to sell to the Underwriters, and the Underwriters, severally
and not jointly, agree, to purchase from Chevy Chase at the purchase price
for the Certificates set forth opposite the names of the Underwriters on
Schedule 1 hereto, the respective principal amount of Certificates set forth
on Schedule 1 hereto. Payment of the purchase price for, and delivery of, any
Certificates to be purchased by the Underwriters shall be made at the office
of Shaw, Pittman, Potts & Trowbridge, 2300 N St., N.W., Washington, D.C., or
at such other place as shall be agreed upon by the Underwriters and Chevy
Chase, at 10:00 a.m. Washington, D.C. time on December 17, 1996 (the "Closing
Date"), or at such other time or date or time as shall be agreed upon in
writing by the Representative and Chevy Chase. On the Closing Date, payment
shall be made to Chevy Chase by wire transfer of same day funds payable to
the account of Chevy Chase against delivery to the Trustee as custodian for
The Depository Trust Company ("DTC") of the Certificates in the form of one
or more global securities in definitive form (the "Global Certificates") and
registered in the name of Cede & Co., as nominee for DTC. The Global
Certificates will be made available for checking at Shaw, Pittman, Potts &
Trowbridge at least 24 hours prior to the Closing Date.
4. OFFERING BY UNDERWRITERS. It is understood that the Underwriters
propose to offer the Certificates for sale to the public (which may include
selected dealers) as set forth in the Prospectus.
5. COVENANTS OF CHEVY CHASE. Chevy Chase covenants with the
Underwriters as follows:
(a) To prepare a Prospectus setting forth any price related information
previously omitted from the effective Registration Statement pursuant to Rule
430A under the Act within the time period prescribed by Rule 430A, and to
transmit such Prospectus to the Commission for filing pursuant to Rule 424(b)
under the Act within the prescribed time period, and prior to the Closing
Date to provide evidence satisfactory to the Underwriters of such timely
filing, or to prepare and timely file a post-effective amendment to the
Registration Statement providing such information, which post-effective
amendment shall have been declared effective in accordance with the
requirements of Rule 430A under the Act and to provide evidence satisfactory
to the Underwriters of the effectiveness thereof.
(b) If at any time when the Prospectus as amended or supplemented is
required by the Act to be delivered in connection with sales of the
Certificates by the Underwriters, any event shall occur or condition exist as
a result of which it is necessary, in the opinion of the Underwriters'
counsel or counsel for Chevy Chase, further to amend or supplement the
Prospectus as then amended or supplemented in order that the Prospectus as
amended or supplemented will not include an untrue statement of a material
fact or omit to state any material fact necessary to make the statements
therein, in the light of circumstances existing at the time it is delivered
to a purchaser, not misleading or if it shall be necessary, in the opinion of
any such counsel, at any such time to amend or supplement the Registration
Statement or the Prospectus as then amended or supplemented in order to
comply with the requirements of the Act or the Rules and Regulations, or if
required by such Rules and Regulations, including Rule 430A thereunder, to
file a post-
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effective amendment to such Registration Statement (including an amended
Prospectus), Chevy Chase will promptly notify the Representative of such
event and will prepare and file with the Commission (subject to the
Representative's prior review), at its own expense, such amendment or
supplement as may be necessary to correct such untrue statement or omission
or to make the Registration Statement comply with such requirements, and
within two Business Days will furnish to the Underwriters as many copies of
the Prospectus, as amended or supplemented, as the Underwriters shall
reasonably request. Neither the Representative's consent to, nor the
Underwriters, delivery of, any such amendment or supplement shall constitute
a waiver of any of the conditions set forth in Section 6 of this Agreement.
(c) Chevy Chase will give the Underwriters reasonable notice of its
intention to file any amendment to the Registration Statement, the Prospectus
or the Prospectus as amended or supplemented, pursuant to the Act, and will
furnish the Underwriters with copies of any such amendment or supplement
proposed to be filed a reasonable time in advance of filing, and will not
file any such amendment or supplement to which the Underwriters or the
Underwriters, counsel shall object.
(d) Chevy Chase will notify the Underwriters immediately, and confirm
the notice in writing, (i) of the effectiveness of any amendment to the
Registration Statement, (ii) of the mailing or the delivery to the Commission
for filing of any supplement to the Prospectus or the Prospectus as amended
or supplemented, (iii) of the receipt and contents of any comments from the
Commission with respect to the Registration Statement or the Prospectus or
the Prospectus as amended or supplemented, (iv) of any request by the
Commission for any amendment to the Registration Statement or any amendment
or supplement to the Prospectus or for additional information and (v) of the
issuance by the Commission of any stop order suspending the effectiveness of
the Registration Statement or the initiation of any proceedings for that
purpose. Chevy Chase will make every reasonable effort to prevent the
issuance of any stop order and, if any stop order is issued, to obtain the
lifting thereof at the earliest possible moment.
(e) Chevy Chase will deliver to the Underwriters as many signed and as
many conformed copies of the Registration Statement (as originally filed) and
of each amendment thereto (including exhibits filed therewith or incorporated
by reference therein and documents incorporated by reference in the
Prospectus), each related preliminary prospectus, and so long as delivery of
a Prospectus relating to the Certificates is required to be delivered under
the Act in connection with sales by any Underwriter or dealer, the Prospectus
and all amendments and supplements to such documents, in each case as soon as
available and in such quantities as the Underwriters may reasonably request.
Chevy Chase will also furnish to the Representative copies of any report on
Form SR required by Rule 463 under the Act.
(f) Chevy Chase will make generally available to holders of the
Certificates as soon as practicable, but in any event not later than the
Availability Date (as defined below), earning statements of the Trust (which
need not be audited) complying with Section 11 (a) of the Act and the Rules
and Regulations (including Rule 158) and covering a period of at least twelve
consecutive months beginning after the Effective Date which will satisfy the
provisions of Section 11(a)
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of the Act. For the purposes of the preceding sentence, the "Availability
Date" means the 45th day after the end of the Trust's fourth fiscal quarter
following the fiscal quarter that includes the Effective Date, except that,
if such fourth fiscal quarter is the last quarter of the Trust's fiscal year,
"Availability Date" means the 90th day after the end of such fourth fiscal
quarter.
(g) Chevy Chase will endeavor, in cooperation with the Underwriters,
to qualify the Certificates for sale and the determination of their
eligibility for investment under the applicable securities laws of such
states and other jurisdictions of the United States as the Representative may
designate, and will maintain or cause to be maintained such qualifications in
effect for as long as may be required for the distribution of the
Certificates. Chevy Chase will file or cause the filing of such statements
and reports as may be required by the laws of each jurisdiction in which the
Certificates have been qualified as above provided.
(h) Chevy Chase will not, directly or indirectly, without the
Underwriters' prior consent, publicly offer or sell or contract to sell or
attempt to offer, sell or dispose of any certificates or other similar
securities representing interests in or secured by the Receivables for a
period of 30 days following the commencement of the offering of the
Certificates to the public.
(i)For a period from the date of this agreement until the retirement of
the Certificates, Chevy Chase, as Servicer, will deliver to the
Representative and, upon request, to each of the other Underwriters, as soon
as practicable, copies of each certificate, report or notice and the annual
statements of compliance delivered by Chevy Chase, as Servicer, to the
Trustee pursuant to Section 4.10 of the Pooling Agreement, the annual
statement of a firm of independent public accountants furnished to the
Trustee pursuant to Section 4.11 of the Pooling Agreement and such other
information concerning the Receivables, Chevy Chase (including in its
capacities as the Seller and Servicer) or the Certificates, as the
Representative may from time to time reasonably request.
(j) On or before the Closing Date, Chevy Chase shall furnish or make
available to the Underwriters or its counsel such additional documents and
information regarding Chevy Chase (including in its capacities as the Seller
and Servicer) and its affairs as the Underwriters may from time to time
reasonably request, including any and all documentation reasonably requested
in connection with their due diligence efforts regarding information in the
Prospectus and in order to evidence the accuracy or completeness of any of
the conditions contained in this Agreement.
(k) So long as any Certificate is outstanding, Chevy Chase shall
furnish to the Representative by first-class mail as soon as practicable, all
documents (A) distributed, or caused to be distributed, by Chevy Chase to
Certificateholders, (B) filed, or caused to be filed, by Chevy Chase with the
Commission pursuant to the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), (C) any order of the Commission under the Exchange Act or
pursuant to a "no-action" letter from the staff of the Commission and (D)
from time to time, such other information in the possession of Chevy Chase
concerning the Trust as the Representative may reasonably request.
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(l) Chevy Chase shall apply the net proceeds from the sale
of the Certificates in the manner set forth in the Prospectus.
(m) If, between the date hereof or, if earlier, the dates as of which
information is given in the Prospectus and the Closing Date, to the knowledge
of Chevy Chase there shall have been any material change, or any development
involving a prospective material change in or affecting the general affairs,
management, financial position, shareholders' equity or results of operations
of Chevy Chase, Chevy Chase will give prompt written notice thereof to the
Underwriters.
(n) To the extent, if any, that any rating provided with respect to the
Certificates set forth in Section 6(j) hereof is conditional upon the
furnishing of documents reasonably available to Chevy Chase or the taking of
any other reasonable actions by Chevy Chase, Chevy Chase shall furnish such
documents or take any such other actions.
6. CONDITIONS OF THE OBLIGATIONS OF THE UNDERWRITERS. The obligations
of the Underwriters to purchase the Certificates pursuant to this Agreement
are subject to the accuracy on and as of the Closing Date of the
representations and warranties on the part of Chevy Chase herein contained,
to the accuracy of the statements of officers of Chevy Chase made pursuant
hereto, to the performance by Chevy Chase of all of its obligations hereunder
and to the following conditions at the Closing Date:
(a) The Representative shall have received a letter, dated the date of
delivery thereof (which, if the Effective Time is prior to the execution and
delivery of this Agreement, shall be on or prior to the date of this
Agreement or, if the Effective Time is subsequent to the execution and
delivery of this Agreement, shall be prior to the filing of the amendment or
post-effective amendment to the Registration Statement to be filed shortly
prior to the Effective Time), from Arthur Andersen LLP, in form and substance
satisfactory to the Underwriters and counsel for the Underwriters, confirming
that they are independent public accountants within the meaning of the Act
and the applicable published Rules and Regulations thereunder and stating in
effect that (i) they have performed certain specified procedures as a result
of which they have determined that certain information of an accounting,
financial or statistical nature (which is limited to accounting, financial or
statistical information derived from the general accounting records of the
Trust and Chevy Chase set forth in the Registration Statement and the
Prospectus), agrees with the accounting records of the Trust and Chevy Chase,
excluding any questions of legal interpretation, and (ii) they have performed
certain specified procedures with respect to the computer programs used to
select the Receivables and to generate information with respect to the
Receivables set forth in the Registration Statement and the Prospectus.
For purposes of this subsection (a), if the Effective Time is subsequent
to the execution and delivery of this Agreement, "Registration Statement"
shall mean the registration statement as proposed to be amended by the
amendment or post-effective amendment to be filed shortly prior to the
Effective Time, and "Prospectus" shall mean the prospectus included in such
Registration Statement. All financial statements included in material
incorporated by reference
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into the Prospectus shall be deemed included in the Registration Statement
for purposes of this subsection (a).
(b) If the Effective Time is not prior to the execution and delivery of
this Agreement, the Effective Time shall have occurred not later than 10:00
p.m., New York time, on the date of this Agreement or such later date as
shall have been consented to by the Representative. If the Effective Time is
prior to the execution and delivery of this Agreement, the Prospectus shall
have been filed with the Commission in accordance with the Rules and
Regulations and Section 5 (a) of this Agreement.
(c) The Registration Statement shall have been declared effective by
the Commission and no stop order suspending the effectiveness of the
Registration Statement shall have been issued under the Act or proceedings
therefor initiated or threatened by the Commission, any price-related
information previously omitted from the effective Registration Statement
pursuant to Rule 430A under the Act shall have been included in the
Prospectus and transmitted to the Commission for filing pursuant to Rule 424
under the Act within the prescribed time period, and Chevy Chase shall have
provided evidence satisfactory to the Underwriters of such timely filing, or
a post-effective amendment to the Registration Statement providing such
information shall have been promptly filed with the Commission and declared
effective in accordance with the requirements of Rule 430A under the Act, and
prior to the Closing Date, Chevy Chase shall have provided evidence
satisfactory to the Underwriters of such effectiveness and there shall not
have come to the attention of the Underwriters facts that would cause the
Underwriters to believe that the Prospectus, at the time it was required to
be delivered to a purchaser of the Certificates, contained an untrue
statement of a material fact or omitted to state a material fact necessary in
order to make the statements therein, in the light of the circumstances
existing at such time, not misleading.
(d) The Underwriters shall have received the favorable opinion, dated
the Closing Date, of Shaw, Pittman, Potts & Trowbridge, counsel to Chevy Chase,
or other counsel to Chevy Chase, acceptable to the Underwriters and their
counsel, addressed to the Underwriters and in form and scope satisfactory to
the Underwriters counsel, to the effect that:
i) Chevy Chase has been duly chartered and is validly existing as
a federally chartered stock savings bank under the laws of the United States
of America and has full corporate power and authority to own its properties
and conduct its business as described in the Prospectus; Chevy Chase has full
corporate power and authority to execute, deliver, and perform its
obligations under this Agreement, the Pooling Agreement, the Indemnification
Agreement and the Insurance Agreement and to cause the Certificates to be
issued and to consummate the transactions contemplated hereby and thereby.
ii) Chevy Chase has duly authorized and executed this
Agreement, the Pooling Agreement and the Indemnification Agreement, and each
such agreement constitutes the valid, legal and binding obligation of Chevy
Chase enforceable against Chevy Chase in accordance with its terms.
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iii) The execution, delivery and performance of this Agreement, the
Pooling Agreement and the Indemnification Agreement the transfer of the
Receivables to the Trust, the issuance and sale of the Certificates and
consummation of any other of the transactions contemplated herein or in the
Pooling Agreement do not conflict with or result in a violation of (a) any
law or regulation of the United States of America or the State of New York or
Maryland (b) the Charter or By-laws of Chevy Chase, (c) any order, writ,
judgment or decree known to such counsel to which Chevy Chase is a party or
is subject or (d) result in any lien, charge or encumbrance upon any of the
properties or assets of Chevy Chase.
iv) The Certificates have been duly authorized and, when executed
and authenticated in accordance with the terms of the Pooling Agreement and
delivered to and paid for by the Underwriters pursuant to this Agreement,
will be duly and validly issued and outstanding and will be entitled to the
benefits of the Pooling Agreement.
v) No consent, approval or authorization of, or registration,
declaration or filing with, any court or governmental agency or body of the
United States of America is required for the issuance of the Certificates and
the sale of the Certificates to the Underwriters or the consummation of the
other transactions contemplated by this Agreement, the Pooling Agreement or
the Indemnification Agreement, except for (x) the filing of a Uniform
Commercial Code financing statement in the State of Maryland with respect to
the transfer of the Receivables to the Trust, (y) such as have been obtained
and made under the Act and (z) such as may be required under state securities
laws.
vi) The Registration Statement was declared effective under the Act
as of the date and time specified in such opinion, the Prospectus either was
filed with the Commission pursuant to the subparagraph of Rule 424 (b)
specified in such opinion on the date specified therein or was included in
the Registration Statement (as the case may be), and, to the best of the
knowledge of such counsel, no stop order suspending the effectiveness of the
Registration Statement or any part thereof has been instituted or is pending
or contemplated under the Act, and the Registration Statement and the
Prospectus, and each amendment or supplement thereof, as of their respective
effective or issue dates, complies as to form in all material respects with
the requirements of the Act and the Rules and Regulations; such counsel have
no reason to believe that the Registration Statement or any amendment
thereto, as of its Effective Date, contained any untrue statement of a
material fact or omitted to state any material fact required to be stated
therein or necessary to make the statements therein not misleading or that
the Registration Statement as of the Closing Date, or the Prospectus, as of
its issue date or as of such Closing Date, contained any untrue statement of
a material fact or omitted to state any material fact necessary in order to
make the statements therein, in the light of the circumstances under which
they were made, not misleading; it being understood that such counsel need
express no opinion as to the financial statements or other financial data
contained in the Registration Statement or the Prospectus.
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vii) The conditions to the use by Chevy Chase of a registration
statement on Form S-3 under the Act, as set forth in the General Instructions
to Form S-3, have been satisfied with respect to the Registration Statement
and the Prospectus. There are no contracts or documents of Chevy Chase which
are required to be filed as exhibits to the Registration Statement pursuant
to the Act or the Rules and Regulations thereunder which have not been so
filed.
viii) There are no actions, proceedings or investigations pending
or threatened before any court, administrative agency or other tribunal to
which Chevy Chase is a named party or to which its assets are subject (A)
asserting the invalidity of the Pooling Agreement, the Indemnification
Agreement, this Agreement or the Certificates, (B) seeking to prevent the
issuance of the Certificates or the consummation by Chevy Chase of any of is
the transactions contemplated by the Pooling Agreement, the Indemnification
Agreement, or this Agreement, (C) that might adversely affect the validity or
enforceability of the Pooling Agreement, the Indemnification Agreement, this
Agreement or the Certificates, or (D) seeking to adversely affect the federal
income taxattributes of the Certificates as described in the Prospectus under
the heading "Certain Federal Income Tax Consequences."
ix) The Registration Statement at the time it became effective, and
any amendment thereto at the time such amendment became effective, complied
as to form in all material respects with the applicable requirements of the
Act and the Rules and Regulations.
x) The Pooling Agreement is not required to be qualified under the
Trust Indenture Act of 1939, as amended.
xi) The Trust is not required to be registered under the 1940 Act,
and immediately following the issuance and sale of the Certificates in the
manner contemplated by the Pooling Agreement and this Agreement, the Trust
will not be required to be so registered.
xii) The Certificates, this Agreement, the Pooling Agreement and
the Certificate Insurance Policy conform in all material respects to the
respective descriptions thereof in the Registration Statement and the
Prospectus.
xiii) The statements in the Prospectus under the heading "Certain
Legal Aspects of the Receivables," "SUMMARY OF TERMS -- Certain Legal Aspects
of the Receivables," "SUMMARY OF TERMS -- Certain Federal Tax
Considerations," "Certain Federal Income Tax Consequences," "ERISA
Considerations," and "SPECIAL CONSIDERATIONS -- Certain Legal Aspects," to
the extent that they constitute matters of law or legal conclusions with
respect thereto, have been prepared or reviewed by such counsel and are
correct in all material respects.
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xiv) No filing or other action, except the filing of a Uniform
Commercial Code financing statement on Form UCC-1 with the Maryland State
Department of Assessments and Taxation naming Chevy Chase as "debtor" and the
Trustee as "secured party," is necessary to perfect the transfer of the
Receivables and proceeds (as defined in Section 9-306 of the Maryland Uniform
Commercial Code) thereof against the claims of creditors of, and transferees
from, Chevy Chase. Such security interest would be enforceable
notwithstanding the insolvency of Chevy Chase or a receivership or
conservatorship of Chevy Chase in which the Federal Deposit insurance
Corporation ("FDIC") or the Resolution Trust Corporation ("RTC") is appointed
a receiver or conservator for Chevy Chase.
xv) The Receivables constitute "chattel paper" as defined in
Section 9-105 of the Uniform Commercial Code as in effect in the State of
Maryland.
In addition, such counsel shall state that nothing has come to their
attention that would lead them to believe that the Registration Statement, at
the time it became effective, contained an untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, or that the
Prospectus, as of its date and as of the Closing Date, contains an untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading.
(e) The Underwriters shall have received the favorable opinion of
counsel to the Trustee, dated the Closing Date, addressed to the Underwriters
and in form and scope satisfactory to the Underwriters, counsel, to the
effect that:
i) The Trustee has duly authorized, executed and delivered the
Pooling Agreement.
ii) The Trustee has been duly organized and is validly existing as
a national banking corporation in good standing under the laws of the United
States of America and has full power and authority to execute and deliver the
Pooling Agreement and to perform its obligations thereunder and each such
Agreement constitutes the valid, legal and binding obligation of the Trustee,
enforceable against the Trustee in accordance with its terms.
iii) The Certificates have been duly executed and countersigned by
the Trustee.
iv) The execution and delivery by the Trustee of the Pooling
Agreement and the performance by the Trustee of its duties thereunder do not
conflict with or result in a violation of (a) any law or regulation of the
United States of America or the State of Minnesota, (b) the charter or
by-laws of the Trustee, (c) any order, writ, judgment or decree or (d) any
agreement, instrument, order, writ, judgment or decree known to such counsel
to which the Trustee is a party or is subject.
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v) No consent, approval or authorization of, or registration,
declaration or filing with, any court or governmental agency or body of the
United States of America or any state thereof is required for the execution,
delivery or performance by the Trustee of the Pooling Agreement.
(f) The Underwriters shall have received the favorable opinion or
opinions, dated the Closing Date, of shaw, pittman, potts & trowbridge, with
respect to the issuance and sale of the Certificates, the Registration
Statement, this Agreement, the Prospectus and such other related matters as
the Underwriters may require.
(g) The Underwriters shall have received an opinion, dated the Closing
Date, of Shaw, Pittman, Potts & Trowbridge, counsel to Chevy Chase, addressed
to, and satisfactory to, Standard & Poor's Corporation ("S&P"), Moody's
Investors Service, Inc. ("Moody's"), Fitch Investors Service, Inc. ("Fitch")
and the Underwriters' counsel, relating to the sale of the Receivables to the
Trustee, and such counsel to Chevy Chase shall have consented to reliance by
the Underwriters on such opinion as though such opinion had been addressed to
the Underwriters.
(h) Chevy Chase shall have furnished to the Underwriters a certificate
signed on behalf of Chevy Chase by any two of the chairman of the board, the
president, any vice chairman of the board, any executive vice president, any
senior vice president, any vice president, the treasurer, or the controller
of the Seller or the Servicer, as appropriate, dated the Closing Date, as to
(i) the accuracy of the representations and warranties of Chevy Chase herein
and in the Pooling Agreement at and as of the Closing Date, (ii) the
performance by Chevy Chase of all of its obligations hereunder to be
performed at or prior to the Closing Date and (iii) such other matters as the
Underwriters may reasonably request.
(i) The Trustee shall have furnished to the Underwriters a certificate
of the Trustee, signed by one or more duly authorized officers of the
Trustee, dated the Closing Date, as to the due acceptance of the Pooling
Agreement by the Trustee and the due execution and delivery of the
Certificates by the Trustee thereunder and such other matters as the
Underwriters shall reasonably request.
(j) The Certificates shall have been rated "AAA" by S&P, ""Aaa" by
Moody's and "AAA" by Fitch, and such ratings shall not have been rescinded.
(k) The Underwriters shall have received from Arthur Andersen LLP, or
other independent certified public accountants acceptable to the
Underwriters, a letter, dated as of the date of the Closing Date, delivered
at such time in form satisfactory to the Underwriters.
(l) Since the respective dates as of which information is given in the
Prospectus, there shall not have been any change, or any development
involving a prospective change, in or affecting the general affairs,
management, financial position, shareholders, equity or results of operations
of Chevy Chase or the Certificate Insurer otherwise than as set forth in the
Prospectus, the effect of which is in the Underwriters, judgment so material
and adverse as to make it
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impracticable or inadvisable to proceed with the public offering or the
delivery of the Certificates on the terms and in the manner contemplated in
the Prospectus or which, in the judgment of the Underwriters, materially
impairs the investment quality of the Certificates or the ability of the
Servicer to service the Receivables.
(m) Subsequent to the execution and delivery of this Agreement, there
shall not have occurred (i) any change, development or event involving a
prospective change, in the condition (financial or other), business,
properties or results of operations of Chevy Chase or its automobile loan
business or the Certificate Insurer which, in the judgment of the
Underwriters, is material and adverse and makes it impracticable or
inadvisable to proceed with the completion of the public offering or the sale
of and payment for the Certificates, (ii) any banking moratorium declared by
Federal, New York, Minnesota or Maryland authorities; or (iii) any
downgrading in the rating of any securities of Chevy Chase or the Certificate
Insurer by any nationally recognized statistical rating organization (as
defined for purposes of Rule 436 (g) under the Act) or any public
announcement that any such organization has under surveillance or review its
rating of any securities of Chevy Chase or the Certificate Insurer (other
than an announcement with positive implications of a possible upgrading, and
no implication of a possible downgrading, of such rating); or (iv) any
suspension or limitation of trading in securities generally on the New York
Stock Exchange, or any setting of minimum prices for trading on such
exchange; or (v) any outbreak or escalation of major hostilities in which the
United States is involved, any declaration of war by Congress or any other
substantial national or international calamity, emergency or change in
financial markets if, in the Representative's judgment, the effect of any
such outbreak, escalation, declaration, calamity, emergency or change makes
it impractical or inadvisable to proceed with completion of the sale of and
payment for the Certificates.
(n) The Underwriters shall have received evidence satisfactory to the
Underwriters and its counsel that (i) on or before the Closing Date, UCC-1
financing statements have been filed in the offices of the Maryland State
Department of Assessments and Taxation, reflecting the interest of the Trust
in the Receivables and the proceeds thereof and (ii) the Trust will have a
first priority perfected security interest in the amounts on deposit from
time to time in the Reserve Account and the Yield Maintenance Account.
(o) Chevy Chase will provide or cause to be provided to the
Representative such conformed copies of such opinions, certificates, letters
and documents being provided pursuant hereto and such further information,
certificates and documents as the Representative may reasonably request.
First Boston may in its sole discretion waive on behalf of the Underwriters
compliance with any conditions to the obligations of the Underwriters
hereunder.
(p) The Certificate Insurance Policy shall have been duly executed and
issued at or prior to the Closing Date and shall conform in all material
respects to the description thereof in the Prospectus.
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(q) The Underwriters shall have received the favorable opinion, dated
the Closing Date, of counsel for the Certificate Insurer, in form and scope
satisfactory to your counsel, to the effect that:
i) The Certificate Insurer is duly organized as a New York stock
insurance corporation and is validly existing under the laws of New York, and
has the full power and authority (corporate and other) to issue, and to take
all action required of it under, the Certificate Insurance Policy.
ii) The execution, delivery and performance by the Certificate
Insurer of the Certificate Insurance Policy and the Indemnification Agreement
dated as of December 6, 1996 (the "Indemnification Agreement") among the
Certificate Insurer, Chevy Chase and the Underwriters have been duly
authorized by all necessary corporate action on the part of the Certificate
Insurer.
iii) The execution, delivery and performance by the Certificate
Insurer of the Certificate Insurance Policy and the Indemnification Agreement
do not require the consent or approval of, the giving of notice to, the
registration with, or the taking of any other action in respect of any state
or other governmental agency or authority which has not previously been
effected.
iv) The Certificate Insurance Policy and the Indemnification
Agreement have been duly authorized, executed and delivered by the
Certificate Insurer and constitute legal, valid and binding obligations of
the Certificate Insurer, enforceable against the Certificate Insurer in
accordance with their terms (subject, as to enforcement, to bankruptcy,
reorganization, insolvency, moratorium and other laws affecting creditors,
rights generally and to general equity principles).
v) The Certificate Insurance Policy is not required to be
registered under the Securities Act.
vi) The information set forth under the captions "The Certificate
Insurance Policy" and "The Certificate Insurer" in the Prospectus, insofar as
such statements constitute a description of the Certificate Insurance Policy,
accurately summarizes the Certificate Insurance Policy.
In rendering this opinion, such counsel may rely, as to matters of
fact, on certificates of responsible officers of the Certificate Insurer and
public officials. Such opinion may assume the due authorization, execution
and delivery of the instruments and documents referred to therein by the
parties thereto other than the Certificate Insurer.
The Certificate Insurer shall have furnished to you and Chevy
Chase a certificate of the Certificate Insurer, signed by one or more duly
authorized officers of the Certificate Insurer, dated the Closing Date,
certifying (i) the information relating to the Certificate Insurer in
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the Prospectus is true and correct in all material respects as of the dates
specified therein, (ii) there has been no change in the financial condition
of the Certificate Insurer since September 30, 1996 which could have a
material adverse effect on the Certificate Insurer's ability to meet its
obligations under the Certificate Insurance Policy and (iii) such other
matters as you may reasonably request.
(r) The Certificate Insurance Policy shall have been issued by the
Certificate Insurer pursuant to the Insurance Agreement.
If any condition specified in this Section 6 shall not have been
fulfilled when and as required to be fulfilled, this Agreement may be
terminated by the Underwriters by notice to Chevy Chase at any time at or
prior to the Closing Date, and such termination shall be without liability of
any party to any other party except as provided in Section 7.
7. PAYMENT OF EXPENSES. Chevy Chase agrees to pay all expenses
incident to the performance of its obligations under this Agreement, and will
reimburse the Underwriters (if and to the extent incurred by them) for any
filing fees and other expenses (including fees and disbursements of counsel),
including without limitation those related to (i) the filing of the
Registration Statement and all amendments thereto, (ii) the duplication and
delivery to the Underwriters, in such quantities as the Underwriters may
reasonably request, of copies of this Agreement, (iii) the preparation,
issuance and delivery of the Certificates and the determination of their
eligibility for investment under the laws of such jurisdictions as the
Representative designates, (iv) 50% of the fees and disbursements of Shaw,
Pittman, Potts & Trowbridge, and the fees and disbursements of Arthur
Andersen LLP, accountants of Chevy Chase, (v) the qualification of the
Certificates under securities and Blue Sky laws and the determination of the
eligibility of the Certificates for investment in accordance with the
provisions of Section 5(g), including filing fees and disbursements and 50%
of the fees of Shaw, Pittman, Potts & Trowbridge, in connection therewith and
in connection with the preparation of any Blue Sky Survey, (vi) the printing
and delivery to the Underwriters, in such quantities as the Underwriters may
reasonably request, hereinabove stated, of copies of the Registration
Statement and Prospectus and all amendments and supplements thereto, and of
any Blue Sky Survey, (vii) for the filing fee of the National Association of
Securities Dealers, Inc., (viii) the duplication and delivery to the
Underwriters in such quantities as the Underwriters may reasonably request,
of copies of the Pooling Agreement, (ix) the fees charged by nationally
recognized statistical rating agencies for rating the Certificates, (x) the
fees and expenses of the Trustee and its counsel, and (xi) the fees and
expenses of the Certificate Insurer and its counsel. The Underwriters agree
to pay (i) 50% of the fees and disbursements of Shaw, Pittman, Potts &
Trowbridge and (ii) other expenses of Chevy Chase relating to the
transactions contemplated hereby in an amount equal to $85,395.00.
8. INDEMNIFICATION. Chevy Chase agrees to indemnify and hold harmless
each Underwriter and each person, if any, who controls each Underwriter
within the meaning of the Act or the Exchange Act, as follows:
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(a) Chevy Chase will indemnify and hold harmless the Underwriters
against any losses, claims, damages or liabilities, joint or several, to
which such Underwriters may become subject, under the Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the Registration
Statement, the Prospectus, or any amendment or supplement thereto, or any
related preliminary prospectus, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading (in
the case of the Prospectus or any amendment or supplement thereto, in the
light of the circumstances under which they were made) and will reimburse the
Underwriters for any legal or other expenses reasonably incurred by such
Underwriters in connection with investigating or defending any such loss,
claim, damage, liability or action as such expenses are incurred; provided,
however, that Chevy Chase will not be liable in any such case to the extent
that any such loss, claim, damage or liability arises out of or is based upon
an untrue statement or alleged untrue statement in or omission or alleged
omission from any of such documents in reliance upon and in conformity with
written information furnished to Chevy Chase by any Underwriters through the
Representative specifically for use therein, it being understood and agreed
that the only such information furnished by any Underwriters consists of the
information described as such in subsection (b) below.
(b) Each Underwriter will severally and not jointly indemnify and hold
harmless Chevy Chase against any losses, claims, damages or liabilities to
which Chevy Chase may become subject, under the Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the Registration Statement, the
Prospectus, or any amendment or supplement thereto, or any related
preliminary prospectus, or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading (in the
case of the Prospectus, in the light of the circumstances under which they
were made), in each case to the extent, but only to the extent, that such
untrue statement or alleged untrue statement or omission or alleged omission
was made in reliance upon and in conformity with written information
furnished to Chevy Chase by such Underwriter through the Representative
specifically for use therein, and will reimburse any legal or other expenses
reasonably incurred by Chevy Chase in connection with investigating or
defending any such loss, claim, damage, liability or action as such expenses
are incurred, it being understood and agreed that the only such information
furnished by any Underwriters consists of the following information in the
Prospectus furnished on behalf of the Underwriters: the last paragraph at the
bottom of the cover page concerning the terms of the offering by the
Underwriters, the legend concerning overallotments and stabilizing on the
inside front cover page and the concession and reallowance figures appearing
in the third paragraph under the caption "Underwriting."
(c) Promptly after receipt by an indemnified party under this Section
of notice of the commencement of any action, such indemnified party will, if
a claim in respect thereof is to be made against the indemnifying party under
subsection (a) or (b) above, notify the indemnifying party of the
commencement thereof; but the omission so to notify the indemnifying party
will not
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relieve it from any liability which it may have to any indemnified party
otherwise than under subsection (a) or (b) above. In case any such action is
brought against any indemnified party and it notifies the indemnifying party
of the commencement thereof, the indemnifying party will be entitled to
participate therein and, to the extent that it may wish, jointly with any
other indemnifying party similarly notified, to assume the defense thereof,
with counsel satisfactory to such indemnified party (who shall not, except
with the consent of the indemnified party, be counsel to the indemnifying
party), and after notice from the indemnifying party to such indemnified
party of its election so to assume the defense thereof, the indemnifying
party will not be liable to such indemnified party under this Section for any
legal or other expenses subsequently incurred by such indemnified party in
connection with the defense thereof other than reasonable costs of
investigation. No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement of any pending or
threatened action in respect of which any indemnified party is or could have
been a party and indemnity could have been sought hereunder by such
indemnified party unless such settlement includes an unconditional release of
such indemnified party from all liability on any claims that are the subject
matter of such action.
9. CONTRIBUTION. (a) If the indemnification provided for in Section 8
is unavailable or insufficient to hold harmless an indemnified party under
subsection (a) or (b) of Section 8 above, then each indemnifying party shall
contribute to the amount paid or payable by such indemnified party as a
result of the losses, claims, damages or liabilities referred to in such
subsection (a) or (b) (i) in such proportion as is appropriate to reflect the
relative benefits received by Chevy Chase on the one hand and each of the
Underwriters on the other from the offering of the Certificates or (ii) if
the allocation provided by clause (i) above is not permitted by applicable
law, in such proportion as is appropriate to reflect not only the relative
benefits referred to in clause (i) above but also the relative fault of Chevy
Chase on the one hand and each of the Underwriters on the other in connection
with the statements or omissions which resulted in such losses, claims,
damages or liabilities as well as any other relevant equitable
considerations. The relative benefits received by Chevy Chase on the one
hand and the Underwriters on the other shall be deemed to be in the same
proportion as the total net proceeds from the offering (before deducting
expenses) received by Chevy Chase bear to the total underwriting discounts
and commissions received by the Underwriters. The relative fault shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to
state a material fact relates to information supplied by Chevy Chase or the
Underwriters and the parties, relative intent, knowledge, access to
information and opportunity to correct or prevent such untrue statement or
omission. The amount paid by an indemnified party as a result of the losses,
claims, damages or liabilities referred to in the first sentence of this
Section 9 shall be deemed to include any legal or other expenses reasonably
incurred by such indemnified party in connection with investigating or
defending any action or claim which is the subject of this Section 9. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation. The Underwriters'
obligations in this Section 9 to contribute are several in proportion to
their respective underwriting obligations and not joint.
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(b) The obligations of Chevy Chase under Section 8 and this Section
9 shall be in addition to any liability which Chevy Chase may otherwise have
and shall extend, upon the same terms and conditions, to each person, if any,
who controls any Underwriter within the meaning of the Act; and the
obligations of the Underwriters under Section 8 and this Section 9 shall be
in addition to any liability which the respective Underwriters may otherwise
have and shall extend, upon the same terms and conditions, to each director
of Chevy Chase, to each officer of Chevy Chase who has signed the
Registration Statement and to each person, if any, who controls Chevy Chase
within the meaning of the Act.
Each Underwriter, with respect to the Certificates, agrees that it
will not prepare or distribute to any proposed purchaser of any Certificates
any Derived Information (as such term is hereinafter defined) , unless it
shall have provided to the Servicer a copy of such Derived Information a
sufficient time prior to its proposed distribution to permit the Servicer to
review and comment upon such Derived Information, and such Underwriters shall
have obtained the prior written consent of the Servicer thereto following its
review. In addition, such Underwriters agree to provide the Servicer, no
later than the date on which the Prospectus is required to be filed pursuant
to Rule 424, with a definitive copy of its Derived Information with respect
to such Certificates provided by the Underwriters for filing with the
Commission on Form 8-K.
The Underwriters agree, assuming all Companies-Provided Information
(as such term is hereinafter defined) provided by Chevy Chase is accurate and
complete in all material respects, to indemnify and hold harmless Chevy
Chase, each of Chevy Chase's officers and directors and each person who
controls Chevy Chase within the meaning of the Act against any and all
losses, claims, damages or liabilities, joint or several, to which they may
become subject under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are
based upon any untrue statement of a material fact contained in the Derived
Information provided by such Underwriters, or arise out of or are based upon
the omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading, and agrees
to reimburse each such indemnified party for any legal or other expenses
reasonably incurred by him, her or it in connection with investigating or
defending or preparing to defend any such loss, claim, damage, liability or
action as such expenses are incurred. The obligations of the Underwriters
under this Section 9 shall be in addition to any liability which the
Underwriters may otherwise have.
For purposes of this Section 9, the term "Derived Information" means
such portion, if any, of the information delivered to Chevy Chase for filing
with the Commission on Form 8-K as:
i) is not contained in the Prospectus without taking into account
information incorporated therein by reference;
ii) does not constitute Companies-Provided Information; and
21
<PAGE>
iii) is not information provided by the Certificate Insurer.
"Companies-Provided Information" means any computer tape furnished to the
Underwriters by Chevy Chase concerning the Receivables assigned to the Trust.
Notwithstanding the provisions of Sections 8 and 9, the Underwriters
shall not be required to contribute any amount in excess of the amount by
which the total price at which the Certificates underwritten by the
Underwriters and distributed to the public were offered to the public exceeds
the amount of any damages which the Underwriters have otherwise been required
to pay in respect of such losses, liabilities, claims, damages and expenses.
For purposes of this Section 9, each person, if any, who controls the
Underwriters within the meaning of the Act or the Exchange Act shall have the
same rights to contribution as each of the Underwriters and each director of
Chevy Chase, each officer of Chevy Chase who signed the Registration
Statement, and each person, if any, who controls Chevy Chase within the
meaning of the Act or the Exchange Act shall have the same rights to
contribution as Chevy Chase.
10. DEFAULT OF UNDERWRITERS. If any Underwriter defaults in its
obligations to purchase Certificates hereunder on the Closing Date and the
aggregate principal amount of Certificates that such defaulting Underwriter
or Underwriters have agreed but failed to purchase does not exceed 10% of the
total principal amount of Certificates that the Underwriters are obligated to
purchase on such Closing Date, the Representative may make arrangements
satisfactory to Chevy Chase for the purchase of such Certificates by other
persons, including any of the Underwriters, but if no such arrangements are
made by such Closing Date, the nondefaulting Underwriters shall be obligated
severally, in proportion to their respective commitments hereunder, to
purchase the Certificates that such defaulting Underwriters agreed but failed
to purchase on such Closing Date. If any Underwriters so default and the
aggregate principal amount of Certificates with respect to which such default
or defaults occur exceeds 10% of the total principal amount of Certificates
that the Underwriters are obligated to purchase on such Closing Date and
arrangements satisfactory to the Representative and Chevy Chase for the
purchase of such Certificates by other persons are not made within 36 hours
after such default, this Agreement will terminate without liability on the
part of any non-defaulting Underwriter or Chevy Chase, except as provided in
Section 11. As used in this Agreement, the term "Underwriter" includes any
person substituted for an Underwriter under this Section 10. Nothing herein
will relieve a defaulting Underwriter from liability for its default.
11. SURVIVAL OF CERTAIN REPRESENTATIONS AND OBLIGATIONS. The
respective indemnities, agreements, representations, warranties and other
statements of Chevy Chase or its officers and of the several Underwriters set
forth in or made pursuant to this Agreement will remain in full force and
effect, regardless of any investigation, or statement as to the results
thereof, made by or on behalf of any Underwriter, Chevy Chase or any of their
respective representatives, officers or directors or any controlling person,
and will survive delivery of and payment for the Certificates. If this
Agreement is terminated or if for any reason the purchase of the Certificates
by the Underwriters is not consummated, Chevy Chase shall remain responsible
for the expenses to be paid or reimbursed by it pursuant to Section 7 and the
respective obligations of Chevy Chase
22
<PAGE>
and the Underwriters pursuant to Section 8 and 9 shall remain in effect, and
if any Certificates have been purchased hereunder the representations and
warranties in Section 2 and all obligations under Section 5 and 6 shall also
remain in effect. If the purchase of the Certificates by the Underwriters is
not consummated for any reason other than solely because of the termination
of this Agreement pursuant to Section 10 or the occurrence of any event
specified in clause (ii), (iv) or (v) of Section 6(n), Chevy Chase will
reimburse the Underwriters for all out-of-pocket expenses reasonably incurred
by them in connection with the offering of the Certificates.
12. NOTICES. All notices and other communications hereunder shall be
in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of telecommunications Notices to First
Boston shall be directed to the address set forth on the first page hereof,
or sent by facsimile machine which produces an electronic confirmation of
receipt to 212/648-5909, attention: Syndicate Desk. Notices to Chevy Chase
shall be directed to Chevy Chase Bank, F.S.B., 8401 Connecticut Avenue, Chevy
Chase, Maryland 20815, or sent by facsimile machine which produces an
electronic confirmation of receipt to 301/986-7401, attention: Stephen R.
Halpin, Jr.
13. PARTIES. This Agreement shall inure to the benefit of and be
binding upon the Underwriters and Chevy Chase, and their respective
successors. Nothing expressed or mentioned in this Agreement is intended nor
shall it be construed to give any person, firm or corporation, other than the
parties hereto or thereto and their respective successors and the controlling
persons and officers and directors referred to in Sections 8 and 9 and their
heirs and legal representatives, any legal or equitable right, remedy or
claim under or with respect to this Agreement or any provision herein
contained. This Agreement and all conditions and provisions hereof are
intended to be for the sole and exclusive benefit of the parties and their
respective successors and such controlling persons and officers and directors
and their heirs and legal representatives (to the extent of their rights as
specified herein and therein) and except as provided above for the benefit of
no other person, firm or corporation. No purchaser of Certificates from the
Underwriters shall be deemed to be a successor by reason merely of such
purchase.
14. REPRESENTATIONS OF UNDERWRITERS. The Representative will act for
the several Underwriters in connection with the transactions contemplated by
this Agreement, and any action under this Agreement taken by the
Representative will be binding upon all the Underwriters.
15. GOVERNING LAW AND TIME; CONSENT TO JURISDICTION. THIS AGREEMENT
SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK AND SHALL BE CONSTRUED
IN ACCORDANCE WITH SUCH LAWS WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF
LAWS. CHEVY CHASE HEREBY SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF THE
FEDERAL AND STATE COURTS IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK
IN ANY SUIT OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY. SPECIFIED TIMES OF DAY REFER TO NEW YORK
CITY TIME.
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16. COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall be deemed to be an original, but together they shall
constitute but one instrument.
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us a counterpart hereof, whereupon this
instrument along with all counterparts will become a binding agreement
between you and Chevy Chase in accordance with its terms.
Very truly yours,
CHEVY CHASE BANK, F.S.B.
By:
----------------------------
Mark A. Holles
Vice President
CONFIRMED AND ACCEPTED, as of
the date first above written:
CS FIRST BOSTON CORPORATION,
acting on behalf of itself
and as the Representative of
the Underwriters.
By: ________________________________
Name: ________________________
Title: ________________________
24
<PAGE>
SCHEDULE 1
Proceeds to
Purchase Chevy Chase
Underwriters Price Principal (excludes accrued
Percentage Amount interest)
CS First Boston Corporation 99.546875% $107,142,908.82 $106,657,417.51
J.P. Morgan Securities Inc. 99.546875% $107,140,000.00 $106,654,521.88
Smith Barney Inc. 99.546875% $107,140,000.00 $106,654,521.88
<PAGE>
Exhibit 4.1
<PAGE>
EXECUTION COPY
_____________________________________________________________________________
CHEVY CHASE BANK, F.S.B.,
Seller and Servicer
and
FIRST BANK NATIONAL ASSOCIATION,
Trustee
POOLING AND SERVICING AGREEMENT,
Dated as of December 1, 1996
$321,422,908.82
Chevy Chase Auto Receivables Trust 1996-2
5.90% Auto Receivables Backed Certificates
_____________________________________________________________________________
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS 1
SECTION 1.1 Definitions. 1
SECTION 1.2 Usage of Terms. 15
SECTION 1.3 Cut-off Date and Record Date. 16
SECTION 1.4 Section References. 16
SECTION 1.5 Interest Calculations. 16
ARTICLE II CREATION OF THE TRUST; CONVEYANCE OF RECEIVABLES 16
SECTION 2.1 Creation of Trust. 16
SECTION 2.2 Conveyance of Receivables. 16
SECTION 2.3 Acceptance by Trustee. 18
ARTICLE III THE RECEIVABLES 18
SECTION 3.1 Representations and Warranties of Seller. 18
SECTION 3.2 Repurchase Upon Breach. 22
SECTION 3.3 Custody of Receivable Files. 23
SECTION 3.4 Duties of Servicer and Sub-Servicer as Custodian. 23
SECTION 3.5 Instructions; Authority to Act. 24
SECTION 3.6 Effective Period and Termination. 24
ARTICLE IV ADMINISTRATION AND SERVICING OF RECEIVABLES 24
SECTION 4.1 Duties of Servicer. 24
SECTION 4.2 Collection of Receivable Payments. 25
SECTION 4.3 Realization Upon Receivables. 25
SECTION 4.4 Insurance 26
SECTION 4.5 Maintenance of Security Interests in Financed Vehicles. 26
SECTION 4.6 Covenants of Servicer. 27
SECTION 4.7 Purchase of Receivables Upon Breach. 29
SECTION 4.8 Servicing Fees. 30
SECTION 4.9 Servicer's Certificate. 30
SECTION 4.10 Annual Statement as to Compliance; Notice of Default. 30
SECTION 4.11 Annual Independent Certified Public Accountants' Report. 31
SECTION 4.12 Access to Certain Documentation and Information Regarding
Receivables. 31
i
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SECTION 4.13 Servicer Expenses. 32
SECTION 4.14 Reports to Certificateholders. 32
ARTICLE V DISTRIBUTIONS; STATEMENTS TO CERTIFICATEHOLDERS 32
SECTION 5.1 Establishment of Accounts. 32
SECTION 5.2 Collections. 34
SECTION 5.3 Purchase Amounts. 35
SECTION 5.4 Distributions. 35
SECTION 5.5 Certificate Insurance Policy. 36
SECTION 5.6 Reserve Account and Yield Maintenance Account. 38
SECTION 5.7 Statements to Certificateholders. 39
ARTICLE VI THE CERTIFICATES 41
SECTION 6.1 The Certificates. 41
SECTION 6.2 Authentication of Certificates. 41
SECTION 6.3 Registration of Transfer and Exchange of Certificates. 42
SECTION 6.4 Mutilated, Destroyed, Lost, or Stolen Certificates. 42
SECTION 6.5 Persons Deemed Owners. 43
SECTION 6.6 Access to List of Certificateholders' Names and Addresses. 43
SECTION 6.7 Maintenance of Office or Agency. 43
SECTION 6.8 Book-Entry Certificates. 43
SECTION 6.9 Notices to Clearing Agency. 44
SECTION 6.10 Definitive Certificates. 44
ARTICLE VII THE SELLER 45
SECTION 7.1 Representations of Seller. 45
SECTION 7.2 Liability of Seller. 47
SECTION 7.3 Merger or Consolidation of, or Assumption of the
Obligations of the Seller. 47
SECTION 7.4 Limitation on Liability of Certain Persons of Seller. 47
ARTICLE VIII THE SERVICER 48
SECTION 8.1 Representations of Servicer. 48
SECTION 8.2 Liabilities of Servicer, Indemnities. 49
SECTION 8.3 Merger or Consolidation of, or Assumption of the
Obligations of the Servicer. 51
SECTION 8.4 Limitation on Liability of Certain Persons of Servicer. 51
ii
<PAGE>
SECTION 8.5 Servicer Not to Resign. 52
SECTION 8.6 Delegation of Duties. 52
ARTICLE IX DEFAULT 53
SECTION 9.1 Events of Default. 53
SECTION 9.2 Appointment of Successor. 54
SECTION 9.3 Notification to Certificateholders. 55
SECTION 9.4 Waiver of Past Defaults. 55
SECTION 9.5 Effect of Event of Default on Sub-Servicer. 56
ARTICLE X THE TRUSTEE 56
SECTION 10.1 Duties of Trustee. 56
SECTION 10.2 Trustee's Certificate. 58
SECTION 10.3 Trustee's Assignment of Purchased Receivables. 58
SECTION 10.4 Certain Matters Affecting the Trustee. 58
SECTION 10.5 Trustee Not Liable for Certificates or Receivables. 60
SECTION 10.6 Trustee May Own Certificates. 61
SECTION 10.7 Trustee's Fees. 61
SECTION 10.8 Eligibility Requirements for Trustee. 61
SECTION 10.9 Resignation or Removal of Trustee. 61
SECTION 10.10 Successor Trustee. 62
SECTION 10.11 Merger or Consolidation of Trustee. 62
SECTION 10.12 Appointment of Co-Trustee or Separate Trustee. 63
SECTION 10.13 Representations and Warranties of Trustee. 64
SECTION 10.14 Tax Returns. 65
ARTICLE XI TERMINATION 65
SECTION 11.1 Termination of the Trust. 65
SECTION 11.2 Optional Purchase of All Receivables. 66
ARTICLE XII MISCELLANEOUS PROVISIONS 66
SECTION 12.1 Amendment. 66
SECTION 12.2 Protection of Title to Trust. 67
SECTION 12.3 Limitation on Rights of Certificateholders. 69
SECTION 12.4 GOVERNING LAW. 70
SECTION 12.5 Notices. 70
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<PAGE>
SECTION 12.6 Severability of Provisions. 71
SECTION 12.7 Assignment. 71
SECTION 12.8 Certificates Nonassessable and Fully Paid. 71
SECTION 12.9 Counterparts. 71
SECTION 12.10 Benefits of Agreement. 71
SECTION 12.11 Tax Treatment. 72
Exhibit A Schedule of Receivables
Exhibit B Form of Certificate
Exhibit C Form of Trustee's Certificate (assignment to Seller)
Exhibit D Form of Trustee's Certificate (assignment to Servicer)
Exhibit E Form of Servicer's Certificate
Exhibit F List of Designated Loans
iv
<PAGE>
This POOLING AND SERVICING AGREEMENT (this "Agreement" or this "Pooling
and Servicing Agreement"), dated as of December 1, 1996, is made with respect
to the formation of the Chevy Chase Auto Receivables Trust 1996-2, among
CHEVY CHASE BANK, F.S.B., a federally chartered savings bank, as seller and
servicer (the "Seller" or the "Servicer" in its respective capacities as
such), and First Bank National Association, as trustee (the "Trustee").
WITNESSETH THAT: In consideration of the premises and of the mutual
agreements herein contained, the parties hereto hereby agree as follows: 1.
DEFINITIONS
SECTION 1.1 Definitions.
Whenever used in this Agreement, the following words and phrases, unless
the context otherwise requires, shall have the following meanings:
"Account" means any of the Collection Account, the Certificate Account,
the Yield Maintenance Account and the Reserve Account.
"Additional Fees" means any late fees, prepayment charges, extension
fees or other administrative fees or similar charges allowed by applicable
law with respect to the Receivables and collected by the Servicer.
"Amount Financed", with respect to a Receivable, means the amount
advanced under the Receivable toward the purchase price of the Financed
Vehicle and any related costs, except with respect to Receivables originated
through applications submitted by Obligors directly to the Seller, exclusive
of the amount allocable to the premium of credit life, disability or
hospitalization insurance covering the Financed Vehicle or the Obligor.
"Annual Percentage Rate" or "APR" of a Receivable means the annual
interest rate stated in the Receivable.
"APR": see "Annual Percentage Rate."
"Available Distribution Amount" means, with respect to any Distribution
Date, the sum of the amounts described in clauses (w), (x) and (y) of Section
5.4(a) on such Distribution Date.
"Available Funds" means the amount defined as such in Section 5.2(c).
The term "Available Funds" does not include Insured Payments and does not
include any amounts that
<PAGE>
cannot be distributed to the Certificateholders by the Trustee as a result of
proceedings under the United States Bankruptcy Code.
"Balloon Payment" means, with respect to a Balloon Receivable, the
payment to be made by the Obligor on the stated maturity date of such Balloon
Receivable.
"Balloon Receivable" means any Receivable that on the date of
origination provided for scheduled monthly payments in level amounts
substantially lower than the amount of the final scheduled payment.
"Book-Entry Certificates" means beneficial interests in the Definitive
Certificate described in Section 6.8, the ownership and transfers of which
shall be made through book entries by a Clearing Agency as described in
Section 6.8.
"Business Day" means, unless otherwise specified in this Agreement, any
day other than a Saturday, a Sunday, or a day on which banking institutions
in New York, New York, St. Paul, Minnesota or Chevy Chase, Maryland shall be
authorized or obligated by law, executive order, or governmental decree to be
closed.
"Certificate" means a certificate executed on behalf of the Trustee and
authenticated by the Trustee substantially in the form attached as Exhibit B.
"Certificateholder" or "Holder" means the Person in whose name the
respective Certificate shall be registered in the Certificate Register,
except that, solely for the purposes of giving any consent, waiver, request,
or demand pursuant to this Agreement, the interest evidenced by any
Certificate registered in the name of the Seller or the Servicer, or any
Person controlling, controlled by, or under common control with the Seller or
the Servicer, shall not be taken into account in determining whether the
requisite percentage necessary to effect any such consent, waiver, request,
or demand shall have been obtained unless all of the Certificates outstanding
are registered in the name of the Seller, the Servicer and any such Persons.
"Certificate Account" means the account designated as such, established
and maintained pursuant to Section 5.1.
"Certificate Factor" means, at any time, a seven digit decimal number
equal to the current Certificate Principal Balance divided by the Initial
Certificate Principal Balance.
"Certificate Insurance Policy" means the certificate guaranty insurance
policy number 22559, issued by the Certificate Insurer to the Trustee for the
benefit of the Certificateholders.
"Certificate Insurer" means MBIA Insurance Corporation, a New York stock
insurance corporation, and any successor thereto.
2
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"Certificate Owner" means, with respect to a Book-Entry Certificate, the
Person who is the owner of such Book-Entry Certificate, as reflected on the
books of the Clearing Agency, or on the books of a direct or indirect
Clearing Agency Participant.
"Certificate Principal Balance" means, at any time, the Initial
Certificate Principal Balance minus all distributions of Monthly Principal
made up to such time plus all amounts referred to in Section 5.4(c) unless
paid pursuant to the Certificate Insurance Policy.
"Certificate Register" and "Certificate Registrar" mean the register
maintained and the registrar appointed pursuant to Section 6.3.
"Claim Date" shall have the meaning specified in Section 5.5(b).
"Clearing Agency" means an organization registered as a "clearing
agency" pursuant to Section 17A of the Securities Exchange Act of 1934, as
amended. The initial Clearing Agency shall be The Depository Trust Company.
"Clearing Agency Participant" means a broker, dealer, bank, other
financial institution or other person for whom from time to time a Clearing
Agency effects book-entry transfers of securities deposited with the Clearing
Agency.
"Closing Date" means December 17, 1996.
"Code" means the Internal Revenue Code of 1986, as it may be amended
from time to time, or any successor statute thereto, and applicable temporary
or final regulations of the U.S. Department of the Treasury promulgated
thereunder.
"Collateral Insurance" shall have the meaning specified in Section
4.4(b).
"Collection Account" means the account designated as such, established
and maintained pursuant to Section 5.1.
"Collection Period" means (i) initially, the period from and including
the Cut-off Date through and including the last day of the calendar month in
which the Cut-off Date occurs and (ii) thereafter, each calendar month until
the Trust shall terminate pursuant to Article XI.
"Corporate Trust Office" at the date hereof, is located at q180 East 5th
Street, St. Paul, Minnesota, 55101, Attention: Structured Finance; the
telecopy number for the Corporate Trust Office on the date of the execution
of this Agreement is (612) 244-0089.
"Cut-off Date" means December 1, 1996.
3
<PAGE>
"Dealer" means the seller of a Financed Vehicle who arranged for a sales
contract or loan from a Lender to the purchaser of a Financed Vehicle under
an existing agreement with such Lender.
"Defaulted Receivable", with respect to any Distribution Date, means a
Receivable (other than a Purchased Receivable) as to which the earlier of the
following has occurred: (i) a scheduled payment is 180 days past due as of
the end of the most recently completed Collection Period or (ii) the Servicer
has determined in accordance with its customary servicing practices, during
the Collection Period preceding such Distribution Date, that eventual payment
in full of the Amount Financed is unlikely.
"Deficiency Amount" shall have the meaning specified in Section 5.5(b).
"Definitive Certificates" shall have the meaning specified in Section
6.8.
"Delinquency Percentage" means, with respect to any Distribution Date,
the fraction, expressed as a percentage, equal to (x) the aggregate principal
balances of all Receivables 30 or more days delinquent (including any
Receivables relating to repossessed Financed Vehicles held in the Servicer's
inventory) as of the last day of the related Collection Period divided by (y)
the Pool Balance as of such date.
"Delivery" when used with respect to any Eligible Investments means:
(a) with respect to bankers' acceptances, commercial paper, negotiable
certificates of deposit and other obligations that constitute "instruments"
within the meaning of Section 9-105(1)(i) of the UCC and are susceptible of
physical delivery, transfer thereof by physical delivery to the Trustee
endorsed to, or registered in the name of, the Trustee or its nominee or
endorsed in blank, and, with respect to a certificated security (as defined
in Section 8-102 of the UCC) transfer thereof (i) by delivery of such
certificated security to the Trustee or by delivery of such certificated
security to a financial intermediary endorsed to, or registered in the name
of, the Trustee or its nominee or endorsed in blank to a financial
intermediary (as defined in Section 8-313 of the UCC) and the making by such
financial intermediary of entries on its books and records identifying such
certificated securities as belonging to the Trustee and the sending by such
financial intermediary of a confirmation of the purchase of such certificated
security by the Trustee, or (ii) by delivery thereof to a "clearing
corporation" (as defined in Section 8-102 (3) of the UCC) and the making by
such clearing corporation of appropriate entries on its books reducing the
appropriate securities account of the transferor and increasing the
appropriate securities account of a financial intermediary by the amount of
such certificated security, the identification by the clearing corporation of
the certificated securities for the sole and exclusive account of the
financial intermediary, the maintenance of such certificated securities by
such clearing corporation or a "custodian bank" (as defined in Section
8-102(4) of the UCC) or the nominee of either subject to the clearing
corporation's exclusive control, the sending of a confirmation by
4
<PAGE>
the financial intermediary of the purchase by the Trustee of such securities
and the making by such financial intermediary of entries on its books and
records identifying such certificated securities as belonging to the Trustee
(all of the foregoing, "Physical Property"), and such additional or
alternative procedures as may hereafter become appropriate to effect the
complete transfer of ownership of or a security interest in any such Eligible
Investment to the Trustee, consistent with changes in applicable law or
regulations or the interpretation thereof;
(b) with respect to any security issued by the U.S. Treasury, the
Federal Home Loan Mortgage Corporation or the Federal National Mortgage
Association that is a book-entry security held through the Federal Reserve
System pursuant to federal book-entry regulations, the following procedures,
all in accordance with applicable law, including applicable federal
regulations and Articles 8 and 9 of the UCC: book-entry registration of such
Eligible Investment to an appropriate book-entry account maintained with a
Federal Reserve Bank by a financial intermediary which is also a "depositary"
pursuant to applicable federal regulations and issuance by such financial
intermediary of a deposit advice or other written confirmation of such
book-entry registration to the Trustee of the purchase by the Trustee of such
book-entry securities; the making by such financial intermediary of entries
in its books and records identifying such book-entry security held through
the Federal Reserve System pursuant to federal book-entry regulations as
belonging to the Trustee and indicating that such financial intermediary
holds such Eligible Investment solely as agent for the Trustee; and such
additional or alternative procedures as may hereafter become appropriate to
effect complete transfer of ownership of or a security interest in any such
Eligible Investment to the Trustee, consistent with changes in applicable law
or regulations or the interpretation thereof; and
(c) with respect to any Eligible Investment that is an uncertificated
security under Article 8 of the UCC and that is not governed by clause (b)
above, registration on the books and records of the issuer thereof in the
name of the financial intermediary, the sending of a confirmation by the
financial intermediary of the purchase by the Trustee or its nominee of such
uncertificated security, and the making by such financial intermediary of
entries on its books and records identifying such uncertificated certificates
as belonging to the Trustee.
"Deposit Date" means, with respect to any Distribution Date, the
Business Day immediately preceding such Distribution Date.
"Designated Loans" means any Receivable with an APR below the Required
Rate, as listed on Exhibit F.
"Designated Loan Required Amount" means, with respect to any
Distribution Date, and with respect to each Designated Loan held by the Trust
as of the opening of business on the first day of the Collection Period in
which such Distribution Date occurs, the sum, for such Collection Period and
each future Collection Period (assuming that such Designated Loan
5
<PAGE>
amortizes in accordance with its terms) of the products of (x) one-twelfth,
(y) such Designated Loan's principal balance as of the opening of business on
the first day of such Collection Period and all future Collection Periods,
assuming that such Designated Loan amortizes according to its terms and (z)
the excess of (i) the Required Rate over (ii) such Designated Loan's APR.
"Determination Date" means the earlier of the eighth Business Day or the
eleventh calendar day of the month (or, if such eleventh calendar day is not
a Business Day, the Business Day preceding the eleventh calendar day of the
month).
"Distribution Date", with respect to each Collection Period, means the
15th day of the following month, or if the 15th day shall not be a Business
Day, the next following Business Day, commencing January 15, 1997.
"Eligible Account" means either (a) a segregated account with an
Eligible Bank or (b) a segregated trust account with the corporate trust
department of a depository institution with corporate trust powers organized
under the laws of the United States of America or any state thereof or the
District of Columbia (or any United States branch of a foreign bank) and
whose deposits are insured by the FDIC, provided that such institution must
have a net worth in excess of $50,000,000 and must have a rating of Baa3 or
higher from Moody's and a rating of BBB- or higher from Standard & Poor's
with respect to long-term deposit obligations.
"Eligible Bank" shall mean a depository institution organized under the
laws of the United States or any one of the states thereof, including the
District of Columbia (or any United States branch or agency of a foreign
bank), which is subject to supervision and examination by federal or state
banking authorities, the deposits of which are insured by the Federal Deposit
Insurance Corporation ("FDIC") and which at all times (a) has a net worth in
excess of $50,000,000 and (b) has either (x) a long-term unsecured debt
rating of at least A2 by Moody's and AA by Standard & Poor's or (y) a
short-term certificate of deposit rating of P-1 by Moody's and A-1+ by
Standard & Poor's.
"Eligible Investment" means any of the following:
(i) Direct obligations of the United States of America and securities
fully and unconditionally guaranteed as to the timely payment of principal
and interest by the United States of America, provided, that the full faith
and credit of the United States of America must be pledged to any such direct
obligation or guarantee ("Direct Obligations");
(ii) Direct Obligations and fully guaranteed certificates of beneficial
interest of the Export-Import Bank of the United States; consolidated debt
obligations and letter of credit-backed issues of the Federal Home Loan
Banks; participation certificates and senior debt obligations of the Federal
Home Loan Mortgage Corporation ("FHLMCs"); debentures of the Federal Housing
Administration; mortgage-backed securities (except stripped mortgage
securities which are valued greater than par on the portion of unpaid
6
<PAGE>
principal) and senior debt obligations of the Federal National Mortgage
Association ("FNMAs") ; participation certificates of the General Services
Administration; guaranteed mortgage backed securities and guaranteed
participation certificates of the Government National Mortgage Association
("GNMAs"); guaranteed participation certificates and guaranteed pool
certificates of the Small Business Administration; debt obligations and
letter of credit-backed issues of the Student Loan Marketing Association;
local authority bonds of the U.S. Department of Housing & Urban Development;
guaranteed Title XI financings of the U.S. Maritime Administration;
guaranteed transit bonds of the Washington Metropolitan Area Transit
Authority; and Resolution Funding Corporation securities; all of the
foregoing rated, at the time of purchase, "P-1" or "A2" or better by Moody's
and, if rated by Fitch, "F-1" or better by Fitch.
(iii) Direct obligations of any state of the United States of America
or any subdivision or agency thereof whose unsecured, uninsured and
unguaranteed general obligation debt is rated, at the time of purchase "A2"
or better by Moody's, "A" or better by Standard & Poor's and "A" or better if
rated by Fitch, or any obligation fully and unconditionally guaranteed by any
state, subdivision or agency whose unsecured, uninsured and unguaranteed
general obligation debt is rated, at the time of purchase, "A2" or better by
Moody's, "A" or better by Standard & Poor's and, if rated by Fitch, "A" or
better by Fitch;
(iv) Commercial paper (having original maturities of not more than 270
days) rated, at the time of purchase, "P-1" by Moody's, "A-1" or better by
Standard & Poor's and, if rated by Fitch, F-1 or better by Fitch;
(v) Federal funds, unsecured certificates of deposit, time deposits or
bankers acceptances (in each case having maturities of not more than 365
days) of any domestic bank including a branch office of a foreign bank which
branch office is located in the United States, provided legal opinions are
received to the effect that full and timely payment of such deposit or
similar obligation is enforceable against the principal office or any branch
of such bank, which, at the time of purchase, has a short-term "Bank Deposit"
rating of "P-1" by Moody's and a "Short-Term CD" rating of "A-1" or better by
Standard & Poor's and further provided that the bank is subject to the
supervision and examination of federal and state banking authorities.
(vi) Deposits of any bank or savings and loan association which has
combined capital, surplus and undivided profits of not less than $3 million,
provided such deposits are continuously and fully insured by the Bank
Insurance Fund or the Savings Association Insurance Fund of the FDIC;
(vii) Investments in money-market funds rated "AAAm" or "AAAm-G" by
Standard & Poor's and "Aaa" by Moody's;
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(viii) Repurchase agreements collateralized by Direct Obligations,
GNMAs, FNMAs or FHLMCs, as defined above, with any registered broker/dealer
subject to the Securities Investors' Protection Corporation jurisdiction or
any commercial bank insured by the FDIC, if such broker/dealer or bank has an
uninsured, unsecured and unguaranteed obligation rated "P-1" or "A2" or
better by Moody's, "A-1" or "A-" or better by Standard Poor's and, if rated
by Fitch, "F-1" or "A" or better by Fitch, provided:
a. a master repurchase agreement or specific written repurchase agreement
governs the transaction; and
b. the securities are held free and clear of any lien by the Trustee or an
independent third party acting solely as agent ("Agent") for the Trustee, and
such third party is (i) a Federal Reserve Bank, (ii) a bank which is a member
of the FDIC and which has combined capital, surplus and undivided profits of
not less than $50 million or (iii) a bank approved in writing for such
purpose by the Certificate Insurer, and the Trustee shall have received
written confirmation from such third party that it holds such securities,
free and clear of any lien, as agent for the Trustee; and
c. a perfected first security interest under the Uniform Commercial Code,
or book entry procedures prescribed at 31 C.F.R. 306.1 et seq. or 31 C.F.R.
350.0 et seq. in such securities is created for the benefit of the Trustee;
and
d. the repurchase agreement has a term of q180 days or less, and the Trustee
or the Agent will value the collateral securities no less frequently than
weekly and will liquidate the collateral securities if any deficiency in the
required collateral percentage is not restored within two business days of
such valuation; and
e. the fair market value of the securities in relation to the amount of the
repurchase obligation, including principal and interest, is equal to at least
103%.
f. the securities have a rating, at the time of purchase of "P-1" or "A2"
or better by Moody's.
(ix) Investment agreements, the issuer, form and substance of which are
specifically approved by the Certificate Insurer with notice to Standard &
Poor's and Moody's.
Notwithstanding the foregoing, Eligible Investments shall not include (i)
"stripped securities" and investments which contractually may return less
than the purchase price therefor, and (ii)
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instrutments with a purchase price greater than par if such instrument may be
prepaid or called at a price less than its pruchase price prior to its stated
maturity.
"Event of Default" means an event specified in Section 9.1.
"Financed Vehicle" means an automobile, light duty truck or van,
together with all accessions thereto, securing an Obligor's indebtedness
under the respective Receivable.
"Fitch" means Fitch Investors Service, Inc.
"Holder" see "Certificateholder."
"Indemnification Agreement" means the Indemnification Agreement dated as
of December 6, 1996, by and among MBIA Insurance Corporation, Chevy Chase
Bank, F.S.B., and CS First Boston Corporation, as representative of itself,
J.P. Morgan Securities Inc. and Smith Barney Inc.
"Initial Certificate Principal Balance" shall be $321,422,908.82.
"Initial Yield Maintenance Amount" means $58,636,08.
"Insurance Policies" means the insurance policies described in Section
3.1(xiii).
"Insured Payment" means (i) as of any Distribution Date, any Deficiency
Amount and (ii) any Preference Amount.
"Late Payment Rate" means, for any Distribution Date, the "Prime Rate"
of interest as published in The Wall Street Journal in New York, New York
plus 2%. The Late Payment Rate shall be computed on the basis of a 360-day
year consisting of twelve 30-day months.
"Lenders" means, together, the Seller and the Seller's wholly-owned
subsidiary, Consumer Finance Corporation, a Virginia corporation, and
"Lender" means the Seller or Consumer Finance Corporation.
"Lien" means a security interest, lien, charge, pledge, equity, or
encumbrance of any kind other than tax liens, mechanics' liens, and any liens
which attach to the respective Receivable by operation of law.
"Liquidation Proceeds" means, with respect to a Distribution Date, all
monies collected on a Defaulted Receivable from whatever source (other than
withdrawals from the Reserve Account or the Yield Maintenance Account and the
proceeds of a claim under the Certificate Insurance Policy), including
insurance proceeds and proceeds of Financed Vehicles which have been sold or
otherwise disposed of, during the preceding Collection Period, net of the
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sum of any amounts expended by the Servicer for the account of the Obligor
plus any amounts required by law to be remitted to the Obligor.
"Monthly Interest" for any Distribution Date will equal one-twelfth of
the product of the Pass-Through Rate on the Certificate Principal Balance
immediately prior to such Distribution Date.
"Monthly Principal" for any Distribution Date will equal the Principal
Balances of the Receivables on the last day of the second preceding
Collection Period (or, in the case of the first Distribution Date, the
Initial Certificate Principal Balance) less the Pool 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 Principal Balance on such date. For the purpose of
determining Monthly Principal, the 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.
"Monthly Servicing Fee" means, for any Distribution Date, one-twelfth of
the product of (a) the Pool Balance as of the beginning of the Collection
Period for the month prior to the month of such Distribution Date and (b) the
Servicing Fee Rate.
"Monthly Trustee's Fee" means, for any Distribution Date, one-twelfth of
the product of (a) the Certificate Principal Balance as of the end of the
Collection Period for the month prior to the month of such Distribution Date
and (b) .00175%.
"Moody's" means Moody's Investors Service, Inc.
"Net Available Distribution Amount" means, with respect to any
Distribution Date, the excess of (x) the Available Distribution Amount for
such Distribution Date over (y) the amounts described in clauses (i) and (ii)
of Section 5.4(a) on such Distribution Date.
"Net Available Funds" means the amount defined as such in Section
5.2(c).
"Net Losses" means with respect to a Collection Period and with respect
to each Receivable which became a Defaulted Receivable during such Collection
Period, the excess of (x) the combined principal balances of all such
Defaulted Receivables over (y) the Liquidation Proceeds, if any, collected
during such Collection Period.
"Net Loss Percentage" means, with respect to any Distribution Date, the
fraction, expressed as a percentage, equal to (x) twelve times the Net Losses
for the related Collection Period divided by (y) the Pool Balance as of the
last day of such Collection Period.
"Obligor" on a Receivable means the purchaser or the co-purchasers of
the Financed Vehicle or any other Person who owes payments under the
Receivable. The phrase
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"payment made on behalf of an Obligor" shall mean all payments made with
respect to a Receivable except payments made by a Lender or the Servicer.
"Officers' Certificate" means a certificate signed by any two of the
chairman of the board, the president, any vice chairman of the board, any
executive vice president, any senior vice president, any vice president, the
treasurer, or the controller of the Seller or the Servicer, as appropriate;
provided that no individual shall sign in a dual capacity.
"Opinion of Counsel" means a written opinion of counsel, who may be
in-house counsel to the Seller or Servicer, which counsel shall be acceptable
to the Trustee and the Certificate Insurer.
"Optional Purchase Price" means the amount specified as such in Section
11.2.
"Original Pool Balance" shall be $321,422,908.82.
"Pass-Through Rate" shall be 5.90% per annum.
"Person" means any individual, corporation, estate, partnership, limited
liability company, joint venture, association, joint stock company, trust,
unincorporated organization, or government or any agency or political
subdivision thereof.
"Pool Balance" as of any date means the aggregate Principal Balance of
the Receivables as of such date.
"Preference Amount" means, as to any Distribution Date, any amounts
included in previous distributions to Certificateholders of Required Payments
(exclusive of Insured Payments) which are recovered from such
Certificateholders as a voidable preference by a trustee in bankruptcy
pursuant to the United States Bankruptcy Code (11 U.S.C.), as amended from
time to time, in accordance with a final, nonappealable order of a court
having competent jurisdiction and which have not theretofore been repaid to
such Certificateholders, provided such Certificateholders have complied with
the provisions of Section 5.5(e).
"Preference Order" shall have the meaning set forth in Section 5.5(e).
"Premium Amount" means, as to any Distribution Date, one-twelfth of the
product of (x) the Premium Percentage and (y) the Certificate Principal
Balance on such Distribution Date (after taking into account any
distributions of Principal to the Certificateholders to be made on such
Distribution Date).
"Premium Percentage" has the meaning set forth in the letter agreement
between the Seller and the Certificate Insurer.
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"Principal Balance" of a Receivable, at any time, means the Amount
Financed minus that portion of all payments received by the Servicer on or
before such time allocable to principal of such Receivable.
"Purchase Amount" means, with respect to a Purchased Receivable as of a
Distribution Date, the amount equal to the sum of the Principal Balance of
such Receivable as of the last day of the preceding Collection Period and any
unpaid interest accrued thereon through the date such Receivable is
repurchased.
"Purchased Receivable" means, with respect to a Distribution Date, a
Receivable purchased not later than the Determination Date immediately
preceding such Distribution Date by the Servicer pursuant to Section 4.2, 4.7
or 11.2 or repurchased not later than such Determination Date by the Seller
pursuant to Section 3.2.
"Rating Agencies" means Moody's, Standard & Poor's and Fitch.
"Receivable" means any motor vehicle retail installment sales contract
or motor vehicle installment loan executed by an obligor in respect of a
Financed Vehicle, including, without limitation, any extension or revision
agreement relating thereto and all payments due thereunder on or after the
Cut-off Date and all proceeds thereof, which Receivable appears on the
Schedule of Receivables.
"Receivable Files" means the documents specified in Section 3.3.
"Record Date" means, as to any Distribution Date, the close of business,
if applicable, on the day (whether or not a Business Day) immediately
preceding such Distribution Date or, if Definitive Certificates are issued
pursuant to Section 6.8, the last day of the calendar month immediately
preceding the month in which such Distribution Date occurs.
"Reimbursement Amount" means, as of any Distribution Date, the sum of
(i) all Insured Payments previously paid by the Certificate Insurer and not
previously repaid to the Certificate Insurer pursuant to Section 5.5(d), plus
the amount of any unpaid Premium Amount not paid to the Certificate Insurer
pursuant to Section 5.4(a)(ii), plus (ii) interest accrued on each such
Insured Payment not previously repaid and each such unpaid Premium Amount,
calculated at the Late Payment Rate in each case from the date the
Certificate Insurer paid the related Insured Payment, or the date the related
Premium Amount was due, as the case may be. The Certificate Insurer shall
notify in writing the Trustee and the Seller of the amount of any
Reimbursement Amount due in respect of any Distribution Date at least two
days prior to the related Determination Date.
"Required Payments" means, with respect to any Distribution Date, the
sum of the Monthly Interest and the Monthly Principal for such Distribution
Date.
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"Required Rate" means 7.47675% per annum.
"Reserve Account" means the Reserve Account established pursuant to
Section 5.6.
"Reserve Account Deposit Amount" means, with respect to any Distribution
Date, the lesser of (x) the excess of (i) the Specified Reserve Balance on
such Distribution Date over (ii) the amount on deposit in the Reserve Account
on such Distribution Date, after taking into account the amount of any
Reserve Account Withdrawal Amount on such Distribution Date and (y) the
amount remaining in the Certificate Account after taking into account the
distributions therefrom described in clauses (i) through (v) of Section
5.4(a).
"Reserve Account Withdrawal Amount" means, with respect to any
Distribution Date, the lesser of (x) the excess of (i) the sum of the amounts
described in clauses (i) through (v) of Section 5.4 (a) over (ii) the
Available Funds for such Distribution Date and (y) the amount on deposit in
the Reserve Account on such Distribution Date before taking into account any
withdrawal therefrom on such Distribution Date.
"Reserve Initial Deposit" shall be $8,035,572.72.
"Responsible Officer" means, when used with respect to the Trustee, any
officer within the Corporate Trust Department (or any successor group of the
Trustee), including any senior vice president, vice president, assistant vice
president, assistant secretary, assistant treasurer or any other officer or
assistant officer of the Trustee customarily performing functions similar to
those performed by the persons who at the time shall be such officers,
respectively, or to whom any corporate trust matter is referred at the
Corporate Trust Department because of his knowledge of and familiarity with
the particular subject.
"Schedule of Receivables" shall be, as of any date, the schedule of
Receivables included in the Trust on such date. The initial Schedule of
Receivables as of the Cut-off Date is attached hereto as Exhibit A and sets
forth as to each Receivable, among other things, (a) its identifying number
and the state of residence of the related Obligor; (b) its date of
origination; (c) the original number of months to stated maturity; (d) the
original stated maturity; (e) the Principal Balance as of the Cut-off Date;
(f) the original Principal Balance; (g) the APR; (h) the scheduled monthly
payment of principal and interest; (i) the amount of the Balloon Payment, if
any; and (j) whether such Receivable is with recourse to any Dealer and the
type of such recourse.
"Securities Act" means the Securities Act of 1933, as amended.
"Seller" means Chevy Chase Bank, F.S.B. in its capacity as the seller of
the Receivables under this Agreement, and each successor to Chevy Chase Bank,
F.S.B. (in the same capacity) pursuant to Section 2.2.
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"Servicer" means Chevy Chase Bank, F.S.B. in its capacity as the
servicer of the Receivables, and each successor to Chevy Chase Bank, F.S.B.
(in the same capacity) pursuant to Sections 3.3, 3.4 and 9.2.
"Servicer's Certificate" means a certificate completed and executed by
the Servicer by its chairman of the board, its president, any vice chairman
of its board, any executive vice president, any senior vice president, any
vice president, the treasurer, or the controller of the Servicer pursuant to
Section 4.9.
"Servicing Fee Rate" means 1.5%.
"Servicing Office" means, at the date of this Agreement, the office of
the Servicer specified in this Agreement, or such other address as the
Servicer may designate from time to time by notice to the Seller, the Trustee
and the Certificate Insurer.
"Servicing Officer" means any officer of the Servicer involved in, or
responsible for, the administration and servicing of the Receivables whose
name appears on a list of servicing officers annexed to an Officers,
Certificate furnished to the Trustee by the Servicer, as the case may be, as
such list may from time to time be amended.
"Specified Reserve Balance" means, with respect to any Distribution
Date, the greater of (i) $3,214,229.09, and (ii) 4.5% of the Pool Balance on
the first day of the related Collection Period; except that if on any
Distribution Date (a) the average of the Net Loss Percentage for the three
Collection Periods preceding such Distribution Date or for the three
Collection Periods preceding either of the two preceding Distribution Dates
exceeds 2%, or (b) the average of the Delinquency Percentages for the three
Collection Periods preceding such Distribution Date or for the three
Collection Periods preceding either of the two preceding Distribution Dates
exceeds 4.5%, then the Specified Reserve Balance applicable to such
Distribution Date shall be an amount equal to the greater of (x)
$3,214,229.09 and (y) 5.625% of the Pool Balance on the first day of the
related Collection Period.
"Standard & Poor's" means Standard & Poor's Ratings Services, a division
of The McGraw Hill Companies, Inc.
"State" means (i) any state of the United States of America or (ii) the
District of Columbia.
"Stated Final Distribution Date" means the Distribution Date in July,
2003.
"Sub-Servicer" means, as to the Sub-Serviced Receivables, the Servicer's
wholly-owned subsidiary, Consumer Finance Corporation, a Virginia
corporation.
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"Sub-Serviced Receivables" means those Receivables sold to Chevy Chase
Bank, F.S.B. pursuant to the Purchase and Sale Agreement dated as of December
1, 1996 between Chevy Chase Bank, F.S.B. as Purchaser and Consumer Finance
Corporation as Seller.
"Trust" means the trust created by this Agreement, the estate of which
shall consist of the Receivables (other than Purchased Receivables) and all
monies due (including accrued interest) or received thereon on or after the
Cut-off Date; security interests in the Financed Vehicles; the Certificate
Account and the Collection Account and funds deposited in the Collection
Account and the Certificate Account; proceeds of Purchased Receivables; the
right to receive payments from funds deposited in the Reserve Account and the
Yield Maintenance Account (under the conditions specified herein); all rights
to receive payments under the Certificate Insurance Policy; any property
(including the right to receive future Liquidation Proceeds) that shall have
secured a Receivable and that shall have been acquired by or on behalf of the
Trust; proceeds from recourse to Dealers relating to the Receivables;
proceeds from claims on any physical damage, theft, vendor's single interest,
credit life, disability, or hospitalization insurance policies covering
Financed Vehicles or obligors; the rights of recourse of the Seller against
any cosigner or under any personal guarantee and any and all of the proceeds
of the foregoing.
"Trustee" means First Bank National Association, a national banking
association, or its successor in interest, or any successor trustee appointed
as herein provided.
"Trustee's Certificate" means a certificate completed and executed by
the Trustee by a Responsible Officer pursuant to Section 10.2, substantially
in the form of, in the case of an assignment to the Seller, Exhibit C, and,
in the case of an assignment to the Servicer, Exhibit D.
"UCC" means the Uniform Commercial Code as in effect in the applicable
jurisdiction.
"Yield Maintenance Account" means the Yield Maintenance Account
established pursuant to Section 5.6.
"Yield Maintenance Amount" means, with respect to any Distribution Date,
the sum of all Designated Loan Required Amounts as of such Distribution Date.
"Yield Maintenance Withdrawal Amount" means, as of any Distribution
Date, the lesser of (i) the sum of, with respect to each Designated Loan held
by the Trust as of the opening of business on the first day of the related
Collection Period, the products of (x) one-twelfth, (y) such Designated
Loan's Principal Balance as of such time and (z) the excess of (1) the
Required Rate over (2) such Designated Loan's APR and (ii) the amount on
deposit in the Yield Maintenance Account on such Distribution Date, exclusive
of any net investment earnings.
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SECTION 1.2 Usage of Terms.
With respect to all terms in this Agreement, the singular includes the
plural and the plural the singular; words importing any gender include the
other genders; references to "writing" include printing, typing, lithography,
and other means of reproducing words in a visible form; references to
agreements and other contractual instruments include all subsequent
amendments thereto or changes therein entered into in accordance with their
respective terms and not prohibited by this Agreement; references to Persons
include their permitted successors and assigns; and the term "including"
means "including without limitation."
SECTION 1.3 Cut-off Date and Record Date.
All references to the Record Date prior to the first Record Date in the
life of the Trust shall be to the Cut-off Date.
SECTION 1.4 Section References.
All section references in this Agreement shall be to sections in this
Agreement.
SECTION 1.5 Interest Calculations.
(a) All allocations of payments with respect to a Receivable to
principal and interest and determinations of periodic charges and the like
shall be made using the simple interest method, based on the actual number of
days elapsed and the actual number of days in the calendar year. Each
payment on a Receivable (net of fees and charges) shall be applied first to
the amount of interest accrued on such Receivable to the date of receipt and
then to reduce the principal amount outstanding on the Receivable.
(b) All calculations of interest on the Certificates shall be made on
the basis of a 360-day year comprised of twelve 30-day months.
ARTICLE II
CREATION OF THE TRUST;
CONVEYANCE OF RECEIVABLES
SECTION 2.1 Creation of Trust.
Upon the execution of this Pooling and Servicing Agreement by the
parties hereto and the concurrent conveyance of the Receivables by the Seller
to the Trustee pursuant to Section 2.2, there is hereby created the Chevy
Chase Auto Receivables Trust 1996-2.
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SECTION 2.2 Conveyance of Receivables.
In consideration of the Trustee's delivery to or upon the order of the
Seller of authenticated Certificates with an initial Certificate Principal
Balance equal to $321,422,908.82, the Seller does hereby sell, transfer,
assign, and otherwise convey to the Trustee, in trust for the benefit of the
Certificateholders and the Certificate Insurer, without recourse (subject to
the obligations herein):
i. all right, title, and interest of the Seller in and to the
Receivables listed in the Schedule of Receivables, including all monies due
or received thereunder on or after the Cut-off Date;
ii. the security interests of the Seller in the Financed Vehicles
granted by obligors pursuant to the Receivables;
iii. the Certificate Account and the Collection Account and funds
deposited therein;
iv. the interest of the Seller in the documents constructively
delivered to the Trustee pursuant to Section 3.3;
v. the interest of the Seller in any proceeds from recourse to Dealers
relating to the Receivables;
vi. the interest of the Seller in any Liquidation Proceeds and any
proceeds from claims on any physical damage, theft, vendor's single interest,
credit life, disability or hospitalization insurance policies covering
Financed Vehicles or Obligors;
vii. the rights of the Seller to proceeds of Insurance Policies;
viii. the right to receive payments as set forth herein from the Reserve
Account and the Yield Maintenance Account;
ix. the right to receive payments as set forth herein from the
Certificate Insurance Policy; and
x. the proceeds of any and all of the foregoing.
It is the express intention of the Seller and the Trustee that (a) the
assignment and transfer herein contemplated constitute a sale of the
Receivables and the other property of the Trust described above, conveying
good title thereto free and clear of any liens, encumbrances, security
interests or rights of other Persons, from the Seller to the Trust and (b)
the Receivables and the other property of the Trust described above not be a
part of the Seller's estate in the event of an insolvency of the Seller. In
the event that such conveyance is deemed to be a pledge in
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connection with a financing, the parties intend that the Seller shall have
granted to the Trustee a first priority perfected security interest in all of
the Seller's right, title and interest in the items of property listed in
clauses (i) through (ix) above, and all proceeds of the foregoing, and that
this Agreement shall constitute a security agreement under applicable law and
the Trustee shall have all of the rights and remedies of a secured party and
creditor under the UCC as in force in the relevant jurisdictions.
The Seller hereby pledges, grants, assigns and otherwise sets over to
the Trustee, in trust, the Yield Maintenance Account and the Reserve Account
and all amounts on deposit therein and all Eligible Investments held therein
from time to time and all proceeds thereof, and hereby grants to the Trustee
for the benefit of the Certificateholders and the Certificate Insurer a first
priority perfected security interest in such Accounts, amounts and Eligible
Investments. It is the intention of the Seller that, with respect to such
Accounts and such amounts and Eligible Investments, this Agreement shall
constitute a security agreement under applicable law and the Trustee shall
have all of the rights and remedies of a secured party and creditor under the
UCC and other applicable law as in force in the relevant jurisdictions.
SECTION 2.3. Acceptance by Trustee.
The Trustee does hereby accept the assignment by the Seller pursuant to
Section 2.2 and declares that the Trustee accepts such assignment upon the
trusts herein set forth for the benefit of the Certificateholders and the
Certificate Insurer, as their respective interests may appear, subject to the
terms and provisions of this Agreement. The assignment will not constitute,
and is not intended to result in, an assumption by the Trustee, any
Certificateholder or the Certificate Insurer of any obligation of the Seller
or any other Persons in connection with the Receivables, the Receivables
Files, the Insurance Policies or under any agreements or instruments relating
to any of them.
ARTICLE III
THE RECEIVABLES
SECTION 3.1 Representations and Warranties of Seller.
The Seller makes the following representations and warranties as to the
Receivables on which the Trustee relies in accepting the Receivables in trust
and executing and authenticating the Certificates and upon which the
Certificate Insurer relies in executing and delivering the Certificate
Insurance Policy. Such representations and warranties speak as of the
Closing Date, but shall survive the sale, transfer, and assignment of the
Receivables to the Trustee.
(i) Characteristics of Receivables. Each Receivable (a) shall
have been originated or purchased by a Lender, (b) shall have been fully and
properly executed by
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the parties thereto, (c) is a fully-amortizing simple interest installment
contract or installment loan which provides for level monthly payments over
its original term, provided that (x) some Receivables may include a payment
in the last month in the life of the Receivable which due to delinquencies or
partial prepayments may be different from the level monthly payment and (y)
0.22% of the Receivables (measured as a percentage of the Original Pool
Balance) may be Balloon Receivables, (d) shall have created or shall create a
valid, subsisting, and enforceable first priority security interest in favor
of such Lender in the Financed Vehicle, which security interest shall be
assignable and shall have been validly assigned by the Seller to the Trustee,
and (e) shall contain customary and enforceable provisions such that the
rights and remedies of the holder thereof shall be adequate for realization
against the collateral of the benefits of the security.
(ii) Schedule of Receivables. The information set forth in the
Schedule of Receivables shall be true and correct in all material respects as
of the opening of business on the Cut-off Date. The Seller shall have caused
each Lender's electronic ledger relating to each related Receivable to be
clearly and unambiguously marked to show that such Receivable has been sold
to the Trust for the benefit of the Certificateholders pursuant to this
Agreement.
(iii) Compliance with Law. Each Receivable and each sale of the
related Financed Vehicle shall have complied at the time it was originated or
made and at the execution of this Agreement shall comply in all material
respects with all requirements of applicable federal, State, and local laws,
and regulations thereunder, including, without limitation, usury laws, the
Federal Truth-in-Lending Act, the Equal Credit Opportunity Act, the Fair
Credit Billing Act, the Fair Credit Reporting Act, the Fair Debt Collection
Practices Act, the Federal Trade Commission Act, the Magnuson-Moss Warranty
Act, the Federal Reserve Board's Regulations B and Z, and State adaptations
of the National Consumer Act and of the Uniform Consumer Credit Code, and
other applicable consumer credit laws and equal credit opportunity and
disclosure laws.
(iv) Binding Obligation. Each Receivable represents the genuine,
legal, valid, and binding payment obligation in writing of the related
Obligor, enforceable by the holder thereof in accordance with its terms. All
parties to such Receivable have full legal capacity to execute and deliver
such Receivable and all other documents related thereto and to grant the
security interest granted thereby and the terms of such Receivable have not
been waived or modified in any respect (other than extensions of payments
granted in the ordinary course of the Servicer's collection procedures and
the term of which does not extend beyond the last day of the Collection
Period immediately preceding the Stated Final Distribution Date).
(v) No Government Obligor. None of the Receivables shall be due
from the United States of America or any State or local government or from
any agency, department, or instrumentality of the United States of America or
any State or local government. Each Receivable is payable in United States
dollars.
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(vi) Security Interest in Financed Vehicle. Immediately prior to
the sale, assignment, and transfer thereof to the Trustee, each Receivable
shall be secured by a validly perfected first priority security interest in
the Financed Vehicle in favor of the Lender that originated or purchased such
Receivable as secured party and all necessary and appropriate actions with
respect to such Receivable shall have been taken to perfect a first priority
security interest in the Financed Vehicle in favor of such Lender as secured
party, which security interest is assignable and has been so assigned to the
Trustee.
(vii) Receivables in Force. No Receivable shall have been
satisfied, subordinated, or rescinded, nor shall any Financed Vehicle have
been released from the lien granted by the related Receivable in whole or in
part.
(viii) No Waiver. No provision of a Receivable shall have been
waived (other than extensions of payments granted in the ordinary course of
the collection procedures of the Servicer (or of the Sub-Servicer, with
respect to the Sub-Serviced Receivables) and the term of which does not
extend beyond the last day of the Collection Period immediately preceding the
Stated Final Distribution Date).
(ix) No Amendments. No Receivable shall have been amended such
that the number of the Obligor's scheduled payments shall have been
increased.
(x) No Defenses. No facts exist which would give rise to any
right of rescission, setoff, counterclaim or defense nor shall have any right
of rescission, setoff, counterclaim, or defense been asserted or threatened
with respect to any Receivable.
(xi) No Liens. No liens or claims shall have been filed, including
liens for work, labor, materials or taxes relating to a Financed Vehicle,
that shall be liens prior to, or equal or coordinate with, the security
interest in the Financed Vehicle granted by the Obligor pursuant to the
Receivable.
(xii) No Default. Except for payment defaults continuing for a
period of not more than 59 days as of the Cut-off Date, no default, breach,
violation or event permitting acceleration under the terms of any Receivable
shall exist; no continuing condition that with notice or lapse of time would
constitute a default, breach, violation or event permitting acceleration
under the terms of any Receivable shall exist; and the related Lender shall
not have waived any of the foregoing.
(xiii) Insurance. The Servicer, in accordance with its customary
procedures, shall have (i) required that the Obligor obtain physical damage
and theft insurance covering the Financed Vehicle as of the date of related
contract and (ii) obtained vendor's single interest insurance covering the
Financed Vehicle.
(xiv) Title. It is the intention of the Seller that the transfer
and assignment herein contemplated, taken as a whole, constitutes a sale of
the Receivables and other
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property of the Trust from the Seller to the Trust and that the beneficial
interest in and title to the Receivables and other Trust property not be part
of the receivership or conservatorship estate in the event of the appointment
of a receiver or conservator for the Seller. No Receivable has been sold,
transferred, assigned, or pledged by the Seller to any Person other than the
Trustee. Immediately prior to the transfer and assignment herein
contemplated, the Seller had good and marketable title to each Receivable
free and clear of all Liens, and, immediately upon the transfer thereof, the
Trustee for the benefit of the Certificateholders and the Certificate Insurer
shall have good and marketable title to each Receivable, free and clear of
all Liens and rights of others, except for the rights of the
Certificateholders and the Certificate Insurer; and the transfer has been
perfected under the UCC.
(xv) Lawful Assignment. No Receivable shall have been originated
in, or shall be subject to the laws of, any jurisdiction under which the
sale, transfer, and assignment of such Receivable under this Agreement or
transfers of the Certificates would be unlawful, void, or voidable.
(xvi) All Filings Made. All filings (including, without limitation,
UCC filings) necessary in any jurisdiction to give the Trustee a first
priority perfected ownership interest in the Receivables shall have been
made.
(xvii) One Original. There shall be only one original executed copy
of each Receivable, and immediately prior to the constructive delivery
thereof to the Trustee pursuant to Section 3.3, such copy shall have been in
the custody and possession of the applicable Lender.
(xviii) No Bankrupt Obligor. None of the Receivables shall be due
from an Obligor who has commenced a voluntary case under the United States
Bankruptcy Code or consented to the entry of or failed to have stayed within
60 days of entry an order for relief against it in an involuntary case under
the United States Bankruptcy Code.
(xix) Chattel Paper. The Receivables constitute "chattel paper"
within the meaning of the UCC as in effect in the State of Maryland. The
chief executive office of the Seller is located in the State of Maryland.
(xx) Maximum Amount Financed. No Obligor shall be the Obligor on
Receivables on which the sum of the Principal Balances of such Receivables is
greater than $86,000.00.
(xxi) No Assignment. The related Lender has not taken any action to
convey any right to any Person that would result in such Person having a
right to payments due under the Receivable that is senior to or equal with
that of the Trust.
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(xxii) Composition of Receivables. Each Receivable is secured by a
Financed Vehicle which is a new or used automobile, light duty truck or van.
(xxiii) Maturity of Receivables. Each Receivable shall have an
original term to stated maturity of at least 12 months and not more than 72
months.
(xxiv) Minimum and Maximum Annual Percentage Rate. Each Receivable
shall have an Annual Percentage Rate no less than 6.00% and no more than
31.00%.
(xxv) Minimum and Maximum Principal Balance. Each Receivable shall
have a Principal Balance no less than $1,000.00 and no more than $40,000.00.
(xxvi) Payment. With respect to Sub-Serviced Receivables only, the
Obligor under each Sub-Serviced Receivable has made at least one payment with
respect thereto as of the Cut-off Date.
(xxvii) States of Obligor Residence. Except with respect to
Receivables with an aggregate Principal Balance representing 7.85% of the
Original Pool Balance, the Obligor under each Receivable resides in Maryland,
Virginia, North Carolina or Georgia.
(xxviii) Location of Receivable Files. The Receivable Files shall be
kept by the Servicer as custodian for the Trustee at 7926 Jones Branch Drive,
McLean, Virginia 22102, or at such other location or locations as may be
designated from time to time by notice to the Trustee and the Certificate
Insurer.
(xxix) Advance Payments. No Receivable has been paid more than six
months in advance.
(xxx) No Adverse Selection. The Receivables were selected from
retail installment sales contracts and motor vehicle installment loans in the
Seller's portfolio that had met the applicable conditions specified in this
Section 3.1 utilizing no selection procedures adverse to the
Certificateholders or the Certificate Insurer relative to similar retail
installment sales contracts and motor vehicle installment loans in the
Seller's portfolio.
SECTION 3.2 Repurchase Upon Breach
The Seller, the Servicer, the Trustee or the Certificate Insurer, as the
case may be, shall inform the other parties promptly, in writing, upon the
discovery of any breach of the Seller's representations and warranties
contained in Section 3.1; provided, that the Trustee shall have no duty to
inquire concerning, or to investigate, the breach of any of such
representations and warranties. Unless the breach shall have been cured by
the last day of the Collection Period following the Collection Period during
which the Seller becomes aware of, or receives written notice of, such
breach, the Seller shall repurchase as of such day (or, at the Seller's
option, as of
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the last day of the month in which such breach was discovered) any Receivable
materially and adversely affected by such breach and any Receivable in which
the interest of the Trust or of the Certificate Insurer is materially and
adversely affected by such breach. In consideration of the purchase of the
Receivable, the Seller shall remit the Purchase Amount, in the manner
specified in Section 5.3. The sole remedy of the Trustee, the Trust, the
Certificateholders or the Certificate Insurer with respect to a breach of the
Seller's representations and warranties contained in Section 3.1 shall be to
require the Seller to repurchase Receivables pursuant to this Section 3.2.
The Seller shall notify the Certificate Insurer of any repurchase of any
Receivable pursuant to this Section.
SECTION 3.3 Custody of Receivable Files.
To assure uniform quality in servicing the Receivables and to reduce
administrative costs, the Trustee, upon the execution and delivery of this
Agreement, hereby revocably appoints the Servicer, and the Servicer hereby
accepts such appointment, to act as the agent of the Trustee as custodian of
the following documents or instruments which are hereby constructively
delivered to the Trustee with respect to each Receivable:
(i) The original of the Receivable fully executed by the Obligor.
(ii) The original credit application fully executed by the Obligor.
(iii) The original certificate of title held by the Lender that
originated or purchased such Receivable evidencing the security interest of
such Lender in the Financed Vehicle.
(iv) Any and all other documents that the Servicer or the
applicable Lender shall keep on file, in accordance with its customary
procedures, relating to a Receivable, an Obligor, or a Financed Vehicle.
SECTION 3.4 Duties of Servicer as Custodian
(a) Safekeeping. The Servicer, in its capacity as custodian, shall
hold the Receivable Files on behalf of the Trustee for the use and benefit of
all present and future Certificateholders and the Certificate Insurer and
maintain such accurate and complete accounts, records, and computer systems
pertaining to each Receivable File as shall enable the Trustee to comply with
this Agreement. In performing its duties as custodian, the Servicer shall
act with reasonable care, using that degree of skill and attention that the
Servicer exercises with respect to the receivable files relating to all
comparable automotive receivables that the Servicer services for itself. The
Servicer shall conduct, or cause to be conducted, periodic audits of the
Receivable Files held by it under this Agreement, and of the related
accounts, records, and computer systems, in such a manner as shall enable the
Trustee to verify the accuracy of the Servicer's record keeping. The
Servicer shall promptly report to the Trustee and the Certificate Insurer any
failure on the Servicer's part to hold the Receivable Files and maintain its
accounts, records, and computer systems as herein provided and promptly take
appropriate action to remedy any such failure.
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(b) Maintenance of and Access to Records. The Servicer shall maintain
each Receivable File at its office specified in this Agreement, or at such
other office or offices as shall be specified by the Servicer to the Trustee
and the Certificate Insurer by prior written notice. The Servicer shall make
available to the Trustee and the Certificate Insurer or their respective duly
authorized representatives, attorneys, or auditors a list of locations of the
Receivable Files, and the related accounts, records, and computer systems
maintained by the Servicer at such times during normal business hours as the
Trustee or the Certificate Insurer shall instruct, which does not
unreasonably interfere with the Servicer's normal operations or customer or
employee relations.
(c) Release of Documents. Upon instruction from the Trustee, the
Servicer shall release any document in a Receivable File to the Trustee, the
Trustee's agent, or the Trustee's designee, as the case may be, at such place
or places as the Trustee may designate, as soon as practicable.
(c) The Servicer shall require the Sub-Servicer to comply with the
preceding provisions of this Section 3.4 with respect to the Sub-Serviced
Receivables. Notwithstanding anything to the contrary, the Servicer shall
remain primarily liable for its duties as custodian with respect to all
Receivables, including the Sub-Serviced Receivables.
SECTION 3.5 Instructions; Authority to Act.
The Servicer and the Sub-Servicer shall be deemed to have received
proper instructions with respect to the Receivable Files upon its receipt of
written instructions signed by a Responsible officer of the Trustee.
SECTION 3.6 Effective Period and Termination.
The appointment of the Servicer as custodian shall become effective as
of the Cut-off Date and shall continue in full force and effect for the term
of the Trust unless terminated earlier pursuant to this Section 3.6. If the
Servicer shall resign in accordance with the provisions of Section 8.5 or if
all of the rights and obligations of the Servicer shall have been terminated
under Section 9.1, the appointment of the Servicer and the Sub-Servicer as
custodian may be terminated (1) by the Trustee or by the Holders of
Certificates evidencing not less than a majority of the Certificate Principal
Balance, in either case, with the consent of the Certificate Insurer or (ii)
by the Certificate Insurer, by written notification to the Servicer. The
Trustee with the consent of the Certificate Insurer may or, at the direction
of the Certificate Insurer, shall terminate the Servicer's appointment as
custodian with cause at any time upon written notification to the Servicer,
in which case the Sub-Servicer shall also be terminated as a custodian. The
Trustee shall notify the Rating Agencies of any termination of the Servicer's
appointment as custodian pursuant to this Section 3.6. As soon as practicable
after any termination of such appointment, the Servicer and the Sub-Servicer
shall deliver the Receivable
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Files to the Trustee or the Trustee's agent at such place or places as the
Trustee may reasonably designate.
ARTICLE IV
ADMINISTRATION AND SERVICING OF RECEIVABLES
SECTION 4.1 Duties of Servicer.
The Servicer as agent for the Trustee shall manage, service, administer,
and make collections on the Receivables with reasonable care, using that
degree of skill and attention that the Servicer exercises with respect to all
comparable automotive receivables that it services for itself. The Servicer'
s duties shall include the collection and posting of all payments, responding
to inquiries of Obligors or of federal, state or local governmental
authorities with respect to the Receivables, investigating delinquencies,
sending payment coupons to Obligors, accounting for collections, and
furnishing monthly and annual statements to the Trustee and the Certificate
Insurer with respect to distributions. The Servicer shall follow its
customary standards, policies, and procedures in performing its duties as
Servicer; provided, that with respect to the Sub-Serviced Receivables and for
so long as the Sub-Servicer is sub-servicing the Sub-Serviced Receivables,
the Servicer shall follow the Sub-Servicer's customary standards, policies
and procedures. Without limiting the generality of the foregoing, the
Servicer is authorized and empowered by the Trustee to execute and deliver,
on behalf of itself, the Trust, the Certificateholders, or the Trustee or any
of them, any and all instruments of satisfaction or cancellation, or partial
or full release or discharge, and all other comparable instruments, with
respect to such Receivables or to the Financed Vehicles securing such
Receivables. If the Servicer shall commence a legal proceeding to enforce a
Receivable, the Trustee shall thereupon be deemed to have automatically
assigned, solely for the purpose of collection, such Receivable to the
Servicer. The Trustee shall execute any documents prepared by the Servicer
and delivered to the Trustee for execution that are necessary or appropriate
to enable the Servicer to carry out its servicing and administrative duties
hereunder.
SECTION 4.2 Collection of Receivable Payments.
The Servicer shall use its best efforts to collect all payments called
for under the terms and provisions of the Receivables as and when the same
shall become due and shall follow such collection procedures as it follows
with respect to all comparable automotive receivables that it services for
itself. If payments are extended in the ordinary course of the Servicer's
collection procedures, and, as a result, any Receivable would be outstanding
on the first day after the end of the Collection Period immediately preceding
the Stated Final Distribution Date, then the Servicer shall be obligated to
purchase such Receivable in the manner set forth in Section 4.7 (unless such
Receivable is otherwise being purchased pursuant to Section 11.2) as of the
last day of the Collection Period following the Collection Period in which
the extension was made (or, at the Servicer's option, as of the last day of
the Collection Period in which the extension was made); provided, however,
that the purchase obligation with respect to a Receivable shall be the
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obligation of the Servicer which granted the extension, and not of any
successor Servicer; and provided, further, that the purchase obligation of
any Servicer shall survive the termination of such Servicer as Servicer. The
Servicer may in its discretion waive any Additional Fees.
SECTION 4.3 Realization Upon Receivables.
On behalf of the Trust, the Servicer shall use its best efforts,
consistent with its customary servicing procedures, to repossess or otherwise
convert the ownership of the Financed Vehicle securing any Receivable as to
which the Servicer shall have determined that eventual payment in full is
unlikely. The Servicer shall follow such customary and usual practices and
procedures as it shall deem necessary or advisable in its servicing of
automotive receivables, which may include reasonable efforts to realize upon
any recourse to Dealers and selling the Financed Vehicle at a public or
private sale. The foregoing shall be subject to the provision that, in any
case in which the Financed Vehicle shall have suffered damage, the Servicer
shall not expend funds in connection with the repair or the repossession of
such Financed Vehicle unless it shall determine in its discretion that such
repair and/or repossession will increase the Liquidation Proceeds of the
related Receivable by an amount equal to or greater than the amount of such
expenses.
SECTION 4.4 Insurance
(a) The Servicer may sue to enforce or collect upon the Insurance
Policies, in its own name, if possible, or as agent of the Trust. If the
Servicer elects to commence a legal proceeding to enforce an Insurance
Policy, the act of commencement shall be deemed to be an automatic assignment
of the rights of the Trust under such Insurance Policy to the Servicer for
purposes of collection only. If, however, in any enforcement suit or legal
proceeding it is held that the Servicer may not enforce an Insurance Policy
on the grounds that it is not a real party in interest or a holder entitled
to enforce the Insurance Policy, the Trustee, on behalf of the Trust, at the
Servicer's expense, or the Seller, at the Seller's expense, shall take such
steps as the Servicer deems necessary to enforce such Insurance Policy,
including bringing suit in its name or the name of the Trustee for the
benefit of the Certificateholders.
(b) The Servicer shall maintain a vendor's single interest or other
collateral protection insurance policy with respect to all Financed Vehicles
("Collateral Insurance") which policy by its terms insures against physical
damage in the event any Obligor fails to maintain physical damage insurance
with respect to the related Financed Vehicles. The Seller will be the named
insured under all policies of Collateral Insurance. The Servicer shall
maintain Collateral Insurance at all times unless the Certificate Insurer
otherwise consents in writing.
(c) Costs incurred by the Servicer in maintaining Collateral Insurance
shall be paid by the Servicer.
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SECTION 4.5 Maintenance of Security Interests in Financed Vehicles.
The Servicer shall, in accordance with its customary servicing
procedures, take such steps as are necessary to maintain perfection of the
security interest created by each Receivable in the related Financed Vehicle.
The Trustee hereby authorizes the Servicer to take such steps as are
necessary to re-perfect such security interest on behalf of the Trust in the
event of the relocation of a Financed Vehicle or for any other reason. In
the event that the assignment of a Receivable to the Trust is insufficient,
without a notation on the related Financed Vehicle's certificate of title, or
without fulfilling any additional administrative requirements under the laws
of the State in which the Financed Vehicle is located, to grant to the Trust
a perfected security interest in the related Financed Vehicle, the Seller
hereby agrees on behalf of itself and the other Lender that the listing of
the applicable Lender as the secured party on the certificate of title is in
its capacity as agent of the Trust.
SECTION 4.6 Covenants of Servicer.
(a) The Servicer shall not release the Financed Vehicle securing any
Receivable from the security interest granted by such Receivable in whole or
in part except in the event of payment in full by or on behalf of the Obligor
thereunder or repossession, nor shall the Servicer impair the rights of the
Trust or the Certificateholders in the Receivables, nor shall the Servicer
change the amount of the scheduled payment under a Receivable (except for an
extension permitted pursuant to Section 4.2) or change the APR of or the
Amount Financed under a Receivable, nor shall the Servicer fail to comply
with the provisions of any Insurance Policy, if the failure to so comply
would impair the protection or benefit to be afforded by such Insurance
Policy.
(b) Compliance with Applicable Laws. The Servicer shall comply with
any law or, to the best of the Servicer's knowledge, any order, rule or
regulation applicable to the Servicer of any court or of any federal or state
regulatory body, administrative agency, or other governmental instrumentality
having jurisdiction over the Servicer or its properties, the failure to
comply with which may materially and adversely affect the performance by the
Servicer of its obligations under, or the validity or enforceability of, this
Agreement, the Indemnification Agreement or the Certificates.
(c) Corporate Existence. The Servicer shall maintain its corporate
existence and shall at all times continue to be duly organized under the laws
of its jurisdiction of incorporation and duly qualified and duly authorized
and shall conduct its business in accordance with the terms of its charter
and bylaws, provided, however, that the Servicer shall not be required to
maintain its existence as a federally chartered thrift if the board of
directors of the Servicer shall determine that the preservation of such
status is no longer desirable and that the loss thereof is not
disadvantageous in any material respect to the Certificateholders or the
Certificate Insurer.
(d) Financial Statements; Accountants' Reports; Other Information. The
Servicer shall keep or cause to be kept in reasonable detail books and
records of account of its assets and
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business, including, but not limited to, books and records relating to this
Agreement. The Servicer shall furnish or cause to be furnished to the
Certificate Insurer:
(i) Annual Financial Statements. As soon as available, and in any
event within 120 days after the close of each fiscal year of the Servicer,
the audited consolidated statements of financial condition of the Servicer
and its subsidiaries as of the end of such fiscal year and the related
audited consolidated statements of operations, shareholders' equity and cash
flows for such fiscal year, all in reasonable detail and stating in
comparative form the respective figures for the corresponding date and period
in the preceding fiscal year, prepared in accordance with generally accepted
accounting principles, consistently applied, and accompanied by the audit
opinion of the Servicer's independent accountants (which shall be a
nationally recognized independent public accounting firm or otherwise
acceptable to the Certificate Insurer).
(ii) Quarterly Financial Statements. As soon as available, and in
any event within 90 days after each of the first three fiscal quarters of
each fiscal year of the Servicer, the unaudited consolidated statements of
financial condition of the Servicer and its subsidiaries as of the end of
such fiscal quarter and the related unaudited consolidated statements of
operations, shareholders' equity and cash flows for such fiscal quarter, all
in reasonable detail and stating in comparative form the respective figures
for the corresponding date and period in the preceding fiscal year, prepared
in accordance with generally accepted accounting principles, consistently
applied.
(iii) Certain Information. Upon the reasonable request of the
Certificate Insurer, the Servicer shall promptly provide copies of any
requested proxy statements, financial statements, reports and registration
statements which the Servicer files with, or delivers to, the Securities and
Exchange Commission or any national securities exchange.
All financial statements specified in clause (d)(i) above shall be
furnished in consolidated form for the Servicer and its subsidiaries in the
event the Servicer shall consolidate its financial statements with its
subsidiaries.
The Certificate Insurer, by the issuance of the Certificate Insurance
Policy, agrees that it and its agents, accountants and attorneys shall keep
confidential all financial statements, reports and other information
delivered by the Servicer pursuant to this Section 4.6(d).
(e) Maintenance of Insurance. The Servicer shall maintain with a
responsible company, and at its own expense, a blanket fidelity bond and an
errors and omissions insurance policy in a minimum amount generally
maintained by prudent federally chartered thrift institutions engaged in the
servicing of automotive receivables and having servicing portfolios of a
similar size.
(f) Access to Records; Discussions With Officers and Accountants. On
an annual basis, or upon the occurrence of an event that could have a
material adverse effect on the ability
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of the Servicer to perform its obligations under, or the validity or
enforceability of, this Agreement or the Certificates, the Servicer shall,
upon the reasonable request of the Certificate Insurer, permit the
Certificate Insurer or its authorized agents:
(i) to discuss the affairs, finances and accounts of the Servicer
with the chief operating officer and the chief financial officer of the
Servicer, in each case, to the extent related to the Receivables, or the
duties of the Servicer hereunder; and
(ii) with the Servicer's consent, which consent shall not be
unreasonably withheld, to discuss the affairs, finances and accounts of the
Servicer with the Servicer's independent accountants, in each case, to the
extent related to the Receivables, or the duty of the Servicer hereunder,
provided that an officer of the Servicer shall have the right to be present
during such discussions.
Such inspections and discussions shall be conducted during normal
business hours and shall not unreasonably disrupt the business of the
Servicer.
The Certificate Insurer, by the issuance of the Certificate Insurance
Policy, agrees that it and its shareholders, directors, agents, accountants
and attorneys shall keep confidential any matter of which it becomes aware
through such inspections or discussions (unless readily available from public
sources), except as may be otherwise required by regulation, law or court
order or requested by appropriate governmental authorities or as necessary to
preserve its rights or security under or to enforce this Agreement, provided
that the foregoing shall not limit the right of the Certificate Insurer to
make such information available to its regulators, securities rating
agencies, reinsurers, credit and liquidity providers, counsel and
accountants. If the Certificate Insurer is requested or required (by oral
questions, interrogatories, requests for information or documents subpoena,
civil investigative demand or similar process) to disclose any information of
which it becomes aware through such inspections or discussions, the
Certificate Insurer will promptly notify the Servicer of such request(s) so
that the Servicer may seek an appropriate protective order and/or waive the
Certificate Insurer's compliance with the provisions of this Agreement. If,
in the absence of a protective order or the receipt of a waiver hereunder,
the Certificate Insurer is, nonetheless, in the opinion of its counsel,
compelled to disclose such information to any tribunal or else stand liable
for contempt or suffer other censure or significant penalty, the Certificate
Insurer may disclose such information to such tribunal that the Certificate
Insurer is compelled to disclose, provided that a copy of all information
disclosed is provided to the Servicer promptly upon such disclosure.
(g) Notice of Material Events. The Servicer shall promptly inform the
Certificate Insurer in writing of the receipt of notice of any proceeding by
any regulatory body seeking any determination or ruling that might materially
and adversely affect the performance by the Servicer of its obligations
under, or the validity or enforceability of, this Agreement or the
Certificates.
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(h) Maintenance of Licenses. The Servicer shall maintain all licenses,
permits, charters and registrations which are material to the performance of
its obligations under this Agreement or the Certificates.
SECTION 4.7 Purchase of Receivables Upon Breach.
The Servicer, the Trustee or the Certificate Insurer shall inform the
other parties promptly, in writing, upon the discovery of any breach by the
Servicer of its obligations under Section 4.5 or 4.6; provided, that the
Trustee shall have no duty to inquire concerning, or to investigate, the
breach of any of such obligations. Unless the breach shall have been cured
by the last day of the Collection Period following the Collection Period
during which the Seller becomes aware of, or receives written notice of such
breach, the Servicer shall purchase as of such day (or, at the Servicer's
option, as of the last day of the month in which such breach was discovered)
any Receivable materially and adversely affected by such breach and any
Receivable in which the interest of the Trust or of the Certificate Insurer
is materially and adversely affected by such breach. In consideration of the
purchase of such Receivable, the Servicer shall remit the Purchase Amount
with respect to such Receivable in the manner specified in Section 5.3. The
sole remedy of the Trustee, the Trust, the Certificateholders or the
Certificate Insurer with respect to a breach pursuant to Section 4.5 or 4.6
shall be to require the Servicer to purchase Receivables pursuant to this
Section 4.7. The Servicer shall notify the Certificate Insurer of any
purchase of a Receivable pursuant to this Section 4.7.
SECTION 4.8 Servicing Fees.
The servicing fee for a Collection Period shall equal the Monthly
Servicing Fee (except that in the case of a successor Servicer, the servicing
fee shall equal such amount as is arranged in accordance with Section 9.2).
The Servicer shall deposit into the Collection Account all Additional Fees.
Investment earnings on the Collection Account, the Certificate Account, the
Yield Maintenance Account and the Reserve Account, if any, shall be deposited
into the respective accounts. The Monthly Servicing Fee may be retained by
the Servicer from the aggregate interest collections on the Receivables
during the related Collection Period, prior to the deposit in the Collection
Account pursuant to Section 5.2; in no event shall the Servicer retain with
respect to any Collection Period, an amount of base servicing compensation in
excess of the Monthly Servicing Fee, even if multiple payments ("advance
payments" or "payaheads") are received from the Obligors during such
Collection Period.
SECTION 4.9 Servicer's Certificate.
On or before each Determination Date, the Servicer shall deliver to the
Trustee and the Certificate Insurer by 12:00 pm New York City time a
Servicer's Certificate in the form of Exhibit E attached hereto containing
all information necessary to make the distributions pursuant to Section 5.4,
to make any transfers of funds pursuant to Sections 5.1, 5.2 and 5.6, and to
make any demands on the Certificate Insurance Policy pursuant to Section 5.5
for the Collection Period preceding the date of such Servicer's Certificate
and all information necessary
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for the Trustee to send statements to Certificateholders pursuant to Section
5.7. Receivables purchased by the Servicer or repurchased by the Seller as of
the last day of such Collection Period shall be identified by the Seller's
account number with respect to such Receivable (as specified in the Schedule
of Receivables).
SECTION 4.10 Annual Statement as to Compliance; Notice of Default.
(a) The Servicer shall deliver to the Trustee and the Certificate
Insurer, on or before December 31 of each year, beginning December 31, 1998,
an Officers' Certificate stating that (i) a review of the activities of the
Servicer during the preceding 12-month period ended September 30 of such year
(or such longer period since the date of this Agreement) and of its
performance under this Agreement has been made under such officers'
supervision and (ii) to the best of such officers' knowledge, based on such
review, the Servicer has fulfilled all of its obligations under this
Agreement throughout such year, or, if there has been a default in the
fulfillment of any such obligation, specifying each such default known to
such officers and the nature and status thereof.
(b) The Servicer shall deliver to the Trustee and the Certificate
Insurer, promptly after having obtained knowledge thereof, but in no event
later than one Business Day thereafter, written notice in an Officers'
Certificate of any event which with the giving of notice or lapse of time, or
both, would become an Event of Default under clause (i) of Section 9.1. The
Seller shall deliver to the Trustee and the Certificate Insurer, promptly
after having obtained knowledge thereof, but in no event later than five
Business Days thereafter, written notice in an Officers' Certificate of any
event which with the giving of notice or lapse of time, or both, would become
an Event of Default under any other clause of Section 9.1.
SECTION 4.11 Annual Independent Certified Public Accountants' Report.
The Servicer shall cause a firm of independent certified public
accountants, who may also render other services to the Servicer, to deliver
to the Trustee and the Certificate Insurer on or before December 31 of each
year concerning the 12-month period ended September 30 of such year (or such
longer period since the date of this Agreement), beginning December 31, 1998,
a report addressed to the Board of Directors of the Servicer, the Trustee and
the Certificate Insurer, to the effect that such firm has read the monthly
Servicer's Certificates delivered pursuant to Section 4.9 with respect to
each Collection Period during such one-year (or longer) period and reviewed
the servicing of the Receivables by the Servicer and that such review
(1) included tests relating to automobile, light duty truck and van loans
serviced for others in accordance with the requirements of the Uniform Single
Attestation Program for Mortgage Bankers, to the extent the procedures in
such program are applicable to the servicing obligations set forth in this
Agreement, and (2) except as described in the report, disclosed no exceptions
or errors in the records relating to automobile, light duty truck and van
loans serviced for others that, in the firm's opinion, paragraph four of such
program requires such firm to report.
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The report will also indicate that the firm is independent of the
Servicer within the meaning of the Code of Professional Ethics of the
American Institute of Certified Public Accountants.
SECTION 4.12 Access to Certain Documentation and Information
Regarding Receivables.
The Servicer shall provide (and shall require the Sub-Servicer to
provide) to the Certificateholders and the Trustee access to the Receivables
Files in such cases where the Certificateholder or the Trustee shall be
required by applicable statutes or regulations to review such documentation.
The Certificate Insurer shall be afforded such access at any time, subject to
the requirements of the next sentence. Access shall be afforded without
charge, but only upon reasonable request and during the normal business hours
at the respective offices of the Servicer. Nothing in this Section shall
affect the obligation of the Servicer to observe any applicable law
prohibiting disclosure of information regarding the Obligors, and the failure
of the Servicer to provide access to information as a result of such
obligation shall not constitute a breach of this Section 4.12.
SECTION 4.13 Servicer Expenses.
The Servicer shall be required to pay all expenses incurred by it in
connection with its activities hereunder, including fees and disbursements of
independent accountants and taxes imposed on the Servicer.
SECTION 4.14 Reports to Certificateholders.
The Trustee shall provide to any Certificateholder, who so requests in
writing (addressed to the Corporate Trust Office) and the Rating Agencies a
copy of any certificate described in Section 4.9, or the annual statement
described in Section 4.10, or the annual report described in Section 4.11.
The Trustee may require the Certificateholder to pay a reasonable sum to
cover the cost of the Trustee's compliance with such request.
ARTICLE V
DISTRIBUTIONS; STATEMENTS TO
CERTIFICATEHOLDERS
SECTION 5.1 Establishment of Accounts.
(a) The Trustee, on behalf of the Trust, shall establish the Collection
Account and the Certificate Account as segregated trust accounts in the name
of the Trust for the benefit of Certificateholders and the Certificate
Insurer with the Corporate Trust Office of the Trustee. The Servicer shall
direct (by written direction or by oral direction, promptly confirmed in
writing) the Trustee to invest the amounts in the Collection Account and the
Certificate Account in Eligible
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Investments that, with respect to the Collection Account, mature not later
than the Business Day prior to the next succeeding Determination Date or,
with respect to the Certificate Account, mature not later than the next
succeeding Deposit Date, and to hold such Eligible Investments to maturity.
The Collection Account and the Certificate Account shall always be maintained
as Eligible Accounts. The Trustee may trade with itself or an affiliate in
the purchase or sale of Eligible Investments.
(b) (i) The Seller shall establish and maintain the Reserve
Account and the Yield Maintenance Account in the name of the Trustee, each as
an Eligible Account for the benefit of the Trust, the Certificateholders and
the Certificate Insurer. The Reserve Account and the Yield Maintenance
Account shall not be property of the Trust.
(ii) Funds on deposit in the Reserve Account and the
Yield Maintenance Account shall be invested by the Trustee in Eligible
Investments, in each case selected by the Servicer by a written direction or
by oral direction, promptly confirmed in writing, which shall certify that
any such investment is authorized by this Section; provided however, the
Trustee shall not be liable for any loss arising from such investment in
Eligible Investments (other than as obligor under any Eligible Investment).
All such Eligible Investments shall be held by the Trustee for the benefit
of the beneficiaries of the Reserve Account and the Yield Maintenance
Account; provided that on each Distribution Date all interest and other
investment income (net of investment losses and expenses) on funds on deposit
in the Yield Maintenance Account shall be withdrawn from the Yield
Maintenance Account at the direction of the Servicer and shall be paid to the
Seller; all interest and other investment income (net of investment losses
and expenses) on funds on deposit in the Reserve Account shall be deposited
to the Reserve Account. Funds on deposit in the Reserve Account and the Yield
Maintenance Account shall be invested in Eligible Investments that will
mature so that such funds will be available at the close of business on the
related Deposit Date. Funds deposited in the Reserve Account and the Yield
Maintenance Account on the day which immediately precedes a Distribution Date
upon the maturity of any Eligible Investments are not required to be (but may
be) invested overnight in accordance with the investment provisions contained
herein. The Seller shall treat the funds and other assets in the Reserve
Account and the Yield Maintenance Account as its own for federal, state and
local income tax and franchise tax purposes and shall report on its tax
returns all income and gain from the Reserve Account and the Yield
Maintenance Account.
(iii) The Trustee agrees as follows with respect to the
Eligible Investments, and the proceeds thereof, held from time to time in the
Reserve Account and the Yield Maintenance Account:
(A) any Eligible Investment that is held in deposit
accounts shall be subject to the exclusive custody and control of the
Trustee, and the Trustee shall have sole signature authority with respect
thereto;
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(B) any Eligible Investment that constitutes Physical Property (as
defined in the definition of Delivery) shall be delivered to the Trustee in
accordance with paragraph (a) of the definition of "Delivery" and shall be
held, pending maturity or disposition, solely by the Trustee or a financial
intermediary (as such term is defined in Section 8-313 (4) of the UCC) acting
solely for the Trustee;
(C) any Eligible Investment that is a book-entry security held through
the Federal Reserve System pursuant to federal book-entry regulations shall
be delivered in accordance with paragraph (b) of the definition of "Delivery"
and shall be maintained by the Trustee, pending maturity or disposition,
through continued book entry registration of such Eligible Investment as
described in such paragraph; and
(D) any Eligible Investment that is an "uncertificated security" under
Article 8 of the UCC and that is not governed by clause (c) above shall be
delivered to the Trustee in accordance with paragraph (c) of the definition
of "Delivery" and shall be maintained by the Trustee, pending maturity or
disposition, through continued registration of the Trustee's (or its
nominee's) ownership of such security directly or through one or more
financial intermediaries.
(iv) The Servicer shall have the power, revocable by the Trustee, to
instruct the Trustee to make withdrawals and payments from the Reserve
Account and the Yield Maintenance Account for the purpose of making
distributions of funds on deposit in such Accounts in accordance with the
provisions hereof.
(c) In the event of any change of law regarding matters relating to the
perfection of security interests in any Account, the amounts or any Eligible
Investments held therein, the Seller shall cause to be furnished to the
Trustee, the Certificate Insurer and each Rating Agency, an Opinion of
Counsel addressing such matters and if necessary, the Seller shall cooperate
with the Trustee in taking all actions necessary to comply with the change in
law.
SECTION 5.2 Collections.
(a) The Servicer shall remit to the Collection Account within two
Business Days following receipt thereof all payments by or on behalf of the
obligors on the Receivables and all Liquidation Proceeds (including payments
made under any of the Insurance Policies or the Collateral Insurance to the
extent applicable to payments due on the Receivables), both as collected
during the Collection Period, net of (i) the Servicer's actual out-of-pocket
expenses reasonably incurred with respect to Defaulted Receivables or
Vehicles, which shall be paid from amounts actually recovered with respect to
any Defaulted Receivable or Vehicle, (ii) charge backs attributable to errors
in posting, returned checks, or rights of offset for amounts that should
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not have been paid or that must be refunded as the result of a successful
claim or defense under bankruptcy or similar laws and (iii) the Monthly
Servicing Fee, as provided in Section 4.8.
(b) On the Determination Date in each month, the Servicer shall instruct
the Trustee to withdraw from the Collection Account the amount collected with
respect to Receivables, including Additional Fees and Liquidation Proceeds,
received during the Collection Period and received investment earnings
related to such Determination Date and deposit such amount in immediately
available funds or by wire transfer in immediately available funds into the
Certificate Account.
(c) On or before each Determination Date, the Servicer shall determine
(i) the sum of (x) the amount of payments on all Receivables, including all
Additional Fees and Liquidation Proceeds (including payments made under any
of the Insurance Policies or the Collateral Insurance to the extent
applicable to payments due on the Receivables), received during the related
Collection Period, investment earnings deposited in the Collection Account or
Certificate Account during the related Collection Period, investment earnings
earned through such Determination Date and not yet deposited in the
Collection Account or Certificate Account, and the Purchase Amounts for all
Receivables to be purchased or repurchased with respect to such Collection
Period which have been deposited in the Certificate Account (the "Net
Available Funds") and (y) the Yield Maintenance Withdrawal Amount for the
related Distribution Date (the sum of (x) and (y) being the "Available
Funds"), and (ii) the amount of funds necessary to make the distributions
required pursuant to clauses (i) through (iv) of Section 5.4(a) on the next
Distribution Date. The Servicer shall by a Servicer's Certificate notify the
Trustee of such amounts by telecopy to the Corporate Trust office (or such
other number as the Trustee may from time to time provide), followed promptly
by mailing such notice to the Trustee at the Corporate Trust Office, and the
Trustee shall promptly provide such notice to the Certificate Insurer.
SECTION 5.2 Purchase Amounts
On the Determination Date following each Collection Period, the Servicer
or the Seller, as the case may be, shall remit to the Certificate Account the
aggregate Purchase Amount for such Collection Period pursuant to Sections
3.2, 4.2 and 4.7.
SECTION 5.4 Distributions.
(a) On each Distribution Date, the Trustee shall apply or cause to be
applied the sum of (w) the Net Available Funds in the Certificate Account
(after withdrawing amounts deposited in error and Liquidation Proceeds
relating to Purchased Receivables) for the prior Collection Period, (x) the
Yield Maintenance Withdrawal Amount, (y) the Reserve Account Withdrawal
Amount and (z) the amount of any Insured Payment to make the following
distributions in the listed order of priority:
(i) the Monthly Trustee's Fee, including any overdue Monthly
Trustee's Fee, to the Trustee;
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(ii) the Premium Amount, including any overdue Premium Amount, to
the Certificate Insurer;
(iii) Monthly Interest, including any overdue Monthly Interest, to
the Certificateholders;
(iv) Monthly Principal, including any overdue Monthly Principal, to
the Certificateholders;
(v) the Reimbursement Amount, to the Certificate Insurer;
(vi) the Reserve Account Deposit Amount, to the Reserve Account;
and
(vii) the remainder, to the Seller.
If the Seller exercises the purchase option on any Distribution Date
pursuant to Section 11.2, the Optional Purchase Price shall be deposited into
the Certificate Account on the Determination Date related to such
Distribution Date.
In making such distributions, the Trustee shall be entitled to rely
upon (without investigation, confirmation or recalculation) all information
and calculations contained in the Servicer's Certificate delivered to the
Trustee pursuant to Section 4.9.
(b) All monthly distributions to Certificateholders shall be made
by wire transfer (if wiring instructions are received from the
Certificateholders), or, in the absence of such instructions, by check mailed
to each Certificateholder of record on the preceding Record Date at its
address appearing on the Certificate Register, or by such other means as the
Certificateholder and the Trustee shall agree. Payments to the Certificate
Insurer or the Seller shall be made by wire transfer based on instructions
received by the Trustee from either of them. Notwithstanding the foregoing,
the final payment on each Certificate shall be made only against the
presentation and surrender of the Certificate at the office or agency then
maintained by the Trustee.
(c) Each Certificateholder shall promptly notify the Trustee and
the Certificate Insurer in writing upon the receipt of a nonappealable court
order of a court having competent jurisdiction seeking to recover payments to
Certificateholders or the Trust as a voidable preference by a trustee in
bankruptcy pursuant to the United States Bankruptcy Code and shall enclose a
copy of such order with such notice to the Trustee and the Certificate
Insurer.
(d) If the Servicer has failed to provide the Trustee with the
notice required pursuant to Section 5.2, the Trustee may calculate Monthly
Interest and apply funds, if any, in the Certificate Account as of the last
day of the prior Collection Period, plus any payments from the Certificate
Insurer, to make a distribution of Monthly Interest to the
Certificateholders.
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SECTION 5.5 Certificate Insurance Policy.
(a) By 12:00 noon New York City time on each Determination Date the
Trustee shall, based solely on the information set forth in the related
Servicer's Certificate, determine the Net Available Distribution Amount with
respect to the immediately following Distribution Date.
(b) If the Required Payments for any Distribution Date exceed the Net
Available Distribution Amount for such Distribution Date (such excess being a
"Deficiency Amount") and the Certificate Insurer does not otherwise fund such
Deficiency Amount by 12:00 p.m. New York City time on the third Business Day
preceding the related Distribution Date (the "Claim Date"), the Trustee shall
complete a Notice in the form of Exhibit A attached to the Certificate
Insurance Policy and submit such notice to the Certificate Insurer no later
than 12:00 p.m. New York City time on the Claim Date as a claim for an
Insured Payment in an amount equal to such Deficiency Amount. The Notice
shall specify the amount of the Insured Payment and shall constitute a claim
for an Insured Payment pursuant to the Certificate Insurance Policy.
(c) The Trustee shall report to the Seller and the Certificate Insurer
with respect to the amounts then held in each Account held by the Trustee and
the identity of the investments included therein, as the Seller or the
Certificate Insurer may from time to time request. Without limiting the
generality of the foregoing, the Trustee shall, at the request of the Seller
or the Certificate Insurer, transmit promptly to the Certificate Insurer and
the Seller copies of all accountings of receipts in respect of the
Receivables furnished to it by the Servicer.
(d) The Trustee shall (i) receive as attorney-in-fact of the
Certificateholders any Insured Payment from the Certificate Insurer and (ii)
disburse the same to such Certificateholders as set forth in Section 5.4.
Insured Payments disbursed by the Trustee from proceeds of the Certificate
Insurance Policy shall not be considered payment by the Trust with respect to
the Certificates, and the Certificate Insurer shall become the owner of such
unpaid amounts due from the Trust in respect of Insured Payments as the
deemed assignee of such Certificateholders, as hereinafter provided. The
Trust and the Trustee hereby agree on behalf of each Certificateholder for
the benefit of the Certificate Insurer that to the extent the Certificate
Insurer pays Insured Payments, either directly or indirectly (as by paying
through the Trustee), to the Certificateholders, the Certificate Insurer
shall be subrogated to the rights of the Certificateholders with respect to
such Insured Payments, shall be deemed to the extent of the Insured Payments
so made to be a Certificateholder and shall receive future distributions
until all such Insured Payments by the Certificate Insurer have been fully
reimbursed, as described in the following paragraph. To evidence such
subrogation, the Trustee shall note the Certificate Insurer's rights as
subrogee on the Certificate Register upon receipt from the Certificate
Insurer of proof of the payment of any Insured Payment, after making the
distribution on any such future Distribution Date to the Certificateholders
other than to the Certificate Insurer.
The Certificate Insurer shall be entitled to receive the related
Reimbursement Amount pursuant to Section 5.4 with respect to each Insured
Payment made by the Certificate Insurer. The Trustee hereby agrees on behalf
of each Certificateholder and the Trust for the
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benefit of the Certificate Insurer that it recognizes that to the extent the
Certificate Insurer makes Insured Payments, either directly or indirectly (as
by paying through the Trustee), to the Certificateholders, or to the extent
any Premium Amount remains unpaid, as the case may be, the Certificate
Insurer shall be entitled to receive the related Reimbursement Amount
pursuant to Section 5.4.
It is understood and agreed that the intention of the parties is
that the Certificate Insurer shall not be entitled to reimbursement on any
Distribution Date for amounts previously paid by it unless on such
Distribution Date the Certificateholders shall also have received the full
amount of the Required Payments for such Distribution Date.
(e) Each Certificateholder which pays any Preference Amounts
theretofore received by such Certificateholder on account of such Certificate
will be entitled to receive reimbursement for such amounts from the
Certificate Insurer in accordance with the terms of the Certificate Insurance
Policy, but only after (i) delivering a copy to the Certificate Insurer of a
final, nonappealable order (a "Preference Order") of a court having competent
jurisdiction under the United States Bankruptcy Code demanding payment of
such amount to the bankruptcy court and (ii) irrevocably assigning such
Certificateholder's claim with respect to such Preference Order to the
Certificate Insurer in such form as is required by the Certificate Insurer.
In no event shall the Certificate Insurer pay more than one Insured Payment
in respect of any Preference Amount. Consequently, the Trustee shall not be
entitled to reimbursement with respect to any Preference Order relating to
the Certificateholder's receipt of funds representing Insured Payments made
by the Certificate Insurer in respect of such Distribution Date.
The Trustee, for itself and on behalf of the Certificateholders,
agrees that the Certificate Insurer may at any time during the continuation
of any proceeding relating to a Preference Order direct all matters relating
to such Preference Order, including, without limitation, the direction of any
appeal of any order relating to such preference order and the posting of any
surety, supersedeas or performance bond pending any such appeal. In addition
and without limitation of the foregoing, the Certificate Insurer shall be
subrogated, to the extent of Insured Payments, to the rights of the Seller,
the Servicer, the Trustee and each Certficateholder in the conduct of any
such preference claim, including, without limitation, all rights of any party
to any adversarial proceeding or action with respect to any court order
issued in connection with any such preference claim.
(f) The Trustee shall keep a complete and accurate record of the
amount of interest and principal paid in respect of any Certificate from
moneys received under the Certificate Insurance Policy. The Certificate
Insurer shall have the right to inspect such records at reasonable times
during normal business hours upon one Business Day's prior notice to the
Trustee.
(g) The Certificate Insurer shall have the right to give
participations in its rights under this Agreement and to enter into contracts
of reinsurance with respect to the Certificate Insurance Policy; provided
that no such grant of participation shall operate to relieve the Certificate
Insurer
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of liability on the Certificate Insurance Policy, and provided further that
no such participation or contract of reinsurance shall require the Servicer,
the Trustee or the Seller to deal with any person other than the Certificate
Insurer.
SECTION 5.6 Reserve Account and Yield Maintenance Account
(a) On the Closing Date, the Seller shall deposit the Reserve Initial
Deposit into the Reserve Account. Amounts held from time to time in the
Reserve Account shall be held by the Trustee for the benefit of Seller,
subject to the first priority security interest granted under Section 2.2
hereof to the Trustee for the benefit of the Certificateholders and the
Certificate Insurer, but the Reserve Account shall not be an asset of the
Trust.
The Certificate Insurer may, by written notice to the Trustee,
direct the Trustee to reduce the amount of the Specified Reserve Balance;
provided, however, that no such notice given to the Trustee shall be
effective unless accompanied by written evidence from each Rating Agency that
such reduction in the Specified Reserve Balance will not result in the
reduction or withdrawal of any rating then assigned to the Certificates.
On each Distribution Date (i) if the amount on deposit in the
Reserve Account is less than the Specified Reserve Balance, the Trustee
shall, after payment of any amounts required to be distributed pursuant to
clauses (i) through (v) of Section 5.4(a), deposit in the Reserve Account the
Reserve Account Deposit Amount and (ii) if the amount on deposit in the
Reserve Account on any Distribution Date (after giving effect to all other
deposits thereto and withdrawals therefrom to be made on such Distribution
Date) is greater than the Specified Reserve Balance, the Trustee shall
distribute the amount of such excess to the Seller on such Distribution Date.
(b) On each Distribution Date, the Servicer shall instruct the
Trustee (based on the information contained in the Servicer's Certificate
delivered on the related Determination Date) to withdraw the Reserve Account
Withdrawal Amount from the Reserve Account and deposit such amount in the
Certificate Account.
(c) On the Closing Date, the Seller shall deposit the Initial
Yield Maintenance Amount into the Yield Maintenance Account. Amounts held
from time to time in the Yield Maintenance Account shall be held by the
Trustee for the benefit of the Seller, subject to the first priority security
interest granted under Section 2.2 hereof to the Trustee for the benefit of
the Certificateholders and the Certificate Insurer, but the Yield Maintenance
Account shall not be an asset of the Trust.
On each Distribution Date (i) the Trustee shall withdraw the Yield
Maintenance Withdrawal Amount from the Yield Maintenance Account and
distribute such amount to the Certificateholders pursuant to Section 5.4
hereof, (ii) the Trustee shall withdraw from the Yield Maintenance Account
the net investment earnings then on deposit thereon and distribute such
amount to the Seller and (iii) if the amount then on desposit in the Yield
Maintenance Account
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(after giving effect to all withdrawals therefrom to be made on such
Distribution Date) is greater than the Yield Maintenance Amount, the Trustee
Shall distribute the amount of such excess to the Seller on such Distribution
Date.
(d) Amounts properly received by the Seller pursuant to this
Agreement shall not be available to the Trustee or the Trust for the purpose
of making deposits to the Reserve Account, or making payments to the
Certificateholders, nor shall the Seller be required to refund any amount
properly received by it.
SECTION 5.7 Statements of Certificateholders.
On each Distribution Date, the Trustee shall mail or send by facsimile
to the Certificateholders, the Rating Agencies and the Certificate Insurer a
statement, based on information in the Servicer's Certificate furnished to
the Trustee by the Servicer pursuant to Section 4.9, setting forth for the
Collection Period relating to such Distribution Date the following
information (which in the case of items (i), (ii) and (iii) shall be based on
a Certificate in a principal amount of $1,000):
(i) the amount of the distribution allocable to principal, including
any overdue principal;
(ii) the amount of the distribution allocable to interest, including
any overdue interest;
(iii) the Monthly Servicing Fee, including any overdue Monthly
Servicing Fee, and the Monthly Trustee's Fee;
(iv) the amount of any Insured Payments;
(v) the Reserve Account Withdrawal Amount and the Yield Maintenance
Withdrawal Amount;
(vi) the Reserve Account Balance;
(vii) the Yield Maintenance Account Balance;
(viii) the aggregate Net Losses on the Receivables for the related
Collection Period;
(ix) the Pool Balance and Certificate Factor as of the end of the
related Collection Period;
(x) the aggregate Principal Balance of all Receivables which
were delinquent 30 days or more as of the last day of the related Collection
Period;
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(xi) the Certificate Principal Balance (after giving effect to
any distribution of Monthly Principal made on such Distribution Date) on
which Monthly Interest will be calculated with respect to the next succeeding
Distribution Date;
(xii) the Delinquency Percentage relating to such Distribution
Date;
(xiii) the aggregate of all Purchase Amounts received on the
related Determination Date;
(xiv) the aggregate amount received with respect to Defaulted
Receivables, including Liquidation Proceeds, during the related Collection
Period; and
(xv) the Reimbursement Amount for such Distribution Date.
Within the prescribed period of time for tax reporting purposes
after the end of each calendar year during the term of this Agreement, the
Trustee shall mail, to each Person who at any time during such calendar year
shall have been a Certificateholder, a statement containing the sum of the
amounts determined in clauses (i), (ii) and (iii) for such calendar year or,
in the event such Person shall have been a Certificateholder during a portion
of such calendar year, for the applicable portion of such year, unless
substantially comparable information has been provided to such
Certificateholder, for the purposes of such Certificateholder's preparation
of federal income tax returns.
ARTICLE VI
THE CERTIFICATES
SECTION 6.1 The Certificates.
(a) The Certificates shall be issued in denominations of $1,000 and
integral multiples thereof; provided, however, that one Certificate may be
issued in a denomination that includes any residual amount. The Certificates
shall be executed on behalf of the Trust by manual signature of a Responsible
Officer of the Trustee. Certificates bearing the signatures of individuals
who were, at the time when such signatures shall have been affixed,
authorized to sign on behalf of the Trust, shall be valid and binding
obligations of the Trust, notwithstanding that such individuals or any of
them shall have ceased to be so authorized prior to the authentication and
delivery of such Certificates or did not hold such offices at the date of
such Certificates.
(b) The Certificates are pass-through securities having the rights
described therein and herein. Notwithstanding references herein or therein
with respect to the Certificates as to "principal" and "interest" no debt of
any Person is represented thereby, nor are the Certificates or the underlying
Receivables guaranteed by any Person (except that the Receivables may be
recourse to the Obligors thereof to the extent permitted by law and except
for the rights of the
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Trustee with respect to the Certificate Insurance Policy). Distributions on
the Certificates are payable solely from payments received on or with respect
to the Receivables, moneys in the Collection Account and the Certificate
Account, except as otherwise provided herein, from earnings on moneys and the
proceeds of property held as a part of the Trust and, upon the occurrence of
certain events as herein provided, from draws on the Reserve Account and the
Yield Maintenance Account and claims under the Certificate Insurance Policy.
Each Certificate entitles the Certificate Owner thereof to receive monthly on
each Distribution Date a specified portion of such payments with respect to
the Receivables, earnings, proceeds and withdrawals from the Reserve Account
and the Yield Maintenance Account and claims under the Certificate Insurance
Policy pro rata in accordance with the ownership interest of such Certificate
Owner.
SECTION 6.2 Authentication of Certificates.
The Trustee shall cause the Certificates to be executed on behalf of the
Trust, authenticated, and delivered to or upon the written order of the
Seller, signed by its chairman of the board, any vice chairman of the board,
its president, any executive vice president, any senior vice president or any
vice president, without further corporate action by the Seller, in authorized
denominations, pursuant to this Agreement. No Certificate shall entitle its
holder to any benefit under this Agreement, or shall be valid for any
purpose, unless there shall appear on such Certificate a certificate of
authentication, substantially as set forth in the form of Certificate
attached as Exhibit B hereto, executed by the Trustee by manual signature;
such authentication shall constitute conclusive evidence that such
Certificate shall have been duly authenticated and delivered hereunder. All
Certificates shall be dated the date of their authentication.
SECTION 6.3 Registration of Transfer and Exchange of Certificates.
The Certificate Registrar shall keep or cause to be kept, at the office
or agency maintained pursuant to Section 6.7, a Certificate Register in
which, subject to such reasonable regulations as it may prescribe, the
Trustee shall provide for the registration of Certificates and of transfers
and exchanges of Certificates as herein provided. The Trustee shall be the
initial Certificate Registrar.
Upon surrender for registration of transfer of any Certificate at
the Corporate Trust Office, the Trustee shall execute, authenticate, and
deliver, in the name of the designated transferee or transferees, one or more
new Certificates in authorized denominations of a like aggregate amount dated
the date of authentication by the Trustee. At the option of a Holder,
Certificates may be exchanged for other Certificates of authorized
denominations of a like aggregate amount upon surrender of the Certificates
to be exchanged at the Corporate Trust Office.
Every Certificate presented or surrendered for registration of transfer
or exchange shall be accompanied by a written instrument of transfer in form
satisfactory to the Trustee and the Certificate Registrar duly executed by
the Holder or his or her attorney duly authorized in
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writing. Each Certificate surrendered for registration of transfer and
exchange shall be canceled and subsequently destroyed by the Trustee.
No service charge shall be made for any registration of transfer or
exchange of Certificates, but the Trustee may require payment of a sum
sufficient to cover any tax or governmental charge that may be imposed in
connection with any transfer or exchange of Certificates.
SECTION 6.4 Mutilated, Destroyed, Lost, or Stolen Certificates.
If (a) any mutilated Certificate shall be surrendered to the Certificate
Registrar, or if the Certificate Registrar shall receive evidence to its
satisfaction of the destruction, loss, or theft of any Certificate and (b)
there shall be delivered to the Certificate Registrar or the Trustee and to
the Certificate Insurer such security or indemnity as may be required by them
to save each of them harmless, then in the absence of notice that such
Certificate shall have been acquired by a bona fide purchaser other than the
Person who requested a replacement Certificate, the Trustee on behalf of the
Trust shall execute and the Trustee shall authenticate and deliver, in
exchange for or in lieu of any such mutilated, destroyed, lost, or stolen
Certificate, a new Certificate of like tenor and denomination. In connection
with the issuance of any new Certificate under this Section 6.4, the Trustee
and the Certificate Registrar may require the payment of a sum sufficient to
cover any tax or other governmental charge that may be imposed in connection
therewith. Any duplicate Certificate issued pursuant to this Section 6.4
shall constitute conclusive evidence of ownership in the Trust, as if
originally issued, whether or not the lost, stolen, or destroyed Certificate
shall be found at any time.
SECTION 6.5 Persons Deemed Owners.
Prior to registration of transfer, the Trustee or the Certificate
Registrar may treat the Person in whose name any Certificate shall be
registered as the owner of such Certificate for the purpose of receiving
distributions pursuant to Section 5.4 and for all other purposes whatsoever,
and none of the Trustee, the Certificate Insurer or the Certificate Registrar
shall be bound by any notice to the contrary.
SECTION 6.6 Access to List of Certificateholders' Names and Addresses.
The Trustee shall furnish or cause to be furnished to the Servicer and
the Certificate Insurer, within 15 days after receipt by the Trustee of a
request therefor from such party in writing, a list, in such form as such
party may reasonably require, of the names and addresses of the
Certificateholders as of the most recent Record Date. If three or more
Certificateholders, or one or more Holders of Certificates aggregating not
less than 25% of the Certificate Principal Balance, apply in writing to the
Trustee, and such application states that the applicants desire to
communicate with other Certificateholders with respect to their rights under
this Agreement or under the Certificates and such application shall be
accompanied by a copy of the communication that such applicants propose to
transmit, then the Trustee shall, within five
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Business Days after the receipt of such application, afford such applicants
access during normal business hours to the current list of
Certificateholders. Each Holder, by receiving and holding a Certificate,
shall be deemed to have agreed to hold neither the Servicer nor the Trustee
accountable by reason of the disclosure of its name and address, regardless
of the source from which such information was derived.
SECTION 6.7 Maintenance of Office or Agency.
The Trustee shall maintain an office or offices or agency or agencies
where Certificates may be surrendered for registration of transfer or
exchange and where notices and demands to or upon the Trustee in respect of
the Certificates and this Agreement may be served. The Trustee initially
designates the Corporate Trust Office as specified in this Agreement as its
office for such purposes. The Trustee shall give prompt written notice to
the Servicer, the Certificate Insurer and Certificateholders of any change in
the location of the Certificate Register or any such office or agency.
SECTION 6.8 Book-Entry Certificates.
The Certificates (other than a Certificate representing any residual
portion of the Pool Balance as of the Cut-Off Date), upon original issuance,
shall be issued in the form of typewritten Certificates representing the
Book-Entry Certificates, to be delivered to The Depository Trust Company, the
initial Clearing Agency, by the Seller or on its behalf. The Certificates
shall initially be registered on the Certificate Register in the name of CEDE
& Co., the nominee of the initial Clearing Agency, and no Certificate Owner
will receive a definitive certificate representing such Certificate Owner's
interest in the Certificates, except as provided in Section 6.10. Unless and
until definitive, fully registered Certificates ("Definitive Certificates")
have been issued to Certificateholders pursuant to Section 6.10:
(i) the provisions of this Section 6.8 shall be in full force and
effect;
(ii) the Seller, the Servicer and the Trustee may deal with
the Clearing Agency and the Clearing Agency Participants for all purposes
(including the making of distributions on the Certificates and the taking of
actions by the Certificateholders) as the authorized representatives of the
Certificate Owners;
(iii) to the extent that the provisions of this Section 6.8
conflict with any other provisions of this Agreement, the provisions of this
Section 6.8 shall control;
(iv) the rights of Certificate Owners shall be exercised only
through the Clearing Agency (or to the extent Certificate Owners are not
Clearing Agency Participants through the Clearing Agency Participants through
which such Certificate Owners own Book-Entry Certificates) and shall be
limited to those established by law and agreements between such Certificate
Owners and the Clearing Agency and/or the Clearing Agency Participants, and
all references in this Agreement to actions by Certificateholders shall
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refer to actions taken by the Clearing Agency upon instructions from the
Clearing Agency Participants, and all references in this Agreement to
distributions, notices, reports and statements to Certificateholders shall
refer to distributions, notices, reports and statements to the Clearing
Agency or its nominee, as registered Holder of the Certificates, as the case
may be, for distribution to Certificate Owners in accordance with the
procedures of the Clearing Agency; and
(v) pursuant to an agreement between the Clearing Agency and
the Seller, the initial Clearing Agency will make Book-Entry transfers among
the Clearing Agency Participants and receive and transmit distributions of
principal and interest on the Certificates to the Clearing Agency
Participants, for distribution by such Clearing Agency Participants to the
Certificate Owners or their nominees.
SECTION 6.9 Notices to Clearing Agency.
Whenever notice or other communication to the Certificateholders is
required under this Agreement, unless and until Definitive Certificates shall
have been issued to Certificate Owners pursuant to Section 6.10, the Trustee
shall give to the Clearing Agency all such notices and communications
specified herein to be given to Certificateholders.
SECTION 6.10 Definitive Certificates.
If (i)(A) the Servicer advises the Trustee in writing that the Clearing
Agency is no longer willing or able properly to discharge its
responsibilities as Clearing Agency with respect to the Certificates, and (B)
the Trustee or the Servicer is unable to locate a qualified successor, (ii)
the Servicer, at its option, elects to terminate the Book-Entry system
through the Clearing Agency or (iii) after the occurrence of an Event of
Default, Certificate Owners representing in the aggregate not less than a
majority of the Certificate Principal Balance advise the Clearing Agency
through the Clearing Agency Participants in writing that the continuation of
a Book-Entry system through the Clearing Agency is no longer in the best
interests of the Certificate Owners, the Trustee shall notify the Clearing
Agency of the occurrence of any such event and of the availability of
Definitive Certificates to Certificate Owners requesting the same. Upon
surrender to the Trustee by the Clearing Agency, accompanied by
re-registration instructions from the Clearing Agency for registration and
instructions and directions from the Servicer to execute and authenticate new
Certificates, the Trustee shall issue authenticated Definitive Certificates.
The Servicer shall arrange for, and will bear all costs of, the printing and
issuance of such Definitive Certificates. None of the Seller, the Servicer,
the Trustee or the Certificate Insurer shall be liable for any delay in
delivery of such instructions and may conclusively rely on, and shall be
protected in relying on, such instructions. Upon the issuance of Definitive
Certificates, all references herein to obligations imposed upon or to be
performed by the Clearing Agency shall be deemed to be imposed upon and
performed by the Trustee, to the extent applicable with respect to such
Definitive Certificates and the Trustee shall recognize the Holders of the
Definitive Certificates as Certificateholders hereunder.
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ARTICEL VII
THE SELLER
SECTION 7.1 Representations of Seller.
The Seller makes the following representations on which the Trustee
relies in accepting the Receivables in trust and executing and authenticating
the Certificates and upon which the Certificate Insurer relies in executing
and delivering the Certificate Insurance Policy. The representations speak
as of the Closing Date and shall survive the sale of the Receivables to the
Trustee.
(i) Due Organization and Good Standing. The Seller shall
have been duly organized and shall be validly existing as a federal savings
bank in good standing under the laws of the United States of America, with
the corporate power and authority to own its properties and to conduct its
business as such properties shall be currently owned and such business is
presently conducted, and had at all relevant times, and shall have, the
corporate power and authority and legal right to acquire and own the
Receivables.
(ii) Due Qualification. The Seller shall be duly qualified to
do business as a foreign corporation in good standing, and shall have
obtained all necessary licenses and approvals in all jurisdictions in which
the ownership or lease of property or the conduct of its business shall
require such qualifications, except where the failure to be so qualified or
to have obtained such licenses or approvals would not have a material adverse
effect on the transactions contemplated by this Agreement.
(iii) Power and Authority. The Seller shall have the corporate
power and authority to execute and deliver this Agreement and to carry out
its terms, the Seller shall have full power and authority to sell and assign
the property to be sold and assigned to and deposited with the Trustee as
part of the Trust and shall have duly authorized such sale and assignment to
the Trustee by all necessary corporate action; and the execution, delivery,
and performance of this Agreement shall have been duly authorized by the
Seller by all necessary corporate action.
(iv) Valid Sale; Binding Obligations. This Agreement shall
evidence a valid sale, transfer, and assignment of the Receivables,
enforceable against creditors of and purchasers from the Seller; and shall
evidence a legal, valid, and binding obligation of the Seller enforceable in
accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, or other similar laws affecting the
enforcement of creditors' rights or other obligees' rights in general or the
rights of creditors or obligees of federally chartered stock savings banks,
the deposits of which are insured by the FDIC, and by general principles of
equity, regardless of whether such enforceability shall be considered in a
proceeding in equity or at law.
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(v) No Violation. The consummation of the transactions
contemplated by this Agreement and the fulfillment of the terms hereof shall
not conflict with, result in any breach of any of the terms and provisions
of, nor constitute (with or without notice or lapse of time) a default under,
the charter or by-laws of the Seller, or any indenture, agreement, or other
instrument to which the Seller is a party or by which it shall be bound; nor
result in the creation or imposition of any Lien upon any of its properties
pursuant to the terms of any such indenture, agreement, or other instrument
(other than this Agreement); nor violate any law or, to the best of the
Seller's knowledge, any order, rule, or regulation applicable to the Seller
of any court or of any federal or state regulatory body, administrative
agency, or other governmental instrumentality having jurisdiction over the
Seller or its properties.
(vi) No Proceedings. There are no proceedings or investigations
pending or, to the Seller's best knowledge, threatened before any court,
regulatory body, administrative agency, or other governmental instrumentality
having jurisdiction over the Seller or its properties (A) asserting the
invalidity of this Agreement or the Certificates, (B) seeking to prevent the
issuance of the Certificates or the consummation of any of the transactions
contemplated by this Agreement, (C) seeking any determination or ruling that
might materially and adversely affect the performance by the Seller of its
obligations under, or the validity or enforceability of, this Agreement or
the Certificates, or (D) which might adversely affect the federal income tax
attributes of the Certificates.
(vii) No Consent Required. The Seller is not required to
obtain the consent of any other Person or any consent, license, approval or
authorization of, or make any registration or declaration with, any
governmental authority or agency in connection with the execution, delivery
and performance of this Agreement (except as have been obtained), other than
as may be required under the Blue Sky laws of any state or the Securities
Act.
(viii) No Insolvency. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby were
not made in contemplation of the insolvency of the Seller or after the
commission of any act of insolvency by the Seller.
(ix) Not an Investment Company. The Trust is not required to
be registered as an "investment company" under the Investment Company Act of
1940, as amended.
(x) Official Record. This Agreement and all other documents
related hereto to which the Seller is a party have been approved by the
Seller's board of directors, which approval is reflected in the minutes of
such board, and shall continuously from the time of each such document's
execution, be maintained as an official record of the Seller.
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SECTION 7.2 Liability of Seller.
The Seller shall be liable in accordance herewith only to the extent of
the obligations specifically undertaken and the representations made by the
Seller under this Agreement.
SECTION 7.3 Merger or Consolidation of, or Assumption of the Obligations of the
Seller.
Any Person (a) into which the Seller may be merged or consolidated, (b)
which may result from any merger or consolidation to which the Seller shall
be a party, or (c) which may succeed to the properties and assets of the
Seller substantially as a whole, which Person in any of the foregoing cases
executes an agreement of assumption to perform every obligation of the Seller
under this Agreement, shall be the successor to the Seller hereunder without
the execution or filing of any document or any further act by any of the
parties to this Agreement; provided, however, that (x) the Seller shall have
delivered to the Trustee and the Certificate Insurer an Officers' Certificate
and an Opinion of Counsel each stating that such consolidation, merger, or
succession and such agreement of assumption comply with this Section 7.3, and
(y) all conditions precedent, if any, provided for in this Agreement relating
to such merger, consolidation or succession have been complied with.
Notwithstanding the above, no such transaction shall result in the Seller
becoming subject to the provisions of the United States Bankruptcy Code or
similar laws of any State. The Seller or its successor hereunder shall
provide the Trustee, the Servicer, the Certificate Insurer and the Rating
Agencies with prompt notice of any such transaction.
SECTION 7.4 Limitation on Liability of Certain Persons of Seller.
No recourse under or upon any obligation or covenant of this Agreement,
or of any Certificate or for any claim based thereon or otherwise in respect
thereof, shall be had against any incorporator, shareholder, officer or
director as such, of the Seller or of any successor corporation, either
directly or through the Seller, whether by virtue of any constitution,
statute or rule of law, or by the enforcement of any assessment or penalty or
otherwise. This Agreement and the obligations created hereunder are solely
corporate obligations, and no personal liability whatever shall attach to, or
is or shall be incurred by the incorporators, shareholders, officers or
directors, as such, of the Seller, or any of them, because of the issuance of
the Certificates, or under or by reason of the obligations, covenants or
agreements contained in this Agreement or in any of the Certificates or
implied therefrom. Any and all such personal liability, either at common law
or in equity or by constitution or statute, of, and any and all such rights
and claims against, every such incorporator, shareholder, officer or
director, as such, because of the issuance of the Certificates, or under or
by reason of the obligations, covenants or agreements contained in this
Agreement or in any of the Certificates or implied therefrom, are hereby
expressly waived and released as a condition of, and as a consideration for,
the execution of this Agreement and the issuance of the Certificates. The
Seller and any director, officer, employee or agent of the
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Seller may rely in good faith on any document of any kind prima facie
properly executed and submitted by any Person respecting any matters arising
hereunder.
ARTICLE VIII
THE SERVICER
SECTION 8.1 Representations of Servicer.
The Servicer makes the following representations on which the Trustee
relies in accepting the Receivables in trust and executing and authenticating
the Certificates and upon which the Certificate Insurer relies in executing
and delivering the Certificate Insurance Policy. The representations speak
as of the Closing Date and shall survive the sale of the Receivables to the
Trustee.
(a) Due Organization and Good Standing. The Servicer shall have been
duly organized and shall be validly existing as a federal savings bank in
good standing under the laws of the United States of America, with the
corporate power and authority to own its properties and to conduct its
business as such properties shall be currently owned and such business is
presently conducted, and had at all relevant times, and shall have, the
corporate power and authority and legal right to acquire, own, sell, and
service the Receivables and to hold the Receivable Files as custodian on
behalf of the Trustee.
(b) Due Qualification. The Servicer shall be duly qualified to do
business as a foreign corporation in good standing, and shall have obtained
all necessary licenses and approvals in all jurisdictions in which the
ownership or lease of property or the conduct of its business (including the
servicing of the Receivables as required by this Agreement) shall require
such qualifications, except where the failure to be so qualified or to have
obtained such licenses or approvals would not have a material adverse effect
on the transactions contemplated by this Agreement and would not render any
Receivable unenforceable by the Trustee on behalf of the Certificateholders
and the Certificate Insurer.
(c) Power and Authority. The Servicer shall have the corporate power
and authority to execute and deliver this Agreement and to carry out its
terms, and the execution, delivery, and performance of this Agreement shall
have been duly authorized by the Servicer by all necessary corporate action.
(d) Binding Obligations. This Agreement shall constitute a legal,
valid, and binding obligation of the Servicer enforceable in accordance with
its terms, except as enforceability may be limited by bankruptcy, insolvency,
reorganization, or other similar laws affecting the enforcement of creditors'
or other obligees' rights in general or the rights of creditors or obligees
of federally chartered stock savings banks, the deposits of which are insured
by the Federal Deposit Insurance Corporation, and by general principles of
equity, regardless of whether such enforceability shall be considered in a
proceeding in equity or at law.
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(e) No Violation. The consummation of the transactions contemplated
by this Agreement and the fulfillment of the terms hereof shall not conflict
with, result in any breach of any of the terms and provisions of, nor
constitute (with or without notice or lapse of time) a default under, the
charter or by-laws of the Servicer, or any indenture, agreement, or other
instrument to which the Servicer is a party or by which it shall be bound;
nor result in the creation or imposition of any Lien upon any of its
properties pursuant to the terms of any such indenture, agreement, or other
instrument (other than this Agreement); nor violate any law or, to the best
of the Servicer's knowledge any order, rule, or regulation applicable to the
Servicer of any court or of any federal or State regulatory body,
administrative agency, or other governmental instrumentality having
jurisdiction over the Servicer or its properties.
(f) No Proceedings. There are no proceedings or investigations
pending or, to the Servicer's best knowledge, threatened before any court,
regulatory body, administrative agency, or other governmental instrumentality
having jurisdiction over the Servicer or its properties (A) asserting the
invalidity of this Agreement or the Certificates, (B) seeking to prevent the
issuance of the Certificates or the consummation of any of the transactions
contemplated by this Agreement, (C) seeking any determination or ruling that
might materially and adversely affect the performance by the Servicer of its
obligations under, or the validity or enforceability of, this Agreement or
the Certificates, or (D) which might adversely affect the federal income tax
attributes of the Certificates.
SECTION 8.2 Liabilities of Servicer, Indemnities.
(a) The Servicer shall be liable in accordance herewith only to the
extent of the obligations specifically undertaken and the representations
made by the Servicer under this Agreement, including its duties as custodian
of the Receivable Files.
(i) The Servicer, except as set forth in this Section 8.2, shall not be
under any liability to the Trust or the Certificateholders for taking any
action or for refraining from taking any action pursuant to this Agreement,
or for errors in judgment; provided, however, that this provision shall not
protect the Servicer against any liability which would otherwise be imposed
upon the Servicer by reason of its willful misfeasance, bad faith or
negligence in the performance of its duties or by reason of its reckless
disregard of its obligations and duties as Servicer hereunder.
(ii) The Servicer shall indemnify, defend, and hold harmless the Trustee,
its officers, directors, agents and employees, the Trust, the
Certificateholders and the Certificate Insurer from and against any and all
costs, expenses, losses, damages, claims, and liabilities, arising out of or
resulting from the use, ownership or operation by the Servicer or any
affiliate thereof of a Financed Vehicle; provided, that the Servicer shall
have no obligation to indemnify any Person against any credit losses on any
Receivable serviced by the Servicer in accordance with the requirements of
this Agreement.
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(iii) The Servicer shall indemnify, defend and hold harmless the Trust,
the Trustee and its officers, directors, employees and agents and the
Certificate Insurer from and against any loss, liability, expense, damage or
injury, including any judgment, award, settlement and other costs or expenses
incurred in connection with the defense of any action, proceeding or claim,
to the extent such loss, liability, expense, damage or injury arose out of,
or was imposed upon such persons through, the willful misfeasance, bad faith
or negligence of the Servicer in the performance of its duties or by reason
of its reckless disregard of its obligations and duties as Servicer
hereunder.
(iv) The initial Servicer shall indemnify, defend and hold harmless the
Trustee, its officers, directors, employees and agents from and against any
loss, liability or expense incurred without negligence or bad faith on the
part of the Trustee or its officers, directors, employees or agents and
arising out of or in connection with the acceptance or administration by the
Trustee of this Trust, as applicable, including the costs and expenses of
defending itself against any claim or liability in connection with the
exercise or performance of any of the Trustee's powers or duties hereunder.
(v) The Servicer shall defend, indemnify and hold harmless the Trust and
the Trustee, its respective officers, directors, agents and employees, the
Certificate Insurer and the Certificateholders from and against any taxes
that may at any time be asserted against the Trust, the Trustee, the
Certificate Insurer or the Certificateholders with respect to the
transactions contemplated in this Agreement, including, without limitation,
any sales, gross receipts, general corporation, tangible personal property,
privilege or license taxes (but not including any personal property taxes
asserted with respect to ownership of the Receivables, or federal or other
income taxes arising out of distributions on the Certificates) and costs and
expenses in defending against the same.
Indemnification under this Section 8.2 shall include reasonable fees
and expenses of counsel and expenses of litigation.
Within a reasonable period after receipt by the Trustee, the Trust,
the Certificate Insurer or the Certificateholders of notice of the
commencement of any action with respect to which indemnification is sought
under this Section 8.2, such party shall notify the Servicer in writing of
the commencement thereof. In case any such action shall be brought, the
Servicer shall be entitled to participate in and, to the extent that it shall
wish, to assume the defense thereof, with counsel satisfactory to such
indemnified party, and after notice from the Servicer to the indemnified
party of its election so to assume the defense thereof, the Servicer shall
not be liable to such indemnified party for any legal or other expenses
subsequently incurred by such indemnified party in connection with the
defense thereof other than reasonable costs of investigation.
The Servicer shall not be liable for any settlement of any
litigation or proceeding effected without the written consent of the Servicer
(which shall not be unreasonably withheld). The indemnified party shall not,
without the Servicer's written consent (which shall not be
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unreasonably withheld), settle or compromise any claim or consent to entry of
any judgment which would impose an injunction or other equitable relief on
the Servicer or which does not include as an unconditional term thereof the
release by the claimant or the plaintiff of the Servicer from all liability
in respect of such claim.
The rights to indemnification under this Section 8.2 shall survive
the termination, resignation or removal of the Servicer with respect to acts
and omissions to act of the Servicer giving rise to such rights and occurring
prior to such termination, resignation or removal. In addition, the rights
to indemnification under this Section 8.2 shall survive the termination of
the Trust.
SECTION 8.3 Merger or Consolidation of, or Assumption of the Obligations of the
Servicer.
Any Person (a) into which the Servicer may be merged or consolidated,
(b) which may result from any merger or consolidation to which the Servicer
shall be a party, or (c) which may succeed to the properties and assets of
the Servicer substantially as a whole, which Person in any of the foregoing
cases executes an agreement of assumption to perform every obligation of the
Servicer hereunder, shall be the successor to the Servicer under this
Agreement without the execution or filing of any document or any further act
on the part of any of the parties to this Agreement; provided, however, that
(x) the Servicer shall have delivered to the Trustee and the Certificate
Insurer an Officers' Certificate and an Opinion of Counsel each stating that
such consolidation, merger or succession and such agreement of assumption
comply with this Section 8.3 and (y) all conditions precedent, if any,
provided for in this Agreement relating to such merger, consolidation or
succession have been complied with. The Servicer or its successor hereunder
shall provide the Trustee, the Seller, the Certificate Insurer and the Rating
Agencies with prompt notice of any such transaction.
SECTION 8.4 Limitation on Liability of Certain Persons of Servicer.
No recourse under or upon any obligation or covenant of this Agreement,
or of any Certificate or for any claim based thereon or otherwise in respect
thereof, shall be had against any incorporator, shareholder, officer or
director as such, of the Servicer or of any successor corporation, either
directly or through the Servicer, whether by virtue of any constitution,
statute or rule of law, or by the enforcement of any assessment or penalty or
otherwise. This Agreement and the obligations created hereunder are solely
corporate obligations, and no personal liability whatever shall attach to, or
is or shall be incurred by the incorporators, shareholders, officers or
directors, as such, of the Servicer, or any of them, because of the issuance
of the Certificates, or under or by reason of the obligations, covenants or
agreements contained in this Agreement or in any of the Certificates or
implied therefrom. Any and all such personal liability, either at common law
or in equity or by constitution or statute, of, and any and all such rights
and claims against, every such incorporator, shareholder, officer or
director, as such, because of the issuance of the Certificates, or under or
by reason of the obligations, covenants or agreements contained in this
Agreement or in any of the Certificates or
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implied therefrom, are hereby expressly waived and released as a condition
of, and as a consideration for, the execution of this Agreement and the
issuance of the Certificates. The Servicer and any director, officer,
employee or agent of the Servicer may rely in good faith on any document of
any kind prima facie properly executed and submitted by any Person respecting
any matters arising hereunder.
Except as provided in this Agreement, the Servicer shall not be under
any obligation to appear in, prosecute, or defend any legal action that shall
not be incidental to its duties to service the Receivables in accordance with
this Agreement (collection actions with respect to Defaulted Receivables are
understood to be incidental to the Servicer's duties to service the
Receivables), and that in its opinion may involve it in any expense or
liability.
SECTION 8.5 Servicer Not to Resign.
The Servicer shall not resign from its obligations and duties under this
Agreement except upon determination that the performance of its duties shall
no longer be permissible under applicable law (any such determination
permitting the resignation of the Servicer shall be evidenced by an Opinion
of Counsel to such effect delivered to the Trustee and the Certificate
Insurer). Notice of any such determination permitting the resignation of the
Servicer, shall be communicated to the Trustee, the Certificate Insurer and
the Rating Agencies at the earliest practicable time and any such
determination permitting the resignation of the Servicer shall be evidenced
by an Opinion of Counsel to such effect delivered to the Trustee concurrently
with such notice. No such resignation shall become effective until the
Trustee or other successor Servicer shall have assumed the responsibilities
and obligations of the Servicer in accordance with Section 9.2.
SECTION 8.6 Delegation of Duties.
The Servicer may at any time delegate any duties hereunder to any
Person, including, without limitation, the Sub-Servicer, who agrees to
conduct such duties in accordance with this Agreement, provided, however,
that the Servicer may not delegate its duties as custodian except (i) with
the consent of the Certificate Insurer, or (ii) as provided in Sections 3.3
and 3.4 of this Agreement. Such delegation shall not relieve the Servicer of
its responsibilities and liabilities with respect to such duties, and shall
not constitute a resignation within the meaning of Section 8.5.
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ARTICLE IX
DEFAULT
SECTION 9.1 Events of Default.
If any one of the following events ("Events of Default") shall occur and
be continuing:
(i) any failure by the Servicer to deliver to the Trustee the Servicer's
Certificate for a Collection Period or to deliver to the Trustee for
distribution to Certificateholders any proceeds or payment required to be so
delivered under the terms of the Certificates and this Agreement that shall
continue unremedied for a period of more than three Business Days after
written notice from (x) the Trustee or the Holders of Certificates evidencing
not less than 25% of the Certificate Principal Balance, which notice, in
either case, shall be consented to by the Certificate Insurer, or (y) the
Certificate Insurer is received by the Servicer as specified in this
Agreement; or
(ii) failure on the part of the Servicer or the Seller duly to observe or
to perform in any material respect any other covenants or agreements of the
Servicer or the Seller, as the case may be, set forth in the Certificates or
in this Agreement, which failure shall (a) materially and adversely affect
the rights of Certificateholders (determined without regard to the
availability of the Certificate Insurance Policy) and (b) continue unremedied
for a period of more than 30 days after the date on which written notice of
such failure, requiring the same to be remedied, shall have been given (x)
(1) to the Servicer or the Seller, as the case may be, by the Trustee, or (2)
to the Servicer or the Seller, as the case may be, and to the Trustee by the
Holders of Certificates evidencing not less than 25% of the Certificate
Principal Balance, which notice, in either case, shall be consented to by the
Certificate Insurer, or (y) to the Servicer or the Seller, as the case may
be, by the Certificate Insurer; or
(iii) 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 conservator, receiver, or liquidator for the Servicer in any insolvency,
readjustment of debt, marshaling of assets and liabilities, or similar
proceedings, or for the winding up or liquidation of its affairs, and the
continuance of any such decree or order unstayed and in effect for a period
of 60 consecutive days; or
(iv) the consent by the Servicer to the appointment of a conservator or
receiver or liquidator in any insolvency, readjustment of debt, marshaling of
assets and liabilities, or similar proceedings of or relating to the Servicer
or of or relating to substantially all of its property; or the admission by
the Servicer in writing of its inability to pay its debts generally as they
become due, the filing by the Servicer of a petition to take advantage of
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any applicable insolvency or reorganization statute, the making by the
servicer of an assignment for the benefit of its creditors, or the voluntary
suspension by the Servicer of payment of its obligations;
then, and in each and every case, so long as an Event of Default shall not
have been remedied, (x) the Trustee or the Holders of Certificates evidencing
not less than 51% of the Certificate Principal Balance, in either case with
the consent of the Certificate Insurer or (y) the Certificate Isurer, by
notice then given in writing to the Servicer (ant to the Trustee if given by
the Certificate Insurer or the Certificateholders), may terminate all of the
rights and obligations of the Servicer under this Agreement.
On or after the receipt by the Servicer of such written notice, all
authority and power of the Servicer under this Agreement, whether with
respect to the Certificates or the Receivables or otherwise, shall, without
further action, pass to and be vested in the Trustee or such successor
Servicer as may be appointed under Section 9.2 pursuant to and under this
Section 9.1; and, without limitation, the Servicer, the Trustee or such other
successor Servicer, as the case may be, is hereby authorized and empowered to
execute and deliver, on behalf of the predecessor Servicer, as
attorney-in-fact or otherwise, any and all documents and other instruments,
and to do or accomplish all other acts or things necessary or appropriate to
effect the purposes of such notice of termination, whether to complete the
transfer and endorsement of the Receivables and related documents, or
otherwise; provided, however, that the Trustee or any successor Servicer
shall not be liable for any acts, omissions or obligations of the Servicer
prior to such succession. The predecessor Servicer shall cooperate with the
successor Servicer and the Trustee in effecting the termination of the
responsibilities and rights of the predecessor Servicer under this Agreement,
including the transfer to the successor Servicer of electronic records
related to the Receivables or such form as the successor Servicer may
reasonably request and the transfer to the successor Servicer for
administration by it of all cash amounts that shall at the time be held by
the predecessor Servicer for deposit, or shall thereafter be received with
respect to a Receivable. The Trustee shall give the Rating Agencies and the
Certificate Insurer notice of any termination of the Servicer pursuant to the
terms of this Section 9.1.
SECTION 9.2 Appointment of Successor.
(a) Upon the Servicer's receipt of notice of termination pursuant to
Section 9.1 or the Servicer's resignation in accordance with the terms of
this Agreement, the predecessor Servicer shall continue to perform its
functions as Servicer under this Agreement, in the case of termination, only
until the date specified in such termination notice or, if no such date is
specified in a notice of termination, until receipt of such notice and, in
the case of resignation, until the later of (x) the date 45 days from the
delivery to the Trustee and the Certificate Insurer of written notice of such
resignation (or written confirmation of such notice) in accordance with the
terms of this Agreement and (y) the date upon which the predecessor Servicer
shall become unable to act as Servicer, as specified in the notice of
resignation and accompanying Opinion of Counsel. In the event of the
Servicer's resignation or termination hereunder, the Trustee shall, with the
consent of the Certificate Insurer, appoint a successor Servicer acceptable
to the
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Certificate Insurer, and the successor Servicer shall accept its appointment
by a written assumption in form acceptable to the Trustee. In the event that
a successor has not been appointed at the time when the predecessor Servicer
has ceased to act as Servicer in accordance with this Section 9.2, the
Trustee without further action shall automatically be appointed the successor
Servicer; provided, however, that the Trustee shall not be liable foa any
act, ommission or obligations of the Servicer prior to such succession.
Notwithstanding the above, the Trustee shall, if it shall be legally unable
to act, appoint, or petition a court of comepentent jurisdiction to appoint,
any established financial institution reasonably acceptable to the
Certificate Insurer, having a net worth of not less than $50,000,000 and
whose regular business shall include the servicing of automotive receivables,
as the successor to the Servicer under this Agreement.
(b) Upon appointment, the successor Servicer shall be the successor in
all respects to the predecessor Servicer and shall be subject to all the
responsibilities, duties, and liabilities arising thereafter relating thereto
placed on the predecessor Servicer, and shall be entitled to all of the
rights granted to the predecessor Servicer, by the terms and provisions of
this Agreement.
(c) In connection with such appointment, the Trustee may make such
arrangements for the compensation of a successor Servicer out of payments on
Receivables as it and such successor Servicer shall agree; provided, however,
that no such compensation shall be in excess of that permitted the original
Servicer under this Agreement. The Trustee and such successor Servicer shall
take such action, consistent with this Agreement, as shall be necessary to
effectuate any such succession.
The Servicer shall cooperate with the successor Servicer in effecting
the transfer of the rights and responsibilities of the Servicer under this
Agreement.
SECTION 9.3 Notification to Certificateholders.
Upon any notice of an Event of Default or upon any termination of, or
appointment of a successor to, the Servicer pursuant to this Article IX, the
Trustee shall give prompt written notice thereof to Certificateholders at
their respective addresses appearing in the Certificate Register, to the
Rating Agencies and to the Certificate Insurer.
SECTION 9.4 Waiver of Past Defaults.
The Certificate Insurer or, provided they have obtained the prior
consent of the Certificate Insurer, the Holders of Certificates evidencing
not less than 51% of the Certificate Principal Balance may, on behalf of all
Holders of Certificates, waive any default by the Servicer or the Seller in
the performance of its obligations hereunder and its consequences, except a
default in making any required deposits to or payments from the Certificate
Account in accordance with this Agreement. Upon any such waiver of a past
default, such default shall cease to exist, and any Event of Default arising
therefrom shall be deemed to have been remedied for every purpose of this
Agreement. No such waiver shall extend to any subsequent or other default or
impair any right consequent thereon.
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SECTION 9.5 Effect of Event of Default on Sub-Servicer.
Any removal of the Servicer pursuant to this Article IX shall ipso facto
constitute a removal of the Sub-Servicer.
ARTICLE X
THE TRUSTEE
SECTION 10.1 Duties of Trustee.
The Trustee both prior to and after the occurrence of an Event of
Default, shall undertake to perform such duties as are specifically set forth
in this Agreement. If an Event of Default shall have occurred and shall not
have been cured, the Trustee shall exercise such of the rights and powers
vested in it by this Agreement, and shall use the same degree of care and
skill in their exercise, as a prudent man or woman would exercise or use
under the circumstances in the conduct of his or her own affairs; provided,
however, that if the Trustee shall assume the duties of the Servicer pursuant
to Section 9.2, the Trustee in performing such duties shall use the degree of
skill and attention customarily exercised by a servicer with respect to
automobile receivables that it services for itself or others.
The Trustee, upon receipt of all resolutions, certificates,
statements, opinions, reports, documents, orders or other instruments
furnished to the Trustee that shall be specifically required to be furnished
pursuant to any provision of this Agreement, shall examine them to determine
whether they conform as to form to the requirements of this Agreement.
No provision of this Agreement shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent
failure to act, or its own bad faith; provided, however, that:
(i) prior to the occurrence of an Event of Default, and after the curing
of all such Events of Default that may have occurred, the duties and
obligations of the Trustee shall be determined solely by the express
provisions of this Agreement, the Trustee shall not be liable except for the
performance of such duties and obligations as shall be specifically set forth
in this Agreement, no implied covenants or obligations shall be read into
this Agreement against the Trustee and, in the absence of bad faith on the
part of the Trustee, or manifest error, the Trustee may conclusively rely on
the truth of the statements and the correctness of the opinions expressed in
any certificates or opinions furnished to the Trustee and conforming to the
requirements of this Agreement;
(ii) the Trustee shall not be liable for an error of judgment made in
good faith by a Responsible Officer, unless it shall be proved that the
Trustee shall have been negligent in ascertaining the pertinent facts;
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(iii) the Trustee shall not be liable with respect to any action taken,
suffered, or omitted to be taken in good faith in accordance with this
Agreement or at the direction of the Certificate Insurer or the Holders of
Certificates evidencing not less than 25% of the Certificate Principal
Balance with the consent of the Certificate Insurer relating to the time,
method, and place of conducting any proceeding for any remedy available to
the Trustee, or exercising any trust or power conferred upon the Trustee,
under this Agreement;
(iv) the Trustee shall not be charged with knowledge of any failure by
the Servicer to comply with the obligations of the Servicer referred to in
clause (i) or (ii) of Section 9.1, or of any failure by the Seller to comply
with the obligations of the Seller referred to in clause (ii) of Section 9.1,
unless a Responsible Officer of the Trustee has actual knowledge or receives
written notice of such failure (it being understood that knowledge of the
Servicer or the Servicer as custodian, in its capacity as agent for the
Trustee, is not attributable to the Trustee) from the Servicer, the Seller or
the Certificate Insurer, as the case may be, or the Holders of Certificates
evidencing not less than 25% of the Certificate Principal Balance; and
(v) without limiting the generality of this Section or Section 10.4, the
Trustee shall have no duty (i) to see to any recording, filing, or depositing
of this Agreement or any agreement referred to therein or any financing
statement evidencing a security interest in the Receivables or the Financed
Vehicles, or to see to the maintenance of any such recording or filing or
depositing or to any rerecording, refiling or redepositing of any thereof,
(ii) to see to any insurance of the Financed Vehicles or Obligors or to
effect or maintain any such insurance, (iii) to see to the payment or
discharge of any tax, assessment, or other governmental charge or any Lien or
encumbrance of any kind owing with respect to, or assessed or levied against,
any part of the Trust, (iv) to confirm or verify the contents of any reports
or certificates of the Servicer delivered to the Trustee pursuant to this
Agreement believed by the Trustee to be genuine and to have been signed or
presented by the proper party or parties, or (v) to inspect the Financed
Vehicles at any time or ascertain or inquire as to the performance or
observance of any of the Seller's or the Servicer's representations,
warranties or covenants or the Servicer's duties and obligations as Servicer
and as custodian of the Receivable Files under this Agreement.
The Trustee shall not be required to expend or risk its own funds or
otherwise incur financial liability in the performance of any of its duties
hereunder, or in the exercise of any of its rights or powers, if there shall
be reasonable ground for believing that the repayment of such funds or
adequate indemnity against such risk or liability shall not be reasonably
assured to it, and none of the provisions contained in this Agreement shall
in any event require the Trustee to perform, or be responsible for the manner
of performance of, any of the obligations of the servicer under this
Agreement except during such time, if any, as the Trustee shall be the
successor to, and be vested with the rights, duties, powers, and privileges
of, the Servicer in accordance with the terms of this Agreement.
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SECTION 10.2 Trustee's Certificate.
On or as soon as practicable after each Distribution Date on which
Receivables shall be (i) assigned to the Seller pursuant to Section 3.2 or
(ii) assigned to the Servicer pursuant to Section 4.2, 4.7 or 11.2, the
Trustee shall execute a Trustee's Certificate, substantially in the form of,
in the case of an assignment to the Seller, Exhibit C, or, in the case of an
assignment to the Servicer, Exhibit D, based on the information contained in
the Servicer's Certificate for the related Collection Period, amounts
deposited to the Certificate Account, and notices received pursuant to this
Agreement, identifying the Receivables repurchased by the Seller pursuant to
Section 3.2 or purchased by the Servicer pursuant to Section 4.2, 4.7 or 11.2
with respect to such Collection Period, and shall deliver such Trustee's
Certificate, accompanied by a copy of the Servicer's Certificate for such
Collection Period to the Seller or the Servicer, as the case may be, with a
copy to the Certificate Insurer. The Trustee's Certificate shall be an
assignment pursuant to Section 10.3.
SECTION 10.3 Trustee's Assignment of Purchased Receivables.
With respect to each Receivable repurchased by the Seller pursuant to
Section 3.2 or purchased by the Servicer pursuant to Section 4.2, 4.7 or
11.2, the Trustee shall assign, on the day on which the Trustee receives
payment for such Receivable, effective as of the last day of the Collection
Period during which such Receivable became subject to repurchase by the
Seller or purchase by the Servicer, without recourse, representation, or
warranty, to the Seller or the Servicer (as the case may be) all the
Trustee's right, title, and interest in and to such Receivables, and all
security and documents relating thereto, and all proceeds thereof, such
assignment being an assignment outright and not for security. If in any
enforcement suit or legal proceeding it shall be held that the Servicer may
not enforce a Receivable on the ground that it shall not be a real party in
interest or a holder entitled to enforce the Receivable, the Trustee shall,
at the Servicer's expense, take such steps as the Trustee deems necessary to
enforce the Receivable, including bringing suit in its name or the name of
the Certificateholders.
SECTION 10.4 Certain Matters Affecting the Trustee.
Except as otherwise provided in Section 10.1:
(i) The Trustee may rely and shall be protected in acting or refraining
from acting upon any resolution, Officers' Certificate, Servicer's
Certificate, certificate of auditors, or any other certificate, statement,
instrument, opinion, report, notice, request, consent, order, appraisal,
bond, or other paper or document believed by it to be genuine and to have
been signed or presented by the proper party or parties.
(ii) The Trustee may consult with counsel and any Opinion of Counsel
shall be full and complete authorization and protection in respect of any
action taken or
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suffered or omitted by it under this Agreement in good faith and in
accordance with such Opinion of Counsel.
(iii) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Agreement, or to institute, conduct, or
defend any litigation under this Agreement or in relation to this Agreement,
at the request, order, or direction of any of the Certificateholders pursuant
to the provisions of this Agreement, unless such Certificateholders shall
have offered to the Trustee reasonable security or indemnity against the
costs, expenses, and liabilities that may be incurred therein or thereby;
nothing contained in this Agreement, however, shall relieve the Trustee of
the obligations, upon the occurrence of an Event of Default (that shall not
have been cured), to exercise such of the rights and powers vested in it by
this Agreement, and to use the same degree of care and skill in their
exercise as a prudent man or woman would exercise or use under the
circumstances in the conduct of his or her own affairs.
(iv) The Trustee shall not be liable for any action taken, suffered, or
omitted by it in good faith and believed by it to be authorized or within the
discretion or rights or powers conferred upon it by this Agreement.
(v) Prior to the occurrence of an Event of Default and after the curing
of all Events of Default that may have occurred, the Trustee shall not be
bound to make any investigation into the facts or matters stated in any
resolution, certificate, statement, instrument, opinion, report, notice,
request, consent, order, approval, bond, or other paper or document, unless
requested in writing to do so by the Holders of Certificates evidencing not
less than 25% of the Certificate Principal Balance or the Certificate
Insurer; provided, however, that if the payment within a reasonable time to
the Trustee of the costs, expenses, or liabilities likely to be incurred by
it in the making of such investigation shall be, in the opinion of the
Trustee, not reasonably assured to the Trustee by the security afforded to it
by the terms of this Agreement, the Trustee may require reasonable indemnity
against such cost, expense, or liability as a condition to so proceeding.
Nothing in this clause (v) shall affect the obligation of the Servicer to
observe any applicable law prohibiting disclosure of information regarding
the Obligors.
(vi) The Trustee may execute any of the trusts or powers hereunder or
perform any duties under this Agreement either directly or by or through
agents or attorneys or a custodian and shall not be liable for the negligence
of any of such agents, attorneys or custodians appointed with due care. The
Trustee shall not be responsible for any misconduct or negligence solely
attributable to the acts or omissions of the Servicer in its capacity as
Servicer or custodian.
(vii) Subsequent to the sale of the Receivables by the Seller to the
Trustee, the Trustee shall have no duty of independent inquiry, except as may
be required by Section 10.1, and the Trustee may rely upon the
representations and warranties and covenants of
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the Seller and the Servicer contained in this Agreement with respect to the
Receivables and the Receivable Files.
SECTION 10.5 Trustee Not Liable for Certificates or Receivables.
The recitals contained herein and in the Certificates (other than the
certificate of authentication on the Certificates) shall be taken as the
statements of the Seller or the Servicer, as the case may be, and the Trustee
assumes no responsibility for the correctness thereof. The Trustee shall
make no representations as to the validity or sufficiency of this Agreement
or of the Certificates (other than the certificate of authentication on the
Certificates), or of any Receivable or related document. The Trustee shall
at no time have any responsibility or liability for or with respect to the
legality, validity, and enforceability of any security interest in any
Financed Vehicle or any Receivable, or the perfection and priority of such a
security interest or the maintenance of any such perfection and priority, or
for or with respect to the efficacy of the Trust or its ability to generate
the payments to be distributed to Certificateholders under this Agreement,
including, without limitation, the existence, condition, location, and
ownership of any Financed Vehicle; the existence and enforceability of any
physical damage insurance, theft insurance, vendor's single interest
insurance, or credit life or disability and hospitalization insurance with
respect to any Receivable; the existence and contents of any Receivable or
any computer or other record thereof; the validity of the assignment of any
Receivable to the Trust or of any intervening assignment; the completeness of
any Receivable; the performance or enforcement of any Receivable; the
compliance by the Seller or the Servicer with any warranty or representation
made under this Agreement or in any related document and the accuracy of any
such warranty or representation prior to the Trustee's receipt of notice or
other discovery of any noncompliance therewith or any breach thereof; any
investment of monies by the Servicer or any loss resulting therefrom other
than investments in obligations of or guaranteed by the Trustee (it being
understood that the Trustee shall remain responsible for any Trust property
that it may hold); the acts or omissions of the Seller, the Servicer, or any
Obligor; any action of the Servicer taken in the name of the Trustee; or any
action by the Trustee taken at the instruction of the Servicer; provided,
however, that the foregoing shall not relieve the Trustee of its obligation
to perform its duties under this Agreement. Except with respect to a claim
based on the failure of the Trustee to perform its duties under this
Agreement or based on the Trustee's negligence or willful misconduct, no
recourse shall be had for any claim based on any provision of this Agreement,
the Certificates, or any Receivable or assignment thereof against the Trustee
in its individual capacity, the Trustee shall not have any personal
obligation, liability, or duty whatsoever to any Certificateholder or any
other Person with respect to any such claim, and any such claim shall be
asserted solely against the Trust or any indemnitor who shall furnish
indemnity as provided in this Agreement. The Trustee shall not be
accountable for the use or application by the Seller of any of the
Certificates or of the proceeds of such Certificates, or for the use or
application of any funds paid to the Seller or the Servicer in respect of the
Receivables. The Trustee shall not be responsible for any statement in any
document prepared, executed or delivered in connection with the sale and
issuance of the Certificates other than any such document prepared, executed
or delivered by the Trustee in connection therewith on the Closing Date.
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SECTION 10.6 Trustee May Own Certificates.
The Trustee in its individual or any other capacity may become the owner
or pledgee of Certificates with the same rights as it would have if it were
not Trustee.
SECTION 10.7 Trustee's Fees.
The Trustee's fee for a Collection Period shall equal the Monthly
Trustee's Fee. The Monthly Trustee's Fee will be paid from the funds of the
Trust in accordance with Section 5.4.
SECTION 10.8 Eligibility Requirements for Trustee.
The Trustee under this Agreement shall at all times be a corporation
having an office in the same State as the location of the Corporate Trust
Office as specified in this Agreement, or another state of the United States
of America or the District of Columbia; and organized and doing business
under the laws of such State, district or the United States of America;
authorized under such laws to exercise corporate trust powers; having a
combined capital and surplus of at least $50,000,000 and subject to
supervision or examination by federal or State authorities; having a rating
of its long-term debt obligations by Moody's of no less than Baa3; and
reasonably satisfactory to the Certificate Insurer. If such corporation
shall publish reports of condition at least annually, pursuant to law or to
the requirements of the aforesaid supervising or examining authority, then
for the purpose of this Section 10.8, the combined capital and surplus of
such corporation shall be deemed to be its combined capital and surplus as
set forth in its most recent report of condition so published. In case at
any time the Trustee shall cease to be eligible in accordance with the
provisions of this Section 10.8, the Trustee shall resign immediately in the
manner and with the effect specified in Section 10.9.
SECTION 10.9 Resignation or Removal of Trustee.
The Trustee may at any time resign and be discharged from the trusts
hereby created by giving written notice thereof to the Servicer and the
Certificate Insurer. Upon receiving such notice of resignation, the Servicer
shall, with the consent of the Certificate Insurer, promptly appoint a
successor Trustee by written instrument, in duplicate, one copy of which
instrument shall be delivered to the resigning Trustee and one copy to the
successor Trustee. If no successor Trustee shall have been so appointed and
have accepted appointment within 30 days after the giving of such notice of
resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor Trustee.
If at any time the Trustee shall cease to be eligible in accordance
with the provisions of Section 10.8 and shall fail to resign after written
request therefor by the Servicer or the Certificate Insurer, or if at any
time the Trustee shall be legally unable to act, or shall be adjudged
bankrupt or insolvent, or a receiver of the Trustee or of its property shall
be appointed, or any public officer shall take charge or control of the
Trustee or of its property or affairs for the
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purpose of rehabilitation, conservation, or liquidation, then the Servicer or
the Certificate Insurer may remove the Trustee. If it shall remove the
Trustee under the authority of the immediately preceding sentence, the
Servicer shall promptly appoint a successor Trustee that meets the
eligibility requirements of Section 10.8 by written instrument, in duplicate,
one copy of which instrument shall be delivered to the Trustee so removed and
one copy to the successor Trustee.
Any resignation or removal of the Trustee and appointment of a
successor Trustee pursuant to any of the provisions of this Section 10.9
shall not become effective without the consent of the Certificate Insurer and
until acceptance of appointment by the successor Trustee pursuant to Section
10.10.
SECTION 10.10 Successor Trustee.
Any successor Trustee appointed pursuant to Section 10.9 shall execute,
acknowledge, and deliver to the Servicer and to its predecessor Trustee an
instrument accepting such appointment under this Agreement, and thereupon the
resignation or removal of the predecessor Trustee shall become effective and
such successor Trustee, without any further act, deed, or conveyance, shall
become fully vested with all the rights, powers, duties, and obligations of
its predecessor under this Agreement, with like effect as if originally named
as Trustee. The predecessor Trustee shall deliver to the successor Trustee
all documents and statements held by it under this Agreement; and the
Servicer and the predecessor Trustee shall execute and deliver such
instruments and do such other things as may reasonably be required for fully
and certainly vesting and confirming in the successor Trustee all such
rights, powers, duties, and obligations.
No successor Trustee shall accept appointment as provided in this
Section 10.10 unless at the time of such acceptance such successor Trustee
shall be eligible pursuant to Section 10.8.
Upon acceptance of appointment by a successor Trustee pursuant to
this Section 10.10, the Servicer shall mail notice of the successor of such
Trustee under this Agreement to all Holders of Certificates at their
addresses as shown in the Certificate Register, to the Certificate Insurer
and to the Rating Agencies. If the Servicer shall fail to mail such notice
within 10 days after acceptance of appointment by the successor Trustee, the
successor Trustee shall cause such notice to be mailed at the expense of the
Servicer.
SECTION 10.11 Merger or Consolidation of Trustee.
Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any
merger, conversion, or consolidation to which the Trustee shall be a party,
or any corporation succeeding to all or substantially all of the corporate
trust business of the Trustee, shall be the successor of the Trustee
hereunder, provided such corporation shall be eligible pursuant to Section
10.8, without the execution or filing of any instrument or any further act on
the part of any of the parties
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hereto, anything herein to the contrary notwithstanding. The Trustee or its
successor hereunder shall provide the Servicer, the Certificate Insurer and
the Rating Agencies with prompt notice of any such transaction.
SECTION 10.12 Appointment of Co-Trustee or Separate Trustee.
Notwithstanding any other provisions of this Agreement, at any time, for
the purpose of meeting any legal requirements of any jurisdiction in which
any part of the Trust or any Financed Vehicle may at the time be located, the
Servicer and the Trustee with the consent of the Certificate Insurer acting
jointly shall have the power and shall execute and deliver all instruments to
appoint one or more Persons approved by the Trustee to act as co-trustee,
jointly with the Trustee, or separate trustee or separate trustees, of all or
any part of the Trust, and to vest in such Person, in such capacity and for
the benefit of the Certificateholders and the Certificate Insurer, such title
to the Trust, or any part thereof, and, subject to the other provisions of
this Section 10.12, such powers, duties, obligations, rights, and trusts as
the Servicer and the Trustee may consider necessary or desirable. If the
Servicer shall not have joined in such appointment within 15 days after the
receipt by it of a request so to do, or in the case an Event of Default shall
have occurred and be continuing, the Trustee alone shall have the power to
make such appointment. No co-trustee or separate trustee under this
Agreement shall be required to meet the terms of eligibility as a successor
Trustee pursuant to Section 10.8 and no notice to Certificateholders of the
appointment of any co-trustee or separate trustee shall be required pursuant
to Section 10.10.
Each separate trustee and co-trustee shall, to the extent permitted
by law, be appointed and act subject to the following provisions and
conditions:
(i) all rights, powers, duties, and obligations conferred or imposed
upon the Trustee shall be conferred upon and exercised or performed by the
Trustee and such separate trustee or co-trustee jointly (it being understood
that such separate trustee or co-trustee is not authorized to act separately
without the Trustee joining in such act), except to the extent that under any
law of any jurisdiction in which any particular act or acts are to be
performed (whether as Trustee under this Agreement or as successor to the
Servicer under this Agreement), the Trustee shall be incompetent or
unqualified to perform such act or acts, in which event such rights, powers,
duties, and obligations (including the holding of title to the Trust or any
portion thereof in any such jurisdiction) shall be exercised and performed
singly by such separate trustee or co-trustee, but solely at the direction of
the Trustee;
(ii) no trustee under this Agreement shall be personally liable by reason
of any act or omission of any other trustee under this Agreement; and
(iii) the Servicer, the Trustee and the Certificate Insurer acting jointly
may at any time accept the resignation of or remove any separate trustee or
co-trustee.
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Any notice, request, or other writing given to the Trustee shall be
deemed to have been given to each of the then separate trustees and
co-trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Agreement
and the conditions of this Article X. Each separate trustee and co-trustee,
upon its acceptance of the trusts conferred, shall be vested with the estates
or property specified in its instrument of appointment, either jointly with
the Trustee or separately, as may be provided therein, subject to all the
provisions of this Agreement, specifically including every provision of this
Agreement relating to the conduct of, affecting the liability of, or
affording protection to, the Trustee. Each such instrument shall be filed
with the Trustee and a copy thereof given to the Servicer and the Certificate
Insurer.
Any separate trustee or co-trustee may at any time appoint the
Trustee, its agent or attorney-in-fact with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect of
this Agreement on its behalf and in its name. If any separate trustee or
co-trustee shall die, become incapable of acting, resign, or be removed, all
of its estates, properties, rights, remedies, and trusts shall vest in and be
exercised by the Trustee, to the extent permitted by law, without the
appointment of a new or successor trustee.
SECTION 10.13 Representations and Warranties of Trustee.
The Trustee shall make the following representations and warranties on
which the Seller, the Certificate Insurer and Certificateholders may rely:
(i) Due Organization and Good Standing. The Trustee is a national
banking association duly organized, validly existing, and in good standing
under the laws of the United States of America.
(ii) Power and Authority. The Trustee has full power, authority, and
legal right to execute, deliver, and perform this Agreement, and shall have
taken all necessary action to authorize the execution, delivery, and
performance by it of this Agreement.
(iii) No Violation. The execution, delivery, and performance by the
Trustee of this Agreement shall not violate any provision of any law
governing the banking and trust powers of the Trustee or, to the best of the
Trustee's knowledge, any order, writ, judgment, or decree of any court,
arbitrator, or governmental authority applicable to the Trustee or any of its
assets.
(iv) No Proceedings. The execution, delivery, and performance by the
Trustee of this Agreement shall not require the authorization, consent, or
approval of, the giving of notice to, the filing or registration with, or the
taking of any other action in respect of any governmental authority or agency
regulating the banking and corporate trust activities of the Trustee.
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(v) Duly Executed. This Agreement shall have been duly executed and
delivered by the Trustee and shall constitute the legal, valid, and binding
agreement of the Trustee, enforceable in accordance with its terms.
(vi) Securities Intermediary. The Trustee is a securities intermediary
as defined under Article 8 of the Minnesota Uniform Commercial Code.
SECTION 10.14 Tax Returns.
The Servicer shall prepare or shall cause to be prepared any tax returns
required to be filed by the Trust and the Trustee shall promptly sign and
file such returns. In no event shall the Trustee be liable for any
liabilities, costs or expenses of the Trust or the Certificateholders under
any tax law, including without limitation federal, state or local income or
excise taxes or any other tax imposed on or measured by income (or any
interest or penalty with respect thereto or arising from a failure to comply
therewith).
ARTICLE XI
TERMINATION
SECTION 11.11 Termination of the Trust.
The respective obligations and responsibilities of the Seller, the
Servicer, and the Trustee created hereby and the Trust created by this
Agreement shall terminate upon (i) the purchase as of the last day of any
Collection Period by the Servicer at its option, pursuant to Section 11.2, of
the corpus of the Trust or (ii) the payment to Certificateholders and the
Certificate Insurer of all amounts required to be paid to them pursuant to
this Agreement and the disposition of all property held as part of the Trust;
provided, however, that in no event shall the trust created by this Agreement
continue beyond the expiration of 21 years from the death of the last
survivor of the descendants of Joseph P. Kennedy, the late ambassador of the
Court of St. James, living on the date of this Agreement. The Servicer shall
promptly notify the Trustee and the Certificate Insurer of any prospective
termination pursuant to this Section 11.1.
Notice of any termination, specifying the Distribution Date upon
which the Certificateholders may surrender their Certificates to the Trustee
for payment of the final distribution and cancellation, shall be given
promptly by the Trustee by letter to Certificateholders mailed not later than
the first day of the month in which the specified Distribution Date occurs,
stating (A) the Distribution Date upon which final payment of the
Certificates shall be made upon presentation and surrender of the
Certificates at the office of the Trustee therein designated, (B) the amount
of any such final payment, and (C) that the Record Date otherwise applicable
to such Distribution Date is not applicable, payments being made only upon
presentation and surrender of the Certificates at the office of the Trustee
therein specified. The Trustee shall give such notice to the Certificate
Registrar (if other than the Trustee) at the time such notice is given to
Certificateholders. Upon presentation and surrender of the
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Certificates, the Trustee shall cause to be distributed to Certificateholders
and the Certificate Insurer amounts distributable on such Distribution Date
pursuant to Section 5.4.
In the event that all of the Certificateholders shall not surrender
their Certificates for cancellation within six months after the date
specified in the above-mentioned written notice, the Trustee shall give a
second written notice to the remaining Certificateholders to surrender their
Certificates for cancellation and receive the final distribution with respect
thereto. If within one year after the second notice all the Certificates
shall not have been surrendered for cancellation, the Trustee may take
appropriate steps, or may appoint an agent to take appropriate steps, to
contact the remaining Certificateholders concerning surrender of their
Certificates, and the cost thereof shall be paid out of the funds and other
assets that shall remain subject to this Agreement. Any funds remaining in
the Trust after exhaustion of such remedies shall, upon notice to the
Trustee, be paid by the Trustee to the Servicer for deposit into an escrow
account, and thereafter Certificateholders shall look only to such escrow
account with respect to any claims in respect of such funds.
SECTION 11.2 Optional Purchase of All Receivables.
The Seller shall have the option to purchase the corpus of the Trust on
any Distribution Date following a Record Date on which the Pool Balance is 5%
or less of the Original Pool Balance. To exercise such option, the Seller
shall deposit in the Certificate Account an amount equal to the aggregate
Purchase Amounts for the Receivables, together with any Reimbursement Amount
then owed to the Certificate Insurer (the "Optional Purchase Price");
provided, however, that the Seller may not effect any such purchase unless
the Trustee and the Certificate Insurer shall have received an Opinion of
Counsel acceptable to them that such purchase does not constitute a
fraudulent conveyance under applicable federal and state laws. Such price
shall be deposited to the Certificate Account in immediately available funds
by 12:00 noon, New York City time, on such Distribution Date and, upon notice
to the Trustee of such deposit, the Trustee shall release the Receivables and
the Receivable Files and all other property of the Trust to the Seller,
whereupon the Certificates shall no longer evidence any right or interest in
the Receivables or other property of the Trust or any proceeds thereof.
ARTICLE XII
MISCELLANEOUS PROVISIONS
SECTION 12.1 Amendment.
This Agreement may be amended by the Seller, the Servicer and the
Trustee, without the consent of any of the Certificateholders but with the
consent of the Certificate Insurer, to cure any ambiguity or defect, to
correct or supplement any provisions in this Agreement, to correct any
typographical error or to add any other provisions with respect to matters or
questions arising under this Agreement; provided, however, that such action
shall not,
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as evidenced by an Opinion of Counsel, adversely affect in any material
respect the interests of any Certificateholder.
This Agreement may also be amended from time to time by the Seller,
the Servicer and the Trustee with the consent of the Certificate Insurer and
the Holders of Certificates evidencing not less than 51% of the Certificate
Principal Balance for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Agreement, or of
modifying in any manner the rights of the Holders of Certificates; provided,
however, that no such amendment shall, without the consent of the Holders of
all Certificates then outstanding, reduce the aforesaid percentage required
to consent to any such amendment. In no case may any such amendment increase
or reduce in any manner the amount of, or accelerate or delay the timing of,
collections of payments on Receivables or distributions that shall be
required to be made on any Certificate without the consent of the Holder of
such Certificate.
The Trustee shall notify each Rating Agency prior to any amendment
of this Agreement; to the extent practicable, such notice shall be given not
less than 10 days prior to the date on which such amendment is executed.
Promptly after the execution of any amendment or consent, the
Trustee shall furnish written notification of the substance of such amendment
or consent to each Certificateholder, each Rating Agency and the Certificate
Insurer; a copy of any proposed amendment shall be furnished to the
Certificate Insurer by the Seller prior to its execution by the Seller.
It shall not be necessary for the consent of Certificateholders
pursuant to this Section 12.1 to approve the particular form of any proposed
amendment or consent, but it shall be sufficient if such consent shall
approve the substance thereof. The manner of obtaining such consents and of
evidencing the authorization of the execution thereof by Certificateholders
shall be subject to such reasonable requirements as the Trustee may
prescribe.
Prior to the execution of any amendment to this Agreement, the
Trustee and the Certificate Insurer shall be entitled to receive and rely
upon an Opinion of Counsel stating that the execution of such amendment is
authorized or permitted by this Agreement and the Opinion of Counsel referred
to in Section 12.2(i)(1). The Trustee may, but shall not be obligated to,
enter into any such amendment which affects the Trustee's own rights, duties,
or immunities under this Agreement.
SECTION 12.2 Protection of Title to Trust.
(a) The Seller shall execute and file, or cause to be executed and
filed, such financing statements and cause to be executed and filed such
continuation statements, all in such manner and in such places as may be
required by law fully to preserve, maintain, and protect the interest of the
Certificateholders, the Certificate Insurer and the Trustee under this
Agreement in the Receivables and in the proceeds thereof. The Seller shall
deliver (or cause to be delivered) to the
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Trustee and the Certificate Insurer file-stamped copies of, or filing
receipts for, any document filed as provided above, as soon as available
following such filing.
(b) Neither the Seller nor the Servicer shall change its name, identity,
or corporate structure in any manner that would, could, or might make any
financing statement or continuation statement filed by the Seller in
accordance with paragraph (a) above seriously misleading within the meaning
of Section 9-402(7) of the UCC, unless the Seller or Servicer shall have
filed (or cause to be filed) UCC financing statements upon any of the stated
events.
(c) If, as a result of a relocation of the Seller's or Servicer's
principal executive office, the applicable provisions of the UCC would
require the filing of any amendment of any previously filed financing or
continuation statement or of any new financing statement, then the Seller or
the Servicer shall file or cause to be filed such amendment or continuation
statement or new financing statement within the period of time necessary
fully to preserve and protect the interest of the Trustee in the Receivables.
The Servicer shall at all times maintain each office from which it shall
service Receivables, and its principal executive office, within the United
States of America.
(d) The Servicer shall maintain accounts and records as to each
Receivable accurately and in sufficient detail to permit (i) the reader
thereof to know at any time the status of such Receivable, including payments
and recoveries made and payments owing (and the nature of each) and (ii)
reconciliation between payments or recoveries on (or with respect to) each
Receivable and the amounts from time to time deposited in the Certificate
Account in respect of such Receivable.
(e) The Servicer shall maintain its computer systems so that, from and
after the time of sale under this Agreement of the Receivables to the
Trustee, the Servicer's master computer records (including any back-up
archives) that refer to a Receivable shall indicate clearly with reference to
the particular grantor trust that such Receivable is owned by the Trustee.
Indication of the Trustee's ownership of a Receivable shall be deleted from
or modified on the Servicer's computer systems when, and only when, the
Receivable shall have been paid in full or repurchased.
(f) If at any time the Seller or the Servicer shall propose to sell,
grant a security interest in, or otherwise transfer any interest in
automotive receivables to any prospective purchaser, lender, or other
transferee, the Servicer shall give to such prospective purchaser, lender, or
other transferee computer tapes, records, or print-outs (including any
restored from back-up archives) that, if they shall refer in any manner
whatsoever to any Receivable, shall indicate clearly that such Receivable has
been sold and is owned by the Trustee.
(g) The Servicer shall permit the Trustee and the Certificate Insurer
and their respective agents at any time during normal business hours to
inspect, audit, and make copies of and abstracts from the Servicer's records
regarding any Receivable to the extent permitted by applicable banking,
privacy and other laws limiting such access.
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(h) Upon request, the Servicer shall furnish to the Trustee and to the
Certificate Insurer, within five Business Days, a list of all Receivables (by
contract number and name of Obligor) then held as part of the Trust, together
with a reconciliation of such list to the Schedule of Receivables and to each
of the Servicer's Certificates furnished before such request indicating
removal of Receivables from the Trust.
(i) The Servicer shall deliver to the Trustee and the Certificate
Insurer:
(1) promptly after the execution and delivery of this Agreement and
of each amendment hereto and at the time of any merger, consolidation or
succession of the Seller or the Servicer, an Opinion of Counsel either (a)
stating that, in the opinion of such counsel, all financing statements and
continuation statements have been executed and filed that are necessary fully
to preserve and protect the first priority perfected security interest of the
Trustee in the Receivables, and reciting the details of such filings or
referring to prior Opinions of Counsel in which such details are given, or
(b) stating that, in the opinion of such counsel, no such action shall be
necessary to preserve and protect such interest; and
(2) by December 31 of each calendar year beginning December 31, 1997,
an Opinion of Counsel, dated as of a date during the 90-day period ending on
such date, either (a) stating that, in the opinion of such counsel, all
financing statements and continuation statements have been executed and filed
that are necessary fully to preserve and protect the first priority perfected
security interest of the Trustee in the Receivables, and reciting the details
of such filings or referring to prior Opinions of Counsel in which such
details are given, or (b) stating that, in the opinion of such counsel, no
such action shall be necessary to preserve and protect such interest.
SECTION 12.3 Limitation on Rights of Certificateholders.
The death or incapacity of any Certificateholder shall not operate to
terminate this Agreement or the Trust, nor entitle such Certificateholder's
legal representatives or heirs to claim an accounting or to take any action
or commence any proceeding in any court for a partition or winding up of the
Trust, nor otherwise affect the rights, obligations, and liabilities of the
parties to this Agreement or any of them.
No Certificateholder shall have any right to vote (except as provided in
Section 9.1, 9.4, 12.1, 12.3 or 12.7) or in any manner otherwise control the
operation and management of the Trust, or the obligations of the parties to
this Agreement, nor shall anything in this Agreement set forth, or contained
in the terms of the Certificates, be construed so as to constitute the
Certificateholders from time to time as partners or members of an
association; nor shall any
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Certificateholder be under any liability to any third person by reason of any
action taken pursuant to any provision of this Agreement.
No Certificateholder shall have any right by virtue or by availing
itself of any provisions of this Agreement to institute any suit, action, or
proceeding in equity or at law upon or under or with respect to this
Agreement, unless such Holder previously shall have received the written
consent of the Certificate Insurer and shall have given to the Trustee a
written notice of default and of the continuance thereof, as hereinbefore
provided, and unless also the Holders of Certificates evidencing not less
than 25% of the Certificate Principal Balance shall have made written request
upon the Trustee to institute such action, suit, or proceeding in its own
name as Trustee under this Agreement and shall have offered to the Trustee
such reasonable indemnity as it may require against the costs, expenses, and
liabilities to be incurred therein or thereby, and the Trustee, for 30 days
after its receipt of such notice, request, and offer of indemnity, shall have
neglected or refused to institute any such action, suit, or proceeding and
during such 30-day period no direction inconsistent with such written request
has been given to the Trustee pursuant to Section 9.4; no one or more Holders
of Certificates shall have any right in any manner whatever by virtue or by
availing itself or themselves of any provisions of this Agreement to affect,
disturb, or prejudice the rights of the Holders of any other of the
Certificates, or to obtain or seek to obtain priority over or preference to
any other such Holder, or to enforce any right, under this Agreement except
in the manner provided in this Agreement and for the equal, ratable, and
common benefit of all Certificateholders. For the protection and enforcement
of the provisions of this Section 12.3, each Certificateholder and the
Trustee shall be entitled to such relief as can be given either at law or in
equity.
SECTION 12.4 GOVERNING LAW.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (WITHOUT REGARD TO
CONFLICTS OF LAW PRINCIPLES) APPLICABLE TO AGREEMENTS MADE AND TO BE
PERFORMED WITHIN THE STATE OF NEW YORK, AND THE OBLIGATIONS, RIGHTS, AND
REMEDIES OF THE PARTIES UNDER THIS AGREEMENT SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS.
SECTION 12.5 Notices.
All demands, notices, and communications under this Agreement shall be
in writing, personally delivered or mailed by certified mail, return receipt
requested, and shall be deemed to have been duly given upon receipt (a) in
the case of the Seller or the Servicer, to the agent for service as specified
in this Agreement, at the following address: Chevy Chase Bank, F.S.B., 8401
Connecticut Avenue, 6th Floor, Chevy Chase, Maryland 20815, Attention:
General Counsel, or at such other address as shall be designated by the
Seller or the Servicer in a written notice to the Trustee and (b) in the case
of the Trustee, at the Corporate Trust Office, (c) in the case of the
Certificate Insurer, at 113 King Street, Armonk, New York 10504, Attention:
Insured
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Portfolio Management - Structured Finance. Any notice required or permitted
to be mailed to a Certificateholder shall be given by first class mail,
postage prepaid, at the address of such Holder as shown in the Certificate
Register. Any notice so mailed within the time prescribed in this Agreement
shall be conclusively presumed to have been duly given, whether or not the
Certificateholder shall receive such notice.
SECTION 12.6 Severability of Provisions.
If any one or more of the covenants, agreements, provisions, or terms of
this Agreement shall be for any reason whatsoever held invalid, then such
covenants, agreements, provisions, or terms shall be deemed severable from
the remaining covenants, agreements, provisions, or terms of this Agreement
and shall in no way affect the validity or enforceability of the other
provisions of this Agreement or of the Certificates or the rights of the
Holders thereof or the rights of the Certificate Insurer.
SECTION 12.7 Assignment.
Notwithstanding anything to the contrary contained herein, except as
provided in Sections 7.3 and 8.3 and as provided in the provisions of this
Agreement concerning the resignation of the Servicer, this Agreement may not
be assigned by the Seller or the Servicer without the prior written consent
of (x) the Certificate Insurer or (y) the Trustee or the Holders of
Certificates evidencing not less than 66% of the Certificate Principal
Balance, in either case acting with the consent of the Certificate Insurer.
SECTION 12.8 Certificates Nonassessable and Fully Paid.
Certificateholders shall not be personally liable for obligations of the
Trust. The interests represented by the Certificates shall be nonassessable
for any losses or expenses of the Trust or for any reason whatsoever, and,
upon authentication thereof by the Trustee pursuant to Section 6.2,
Certificates shall be deemed fully paid.
SECTION 12.9 Counterparts.
For the purpose of facilitating the execution of this Agreement and for
other purposes, this Agreement may be executed simultaneously in any number
of counterparts, each of which counterparts shall be deemed to be an
original, and all of which counterparts shall constitute but one and the same
instrument.
SECTION 12.10 Benefits of Agreement.
This Agreement shall inure to the benefit of and be binding upon the
parties hereto, the Certificateholders and their respective successors and
assigns, and to the extent provided herein, the Certificate Insurer. Without
limiting the generality of the foregoing, all covenants and agreements in
this Agreement which expressly confer rights upon the Certificate
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Insurer shall be for the benefit of and run directly to the Certificate
Insurer, and the Certificate Insurer shall be entitled to rely on and enforce
such covenants to the same extent as if it were a party hereto. Except as
otherwise provided in this Agreement, no other person shall have any rights
or obligations hereunder.
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SECTION 12.11 Tax Treatment.
The parties hereto agree that the Trust created hereby will at all times
be characterized as a grantor trust for federal, state and local income tax
purposes.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed by their respective officers as of the day and year first above
written.
CHEVY CHASE BANK, F.S.B.,
as Seller and Servicer
By:
-----------------------
Mark A. Holles
Vice President
FIRST BANK NATIONAL ASSOCIATION,
as Trustee
By:
--------------------------
Edward Kachinski
Vice President
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EXHIBIT A
SCHEDULE OF RECEIVABLES
75
