<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 12, 1997
REGISTRATION STATEMENT NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
CHEVY CHASE BANK, F.S.B.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
United States 8401 CONNECTICUT AVENUE 52-0897004
(Jurisdiction of CHEVY CHASE, MARYLAND 20815 (I.R.S.
Employer Organization) (301) 986-7000 Identification No.)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE)
STEPHEN R. HALPIN, JR.
Executive Vice President
Chevy Chase Bank, F.S.B.
8401 Connecticut Avenue
Chevy Chase, Maryland 20815
(301) 986-7000
(NAME, ADDRESS AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE)
COPIES TO:
M. DAVID KROHN, ESQ. CHRIS DIANGELO, ESQ. and
SHAW, PITTMAN, POTTS & TROWBRIDGE GLENN ARDEN, ESQ.
2300 N STREET, N.W. DEWEY BALLANTINE
WASHINGTON, D.C. 20037 1301 AVENUE OF THE AMERICAS
(202) 663-8000 NEW YORK, NEW YORK 10019
(212) 259-8000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this registration statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box.[_]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box.[X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration number of the earlier effective
registration statement for the same offering.[_]
If this Form is filed as a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, please check the following box and list the
Securities Act registration number of the earlier effective registration
statement for the same offering.[_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
=============================================================================================================
PROPOSED
MAXIMUM PROPOSED
AMOUNT AGGREGATE MAXIMUM AMOUNT OF
TO BE PRICE AGGREGATE REGISTRATION
TITLE OF SECURITIES BEING REGISTERED REGISTERED PER UNIT(1) OFFERING PRICE(1) FEE
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<S> <C> <C> <C> <C>
Auto Receivables Backed Securities $1,000,000 100% $1,000,000 $303.03
=============================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
--------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
<PAGE>
CROSS REFERENCE SHEET
TO FORM S-3
<TABLE>
<CAPTION>
CAPTION OR LOCATION
ITEM AND CAPTION IN FORM S-3 IN PROSPECTUS
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<S> <C>
1. Forepart of the Registration Statement
and Outside Front Cover Page of
Prospectus........................................................... Forepart of Registration Statement;
Outside Front Cover Page**
2. Inside Front and Outside Back Cover Page of
Prospectus........................................................... Inside Front Cover Page**; Outside
Back Cover Page**
3. Summary Information, Risk Factors and Ratio
of Earnings to Fixed Charges......................................... Prospectus Summary**;
Risk Factors**;*
4. Use of Proceeds......................................................... Use of Proceeds**
5. Determination of Offering Price......................................... *
6. Dilution................................................................ *
7. Selling Security Holders................................................ *
8. Plan of Distribution.................................................... Methods of Distribution**
9. Description of Securities to be Registered.............................. Outside Front Cover Page**;
Prospectus Summary**;
Description of the Securities**;
Certain Tax Considerations**
10. Interests of Named Experts and Counsel.................................. *
11. Material Changes........................................................ *
12. Incorporation of Certain Information by Reference....................... Inside Front Cover Page**;
Incorporation of Certain
Documents by Reference
13. Disclosure of Commission Position on
Indemnification for Securities Act Liabilities....................... See page II-2, Item 17.A.
</TABLE>
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* Not applicable or answer is negative.
** To be completed from time to time
by Prospectus Supplement.
<PAGE>
Subject to Completion. Dated February 12, 1997.
================================================
PROSPECTUS
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Auto Receivables Backed Securities Issuable in Series
CHEVY CHASE BANK, F.S.B.
This Prospectus describes certain Auto Receivables Backed Notes (the
"Notes") and Auto Receivables Backed Certificates (the "Certificates" and,
together with the Notes, the "Securities") that may be issued and sold from time
to time in one or more series, in amounts, at prices and on terms to be
determined at the time of sale and to be set forth in a supplement to this
Prospectus (each, a "Prospectus Supplement"). Each series of Securities may
include one or more classes of Notes and one or more classes of Certificates,
which will be issued either by Chevy Chase Bank, F.S.B. (the "Bank") or by a
trust to be formed or managed by the Bank for the purpose of issuing one or more
series of such Securities (each, a "Trust"). A Trust issuing Securities as
described in this Prospectus and the related Prospectus Supplement shall be
referred to herein as the "Issuer."
Each series of Certificates will evidence beneficial interests in a
segregated pool of assets (the "Trust Property") and each series of Notes will
represent indebtedness of the Issuer secured by the Trust Property, as described
herein and in the related Prospectus Supplement. The Trust Property may consist
of any combination of retail installment sale or finance contracts between
manufacturers, dealers or certain other originators and retail consumers for the
purchase of new and used automobiles, light duty trucks and vans (the
"Contracts"), or participation interests therein, along with the related
security interests in the underlying new and used automobiles,light duty trucks
and vans, and property relating thereto (the "Vehicles"; together with the
Contracts and the proceeds thereof the "Receivables") together with all monies
received relating thereto. If and to the extent specified in the related
Prospectus Supplement, credit or cash flow enhancement with respect to the Trust
Properties or any class of Securities may include any one or more of the
following: a financial guaranty insurance policy issued by an insurer specified
in the related Prospectus Supplement, a reserve account, yield maintenance
account, letters of credit, credit or liquidity facilities, third party payments
or other support, cash deposits or other arrangements, including hedging or
derivatives contracts. In addition to or in lieu of the foregoing, Credit
Enhancement (as defined hereinafter) may be provided by means of subordination,
cross-support among the Trust Properties or over-collateralization. See
"Description of the Securities -- Credit and Cash Flow Enhancements." The
Receivables in the Trust Property for a series have been or will be originated
or acquired by the Bank or Consumer Finance Corporation ("CFC"), the Bank's
wholly owned subsidiary, or another affiliate of the Bank (each an "Affiliate")
on or prior to the date of issuance of the related Securities, as described
herein and in the related Prospectus Supplement. Such Receivables will be
serviced by a servicer (the "Servicer"), which will be the Bank unless otherwise
described in the related Prospectus Supplement.
Each series of Securities may include one or more classes (each, a
"Class") entitled to disproportionate, nominal or no interest or principal
distributions. The rights of one or more Classes of Securities of any series
may be senior or subordinate to the rights of one or more of the other Classes
of such series of Securities. A series may include two or more Classes of
Securities which differ as to the timing, order or priority of payment, interest
rate or amount of distributions of principal or interest or both. Information
regarding each Class of Securities of a series, together with certain
characteristics of the related Receivables, will be set forth in the related
Prospectus Supplement. The rate of payment in respect of principal of the
Securities of any Class will depend on the priority of payment of such a Class
and the rate and timing of payments (including prepayments, defaults,
liquidations or repurchases of Receivables) on the related Receivables. A rate
of payment lower or higher than that anticipated may affect the weighted average
life of each Class of Securities in the manner described herein and in the
related Prospectus Supplement. See "Description of the Securities" and "Risk
Factors -- Maturity and Prepayment Considerations."
PROSPECTIVE INVESTORS SHOULD CONSIDER THE FACTORS SET FORTH UNDER
"RISK FACTORS" AT PAGE 11 HEREIN AND IN THE RELATED PROSPECTUS SUPPLEMENT.
THE NOTES OF A GIVEN SERIES REPRESENT NON-RECOURSE OBLIGATIONS OF THE ISSUER
ONLY AND DO NOT REPRESENT OBLIGATIONS OF CFC, ANY SERVICER OR ANY OF THEIR
RESPECTIVE AFFILIATES. THE CERTIFICATES OF A GIVEN SERIES REPRESENT BENEFICIAL
INTERESTS IN THE RELATED TRUST ONLY AND DO NOT REPRESENT INTERESTS IN OR
OBLIGATIONS OF THE BANK, CFC, ANY SERVICER OR ANY OF THEIR RESPECTIVE
AFFILIATES. NEITHER THE SECURITIES NOR THE UNDERLYING RECEIVABLES WILL BE
GUARANTEED OR INSURED BY ANY GOVERNMENTAL AGENCY OR INSTRUMENTALITY OR BY THE
BANK, CFC, ANY SERVICER, ANY TRUSTEE OR ANY OF THEIR RESPECTIVE AFFILIATES,
EXCEPT AS SET FORTH IN THE RELATED PROSPECTUS SUPPLEMENT. NEITHER THE
SECURITIES NOR THE UNDERLYING RECEIVABLES OR ANY COLLECTIONS THEREON ARE INSURED
OR GUARANTEED BY THE SAVINGS ASSOCIATION INSURANCE FUND, THE FEDERAL DEPOSIT
INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY OR INSTRUMENTALITY.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
Offers of the Securities may be made through one or more different
methods, including offerings through underwriters as more fully described under
"Method of Distribution" herein and in the related Prospectus Supplement.
Retain this Prospectus for future reference. This Prospectus may not
be used to consummate sales of Securities unless accompanied by a Prospectus
Supplement.
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The date of this Prospectus is _____________, 1997.
<PAGE>
PROSPECTUS SUPPLEMENT
The Prospectus Supplement relating to a series of Securities to be
offered hereunder, among other things, will set forth with respect to such
series of Securities: (i) a description of the Class or Classes of such
Securities; (ii) the rate of interest, the "Pass-Through Rate" or "Interest
Rate" or other applicable rate (or the manner of determining such rate) and
authorized denominations of such Class of such Securities; (iii) certain
information concerning the Receivables; (iv) a description of insurance
policies, cash accounts, letters of credit, financial guaranty insurance
policies, third party guarantees, hedging agreements, derivatives contracts or
other forms of Credit Enhancement, if any, relating to one or more pools of
Receivables or all or part of the related Securities; (v) the specified
interest, if any, of each Class of Securities in, and manner and priority of,
the distributions from the Trust Property; (vi) information as to the nature and
extent of subordination with respect to such series or Class of Securities, if
any; (vii) the payment or distribution dates to Securityholders (as defined
hereinafter); (viii) if other than the Bank, information regarding the
Servicer(s) for the related Receivables; (ix) events of default or amortization
events; (x) the circumstances, if any, under which the Certificates or the Notes
may be subject to redemption, at the option of the Securityholder or of the
Issuer; (xi) the operation of any Pre-Funding Account (as defined hereinafter);
(xii) a description of the Issuer with respect to such series of Securities;
(xiii) information regarding tax and ERISA (as defined hereinafter)
considerations, including whether the Issuer will constitute a Financial Asset
Securitization Trust ("FASIT") and the tax effects thereof; and (xiv) additional
information with respect to the method of distribution of such Securities.
AVAILABLE INFORMATION
The Bank has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement (together with all amendments and
exhibits thereto, referred to herein as the "Registration Statement") under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to the
Securities offered pursuant to this Prospectus. For further information,
reference is made to the Registration Statement which may be inspected and
copied at the public reference facilities maintained by the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549; and at the Commission's regional
offices at 500 West Madison, 14th Floor, Chicago, Illinois 60661 and Seven World
Trade Center, 13th Floor, New York, New York 10048. Copies of the Registration
Statement may be obtained from the Public Reference Section of the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates.
The Commission maintains a Web site that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission. The address of such site is
(http://www.sec.gov).
No person has been authorized to give any information or to make any
representation other than those contained in this Prospectus and any Prospectus
Supplement with respect hereto and, if given or made, such information or
representations must not be relied upon. This Prospectus and any Prospectus
Supplement with respect hereto do not constitute an offer to sell or a
solicitation of an offer to buy any securities other than the Securities offered
hereby and thereby, nor an offer of the Securities to any person in any state or
other jurisdiction in which such offer would be unlawful. The delivery of this
Prospectus at any time does not imply that information herein is correct as of
any time subsequent to its date.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All documents filed by the Bank with respect to the Registration
Statement, either on its own behalf or on behalf of a Trust, relating to any
series of Securities referred to in the accompanying Prospectus Supplement, with
the Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), after the date of this
Prospectus and prior to the termination of any offering of the Securities, shall
be deemed to be incorporated by reference in this Prospectus and to be a part of
this Prospectus from the date of the filing of such documents. Any statement
contained herein or in a document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein (or in the
accompanying Prospectus Supplement) or in any other subsequently filed document
which also is or is deemed to be incorporated by reference herein, modifies or
replaces such statement. Any such statement so modified or superseded shall not
be deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
2
<PAGE>
REPORTS TO SECURITYHOLDERS
So long as the Securities are in book-entry form, monthly and annual
reports concerning the Securities, the Issuer and the Trust Property will be
furnished to the Depositary Trust Company ("DTC") as registered holder of the
Securities. DTC will supply such reports to Securityholders in accordance with
its procedures. To the extent required by the Exchange Act, the Bank will
provide financial information to the Securityholders which has been examined and
reported upon, with an opinion expressed by, an independent public accountant;
to the extent not so required, such financial information will be unaudited.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Title Page No
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<S> <C>
PROSPECTUS SUPPLEMENT..........................................................2
AVAILABLE INFORMATION..........................................................2
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE................................2
REPORTS TO SECURITYHOLDERS.....................................................3
PROSPECTUS SUMMARY.............................................................4
RISK FACTORS..................................................................11
THE TRUST PROPERTY............................................................15
THE ISSUERS...................................................................16
THE RECEIVABLES...............................................................16
AUTOMOBILE FINANCING PROGRAMS.................................................18
POOL FACTORS..................................................................19
USE OF PROCEEDS...............................................................19
THE LENDERS...................................................................19
THE TRUSTEE(S)................................................................19
DESCRIPTION OF THE SECURITIES.................................................20
DESCRIPTION OF THE TRUST AGREEMENTS...........................................27
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES......................................37
CERTAIN TAX CONSIDERATIONS....................................................41
ERISA CONSIDERATIONS..........................................................41
METHODS OF DISTRIBUTION.......................................................41
LEGAL OPINIONS................................................................42
INDEX OF TERMS................................................................43
</TABLE>
3
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus and by reference to
the information with respect to the Securities of any series contained in the
related Prospectus Supplement to be prepared and delivered in connection with
the offering of such Securities. Certain capitalized terms used in the summary
are defined elsewhere in the Prospectus on the pages indicated in the "Index of
Terms."
Issuer................. With respect to each series of Securities, either the
Bank or a Trust to be formed or managed by the Bank.
The Bank and any Trust issuing Securities pursuant to
this Prospectus and the related Prospectus Supplement
shall be referred to herein as the "Issuer" with
respect to the related Securities. See "The Issuers."
Bank................... Chevy Chase Bank, F.S.B., a federally chartered stock
savings bank. The Bank's principal executive offices
are located at 8401 Connecticut Avenue, Chevy Chase,
Maryland 20815, and its telephone number is
(301) 986-7000. See "The Lenders."
Servicer............... Unless otherwise disclosed in a Prospectus Supplement,
the Servicer for each series of Securities will be the
Bank.
Trustee................ The Trustee for each series of Securities (the
"Trustee") will be specified in the related Prospectus
Supplement. In addition, a Trust may separately enter
into an Indenture and may issue Notes pursuant to such
Indenture; in any such case the Trust and the
Indenture will be administered by separate,
independent trustees as required by the rules and
regulations under the Trust Indenture Act of 1939 and
the Investment Company Act of 1940, as amended (the
"Investment Company Act").
The Securities......... Each Class of Securities of any series will either
comprise Certificates evidencing beneficial ownership
interests in the Trust Property or Notes representing
indebtedness of the Issuer secured by the Trust
Property, as described herein and in the related
Prospectus Supplement.
With respect to Certificates issued by a Trust, each
Trust will be established, and the Certificates
issued, pursuant to an agreement (each, a "Pooling
Agreement") by and between the Bank, as transferor,
and the Trustee named therein. Each Pooling Agreement
will describe the related pool of Receivables held by
the Trust.
With respect to Notes that represent debt issued by
the Issuer (which may be the Bank or a Trust), the
Issuer will enter into an indenture (each, an
"Indenture") by and between the Issuer and the Trustee
named in such Indenture. Each Indenture will describe
the related pool of Receivables comprising the Trust
Property and securing the debt issued by the related
Issuer.
The Receivables comprising the Trust Property will be
serviced by the Servicer pursuant to a servicing
agreement (each, a "Servicing Agreement") by and
between the Servicer and the related Issuer.
In the case of the Trust Property of any class of
Securities, the contractual arrangements relating to
the establishment of a Trust, if any, the servicing of
the related Receivables and the issuance of the
related Securities may be contained in a single
agreement, or in several agreements which combine
certain aspects of the Pooling Agreement, the
Servicing Agreement and the Indenture described above
(for example, a pooling and servicing agreement, or a
servicing and collateral management agreement). For
purposes of this Prospectus, the term "Trust
Agreement" as used with respect to Trust
4
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Property means, collectively, and except as otherwise
described in the related Prospectus Supplement, any
and all agreements relating to the establishment of a
Trust, if any, the servicing of the related
Receivables and the issuance of the related
Securities. The term "Trustee" means any and all
persons acting as a trustee pursuant to a Trust
Agreement.
Securities Will Be Non-Recourse.
The Notes of a given series will represent non-
recourse obligations of the Issuer, and the
Certificates of a given series will represent
beneficial interests in the related Issuer and Trust
Property only and will not represent interests in or
recourse obligations of the Bank. In the case of
Certificates that represent beneficial ownership
interests in the related Issuer, the sole source of
payment will be the Trust Property. In the case of
Notes that represent debt issued by the related
Issuer, such Securities will have recourse solely to,
and will be secured by, the related Trust Property.
Notwithstanding the foregoing, and as to be described
in the related Prospectus Supplement, certain types of
Credit Enhancement, such as a letter of credit or
financial guaranty insurance policy may constitute a
full recourse obligation of the issuer of such Credit
Enhancement.
General Nature of the Securities as Investments.
Unless otherwise disclosed in a Prospectus Supplement,
all of the Securities offered pursuant to this
Prospectus and the related Prospectus Supplement will
be rated in one of the four highest rating categories
by one or more Rating Agencies (as defined herein).
Additionally, except to the extent provided in the
related Prospectus Supplement, all of the Securities
offered pursuant to this Prospectus and the related
Prospectus Supplement will be of the fixed-income type
("Fixed Income Securities"). Fixed Income Securities
will generally be styled as debt instruments, having a
principal balance and a specified Interest Rate. Fixed
Income Securities may consist of either Certificates
representing beneficial ownership interests in the
related Trust or Notes evidencing debt secured by the
Trust Property held by the related Issuer.
Each series or Class of Fixed Income Securities
offered pursuant to this Prospectus may have a
different Interest Rate, which may be a fixed or
variable Interest Rate, or determined pursuant to an
index. The related Prospectus Supplement will specify
the Interest Rate for each series or Class of Fixed
Income Securities described therein, or the initial
Interest Rate and the method for determining
subsequent changes to the Interest Rate. The
applicable Prospectus Supplement will disclose the
method for accruing interest on Fixed Income
Securities.
A series may include one or more Classes of Fixed
Income Securities ("Strip Securities") entitled (i) to
principal distributions, with disproportionate,
nominal or no interest distributions, or (ii) to
interest distributions, with disproportionate, nominal
or no principal distributions. In addition, a series
of Securities may include two or more Classes of Fixed
Income Securities that differ as to timing, sequential
order, priority of payment, Interest Rate or amount of
distribution of principal or interest or both, or as
to which distributions of principal or interest or
both on any Class may be made upon the occurrence of
specified events, in accordance with a schedule or
formula, or on the basis of collections from
designated portions of the related pool of
Receivables. Any such series may include one or more
Classes of Fixed Income Securities ("Accrual
Securities"), as to which
5
<PAGE>
certain accrued interest will not be distributed but
rather will be added to the principal balance (or
nominal balance, in the case of Accrual Securities
which are also Strip Securities) thereof on each
Distribution Date, as hereinafter defined, or in the
manner described in the related Prospectus Supplement.
If so provided in the related Prospectus Supplement, a
series may include one or more other Classes of Fixed
Income Securities (collectively, the "Senior
Securities") that are senior to one or more other
Classes of Fixed Income Securities (collectively, the
"Subordinate Securities") in respect of certain
distributions of principal and interest and
allocations of losses on Receivables.
In addition, certain Classes of Senior (or
Subordinate) Securities may be senior to other Classes
of Senior (or Subordinate) Securities in respect of
such distributions or losses.
General Payment Terms of Securities.
As provided in the related Trust Agreement and as
described in the related Prospectus Supplement, the
holders of the Securities ("Securityholders") will be
entitled to receive payments on their Securities on
specified dates (each, a "Distribution Date").
Distribution Dates with respect to Fixed Income
Securities will occur as described in the related
Prospectus Supplement.
The related Prospectus Supplement will describe a date
(the "Record Date") preceding such Distribution Date,
as of which the Trustee or its paying agent will fix
the identity of the Securityholders for the purpose of
receiving payments on the next succeeding Distribution
Date. As described in the related Prospectus
Supplement, the Distribution Date will be a specified
day of each month.
Each Trust Agreement will describe a period (each, a
"Collection Period") preceding each Distribution Date
(for example, in the case of monthly-pay Securities,
the calendar month preceding the month in which a
Distribution Date occurs). As more fully described in
the related Prospectus Supplement, collections
received on or with respect to the related Receivables
constituting Trust Property during a Collection Period
will be required to be remitted by the Servicer to the
related Trustee prior to the related Distribution Date
and will be used to fund payments to Securityholders
on such Distribution Date. As may be described in the
related Prospectus Supplement, the related Trust
Agreement may provide that all or a portion of the
payments collected on or with respect to the related
Receivables may be applied by the related Trustee to
the acquisition of additional Receivables during a
specified period (rather than be used to fund payments
of principal to Securityholders during such period),
with the result that the related Securities will
possess an interest-only period, also commonly
referred to as a revolving period, which will be
followed by an amortization period. Any such interest-
only or revolving period may, upon the occurrence of
certain events to be described in the related
Prospectus Supplement, terminate prior to the end of
the specified period and result in the earlier than
expected amortization of the related Securities.
In addition, and as may be described in the related
Prospectus Supplement, the related Trust Agreement may
provide that all or a portion of such collected
payments may be retained by the Trustee (and held in
certain temporary investments, including Receivables)
for a specified period prior to being used to fund
payments of principal to Securityholders. Such
retention and temporary investment by the Trustee of
such collected payments may be required by the related
6
<PAGE>
Trust Agreement for the purpose of (a) slowing the
amortization rate of the related Securities relative
to the installment payment schedule of the related
Receivables, or (b) attempting to match the
amortization rate of the related Securities to an
amortization schedule established at the time such
Securities are issued. Any such feature applicable to
any Securities may terminate upon the occurrence of
events to be described in the related Prospectus
Supplement, resulting in distributions to the
specified Securityholders and an acceleration of the
amortization of such Securities.
As more fully specified in the related Prospectus
Supplement, neither the Securities nor the underlying
Receivables will be guaranteed or insured by any
governmental agency or instrumentality or the Bank,
the related Servicer, any Trustee, or any of their
affiliates.
Credit Enhancement.
If and to the extent specified in the related
Prospectus Supplement, credit or cash flow enhancement
with respect to any Class or series of Securities or
the related Trust Property may include any one or more
of the following: a financial guaranty insurance
policy issued by an insurer specified in the related
Prospectus Supplement, a reserve account, letters of
credit, credit or liquidity facilities, third party
payments or other support, cash deposits or other
arrangements, including hedging and derivatives
contracts (collectively "Credit Enhancement"). In
addition to or in lieu of the foregoing, Credit
Enhancement may be provided by means of subordination,
cross-support among the Receivables or over-
collateralization. See "Description of the
Securities -- Credit and Cash Flow Enhancements."
Master Trusts; Issuance
of Additional Series... As may be described in the related Prospectus
Supplement, the Bank may cause one or more of the
Trusts (such a Trust, a "Master Trust") to issue
additional series of Securities from time to time.
Under each Trust Agreement relating to a Master Trust
(each, a "Master Trust Agreement"), the Bank may
determine the terms of any such new series and may
offer any such new series to the public or other
investors, in transactions either registered under the
Securities Act or exempt from registration thereunder,
directly or through one or more underwriters or
placement agents, in fixed-price offerings or in
negotiated transactions or otherwise. See "Description
of the Trust Agreements -- Master Trusts."
A new series to be issued by a Master Trust which has
a series outstanding may only be issued upon
satisfaction of the conditions described herein under
"Description of the Trust Agreements -- Master
Trusts". Securities issued out of a Master Trust
generally will represent undivided interests in the
entire pool of Receivables subject to such Master
Trust.
The Residual Interest.. With respect to certain Trusts, such as Master Trusts,
the "Residual Interest" at any time represents the
rights to the related Trust Property in excess of the
Securityholders' interest of all series then
outstanding that were issued by such Trust. The
Residual Interest in any Trust Property will fluctuate
as the aggregate principal balance of Receivables of
such Trust (the "Pool Balance") changes from time to
time. A portion of the Residual Interest in any Trust
may be sold separately in one or more public or
private transactions. See "Description of the Trust
Agreements -- Master Trusts."
Cross-
Collateralization...... As described in the related Trust Agreement and the
related Prospectus Supplement, the source of payment
for Securities of each series will be the related
Trust Property only.
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However, as may be described in the related Prospectus
Supplement, a series or class of Securities may
include the right to receive moneys from a common pool
of Credit Enhancement which may be available for more
than one series of Securities, such as a master
reserve account, master insurance policy or a master
collateral pool consisting of similar Receivables.
Trust Property......... As more fully specified in the related Prospectus
Supplement, the Trust Property will consist of certain
Contracts, and generally will include a security
interest in the related Vehicles. The Contracts are
obligations for the purchase of the Vehicles, or
evidence borrowings used to purchase the Vehicles. As
specified in the related Prospectus Supplement, the
Contracts may consist of any combination of Rule of
78s Contracts, Actuarial Contracts, Simple Interest
Contracts (each, as defined hereinafter) or other
forms of Contracts as described therein. See "The
Receivables -- The Contracts".
The related Prospectus Supplement will further
describe the type and characteristics of the Contracts
included in the Trust Property relating to the
Securities offered pursuant to this Prospectus and the
related Prospectus Supplement.
The Receivables comprising the Trust Property will be
originated by the Bank or its affiliates or acquired
by the Bank from other originators or owners of
Receivables.
The Bank will either transfer a pool of Receivables to
a Trust pursuant to a Pooling Agreement or a sale
agreement or pledge the Bank's right, title and
interest in and to such Receivables to a Trustee on
behalf of Securityholders pursuant to an Indenture.
The relative rights and duties of the Bank, the
Servicer and the related Trustee, if any, under the
related Trust Agreement include those specified below
and in the related Prospectus Supplement.
In addition, if so specified in the related Prospectus
Supplement, the Trust Property will include monies on
deposit in a Pre-Funding Account (the "Pre-Funding
Account") to be established with the Trustee, which
will be used to acquire Additional Receivables (as
hereinafter defined) from time to time during the
"Pre-Funding Period" specified in the related
Prospectus Supplement. The Pre-Funding Account, if
any, will be reduced during the related Pre-Funding
Period by the amount thereof used to purchase
Additional Receivables. Any amount remaining in the
Pre-Funding Account at the end of the related Pre-
Funding Period will be distributed to the related
Securityholders, pro rata, on the Distribution Date
immediately following the end of the Pre-Funding
Period.
If and to the extent provided in the related
Prospectus Supplement, the Bank will be obligated
(subject only to the availability thereof) to either
transfer to a Trust or pledge to a Trustee on behalf
of Securityholders, additional Receivables (the
"Additional Receivables") from time to time during any
Pre-Funding Period specified in the related Prospectus
Supplement. See "Description of the Trust Agreements
-- Pre-Funding Accounts."
Yield Maintenance
Accounts............... Certain of the Receivables may have annual percentage
rates of interest ("APR") which are less than the sum
of the Pass-Through Rate, the Servicing Fee Rate and,
if applicable, the rates at which the premium of a
Credit Enhancer (as defined hereinafter) and the
Trustee's fee are calculated (the sum of such rates,
the "Required Rate"). In such event, a Yield
Maintenance Account may be established as a segregated
trust account into which the Issuer may make a single
deposit on the Closing Date in an amount (the "Initial
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Yield Maintenance Amount") necessary to fund any
shortfall on interest collections which results from
Receivables having an APR of less than the Required
Rate.
Registration of
Securities; Clearance
and Settlement......... Unless otherwise set forth in a Prospectus Supplement,
the Securities will initially be represented by one or
more global securities registered in the name of Cede
& Co. ("Cede") as the nominee of DTC or another
depositary. Securityholders must elect to hold their
Securities through any of DTC (in the United States),
Cedel Bank, societe anonyme ("Cedel") or Euroclear
System ("Euroclear") (in Europe). Transfers within
DTC, Cedel or Euroclear, as the case may be, will be
in accordance with the usual rules and operating
procedures of the relevant system. In such case,
Securityholders will not be entitled to receive
definitive securities representing such
Securityholders' interests, except in certain
circumstances described in the related Prospectus
Supplement. See "Description of the Securities --
Book-Entry Registration."
Repurchase Obligations
and the Receivables
Acquisition Agreement.. As more fully described in the related Prospectus
Supplement, the Bank will be obligated to reacquire
from the related Trust Property any Receivable which
was transferred pursuant to a Pooling Agreement or
pledged pursuant to an Indenture if the interest of
the Securityholders therein is materially and
adversely affected by a breach of any representation
or warranty made by the Bank with respect to such
Receivable, which breach has not been cured. In
addition, if so specified in the related Prospectus
Supplement, the Bank may from time to time reacquire
certain Receivables of the Trust Property, subject to
specified conditions set forth in the related Trust
Agreement.
Servicer's
Compensation........... The Servicer shall be entitled to receive a fee for
servicing the Trust Property equal to a specified
percentage of the value of such Trust Property, as set
forth in the related Prospectus Supplement. See
"Description of the Trust Agreements -- Servicing
Compensation and Payment of Expenses" herein and in
the related Prospectus Supplement.
Optional Termination... The Servicer, the Bank, or, if specified in the
related Prospectus Supplement, certain other entities
may, at their respective options, effect early
retirement of a series of Securities under the
circumstances and in the manner set forth herein under
"Description of the Trust Agreements -- Termination"
herein and in the related Prospectus Supplement.
Mandatory Termination.. The Trustee, the Servicer or certain other entities
specified in the related Prospectus Supplement may be
required to effect early retirement of all or any
portion of a series of Securities by soliciting
competitive bids for the purchase of the Trust
Property or otherwise, under other circumstances and
in the manner specified in "Description of the Trust
Agreements -- Termination" herein and in the related
Prospectus Supplement.
Tax Considerations..... Securities of each series offered hereby will, for
federal income tax purposes, constitute either
(i) interests in a Trust treated as a grantor trust
under applicable provisions of the Internal Revenue
Code of 1986, as amended (the "Code"), (ii) debt
issued by a Trust or by the Bank, (iii) interests in a
Trust treated as a partnership, (iv) interests in a
Trust treated as debt of the Bank, or (v) "regular" or
"high-yield interests" issued by a FASIT.
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The Prospectus Supplement for each series of
Securities will summarize, subject to the limitations
stated therein, federal income tax considerations
relevant to the purchase, ownership and disposition of
such Securities.
Investors are advised to consult their tax advisors
and to review "Certain Federal Income Tax
Consequences" in the related Prospectus Supplement.
ERISA Considerations... The Prospectus Supplement for each series of
Securities will summarize, subject to the limitations
discussed therein, considerations under the Employee
Retirement Income Security Act of 1974, as amended
("ERISA"), relevant to the purchase of such Securities
by employee benefit plans and individual retirement
accounts. See "ERISA Considerations" in the related
Prospectus Supplement.
Legal Investment....... The related Prospectus Supplement will describe each
Class of Securities, if any, that will be eligible for
purchase by money market funds under Rule 2a-7 under
the Investment Company Act.
Ratings................ If set forth in a Prospectus Supplement, each Class of
Securities offered pursuant to this Prospectus and the
related Prospectus Supplement will be rated in one of
the four highest rating categories by one or more
"national statistical rating organizations", as
defined in the Exchange Act, and commonly referred to
as "Rating Agencies". Such ratings will address, in
the opinion of such Rating Agencies, the likelihood
that the Issuer will be able to make timely payment of
all amounts of interest due on the related Securities
and ultimate payment of all amounts of principal due
thereon in accordance with the terms thereof. Such
ratings will neither address any prepayment or yield
considerations applicable to any Securities nor
constitute a recommendation to buy, sell or hold any
Securities.
The ratings expected to be received with respect to
any Securities will be set forth in the related
Prospectus Supplement.
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RISK FACTORS
Prospective Securityholders should consider, among other things, the
following factors in connection with the purchase of the Securities:
Limited Liquidity. There can be no assurance that a secondary market
for the Securities of any series or Class will develop or, if it does develop,
that it will provide Securityholders with liquidity of investment or that it
will continue for the life of such Securities. The Prospectus Supplement for
any series of Securities may indicate whether or not such series will be listed
on any securities exchange or that an underwriter specified therein intends to
establish and maintain a secondary market in such Securities.
Ownership of Contracts. In connection with the issuance of any series
of Securities, the Bank will originate or acquire Contracts or CFC will
originate or acquire Contracts and assign them to the Bank. The Bank will
warrant in a Trust Agreement (i) if the Bank retains title to the Contracts,
that the Trustee for the benefit of Securityholders has a valid security
interest in such Contracts, or (ii) if the Bank transfers such Contracts to a
Trust, that the transfer of the Contracts to such Trust is either a valid
assignment, transfer and conveyance of the Contracts to the Trust or the Trustee
on behalf of the Securityholders has a valid security interest in such
Contracts. As to be described in the related Prospectus Supplement, the related
Trust Agreement will provide either that the Trustee will be required to
maintain possession of the original copies of all Contracts that constitute
chattel paper or that the Bank or the Servicer will retain possession of such
Contracts; provided that in case the Bank retains possession of the related
Contracts, the Servicer may take possession of such original copies as necessary
for the enforcement of any Contract. If any Contracts remain in the possession
of the Bank, the related Prospectus Supplement may describe specific trigger
events that will require delivery to the Trustee. If the Bank, the Servicer,
the Trustee or other third party, while in possession of the Contracts, sells or
pledges and delivers such Contracts to another party, in violation of the
agreement by which such Receivables were acquired (the "Receivables Acquisition
Agreement") or the Trust Agreement, there is a risk that such other party could
acquire an interest in such Contracts having a priority over the Issuer's
interest. Furthermore, if the Bank, the Servicer or a third party, while in
possession of the Contracts, is rendered insolvent, such event of insolvency may
result in competing claims to ownership or security interests in the Contracts.
Such an attempt, even if unsuccessful, could result in delays in payments on the
Securities. If successful, such attempt could result in losses to the
Securityholders or an acceleration of the repayment of the Securities. The Bank
will be obligated to repurchase any Contract transferred to the Trust by the
Bank which remains a part of the related Trust Property if there is a breach of
the Bank's representations and warranties that materially and adversely affects
the interests of the Trust in such Contract and such breach has not been cured.
Security Interests. The transfer of the Receivables by the Bank to a
Trustee or Trust pursuant to the related Pooling Agreement, Indenture or other
Trust Agreement, the perfection of the security interests in the Receivables and
the enforcement of rights to realize on the Vehicles as collateral for the
Receivables are subject to a number of federal and state laws, including the UCC
as in effect in various states. As specified in each Prospectus Supplement, the
Servicer will take such action as is required to perfect the rights of the
Trustee or Trust in the Receivables. Except as specified in each Prospectus
Supplement, no action will be taken to perfect the rights of the Trustee in
proceeds of any insurance policies covering individual Vehicles or Obligors.
Therefore, the rights of a third party with an interest in such proceeds could
prevail against the rights of the Trust prior to the time such proceeds are
deposited by the Servicer into a Trust Account (as hereinafter defined). See
"Certain Legal Aspects of the Receivables".
Each Contract will include a perfected security interest in the
related Vehicle in favor of CFC or the Bank or their designees (and, if
perfected in the name of CFC or the Bank, assigned pursuant to the related
Pooling Agreement, Indenture or Trust Agreement to the Trustee for the benefit
of the Securityholders). However, to the extent provided in the related
Prospectus Supplement, due to the administrative burden and expense, the
certificates of title of the Vehicles securing certain Contracts which reflect
the security interest of the Bank in such Vehicles may not be endorsed to
reflect the Trustee's interest therein or delivered to the Trustee. In the
absence of such endorsement and delivery, the Trustee
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may not have a perfected security interest in such Vehicles. As a result, a
trustee in bankruptcy of a Lender (as defined hereinafter), or a receiver for
the Bank may be able to assert successfully that the Trust or the Trustee did
not have a security interest in the Vehicle. In addition, statutory liens for
repairs or unpaid taxes and other liens arising by operation of law may have
priority even over prior perfected security interests in the name of the Trustee
in the Vehicles.
Restrictions on Recoveries. Unless specific limitations are described
in the related Prospectus Supplement with respect to specific Contracts, all
Contracts will provide that the obligations of the Obligors thereunder are
absolute and unconditional, regardless of any defense, set-off or abatement
which the Obligor may have against the Bank or any other person or entity
whatsoever. At the time of sale, the Bank will warrant that no claims or
defenses have been asserted or threatened with respect to the Contracts and that
all requirements of applicable law with respect to the Contracts have been
satisfied.
In the event that the Bank or the Servicer must rely on repossession
and disposition of Vehicles to recover scheduled payments due on Defaulted
Receivables (as defined in the related Trust Agreement), the Issuer may not
realize the full amount due on a Contract (or may not realize the full amount on
a timely basis). Other factors that may affect the ability of the Issuer to
realize the full amount due on a Contract include whether amendments to
certificates of title relating to the Vehicles had been filed, whether financing
statements to perfect the security interest in the Vehicles had been filed,
depreciation, obsolescence, damage or loss of any Vehicle, and the application
of federal and state bankruptcy and insolvency laws. As a result, the
Securityholders may be subject to delays in receiving payments and suffer loss
of their investment in the Securities.
Financial Institution Insolvency Risks. The Bank intends that each
transfer by it to a Trustee or Trust will constitute either a valid sale and
assignment of the Receivables or a grant of a security interest in the
Receivables. To the extent the Bank grants a security interest in the
Receivables transferred by it to the Trust, and such security interest is
validly perfected before the occurrence of an insolvency event and is not taken
or granted in contemplation of insolvency or with the intent to hinder, delay or
defraud the Bank or its creditors, the Federal Deposit Insurance Act, as amended
("FDIA"), including as amended by the Financial Institutions Reform, Recovery,
and Enforcement Act of 1989, as amended ("FIRREA"), provides that such security
interest should not be subject to avoidance by the Federal Deposit Insurance
Corporation (the "FDIC") as receiver or conservator for the Bank. Subject to
clarification by regulations or interpretations, positions taken by the FDIC
staff prior to the passage of FIRREA do not suggest that the FDIC, as receiver
or conservator for the Bank, would interfere with the timely transfer to the
Trust of payments collected on the related Receivables. If, however, the FDIC
were to assert a contrary position, such as requiring the Trustee to establish
its right to those payments by submitting to and completing the administrative
claims procedure under the FDIA, or the conservator or receiver were to request
a stay of proceedings with respect to the Bank as provided under the FDIA,
delays in payments on the Securities and possible reductions in the amount of
those payments could occur. In addition, the FDIC, if appointed as conservator
or receiver for the Bank, has the power under the FDIA to repudiate contracts,
including secured contracts of the Bank. The FDIA provides that a claim for
damages arising from the repudiation of a contract is limited to "actual direct
compensatory damages." In the event the FDIC were to be appointed as conservator
or receiver of the Bank and were to repudiate the Trust Agreement, then the
amount payable out of available collections on the Receivables to the
Securityholders could be lower than the outstanding principal and accrued
interest on the Securities.
Insurance on Vehicles. Each Receivable generally requires the related
Obligor to maintain insurance covering physical damage to the Vehicle in an
amount not less than the unpaid principal balance of such Receivable pursuant to
which the Bank (or CFC in the case of Receivables originated or acquired by CFC)
is named as a loss payee. Since the Obligors select their own insurers to
provide the requisite coverage, the specific terms and conditions of their
policies vary.
In addition, although each Receivable generally gives the Bank the
right to force place insurance coverage in the event the required physical
damage insurance on a Vehicle is not maintained by an Obligor, neither the Bank
nor the Servicer is obligated to place such coverage. In the event insurance
coverage is not maintained by Obligors and coverage is not force placed, then
insurance recoveries may be limited in the event of losses or casualties to
Vehicles included in the Trust Property, as a result of which Securityholders
could suffer a loss on their investment.
Delinquencies and Losses. There can be no assurance that the
historical levels of delinquencies and losses experienced by a Lender on its
respective loan and vehicle portfolio will be indicative of the
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performance of the Contracts included in a Trust or that such levels will
continue in the future. Delinquencies and losses could increase significantly
for various reasons, including changes in the federal income tax laws, changes
in the local, regional or national economies or due to other events.
Subordination; Limited Assets. To the extent specified in the related
Prospectus Supplement, distributions of interest and principal on one Class of
Securities of a series may be subordinated in priority of payment to interest
and principal due on other Classes of Securities of a related series. Moreover,
the Trust Property will not have, nor is it permitted or expected to have, any
significant assets or sources of funds other than the related Receivables and,
to the extent provided in the related Prospectus Supplement, the related reserve
account and any other Credit Enhancement. The Securities represent obligations
solely of the related Trust or debt secured by the related Trust Property, and
will not represent a recourse obligation to other assets of the Bank. No
Securities of any series will be insured or guaranteed by the Bank, the
Servicer, or the applicable Trustee. Consequently, holders of the Securities of
any series must rely for repayment primarily upon payments on the Receivables
and, if and to the extent available, the reserve account, if any, and any other
Credit Enhancement, all as specified in the related Prospectus Supplement.
Master Trusts. As may be described in the related Prospectus
Supplement, a Master Trust may issue from time to time more than one series.
While the terms of any additional series will be specified in a supplement to
the related Master Trust Agreement, the provisions of such supplement and,
therefore, the terms of any additional series, will not be subject to prior
review by, or consent of, holders of the Securities of any series previously
issued by such Master Trust. Such terms may include methods for determining
applicable investor percentages and allocating collections, provisions creating
different or additional security or Credit Enhancements and any other provisions
which are made applicable only to such series. The obligation of the related
Trustee to issue any new series is subject to the condition, among others, that
such issuance will not result in any Rating Agency reducing or withdrawing its
rating of the Securities of any outstanding series (any such reduction or
withdrawal is referred to herein as a "Ratings Effect"). There can be no
assurance, however, that the terms of any series might not have an impact on the
timing or amount of payments received by a Securityholder of another series
issued by the same Master Trust. See "Description of the Trust Agreements --
Master Trusts."
Book-Entry Registration. Issuance of the Securities in book-entry
form may reduce the liquidity of such Securities in the secondary trading market
since investors may be unwilling to purchase Securities for which they cannot
obtain definitive physical securities representing such Securityholders'
interests, except in certain circumstances described in the related Prospectus
Supplement. In addition, beneficial owners of Securities may not be recognized
as Securityholders under the terms of a Trust Agreement and may exercise rights
only indirectly through DTC, Cedel or Euroclear.
Since transactions in Securities will, in most cases, be able to be
effected only through DTC, direct or indirect participants in DTC's book-entry
system or certain banks, the ability of a Securityholder to pledge a Security to
persons or entities that do not participate in the DTC system, or otherwise to
take actions in respect to such Securities, may be limited due to lack of a
physical security representing the Securities.
Securityholders may experience some delay in their receipt of
distributions of interest on and principal of the Securities since distributions
may be required to be forwarded by the Trustee to DTC and, in such case, DTC
will be required to credit such distributions to the accounts of its
Participants (as defined hereinafter) which thereafter will be required to
credit them to the accounts of the applicable class of Securityholders either
directly or indirectly through Indirect Participants (as defined hereinafter).
See "Description of the Securities -- Book Entry Registration."
Security Rating. The rating of Securities credit enhanced by a letter
of credit, financial guaranty insurance policy, reserve fund, credit or
liquidity facilities, cash deposits or other forms of Credit Enhancement will
depend primarily on the creditworthiness of the issuer of such external Credit
Enhancement device (a "Credit Enhancer"). Any reduction in the rating assigned
to the claims-paying ability of the related Credit Enhancer to honor its
obligations pursuant to any such Credit Enhancement
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below the rating initially given to the Securities would likely result in a
reduction in the rating of the Securities.
Maturity and Prepayment Considerations. Because the rate of payment
of principal on the Securities will depend, among other things, on the rate of
payment on the related Contracts, the rate of payment of principal on the
Securities cannot be predicted. Payments on the Contracts will include
scheduled payments as well as partial and full prepayments (to the extent not
replaced with substitute Contracts), payments upon the liquidation of Defaulted
Contracts, payments upon acquisitions by the Servicer or the Bank of Contracts
from the related Trust Property on account of a breach of certain
representations and warranties in the related Trust Agreement, and payments
upon an optional acquisition by the Servicer or the Bank of Contracts from the
related Trust Property (any such voluntary or involuntary prepayment or other
early payment of a Contract, a "Prepayment"). The rate of early terminations of
Contracts due to Prepayments and defaults may be influenced by a variety of
economic and other factors, including, among others, obsolescence, then current
economic conditions and tax considerations. The risk of reinvesting
distributions of the principal of the Securities will be borne by the
Securityholders. The yield to maturity on Strip Securities or Securities
purchased at premiums or discounts to par will be extremely sensitive to the
rate of Prepayments on the related Receivables. In addition, the yield to
maturity on certain other types of classes of Securities, including Strip
Securities, Accrual Securities or certain other Classes in a series including
more than one Class of Securities, may be relatively more sensitive to the rate
of prepayment of the related Contracts than other Classes of Securities.
The rate of Prepayments of Contracts cannot be predicted and is
influenced by a wide variety of economic, social, and other factors, including
prevailing interest rates, the availability of alternate financing and local and
regional economic conditions. Therefore, no assurance can be given as to the
level of Prepayments that a Trust will experience.
Securityholders should consider, in the case of Securities purchased
at a discount, the risk that a slower than anticipated rate of Prepayments on
the Receivables could result in an actual yield that is less than the
anticipated yield and, in the case of any Securities purchased at a premium, the
risk that a faster than anticipated rate of Prepayments on the Receivables could
result in an actual yield that is less than the anticipated yield.
Limitations on Interest Payments and Repossessions. Generally, under
the terms of the Soldiers' and Sailors' Civil Relief Act of 1940, as amended
(the "Relief Act"), or similar state legislation, an Obligor who enters military
service after the origination of the related Receivable (including an Obligor
who is a member of the National Guard or is in reserve status at the time of the
origination of the Receivable and is later called to active duty) may not be
charged interest (including fees and charges) above an annual rate of 6% during
the period of such Obligor's active duty status, unless a court orders otherwise
upon application of the lender. It is possible that such action could have an
effect, for an indeterminate period of time, on the ability of the Servicer to
collect full amounts of interest on certain of the Receivables. In addition,
the Relief Act imposes limitations that would impair the ability of the Servicer
to repossess a Vehicle during the Obligor's period of active duty status. Thus,
in the event that such a Receivable goes into default, there may be delays and
losses occasioned by the inability of the Servicer to realize upon the Vehicle
in a timely fashion.
Financial Condition of the Bank. The Bank is generally not obligated
to make any payments in respect of the Securities or the Receivables of a
specific Trust. If the Bank were to cease acting as Servicer, delays in
processing payments on the Receivables and information in respect thereof could
occur and result in delays in payments to the Securityholders.
In certain circumstances, the Bank will be required to acquire
Receivables from the related Trust Property with respect to which such
representations and warranties have been breached. In the event that the Bank
is incapable of complying with its reacquire obligations and no other party is
obligated to perform or satisfy such obligations, Securityholders may be subject
to delays in receiving payments and suffer loss of their investment in the
Securities.
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The related Prospectus Supplement will set forth certain information
regarding the Bank. In addition, the Bank is subject to the information
requirements of the Exchange Act and, in accordance therewith, file reports and
other information with the Commission. For further information regarding the
Bank reference is made to such reports and other information which are available
as described under "Available Information."
Consumer Protection Laws. The Receivables are subject to federal and
state consumer protection laws which impose requirements with respect to the
making, transfer, acquisition, enforcement and collection of consumer loans.
Such laws, as well as any new laws or rules which may be adopted, may adversely
affect the Servicer's ability to collect on the Receivables. In addition,
failure by the Bank to have complied, or the Servicer to comply, with such
requirements could adversely affect the enforceability of the Receivables. The
Bank will make representations and warranties relating to the validity and
enforceability of the Receivables and its compliance with applicable law in
connection with its performance of the transactions contemplated by the related
Trust Agreement. Pursuant to such Trust Agreement, if the Trust's interest in a
Receivable is materially and adversely affected by the failure of such
Receivable to comply with applicable requirements of consumer protection law,
such Receivable will be repurchased by the Bank. The sole remedy if any such
representation or warranty is not complied with and such noncompliance continues
beyond the applicable cure period is that the Receivables affected thereby will
be repurchased by the Bank.
THE TRUST PROPERTY
The Trust Property will include, as specified in the related
Prospectus Supplement, (i) a pool of Receivables, (ii) all monies (including
accrued interest) due or received thereunder on or after the date on which the
payments made with respect to the Receivables are payable to the related Trust
("applicable Cut-off Date"), (iii) such amounts as from time to time may be held
in one or more accounts established and maintained by the Servicer pursuant to
the related Trust Agreement, as described below and in the related Prospectus
Supplement, (iv) the security interests, if any, in the Vehicles relating to
such pool of Receivables, (v) unless otherwise specified in the related
Prospectus Supplement, the right to proceeds from claims on physical damage,
credit life insurance and disability policies or other policies, if any,
covering such Vehicles or the related Obligors, as the case may be, (vi) the
proceeds of any repossessed Vehicles related to such pool of Receivables, (vii)
the rights of the Bank under the related Receivables Acquisition Agreement,
(viii) interest earned on certain short-term investments held in such Trust
Property, unless the related Prospectus Supplement specifies that such earnings
may be paid to the Servicer or the Bank, and (ix) Additional Receivables which
may be added to the Trust Property from time to time. The Trust Property will
also include, if so specified in the related Prospectus Supplement, monies on
deposit in a Pre-Funding Account, which will be used by the Trustee to acquire
or receive a security interest in Additional Receivables from time to time
during the Pre-Funding Period specified in the related Prospectus Supplement.
See "Description of the Trust Agreement -- Pre-Funding Accounts." In addition,
to the extent specified in the related Prospectus Supplement, some combination
of Credit Enhancements may be issued to or held by the Trustee on behalf of the
related Trust for the benefit of the holders of one or more classes of
Securities.
The Receivables comprising the Trust Property will, as specifically
described in the related Prospectus Supplement, be purchased or originated by
the Bank, its wholly-owned subsidiary, CFC or another originator (each, a
"Lender" and together, the "Lenders"). The underwriting criteria applicable to
the Receivables included in any Trust Property will be described in all material
respects in the related Prospectus Supplement.
The Trust Property will include Receivables with respect to which the
related Contract or the related Vehicles are subject to federal or state
registration or titling requirements. No Trust Property will include
Receivables with respect to which the underlying Contracts or Vehicles relate to
office equipment, aircraft, ships or boats, firearms or other weapons, railroad
rolling stock or facilities such as factories, warehouses or plants subject to
state laws governing the manner in which title or security interest in real
property is determined or perfected.
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The Receivables included in the Trust Property will be selected from
those Receivables held by the Bank based on the criteria specified in the
applicable Trust Agreement and described herein or in the related Prospectus
Supplement.
With respect to each series of Securities, on or prior to the date on
which the Securities are delivered to Securityholders (the "Closing Date"), the
Bank will either (i) transfer the related Receivables into a Trust pursuant to a
Pooling Agreement between the Bank and the Trustee or (ii) enter into an
Indenture with a Trustee relating to the issuance of such Securities, secured by
the related Receivables.
THE ISSUERS
With respect to each series of Securities, the Bank will establish a
separate Trust that will issue such Securities pursuant to the related Trust
Agreement. For purposes of this Prospectus and the related Prospectus
Supplement, the related Trust shall be referred to as the Issuer with respect
to such Securities.
Upon the issuance of the Securities of a given series, the proceeds
from such issuance will be used by a Trust to acquire the related Receivables.
The Servicer will service the related Receivables pursuant to the applicable
Servicing Agreement, and will be compensated for acting as the Servicer. To
facilitate servicing and to minimize administrative burden and expense, the
Servicer may be appointed custodian for the related Receivables by each Trustee
and the Bank, as may be set forth in the related Prospectus Supplement.
If the protection provided to the Securityholders of a given Class by
the subordination of another Class of Securities of such series and by the
availability of the funds in the reserve account, if any, or any other Credit
Enhancement for such series is insufficient, the Issuer must rely solely on the
payments from the Obligors on the related Contracts, and the proceeds from the
sale of Vehicles which secure the Defaulted Contracts. In such event, certain
factors may affect such Issuer's ability to realize on the collateral securing
such Contracts, and thus may reduce the proceeds to be distributed to the
Securityholders of such series.
THE RECEIVABLES
Receivables Pools
Information with respect to the Receivables in the related Trust
Property will be set forth in the related Prospectus Supplement, including, to
the extent appropriate, the composition of such Receivables and the distribution
of such Receivables by geographic concentration, payment frequency and current
principal balance as of the applicable Cut-off Date.
The Contracts
As specified in the related Prospectus Supplement, the Contracts may
consist of any combination of Rule of 78s Contracts, Actuarial Contracts or
Simple Interest Contracts. Generally, "Rule of 78s Contracts" provide for fixed
level monthly payments which will amortize the full amount of the Contract over
its term. The Rule of 78s Contracts provide for allocation of payments
according to the "sum of periodic balances" or "sum of monthly payments" method
(the "Rule of 78s"). Each Rule of 78s Contract provides for the payment by the
Obligor of a specified total amount of payments, payable in monthly installments
on the related due date, which total represents the principal amount financed
and finance charges in an amount calculated on the basis of APR for the term of
such Contract. The rate at which such amount of finance charges is earned and,
correspondingly, the amount of each fixed monthly payment allocated to reduction
of the outstanding principal balance of the related Contract are calculated in
accordance with the Rule of 78s. Under the Rule of 78s, the portion of each
payment allocable to interest is higher during the early months of the term of a
Contract and lower during later months than that under a constant yield
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method for allocating payments between interest and principal. Notwithstanding
the foregoing, as specified in the related Prospectus Supplement, all payments
received by the Servicer on or in respect of the Rule of 78s Contracts may be
allocated on an actuarial or simple interest basis.
If an Obligor elects to prepay a Rule of 78s Contract in full, it is
entitled to a rebate of the portion of the outstanding balance then due and
payable attributable to unearned finance charges. If a Simple Interest Contract
is prepaid, rather than receive a rebate, the Obligor is required to pay
interest only to the date of prepayment. The amount of a rebate under a Rule of
78s Contract calculated in accordance with the Rule of 78s will always be less
than had such rebate been calculated on an actuarial basis and generally will be
less than the remaining scheduled payments of interest that would be due under a
Simple Interest Contract for which all payments were made on schedule.
Distributions to Securityholders may not be affected by Rule of 78s rebates
under the Rule of 78s Contract because pursuant to the related Prospectus
Supplement such distributions may be determined using the actuarial or simple
interest method.
Generally, the "Actuarial Contracts" provide for amortization of the
loan over a series of fixed level payment monthly installments. A fixed,
scheduled amount is due monthly on a specified date; the application of the
payment to principal and interest is not affected by whether the payment was
received on the scheduled due date, or early or late.
"Simple Interest Contracts" provide for the amortization of the amount
financed under the receivable over a series of fixed level monthly payments.
However, unlike the monthly payment under Rule of 78s Contracts, each monthly
payment consists of an installment of interest which is calculated on the basis
of the outstanding principal balance of the receivable multiplied by the stated
APR and further multiplied by the period elapsed (as a fraction of a calendar
year) since the preceding payment of interest was made. As payments are
received under a Simple Interest Contract, the amount received is applied first
to interest accrued to the date of payment and the balance is applied to reduce
the unpaid principal balance. Accordingly, if an Obligor pays a fixed monthly
installment before its scheduled due date, the portion of the payment allocable
to interest for the period since the preceding payment was made will be less
than it would have been had the payment been made as scheduled, and the portion
of the payment applied to reduce the unpaid principal balance will be
correspondingly greater. Conversely, if an Obligor pays a fixed monthly
installment after its scheduled due date, the portion of the payment allocable
to interest for the period since the preceding payment was made will be greater
than it would have been had the payment been made as scheduled, and the portion
of the payment applied to reduce the unpaid principal balance will be
correspondingly less. In either case, the Obligor pays a fixed monthly
installment until the final scheduled payment date, at which time the amount of
the final installment is increased or decreased as necessary to repay the then
outstanding principal balance.
Delinquencies and Losses
Certain information relating to a Lender's delinquency and loss
experience with respect to Contracts it has originated or acquired will be set
forth in each Prospectus Supplement. This information may include, among other
things, the experience with respect to all Contracts in such Lender's portfolio
during certain specified periods. There can be no assurance that the
delinquency and loss experience on any Trust Property will be comparable to such
Lender's prior experience.
Maturity and Prepayment Considerations
As more fully described in the related Prospectus Supplement, if a
Contract permits a Prepayment, such payment, together with accelerated payments
resulting from defaults, will shorten the weighted average life of the related
pool of Receivables and the weighted average life of the related Securities.
The rate of Prepayments on the Receivables may be influenced by a variety of
economic, financial and other factors. In addition, under certain
circumstances, the Bank will be obligated to reacquire Receivables from the
related Trust Property pursuant to the applicable Trust Agreement or Receivables
Acquisition Agreement as a result of breaches of representations and warranties.
Any reinvestment risks resulting
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from a faster or slower amortization of the related Securities which results
from Prepayments will be borne entirely by the related Securityholders.
The related Prospectus Supplement will set forth certain additional
information with respect to the maturity and prepayment considerations
applicable to a particular pool of Receivables and the related series of
Securities, together with a description of any applicable prepayment penalties.
AUTOMOBILE FINANCING PROGRAMS
Underwriting Procedures
Each Receivable was originated or purchased by a Lender after a review
by such Lender in accordance with its established underwriting procedures. Each
Lender has its own underwriting procedures which will be more fully described
in the related Prospectus Supplement; however, some of the current underwriting
practices of the Lenders are noted in the following paragraphs.
Generally, the underwriting procedures of the Lenders are designed to
provide a basis for assessing the Obligor's ability and willingness to repay the
loan. In conducting this assessment, the Lenders consider the Obligor's ratio
of debt to income and evaluate the Obligor's credit history through a review of
a written credit report compiled by a recognized consumer credit reporting
bureau. The Obligor's equity in the collateral and the terms of the loan are of
secondary importance in the Lender's analysis. The Lenders' guidelines are
intended only to provide a basis for lending decisions, and exceptions to such
guidelines may, within certain limits, be made based upon the credit judgment of
the lending officer. The Lenders periodically conduct quality audits to ensure
compliance with their established policies and procedures.
CFC's underwriting guidelines relate to a category of lending in which
loans may be made to applicants who have experienced certain adverse credit
events (and therefore would not necessarily meet all of the Bank's guidelines
for its traditional loan program) but who meet certain other creditworthiness
tests. Such loans may experience higher rates of delinquencies, repossessions
and losses, especially under adverse economic conditions, as compared with loans
originated pursuant to the Bank's traditional lending program.
Selection Criteria
The Receivables with respect to each issuance of Securities will be
selected from the Lenders' portfolios on the basis of a number of criteria
specified in the related Prospectus Supplement, including the following: (i)
original term to maturity, (ii) final maturity date, (iii) except as otherwise
disclosed, Contracts which provide for level monthly payments that fully
amortize the amount financed over the original term, (iv) maximum number of days
delinquent and (v) Contracts which have an unpaid principal balance of not less
than a specified amount as of the applicable Cut-Off Date.
Contracts are generally prepayable at any time. No Lender maintains
records of the historical prepayment experience of its automobile receivables
portfolio, and the Bank makes no prediction as to the actual prepayment
experience on the Receivables.
The composition, distribution by APR and geographical distribution of
the Receivables as of the applicable Cut-Off Date will be as set forth in the
applicable Prospectus Supplement.
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POOL FACTORS
The "Pool Factor" for each Class of Securities will be a seven-digit
decimal, which the Servicer will compute prior to each distribution with respect
to such Class of Securities, indicating the remaining outstanding principal
balance of such Class of Securities as of the applicable Distribution Date, as a
fraction of the initial outstanding principal balance of such Class of
Securities. Each Pool Factor will be initially 1.0000000, and thereafter will
decline to reflect reductions in the outstanding principal balance of the
applicable Class of Securities. A Securityholder's portion of the aggregate
outstanding principal balance of the related Class of Securities is the product
of (i) the original face amount of such Securityholder's Securities and (ii) the
applicable Pool Factor.
As more specifically described in the related Prospectus Supplement
with respect to each series of Securities, the related Securityholders of record
will receive reports on or about each Distribution Date concerning the payments
received on the Receivables, the Pool Balance, each Pool Factor and various
other items of information. In addition, Securityholders of record during any
calendar year will be furnished information for tax reporting purposes not later
than the latest date permitted by law.
USE OF PROCEEDS
Except as provided in the related Prospectus Supplement, the proceeds
from the sale of the Securities of a given series will be used by the Bank or a
Trust for the acquisition of the related Receivables, to fund reserve accounts,
for issuance expenses, and/or general corporate purposes, including, without
limitation, the purchase of additional Receivables, the repayment of
indebtedness and general working capital purposes.
THE LENDERS
General
The Bank, which is one of the Lenders, is a federally chartered stock
savings bank. The Bank's home office is located at 7926 Jones Branch Drive,
McLean, Virginia 22102, and the Bank's principal executive offices are located
at 8401 Connecticut Avenue, Chevy Chase, Maryland 20815, and the Bank's
telephone number is (301) 986-7000. The Bank is subject to comprehensive
regulation, examination and supervision by the Office of Thrift Supervision (the
"OTS") within the Department of the Treasury and the FDIC. Deposits at the Bank
are fully insured up to $100,000 per insured depositor by the Savings
Association Insurance Fund ("SAIF"), which is administered by the FDIC. For
further information regarding the Bank, its assets, capitalization, and
regulatory status and the effect of current legislation, see the related
Prospectus Supplement.
The other Lender, CFC, is a wholly-owned subsidiary of the Bank,
formed in December 1994 for the purpose of providing automobile financing to
applicants who may have experienced certain adverse credit events.
THE TRUSTEE(S)
The Trustee for each series of Securities will be specified in the
related Prospectus Supplement. The Trustee's liability in connection with the
issuance and sale of the related Securities is limited solely to the express
obligations of such Trustee set forth in the related Trust Agreement.
With respect to each series of Securities, the procedures for the
resignation or removal of the Trustee and the appointment of a successor Trustee
shall be specified in the related Prospectus Supplement to the extent such
procedures differ from those described herein under "Description of the Trust
Agreements -- Duties and Immunities of the Trustee."
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DESCRIPTION OF THE SECURITIES
General
The Securities will be issued in series. Each series of Securities
(or, in certain instances, two or more series of Securities) will be issued
pursuant to a Trust Agreement. The following summaries (together with
additional summaries under "Description of the Trust Agreements" below) describe
all material terms and provisions relating to the Securities common to each
Trust Agreement. The summaries do not purport to be complete and are subject
to, and are qualified in their entirety by reference to, all of the provisions
of the Trust Agreement for the related Securities and the related Prospectus
Supplement.
All of the Securities offered pursuant to this Prospectus and the
related Prospectus Supplement will be rated in one of the four highest rating
categories by one or more Rating Agencies.
The Securities will generally be styled as having a principal or
notional balance and a specified Interest Rate. The Securities may either
represent beneficial ownership interests in the related Receivables held by the
related Trust or debt secured by certain assets of the related Issuer.
Each series or Class of Securities offered pursuant to this Prospectus
may have a different Interest Rate, which may be a fixed or adjustable interest
rate, or tied to an index. The related Prospectus Supplement will specify the
Interest Rate for each series or Class of Securities described therein, or the
initial interest rate and the method for determining subsequent changes to the
Interest Rate.
A series may include one or more Classes of Strip Securities entitled
(i) to principal distributions, with disproportionate, nominal or no interest
distributions, or (ii) to interest distributions, with disproportionate, nominal
or no principal distributions. In addition, a series of Securities may include
two or more Classes of Securities that differ as to timing, sequential order,
priority of payment, Interest Rate or amount of distribution of principal or
interest or both, or as to which distributions of principal or interest or both
on any Class may be made upon the occurrence of specified events, in accordance
with a schedule or formula, or on the basis of collections from designated
portions of the related pool of Receivables. Any such series may include one or
more Classes of Accrual Securities, as to which certain accrued interest will
not be distributed but rather will be added to the principal balance (or nominal
balance, in the case of Accrual Securities which are also Strip Securities)
thereof on each Distribution Date (as hereinafter defined) or in the manner
described in the related Prospectus Supplement.
If so provided in the related Prospectus Supplement, a series may
include one or more other Classes of Senior Securities that are senior to one or
more other Classes of Subordinate Securities in respect of certain distributions
of principal and interest and allocations of losses on Receivables.
In addition, certain Classes of Senior (or Subordinate) Securities may
be senior to other Classes of Senior (or Subordinate) Securities in respect of
such distributions or losses.
General Payment Terms of Securities
As provided in the related Trust Agreement and as described in the
related Prospectus Supplement, Securityholders will be entitled to receive
payments on their Securities on the specified Distribution Dates. Distribution
Dates with respect to the Securities will occur monthly, quarterly or semi-
annually, as described in the related Prospectus Supplement.
The related Prospectus Supplement will describe the Record Date
preceding such Distribution Date, as of which the Trustee or its paying agent
will fix the identity of the Securityholders for the purpose of receiving
payments on the next succeeding Distribution Date. Unless otherwise described
in the related Prospectus Supplement, the Distribution Date may be the fifteenth
day of each month (or, in the case of quarterly-pay Securities, the fifteenth
day of every third month; and in the case of semi-annual pay Securities, the
fifteenth day of every sixth month) and the Record Date will be the close of
business as
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of the last day of the calendar month that precedes the calendar month in which
such Distribution Date occurs.
Each Trust Agreement will describe a Collection Period preceding each
Distribution Date (for example, in the case of monthly-pay Securities, the
calendar month preceding the month in which a Distribution Date occurs). As
more fully provided in the related Prospectus Supplement, collections received
on or with respect to the related Receivables held by a Trust during a
Collection Period will be required to be remitted by the Servicer to the related
Trustee prior to the related Distribution Date and will be used to fund payments
to Securityholders on such Distribution Date. As may be described in the
related Prospectus Supplement, the related Trust Agreement may provide that all
or a portion of the payments collected on or with respect to the related
Receivables may be applied by the related Trustee to the acquisition of
additional Receivables during a specified period (rather than be used to fund
payments of principal to Securityholders during such period) with the result
that the related Securities will possess an interest-only period, also commonly
referred to as a revolving period, which will be followed by an amortization
period. Any such interest only or revolving period may, upon the occurrence of
certain events to be described in the related Prospectus Supplement, terminate
prior to the end of the specified period and result in the earlier than expected
amortization of the related Securities.
In addition, and as may be described in the related Prospectus
Supplement, the related Trust Agreement may provide that all or a portion of
such collected payments may be retained by the Trustee (and held in certain
temporary investments, including Receivables) for a specified period prior to
being used to fund payments of principal to Securityholders. Such retention and
temporary investment by the Trustee of such collected payments may be required
by the related Trust Agreement for the purposes of (a) slowing the amortization
rate of the related Securities relative to the installment payment schedule of
the related Receivables, or (b) attempting to match the amortization rate of the
related Securities to an amortization schedule established at the time such
Securities are issued. Any such feature applicable to any Securities may
terminate upon the occurrence of events to be described in the related
Prospectus Supplement, resulting in distributions to the specified
Securityholders and an acceleration of the amortization of such Securities.
Neither the Securities nor the underlying Receivables will be
guaranteed or insured by any governmental agency or instrumentality or the Bank,
CFC, the Servicer, any Trustee or any of their respective affiliates unless
specifically set forth in the related Prospectus Supplement.
As may be described in the related Prospectus Supplement, Securities
of each series covered by a particular Trust Agreement will either evidence
specified beneficial ownership interests in the Trust Property or represent debt
secured by the related Trust Property. To the extent that any Trust Property
includes certificates of interest or participations in Receivables, the related
Prospectus Supplement will describe the material terms and conditions of such
certificates or participations.
Book-Entry Registration
As may be described in the related Prospectus Supplement,
Securityholders of a given series may hold their Securities through DTC (in the
United States) or CEDEL or Euroclear (in Europe) if they are participants of
such systems, or indirectly through organizations that are participants in such
systems.
Cede, as nominee for DTC, will hold the global Securities in respect
of a given series. CEDEL and Euroclear will hold omnibus positions on behalf of
the CEDEL Participants (as defined below) and the Euroclear Participants (as
defined below) (collectively, the "Participants"), respectively, through
customers' securities accounts in CEDEL's and Euroclear's names on the books of
their respective depositaries (collectively, the "Depositaries") which in turn
will hold such positions in customers' securities accounts in the Depositaries'
names on the books of DTC.
DTC is a limited purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York UCC and a "clearing agency"
registered pursuant to Section 17A of the Exchange Act. DTC was created to hold
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securities for its Participants and to facilitate the clearance and settlement
of securities transactions between Participants through electronic book-entries,
thereby eliminating the need for physical movement of notes or certificates.
Participants include securities brokers and dealers, banks, trust companies and
clearing corporations. Indirect access to the DTC system also is available to
others such as banks, brokers, dealers and trust companies that clear through or
maintain a custodial relationship with a Participant, either directly or
indirectly ("Indirect Participants").
Transfers between DTC Participants will occur in accordance with DTC
rules. Transfers between CEDEL Participants and Euroclear Participants will
occur in the ordinary way in accordance with their applicable rules and
operating procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly or indirectly through CEDEL
Participants or Euroclear Participants, on the other, will be effected in DTC in
accordance with DTC rules on behalf of the relevant European international
clearing system by its Depositary; however, such cross-market transactions will
require delivery of instructions to the relevant European international clearing
system by the counterparty in such system in accordance with its rules and
procedures and within its established deadlines (European time). The relevant
European international clearing system will, if the transaction meets its
settlement requirements, deliver instructions to its Depositary to take action
to effect final settlement on its behalf by delivering or receiving securities
in DTC, and making or receiving payment in accordance with normal procedures for
same-day funds settlement applicable to DTC. CEDEL Participants and Euroclear
Participants may not deliver instructions directly to the Depositaries.
Because of time-zone differences, credits of securities in CEDEL or
Euroclear as a result of a transaction with a DTC Participant will be made
during the subsequent securities settlement processing, dated the business day
following the DTC settlement date, and such credits or any transactions in such
securities settled during such processing will be reported to the relevant CEDEL
Participant or Euroclear Participant on such business day. Cash received in
CEDEL or Euroclear as a result of sales of securities by or through a CEDEL
Participant or a Euroclear Participant to a DTC Participant will be received
with value on the DTC settlement date but will be available in the relevant
CEDEL or Euroclear cash account only as of the business day following settlement
in DTC.
The Securityholders of a given series that are not Participants or
Indirect Participants but desire to purchase, sell or otherwise transfer
ownership of, or other interests in, Securities of such series may do so only
through Participants and Indirect Participants. In addition, Securityholders of
a given series will receive all distributions of principal and interest through
the Participants who in turn will receive them from DTC. Under a book-entry
format, Securityholders of a given series may experience some delay in their
receipt of payments, since such payments will be forwarded by the applicable
Trustee to Cede, as nominee for DTC. DTC will forward such payments to its
Participants, which thereafter will forward them to Indirect Participants or
such Securityholders. It is anticipated that the only "Securityholder" in
respect of any series will be Cede, as nominee of DTC. Securityholders of a
given series will not be recognized as Securityholders of such series, and such
Securityholders will be permitted to exercise the rights of Securityholders of
such series only indirectly through DTC and its Participants.
Under the rules, regulations and procedures creating and affecting DTC
and its operations (the "Rules"), DTC is required to make book-entry transfers
of Securities of a given series among Participants on whose behalf it acts with
respect to such Securities and to receive and transmit distributions of
principal of, and interest on, such Securities. Participants and Indirect
Participants with which the Securityholders of a given series have accounts with
respect to such Securities similarly are required to make book-entry transfers
and receive and transmit such payments on behalf of their respective
Securityholders of such series. Accordingly, although such Securityholders will
not possess Securities, the Rules provide a mechanism by which Participants will
receive payments and will be able to transfer their interests.
Because DTC can only act on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of a
Securityholder of a given series to pledge Securities of such
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series to persons or entities that do not participate in the DTC system, or to
otherwise act with respect to such Securities, may be limited due to the lack of
a physical certificate for such Securities.
DTC will advise the Trustee in respect of each series that it will
take any action permitted to be taken by a Securityholder of the related series
only at the direction of one or more Participants to whose accounts with DTC the
Securities of such series are credited. DTC may take conflicting actions with
respect to other undivided interests to the extent that such actions are taken
on behalf of Participants whose holdings include such undivided interests.
CEDEL is incorporated under the laws of Luxembourg as a professional
depository. CEDEL holds securities for its participating organizations ("CEDEL
Participants") and facilitates the clearance and settlement of securities
transactions between CEDEL Participants through electronic book-entry changes in
accounts of CEDEL Participants, thereby eliminating the need for physical
movement of certificates. Transactions may be settled in CEDEL in any of 28
currencies, including United States dollars. CEDEL provides to its CEDEL
Participants, among other things, services for safekeeping, administration,
clearance and settlement of internationally traded securities and securities
lending and borrowing. CEDEL interfaces with domestic markets in several
countries. As a professional depository, CEDEL is subject to regulation by the
Luxembourg Monetary Institute. CEDEL Participants are recognized financial
institutions around the world, including underwriters, securities brokers and
dealers, banks, trust companies, clearing corporations and certain other
organizations. Indirect access to CEDEL is also available to others, such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a CEDEL Participant, either directly or indirectly.
Euroclear was created in 1968 to hold securities for participants of
the Euroclear System ("Euroclear Participants") and to clear and settle
transactions between Euroclear Participants through simultaneous electronic
book-entry delivery against payment, thereby eliminating the need for physical
movement of certificates and any risk from lack of simultaneous transfers of
securities and cash. Transactions may now be settled in any of 28 currencies,
including United States dollars. The Euroclear System includes various other
services, including securities lending and borrowing and interfaces with
domestic markets in several countries generally similar to the arrangements for
cross-market transfers with DTC described above. Euroclear is operated by
Morgan Guaranty Trust Bank of New York, Brussels, Belgium office, under contract
with Euroclear Clearance System, S.C., a Belgian cooperative corporation (the
"Cooperative"). All operations are conducted by the "Euroclear Operator" (as
defined below), and all Euroclear securities clearance accounts and Euroclear
cash accounts are accounts with the Euroclear Operator, not the Cooperative.
The Cooperative establishes policy for the Euroclear System on behalf of
Euroclear Participants. Euroclear Participants include banks (including central
banks), securities brokers and dealers and other professional financial
intermediaries and may include the Underwriters. Indirect access to the
Euroclear System is also available to other firms that clear through or maintain
a custodial relationship with a Euroclear Participant, either directly or
indirectly.
The "Euroclear Operator" is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. As such, it
is regulated and examined by the Board of Governors of the Federal Reserve
System and the New York State Banking Department, as well as the Belgian Banking
Commission.
Securities clearance accounts and cash accounts with the Euroclear
Operator are governed by the Terms and Conditions Governing Use of Euroclear and
the related Operating Procedures of the Euroclear System and applicable Belgian
law (collectively, the "Terms and Conditions"). The Terms and Conditions govern
transfers of securities and cash within the Euroclear System, withdrawal of
securities and cash from the Euroclear System, and receipts of payments with
respect to securities in the Euroclear System. All securities in the Euroclear
System are held on a fungible basis without attribution of specific certificates
to specific securities clearance accounts. The Euroclear Operator acts under
the Terms and Conditions only on behalf of Euroclear Participants and has no
record of relationship with persons holding through Euroclear Participants.
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Except as required by law, the Trustee in respect of a series will not
have any liability for any aspect of the records relating to or payments made on
account of beneficial ownership interests of the related Securities held by
Cede, as nominee for DTC, or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interests.
Definitive Notes
As may be described in the related Prospectus Supplement, the
Securities will be issued in fully registered, certificated form ("Definitive
Securities") to the Securityholders of a given series or their nominees, rather
than to DTC or its nominee, only if (i) the Trustee in respect of the related
series advises the Securityholders in writing that DTC is no longer willing or
able to discharge properly its responsibilities as depository with respect to
such Securities and such Trustee is unable to locate a qualified successor, (ii)
such Trustee, at its option, elects to terminate the book-entry system through
DTC or (iii) after the occurrence of a default by the Servicer under the
related Trust Agreement, Securityholders representing at least a majority of the
outstanding principal amount of such Securities advise the Trustee through DTC
in writing that the continuation of a book-entry system through DTC (or a
successor thereto) is no longer in such Securityholders' best interest.
Upon the occurrence of any event described in the immediately
preceding paragraph, the applicable Trustee will be required to notify all such
Securityholders through Participants of the availability of Definitive
Securities. Upon surrender by DTC of the definitive certificates representing
such Securities and receipt of instructions for re-registration, the applicable
Trustee will reissue such Securities as Definitive Securities to such
Securityholders.
Distributions of principal of, and interest on, such Securities will
thereafter be made by the applicable Trustee in accordance with the procedures
set forth in the related Indenture or Trust Agreement directly to holders of
Definitive Securities in whose names the Definitive Securities were registered
at the close of business on the applicable Record Date specified for such
Securities in the related Prospectus Supplement. Such distributions will be
made by check mailed to the address of such holder as it appears on the register
maintained by the applicable Trustee. The final payment on any such Security,
however, will be made only upon presentation and surrender of such Security at
the office or agency specified in the notice of final distribution to the
applicable Securityholders.
Definitive Securities in respect of a given series of Securities will
be transferable and exchangeable at the offices of the applicable Trustee or of
a certificate registrar named in a notice delivered to holders of such
Definitive Securities. No service charge will be imposed for any registration
of transfer or exchange, but the applicable Trustee may require payment of a sum
sufficient to cover any tax or other governmental charge imposed in connection
therewith.
Distributions
With respect to each series of Securities, beginning on the
Distribution Date specified in the related Prospectus Supplement, distributions
of principal and interest (or, where applicable, of principal or interest only)
on each Class of such Securities entitled thereto will be made by the applicable
Indenture Trustee to the holders of Notes (the "Noteholders") and by the
applicable Trustee to the holders of Certificates (the "Certficateholders") of
such series. The timing, calculation, allocation, order, source, priorities of
and requirements for each Class of Noteholders and all distributions to each
Class of Certificateholders of such series will be set forth in the related
Prospectus Supplement.
With respect to each series of Securities, on each Distribution Date
collections on the related Receivables will be distributed to Securityholders,
to the extent provided in the related Prospectus Supplement. Credit Enhancement,
such as a reserve account, may be available to cover any shortfalls in the
amount available for distribution on such date, to the extent specified in the
related Prospectus Supplement. As more fully described in the related Prospectus
Supplement, and
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unless otherwise specified therein, distributions in respect of principal of a
Class of Securities of a given series will be subordinate to distributions in
respect of interest on such Class, and distributions in respect of the
Securities of such series may be subordinate to payments in respect of the Notes
of such series.
Credit and Cash Flow Enhancements
The amounts and types of Credit Enhancement arrangements, if any, and
the provider thereof, if applicable, with respect to each Class of Securities of
a given series will be set forth in the related Prospectus Supplement. If and
to the extent provided in the related Prospectus Supplement, Credit Enhancement
may be in the form of an insurance policy, subordination of one or more Classes
of Securities, reserve accounts, overcollateralization, letters of credit,
credit or liquidity facilities, third party payments or other support, surety
bonds, guaranteed cash deposits or such other arrangements as may be described
in the related Prospectus Supplement or any combination of two or more of the
foregoing. If specified in the applicable Prospectus Supplement, Credit
Enhancement for a Class of Securities may cover one or more other Classes of
Securities of the same series, and Credit Enhancement for a series of Securities
may cover one or more other series of Securities.
The presence of Credit Enhancement for the benefit of any Class or
series of Securities is intended to enhance the likelihood of receipt by the
Securityholders or such Class or series of the full amount of principal and
interest due thereon and to decrease the likelihood that such Securityholders
will experience losses. As more specifically provided in the related Prospectus
Supplement, the Credit Enhancement for a Class or series of Securities will not
provide protection against all risks of loss and will not guarantee repayment of
the entire principal balance and interest thereon. If losses occur which exceed
the amount covered by any Credit Enhancement or which are not covered by any
Credit Enhancement, Securityholders of any Class or series will bear their
allocable share of deficiencies, as described in the related Prospectus
Supplement. In addition, if a form of Credit Enhancement covers more than one
series of Securities, Securityholders of any such series will be subject to the
risk that such Credit Enhancement will be exhausted by the claims of
Securityholders of other series.
Waiver of Past Defaults
The Securityholders of Securities evidencing more than 50% of the
outstanding principal balance of the related Securities (the "Security Principal
Balance") (with the consent of a Credit Enhancer), or a Credit Enhancer, may
waive certain defaults by the Servicer in the performance of its obligations
under a Trust Agreement. No such waiver shall impair any Credit Enhancer's or
the Securityholders' rights with respect to subsequent defaults.
Optional Termination
A Trust Agreement may provide that on any Distribution Date following
the Record Date on which the Pool Balance is a specified percentage or less of
the Security Principal Balance of the related Securities at issuance (the
"Original Security Principal Balance"), the Bank will have the option to acquire
all rights, title and interest in all, but not less than all, Receivables held
in the Trust, by paying into the Trust for retirement of the Securities an
amount equal to the aggregate Purchase Amounts for the Receivables, together
with any Reimbursement Amounts then owed to any Credit Enhancer pursuant to the
terms of the Credit Enhancement and the related agreements (the "Reimbursement
Amounts").
Reports to Securityholders
With respect to each series of Securities, on or prior to each
Distribution Date for such series, the Servicer or the related Trustee will
forward or cause to be forwarded to each holder of record of such Class of
Securities a statement or statements with respect to the related Trust Property
setting forth the information specifically described in the related Trust
Agreement which generally will include the following information:
(i) the amount of the distribution with respect to each Class of
Securities;
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(ii) the amount of such distribution allocable to principal;
(iii) the amount of such distribution allocable to interest;
(iv) the Pool Balance, if applicable, as of the close of business
on the last day of the related Collection Period;
(v) the aggregate outstanding principal balance and the Pool
Factor for each Class of Securities after giving effect to all payments
reported under (ii) above on such Distribution Date;
(vi) the amount paid to the Servicer, if any, with respect to the
related Collection Period;
(vii) the amount of the aggregate Purchase Amounts for Receivables
that have been reacquired, if any, for such Collection Period; and
(viii) the amount of coverage under any letter of credit, financial
guaranty insurance policy, reserve account, yield maintenance account or
other form of Credit Enhancement covering default risk as of the close of
business on the applicable Distribution Date.
Each amount set forth pursuant to subclauses (i), (ii), (iii) and (v) with
respect to the Securities of any series will be expressed as a dollar amount per
$1,000 of the initial principal balance of such Securities, as applicable. The
actual information to be set forth in statements to Securityholders of a series
will be described in the related Prospectus Supplement.
Within the prescribed period of time for tax reporting purposes after the
end of each calendar year, the applicable Trustee will provide to the
Securityholders a statement containing the amounts described in (ii) and (iii)
above for that calendar year and any other information required by applicable
tax laws, for the purpose of the Securityholders' preparation of federal income
tax returns.
Indexed Securities
To the extent so specified in any Prospectus Supplement, any Class of Securities
of a given series may consist of Securities ("Indexed Securities") in which the
principal amount payable at the final scheduled Distribution Date (the "Indexed
Principal Amount") is determined by reference to a measure (the "Index") which
will be related to (i) the difference in the rate of exchange between United
States dollars and a currency or composite currency (the "Indexed Currency")
specified in the applicable Prospectus Supplement (such Indexed Securities,
"Currency Indexed Securities"); (ii) the difference in the price of a specified
commodity (the "Indexed Commodity") on specified dates (such Indexed Securities,
"Commodity Indexed Securities"); (iii) the difference in the level of a
specified stock index (the "Stock Index"), which may be based on U.S. or foreign
stocks, on specified dates (such Indexed Securities, "Stock Indexed
Securities"); or (iv) such other objective price or economic measures as are
described in the applicable Prospectus Supplement. The manner of determining
the Indexed Principal Amount of an Indexed Security and historical and other
information concerning the Indexed Currency, the Indexed Commodity, the Stock
Index or other price or economic measures used in such determination will be set
forth in the applicable Prospectus Supplement, together with information
concerning tax consequences to the holders of such Indexed Securities.
If the determination of the Indexed Principal Amount of an Indexed Security
is based on an Index calculated or announced by a third party and such third
party either suspends the calculation or announcement of such Index or changes
the basis upon which such Index is calculated (other than changes consistent
with policies in effect at the time such Indexed Security was issued and
permitted changes described in the applicable Prospectus Supplement), then such
Index shall be calculated for purposes of such Indexed Security by an
independent calculation agent named in the applicable Prospectus Supplement on
the same basis, and subject to the same conditions and controls, as applied to
the original third party. If for any reason such index cannot be calculated on
the same basis and subject to the same conditions and controls as applied to the
original third party, then the Indexed Principal
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Amount of such Indexed Security shall be calculated in the manner set forth in
the applicable Prospectus Supplement. Any determination of such independent
calculation agent shall in the absence of manifest error be binding on all
parties.
Interest on an Indexed Security will be payable based on the amount
designated in the applicable Prospectus Supplement (the "Face Amount"). The
applicable Prospectus Supplement will describe whether the principal amount of
the related Indexed Security, if any, that would be payable upon redemption or
repayment prior to the applicable final scheduled Distribution Date will be the
Face Amount of such Indexed Security, the Indexed Principal Amount of such
Indexed Security at the time of redemption or repayment or another amount
described in such Prospectus Supplement.
DESCRIPTION OF THE TRUST AGREEMENTS
The following summary describes certain terms of each Trust Agreement
pursuant to which a Trust Property will be created and the related Securities in
respect of such Trust Property will be issued. For purposes of this Prospectus,
the term Trust Agreement as used with respect to a Trust means, collectively,
and except as otherwise specified, any and all agreements relating to the
establishment of the related Trust, the servicing of the related Receivables and
the issuance of the related Securities, including without limitation the
Indenture, (i.e. pursuant to which any Notes shall be issued). Forms of the
Trust Agreement have been filed as exhibits to the Registration Statement of
which this Prospectus forms a part. The summary does not purport to be
complete. It is qualified in its entirety by reference to the provisions of the
Trust Agreements.
Conveyance of Receivables
Except as expressly set forth in the related Trust Agreement, on the
Closing Date, the Bank will transfer, without recourse, Receivables acquired by
the Bank and originated or aquired by the Bank, another Lender or another
originator either to a Trust pursuant to a Pooling Agreement or a Sale
Agreement, or will pledge, without recourse, the Bank's right, title and
interests in and to such Receivables to a Trustee on behalf of the
Securityholders pursuant to an Indenture. The obligations of the Bank and the
Servicer under the related Trust Agreement include those specified below and in
the related Prospectus Supplement.
As more fully described in the related Prospectus Supplement, the Bank
will be obligated to reacquire from the related Trust Property its interest in
any Receivable transferred to a Trust or pledged to a Trustee on behalf of
Securityholders if the interest of the Securityholders therein is materially and
adversely affected by a breach of any representation or warranty made by the
Bank with respect to such Receivable, which breach has not been cured following
the discovery by or notice to the Bank of the breach. In addition, if so
specified in the related Prospectus Supplement, the Bank may from time to time
reacquire certain Receivables or substitute other Receivables for such
Receivable subject to specified conditions set forth in the related Trust
Agreement.
Possible representations and warranties may include, among other
things, that (i) the information provided with respect to the Receivables is
correct in all material respects; (ii) the Obligor on each Receivable is
generally required to obtain physical damage and theft insurance in accordance
with the Bank's normal requirements; (iii) at the date of issuance of the
Securities, the Receivables are free and clear of all security interests, liens,
charges, and encumbrances and no setoffs, defenses, or counterclaims against the
Bank have been asserted or threatened (other than the interest of the Trustee);
(iv) on the Closing Date, each of the Receivables is or will be secured by a
first priority perfected security interest in the Vehicle in favor of the
applicable Lender; and (v) each Receivable, at the time it was originated or
purchased, complied, and on the Closing Date complies, in all material respects,
with applicable federal and state laws, including consumer credit, truth in
lending, equal credit opportunity, and disclosure laws.
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Accounts
With respect to each series of Securities issued by a Trust, the
Servicer will establish and maintain with the applicable Trustee one or more
accounts, in the name of such Trustee on behalf of the related Securityholders,
into which all payments made on or with respect to the related Receivables will
be deposited (the "Collection Account"). Unless otherwise specified in the
related Prospectus Supplement, the Servicer will also establish and maintain
with such Trustee separate accounts, in the name of such Trustee on behalf of
such Securityholders, in which amounts released from the Collection Account and
the reserve account or other Credit Enhancement, if any, for distribution to
such Securityholders will be deposited and from which distributions to such
Securityholders will be made (the "Distribution Account").
Any other accounts to be established with respect to a Trust,
including any reserve account, will be described in the related Prospectus
Supplement.
For any series of Securities, funds in the Collection Account, the
Distribution Account, any reserve account and other accounts identified as such
in the related Prospectus Supplement (collectively, the "Trust Accounts") shall
be invested as provided in the related Trust Agreement in Eligible Investments.
"Eligible Investments" are generally limited to investments acceptable to the
Rating Agencies as being consistent with the rating of such Securities. Subject
to certain conditions, Eligible Investments may include securities issued by the
Bank, the Servicer or their respective affiliates or other trusts created by the
Bank or its affiliates. Except as described below or in the related Prospectus
Supplement, Eligible Investments are limited to obligations or securities that
mature not later than the business day immediately preceding the related
Distribution Date. However, subject to certain conditions, funds in the reserve
account may be invested in securities that will not mature prior to the date of
the next distribution and will not be sold to meet any shortfalls. Thus, the
amount of cash in any reserve account at any time may be less than the balance
of such reserve account. If the amount required to be withdrawn from any
reserve account to cover shortfalls in collections on the related Receivables
exceeds the amount of cash in such reserve account a temporary shortfall in the
amounts distributed to the related Securityholders could result, which could, in
turn, increase the average life of the Securities of such series. Except as
otherwise specified in the related Prospectus Supplement, investment earnings on
funds deposited in the applicable Trust Accounts, net of losses and investment
expenses (collectively, "Investment Earnings"), shall be deposited in the
applicable Collection Account on each Distribution Date and shall be treated as
collections of interest on the related Receivables.
Unless otherwise specified in the related Prospectus Supplement, the
Trust Accounts will be maintained as Eligible Deposit Accounts. Unless otherwise
specified in the related Prospectus Supplement, "Eligible Deposit Account" means
either (a) a segregated account with an Eligible Institution or (b) a segregated
trust account with the corporate trust department of a depository institution
organized under the laws of the United States of America or any one of the
states thereof or the District of Columbia (or any domestic branch of a foreign
bank), having corporate trust powers and acting as trustee for funds deposited
in such account, so long as any of the securities of such depository institution
has a credit rating from each Rating Agency in one of its generic rating
categories which signifies investment grade. Unless otherwise specified in the
related Prospectus Supplement, "Eligible Institution" means, with respect to a
Trust, (a) the corporate trust department of the related Indenture Trustee or
the related Trustee, as applicable, or (b) a depository institution organized
under the laws of the United States of America or any one of the states thereof
or the District of Columbia (or any domestic branch of a foreign bank), which
(i) (A) has either (w) a long-term unsecured debt rating acceptable to the
Rating Agencies or (x) a short-term unsecured debt rating or certificate of
deposit rating acceptable to the Rating Agencies or (B) the parent corporation
of which has either (y) a long-term unsecured debt rating acceptable to the
Rating Agencies or (z) a short-term unsecured debt rating or certificate of
deposit rating acceptable to the Rating Agencies and (ii) whose deposits are
insured by the FDIC.
Mandatory Repurchase of Receivables
Unless otherwise specified in the related Prospectus Supplement, in
the event of a breach of any representation or warranty with respect to the
Receivables described in "-Conveyance of Receivables,"
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which breach or failure materially and adversely affects a Receivable or the
interests of the Trust, the Securityholders or a Credit Enhancer in such
Receivable, the Bank, unless such breach or failure has been cured by the last
day of the Collection Period following the Collection Period during which the
Bank becomes aware of, or receives written notice from the Trustee or the
Servicer of, such breach or failure, will be required to repurchase, as of such
day (or, at Bank's option, as of the last day of the month in which such breach
was discovered), the Receivable from the Trustee for the Purchase Amount. The
Purchase Amount is payable on the date on which the amounts to be distributed on
the related Distribution Date are to be determined (the "Determination Date") in
such subsequent Collection Period. The repurchase obligation will constitute
the sole remedy available to the Securityholders or the Trustee against the Bank
for any such uncured breach or failure.
The "Purchase Amount" of any Receivable means, with respect to any
Distribution Date an amount equal to the sum of (a) the outstanding principal
balance of such Receivable as of the last day of the preceding Collection Period
and (b) the amount of accrued interest on such principal balance at the related
APR from the date a payment was last made by or on behalf of the Obligor through
the Determination Date immediately preceding such Distribution Date, and after
giving effect to the receipt of monies collected on such Receivable in such
preceding Collection Period.
Yield Maintenance Account and Yield Maintenance Agreement
If so provided in the related Prospectus Supplement, pursuant to the
related Trust Agreement and/or a Yield Maintenance Agreement (as such term is
defined in the related Prospectus Supplement, the "Yield Maintenance Agreement")
the Affiliates, the Bank or such other person will establish for a series a
Yield Maintenance Account which, if so specified in the related Prospectus
Supplement, will be created with an initial deposit by the Bank. Each Yield
Maintenance Account will be designed solely to hold funds to be applied by the
Indenture Trustee or applicable Trustee to provide payments to Securityholders
in respect of Receivables the APR of which is less than the Required Rate.
On each Distribution Date, the obligor under the Yield Maintenance
Agreement will pay to the Trust an amount equal to the Yield Maintenance Amount
(as such term is defined in the related Prospectus Supplement, the "Yield
Maintenance Amount") in respect of the Receivables for such Distribution Date.
If so specified in the Prospectus Supplement, in the event that such obligor
defaults on its obligation to make payments under the Yield Maintenance
Agreement, the related Prospectus Supplement will describe the manner and
circumstances in which amounts on deposit on any Distribution Date in the Yield
Maintenance Account in excess of the Required Yield Maintenance Amount (as such
term is defined in the related prospectus Supplement, the "Required Yield
Maintenance Amount") will be released, and to whom such amounts will be
distributed. Monies on deposit in the Yield Maintenance Account may be invested
in Eligible Investments under the circumstances and in the manner described in
the related Yield Maintenance Agreement. If so specified in the related
Prospectus Supplement, investment earnings on investment of funds in a Yield
Maintenance Account will be deposited into such Yield Maintenance Account. The
related Prospectus Supplement will describe the manner in which any monies
remaining on deposit in a Yield Maintenance Account upon the termination of the
related Trust pursuant to its terms will be released and to whom such amounts
will be distributed.
If a Yield Maintenance Account is established with respect to any
Trust as to which a Pre-Funding Account has been established, the Bank and the
related Indenture Trustee or applicable Trustee, will enter into a Yield
Maintenance Agreement pursuant to which, on each subsequent transfer date, the
Bank will deposit into the Yield Maintenance Account the Additional Yield
Maintenance Amount (as such term is defined in the related Prospectus
Supplement, the "Additional Yield Maintenance Amount") in respect of the related
Receivables. Each Yield Maintenance Agreement will affect only Receivables
having an APR less than the related Required Rate.
Master Trusts
As may be described in the related Prospectus Supplement, each Trust
Agreement may provide that, pursuant to any one or more supplements thereto, the
Bank may direct the related Trustee to issue
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from time to time new series subject to the conditions described below (each
such issuance a "Master Trust New Issuance"). Each Master Trust New Issuance
will have the effect of decreasing the Residual Interest in the related Master
Trust. Under each such Master Trust Agreement, the Bank may designate, with
respect to any newly issued series: (i) its name or designation; (ii) its
initial principal amount (or method for calculating such amount); (iii) its
Interest Rate (or formula for the determination thereof); (iv) the Distribution
Dates and the date or dates from which interest shall accrue; (v) the method for
allocating collections to Securityholders of such series; (vi) any bank accounts
to be used by such series and the terms governing the operation of any such bank
accounts; (vii) the percentage used to calculate monthly servicing fees; (viii)
the provider and terms of any form of Credit Enhancement with respect thereto;
(ix) the terms on which the Securities of such series may be repurchased or
remarketed to other investors; (x) the number of Classes of Securities of such
series, and if such series consists of more than one Class, the rights and
priorities of each such Class; (xi) the extent to which the Securities of such
series will be issuable in book-entry form; (xii) the priority of such series
with respect to any other series; and (xiii) any other relevant terms. None of
the Bank, the Servicer, the related Trustee or any Master Trust is required or
intends to obtain the consent of any Securityholder of any outstanding series to
issue any additional series.
Each Master Trust Agreement provides that the Bank may designate terms
such that each Master Trust New Issuance has an amortization period which may
have a different length and begin on a different date than such periods for any
series previously issued by the related Master Trust and then outstanding.
Moreover, each Master Trust New Issuance may have the benefits of Credit
Enhancements issued by enhancement providers different from the providers of the
Credit Enhancement, if any, with respect to any series previously issued by the
related Master Trust and then outstanding. Under each Master Trust Agreement,
the related Trustee shall hold any such Credit Enhancement only on behalf of the
Securityholders to which such Credit Enhancement relates. The Bank will have the
option under each Master Trust Agreement to vary among series the terms upon
which a series may be repurchased by the Issuer or remarketed to other
investors. As more fully described in the related Prospectus Supplement, there
is no limit to the number of Master Trust New Issuances that the Bank may cause
under a Master Trust Agreement. Each Master Trust will terminate only as
provided in the related Master Trust Agreement. There can be no assurance that
the terms of any Master Trust New Issuance might not have an impact on the
timing and amount of payments received by Securityholders of another series
issued by the same Master Trust.
Under each Master Trust Agreement and pursuant to a related
supplement, a Master Trust New Issuance may only occur upon the satisfaction of
certain conditions provided in each such Master Trust Agreement. Unless
otherwise specified in the related Prospectus Supplement, the obligation of the
related Trustee to authenticate the Securities of any such Master Trust New
Issuance and to execute and deliver the supplement to the related Master Trust
Agreement is subject to the satisfaction of the following conditions: (a) on or
before the date upon which the Master Trust New Issuance is to occur, the Bank
shall have given the related Trustee, the Servicer, the Rating Agency and
certain related providers of Credit Enhancement, if any, written notice of such
Master Trust New Issuance and the date upon which the Master Trust New Issuance
is to occur; (b) the Bank shall have delivered to the related Trustee a
supplement to the related Master Trust Agreement, in form satisfactory to such
Trustee, executed by each party to the related Master Trust Agreement other than
such Trustee; (c) the Bank shall have delivered to the related Trustee any
related Credit Enhancement agreement; (d) the related Trustee shall have
received confirmation from the Rating Agency that such Master Trust New Issuance
will not result in any Rating Agency reducing or withdrawing its rating with
respect to any other series or Class of such Trust; (e) the Bank shall have
delivered to the related Trustee, the Rating Agency and certain providers of
Credit Enhancement, if any, an opinion of counsel acceptable to the related
Trustee that for federal income tax purposes (i) the Master Trust New Issuance
will not cause the related Master Trust to be deemed to be an association (or
publicly traded partnership) taxable as a corporation, (ii) such Master Trust
New Issuance will not affect the tax characterization as debt of Securities of
any outstanding series or Class issued by such Master Trust that were
characterized as debt at the time of their issuance and (iii) such Master Trust
New Issuance will not cause or constitute an event in which gain or loss would
be recognized by any Securityholders or the related Master Trust; and (f) any
other conditions specified in any
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supplement. Upon satisfaction of the above conditions, the related Trustee
shall execute the supplement to the related Master Trust Agreement and issue the
Securities of such new series.
The Servicer
The Servicer under each Trust Agreement will be named in the related
Prospectus Supplement. The entity serving as Servicer may be the Bank or an
affiliate of the Bank and may have other business relationships with the Bank or
the Bank's affiliates. The Servicer with respect to each series will service
the Receivables contained in the Trust Fund for such series. Any Servicer may
delegate its servicing responsibilities to one or more sub-servicers, but will
not be relieved of its liabilities with respect thereto.
To assure uniform quality in servicing the Receivables and to reduce
administrative costs, the Trustee will appoint the Servicer as initial custodian
of the Receivables. The Servicer, in its capacity as custodian, will hold the
Receivables and all electronic entries, documents, instruments and writings
relating thereto (each, a "Receivable File"), either directly or through sub-
servicers, on behalf of the Trustee for the benefit of Securityholders and the
related Credit Enhancer, if any. The Servicer may designate CFC to act as
Custodian with respect to Receivables Files relating to the CFC Receivables.
The Servicer will make certain representations and warranties regarding its
authority to enter into, and its ability to perform its obligations under, the
related Trust Agreement. An uncured breach of such a representation or warranty
that in any respect materially and adversely affects the interests of the
Securityholders will constitute a Servicer Default by the Servicer under the
related Trust Agreement.
Servicing Procedures
The Receivables will be serviced by a Servicer pursuant to a Trust
Agreement. Such Servicer may designate CFC or another entity to act as sub-
servicer with respect to the CFC Receivables, although such designation will not
relieve the Servicer from its servicing obligations with respect to such CFC
Receivables. Each Trust Agreement will require that servicing of the
Receivables by the Servicer shall generally be carried out in the same manner in
which it services receivables and vehicles held for its own account. In
performing its duties thereunder, the Servicer will act on behalf and for the
benefit of the Trust, subject at all times to the provisions of the Trust
Agreement, without regard to any relationship which the Servicer or any
affiliate of the Servicer may otherwise have with an Obligor.
The Servicer, as an independent contractor on behalf of the related Trust
and for the benefit of the Securityholders and any Credit Enhancer, will be
responsible for managing, servicing and administering the Receivables and
enforcing and making collections on the Receivables and any insurance policies
and for enforcing any security interest in any of the Vehicles, all as set forth
in the related Trust Agreement. The Servicer's responsibilities will include
collecting and posting of all payments, responding to inquiries of Obligors,
investigating delinquencies, accounting for collections, furnishing monthly and
annual statements to the Trustee and any Credit Enhancer, with respect to
distributions, providing appropriate federal income tax information for use in
providing information to Securityholders, collecting and remitting sales and
property taxes on behalf of taxing authorities and maintaining the perfected
security interest of the Bank in the Vehicles.
Unless otherwise specified in the related Prospectus Supplement, the
Servicer will covenant in each Trust Agreement that: (A) the Vehicle securing
each Receivable will not be released from the security interest granted by the
Receivable in whole or in part, except as contemplated by such Trust Agreement;
(B) the Servicer will not impair in any material respect the rights of the
Trustee or the Securityholders in the Receivables, certain rights under
agreements with Dealers related to breach of
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representations and warranties of Dealers with respect to the Receivables, or
any physical damage or other insurance policy; and (C) the Servicer will not
increase or decrease the amount of payments or the amount financed under a
Receivable, or change the APR of a Receivable; provided, however, that the
Servicer may extend any Receivable for credit-related reasons that would be
acceptable to the Servicer with respect to retail installment sales or finance
contracts and installment loans serviced by it for its own account in accordance
with its customary standards. However, if the cumulative extensions with
respect to any Receivable shall cause the term of any such Receivable to extend
beyond the last day of the Collection Period immediately preceding the Final
Scheduled Distribution Date, then the Servicer shall be obligated to purchase
such Receivable as of the last day of the Collection Period following the
Collection Period in which the extension was made (or, at the Servicer's
election, as of the last day of the Collection Period or earlier under certain
circumstances).
Unless otherwise specified in the related Prospectus Supplement, in the
event of a breach by the Servicer of any covenant described above that
materially and adversely affects a Receivable or the interests of the Trust, the
Securityholders or a Credit Enhancer in such Receivable, the Servicer, unless
such breach has been cured by the last day of the Collection Period following
the Collection Period during which the Servicer became aware of, or received
written notice of, such breach, will be required to purchase as of such day (or,
at the Servicer's election, as of the last day of the Collection Period during
which such breach was discovered) the Receivable from the Trustee for the
Purchase Amount which shall be paid on the Determination Date in such subsequent
Collection Period or earlier under certain circumstances. The purchase
obligation will constitute the sole remedy available to the Securityholders or
the Trustee against the Servicer for any such uncured breach, except with
respect to certain indemnities of the Servicer under the Trust Agreement related
thereto.
Each Trust Agreement will also require the Servicer to charge off a
Receivable as a Defaulted Receivable in accordance with its customary standards
and to follow such of its normal collection practices and procedures as it deems
necessary or advisable, and that are consistent with the standard of care
required by such Trust Agreement, to realize upon any Receivable. The Servicer
may sell the Vehicle securing such Receivable at a judicial sale or take any
other action permitted by applicable law. See "Certain Legal Aspects of the
Receivables." The net proceeds of such realization will be deposited into the
Collection Account at the time and in the manner described above.
Servicing Compensation and Payment of Expenses
For its servicing of the Receivables, the Servicer will be entitled to
retain from collections on the Receivables a Servicing Fee in an amount as
described in the related Prospectus Supplement. A portion of such Servicing Fee
may be paid over by the Servicer to CFC with respect to its sub-servicing of the
CFC Receivables.
All costs of servicing each Receivable in the manner required by the Trust
Agreement shall be borne by the Servicer, but the Servicer shall be entitled to
retain, out of any amounts actually recovered with respect to any Defaulted
Receivable or the Vehicles subject thereto, the Servicer's actual out-of-pocket
expenses reasonably incurred with respect to such Defaulted Receivable or
Vehicle.
Indemnification
Each Trust Agreement will provide that the Servicer will defend, indemnify
and hold harmless the Trustee, the Trust, the Securityholders, and any Credit
Enhancer against any and all costs, expenses, losses, damages, claims and
liabilities, including reasonable fees and expenses of counsel and expenses of
litigation, reasonably incurred, arising out of or resulting from the use,
repossession or operation by the Servicer or any affiliate thereof of any
Vehicles; provided, however, that the Servicer will have no obligation to
indemnify any person or entity against any credit loss on any Receivable
serviced by the Servicer in accordance with the requirements of the Trust
Agreement. The Servicer will also indemnify, defend and hold harmless the
Trust, the Trustee and its officers, directors, employees and agents, and any
Credit Enhancer from and against any loss, liability, expense, damage or injury,
including any judgement, award, settlement, reasonable attorneys' fees and other
costs or expenses incurred in
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connection with the defense of any action, proceeding or claim, to the extent
such loss, liability, expense, damage or injury arises out of, or is 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 under the Trust Agreement.
The Bank's obligations, as Servicer, to indemnify the Trust and the
Securityholders for acts or omissions of the Bank as Servicer will survive the
removal of the Servicer but will not apply to any acts or omissions of a
successor Servicer.
Evidence as to Compliance
Except as otherwise provided in the related Prospectus Supplement, each
Trust Agreement will require the Servicer to deliver an officers' certificate to
the Trustee stating (i) a review of the activities of the Servicer during the
period specified in the related Prospectus Supplement and of its performance
under the Trust 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 the Trust Agreement throughout such
period, 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.
If so specified in the related Prospectus Supplement, 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 each holder of the
Securities an annual written statement to the effect that such firm has read
the monthly Servicer's certificates delivered pursuant to a Trust Agreement with
respect to such period and reviewed the servicing of the Receivables by the
Servicer and that such review (1) included evaluations of servicing practices
relating to automobile, light duty truck and van loans serviced for others in
accordance with the requirements set forth in the Trust 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, industry practice requires such firm to
report.
Certain Matters Regarding the Servicer
Each Trust Agreement will provide that the Servicer may not resign from its
obligations and duties as Servicer thereunder, except upon determination that
the performance by such Servicer of such duties is no longer permissible under
applicable law. No such resignation will become effective until the Trustee or
a successor servicer has assumed such Servicer's servicing obligations and
duties under such Trust Agreement.
Each Trust Agreement will further provide that neither the Servicer nor any
of its respective directors, officers, employees, or agents shall be under any
liability to the Trustee or the Securityholders for taking any action or for
refraining from taking any action pursuant to the Trust Agreement, or for errors
in judgment; provided, however, that neither the Servicer nor any such person
will be protected against any liability that would otherwise be imposed by
reason of willful misfeasance, bad faith or negligence in the performance of
duties or by reason of reckless disregard of obligations and duties thereunder.
In addition, each Trust Agreement will provide that the Servicer is under no
obligation to appear in, prosecute, or defend any legal action that is not
incidental to its servicing responsibilities under such Trust Agreement and
that, in its opinion, may cause it to incur any expense or liability.
Under the circumstances specified in a Trust Agreement, any entity into
which the Servicer may be merged or consolidated, or any entity resulting from
any merger or consolidation to which the Servicer is a party, or any entity
succeeding to the business of the Servicer or, with respect to its obligations
as Servicer, which corporation or other entity in each of the foregoing cases
assumes the obligations of the Servicer, will be the successor to the Servicer
under such Trust Agreement.
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Servicer Default
Unless otherwise specified in the related Prospectus Supplement, any of the
following events will constitute a "Servicer Default" under a Trust Agreement:
(i) any failure by the Servicer to deliver to the Trustee on or before the
Determination Date the Servicer's certificate or to deliver to the Trustee for
distribution to the Securityholders any required payment, which failure
continues unremedied for more than the number of days specified in the related
Prospectus Supplement after written notice from (x) the Trustee, or the Holders
of Securities evidencing not less than 25% of the Security Principal Balance, in
either case with the consent of any Credit Enhancer, or (y) a Credit Enhancer,
if any, is received by the Servicer; (ii) any failure by the Servicer or the
Bank duly to observe or perform in any material respect any other covenant or
agreement of the Servicer or the Bank, as the case may be, in the Trust
Agreement, which failure materially and adversely affects the rights of the
Securityholders and which continues unremedied for more than the number of days
specified in the related Prospectus Supplement after the giving of written
notice of such failure (x) to the Servicer or the Bank, as the case may be, by
the Trustee and by the Credit Enhancer, (y) to the Servicer or the Bank, as the
case may be, and to the Trustee by the Securityholders evidencing not less than
25% of the Security Principal Balance and by the Credit Enhancer or (z) to the
Servicer or the Bank, as the case may be, by the Credit Enhancer; and (iii)
any Insolvency Event. An "Insolvency Event" shall mean financial insolvency,
readjustment of debt, marshalling of assets and liabilities, or similar
proceedings with respect to the Servicer and certain actions by the Servicer
indicating its insolvency or inability to pay its obligations.
Removal of the Servicer
Unless otherwise specified in the related Prospectus Supplement, the
Servicer can only be removed pursuant to a Servicer Default. Unless otherwise
specified in the related Prospectus Supplement, if a Servicer Default shall have
occurred and be continuing, (x) with the consent of the Credit Enhancer, if any,
either the Trustee or the Securityholders evidencing more than 50% of the
Security Principal Balance or (y) a Credit Enhancer may give written notice to
the Servicer of the termination of all of the rights and obligations of the
Servicer under the Trust Agreement. On and after the time the Servicer receives
a notice of termination, the Trustee shall be the successor in all respects to
the Servicer in its capacity as servicer of the Receivables under the Trust
Agreement. The Trustee may, if it shall be unwilling to so act, or shall, if it
is unable to so act, appoint, or petition a court of competent jurisdiction for
the appointment of, a successor Servicer to act as successor to the outgoing
Servicer under the Trust Agreement.
Payments on Receivables
With respect to each series of Securities, unless otherwise specified in
the related Prospectus Supplement, the Servicer will deposit into the Collection
Account all payments on the related Receivables (from whatever source) and all
proceeds of such Receivables collected within three (3) business days of receipt
thereof in the related collection facility, such as a lock-box account or
collection account. Moneys deposited in such collection facility for Trust
Property may be commingled with funds from other sources.
Pre-Funding Accounts
A Trust may enter into an agreement with the Bank whereby the Bank
will agree to transfer Additional Receivables to such Trust following the date
on which such Trust is established and the related Securities are issued. The
Trust may enter into such agreements to permit the acquisition of Additional
Receivables that could not be delivered by the Bank or have not formally
completed the origination process, in each case prior to the Closing Date. Any
such agreement will require that any Receivables so transferred to the Trust
conform to the requirements specified therein.
If such an agreement is to be utilized or the related Trust Agreement
so specifies, and unless otherwise specified in the related Prospectus
Supplement, the related Trustee will be required to deposit in a segregated
account (each, a "Pre-Funding Account") up to 100% of the net proceeds received
by the Trustee in connection with the
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sale of one or more Classes of Securities of the related series; the Additional
Receivables will be transferred to the related Trust in exchange for money
released to the Bank from the related Pre-Funding Account. Each such agreement
or the related Trust Agreement will specify the Pre-Funding Period during which
any such transfers must occur; for a Trust which elects federal income treatment
as a grantor trust, the related Pre-Funding Period will be limited to three
months from the date such Trust is established; for a Trust which is treated as
a mere security device for federal income tax purposes, the related Pre-Funding
Period will be limited to nine months from the date such Trust is established.
Unless otherwise specified in the related Prospectus Supplement, each such
agreement or the related Trust Agreement will require that, if all moneys
originally deposited to such Pre-Funding Account are not so used by the end of
the related Pre-Funding Period, then any remaining moneys will be applied as a
mandatory prepayment of the related Class or Classes of Securities as specified
in the related Prospectus Supplement.
During the Pre-Funding Period the moneys deposited to the Pre-Funding
Account will either (i) be held uninvested or (ii) will be invested in cash-
equivalent investments rated in one of the four highest rating categories by at
least one nationally recognized statistical rating organization and which will
either mature prior to the end of the Pre-Funding Period, or will be drawable on
demand and in any event, will not constitute the type of investment which would
require registration of the related Trust as an "investment company" under the
Investment Company Act of 1940, as amended.
Statements to Indenture Trustees and Trustees
Prior to each Distribution Date with respect to each series of Securities,
the Servicer will provide to the applicable Indenture Trustee and/or the
applicable Trustee and Credit Enhancer as of the close of business on the last
day of the preceding related Collection Period a statement setting forth
substantially the same information as is required to be provided in the periodic
reports provided to Securityholders of such series described under "Description
of the Securities--Reports to Securityholders".
Amendment
Unless otherwise specified in the related Prospectus Supplement, a Trust
Agreement may be amended by agreement of the Trustee, the Bank and the Servicer
at any time, without the consent of the Securityholders but with the consent of
the related Credit Enhancer, to cure any ambiguity or defect, to correct or
supplement any provisions therein, to correct any typographical error or to add
any other provisions with respect to matters or questions arising thereunder,
upon receipt of an opinion of counsel to the Trustee that such amendment will
not adversely affect in any material respect the interests of any Securityholder
or the Credit Enhancer.
Unless otherwise specified in the related Prospectus Supplement, a Trust
Agreement may also be amended from time to time by the Trustee, the Bank and the
Servicer with the consent of the related Credit Enhancer, and Holders of
Securities evidencing more than 50% of the Security Principal Balance for the
purpose of adding any provisions to or changing in any manner or eliminating any
of the provisions of the Trust Agreement or of modifying in any manner the
rights of the Securityholders; provided, however, that no such amendment shall
(a) increase or reduce in any manner the amount of, or accelerate or delay the
timing of, collections of payments on the Receivables or distributions which are
required to be made on any Security without the consent of the Holder of such
Security or (b) reduce the aforesaid percentage of Securityholders required to
consent to any amendment, without unanimous consent of the Securityholders.
The Trustee will be required under a Trust Agreement to furnish
Securityholders, any Credit Enhancer and the Rating Agencies with written notice
of the substance of any such amendment to the Trust Agreement promptly upon
execution of such amendment.
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Duties and Immunities of the Trustee
The Trustee may resign, subject to the conditions set forth below, at any
time upon written notice to the Servicer, in which event the Servicer, with the
consent of any Credit Enhancer, will be obligated to appoint a successor
Trustee. If no successor Trustee shall have been so appointed and have accepted
such appointment within 30 days after the giving of such notice of resignation,
the resigning Trustee may petition a court of competent jurisdiction for the
appointment of a successor Trustee. Any successor Trustee shall meet the
financial and other standards for qualifying as a successor Trustee under the
Trust Agreement. The Servicer may also remove the Trustee if the Trustee ceases
to be eligible to continue as such under the Trust Agreement, or is legally
unable to act, or if the Trustee is adjudicated to be insolvent. In such
circumstances, the Servicer will also be obligated to appoint a successor
Trustee. Any resignation or removal of the Trustee and appointment of a
successor Trustee will not become effective without the written consent of any
Credit Enhancer and until acceptance of the appointment by the successor
Trustee.
The Trust Agreement will provide that the Trustee shall prepare or shall
cause to be prepared any tax returns required to be filed by the Trust and shall
promptly sign and file such returns. In addition, the Trust Agreement provides
that in no event shall the Trustee be liable for any liabilities, costs or
expenses of the Trust or the Securityholders 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).
The Servicer will indemnify, defend and hold harmless the Trustee, its
officers, directors, employees and agents and any Credit Enhancer 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 the trust created pursuant to the Trust Agreement, 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 under the Trust Agreement.
Termination
With respect to each Trust, unless otherwise specified in the related
Prospectus Supplement, the obligations of the Servicer, the Bank and the
applicable Trustee pursuant to the related Trust Agreement will terminate upon
the earlier to occur of (i) the maturity or other liquidation of the last
related Receivable and the disposition of any amounts received upon liquidation
of any such remaining Receivables and (ii) the payment to Securityholders of the
related series of all amounts required to be paid to them pursuant to such Trust
Agreement. As more fully described in the related Prospectus Supplement, in
order to avoid excessive administrative expense, the Servicer will be permitted
in respect of the applicable Trust, unless otherwise specified in the related
Prospectus Supplement, at its option to purchase from such Trust Property, as of
the end of any Collection Period immediately preceding a Distribution Date, if
the Pool Balance of the related Contracts is less than a specified percentage
(set forth in the related Prospectus Supplement) of the initial Pool Balance in
respect of such Trust Property, all such remaining Receivables at a price equal
to the aggregate of the Purchase Amounts thereof as of the end of such
Collection Period, together with any related Reimbursement Amounts. The
related Securities will be redeemed following such purchase.
If and to the extent provided in the related Prospectus Supplement with
respect to the Trust Property, the applicable Trustee will solicit bids for the
purchase of the Receivables remaining in such Trust, in the manner and subject
to the terms and conditions set forth in such Prospectus Supplement. If such
Trustee receives satisfactory bids as described in such Prospectus Supplement,
then the Receivables remaining in such Trust Property will be sold to the
highest bidder.
As more fully described in the related Prospectus Supplement, any
outstanding Securities of the related series will be redeemed concurrently with
either of the events specified above and the subsequent distribution to the
related Securityholders of all amounts required to be distributed to them
pursuant to the applicable Trust Agreement may effect the prepayment of the
Securities of such series.
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CERTAIN LEGAL ASPECTS OF THE RECEIVABLES
General
The transfer of Receivables by the Bank to the Trust pursuant to the
related Trust Agreement, the perfection of the security interests in the
Receivables and the enforcement of rights to realize on the Vehicles as
collateral for the Receivables are subject to a number of federal and state
laws, including the UCC as in effect in various states. As specified in each
Prospectus Supplement, the Bank will take such action as is required to
perfect the rights of the Trustee in the Receivables. If, through inadvertence
or otherwise, a third party were to purchase (including the taking of a security
interest in) a Receivable for new value in the ordinary course of its business,
without actual knowledge of the Trust's interest, and take possession of a
Receivable, the purchaser would acquire an interest in such Receivable superior
to the interest of the Trust. As further specified in each Prospectus
Supplement, no action will be taken to perfect the rights of the Trustee in
proceeds of any insurance policies covering individual Vehicles or Obligors.
Therefore, the rights of a third party with an interest in such proceeds could
prevail against the rights of the Trust prior to the time such proceeds are
deposited by the Servicer into a Trust Account.
Security Interest in Vehicles
Retail installment sale or finance contracts and installment loans such as
the Receivables evidence the credit sale of automobiles, light duty trucks and
vans by dealers to obligors; the contracts and the installment loan and security
agreements also constitute personal property security agreements and include
grants of security interests in the vehicles under the UCC. Perfection of
security interests in the vehicles is generally governed by the motor vehicle
registration laws of the state in which the vehicle is located. In the
jurisdictions in which most of the Vehicles are expected to be located, a
security interest in a vehicle is perfected by notation of the secured party's
lien on the vehicle's certificate of title and, in certain jurisdictions, by
delivery of the certificate of title to the secured party. Each Receivable
prohibits the sale or transfer of the Vehicle without the consent of the
applicable Lender.
Pursuant to each Trust Agreement, the Bank will assign its security
interests in the Vehicles to the Trustee. However, because of the
administrative burden and expense, neither the Lender nor the Trustee will amend
any certificate of title to identify the Trust as the new secured party on the
certificates of title relating to the Vehicles. Also, unless otherwise specified
in the related Prospectus Supplement, the Bank, as Servicer, will continue to
hold any certificates of title relating to the Vehicles in its possession as
custodian for the Trustee pursuant to the related Trust Agreement.
Under the laws of certain states, such an assignment of security interests
may not be sufficient to convey to the Trustee perfected security interests in
the Vehicles.
Because the Trust will not be identified as the secured party on the
certificate of title, the security interest of the Trust in the vehicle could be
defeated in certain circumstances. In the absence of fraud or forgery by the
vehicle owner or the Bank or CFC or administrative error by state or local
agencies or the Bank, the notation of the lien of the Bank (or of CFC with
respect to the CFC Receivables) on the certificates should be sufficient to
protect the Trust against the right of subsequent purchasers of a Vehicle or
subsequent lenders who take a security interest in a Vehicle. If there are any
Vehicles as to which the Bank or CFC failed to obtain a perfected security
interest, its security interest would be subordinate to, among others,
subsequent purchasers of the Vehicles and holders of perfected security
interests. Such a failure, however, would constitute a breach of the Bank's
warranties under the Trust Agreement and would create an obligation of the Bank
to repurchase the related Receivable unless the breach is cured.
Under the laws of most states, the perfected security interest in a vehicle
continues for four months after a vehicle is moved to a state other than the
state which issued the certificate of title and thereafter until the vehicle
owner re-registers the vehicle in the new state. A majority of states require
surrender of a certificate of title to re-register a vehicle; accordingly, a
secured party must surrender possession if it holds the certificate of title to
the vehicle. Thus, the secured party would have the opportunity to re-perfect
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its security interest in the vehicle in the state of relocation. In states that
do not require a certificate of title for registration of a motor vehicle, re-
registration could defeat perfection.
In the ordinary course of servicing receivables, the Bank takes steps to
effect re-perfection upon receipt of notice of re-registration or information
from the obligor as to relocation. Similarly, when an obligor sells a vehicle,
a majority of states require surrender of a certificate of title to issue a
certificate of title in the name of the purchaser. In such states the Bank must
surrender possession of the certificate of title, if it holds the certificate of
title, and accordingly will have an opportunity to require satisfaction of the
related Receivable before release of the lien. Under each Trust Agreement, the
Servicer will be obligated to take appropriate steps, at its own expense, to
maintain perfection of security interests in the Vehicles.
Under the laws of most states, liens for repairs performed on a motor
vehicle and liens for certain unpaid taxes take priority over even a perfected
security interest in a Vehicle. The Code also grants priority to certain federal
tax liens over the lien of a secured party. The laws of certain states and
federal law permit the confiscation of motor vehicles under certain
circumstances if used in unlawful activities, which may result in the loss of a
secured party's perfected security interest in the confiscated motor vehicle.
The Bank will represent that, as of the Closing Date, each security
interest in a Vehicle is or will be prior to all other present liens (other than
tax liens and liens that arise by operation of law) upon and security interests
in such Vehicle. However, liens for repairs or taxes, or the confiscation of a
Vehicle, could arise or occur at any time during the term of a Receivable. No
notice will be given to the Trustee or Securityholders in the event such a lien
arises or confiscation occurs.
Repossession
In the event of default by an Obligor, the holder of the related retail
installment sale or finance contract has all the remedies of a secured party
under the UCC, except where specifically limited by other state laws. The UCC
remedies of a secured party include the right to repossession by self-help
means, unless such means would constitute a breach of the peace. Unless a
vehicle is voluntarily surrendered, self-help repossession is accomplished
simply by taking possession of the related financed vehicle. In cases where the
Obligor objects or raises a defense to repossession, or if otherwise required by
applicable state law, a court order is obtained from the appropriate state
court, and the vehicle must then be recovered in accordance with that order. In
some jurisdictions, the secured party is required to notify the debtor of the
default and the intent to repossess the collateral and give the debtor a time
period within which to cure the default prior to repossession. Generally, this
right of cure may only be exercised on a limited number of occasions during the
term of the related contract. Other jurisdictions permit repossession without
prior notice if it can be accomplished without a breach of the peace (although
in some states, a course of conduct in which the creditor has accepted late
payments has been held to create a right by the Obligor to receive prior
notice).
Notice of Sale; Redemption Rights
The UCC and other state laws require a secured party to provide the Obligor
with reasonable notice of the date, time and place of any public sale and/or the
date after which any private sale of the collateral may be held. In addition,
some states also impose substantive timing requirements on the sale of
repossessed vehicles in certain circumstances and/or various substantive timing
and content requirements on such notices. In most states, under certain
circumstances after a financed vehicle has been repossessed, the Obligor may
redeem the collateral by paying the delinquent installments and other amounts
due. The Obligor has the right to redeem the collateral prior to actual sale or
entry by the secured party into a contract for sale of the collateral by paying
the secured party the unpaid principal balance of the obligation, accrued
interest thereon, reasonable expenses for repossessing, holding, and preparing
the collateral for disposition and arranging for its sale, plus, in some
jurisdictions, reasonable attorneys' fees and legal expenses or in some other
states, by payment of delinquent installments on the unpaid principal balance of
the related obligation.
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Deficiency Judgments and Excess Proceeds
The proceeds of resale of the Vehicles generally will be applied first to
the expenses of resale and repossession and then to the satisfaction of the
indebtedness. In many instances, the remaining principal amount of such
indebtedness will exceed such proceeds. Under the UCC and laws applicable in
some states, a creditor is entitled to bring an action to obtain a deficiency
judgment from a debtor for any deficiency on repossession and resale of a motor
vehicle securing such debtor's loan; however, in some states, a creditor may not
seek a deficiency judgment from a debtor whose financed vehicle had an initial
cash sales price below some requisite dollar amount. Some states, impose
prohibitions or limitations or notice requirements on actions for deficiency
judgments. In addition to the notice requirement described above, the UCC
requires that every aspect of the sale or other disposition, including the
method, manner, time, place and terms, be "commercially reasonable." Generally,
courts have held that when a sale is not "commercially reasonable," the secured
party loses its right to a deficiency judgment. In addition, the UCC permits
the debtor or other interested party to recover for any loss caused by
noncompliance with the provisions of the UCC. Also, prior to a sale, the UCC
permits the debtor or other interested person to obtain an order mandating that
the secured party refrain from disposing of the collateral if it is established
that the secured party is not proceeding in accordance with the "default"
provisions under the UCC. However, the deficiency judgment would be a personal
judgment against the Obligor for the shortfall, and a defaulting Obligor can be
expected to have very little capital or sources of income available following
repossession. Therefore, in many cases, it may not be useful to seek a
deficiency judgment or, if one is obtained, it may be settled at a significant
discount or be uncollectible.
Occasionally, after resale of a vehicle and payment of all expenses and
indebtedness, there is a surplus of funds. In that case, the UCC requires the
creditor to remit the surplus to any holder of a subordinate lien with respect
to the vehicle or if no such lienholder exists or if there are remaining funds,
the UCC requires the creditor to remit the surplus to the Obligor under the
contract.
Consumer Protection Laws
Numerous federal and state consumer protection laws and related regulations
impose substantial requirements upon creditors and servicers involved in
consumer finance. These laws include the Truth-in-Lending Act, the Equal Credit
Opportunity Act, the Federal Trade Commission Act, the Fair Credit Billing Act,
the Fair Credit Reporting Act, the Fair Debt Collection Practices Act, the
Magnuson-Moss Warranty Act, the Federal Reserve Board's Regulations B and Z,
state adaptations of the National Consumer Act and of the Uniform Consumer
Credit Code, state motor vehicle retail installment sale acts, state "lemon"
laws and other similar laws. In addition, the laws of certain states impose
finance charge ceilings and other restrictions on consumer transactions and
require contract disclosures in addition to those required under federal law.
These requirements impose specific statutory liabilities upon creditors who fail
to comply with their provisions. In some cases, this liability could affect the
ability of an assignee such as the Trustee to enforce consumer finance contracts
such as the Receivables.
The so-called "Holder-in-Due-Course Rule" of the Federal Trade Commission
(the "FTC Rule") has the effect of subjecting any assignee of the seller in a
consumer credit transaction (and certain related creditors and their assignees)
to all claims and defenses which the Obligor in the transaction could assert
against the seller. Liability under the FTC Rule is limited to the amounts paid
by the Obligor under the contract, and the holder of the contract may also be
unable to collect any balance remaining due thereunder from the Obligor. The
FTC Rule is generally duplicated by the Uniform Consumer Credit Code, other
state statutes or the common law in certain states. To the extent that the
Receivables will be subject to the requirements of the FTC Rule, the Trustee, as
holder of the Receivables, will be subject to any claims or defenses that the
purchaser of the related Vehicle may assert against the seller of such Vehicle.
Such claims will be limited to a maximum liability equal to the amounts paid by
the Obligor under the related Receivable.
Under most state vehicle dealer licensing laws, sellers of automobiles,
light duty trucks and vans are required to be licensed to sell vehicles at
retail sale. In addition, with respect to used vehicles, the Federal Trade
Commission's Rule on Sale of Used Vehicles requires that all sellers of used
vehicles
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prepare, complete and display a "Buyer's Guide" which explains the warranty
coverage for such vehicles. Furthermore, Federal Odometer Regulations
promulgated under the Motor Vehicle Information and Cost Savings Act and the
motor vehicle title laws of most states require that all sellers of used
vehicles furnish a written statement signed by the seller certifying the
accuracy of the odometer reading. If a seller is not properly licensed or if
either a Buyer's Guide or Odometer Disclosure Statement was not provided to the
purchaser of a Vehicle, the Obligor may be able to assert a defense against the
seller of the Vehicle. If an Obligor on a Receivable were successful in
asserting any such claim or defense, the Servicer would pursue on behalf of the
Trust any reasonable remedies against the seller or manufacturer of the vehicle,
subject to certain limitations as to the expense of any such action specified in
the related Trust Agreement.
Any loss relating to any such claim, to the extent not covered by a
withdrawal from a reserve account or from a payment under an insurance policy or
other Credit Enhancement could result in losses to the Securityholders. If an
Obligor were successful in asserting any such claim or defense as described in
this paragraph or the two immediately preceding paragraphs, such claim or
defense would constitute a breach of a representation and warranty under the
related Trust Agreement and would create an obligation of the Bank to repurchase
the related Receivable unless the breach were cured.
Courts have applied general equitable principles to secured parties
pursuing repossession or litigation involving deficiency balances. These
equitable principles may have the effect of relieving an Obligor from some or
all of the legal consequences of a default.
In several cases, consumers have asserted that the self-help remedies of
secured parties under the UCC and related laws violate the due process
protections of the 14th Amendment to the Constitution of the United States.
Courts have generally either upheld the notice provisions of the UCC and related
laws as reasonable or have found that the creditor's repossession and resale do
not involve sufficient state action to afford constitutional protection to
consumers.
Soldiers' and Sailors' Civil Relief Act of 1940
Under the terms of the Relief Act, an Obligor who enters military service
after the origination of such Obligor's Receivable (including an Obligor who was
in reserve status and is called to active duty after origination of the
Receivable), may not be charged interest (including fees and charges) above an
annual rate of 6% during the period of such Obligor's active duty status, unless
a court orders otherwise upon application of the lender. The Relief Act applies
to Obligors who are members of the Army, Navy, Air Force, Marines, National
Guard, Reserves, Coast Guard, and officers of the U.S. Public Health Service
assigned to duty with the military. Because the Relief Act applies to Obligors
who enter military service (including reservists who are called to active duty)
after origination of the related Receivable, no information can be provided as
to the number of loans that may be effected by the Relief Act. Application of
the Relief Act would adversely affect, for an indeterminate period of time, the
ability of the Servicer to collect full amounts of interest on certain of the
Receivables. Any shortfall in interest collections resulting from the
application of the Relief Act or similar legislation or regulations, which would
not be recoverable from the related Receivables, would result in a reduction of
the amounts distributable to the holders of the related Securities, and would
not be covered by any form of Credit Enhancement provided in connection with the
related series of Securities. In addition, the Relief Act imposes limitations
that would impair the ability of the Servicer to foreclose on an affected
Receivable during the Obligor's period of active duty status, and, under certain
circumstances, during an additional three month period thereafter. Thus, in the
event that the Relief Act or similar legislation or regulations applies to any
Receivable which goes into default, there may be delays in payment and losses on
the related Securities in connection therewith. Any other interest shortfalls,
deferrals or forgiveness of payments on the Receivables resulting from similar
legislation or regulations may result in delays in payments or losses to
Securityholders of the related series.
Other Limitations
In addition to the laws limiting or prohibiting deficiency judgments,
numerous other statutory provisions, including federal bankruptcy laws and
related state laws, may interfere with or affect the ability of
40
<PAGE>
a creditor to realize upon collateral or enforce a deficiency judgment. For
example, in a Chapter 13 proceeding under the federal bankruptcy law, a court
may prevent a creditor from repossessing a motor vehicle, and, as part of the
rehabilitation plan, reduce the amount of the secured indebtedness to the market
value of the motor vehicle at the time of bankruptcy (as determined by the
court), leaving the party providing financing as a general unsecured creditor
for the remainder of the indebtedness. A bankruptcy court may also reduce the
monthly payments due under a contract or change the rate of interest and time of
repayment of the indebtedness. Any such shortfall, to the extent not covered by
Credit Enhancement (as specified in each Prospectus Supplement), could result in
losses to the Securityholders.
CERTAIN TAX CONSIDERATIONS
The Prospectus Supplement for each series of Securities will summarize,
subject to the limitations stated therein, federal income tax considerations
relevant to the purchase, ownership and disposition of such Securities.
ERISA CONSIDERATIONS
The Prospectus Supplement for each series of Securities will summarize,
subject to the limitations discussed therein, considerations under ERISA
relevant to the purchase of such Securities by employee benefit plans and
individual retirement accounts.
METHODS OF DISTRIBUTION
The Securities offered hereby and by the related Prospectus Supplement will
be offered in series through one or more of the methods described below. The
Prospectus Supplement prepared for each series will describe the method of
offering being utilized for that series and will state the public offering or
purchase price of such series and the net proceeds to the Bank from such sale.
The Bank intends that Securities will be offered through the following
methods from time to time and that offerings may be made concurrently through
more than one of these methods or that an offering of a particular series of
Securities may be made through a combination of two or more of these methods.
Such methods are as follows:
1. By negotiated firm commitment or best efforts underwriting and
public re-offering by underwriters, including sales to trusts with respect
to which the underwriters may act as depositor and may from time to time
repurchase Securities for resale to the public;
2. By placements by the Bank with institutional investors through
dealers;
3. By direct placements by the Bank with institutional investors; and
4. By competitive bid.
In addition, if specified in the related Prospectus Supplement, a series of
Securities may be offered in whole or in part in exchange for the Receivables
(and other assets, if applicable) that would comprise the Trust Property in
respect of such Securities.
If underwriters are used in a sale of any Securities (other than in
connection with an underwriting on a best efforts basis), such Securities will
be acquired by the underwriters for their own account and may be resold from
time to time in one or more transactions, including negotiated transactions, at
fixed public offering prices or at varying prices to be determined at the time
of sale or at the time of commitment therefor. The managing underwriters will
be set forth on the cover of the Prospectus Supplement relating
41
<PAGE>
to such series and the members of the underwriting syndicate, if any, will be
named in such Prospectus Supplement.
In connection with the sale of the Securities, underwriters may receive
compensation from the Bank or from purchasers of the Securities in the form of
discounts, concessions or commissions. Underwriters and dealers participating
in the distribution of the Securities may be deemed to be underwriters in
connection with such Securities, and any discounts or commissions received by
them from the Bank and any profit on the resale of Securities by them may be
deemed to be underwriting discounts and commissions under the Securities Act.
The Prospectus Supplement will describe any such compensation paid by the Bank.
It is anticipated that the underwriting agreement pertaining to the sale of
any series of Securities will provide that the obligations of the underwriters
will be subject to certain conditions precedent, that the underwriters will be
obligated to purchase all such Securities if any are purchased (other than in
connection with an underwriting on a best efforts basis) and that, in limited
circumstances, the Bank will indemnify the several underwriters and the
underwriters will indemnify the Bank against certain civil liabilities,
including liabilities under the Securities Act or will contribute to payments
required to be made in respect thereof.
The Prospectus Supplement with respect to any series offered by placements
through dealers will contain information regarding the nature of such offering
and any agreements to be entered into between the Bank and purchasers of
Securities of such series.
Purchasers of Securities, including dealers, may, depending on the facts
and circumstances of such purchases, be deemed to be "underwriters" within the
meaning of the Securities Act in connection with reoffers and sales by them of
Securities. Holders of Securities should consult with their legal advisors in
this regard prior to any such reoffer or sale.
LEGAL OPINIONS
Certain legal matters relating to the issuance of the Securities of any
series, including certain federal and state income tax consequences with respect
thereto, will be passed upon by Dewey Ballantine, New York, New York, or other
counsel specified in the related Prospectus Supplement.
42
<PAGE>
INDEX OF TERMS
Set forth below is a list of the defined terms used in this Prospectus and
the pages on which the definitions of such terms may be found herein.
<TABLE>
<CAPTION>
<S> <C>
Accrual Securities...................................................... 5
Actuarial Contracts..................................................... 17
Additional Receivables.................................................. 8
Additional Yield Maintenance Amount..................................... 29
Affiliate............................................................... 1
APR..................................................................... 16
Bank.................................................................... 1
Cede.................................................................... 9
Cedel................................................................... 9
CEDEL Participants...................................................... 23
Certificateholders...................................................... 24
Certificates............................................................ 1
CFC..................................................................... 1
Class................................................................... 1
Closing Date............................................................ 16
Code.................................................................... 9
Collection Account...................................................... 28
Collection Period....................................................... 6
Commission.............................................................. 2
Commodity Indexed Securities............................................ 26
Contracts............................................................... 1
Cooperative............................................................. 23
Credit Enhancement...................................................... 13
Credit Enhancer......................................................... 13
Currency Indexed Securities............................................. 26
Definitive Securities................................................... 24
Depositaries............................................................ 21
Determination Date...................................................... 29
Distribution Account.................................................... 28
Distribution Date....................................................... 6
DTC..................................................................... 3
Eligible Deposit Account................................................ 28
Eligible Institution.................................................... 28
Eligible Investments.................................................... 28
ERISA................................................................... 10
Euroclear............................................................... 9
Euroclear Operator...................................................... 23
Euroclear Participants.................................................. 23
Exchange Act............................................................ 2
Face Amount............................................................. 27
FASIT................................................................... 2
FDIC.................................................................... 12
Fixed Income Securities................................................. 5
FTC..................................................................... 39
Indenture............................................................... 4
Index................................................................... 26
Indexed Commodity....................................................... 26
Indexed Currency........................................................ 26
Indexed Principal Amount................................................ 26
Indexed Securities...................................................... 26
</TABLE>
43
<PAGE>
<TABLE>
<S> <C>
Indirect Participants................................................... 22
Initial Yield Maintenance Amount........................................ 8
Insolvency Event........................................................ 34
Interest Rate........................................................... 2
Investment Company Act.................................................. 4
Investment Earnings..................................................... 28
Issuer.................................................................. 1
Lender.................................................................. 15
Master Trust............................................................ 7
Master Trust Agreement.................................................. 7
Master Trust New Issuance............................................... 30
Noteholders............................................................. 24
Notes................................................................... 1
Original Security Principal Balance..................................... 25
OTS..................................................................... 19
Participants............................................................ 21
Pass-Through Rate....................................................... 2
Pool Balance............................................................ 19
Pool Factor............................................................. 19
Pooling Agreement....................................................... 4
Pre-Funding Account..................................................... 8
Pre-Funding Period...................................................... 8
Prepayment.............................................................. 14
Prospectus Supplement................................................... 1
Purchase Amount......................................................... 29
Rating Agencies......................................................... 10
Ratings Effect.......................................................... 13
Receivable File......................................................... 31
Receivables............................................................. 1
Record Date............................................................. 6
Registration Statement.................................................. 2
Reimbursement Amounts................................................... 25
Relief Act.............................................................. 14
Required Rate........................................................... 8
Required Yield Maintenance Amount....................................... 29
Residual Interest....................................................... 7
Rule of 78s............................................................. 16
Rule of 78s Contracts................................................... 16
Rules................................................................... 22
SAIF.................................................................... 19
Securities.............................................................. 1
Securities Act.......................................................... 2
Security Principal Balance.............................................. 25
Securityholders......................................................... 6
Senior Securities....................................................... 6
Servicer................................................................ 1
Servicer Default........................................................ 34
Servicing Agreement..................................................... 4
Simple Interest Contracts............................................... 17
Stock Index............................................................. 26
Stock Indexed Securities................................................ 26
Strip Securities........................................................ 5
Subordinate Securities.................................................. 6
Terms and Conditions.................................................... 23
Trust................................................................... 1
Trust Accounts.......................................................... 28
Trust Agreement......................................................... 4
</TABLE>
44
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Trust Property.......................................................... 1
Trustee................................................................. 5
Vehicles................................................................ 1
Yield Maintenance Agreement............................................. 29
Yield Maintenance Amount................................................ 29
</TABLE>
45
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
Set forth below is an estimate of the amount of fees and expenses
(other than underwriting discounts and commissions) to be incurred in connection
with the issuance and distribution of the Offered Certificates.
SEC Filing Fee ................................ $ 303
Trustee's Fees and Expenses* ..................
Legal Fees and Expenses* ......................
Accounting Fees and Expenses* .................
Printing and Engraving Expenses* ..............
Blue Sky Qualification and Legal
Investment Fees and Expenses* ................
Rating Agency Fees* ...........................
Certificate Insurer's Fee* ....................
Miscellaneous* ................................ ___________
TOTAL* ...................................... ___________
$
=
- ----------
* To be filed by Amendment.
Item 15. Indemnification of Directors and Officers.
12 C.F.R. 545.121 of the rules and regulations of the OTS
prescribe the conditions under which indemnification may be obtained by a
present or former director, officer or employee of the Bank against whom an
action has been brought or is threatened, for any amount for which that person
is liable under a judgment and for reasonable costs and expenses, including
reasonable attorney's fees, actually paid or incurred by that person defending
or settling such action.
Subject to prior OTS review, the OTS rules and regulations
require the Bank to indemnify the director, officer or employee if (a) a final
judgment on the merits is in his favor, or (b) in the case of (i) settlement,
(ii) final judgment against him or (iii) final judgment in his favor, other than
on the merits, if a majority of the disinterested directors of the Bank
determines that he was acting in good faith within the scope of his employment
or authority as he could reasonably have perceived it under the circumstances,
and for a purpose he could reasonably have believed under the circumstances was
in the best interests of the Bank or its shareholders.
The officers and directors of the Bank are covered by directors'
and officers' insurance insuring them against any liability they may incur in
their capacities as such, subject to 12 C.F.R. 545.121 of the rules and
regulations of the OTS.
Pursuant to Section __ of the Form of Underwriting Agreement,
which is attached as Exhibit 1.1 hereto, the Underwriters will agree to
indemnify the Bank and its officers and directors against certain liabilities,
including liabilities under the Securities Act of 1933, as amended, arising from
information which has been or will be furnished to the Bank by the Underwriters
that appear in the Registration Statement or the Prospectus.
II-1
<PAGE>
Item 16. Exhibits.
*1.1 -- Form of Underwriting Agreement - Notes.
*1.2 -- Form of Underwriting Agreement - Certificates.
*4.1 -- Form of Indenture between the Trust and the Indenture
Trustee.
*4.2 -- Form of Indenture between the Registrant and the
Indenture Trustee.
*4.3 -- Form of Pooling and Servicing Agreement (Grantor/FASIT
Trust).
*4.4 -- Form of Pooling and Servicing Agreement (Master Trust).
*5.1 -- Opinion of Dewey Ballantine with respect to validity.
*8.1 -- Opinion of Dewey Ballantine with respect to tax matters.
*10.1 -- Form of Receivables Acquisition Agreement.
*23.1 -- Consents of Dewey Ballantine are included in its opinions
filed as Exhibits 5.1 and 8.1 hereto.
*25.1 -- Statement of Trustee's Eligibility on Form T-1.
*99.1 -- Form of Prospectus Supplement - Certificates and Notes.
*99.2 -- Form of Prospectus Supplement - Notes.
*99.3 -- Form of Prospectus Supplement - Certificates.
*99.4 -- Form of Prospectus Supplement - Master Trust.
* To be filed by Amendment.
Item 17. Undertakings.
A. Undertaking in respect of indemnification
Insofar as indemnification for liabilities arising under the 1933
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described above in Item 15, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of their counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of whether
such indemnification by them is against public policy as expressed in the 1933
Act and will be governed by the final adjudication of such issue.
B. Undertaking pursuant to Rule 415.
The Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) to include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(ii) to reflect in the Prospectus any facts or events arising
after the effective date of the Registration Statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate, represent
a fundamental change in the information set forth in the Registration Statement;
(iii) to include any material information with respect to the
plan of distribution not previously disclosed in the Registration Statement or
any material change of such information in the Registration Statement; provided,
however, that paragraphs (i) and (ii) do not apply if the information required
to be included in the post-effective amendment is contained in periodic reports
filed by the Issuer pursuant to Section 13 or Section 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in the Registration
Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
II-2
<PAGE>
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
C. Undertaking pursuant to Rule 430A.
The Registrant hereby undertakes:
(1) For purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form of prospectus
filed as part of a registration statement in Reliance upon Rule 430A and
contained in the form of prospectus filed by the Registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part
of this registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the registrant certifies that it has reasonable grounds to believe that
it meets all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Chevy Chase, State of Maryland on February 12,
1997.
Chevy Chase Bank, F.S.B
as Originator of the Trusts and Registrant
By /s/ B. Francis Saul II
-----------------------------
B. Francis Saul II
Chairman of the Board
(Principal Executive Officer)
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Stephen R. Halpin, Jr. and Alexander R.
M. Boyle, and each of them, his true and lawful attorney-in-fact and agent, with
full power of substitution and resubstitution, for and in his name, place and
stead, in any and all capacities to sign any or all amendments (including
posteffective amendments) to this Registration Statement and any or all other
documents in connection therewith, and to file the same, with all exhibits
thereto, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as might or could be done in
person, hereby ratifying and confirming all said attorneys-in-fact and agents or
any of them, or their substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as
amended this Registration Statement has been signed on February 12, 1997 below
by the following persons in the capacities indicated.
Signature Title
--------- -----
/s/ Alexander R.M. Boyle Vice Chairman of the Board
- ---------------------------
Alexander R.M. Boyle
Director
- ---------------------------
Vincent C. Burke, Jr.
Director
- ---------------------------
Donald G. Conrad
/s/ Gavin Malloy Farr Director
- ---------------------------
Gavin Malloy Farr
/s/ Joel A. Friedman Senior Vice President and
- --------------------------- Controller
Joel A. Friedman (Principal Accounting Officer)
Director
- ---------------------------
Gilbert M. Grosvenor
/s/ Stephen R. Halpin, Jr. Executive Vice President
- --------------------------- (Principal Financial Officer)
Stephen R. Halpin, Jr.
/s/ Penne Percy Korth Director
- ---------------------------
Penne Percy Korth
Director
- ---------------------------
LaSalle D. Leffall
II-4
<PAGE>
/s/ William F. McSweeny Director
- ---------------------------
William F. McSweeny
/s/ Garland P. Moore, Jr. Director
- ---------------------------
Garland P. Moore, Jr.
Director
- ---------------------------
George M. Rogers, Jr.
/s/ B. Francis Saul II Chairman of the Board
- --------------------------- (Principal Executive Officer)
B. Francis Saul II
/s/ Leonard L. Silverstein Director
- ---------------------------
Leonard L. Silverstein
II-5
