<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 13, 1997
REGISTRATION NO. 333-
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- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
CHEVY CHASE BANK, F.S.B.
(ORIGINATOR OF THE TRUST DESCRIBED HEREIN)
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
CHEVY CHASE AUTO RECEIVABLES TRUST 1997-1
(ISSUER OF THE CERTIFICATES)
UNITED STATES 52-0897004
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
8401 CONNECTICUT AVENUE
CHEVY CHASE, MARYLAND 20815
(301) 986-7000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
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, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
---------------
COPIES TO:
M. DAVID KROHN, ESQ.
SHAW, PITTMAN, POTTS & TROWBRIDGE
2300 N STREET, N.W.
WASHINGTON, D.C. 20037
(202) 663-8000
---------------
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, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
PROPOSED
PROPOSED MAXIMUM
MAXIMUM AGGREGATE AMOUNT OF
TITLE OF SECURITIES AMOUNT TO OFFERING PRICE OFFERING REGISTRATION
TO BE REGISTERED BE REGISTERED PER UNIT(1) PRICE(1) FEE
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Auto Receivable Backed
Certificates........... $1,000,000 100% $1,000,000 $303.03
</TABLE>
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(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.
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<PAGE>
CHEVY CHASE AUTO RECEIVABLES TRUST 1997-1
----------------
CROSS REFERENCE SHEET TO FORM S-3
<TABLE>
<CAPTION>
ITEM
NO. ITEM PROSPECTUS CAPTION OR PAGE
---- ---- --------------------------
<C> <S> <C>
1. Forepart of the Registration
Statement and Outside Front Cover Forepart of the Registration
Page of Prospectus................ Statement and Front Cover Page of
Prospectus;
2. Inside Front and Outside Back Cover
Pages of the Prospectus........... Inside Front Cover Page and Outside
Back Cover Page of Prospectus;
Available Information;
Incorporation of Certain Documents
By Reference; Reports to
Certificateholders; Table of
Contents
3. Summary Information; Risk Factors
and Ratio of Earnings to Fixed Summary of Terms and Special
Charges........................... Considerations
4. Use of Proceeds.................... Use of Proceeds
5. Determination of Offering Price.... *
6. Dilution........................... *
7. Selling Security Holders........... *
8. Plan of Distribution............... Underwriting
9. Description of Securities to be Summary of Terms; Formation of the
Registered........................ Trust; The Certificates
10. Interest of Named Experts and
Counsel........................... *
11. Material Changes................... *
12. Incorporation of Certain Incorporation of Certain Documents
Information by Reference.......... by Reference
13. Disclosure of Commission Position
on Indemnification for Securities
Act Liabilities................... *
</TABLE>
- --------
* Not applicable or answer is negative.
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION DATED FEBRUARY 13, 1997
$
CHEVY CHASE AUTO RECEIVABLES TRUST 1997-1
% AUTO RECEIVABLES BACKED CERTIFICATES
CHEVY CHASE BANK, F.S.B.
SELLER AND SERVICER
--------
Principal, and interest to the extent of the Pass-Through Rate of % per annum,
will be distributed to Certificateholders on the th day of each month (or, if
such th day is not a Business Day, the next following Business Day),
beginning , 1997. The aggregate principal balance of the Receivables as of
the Cut-Off Date is $ . The final scheduled distribution date of the
Certificates will be the Distribution Date in (the "Final Scheduled
Distribution Date").
The % Auto Receivables Backed Certificates (the "Certificates") represent
fractional undivided interests in the assets of the Chevy Chase Auto
Receivables Trust 1997-1 (the "Trust") to be formed pursuant to a Pooling and
Servicing Agreement (the "Pooling Agreement"), dated as of , 1997, among
Chevy Chase Bank, F.S.B. (the "Bank"), as seller and as servicer of the
receivables (the "Seller" and the "Servicer," respectively), and , as
trustee (the "Trustee"). The assets of the Trust will primarily consist of
simple interest retail installment sales contracts and installment loans (the
"Receivables") secured by new and used automobiles, light duty trucks and vans
financed thereby (the "Vehicles"), certain payments made thereunder on or after
, 1997 (the "Cut-Off Date"), security interests in the Vehicles and the
proceeds thereof received by the Trust from the Seller on or prior to the date
of the issuance of the Certificates, all as more fully described herein.
(cover continued on next page)
THERE CURRENTLY IS NO SECONDARY MARKET FOR THE CERTIFICATES. THE UNDERWRITERS
INTEND TO MAKE A SECONDARY MARKET IN THE CERTIFICATES BUT HAVE NO OBLIGATION TO
DO SO. POTENTIAL INVESTORS SHOULD CONSIDER, AMONG OTHER THINGS, THE INFORMATION
SET FORTH IN "SPECIAL CONSIDERATIONS" HEREIN.
--------
THE CERTIFICATES REPRESENT BENEFICIAL INTERESTS IN THE TRUST ONLY AND DO NOT
REPRESENT INTERESTS IN OR OBLIGATIONS OF THE BANK OR ANY AFFILIATES OF THE
BANK. NEITHER THE CERTIFICATES 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.
--------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNT AND PROCEEDS TO THE
PUBLIC(2) COMMISSIONS SELLER(1)(2)
------------ ------------ ---------------
<S> <C> <C> <C>
Per Certificate............................ % % %
Total...................................... $ $ $
</TABLE>
- -----
(1) Before deduction of expenses payable by the Bank estimated at $ .
(2) Plus accrued interest, if any, at the Pass-Through Rate from , 1997.
--------
The Certificates are offered by the several Underwriters when, as and if issued
by the Trust, delivered to and accepted by the Underwriters and subject to
their right to reject orders in whole or in part. It is expected that the
Certificates will be offered globally and delivered in book-entry form on or
about , 1997 through the facilities of The Depository Trust Company,
Cedel Bank, societe anonyme and Euroclear System, against payment in
immediately available funds.
CREDIT SUISSE FIRST BOSTON
The date of this Prospectus is , 1997.
<PAGE>
(cover continued from previous page)
The assets of the Trust also will include a financial guaranty insurance
policy (the "Certificate Insurance Policy") from (the "Certificate
Insurer"), which will unconditionally and irrevocably guarantee payment of
amounts due to the holders of the Certificates (the "Certificateholders") to
the extent described herein. The Trustee will also have access to a Reserve
Account and a Yield Maintenance Account to be established for the benefit of
the Certificateholders and the Certificate Insurer.
There currently is no secondary market for the Certificates. The
Underwriters intend to make a secondary market in the Certificates but have no
obligation to do so.
AVAILABLE INFORMATION
The Seller 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 Certificates 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 Servicer, on behalf of the Trust, will also file or
cause to be filed with the Commission such periodic reports as may be required
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
and the rules and regulations of the Commission thereunder. In addition the
Commission maintains a Web site at "http://www.sec.gov" that contains
information regarding registrants that file electronically with the
Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All documents subsequently filed by the Servicer with the Registration
Statement, either on its own behalf or on behalf of the Trust, relating to the
Certificates, with the Commission pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act, after the date of this Prospectus and prior to the
termination of the offering of the Certificates offered hereby, 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 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.
The Servicer will provide without charge to each person to whom this
Prospectus is delivered, on the written or oral request of such person, a copy
of any or all of the documents referred to above that have been or may be
incorporated by reference in this Prospectus (not including exhibits to the
information that is incorporated by reference unless such exhibits are
specifically incorporated by reference into the information that this
Prospectus incorporates). Written requests for such copies should be directed
to: Chevy Chase Bank, F.S.B., 8401 Connecticut Avenue, Chevy Chase, Maryland
20815, Attention: Chief Financial Officer. Telephone requests for such copies
should be directed to Chevy Chase Bank, F.S.B. at (301) 986-7000.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE CERTIFICATES
AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
REPORTS TO CERTIFICATEHOLDERS
Unless and until Definitive Certificates are issued, periodic and annual
unaudited reports containing information concerning the Receivables will be
prepared by the Servicer and sent on behalf of the Trust only to Cede & Co.
("Cede"), as nominee of The Depository Trust Company ("DTC") and registered
holder of the Certificates. Such reports will not constitute financial
statements prepared in accordance with generally accepted accounting
principles. The Servicer will file with the Commission such periodic reports
as are required under the Exchange Act, and the rules and regulations
thereunder and as are otherwise agreed to by the Commission. Copies of such
periodic reports may be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates.
2
<PAGE>
SUMMARY OF TERMS
The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus. Certain
capitalized terms used in this Summary of Terms are defined elsewhere in this
Prospectus on the pages indicated in the Index of Principal Terms.
Issuer...................... Chevy Chase Auto Receivables Trust 1997-1 (the
"Trust" or the "Issuer").
Seller/Servicer............. Chevy Chase Bank, F.S.B., a federally chartered
stock savings bank (the "Bank"). The principal
executive offices of the Seller and the Servicer
are located at 8401 Connecticut Avenue, Chevy
Chase, Maryland 20815.
Trustee..................... , a national banking association. The
corporate trust offices of the Trustee are
located at , and the telephone number of
the Trustee is .
Cut-Off Date................ , 1997.
Securities Offered.......... The % Auto Receivables Backed Certificates (the
"Certificates"). The Certificates will evidence
fractional undivided ownership interests in the
assets of the Trust. The Certificates will be
offered for purchase in denominations of $1,000
and integral multiples thereof. See "The
Certificates -- General." Each Certificateholder
will also purchase the right to receive a pro
rata share of amounts payable under the Yield
Maintenance Account established pursuant to the
Pooling Agreement ("Yield Maintenance Payments").
The Trust................... The Trust will be a trust established under the
laws of the State of New York. The activities of
the Trust are limited by the terms of the Pooling
Agreement to purchasing, owning and managing the
Receivables, issuing and making payments on the
Certificates and other activities related
thereto.
Trust Property.............. The assets of the Trust (the "Trust Property")
include (i) the Receivables, (ii) all monies
(including accrued interest) due or received on
or after the Cut-Off Date, (iii) the Collection
Account and the Certificate Account and such
amounts as from time to time may be held in one
or more accounts established and maintained by
the Servicer and the Trustee pursuant to the
Pooling Agreement, as described below, (iv) the
security interests in the Vehicles, (v) the
rights to proceeds from claims on physical
damage, credit life and disability insurance
policies, if any, covering Vehicles or Obligors,
as the case may be, (vi) any proceeds from the
sale of repossessed Vehicles, (vii) all rights to
receive payments under certain circumstances from
the Reserve Account, (viii) the Certificate
Insurance Policy and (ix) certain other property,
as more fully described herein. See "The Trust
Property."
The Receivables............. The Receivables consist of simple interest retail
installment sales contracts between dealers and
retail purchasers and installment loans which are
secured by the new and used automobiles, light
duty trucks and vans financed thereby. Each
Obligor's obligation under
3
<PAGE>
its Receivable is a full recourse obligation. The
"Obligor" is the obligor under each Receivable
including any guarantor. The Receivables contain
provisions which unconditionally obligate the
Obligor to make all payments under the related
Receivable. Approximately % of the Receivables
(by aggregate principal balance of the
Receivables as of the Cut-Off Date) were
purchased or originated by the Bank and the other
% of the Receivables were purchased or
originated by the Bank's wholly-owned subsidiary,
Consumer Finance Corporation ("CFC"). The
Receivables purchased or originated by CFC are
referred to herein as the "CFC Receivables." See
"The Receivables Pool."
Registration of
Certificates................ The Certificates will be represented initially by
physical certificates registered in the name of
Cede, as nominee of DTC. Persons acquiring
beneficial ownership interests in such
Certificates ("Beneficial Owners") may elect to
hold their interests through DTC, in the United
States of America, or Cedel Bank, societe anonyme
("CEDEL") or the Euroclear System ("Euroclear"),
in Europe. A Beneficial Owner will not be
entitled to receive a Definitive Certificate
representing such person's interest in the Trust
except in certain limited circumstances. Under
the terms of the Pooling Agreement, Beneficial
Owners will not be recognized as
Certificateholders and will be permitted to
exercise the rights of the Certificateholders
only indirectly through DTC. See "The
Certificates -- Book-Entry Registration."
Pass-Through Rate........... % per annum, calculated on the basis of a 360-
day year consisting of twelve 30-day months (the
"Pass-Through Rate").
Distribution Date........... The th day of each month (or, if such th day
is not a day on which banks located in New York,
New York, or Chevy Chase, Maryland are
open for the purpose of conducting commercial
banking business (a "Business Day"), the next
following Business Day) (each a "Distribution
Date") beginning , 1997.
Monthly Interest............ On each Distribution Date, the Trustee will
distribute pro rata to the Certificateholders of
record as of the close of business on the day
(whether or not a Business Day) immediately
preceding such Distribution Date (or, if
Definitive Certificates are issued, the close of
business on the last day of the calendar month
immediately preceding the month of such
Distribution Date) (the "Record Date") interest
at one-twelfth of the Pass-Through Rate on the
Certificate Principal Balance immediately prior
to such Distribution Date. To the extent interest
collections received by the Trust are
insufficient to pay such interest as a result of
the APRs on certain of the Receivables, the
Certificateholders will be entitled to amounts
payable from the Yield Maintenance Account. The
"Certificate Principal Balance" shall equal,
initially, $ (the "Original Certificate
Principal Balance") and thereafter, the Original
Certificate Principal Balance, reduced by all
amounts previously distributed to
Certificateholders and allocable to principal. A
"Collection Period" with respect to a
Distribution Date will be the
4
<PAGE>
calendar month preceding the month in which such
Distribution Date occurs. See "The
Certificates -- Flow of Funds."
Monthly Principal........... On each Distribution Date, the Trustee will
distribute to Certificateholders, as of the
related Record Date, the Monthly Principal
relating to such Distribution Date. See "The
Certificates -- Flow of Funds."
Accounts.................... The Pooling Agreement will require that the
Trustee establish an account (the "Collection
Account") and that the Servicer deposit into the
Collection Account all collections received by
the Servicer on the Receivables within two
Business Days following receipt of such amounts.
With respect to any Distribution Date and on the
related Determination Date, the Servicer shall
instruct the holder of the Collection Account to
deposit into an account established by the
Trustee (the "Certificate Account") all funds
collected on the Receivables during the most
recently completed Collection Period.
Credit Enhancement.......... The credit enhancement available for the benefit
of the Certificateholders will consist of the
Reserve Account and the Certificate Insurance
Policy.
A. Reserve Account.......... The Trustee will hold a Reserve Account (the
"Reserve Account") for the benefit of the
Certificateholders and the Certificate Insurer.
The Reserve Account will be created with an
initial deposit by the Seller of cash in an
amount required by the Pooling Agreement (the
"Reserve Initial Deposit"). The Reserve Initial
Deposit will be augmented on each Distribution
Date by the deposit in the Reserve Account of
amounts otherwise distributable to the Seller
from Excess Interest until the amount in the
Reserve Account reaches an amount equal to the
Specified Reserve Balance. Thereafter, amounts
otherwise distributable to the Seller will be
deposited in the Reserve Account to the extent
necessary to maintain the amount in the Reserve
Account at an amount equal to the Specified
Reserve Balance. Amounts in the Reserve Account
(including any investment earnings thereon) on
any Distribution Date (after giving effect to all
distributions made on such Distribution Date) in
excess of the Specified Reserve Balance for such
Distribution Date generally will be released to
the Seller. With respect to any Distribution
Date, "Excess Interest" shall mean funds on
deposit in the Certificate Account after
distribution of the Required Payments to the
Certificateholders on such Distribution Date and
payment of the fee due the Trustee, the premium
then due to the Certificate Insurer and the
Reimbursement Amount.
The "Specified Reserve Balance" with respect to
any Distribution Date means the amount so
specified in the Pooling Agreement. The Reserve
Account will be maintained with the Trustee as an
Eligible Deposit Account, and will not be part of
the Trust. See "The Reserve Account."
The Certificate Insurer may, at its option and
without notice to, or the consent of, the
Certificateholders, reduce the Specified Reserve
Balance.
5
<PAGE>
B. The Certificate
Insurance Policy............ On or before the Closing Date, the Seller will
obtain the Certificate Insurance Policy (the
"Certificate Insurance Policy") which is
noncancelable, in favor of the Trustee on behalf
of the Certificateholders. On each Distribution
Date, the Certificate Insurer will be required to
make available to the Trustee the amount, if any,
by which the Required Payments on the
Certificates exceed the sum of (x) Available
Funds as of such Distribution Date and (y) the
amount, if any, then on deposit in the Reserve
Account. The Certificate Insurance Policy does
not guarantee to the Cer- tificateholders any
specified rate of prepayments. A payment by the
Certificate Insurer under the Certificate
Insurance Policy is referred to herein as an
"Insured Payment." See "The Certificate Insurance
Policy " and "The Certificate Insurer" herein.
The Trustee will (i) receive as attorney-in-fact
of each Certificateholder, any Insured Payment
from the Certificate Insurer and (ii) disburse
such Insured Payment to each Certificateholder in
accordance with the Pooling Agreement. The
Pooling Agreement will provide that to the extent
the Certificate Insurer makes Insured Payments,
either directly or indirectly (as by paying
through the Trustee), to the Certificateholders,
the Certificate Insurer will be subrogated to the
rights of such Certificateholders with respect to
such Insured Payments. The Certificate Insurer
will receive reimbursement for such Insured
Payments, but only from the sources and in the
manner provided in the Pooling Agreement. Such
subrogation and reimbursement will have no effect
on the Certificate Insurer's obligations under
the Certificate Insurance Policy.
Yield Maintenance Account... Certain of the Receivables have annual percentage
rates of interest ("APRs") which are less than
the sum of the Pass-Through Rate, the Servicing
Fee Rate and the rates at which the Certificate
Insurer's premium and the Trustee's fee are
calculated (the sum of such rates, the "Required
Rate"). The Yield Maintenance Account is a
segregated trust account which will not be part
of the Trust into which the Seller will make a
single deposit on the Closing Date in an amount
(the "Initial Yield Maintenance Amount")
necessary to fund any shortfall on interest
collections which results from Receivables having
an APR of less than the Required Rate. After the
Closing Date no additional amounts will be
deposited in the Yield Maintenance Account. The
Initial Yield Maintenance Amount has been
calculated using a zero prepayment rate on the
Receivables. On each Determination Date, the
Servicer is permitted to recalculate the amount
required to be on deposit in the Yield
Maintenance Account (the "Yield Maintenance
Amount"), which may decline as Receivables having
less than the Required Rate prepay or are
otherwise removed from the Trust. Any amounts in
excess of the Yield Maintenance Amount will be
released to the Seller. Amounts may be withdrawn
from the Yield Maintenance Account only with
respect to the interest shortfalls described
above. Any excess funds in the Yield Maintenance
Account will be released to the Seller.
6
<PAGE>
Certificate Insurer......... MBIA Insurance Corporation and any successor
thereto.
Servicing................... The Servicer will be responsible for servicing,
managing, arranging, making collections on and
otherwise enforcing the Receivables. The Servicer
will be required to exercise the degree of skill
and care in performing these functions that it
customarily exercises with respect to similar
receivables owned by the Servicer. The Servicer
will be entitled to retain from collections on
the Receivables a monthly fee (the "Servicing
Fee") equal to one-twelfth the product of (i) %
(the "Servicing Fee Rate") and (ii) the Pool
Balance as of the beginning of the immediately
preceding Collection Period. The Servicer may
designate CFC to act as sub-servicer with respect
to the CFC Receivables.
Optional Termination........ The Seller will have the option, subject to
certain conditions set forth in the Pooling
Agreement, including the deposit of the sum
specified in the Pooling Agreement, to remove
all, but not less than all, of the property in
the Trust, and thereby cause early retirement of
the Certificates as of any Distribution Date
following a Record Date on which the Pool Balance
is 5% or less of the Original Certificate
Principal Balance (such option, the "Optional
Termination"). In the event of such a removal,
the entire outstanding Certificate Principal
Balance, together with accrued interest thereon
at the Pass-Through Rate, will be required to be
paid to the Certificateholders on such
Distribution Date. The Certificate Insurance
Policy will not insure payments to
Certificateholders resulting from an Optional
Termination. See "The Certificates -- Optional
Termination."
Certain Legal Aspects of
the Receivables............ Because of the administrative burden and expense
that would be entailed in doing so, the
certificates of title for the Vehicles will not
be amended to identify the Trustee as the secured
party. If there are any Vehicles as to which the
Bank 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. Pursuant to the
Pooling Agreement, the Seller will assign its
security interests in the Vehicles to the
Trustee. Under the laws of Virginia and North
Carolina, such an assignment of security
interests may not be, and under the laws of
Maryland will not be, sufficient to convey to the
Trustee perfected security interests in the
Vehicles. The Seller will covenant in the Pooling
Agreement to repurchase any Receivable if, on the
Closing Date, a valid, subsisting and enforceable
first priority security interest in the related
Vehicle, which will have been assigned to the
Trust, has not been perfected (or is not in the
process of being perfected) in favor of the
applicable Lender. The Seller will also covenant
in the Pooling Agreement to repurchase any
Receivable if, after the Closing Date, a valid,
subsisting and enforceable first priority
security interest in the name of the applicable
Lender is not maintained on behalf of the Trust
in the related Vehicle. See "Special
Considerations -- Certain Legal Aspects" and
"Certain Legal Aspects of the Receivables."
7
<PAGE>
Certain Federal Tax
Considerations.............. In the opinion of Shaw, Pittman, Potts &
Trowbridge, counsel to the Seller, the Trust will
constitute a grantor trust for federal income tax
purposes and will not be subject to federal
income tax. Beneficial Owners of the Certificates
must report their respective allocable shares of
all income earned on the Trust Property (other
than amounts treated as "stripped coupons") and
may deduct their respective allocable shares of
reasonable servicing fees. See "Certain Federal
Income Tax Consequences -- Tax Status of the
Trust." Prospective investors should note that no
rulings have been or will be sought from the
Internal Revenue Service (the "Service") with
respect to any of the federal income tax
consequences discussed herein, and no assurance
can be given that the Service will not take
contrary positions. See "Certain Federal Income
Tax Consequences."
ERISA Considerations........ Certificates may be purchased by or with the
assets of an employee benefit plan subject to the
Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), and the provisions of
Section 4975 of the Code. An acquisition of
Certificates by such an employee benefit plan is
subject to the general fiduciary standards of
ERISA and satisfaction of the conditions imposed
under the terms of certain prohibited transaction
exemptions granted to the Underwriters. See
"ERISA Considerations."
Ratings..................... It is a condition of the original issuance of the
Certificates that the Certificates be rated in
the highest rating category by at least one of
Moody's Investors Service, Inc. ("Moody's"),
Standard & Poor's Ratings Services, a division of
The McGraw-Hill Companies, Inc. ("S&P") or Fitch
Investors Service, Inc. ("Fitch") (Moody's, S&P
or Fitch, collectively, the "Rating Agencies").
The rating of the Certificates will depend
primarily on an assessment by the Rating Agencies
of the claims-paying ability of the Certificate
Insurer. Any reduction in the rating assigned to
the claims-paying ability of the Certificate
Insurer below the rating initially given to the
Certificates would likely result in a reduction
of the rating of the Certificates. A security
rating is not a recommendation to buy, sell or
hold securities, and may be subject to revision
or withdrawal at any time by the assigning
entity. See "Ratings."
Special Considerations...... For a discussion of certain factors that should
be considered by prospective investors in the
Certificates, see "Special Considerations"
herein.
Certain Legal Matters....... Certain legal matters relating to the validity of
the issuance of the Certificates will be passed
upon for the Seller and the Underwriters by Shaw,
Pittman, Potts & Trowbridge, Washington, D.C.
8
<PAGE>
SPECIAL CONSIDERATIONS
Prospective Certificateholders should consider, among other things, the
following factors in connection with the purchase of the Certificates:
Limited Liquidity. There currently is no secondary market for the
Certificates, and there is no assurance that one will develop or, if one does
develop, that it will continue until the Certificates are paid in full. The
Underwriters intend to make a market in the Certificates but have no
obligation to do so.
Certain Legal Aspects. Because of the administrative burden and expense that
would be entailed in doing so, the certificates of title for the Vehicles will
not be amended to identify the Trustee as the secured party. If there are any
Vehicles as to which the Bank 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.
Pursuant to the Pooling Agreement, the Seller will assign its security
interests in the Vehicles to the Trustee. Under the laws of Virginia and North
Carolina, such an assignment of security interests may not be, and under the
laws of Maryland will not be, sufficient to convey to the Trustee perfected
security interests in the Vehicles. The Seller will covenant in the Pooling
Agreement to repurchase any Receivable if, on the Closing Date, a valid,
subsisting and enforceable first priority security interest in the related
Vehicle, which will have been assigned to the Trust, has not been perfected
(or is not in the process of being perfected) in favor of the applicable
Lender. The Seller will also covenant in the Pooling Agreement to repurchase
any Receivable if, after the Closing Date, a valid, subsisting and enforceable
first priority security interest in the name of the applicable Lender is not
maintained on behalf of the Trust in the related Vehicle. See "Certain Legal
Aspects of the Receivables."
Yield and Prepayment Considerations. The weighted average life of the
Certificates will be reduced by full or partial prepayments on the
Receivables. The Receivables will generally be prepayable at any time without
penalty. Prepayments (or, for this purpose, equivalent payments to the Trust)
may result from payments by Obligors, liquidations due to default, the receipt
of proceeds from physical damage or credit life and/or credit disability
insurance, repurchases by the Seller as a result of certain uncured breaches
of representations and warranties made with respect to the Receivables,
purchases by the Servicer as a result of certain uncured breaches of the
covenants made by it with respect to the Receivables, or the exercise by the
Seller of its Optional Termination.
The Seller has served or is serving as the seller/servicer with respect to
five prior auto loan securitization transactions, Chevy Chase Auto Receivables
Trust 1996-2, Chevy Chase Auto Receivables Trust 1996-1, Chevy Chase Auto
Receivables Trust 1995-2, Chevy Chase Auto Receivables Trust 1995-1 and Chevy
Chase Automobile Loan Trust 1991-1 and, accordingly, has limited historical
experience with respect to prepayments. The Seller has not as of the date
hereof prepared data on prepayment rates and is not aware of publicly
available industry statistics that set forth principal prepayment experience
for retail installment sales contracts similar to the Receivables. The Seller
can make no prediction as to the actual prepayment rates that will be
experienced on the Receivables. The Seller, however, believes that the actual
rate of prepayments will result in a substantially shorter weighted average
life than the scheduled weighted average life of the Receivables.
Book-Entry Registration. Issuance of the Certificates in book-entry form may
reduce the liquidity of such Certificates in the secondary trading market
since investors may be unwilling to purchase Certificates for which they
cannot obtain definitive physical securities representing such
Certificateholders' interests, except in certain circumstances described
herein.
Certificateholders may experience some delay in their receipt of
distributions of interest on and principal of the Certificates since
distributions may be required to be forwarded by the Trustee to DTC, CEDEL or
Euroclear and, in such case, DTC, CEDEL or Euroclear, as the case may be, will
be required to credit such distributions to the accounts of its participating
organization which thereafter will be required to credit them to the accounts
of
9
<PAGE>
the Certificateholders either directly or indirectly through indirect
participants. See "The Certificates--Book-Entry Registration."
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 Seller to have complied, or the Servicer to comply, with such
requirements could adversely affect the enforceability of the Receivables. The
Seller 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
Pooling Agreement. Pursuant to the Pooling 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 Seller. 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 Seller.
Rating of the Certificates. It is a condition to the issuance of the
Certificates that they be rated in the highest rating category by at least one
of the Rating Agencies. The rating of the Certificates will depend primarily
on an assessment by the Rating Agencies of the claims-paying ability of the
Certificate Insurer. Any reduction in the rating assigned to the claims-paying
ability of the Certificate Insurer below the rating initially given to the
Certificates would likely result in a reduction of the rating of the
Certificates. The rating by a Rating Agency of the Certificates is not a
recommendation to purchase, hold or sell the Certificates, inasmuch as such
rating does not comment as to market price or suitability for a particular
investor but addresses the likelihood of the payment of principal and interest
on the Certificates pursuant to their terms. There is no assurance that a
rating will remain in effect for any given period of time or that ratings will
not be reduced, suspended or withdrawn by the Rating Agencies.
Limited Assets. The Trust does not have, nor is it permitted or expected to
have, any significant assets or sources of funds other than the Receivables,
amounts on deposit in the Collection Account and the Certificate Account, the
Certificate Insurance Policy and the right to receive payments under certain
circumstances from the Reserve Account. The Certificates represent interests
solely in the Trust and are not obligations of, and will not be insured or
guaranteed by, the Seller, the Trustee or any other person or entity other
than the Certificate Insurer in accordance with the terms of the Certificate
Insurance Policy. Consequently, the Certificateholders must rely upon payments
on the Receivables, Insured Payments and, if and to the extent available,
amounts on deposit in the Reserve Account and the Yield Maintenance Account.
Geographic Concentration. As of the Cut-Off Date, based upon billing address
information provided to the Seller, the Obligors resided in states and the
District of Columbia, four of which, Maryland, Virginia, North Carolina and
Georgia, account for %, %, % and %, respectively, of the aggregate
principal balance of the Receivables in the Trust. Adverse economic conditions
in Maryland, Virginia, North Carolina or Georgia could adversely affect the
delinquency, loan loss or repossession experience of the Trust with respect to
the Receivables.
FORMATION OF THE TRUST
The Seller will establish the Trust by selling and assigning the Receivables
and certain other Trust Property to the Trustee in exchange for the
Certificates. Prior to such sale and assignment, the Trust will have no assets
or obligations or any operating history. The Trust will not engage in any
business other than acquiring and holding the Trust Property, issuing the
Certificates and distributing payments on the Certificates.
The Seller, immediately prior to its transfer of the Receivables to the
Trust, will acquire the CFC Receivables from CFC.
10
<PAGE>
The Servicer will hold the Receivables and the certificates of title or
ownership relating to the Vehicles as custodian for the Trustee. However, the
Receivables will not be marked or stamped to indicate that they have been sold
to the Trust, and the certificates of title or ownership for the Vehicles will
not be endorsed or otherwise amended to identify the Trust as the new secured
party. Under such circumstances and in certain jurisdictions, the Trust's
interest in the Receivables and the Vehicles may be defeated. See "Certain
Legal Aspects of the Receivables."
The Trust will not acquire any assets other than the Trust Property, and it
is not anticipated that the Trust will have any need for additional capital
resources. Because the Trust will have no operating history upon its
establishment and will not engage in any business other than acquiring and
holding the Trust Property, issuing the Certificates and distributing payments
on the Certificates, no historical or pro forma financial statements or ratios
of earnings to fixed charges with respect to the Trust have been included
herein.
If the protection provided to the Certificateholders by the Certificate
Insurance Policy, the Reserve Account and the Yield Maintenance Account is
insufficient, the Certificateholders would have to look principally to the
Obligors on the Receivables and to the proceeds from the repossession and sale
of Vehicles which secure Defaulted Receivables. In such event, certain
factors, such as the Trustee's failure to have perfected security interests in
the Vehicles in all states, may affect the Trust's ability to repossess and
sell the Vehicles securing the Receivables, and thus may reduce the proceeds
to be distributed to Certificateholders. See "The Certificates -- Flow of
Funds," "The Certificate Insurance Policy" and "Certain Legal Aspects of the
Receivables."
THE TRUST PROPERTY
Each Certificate will represent a fractional undivided interest in the
Trust. The Trust Property will include (i) the Receivables, (ii) all monies
(including accrued interest) due or received thereon on or after the Cut-Off
Date, (iii) all amounts and property from time to time held in or credited to
the Collection Account and the Certificate Account, (iv) all of the Seller's
security interests in the Vehicles, (v) all rights to receive payments under
certain circumstances from the Reserve Account, (vi) the Certificate Insurance
Policy, (vii) all of the Seller's rights to receive proceeds from claims on
physical damage, credit life and disability insurance policies covering the
Vehicles or the Obligors, as the case may be, to the extent that such
insurance policies relate to the Receivables, (viii) all of the Seller's right
to all documents contained in the Receivable Files, (ix) all of the Seller's
rights of recourse against Dealers relating to the Receivables, (x) all
property (including the right to receive future Liquidation Proceeds and
Recoveries) that secures a Receivable and that shall have been acquired by or
on behalf of the Trustee and (xi) all proceeds (within the meaning of Section
9-306 of the UCC) of the foregoing. The Pooling Agreement does not permit the
Trust to acquire any additional assets. The Yield Maintenance Account will
hold certain amounts relating to the provision of the Yield Maintenance
Payments. The Trustee will hold the Certificate Insurance Policy.
USE OF PROCEEDS
A portion of the net proceeds to be received by the Seller from the sale of
the Certificates will be used by the Seller to purchase the CFC Receivables
from CFC; the remainder of such net proceeds will be used by the Seller for
general corporate purposes.
PREPAYMENT AND YIELD CONSIDERATIONS
The rate of principal payments on the Certificates will be directly related
to the scheduled rate of principal payments on the underlying Receivables. If
the Certificates are purchased at a price of other than par, the yield to
maturity on the Certificates also will be affected by the rate of principal
payments. The principal payments on such Receivables may be in the form of
scheduled principal payments or liquidations due to default, casualty
11
<PAGE>
and the like. Any such payments will result in distributions to the
Certificateholders of amounts which would otherwise have been distributed over
the remaining term of the Receivables. In general, the rate of such payments
may be influenced by a number of other factors, including general economic
conditions.
The effective yield to the Certificateholders will depend upon, among other
things, the price at which such Certificates are purchased, the amount of
principal, including both scheduled and nonscheduled payments thereof, which
is paid to the Certificateholders and the rate at which such principal is
paid.
Interest on the Receivables will be passed through to Certificateholders on
each Distribution Date to the extent of the Pass-Through Rate applied to the
Certificate Principal Balance immediately prior to such Distribution Date. In
the event of prepayments on a Receivable, Certificateholders will receive
thirty (30) days' interest on such Receivable to the extent that amounts are
available from Available Funds, the Reserve Account, the Yield Maintenance
Account and the Certificate Insurance Policy and are sufficient for such
purpose. See "The Certificates -- Flow of Funds."
POOL FACTOR AND OTHER INFORMATION
The "Pool Factor" will be a number (calculated to seven decimal places)
which the Servicer will compute each month equal to the Certificate Principal
Balance as of the close of business on the Distribution Date in that month,
divided by the Original Certificate Principal Balance. The Pool Factor will be
1.0000000 as of the date of the Closing Date, and thereafter will decline to
reflect reductions in the Certificate Principal Balance. A Certificateholder's
portion of the Certificate Principal Balance for a given month is the product
of (i) the original denomination of the holder's Certificate and (ii) the Pool
Factor.
Pursuant to the Pooling Agreement, the Certificateholders will receive from
the Trustee monthly reports concerning the payments received on the
Receivables, the Pool Balance, the Pool Factor and various other items of
information. Certificateholders of record during any calendar year will be
furnished information by the Trustee for tax reporting purposes not later than
the latest date permitted by law. See "The Certificates -- Reports to
Certificateholders."
THE RECEIVABLES POOL
GENERAL
The Receivables in the pool were purchased or originated by Chevy Chase Bank
F.S.B. (the "Bank") or its wholly-owned subsidiary, CFC ("CFC," together with
the Bank, the "Lenders"). Of the aggregate principal balance of the
Receivables as of the Cut-off Date, % were purchased or originated by the
Bank (the "Bank Receivables") and % were purchased or originated by CFC (the
"CFC Receivables").
Of the Bank Receivables as of the Cut-Off Date, %, by aggregate principal
balance, were purchased by the Bank from dealers in new and used automobiles,
light duty trucks and vans ("Dealers") in the ordinary course of business and
% were originated directly by the Bank at or through its deposit branches.
Approximately % of the aggregate principal balance of the Bank Receivables
represents financing of new automobiles, light duty trucks and vans, and
approximately % represents financing of used automobiles, light duty trucks
and vans.
All of the CFC Receivables as of the Cut-Off Date were purchased from
Dealers. Approximately % of the aggregate principal balance of the CFC
Receivables represents financing of new automobiles, light duty trucks and
vans, and approximately % represents financing of used automobiles, light
duty trucks and vans.
12
<PAGE>
UNDERWRITING PROCEDURES
Each Receivable was originated or purchased by the Lenders after a review by
the Lenders in accordance with their established underwriting procedures. Each
Lender has its own underwriting procedures.
The underwriting procedures of each Lender 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 Lenders' analysis. For the Obligor's purchase
of an automobile, the Bank's guidelines provide for financing up to 115% of
the dealer cost for new vehicles and of the Trade-In Value (as published by
the National Automobile Dealers Association, a standard reference source for
dealers in used vehicles) for used vehicles. CFC has two sets of guidelines
which vary based on the obligor's credit history. For new vehicles, CFC will
finance up to 105% of dealer cost, plus sales taxes, license fees and a
maximum of $2,000 of rebatable warranties and insurance, or 130% of dealer
cost, inclusive of all additional expenses. For used vehicles, CFC will
finance up to 110% of the Trade-in Value, plus sales taxes, license fees and a
maximum of $2,000 of rebatable warranties and insurance, or 130% of the Trade-
in Value, inclusive of all additional expenses. 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 were selected from the Lenders' portfolios on the basis of a
number of criteria, including the following: each Receivable (i) has an
original term to maturity of to months, (ii) has a maturity of not later
than , (iii) except with respect to the Balloon Receivables, provides
for level monthly payments that fully amortize the amount financed over the
original term, (iv) was not more than days past due as of the Cut-Off Date,
(v) has an unpaid principal balance of not less than $ as of the Cut-Off
Date and (vi) if such Receivable was purchased or originated by CFC only, the
Obligor has made at least one payment with respect thereto as of the Cut-Off
Date. The weighted average remaining term (number of payments) of the
Receivables was months as of the Cut-Off Date.
All the Receivables are prepayable at any time. Neither Lender maintains
records of the historical prepayment experience of its automobile receivables
portfolio, and the Seller makes no prediction as to the actual prepayment
experience on the Receivables. See also "The Certificates -- Optional
Termination" regarding the Seller's option to purchase the Receivables when
the Pool Balance is 5% or less of the Original Certificate Principal Balance.
The Receivables are simple interest installment sales contracts and
installment loans which provide for equal monthly payments, except for % of
the Receivables (as a percentage of the initial Pool Balance) with respect to
which the last scheduled monthly payment of each such Receivable is
significantly larger than any prior scheduled monthly payment (each such
Receivable, a "Balloon Receivable"). As payments are received under a simple
interest receivable, interest accrued to date is paid first and the remaining
payment is applied to reduce the unpaid principal balance. Accordingly, if an
obligor pays a fixed monthly installment before its due date, the portion of
the payment allocable to interest for the period since the preceding payment
will be less than it would have been had the payment been made on the due
date, and the portion of the payment applied to reduce the principal balance
will be correspondingly greater. Conversely, if an obligor pays a fixed
monthly installment after its due date, the portion of the payment allocable
to interest for the period since the preceding payment will be
13
<PAGE>
greater than it would have been had the payment been made on the due date, and
the portion of the payment applied to reduce the principal balance will be
correspondingly less, in which case a larger portion of the principal balance
will be due on the final scheduled payment date. In the case of a liquidation
or repossession, amounts recovered are applied first to the expenses of
repossession, then to unpaid interest and finally to unpaid principal.
The composition, distribution by APR and geographical distribution of the
Receivables as of the Cut-Off Date are as set forth in the following tables.
COMPOSITION OF THE RECEIVABLES
<TABLE>
<S> <C>
Initial Aggregate Principal Balance....................... $
Number of Receivables.....................................
Average Original Principal Balance........................ $
Range of Original Principal Balances.................... $ to $
Average Remaining Principal Balance....................... $
Range of Remaining Principal Balances................... $ to $
Weighted Average APR (1).................................. %
Range of APRs........................................... % to %
Weighted Average Original Term to Maturity (1)............ months
Range of Original Terms to Maturity..................... months to months
Weighted Average Remaining Term to Maturity (1)........... months
Range of Remaining Terms of Maturity.................... months to months
</TABLE>
- --------
(1) Weighted by current balance.
14
<PAGE>
DISTRIBUTION OF THE RECEIVABLES BY APR AS OF THE CUT-OFF DATE
<TABLE>
<CAPTION>
PERCENTAGE OF PERCENTAGE OF
NUMBER OF NUMBER OF AGGREGATE AGGREGATE
RANGE OF APRS RECEIVABLES RECEIVABLES PRINCIPAL BALANCE PRINCIPAL BALANCE
- ------------- ----------- ------------- ----------------- -----------------
<S> <C> <C> <C> <C>
% to %......... % $ %
% to %......... % %
% to %......... % %
% to %......... % %
% to %......... % %
% to %......... % %
% to %......... % %
% to %......... % %
% to %......... % %
% to %......... % %
% to %......... % %
% to %......... % %
% to %......... % %
% to %......... % %
% to %......... % %
% to %......... % %
% to %......... % %
% to %......... % %
% to %......... % %
% to %......... % %
% to %......... % %
% to %......... % %
% to %......... % %
% to %......... % %
% to %......... % %
% to %......... % %
--- --- ----- ---
Total........ % $ %
=== === ===== ===
</TABLE>
GEOGRAPHIC DISTRIBUTION OF THE RECEIVABLES AS OF THE CUT-OFF DATE
<TABLE>
<CAPTION>
PERCENTAGE OF PERCENTAGE OF
NUMBER OF NUMBER OF AGGREGATE AGGREGATE
STATE (1) RECEIVABLES RECEIVABLES PRINCIPAL BALANCE PRINCIPAL BALANCE
--------- ----------- ------------- ----------------- -----------------
<S> <C> <C> <C> <C>
.............. % $ %
.............. % %
.............. % %
.............. % %
.............. % %
.............. % %
Other............ % %
--- --- ----- ---
Total.......... % $ %
=== === ===== ===
</TABLE>
- --------
(1) Based upon the billing address of the Obligors.
15
<PAGE>
DISTRIBUTION OF THE RECEIVABLES BY REMAINING PRINCIPAL BALANCE AS OF THE CUT-
OFF DATE
<TABLE>
<CAPTION>
PERCENTAGE OF PERCENTAGE OF
NUMBER OF NUMBER OF AGGREGATE AGGREGATE
RANGE OF REMAINING PRINCIPAL BALANCES RECEIVABLES RECEIVABLES PRINCIPAL BALANCE PRINCIPAL BALANCE
- ------------------------------------- ----------- ------------- ----------------- -----------------
<S> <C> <C> <C> <C>
$ to $ ................ % $ %
$ to $ ................ % %
$ to $ ................ % %
$ to $ ................ % %
$ to $ ................ % %
$ to $ ................ % %
$ to $ ................ % %
$ to $ ................ % %
--- --- ----- ---
Total................... % $ %
=== === ===== ===
</TABLE>
DISTRIBUTION OF THE RECEIVABLES BY REMAINING TERMS TO MATURITY AS OF THE CUT-
OFF DATE
<TABLE>
<CAPTION>
PERCENTAGE OF PERCENTAGE OF
NUMBER OF NUMBER OF AGGREGATE AGGREGATE
RANGE OF REMAINING TERMS TO MATURITY RECEIVABLES RECEIVABLES PRINCIPAL BALANCE PRINCIPAL BALANCE
- ------------------------------------ ----------- ------------- ----------------- -----------------
<S> <C> <C> <C> <C>
to ................ % $ %
to ................ % %
to ................ % %
to ................ % %
to ................ % %
to ................ % %
--- --- ----- ---
Total................... % $ %
=== === ===== ===
</TABLE>
THE SELLER AND THE SERVICER
GENERAL
The Seller, which is one of the Lenders, is a federally chartered stock
savings bank. The Seller's executive offices are located at 8401 Connecticut
Avenue, Chevy Chase, Maryland 20815, and the Seller's telephone number is
(301) 986-7000. The Seller is subject to comprehensive regulation, examination
and supervision by the Office of Thrift Supervision (the "OTS") within the
Department of the Treasury and the Federal Deposit Insurance Corporation (the
"FDIC"). Deposits at the Seller are fully insured up to $100,000 per insured
depositor by the Savings Association Insurance Fund ("SAIF"), which is
administered by the FDIC.
Based on unaudited results, at September 30, 1996, the Bank had consolidated
assets of approximately $5.7 billion, deposits of approximately $4.2 billion,
and stockholders' equity of approximately $339.2 million. As a savings bank
chartered under the laws of the United States, the Bank is subject to certain
minimum regulatory capital requirements imposed under the Financial
Institutions Reform, Recovery, and Enforcement Act of 1989, as amended
("FIRREA"). At June 30, 1996, the Bank's tangible, core, tier 1 risk-based and
total risk-based regulatory capital ratios were 6.30%, 6.30%, 6.91% and
12.04%, respectively. As of such date, the Bank's capital ratios exceeded the
requirements under FIRREA as well as the standards established for "well
capitalized" institutions under the prompt corrective action regulations
established pursuant to the Federal Deposit Insurance Corporation Improvement
Act of 1991 ("FDICIA") (both as applicable on June 30, 1996 and on a fully
phased-in basis). Based on unaudited results, at September 30, 1996, the
Bank's tangible, core, tier 1 risk-based and total risk-based regulatory
capital ratios decreased to 5.21%, 5.21%, 5.80% and 10.14%, respectively. As
of such date, the Bank's capital ratios exceeded the requirements under FIRREA
as well as the standards established for
16
<PAGE>
"adequately capitalized" institutions under the prompt corrective action
regulations established pursuant to FDICIA. The OTS has the discretion to
treat an "adequately capitalized" institution as an "undercapitalized"
institution for purposes of the prompt corrective action regulations if, after
notice and an opportunity for a hearing, the OTS determines that the
institution (i) is being operated in an unsafe or unsound condition or
(ii) has received and has not corrected a less than satisfactory examination
rating for asset quality, management, earnings or liquidity.
On September 30, 1996, President Clinton signed into law the Economic
Development and Regulatory Paperwork Reduction Act of 1996 (the "Act"). The
Act's principal provisions relate to recapitalization of the SAIF, but it also
contains numerous regulatory relief measures, some of which are directly
applicable to the Bank. The Act requires the FDIC to impose a one-time special
assessment of 65.7 cents for every $100 of SAIF-insured deposits held on March
31, 1995 in order to bring SAIF to its statutory reserve level. As a result of
the legislation, at September 30, 1996, Chevy Chase accrued a one-time charge
to earnings of approximately $26.5 million for the special assessment as
described above. If this SAIF assessment had not been made in the quarter
ended September 30, 1996, the Bank's regulatory capital ratios would have
continued to be sufficient to meet the standards established for well-
capitalized institutions. In the September 30, 1996 quarter, the Bank's
capital ratios fell below the ratios established for "well capitalized"
institutions for the first time since June 1993.
The Act also requires the merger of the Bank Insurance Fund and SAIF into a
single Deposit Insurance Fund on January 1, 1999, but only if the thrift
charter is eliminated by that date. The Treasury Department is required to
submit a report on thrift charter issues by March 31, 1997. Although this
provision of the Act establishes a time frame for the eventual elimination of
the thrift charter, it contains no provisions concerning the form the current
thrift charter may be required to take. The Bank cannot determine at this time
what effect this provision will have on its financial position or operations.
Because of the continued improvement in the financial condition of the Bank,
on March 29, 1996, the OTS released the Bank from certain restrictions and
requirements contained in an agreement with the OTS, which had been amended in
October 1993. In connection with the termination of the written agreement at
the request of the OTS, the Board of Directors of the Bank has adopted a
resolution that addresses certain issues previously addressed by the written
agreement. The resolution also provides that the Bank will present a plan
annually to the OTS detailing anticipated consumer loan securitization
activity.
The other Lender, CFC, is a wholly-owned subsidiary of the Seller, formed in
December 1994 for the purpose of providing automobile financing to applicants
who may have experienced certain adverse credit events. See "The Receivables
Pool."
17
<PAGE>
DELINQUENCY AND DEFAULT EXPERIENCE
There can be no assurance that the levels of delinquency and loss experience
reflected in the tables below, are indicative of the performance of the
Receivables included in the Trust.
CHEVY CHASE BANK, F.S.B.
DELINQUENCY EXPERIENCE
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
------------------------------------------------------------------------------------------------------
1992 1993 1994 1995 1996
------------------- -------------------- --------------------- -------------------- ------------------
DOLLAR PERCENTAGE DOLLAR PERCENTAGE DOLLAR PERCENTAGE DOLLAR PERCENTAGE DOLLAR PERCENTAGE
AMOUNT OF TOTAL AMOUNT OF TOTAL AMOUNT OF TOTAL AMOUNT OF TOTAL AMOUNT OF TOTAL
(000) RECEIVABLES (000) RECEIVABLES (000) RECEIVABLES (000) RECEIVABLES (000) RECEIVABLES
------- ----------- -------- ----------- --------- ----------- -------- ----------- ------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Receivables
Outstanding(1).. $84,533 $166,307 $ 299,096 $431,351 $
DELINQUENCIES:(2)(3)
30-59 Days...... $ 1,469 1.74% $ 1,210 0.73% $ 4,074 1.36% $ 2,491 0.58% $ %
60-89 Days...... 237 0.28% 223 0.13% 729 0.24% 742 0.17% %
90 days or
more........... 328 0.39% 226 0.14% 1,209 0.40% 1,667 0.39% %
------- ---- -------- ---- --------- ---- -------- ---- --- ---
Total
Delinquencies.. $ 2,034 2.41% $ 1,659 1.00% $ 6,012 2.00% $ 4,900 1.14% $ %
======= ==== ======== ==== ========= ==== ======== ==== === ===
</TABLE>
- --------
(1) Total Seller Portfolio is the net remaining principal balance.
(2) The period of delinquency is based on the number of days payments are
contractually past due.
(3) Includes repossessions in inventory.
CHEVY CHASE BANK, F.S.B.
LOSS EXPERIENCE
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------------------------------------------
1992 1993 1994 1995 1996
------------------- -------------------- -------------------- -------------------- ------------------
PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
DOLLAR OF AVERAGE DOLLAR OF AVERAGE DOLLAR OF AVERAGE DOLLAR OF AVERAGE DOLLAR OF AVERAGE
AMOUNT RECEIVABLES AMOUNT RECEIVABLES AMOUNT RECEIVABLES AMOUNT RECEIVABLES AMOUNT RECEIVABLES
(000) OUTSTANDING (000) OUTSTANDING (000) OUTSTANDING (000) OUTSTANDING (000) OUTSTANDING
------- ----------- -------- ----------- -------- ----------- -------- ----------- ------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Average
Receivables
Outstanding(1).. $90,271 $116,475 $245,295 $363,845 $
------- -------- -------- -------- ---
Gross Charge-
offs(2)......... $ 811 0.90% $ 627 0.54% $ 766 0.31% $ 2,120 0.58% $ %(3)
Recoveries(3).... 103 0.12% 115 0.10% 219 0.09% 275 0.07% %(3)
------- ---- -------- ---- -------- ---- -------- ---- --- ---
Net Losses....... $ 708 0.78% $ 512 0.44% $ 547 0.22% $ 1,845 0.51% $ %(3)
======= ==== ======== ==== ======== ==== ======== ==== === ===
</TABLE>
- --------
(1) Equals the arithmetic average of the month-end balances.
(2) Gross Charge-offs represent the excess of the outstanding loan balance over
net liquidation proceeds, where net liquidation proceeds are the excess of
liquidation proceeds over the sum of repossession, liquidation and other
related expenses.
(3) Includes current post-disposition recoveries on receivables previously
charged off.
18
<PAGE>
CONSUMER FINANCE CORPORATION
DELINQUENCY EXPERIENCE
<TABLE>
<CAPTION>
AS OF AS OF
DECEMBER 31, 1995 DECEMBER 31, 1996
------------------- ------------------
DOLLAR PERCENTAGE DOLLAR PERCENTAGE
AMOUNT OF TOTAL AMOUNT OF TOTAL
(000) RECEIVABLES (000) RECEIVABLES
------- ----------- ------ -----------
<S> <C> <C> <C> <C>
Receivables Outstanding(1)............... $49,375 $
Delinquencies(2)(3):
30-59 Days............................... $ 2,528 5.12% $ %
60-89 Days............................... $ 609 1.23% $ %
90 days or more.......................... $ 871 1.76% $ %
------- ---- ---- ---
Total Delinquencies...................... $ 4,008 8.11% $ %
======= ==== ==== ===
</TABLE>
- --------
(1) Receivables Outstanding consists of all amounts due from obligors as posted
to the related accounts.
(2) The period of delinquency is based on the number of days payments are
contractually past due.
(3) Includes repossessions in inventory.
CONSUMER FINANCE CORPORATION
LOSS EXPERIENCE
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE YEAR ENDED
DECEMBER 31, 1995 DECEMBER 31, 1996
------------------- --------------------------
PERCENTAGE
DOLLAR OF AVERAGE DOLLAR PERCENTAGE OF
AMOUNT RECEIVABLES AMOUNT AVERAGE RECEIVABLES
(000) OUTSTANDING (000) OUTSTANDING
------- ----------- ------ -------------------
<S> <C> <C> <C> <C>
Average Receivables
Outstanding(1)................ $21,383 $
Gross Charge-offs(2)........... $ 144 0.67% $ %
Recoveries(3).................. $ 0 0.00% $ %
Net Losses..................... $ 144 0.67% $ %
</TABLE>
- --------
(1) Equals the arithmetic average of the month-end balances.
(2) Gross Charge-offs represent the excess of the outstanding loan balance over
net liquidation proceeds, where net liquidation proceeds are the excess of
liquidation proceeds over the sum of repossession, liquidation and other
related expenses.
(3) Includes current post-disposition recoveries on receivables previously
charged off.
LITIGATION
The Seller is not involved in any legal proceedings, and is not aware of any
pending or threatened legal proceedings, that would have a material adverse
effect upon its financial condition or results of operations.
THE CERTIFICATES
The Certificates will be issued pursuant to the Pooling Agreement to be
entered into by the Servicer, the Seller and the Trustee. The Trustee will
provide a copy of the Pooling Agreement to Certificateholders without charge on
written request addressed to its Corporate Trust Department at Att:
Structured Finance/Chevy Chase 1997-1.
19
<PAGE>
The following summary describes certain terms of the Pooling Agreement, does
not purport to be complete and is subject to and qualified in its entirety by
reference to the Pooling Agreement. Wherever provisions of the Pooling
Agreement are referred to, such provisions are hereby incorporated herein by
reference.
GENERAL
The Certificates will be offered for purchase in denominations of $1,000 and
integral multiples thereof and will be represented initially by physical
certificates registered in the name of Cede as nominee of DTC. No Certificate
Owner will be entitled to receive a definitive certificate representing such
person's interest in the Trust except in the event that Definitive
Certificates are issued under the limited circumstances described herein.
Unless and until Definitive Certificates are issued, all references to actions
by Certificateholders shall refer to actions taken by DTC upon instructions
from DTC Participants and all references to distributions, notices, reports,
and statements to Certificateholders shall refer to distributions, notices,
reports, and statements to DTC. See "-- Book-Entry Registration" and "--
Definitive Certificates."
In general, it is intended that Certificateholders receive, on each
Distribution Date, an amount of principal equal to the decrease in the Pool
Balance from the beginning to the end of the related Collection Period, plus
interest at one-twelfth of the Pass-Through Rate on the Certificate Principal
Balance immediately prior to such Distribution Date. See "-- Flow of Funds."
Principal and interest to be distributed to Certificateholders may be provided
by payments made by or on behalf of Obligors, the payment of Purchase Amounts
by the Seller or the Servicer, amounts, if any, from the Reserve Account and
the Yield Maintenance Account, proceeds from physical damage insurance,
Liquidation Proceeds (net of certain Servicer expenses) upon the repossession
and sale of Vehicles or Recoveries (net of certain Servicer expenses) after
the repossession and sale of Vehicles and any Insured Payments remitted by the
Certificate Insurer under the Certificate Insurance Policy. See "The
Certificate Insurance Policy."
Distribution of principal and interest on the Certificates with respect to
each Collection Period will be made on the Distribution Date immediately
succeeding such Collection Period, commencing on , 1997. Each Collection
Period will be one calendar month.
BOOK-ENTRY REGISTRATION
The Certificates will be book-entry certificates (the "Book-Entry
Certificates"). The Beneficial Owners may elect to hold their Certificates
through DTC (in the United States), or CEDEL or Euroclear (in Europe) if they
are participants of such systems ("Participants"), or indirectly through
organizations which are Participants in such systems. The Book-Entry
Certificates will initially be registered in the name of Cede, the nominee of
DTC. CEDEL and Euroclear will hold omnibus positions on behalf of their
Participants through customers' securities accounts in CEDEL's and Euroclear's
names on the books of their respective depositaries which in turn will hold
such positions in customers' securities accounts in the depositaries' names on
the books of DTC. Citibank, N.A. ("Citibank") will act as depositary for CEDEL
and Chemical Bank, New York will act as depositary for Euroclear (in such
capacities, individually, the "Relevant Depositary" and collectively the
"European Depositaries"). Unless and until Definitive Certificates are issued,
it is anticipated that the only "Certificateholder" of the Certificates will
be Cede, as nominee of DTC. Beneficial Owners will not be the
Certificateholders as that term is used in the Pooling Agreement. Beneficial
Owners are only permitted to exercise their rights indirectly through
Participants and DTC.
A Beneficial Owner's ownership of a Book-Entry Certificate will be recorded
on the records of the brokerage firm, bank, thrift institution or other
financial intermediary (each, a "Financial Intermediary") that maintains the
Beneficial Owner's account for such purpose. In turn, the Financial
Intermediary's ownership of such Book-Entry Certificate will be recorded on
the records of DTC (or of a participating firm that acts as agent for the
Financial Intermediary, whose interest will in turn be recorded on the records
of DTC, if the Beneficial Owner's Financial Intermediary is not a DTC
Participant, and on the records of CEDEL or Euroclear, as appropriate).
20
<PAGE>
Beneficial Owners will receive all distributions of principal of, and
interest on, the Certificates from the Trustee through DTC and DTC
Participants. While such Certificates are outstanding (except under the
circumstances described below), under the rules, regulations and procedures
creating and affecting DTC and its operations (the "Rules"), DTC is required
to make book-entry transfers among Participants on whose behalf it acts with
respect to such Certificates and is required to receive and transmit
distributions of principal of, and interest on, such Certificates.
Participants and indirect participants with whom Beneficial Owners have
accounts with respect to Certificates are similarly required to make book-
entry transfers and receive and transmit such distributions on behalf of their
respective Beneficial Owners. Accordingly, although Beneficial Owners will not
possess certificates, the Rules provide a mechanism by which Beneficial Owners
will receive distributions and will be able to transfer their interest.
Beneficial Owners will not receive or be entitled to receive certificates
representing their respective interests in the Certificates, except under the
limited circumstances described below. Unless and until Definitive
Certificates are issued, Beneficial Owners who are not Participants may
transfer ownership of Certificates only through Participants and indirect
participants by instructing such Participants and indirect participants to
transfer such Certificates, by book-entry transfer, through DTC for the
account of the purchasers of such Certificates, which account is maintained
with their respective Participants. Under the Rules and in accordance with
DTC's normal procedures, transfers of ownership of such Certificates will be
executed through DTC and the accounts of the respective Participants at DTC
will be debited and credited. Similarly, the Participants and indirect
participants will make debits or credits, as the case may be, on their records
on behalf of the selling and purchasing Beneficial Owners.
Because of time zone differences, credits of securities received in CEDEL or
Euroclear as a result of a transaction with a Participant will be made during
subsequent securities settlement processing and dated the business day
following the DTC settlement date. Such credits or any transactions in such
securities settled during such processing will be reported to the relevant
Euroclear or CEDEL Participants on such business day. Cash received in CEDEL
or Euroclear as a result of sales of securities by or through a CEDEL
Participant (as defined below) or Euroclear Participant (as defined below) 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 settlements in DTC. For information with respect to
tax documentation procedures relating to the Certificates, see "Certain
Federal Income Tax Consequences -- Foreign Investors" and "-- Backup
Withholding" herein and "Global Clearance, Settlement and Tax Documentation
Procedures -- Certain U.S. Federal Income Tax Documentation Requirements" in
Annex I to this Prospectus.
Transfers between Participants will occur in accordance with DTC rules.
Transfers between CEDEL Participants and Euroclear Participants will occur in
accordance with their respective 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 the Relevant 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 the
Relevant 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 European Depositaries.
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
securities for its
21
<PAGE>
participating organization ("DTC Participants") and to facilitate the
clearance and settlement of securities transactions between DTC Participants
through electronic book-entries, thereby eliminating the need for physical
movement of notes or certificates. DTC 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 DTC Participant, either directly or indirectly ("Indirect DTC
Participants"). In general, Beneficial Owners will be subject to the Rules, as
in effect from time to time.
CEDEL is incorporated under the laws of Luxembourg as a professional
depository. CEDEL holds securities for its participant 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
Euroclear ("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 27 currencies, including
United States dollars. Euroclear 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 the Brussels,
Belgium office of Morgan Guarantee Trust Company of New York (the "Euroclear
Operator"), under contract with Euroclear Clearance Systems S.C., a Belgian
cooperative corporation (the "Cooperative"). All operations are conducted by
the Euroclear Operator, and all Euroclear Securities clearance accounts and
Euroclear cash accounts are accounts with the Euroclear operator, not the
Cooperative. The Cooperative establishes policy for Euroclear on behalf of
Euroclear Participants. Euroclear Participants include banks (including
central banks), securities brokers and dealers and other professional
financial intermediaries. Indirect access to Euroclear 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 Euroclear, withdrawals of
securities and cash from Euroclear, and receipts of payments with respect to
securities in Euroclear. All securities in Euroclear 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 or relationship
with persons holding through Euroclear Participants.
Distributions on the Book-Entry Certificates will be made on each Payment
Date by the Trustee to DTC. DTC will be responsible for crediting the amount
of such payments to the accounts of the applicable DTC Participants in
accordance with DTC's normal procedures. Each DTC Participant will be
responsible for
22
<PAGE>
disbursing such payment to the Beneficial Owners of the Book-Entry
Certificates that it represents and to each Financial Intermediary for which
it acts as agent. Each such Financial Intermediary will be responsible for
disbursing funds to the Beneficial Owners of the Book-Entry Certificates that
it represents.
Under a book-entry format, Beneficial Owners of the Book-Entry Certificates
may experience some delay in their receipt of payments, since such payments
will be forwarded by the Trustee to Cede. Distributions with respect to
Certificates held through CEDEL or Euroclear will be credited to the cash
accounts of CEDEL Participants or Euroclear Participants in accordance with
the relevant system's rules and procedures, to the extent received by the
Relevant Depositary. Such distributions will be subject to tax reporting in
accordance with relevant United States tax laws and regulations. Because DTC
can only act on behalf of Financial Intermediaries, the ability of a
Beneficial Owner to pledge Book-Entry Certificates, to persons or entities
that do not participate in the Depository system, or otherwise take actions in
respect of such Book-Entry Certificates, may be limited due to the lack of
physical certificates for such Book-Entry Certificates. In addition, issuance
of the Book-Entry Certificates in book-entry form may reduce the liquidity of
such Certificates in the secondary market since certain potential investors
may be unwilling to purchase Certificates for which they cannot obtain
physical certificates.
Monthly and annual reports on the Trust provided by the Servicer to Cede, as
nominee of DTC, may be made available to Beneficial Owners upon request, in
accordance with the Rules, and to the Financial Intermediaries to whose DTC
accounts the Book-Entry Certificates of such Beneficial Owners are credited.
DTC has advised the Trustee that, unless and until Definitive Certificates
are issued, DTC will take any action permitted to be taken by the holders of
the Book-Entry Certificates under the Pooling Agreement only at the direction
of one or more DTC Participants to whose DTC accounts the Book-Entry
Certificates are credited. CEDEL or the Euroclear Operator, as the case may
be, will take any action permitted to be taken by a Certificateholder under
the Pooling Agreement on behalf of a CEDEL Participant or Euroclear
Participant only in accordance with its relevant rules and procedures and
subject to the ability of the Relevant Depositary to effect such actions on
its behalf through DTC.
Although DTC, CEDEL and Euroclear have agreed to the foregoing procedures in
order to facilitate transfers of certificates among Participants of DTC, CEDEL
and Euroclear, they are under no obligation to perform or continue to perform
such procedures, and such procedures may be discontinued at any time.
DEFINITIVE CERTIFICATES
The Certificates will be issued in fully registered, certificated form
("Definitive Certificates") to the Beneficial Owners or their nominees, rather
than to DTC or its nominee, only if (i) the Trustee advises the Beneficial
Owners 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 Servicer Default, the Beneficial Owners representing at
least a majority of the outstanding principal amount of such Certificates
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 the best
interests of the Beneficial Owners.
Upon the occurrence of any event described in the immediately preceding
paragraph, the Trustee is required to notify all Participants of the
availability through DTC of Definitive Certificates. Upon surrender by DTC of
the global certificate or the certificates representing the Certificates and
receipt by the Trustee of instructions for re-registration, the Trustee will
reissue the Certificates as Definitive Certificates to the Beneficial Owners,
and thereafter the Trustee will recognize the holders of such Definitive
Certificates as Certificateholders under the Pooling Agreement ("Holders").
Distributions of principal of, and interest on, Definitive Certificates will
be made by the Trustee in accordance with the procedures set forth in the
Pooling Agreement directly to Holders in whose names the Definitive
Certificates were registered at the close of business on the applicable Record
Date. Such distributions
23
<PAGE>
will be made by check mailed to the address of such Holder as it appears on
the register maintained by the Trustee. The final payment on any Definitive
Certificate, however, will be made only upon presentation and surrender of
such Definitive Certificate at the office or agency specified in the notice of
final distribution to the applicable Certificateholders.
Definitive Certificates will be transferable and exchangeable at the offices
of the Trustee. No service charge will be imposed for any registration of
transfer or exchange, but the Trustee may require payment of a sum sufficient
to cover any tax or other governmental charge imposed in connection therewith.
CONVEYANCE OF RECEIVABLES
On the Closing Date, the Seller will sell, transfer, assign, set over and
otherwise convey to the Trustee, without recourse (except as expressly set
forth in the Pooling Agreement), all of its right, title and interest in and
to the Receivables, including its security interests in the Vehicles. CFC will
convey the CFC Receivables to the Seller prior to such sale and assignment.
The Trustee will, concurrently with such sale and assignment, execute,
authenticate and deliver the definitive certificates representing the
Certificates to the Underwriters against payment to the Seller of the net
purchase price of the sale of the Certificates.
In the Pooling Agreement, the Seller will represent and warrant to the
Trustee, among other things, that (i) the information provided with respect to
Receivables is correct in all material respects; (ii) the Obligor on each
Receivable is required to obtain physical damage and theft insurance in
accordance with Seller's normal requirements; (iii) at the date of issuance of
the Certificates, the Receivables are free and clear of all security
interests, liens, charges, and encumbrances and no setoffs, defenses, or
counterclaims against the Seller 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, 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. The only recourse the Trustee and the Certificateholders will
have against the Seller for breach or failure to be true of any of the
representations and warranties contained in the Pooling Agreement with respect
to a Receivable will be to require the Seller to repurchase the Receivable.
See "-- Mandatory Repurchase of Receivables."
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
Certificateholders and the Certificate Insurer. The Receivables will not be
stamped or otherwise marked to reflect the sale and assignment of the
Receivables to the Trust and will not be segregated from other receivables
held by the Servicer or the subservicers. However, Uniform Commercial Code
(the "UCC") financing statements reflecting the sale and assignment of the
Receivables by the Seller to the Trustee will be filed, and the Servicer's
accounting records and computer systems will be marked to reflect such sale
and assignment. See "Formation of the Trust" and "Certain Legal Aspects of the
Receivables." Pursuant to the terms of the Pooling Agreement, the Servicer
will be required to file continuation statements relating to such UCC
financing statements in order to maintain the perfected security interest of
the Trust in the Receivables. The Servicer may designate CFC to act as
Custodian with respect to Receivables Files relating to the CFC Receivables.
SERVICING PROCEDURES
The Receivables will be serviced by the Servicer pursuant to the Pooling
Agreement. The Servicer may designate CFC 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.
The Pooling Agreement requires 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
24
<PAGE>
Servicer will act on behalf and for the benefit of the Trustee and the Holders
and the Certificate Insurer, subject at all times to the provisions of the
Pooling Agreement, without regard to any relationship which the Servicer or
any affiliate of the Servicer may otherwise have with an Obligor.
CFC's collection procedures differ in certain respects from those employed
by the Bank. On an obligor's fifth day of delinquency, CFC sends a late
payment notice and begins the collection process, while the Bank initiates
these steps on the obligor's tenth day of delinquency. CFC's collections
department is currently staffed to have approximately one collector for every
1,400 loans outstanding, compared to the Bank's ratio of approximately one
collector for every 4,000 loans outstanding. In general, both the Bank and CFC
initiate the repossession process by the 45th day of delinquency.
The Servicer, as an independent contractor on behalf of the Trust and for
the benefit of the Certificateholders and the Certificate Insurer, 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 Pooling 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 the Certificate Insurer, with respect
to distributions, providing appropriate federal income tax information for use
in providing information to Certificateholders, collecting and remitting sales
and property taxes on behalf of taxing authorities and maintaining the
perfected security interest of the Seller in the Vehicles.
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 equal to one-
twelfth of the product of (i) % and (ii) the Pool Balance of all Receivables
as of the first day of the immediately preceding Collection Period. 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 Pooling
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.
MANDATORY REPURCHASE OF RECEIVABLES
In the event of a breach or failure to be true of any representation or
warranty with respect to the Receivables described in "-- Conveyance of
Receivables," which breach or failure materially and adversely affects a
Receivable or the interests of the Trust, the Certificateholders or the
Certificate Insurer in such Receivable, the Seller, unless such breach or
failure has been cured by the last day of the Collection Period following the
Collection Period during which the Seller becomes aware of, or receives
written notice from the Trustee or the Servicer of, such breach or failure,
will be required to repurchase, as of such day (or, at Seller'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 Determination Date in such subsequent Collection Period. The repurchase
obligation will constitute the sole remedy available to the Certificateholders
or the Trustee against the Seller 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.
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ACCOUNTS
On the Closing Date, the Trustee will establish the Collection Account, into
which all payments (other than amounts representing the Servicing Fee and
other amounts payable to the Servicer as additional servicing compensation)
made on or with respect to the Receivables will be deposited, and the
Certificate Account, from which all distributions with respect to the
Receivables and the Certificates will be made. The Seller will establish the
Reserve Account and the Yield Maintenance Account with the Trustee. The
Collection Account, the Certificate Account, the Reserve Account and the Yield
Maintenance Account are collectively referred to as the "Accounts." Each
Account will be established in the name of the Trustee on behalf of the Trust,
the Certificateholders and the Certificate Insurer. The Reserve Account and
the Yield Maintenance Account will not be assets of the Trust, although such
accounts will be pledged to the Trust. Any net investment earnings on the
Yield Maintenance Account will be released to the Seller on each Distribution
Date.
On each Distribution Date, as described under "Flow of Funds," certain
amounts are required to be deposited in the Reserve Account. No later than the
Claim Date, amounts, if any, on deposit in the Reserve Account will be
deposited in the Certificate Account to the extent that Required Payments for
the following Distribution Date exceed Available Funds. Amounts on deposit in
the Reserve Account that are in excess of the Specified Reserve Balance will
be released to the Seller. The Certificate Insurer may, at its option and
without notice to, or the consent of, the Certificateholders, reduce the
Specified Reserve Balance.
Each Account will be maintained at all times in an Eligible Deposit Account.
"Eligible Deposit Account" means either (a) a segregated account with an
Eligible Bank or (b) a segregated trust account with the corporate trust
department of a depository institution with corporate trust powers organized
under the laws of the United States of America or any state thereof or the
District of Columbia (or any United States branch or agency of a foreign bank)
and whose deposits are insured by the FDIC, provided that such institution
must have a net worth in excess of $50,000,000 and must have a rating of Baa3
or higher from Moody's and a rating of BBB- or higher from S&P with respect to
long-term deposit obligations.
"Eligible Bank" means any depository institution (which shall initially be
the Trustee), organized under the laws of the United States of America or any
one of the states thereof or the District of Columbia (or any United States
branch or agency of a foreign bank), which is subject to supervision and
examination by federal or state banking authorities and which at all times (a)
has a net worth in excess of $50,000,000 and (b) has either (i) a rating of P-
1 from Moody's and A-1+ from S&P with respect to short-term deposit
obligations, or (ii) if such institution has issued long-term unsecured debt
obligations, a rating of A2 or higher from Moody's and AA from S&P with
respect to long-term unsecured debt obligations.
Funds in the Accounts will be invested as provided in the Pooling Agreement
in Eligible Investments at the direction of the Servicer. "Eligible
Investments" are generally limited to investments acceptable to the Rating
Agencies as being consistent with the rating of the Certificates and
acceptable to the Certificate Insurer. Eligible Investments must mature not
later than the Business Day before the date on which the funds invested in
such Eligible Investments are required to be withdrawn from the Accounts. Any
earnings (net of losses and investment expenses) on amounts on deposit in the
Collection Account will be deposited into the Collection Account and shall be
available for distribution to the Certificateholders.
The Servicer may deduct from amounts otherwise payable to the Collection
Account with respect to a Collection Period an amount equal to amounts
previously deposited by the Servicer into the Collection Account but later
determined to have resulted from mistaken deposits.
INDEMNIFICATION
The Pooling Agreement will provide that the Servicer will defend, indemnify
and hold harmless the Trustee, the Trust, the Certificateholders, and the
Certificate Insurer 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
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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 Pooling
Agreement. The Servicer will also indemnify, defend and hold harmless the
Trust, the Trustee and its officers, directors, employees and agents, and the
Certificate Insurer from and against any loss, liability, expense, damage or
injury, including any judgement, award, settlement, reasonable attorneys' fees
and other costs or expenses incurred in connection with the defense of any
action, proceeding or claim, to the extent such loss, liability, expense,
damage or injury 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 Pooling Agreement. The Seller's
obligations, as Servicer, to indemnify the Trust and the Certificateholders
for acts or omissions of the Seller as Servicer will survive the removal of
the Servicer but will not apply to any acts or omissions of a successor
Servicer.
FLOW OF FUNDS
On or before the earlier of the eighth Business Day or the eleventh calendar
day of each month (each, a "Determination Date"), the Servicer will (x)
instruct the Trustee to withdraw from the Collection Account and deposit into
the Certificate Account the amount deposited to the Collection Account with
respect to the Receivables during or otherwise with respect to the related
Collection Period, including Liquidation Proceeds, and (y) deliver to the
Trustee, the Rating Agencies and the Certificate Insurer a certificate (the
"Servicer's Certificate") setting forth the information needed to make
payments and other distributions and transfers on the upcoming Distribution
Date.
If, in preparing the Servicer's Certificate, the Servicer determines that
the Required Payments exceed Available Funds, the Servicer will calculate the
Insufficiency Amount and notify the Trustee and the Certificate Insurer
thereof. Pursuant to the Pooling Agreement, the Trustee will withdraw from the
Reserve Account and deposit in the Certificate Account an amount equal to the
lesser of (x) such Insufficiency Amount and (y) the amount then on deposit in
the Reserve Account. Unless the Certificate Insurer has otherwise caused the
remaining Insufficiency Amount (after any deposits from the Reserve Account)
to be deposited in the Certificate Account not later than 12:00 p.m. time
on the Claim Date preceding any Distribution Date, the Trustee will deliver on
such Claim Date a completed Notice of Nonpayment to the Certificate Insurer
(with the Insufficiency Amount as of such Claim Date, the amount withdrawn
from the Reserve Account, the amount of the Insured Payment, and any other
data appropriately completed). The Certificate Insurer will then pay such
Insured Payment as of such Claim Date as provided under the terms of the
Certificate Insurance Policy.
On each Distribution Date, the Trustee is required to pay the entire amount
of money then on deposit in the Certificate Account, other than amounts
deposited into the Certificate Account in error and Liquidation Proceeds from
Receivables purchased by the Seller or the Servicer, as the case may be, in
the following order of priority:
(a) to itself, the Trustee fee;
(b) to the Certificate Insurer, an amount equal to any premium owed to it
for such Distribution Date;
(c) to the Certificateholders, pro rata, the Monthly Interest, including
any overdue Monthly Interest;
(d) to the Certificateholders, pro rata, the Monthly Principal, including
any overdue Monthly Principal;
(e) to the Certificate Insurer, by wire transfer of immediately available
funds to the account designated in writing by the Certificate Insurer, the
Reimbursement Amount, if any, then owed to the Certificate Insurer;
(f) to the Reserve Account, by wire transfer of immediately available
funds, the lesser of (i) the difference, if any, between (x) the Specified
Reserve Balance as of such Distribution Date and (y) the amount on deposit
in the Reserve Account and (ii) the aggregate amount remaining in the
Certificate Account;
(g) to the Servicer, the Trustee and the Certificate Insurer, certain
indemnification amounts to which they may be entitled; and
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(h) to the Seller, the aggregate amount remaining in the Certificate
Account.
As used in this Prospectus, the following terms have the following meanings:
"Available Funds" means, with respect to a Distribution Date, for the
related Determination Date, any and all amounts then held in the Collection
Account and deposited thereto with respect to the Receivables during or
otherwise with respect to the related Collection Period, together with amounts
to be transferred from the Yield Maintenance Account to the Certificate
Account with respect to such Distribution Date, less the amount described in
clauses (a) and (b) above for such Distribution Date. "Available Funds" does
not include amounts, if any, on deposit in the Reserve Account or any amounts
paid by the Certificate Insurer under the Certificate Insurance Policy.
"Claim Date" means, with respect to a Distribution Date, the third Business
Day immediately preceding such Distribution Date.
"Defaulted Receivable" means, with respect to any Distribution Date, a
Receivable with respect to which the earlier of the following has occurred:
(i) the related Obligor is contractually delinquent for 180 days as of the end
of the most recently completed Collection Period or (ii) as to which the
Servicer has determined in accordance with its customary servicing practices
that eventual payment of the scheduled payments is unlikely.
"Insufficiency Amount" means, with respect to any Distribution Date, the
excess, if any, of (x) the Required Payments over (y) Available Funds.
"Late Payment Rate" means, for any Distribution Date, the "Prime Rate" of
interest as published in The Wall Street Journal in New York, New York plus
2%. The Late Payment Rate shall be computed on the basis of a 360-day year
consisting of twelve 30-day months.
"Liquidated Receivable" means a Defaulted Receivable with respect to which
the Servicer has determined that eventual payment in full is unlikely or has
repossessed and disposed of the related Vehicle.
"Liquidation Proceeds" means, with respect to any Liquidated Receivable and
Collection Period, the monies collected with respect to such Liquidated
Receivable during such Collection Period from whatever source (other than
claims under the Certificate Insurance Policy or withdrawals from the Reserve
Account or the Yield Maintenance Account), net of the sum of (i) any amounts
expended by the Servicer for the account of the Obligor and (ii) any amount
required by law to be remitted to the Obligor.
"Monthly Interest" for any Distribution Date will equal one-twelfth of the
product of the Pass-Through Rate on the Certificate Principal Balance
immediately prior to such Distribution Date.
"Monthly Principal" for any Distribution Date will equal the excess of (x)
the aggregate unpaid principal balances of the Receivables on the last day of
the second preceding Collection Period (or, in the case of the first
Distribution Date, the Original Certificate Principal Balance) over (y) the
aggregate unpaid principal balances of the Receivables on the last day of the
preceding Collection Period; provided, however, that Monthly Principal on the
Final Scheduled Distribution Date will equal the Certificate Principal Balance
on such date. For the purpose of determining Monthly Principal, the unpaid
principal balance of a Defaulted Receivable or a Purchased Receivable is
deemed to be zero on and after the last day of the Collection Period in which
such Receivable became a Defaulted Receivable or a Purchased Receivable. In no
event shall the Monthly Principal to be distributed exceed the Certificate
Principal Balance.
"Pool Balance" means, with respect to any date of determination, the
aggregate outstanding principal balance of all the Receivables as of the close
of business on such date.
"Purchased Receivable" means, with respect to a Distribution Date, a
Receivable purchased by the Seller or the Servicer on or prior to the
Determination Date immediately preceding such Distribution Date.
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"Recoveries" means all amounts collected as judgments against an Obligor or
others related to the failure of such Obligor to pay any required amounts
under the related Receivable or to return the Vehicles, in each case as
reduced by any out-of-pocket expenses reasonably incurred by the Servicer in
enforcing such Receivable or in liquidating such Vehicles.
"Reimbursement Amount" means, with respect to any Distribution Date, the
aggregate of unreimbursed Insured Payments paid by the Certificate Insurer
under the Certificate Insurance Policy as of such Distribution Date, plus the
amount of any unpaid premium owed to the Certificate Insurer, plus accrued
interest on each at the Late Payment Rate.
"Required Payments" means, with respect to any Distribution Date, the sum of
the Monthly Principal and Monthly Interest.
WITHHOLDING
The Trustee is required to comply with all federal income tax withholding
requirements respecting payments to Certificateholders of interest or original
issue discount with respect to the Certificates that the Trustee reasonably
believes are applicable under the Code. Foreign Owners will be subject to U.S.
income and withholding tax unless they provide certain certifications as
described under "Certain Federal Income Tax Consequences -- Foreign Owners."
The consent of neither the Certificateholders nor the Beneficial Owners will
be required for such withholding. In the event that the Trustee does withhold
or causes to be withheld any amount from interest or original issue discount
payments or advances thereof to any Certificateholders pursuant to federal
income tax withholding requirements, the Trustee is required to indicate the
amount withheld in its monthly report to such Certificateholders. If any
withholding or other tax is imposed by any jurisdiction, neither the
Certificateholders nor the Owners have any right to receive additional
interest or other amounts in consequence thereof.
REPORTS TO CERTIFICATEHOLDERS
On each Distribution Date, the Trustee will furnish or cause to be furnished
with each payment to Certificateholders, a statement (a "Monthly Report"),
based on information in the Servicer's Certificate, setting forth the
following information for such Distribution Date:
(a) the amount of the distribution allocable to principal, including any
overdue principal;
(b) the amount of the distribution allocable to interest, including any
overdue interest;
(c) the aggregate amount of fees and compensation received by the
Servicer and the Trustee for the Collection Period;
(d) the amount, if any, of Insured Payments with respect to such
Distribution Date;
(e) the amount, if any, withdrawn from the Reserve Account and the Yield
Maintenance Account with respect to such Distribution Date;
(f) the aggregate net losses on the Receivables for the related
Collection Period;
(g) the Pool Balance and the Pool Factor as of the end of the related
Collection Period;
(h) the aggregate principal balance of all Receivables which were
delinquent 30 days or more as of the last day of the related Collection
Period; and
(i) the Certificate Principal Balance as of such Distribution Date (after
giving effect to the distributions on such Distribution Date).
EVIDENCE AS TO COMPLIANCE
The Pooling Agreement requires that on or before December 31 of each year,
beginning December 31, 1998, the Servicer will deliver an officers'
certificate to the Trustee and the Certificate Insurer stating (i) a review of
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the activities of the Servicer during the preceding 12-month period ended
September 30 of such year (or such longer or shorter period since the date of
this Agreement) and of its performance under this Agreement has been made
under such officers' supervision and (ii) to the best of such officers'
knowledge, based on such review, the Servicer has fulfilled all of its
obligations under the Pooling Agreement throughout such year, or, if there has
been a default in the fulfillment of any such obligation, specifying each such
default known to such officers and the nature and status thereof.
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, with a copy to the Rating Agencies and the Certificate Insurer and
each holder of the Certificates, within 90 days following the end of each
fiscal year of the Servicer, beginning with the Servicer's fiscal year ending
September 30, 1998, a written statement to the effect that such firm has read
the monthly Servicer's Certificates delivered pursuant to the Pooling
Agreement with respect to each Collection Period during such one-year or
(longer or shorter) period and reviewed the servicing of the Receivables by
the Servicer and that such review (1) included tests relating to automobile,
light duty truck and van loans serviced for others in accordance with the
requirements of the Uniform Single Attestation Program for Mortgage Bankers,
to the extent the procedures in such program are applicable to the servicing
obligations set forth in the Pooling Agreement, and (2) except as described in
the report, disclosed no exceptions or errors in the records relating to
automobile, light duty truck and van loans serviced for others that, in the
firm's opinion, paragraph four of such program requires such firm to report.
OTHER SERVICING PROCEDURES
The Servicer will covenant in the Pooling 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 the
Pooling Agreement; (B) the Servicer will not impair in any material respect
the rights of the Trustee or the Certificateholders in the Receivables,
certain rights under agreements with Dealers related to breach of
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 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).
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 Certificateholders or the Certificate Insurer 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 Certificateholders or the Trustee against the Servicer for
any such uncured breach, except with respect to certain indemnities of the
Servicer under the Pooling Agreement related thereto. Payment of the Purchase
Amounts is not covered by the Certificate Insurance Policy.
The Pooling 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 the Pooling Agreement, to realize upon any Receivable. The
Servicer may sell the Vehicle securing such Receivable at a
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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.
CERTAIN MATTERS REGARDING THE SERVICER
The Pooling 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 acceptable to the Certificate Insurer has assumed such
Servicer's servicing obligations and duties under the Pooling Agreement.
The Pooling 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 Trust or the Certificateholders for taking any action or for
refraining from taking any action pursuant to the Pooling 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, the Pooling 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 the Pooling
Agreement and that, in its opinion, may cause it to incur any expense or
liability.
Under the circumstances specified in the Pooling 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 the Pooling Agreement.
SERVICER DEFAULT
Any of the following events will constitute a "Servicer Default" under the
Pooling 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 Certificateholders any required
payment, which failure continues unremedied for more than three Business Days
after written notice from (x) the Trustee, the Holders of Certificates
evidencing not less than 25% of the Certificate Principal Balance and the
Certificate Insurer or (y) the Certificate Insurer is received by the
Servicer; (ii) any failure by the Servicer or the Seller duly to observe or
perform in any material respect any other covenant or agreement of the
Servicer or the Seller, as the case may be, in the Pooling Agreement, which
failure materially and adversely affects the rights of the Certificateholders
and which continues unremedied for more than 30 days after the giving of
written notice of such failure (x) to the Servicer or the Seller, as the case
may be, by the Trustee and by the Certificate Insurer, (y) to the Servicer or
the Seller, as the case may be, and to the Trustee by the Certificateholders
evidencing not less than 25% of the Certificate Principal Balance and by the
Certificate Insurer or (z) to the Servicer or the Seller, as the case may be,
by the Certificate Insurer; 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
The Servicer can only be removed pursuant to a Servicer Default. If a
Servicer Default shall have occurred and be continuing, (x) with the consent
of the Certificate Insurer, either the Trustee or the Certificateholders
evidencing not less than 51% of the Certificate Principal Balance or (y) the
Certificate Insurer shall give written notice to the Servicer of the
termination of all of the rights and obligations of the Servicer under the
Pooling Agreement. On and after the time the Servicer receives a notice of
termination, the Trustee shall be the successor
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in all respects to the Servicer in its capacity as servicer of the Receivables
under the Pooling 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 acceptable
to the Certificate Insurer to act as successor to the outgoing Servicer under
the Pooling Agreement.
WAIVER OF PAST DEFAULTS
The Holders of Certificates evidencing at least 51% of the Certificate
Principal Balance (with the consent of the Certificate Insurer), or the
Certificate Insurer, may waive certain defaults by the Servicer in the
performance of its obligations under the Pooling Agreement. No such waiver
shall impair the Certificate Insurer's or the Certificateholders' rights with
respect to subsequent defaults.
OPTIONAL TERMINATION
The Pooling Agreement will provide that on any Distribution Date following
the Record Date on which the Pool Balance is 5% or less of the Original
Certificate Principal Balance, the Seller 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 Certificates an
amount equal to the aggregate Purchase Amounts for the Receivables, together
with any Reimbursement Amounts then owed to the Certificate Insurer.
AMENDMENT
The Pooling Agreement may be amended by agreement of the Trustee, the Seller
and the Servicer at any time, without the consent of the Certificateholders
but with the consent of the Certificate Insurer, 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 Certificateholder or the Certificate Insurer.
The Pooling Agreement may also be amended from time to time by the Trustee,
the Seller and the Servicer with the consent of the Certificate Insurer and
Holders of Certificates evidencing not less than 51% of the Certificate
Principal Balance for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of the Pooling Agreement or of
modifying in any manner the rights of the Certificateholders; 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
Certificate without the consent of the Holder of such Certificate or (b)
reduce the aforesaid percentage of Certificateholders required to consent to
any amendment, without unanimous consent of the Certificateholders.
The Trustee is required under the Pooling Agreement to furnish
Certificateholders, the Certificate Insurer and the Rating Agencies with
written notice of the substance of any such amendment to the Pooling Agreement
promptly upon execution of such amendment.
DUTIES AND IMMUNITIES OF THE TRUSTEE
The Trustee will make no representations as to the validity or sufficiency
of the Pooling Agreement, the Certificates (other than the authentication
thereof) or of any Receivable or related document and will not be accountable
for the use or application by the Seller of any funds paid to the Seller in
consideration of the sale of the Certificates. If no Servicing Default has
occurred, then the Trustee will be required to perform only those duties
specifically required of it under the Pooling Agreement. However, upon receipt
of the various resolutions, certificates, statement, opinions, reports,
documents, orders or other instruments required to be furnished to it, the
Trustee will be required to examine them to determine whether they conform as
to form to the requirements of the Pooling Agreement.
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No recourse is available based on any provision of the Pooling Agreement,
the Certificates or any Receivable or assignment thereof against , in its
individual capacity, and shall not have any personal obligation, liability
or duty whatsoever to any Certificateholder or any other person with respect
to any such claim and such claim shall be asserted solely against the Trust
Property or any indemnitor, except for such liability as is determined to have
resulted from the Trustee's own negligence or willful misconduct. No
Certificateholder will have any right under the Pooling Agreement to institute
any proceeding with respect to the Pooling Agreement, unless such
Certificateholder previously received the consent of the Certificate Insurer
and has given to the Trustee written notice of default and further, unless the
holders of Certificates evidencing not less than 25% of the Certificate
Principal Balance have made written request upon the Trustee to institute such
proceeding in its own name as Trustee thereunder and have offered to the
Trustee reasonable indemnity and the Trustee for 30 days has neglected or
refused to institute any such proceedings.
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 the Certificate Insurer, 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 Pooling Agreement. The Servicer may also remove the Trustee
if the Trustee ceases to be eligible to continue as such under the Pooling
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 the Certificate Insurer and until acceptance of the
appointment by the successor Trustee.
The Pooling Agreement provides 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 Pooling Agreement
provides that in no event shall the Trustee be liable for any liabilities,
costs or expenses of the Trust or the Certificateholders under any tax law,
including without limitation federal, state or local income or excise taxes or
any other tax imposed on or measured by income (or any interest or penalty
with respect thereto or arising from a failure to comply therewith).
The Servicer will indemnify, defend and hold harmless the Trustee, its
officers, directors, employees and agents and the Certificate Insurer 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 Pooling
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 Pooling Agreement.
THE CERTIFICATE INSURER
[TO BE PROVIDED]
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THE CERTIFICATE INSURANCE POLICY
[TO BE PROVIDED]
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES
SECURITY INTEREST IN VEHICLES
Retail installment sale 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
Maryland, Virginia and North Carolina, the jurisdictions in which most of the
Vehicles are 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 Virginia and North Carolina, 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 the Pooling Agreement, the Seller 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, 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
Agreement. See "The Certificates -- Conveyance of Receivables."
Under the laws of Virginia and North Carolina, such an assignment of
security interests may not be, and under the laws of Maryland will not be,
sufficient to convey to the Trustee perfected security interests in the
Vehicles.
Because the Trust is not 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 Pooling
Agreement and would create an obligation of the Bank to repurchase the related
Receivable unless the breach is cured. See "The Certificates -- Conveyance of
Receivables."
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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 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 the
Pooling Agreement, the Servicer is 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 Seller 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 Certificateholders 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 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
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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.
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
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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 and
light duty trucks 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
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 Pooling Agreement.
Any loss relating to any such claim, to the extent not covered by a
withdrawal from the Reserve Account or from a payment under the Certificate
Insurance Policy could result in losses to the Certificateholders. 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
Pooling Agreement and would create an obligation of the Seller 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.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a general discussion of certain federal income tax
consequences of the purchase, ownership and disposition of the Certificates.
This summary is based upon laws, regulations, rulings and decisions currently
in effect, all of which are subject to change. The discussion does not deal
with all federal tax consequences applicable to all categories of investors,
some of which may be subject to special rules. In addition, this summary is
generally limited to investors who are Beneficial Owners of the Certificates
holding the Certificates as "capital assets" (generally, property held for
investment) within the meaning of Section 1221 of the Internal Revenue Code
(the "Code"). Investors should consult their own tax advisers to determine the
federal, state, local and other tax consequences of the purchase, ownership
and disposition of the Certificates. Prospective investors should note that no
rulings have been or will be sought from the Service with respect to any of
the federal income tax consequences discussed below, and no assurance can be
given that the Service will not take contrary positions.
TAX STATUS OF THE TRUST
In the opinion of Shaw, Pittman, Potts & Trowbridge, counsel to the Seller,
the Trust will be classified as a grantor trust and not as an association
taxable as a corporation for federal income tax purposes. Each Beneficial
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Owner will be treated as owning its pro rata percentage interest in the
principal of, and interest (at the Pass-Through Rate) payable on, each
Receivable.
TAXATION OF BENEFICIAL OWNERS
Subject to the discussion below under the heading "Discount and Premium,"
each Beneficial Owner is required to include for federal income tax purposes
its share of the gross income of the Trust, including interest and certain
other charges accrued on the Receivables and any gain upon collection or
disposition of the Receivables. Each Beneficial Owner is entitled to deduct
its share of the amount used to pay expenses of the Trust to the extent
described below. Any amounts received by a Certificateholder from the Reserve
Account or the Yield Maintenance Account will be treated for federal income
tax purposes as having the same characteristics as the payments they replace.
Each Beneficial Owner should report its share of the income of the Trust
under its usual method of accounting. Accordingly, interest is includible in a
Beneficial Owner's gross income when it accrues on the Receivables, or in the
case of Beneficial Owners who are cash basis taxpayers, when received by the
Servicer on behalf of the Beneficial Owners. Because (i) interest accrues on
the Receivables over differing monthly periods and is paid in arrears and (ii)
interest collected on a Receivable generally is paid to Beneficial Owners in
the following month, the amount of interest accruing to a Beneficial Owner
during any calendar month will not equal the interest distributed in that
month. Discount on a Receivable would be includible in income as described
below.
Each Beneficial Owner will be entitled to deduct, consistent with its method
of accounting, its pro rata share of reasonable servicing fees and other fees
paid or incurred by the Trust as provided in Section 162 or 212 of the Code.
If a Beneficial Owner is an individual, estate or trust, the deduction for
such Beneficial Owner's share of such fees will be allowed only to the extent
that all of such Beneficial Owner's miscellaneous itemized deductions,
including such Beneficial Owner's share of such fees, exceed 2% of such
Beneficial Owner's adjusted gross income.
DISCOUNT AND PREMIUM
A Beneficial Owner that purchases a Certificate at a discount (i.e., for an
amount less than its face amount) must include such discount in income over
the life of the Certificates. Distinctions in the Code between original issue
discount and market discount generally are not relevant in the case of the
Certificates.
The rate at which discount must be included in income depends on whether it
is greater or less than a statutorily defined de minimis amount. Although not
entirely certain, it would appear that the de minimis computation can be done
for each Certificate overall and need not be done on a Receivable-by-
Receivable basis. Generally, discount is treated as de minimis if it is less
than 1/4 of one percent of the principal amount of the Certificate times the
number of full years remaining to the maturity date of the Certificate. It is
not clear whether the maturity date for this purpose is the final maturity
date or the weighted average maturity date (and whether expected prepayments
are taken into account).
If the discount is de minimis (which should be the case for original
purchasers of Certificates), it would appear that such discount is includible
in income as principal payments are received on the Receivables and in
proportion to such principal payments. Although not entirely clear, the income
attributable to DE MINIMIS discount should be treated as capital gain.
If the discount is more than a de minimis amount, such discount must be
included in income as it accrues on the basis of the yield to maturity of the
Certificate to the particular purchaser. It is not clear whether a prepayment
assumption must be taken into account in computing this yield to maturity and
how actual prepayments will affect accruals of discount. Unless the
Certificates are originally issued with more than a de minimis amount of
discount, the Trustee will not be providing any information relating to the
computation of the accruals of discount by subsequent purchasers of
Certificates.
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In the event that a Receivable is treated as purchased at a premium (i.e.,
the purchase price thereof exceeds the portion of the remaining principal
balance of the Receivables allocable to the Beneficial Owners), such premium
will be amortizable by a Beneficial Owner as an offset to interest income
(with a corresponding reduction in the Beneficial Owner's basis) under a
constant yield method over the term of the Receivable if an election under
Section 171 of the Code is made (or was previously in effect) with respect to
the Certificates. Any such election will also apply to debt instruments held
by the taxpayer during the year in which the election is made and to all debt
instruments acquired thereafter.
SALE OF A CERTIFICATE
If a Certificate is sold, gain or loss will be recognized equal to the
difference between the amount realized on the sale and the Beneficial Owner's
adjusted basis in the Receivables and any other assets held by the Trust. Such
gain or loss will be treated as capital gain or loss. A Beneficial Owner's
adjusted basis will equal the Beneficial Owner's cost for the Certificate,
increased by any discount previously included in income, and decreased by any
payments received that are attributable to accrued discount by any offset
previously allowed for accrued premium and by the amount of principal payments
previously received.
Except as provided in the discussion of backup withholding, a non-U.S.
Person (other than a nonresident alien individual present in the United States
for a total of 183 days or more during his or her taxable year) will not be
subject to federal income tax, and no withholding of such tax will be
required, with respect to any gain realized upon the disposition or retirement
of a Certificate.
FOREIGN OWNERS
Interest attributable to Receivables which is received by a person that is
not a U.S. Person (a "Foreign Owner") (other than a foreign bank and certain
other persons) generally will not be subject to the normal 30% withholding tax
(or lower treaty rate) imposed with respect to such payments, provided that
such Foreign Owner is not engaged in a trade or business in the United States
and that such Foreign Owner fulfills certain certification requirements. Under
such requirements, the holder must certify, under penalties of perjury, that
it is not a "U.S. Person" and provide its name and address. The Foreign Owner
must inform the Trustee (or the last intermediary in the chain between the
Trustee and the Foreign Owner) of any change in the information in the
certification within 30 days of such change. For this purpose, "U.S. Person"
means a citizen or resident of the United States, a corporation, partnership,
or other entity created or organized in or under the laws of the United States
or any political subdivision thereof, or an estate or trust that is subject to
federal income tax, regardless of the source of its income. Payments of
interest on a Certificate that are effectively connected with the conduct of a
trade or business in the United States by a Foreign Owner who is a non-U.S.
Person, although exempt from the withholding tax, may be subject to graduated
federal income tax as if such amounts were earned by a U.S. Person.
BACKUP WITHHOLDING
Backup withholding of federal income tax at a rate of 31% may apply to
payments made in respect of the Certificates, as well as payments of proceeds
from the sale of Certificates, to Beneficial Owners that are not "exempt
recipients" and that fail to provide certain identifying information (such as
the taxpayer identification number of the Beneficial Owner) to the Trustee or
its agent in the manner required. Individuals generally are not exempt
recipients, whereas corporations and certain other entities generally are
exempt recipients. Payments made in respect of the Certificates must be
reported to the Service, unless the recipient is an exempt recipient or
establishes an exemption. Any amounts withheld under the backup withholding
rules from a payment to a person would be allowed as a refund or a credit
against such person's federal income tax, provided that the required
information is furnished to the Service. Furthermore, certain penalties may be
imposed by the Service on a Beneficial Owner who is required to supply
information but who does not do so in the proper manner.
In addition, if a Certificate is sold before the stated maturity to (or
through) a "broker," the broker may be required to withhold 31% of the entire
sale price, unless either (i) the broker determines that the seller is a
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corporation or other exempt recipient or (ii) the seller provides, in the
required manner, certain identifying information and, in the case of a non-
U.S. Person, certifies that such seller is a non-U.S. Person (and certain
other conditions are met). Such a sale also must be reported by the broker to
the Service, unless either (i) the broker determines that the seller is an
exempt recipient or (ii) the seller certifies its non-U.S. status (and certain
other conditions are met).
STATE, LOCAL AND FOREIGN TAXATION
The discussion above does not address the tax consequences of purchase,
ownership or disposition of the Certificates under any state, local or foreign
tax law. Investors should consult their own tax advisers regarding state,
local and foreign tax consequences.
THE FEDERAL INCOME TAX DISCUSSIONS SET FORTH ABOVE ARE INCLUDED FOR GENERAL
INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON AN INVESTOR'S
PARTICULAR TAX SITUATION. PROSPECTIVE PURCHASERS SHOULD CONSULT THEIR TAX
ADVISERS WITH RESPECT TO THE TAX CONSEQUENCES TO THEM OF THE PURCHASE,
OWNERSHIP AND DISPOSITION OF THE CERTIFICATES, INCLUDING THE TAX CONSEQUENCES
UNDER STATE, LOCAL, FOREIGN AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF
CHANGES IN FEDERAL OR OTHER TAX LAWS.
ERISA CONSIDERATIONS
Section 406 of ERISA and Section 4975 of the Code prohibit pension, profit
sharing, or other employee benefit plans, individual retirement accounts or
annuities, employee annuity plans and Keogh plans subject to ERISA or Section
4975 of the Code (collectively referred to as "Benefit Plans") from engaging
in certain transactions involving "plan assets" with persons that are "parties
in interest" under ERISA or "disqualified persons" under the Code with respect
to the plan. ERISA also imposes certain duties on persons who are fiduciaries
of plans subject to ERISA. Under ERISA, any person who exercises any authority
or control respecting the management or disposition of the assets of a plan is
considered to be a fiduciary of such plan (subject to certain exceptions not
here relevant). A violation of these "prohibited transaction" rules may
generate excise tax and other liabilities under ERISA and the Code for
fiduciaries, "parties in interest" and "disqualified persons."
Unless a statutory, regulatory or administrative exemption is available, a
violation of the prohibited transaction rules could occur if any Certificates
were to be acquired by a Benefit Plan or with "plan assets" of any Benefit
Plan, and if any of the Transferor, the Trustee, the Underwriters or any of
their affiliates were a "party in interest" or a "disqualified person" with
respect to such Benefit Plan. The Seller, the Trustee and the Underwriter are
likely to be "parties in interest" or "disqualified persons" with respect to
many Benefit Plans.
Pursuant to the Final Regulation issued by the U.S. Department of Labor
("DOL") concerning the definition of what constitutes the "plan assets" of a
Benefit Plan, the assets and properties of certain entities in which a Benefit
Plan makes an equity investment could be deemed to be assets of the Benefit
Plan unless certain exceptions under the Final Regulation apply or an
exemption is available. There can be no assurance that any of the exceptions
provided in the Final Regulation will apply. If the underlying assets of the
Trust or the Yield Maintenance Account were deemed to be plan assets by reason
of the acquisition of Certificates by Benefit Plans, the Seller, the Servicer
the Trustee and other persons who provide services with respect to the Trust
might be subject to the fiduciary responsibility provisions of Title I of
ERISA and the operations of the Trust including those operations related to
the Yield Maintenance Account could result in prohibited transactions.
The DOL has granted to each of CS First Boston, and an
administrative exemption (Prohibited Transactions Exemptions 89-90, and
), (collectively, the "Exemption") which generally exempts from the
application of the prohibited transaction provisions of Section 406(a),
Section 406(b)(1),
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Section 406(b)(2) and Section 407(a) of ERISA and the excise taxes imposed
pursuant to Sections 4975(a) and (b) of the Code, certain transactions
relating to the servicing and operation of asset pools, including pools of
motor vehicle installment obligations such as the Receivables and the
purchase, sale and holding of asset-backed pass-through certificates,
including pass-through certificates evidencing interests in certain
receivables, loans and other obligations, such as the Certificates, provided
that certain conditions set forth in the Exemption are satisfied. The Seller
believes that the Exemption will apply to the acquisition and holding of
Certificates by Benefit Plans and that all conditions of the Exemption other
than those within the control of the investors have been or will be met. The
Exemption sets forth the following six general conditions which must be
satisfied for a transaction to be eligible for exemptive relief thereunder:
(1) The acquisition of the Certificates by a Benefit Plan is on terms
(including the price for the certificates) that are at least as favorable
to the Benefit Plan as they would be in an arm's length transaction with an
unrelated party;
(2) The rights and interests evidenced by the Certificates acquired by
the Benefit Plan are not subordinated to the rights and interests evidenced
by other certificates of the trust;
(3) The Certificates acquired by the Benefit Plan have received a rating
at the time of such acquisition that is one of the three highest general
rating categories from either S&P, Moody's, Fitch or Duff & Phelps Credit
Rating Co.
(4) The Trustee is not an affiliate of any other member of the Restricted
Group (as defined below);
(5) The sum of all payments made to and retained by the Underwriters in
connection with the distribution of the Certificates represents not more
than reasonable compensation for their services. The sum of all payments
made and retained by the Seller pursuant to the assignment of the
Receivables to the Trust represents not more than the fair market value of
such Receivables. The sum of all payments made to and retained by the
Servicer represents not more than reasonable compensation for such person's
services under the Pooling Agreement and reimbursement of such person's
reasonable expenses in connection therewith; and
(6) The Benefit Plan investing in the Certificates is an "accredited
investor" as defined in Rule 501(a)(1) of Regulation D of the Commission
under the Securities Act.
If the general conditions of the Exemption are satisfied, the Exemption
provides an exemption from the restrictions imposed by Sections 406(a) and
407(a) of ERISA (as well as the excise taxes imposed by Sections 4975(c)(1)(A)
through (D) of the Code) in connection with the direct or indirect sale,
exchange or transfer of Certificates by Benefit Plans in the initial issue of
Certificates, the holding of Certificates by Benefit Plans or the direct or
indirect acquisition or disposition in the secondary market of Certificates by
Benefit Plans. However, no exemption is provided from the restrictions of
Section 406(a)(1)(E), 406(a)(2) and 407 of ERISA for the acquisition or
holding of a Certificate on behalf of an "Excluded Plan" by any person who has
discretionary authority or renders investment advice with respect to the
assets of such Excluded Plan. For purposes of the Certificates, an Excluded
Plan is a Benefit Plan sponsored by (1) an Underwriter, (2) the Certificate
Insurer, (3) the Issuer, (4) the Seller, (5) the Servicer, (6) the Trustee,
(7) any Obligor with respect to Receivables constituting more than 5% of the
aggregate unamortized principal balance of the Receivables as of the date of
initial issuance and (8) any affiliate or successor of a person described in
(1) to (7) above (the "Restricted Group").
If the specific conditions of Section I.B. of the Exemption are also
satisfied, the Exemption provides an exemption from the restrictions imposed
by Sections 406(b)(1) and (b)(2) of ERISA and the taxes imposed by Sections
4975(a) and (b) of the Code by reason of Section 4975(c)(1)(E) of the Code in
connection with (1) the direct or indirect sale, exchange or transfer of
Certificates in the initial issuance of Certificates to a Benefit Plan when
the person who has discretionary authority or renders investment advice with
respect to the investment of plan assets in Certificates is (a) an Obligor
with respect to 5% or less of the fair market value of the Receivables or (b)
an affiliate of such a person, (2) the direct or indirect acquisition or
disposition in the secondary market of Certificates by Benefit Plans and (3)
the holding of Certificates by Benefit Plans. Among the specific conditions
41
<PAGE>
that must be satisfied is the condition that the Benefit Plan acquires no more
than 25% of the Certificates and immediately after the acquisition of the
Certificates no more than 25% of the assets of the Benefit Plan with respect
to which the person is a fiduciary are invested in certificates representing
an interest in a trust containing assets sold or serviced by the same entity.
As of the Cut-off Date, the Seller believes no Obligor with respect to
Receivables included in the Trust constitutes more than % of the aggregate
unamortized principal balance of the Trust.
If the specific conditions of Section I.C. of the Exemption are also
satisfied, the Exemption provides an exemption from the restrictions imposed
by Sections 406(a), 406(b) and 407(a) of ERISA, and the taxes imposed by
Sections 4975(a) and (b) of the Code by reason of Section 4975(c) of the Code
for transactions in connection with the servicing, management and operation of
the Trust.
Section I.D of the Exemption provides an exemption from the restrictions
imposed by Section 406(a) and 407(a) of ERISA, and the taxes imposed by
Sections 4975(a) and (b) of the Code by reason of Sections 4975(c)(1)(A)
through (D) of the Code if such restrictions are deemed to otherwise apply
merely because a person is deemed to be a "party in interest" or a
"disqualified person" with respect to an investing Benefit Plan by virtue of
providing services to the Benefit Plan (or by virtue of having certain
specified relationships to such a person) solely as a result of such Benefit
Plan's ownership of Certificates.
Assuming compliance with the otherwise applicable conditions of the
Exemption, the Seller believes that the specific exemptions provided by
Section I.C. of the Exemption are also available with respect to transactions
contemplated by the Yield Maintenance Payments, which transactions are
provided for in the Pooling Agreement. Before purchasing a Certificate based
on the Exemption, however, a fiduciary of a Benefit Plan should itself confirm
(1) that such Certificate constitutes a "certificate" for purposes of the
Exemption and (2) that the specific conditions and other requirements set
forth in the Exemption would be satisfied.
Prospective Benefit Plan investors in the Certificates should consult with
their legal advisors concerning the impact of ERISA and the Code, the
applicability of the Exemption, and the potential consequences in their
specific circumstances, prior to making an investment in the Certificates.
Moreover, each Benefit Plan fiduciary should determine whether, under the
general fiduciary standards of investment prudence and diversification, an
investment in the Certificates is appropriate for the Benefit Plan, taking
into account the overall investment policy of the Benefit Plan and the
composition of the Benefit Plan's investment portfolio.
RATINGS
It is a condition to the issuance of the Certificates that they be rated in
the highest rating category by at least one of the Rating Agencies. A security
rating is not a recommendation to buy, sell or hold securities and may be
subject to revision or withdrawal at any time. The ratings of Rating Agencies
assigned to Certificates addresses the likelihood of the receipt by the
Certificateholders of all distributions to which such Certificateholders are
entitled. The ratings do not address the timely or ultimate payment of any
withholding tax imposed. The ratings assigned to Certificates do not represent
any assessment of the likelihood that principal prepayments might differ from
those originally anticipated or address the possibility that
Certificateholders might suffer a lower than anticipated yield.
42
<PAGE>
UNDERWRITING
Under the terms and subject to the conditions set forth in an Underwriting
Agreement dated , 1997 (the "Underwriting Agreement"), the Underwriters
named below (the "Underwriters") have agreed to purchase from the Seller the
following respective principal amounts of the Certificates:
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT OF
UNDERWRITERS CERTIFICATES
------------ ------------
<S> <C>
Credit Suisse First Boston Corporation......................... $
$
$
--------
Total........................................................ $
========
</TABLE>
The Underwriting Agreement provides that the obligations of the Underwriters
are subject to certain conditions precedent and that the Underwriters will be
obligated to purchase all the Certificates, if any are purchased.
The Seller has been advised by the Underwriters that the Underwriters
propose to offer the Certificates to the public initially at the public
offering price set forth on the cover page of this Prospectus and to certain
dealers at such price less a concession of % of the principal amount per
Certificate, and the Underwriters and such dealers may allow a discount of %
of such principal amount per Certificate on sales to certain other dealers.
After the initial public offering, the public offering price and concession
and discount to dealers may be changed by the Underwriters.
The Certificates are a new issue of securities with no established trading
market. The Underwriters have advised the Seller that they intend to act as
market makers for the Certificates. However, the Underwriters are not
obligated to do so and may discontinue any market making at any time without
notice. No assurance can be given as to the liquidity of any trading market
for the Certificates.
The Seller has agreed to indemnify the Underwriters against certain
liabilities, including civil liabilities under the Securities Act, or
contribute to payments which the Underwriters may be required to make in
respect thereof.
Each Underwriter has represented and agreed that (a) it has complied and
will comply with all applicable provisions of the Financial Services Act 1986
and the Public Offers of Securities Regulations 1995 (the "Regulations") with
respect to anything done by it in relation to the Series 1997-1 Certificates
in, from or otherwise involving the United Kingdom; (b) it has only issued or
passed on and will only issue or pass on to any person in the United Kingdom
any document received by it in connection with the issue of the Series 1997-1
Certificates if that person is of a kind described in Article 11(3) of the
Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order
1995 or is a person to whom such document may otherwise lawfully be issued or
passed on; and (c) it has not offered or sold and, during the period of six
months from the date hereof, will not offer or sell any Series 1997-1
Certificates to persons in the United Kingdom except to persons whose ordinary
activities involve them in acquiring, holding, managing, or disposing of
investments (as principal or agent) for the purposes of their businesses or
otherwise in circumstances which have not resulted and will not result in an
offer to the public in the United Kingdom within the meaning of the
Regulations.
In the ordinary course of their respective businesses, the Underwriters and
their respective affiliates have engaged and may in the future engage in
commercial banking and investment banking transactions with Chevy Chase Bank,
F.S.B. and its affiliates.
43
<PAGE>
NOTICE TO CANADIAN RESIDENTS
RESALE RESTRICTIONS
The distribution of the Certificates in Canada is being made only on a
private placement basis exempt from the requirement that the Seller prepare
and file a prospectus with the securities regulatory authorities in each
province where trades of the Certificates are effected. Accordingly, any
resale of the Certificates in Canada must be made in accordance with
applicable securities laws which will vary depending on the relevant
jurisdiction, and which may require resales to be made in accordance with
available statutory exemptions or pursuant to a discretionary exemption
granted by the applicable Canadian securities regulatory authority. Purchasers
are advised to seek legal advice prior to any resale of the Certificates.
REPRESENTATIONS OF PURCHASERS
Each purchaser of a Certificate in Canada who receives a purchase
confirmation will be deemed to represent to the Seller and the dealer from
whom such purchase confirmation is received that (i) such purchaser is
entitled under applicable provincial securities laws to purchase such
Certificate without the benefit of a prospectus qualified under such
securities laws, (ii) where required by law, that such purchaser is purchasing
as principal and not as agent and (iii) such purchaser has reviewed the text
above under "Resale Restrictions."
RIGHTS OF ACTIONS AND ENFORCEMENT
The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
section 32 of the Regulation under the Securities Act (Ontario). As a result,
Ontario purchasers must rely on other remedies that may be available,
including common law rights of action for damages or rescission or rights of
action under the civil liability provisions of the U.S. federal securities
laws.
All of the issuer's directors and officers as well as the experts named
herein may be located outside of Canada and, as a result, it may not be
possible for Ontario purchasers to effect service of process within Canada
upon the issuer or such persons. All or a substantial portion of the assets of
the issuer and such persons may be located outside of Canada and, as a result,
it may not be possible to satisfy a judgment against the issuer or such
persons in Canada or to enforce a judgment obtained in Canadian courts against
such issuer or persons outside of Canada.
NOTICE TO BRITISH COLUMBIA RESIDENTS
A purchaser of a Certificate to whom the Securities Act (British Columbia)
applies is advised that such purchaser is required to file with the British
Columbia Securities Commission a report within ten days of the sale of any
Certificates acquired by such purchaser pursuant to this offering. Such report
must be in the form attached to British Columbia Securities Commission Blanket
Order BOR #88/5, a copy of which may be obtained from the Seller. Only one
such report must be filed in respect of the Certificates acquired on the same
date and under the same prospectus exemption.
REPORT OF EXPERTS
[To be provided]
44
<PAGE>
LEGAL MATTERS
Certain legal matters relating to the validity of the issuance of the
Certificates will be passed upon for the Seller and the Underwriters by Shaw,
Pittman, Potts & Trowbridge, Washington, D.C.
45
<PAGE>
ANNEX I
GLOBAL CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION PROCEDURES
Except in certain limited circumstances, the globally offered Certificates
(the "Global Securities") will be available only in book-entry form. Investors
in the Global Securities may hold such Global Securities through any of DTC,
CEDEL or Euroclear. The Global Securities will be tradeable as home market
instruments in both the European and U.S. domestic markets. Initial settlement
and all secondary trades will settle in same-day funds.
Secondary market trading between investors through CEDEL and Euroclear will
be conducted in the ordinary way in accordance with the normal rules and
operating procedures of CEDEL and Euroclear and in accordance with
conventional eurobond practice (i.e., seven calendar day settlement).
Secondary market trading between investors through DTC will be conducted
according to DTC's rules and procedures applicable to U.S. corporate debt
obligations.
Secondary cross-market trading between CEDEL or Euroclear and DTC
Participants holding Certificates will be effected on a delivery-against-
payment basis through the respective Depositaries of CEDEL and Euroclear (in
such capacity) and as DTC Participants.
Non-U.S. holders (as described below) of Global Securities will be subject
to U.S. withholding taxes unless such holders meet certain requirements and
deliver appropriate U.S. tax documents to the securities clearing
organizations or their participants.
INITIAL SETTLEMENT
All Global Securities will be held in book-entry form by DTC in the name of
Cede & Co. as nominee of DTC. Investors' interests in the Global Securities
will be represented through financial institutions acting on their behalf as
direct and indirect Participants in DTC. As a result, CEDEL and Euroclear will
hold positions on behalf of their participants through their Relevant
Depository which in turn will hold such positions in their accounts as DTC
Participants.
Investors electing to hold their Global Securities through DTC will follow
DTC settlement practices. Investor securities custody accounts will be
credited with their holdings against payment in same-day funds on the
settlement date.
Investors electing to hold their Global Securities through CEDEL or
Euroclear accounts will follow the settlement procedures applicable to
conventional eurobonds, except that there will be no temporary global security
and no "lock-up" or restricted period. Global Securities will be credited to
the securities custody accounts on the settlement date against payment in
same-day funds.
SECONDARY MARKET TRADING
Since the purchaser determines the place of delivery, it is important to
establish at the time of the trade where both the purchaser's and seller's
accounts are located to ensure that settlement can be made on the desired
value date.
Trading between DTC Participants. Secondary market trading between DTC
Participants will be settled using the procedures applicable to prior asset-
backed certificates issues in same-day funds.
Trading between CEDEL and/or Euroclear Participants. Secondary market
trading between CEDEL Participants or Euroclear Participants will be settled
using the procedures applicable to conventional eurobonds in same-day funds.
46
<PAGE>
Trading between a DTC Seller and CEDEL or Euroclear Participants. When
Global Securities are to be transferred from the account of a DTC Participant
to the account of a CEDEL Participant or a Euroclear Participant, the
purchaser will send instructions to CEDEL or Euroclear through a CEDEL
Participant or Euroclear Participant at least one business day prior to
settlement. CEDEL or Euroclear will instruct the Relevant Depository, as the
case may be, to receive the Global Securities against payment. Payment will
include interest accrued on the Global Securities from and including the last
coupon payment date to and excluding the settlement date, on the basis of the
actual number of days in such accrual period and a year assumed to consist of
360 days. For transactions settling on the 31st of the month, payment will
include interest accrued to and excluding the first day of the following
month. Payment will then be made by the Relevant Depository to the DTC
Participant's account against delivery of the Global Securities. After
settlement has been completed, the Global Securities will be credited to the
respective clearing system and by the clearing system, in accordance with its
usual procedures, to the CEDEL Participant's or Euroclear Participant's
account. The securities credit will appear the next day (European time) and
the cash debt will be back-valued to, and the interest on the Global
Securities will accrue from, the value date (which would be the preceding day
when settlement occurred in New York). If settlement is not completed on the
intended value date (i.e., the trade fails), the CEDEL or Euroclear cash debt
will be valued instead as of the actual settlement date.
CEDEL Participants and Euroclear Participants will need to make available to
the respective clearing systems the funds necessary to process same-day funds
settlement. The most direct means of doing so is to preposition funds for
settlement, either from cash on hand or existing lines of credit, as they
would for any settlement occurring within CEDEL or Euroclear. Under this
approach, they may take on credit exposure to CEDEL or Euroclear until the
Global Securities are credited to their account one day later.
As an alternative, if CEDEL or Euroclear has extended a line of credit to
them, CEDEL Participants or Euroclear Participants can elect not to
preposition funds and allow that credit line to be drawn upon to finance
settlement. Under this procedure, CEDEL Participants or Euroclear Participants
purchasing Global Securities would incur overdraft charges for one day,
assuming they cleared the overdraft when the Global Securities were credited
to their accounts. However, interest on the Global Securities would accrue
from the value date. Therefore, in many cases the investment income on the
Global Securities earned during that one-day period may substantially reduce
or offset the amount of such overdraft charges, although the result will
depend on each CEDEL Participant's or Euroclear Participant's particular cost
of funds.
Since the settlement is taking place during New York business hours, DTC
Participants can employ their usual procedures for crediting Global Securities
to the respective European Depository for the benefit of CEDEL Participants or
Euroclear Participants. The sale proceeds will be available to the DTC seller
on the settlement date. Thus, to the DTC Participants a cross-market
transaction will settle no differently than a trade between two DTC
Participants.
Trading between CEDEL or Euroclear Seller and DTC Purchaser. Due to time
zone differences in their favor, CEDEL Participants and Euroclear Participants
may employ their customary procedures for transactions in which Global
Securities are to be transferred by the respective clearing system, through
the respective Depository, to a DTC Participant. The seller will send
instructions to CEDEL or Euroclear through a CEDEL Participant or Euroclear
Participant at least one business day prior to settlement. In these cases
CEDEL or Euroclear will instruct the respective Depository, as appropriate, to
credit the Global Securities to the DTC Participant's account against payment.
Payment will include interest accrued on the Global Securities from and
including the last coupon payment to and excluding the settlement date on the
basis of the actual number of days in such accrual period and a year assumed
to consist of 360 days. For transactions settling on the 31st of the month,
payment will include interest accrued to and excluding the first day of the
following month. The payment will then be reflected in the account of CEDEL
Participant or Euroclear Participant the following day, and receipt of the
cash proceeds in the CEDEL Participant's or Euroclear Participant's account
would be back-valued to the value date (which would be the preceding day, when
settlement occurred in New York). In the event that the CEDEL Participant or
Euroclear Participant have a line of credit with its respective clearing
system and elect to be in debt in anticipation of receipt of the sale proceeds
in its account, the back-valuation will extinguish any
47
<PAGE>
overdraft incurred over that one-day period. If settlement is not completed on
the intended value date (i.e., the trade fails), receipt of the cash proceeds
in the CEDEL Participant's or Euroclear Participant's account would instead be
valued as of the actual settlement date.
Finally, day traders that use CEDEL or Euroclear and that purchase Global
Securities from DTC Participants for delivery to CEDEL Participants or
Euroclear Participants should note that these trades would automatically fail
on the sale side unless affirmative action is taken. At least three techniques
should be readily available to eliminate this potential problem:
(a) borrowing through CEDEL or Euroclear for one day (until the purchase
side of the trade is reflected in their CEDEL or Euroclear accounts) in
accordance with the clearing system's customary procedures;
(b) borrowing the Global Securities in the U.S. from a DTC Participant no
later than one day prior to settlement, which would give the Global
Securities sufficient time to be reflected in their CEDEL or Euroclear
account in order to settle the sale side of the trade; or
(c) staggering the value dates for the buy and sell sides of the trade so
that the value date for the purchase from the DTC Participant is at least
one day prior to the value date for the sale to the CEDEL Participant or
Euroclear Participant.
CERTAIN U.S. FEDERAL INCOME TAX DOCUMENTATION REQUIREMENTS
A beneficial owner of Global Securities holding securities through CEDEL or
Euroclear (or through DTC if the holder has an address outside the U.S.) will
be subject to the 30% U.S. withholding tax that generally applies to payments
of interest (including original issue discount) on debt issued in registered
form by U.S. Persons (as defined below), unless (i) each clearing system, bank
or other financial institution that holds customers' securities in the
ordinary course of its trade or business in the chain of intermediaries
between such beneficial owner and the U.S. entity required to withhold tax
complies with applicable certification requirements and (ii) such beneficial
owner takes one of the following steps to obtain an exemption or reduced tax
rate:
Exemption for Non-U.S. Persons (Form W-8). Beneficial Owners of Global
Securities that are Non-U.S. Persons (as defined below) can obtain a complete
exemption from the withholding tax by filing a signed Form W-8 (Certificate of
Foreign Status). If the information shown on Form W-8 changes, a new Form W-8
must be filed within 30 days of such change.
Exemption for Non-U.S. Persons with effectively connected income (Form
4224). A Non-U.S. Person (as defined below), including a corporation or bank
that is a Non-U.S. Person, for which the interest income is effectively
connected with its conduct of a trade or business in the United States, can
obtain an exemption from the withholding tax by filing Form 4224 (Exemption
from Withholding of Tax on Income Effectively Connected with the Conduct of a
Trade or Business in the United States). Form 4224 may also be filed by the
Certificate Owner's Agent.
Exemption or reduced rate for non-U.S. Persons resident in treaty countries
(Form 1001). Non-U.S. Persons residing in a country that has a tax treaty with
the United States can obtain an exemption or reduced tax rate (depending on
the treaty terms) by filing Form 1001 (Ownership, Exemption or Reduced Rate
Certificate). If the treaty provides only for a reduced rate, withholding tax
will be imposed at that rate unless the filer alternatively files Form W-8.
Form 1001 may be filed by Certificate Owners or their agent.
Exemption for U.S. Persons (Form W-9). U.S. Persons can obtain a complete
exemption from the withholding tax by filing Form W-9 (Payer's Request for
Taxpayer Identification Number and Certification).
U.S. Federal Income Tax Reporting Procedure. Owners of Global Securities or,
in the case of a Form 1001 or a Form 4224 filer, their agent, file by
submitting the appropriate form to the person through whom they hold (the
clearing agency, in the case of persons holding directly on the books of the
clearing agency). Form
48
<PAGE>
W-8 and Form 1001 are effective for three calendar years and Form 4224 is
effective for one taxable year of the Owner.
The term "U.S. Person" means (i) a citizen or resident of the United States,
(ii) a corporation, partnership or other entity organized in or under the laws
of the United States or any political subdivision thereof or (iii) an estate
or trust that is subject to U.S. federal income tax regardless of the source
of its income. The term "Non-U.S. Person" means any person who is not a U.S.
Person. This summary does not deal with all aspects of U.S. Federal income tax
withholding that may be relevant to foreign holders of the Global Securities.
Investors are advised to consult their own tax advisors for specific tax
advice concerning their holding and disposing of the Global Securities.
49
<PAGE>
INDEX OF DEFINED TERMS
<TABLE>
<S> <C>
Accounts............................................................... 26
APR.................................................................... 6
Available Funds........................................................ 28
Balloon Receivable..................................................... 13
Bank................................................................... 1, 3, 12
Bank Receivables....................................................... 12
Beneficial Owners...................................................... 4
Benefit Plans.......................................................... 40
Book-Entry Certificates................................................ 20
Business Day........................................................... 4
Cede................................................................... 2
CEDEL.................................................................. 4
CEDEL Participants..................................................... 21
Certificate Account.................................................... 5
Certificate Insurance Policy........................................... 2, 6
Certificate Insurer.................................................... 2
Certificate Principal Balance.......................................... 4
Certificateholder...................................................... 2
Certificates........................................................... 1, 3
CFC.................................................................... 4, 12
CFC Receivables........................................................ 4, 12
Citibank............................................................... 20
Claim Date............................................................. 27
Code................................................................... 36
Collection Account..................................................... 5
Collection Period...................................................... 4
Commission............................................................. 2
Cooperative............................................................ 22
Cut-Off Date........................................................... 1
Dealers................................................................ 12
Defaulted Receivable................................................... 28
Definitive Certificates................................................ 23
Determination Date..................................................... 27
Distribution Date...................................................... 4
DOL.................................................................... 40
DTC.................................................................... 2
DTC Participants....................................................... 20
Eligible Bank.......................................................... 26
Eligible Deposit Account............................................... 26
Eligible Investments................................................... 26
ERISA.................................................................. 8
Euroclear.............................................................. 4
Euroclear Operator..................................................... 22
Euroclear Participants................................................. 22
European Depositaries.................................................. 21
Excess Interest........................................................ 5
Exchange Act........................................................... 2
Exemption.............................................................. 40
FDIC................................................................... 16
</TABLE>
50
<PAGE>
<TABLE>
<S> <C>
Final Scheduled Distribution Date........................................... 1
Financial Intermediary...................................................... 20
FIRREA...................................................................... 16
Fitch....................................................................... 8
Foreign Owner............................................................... 39
FTC Rule.................................................................... 36
Global Securities........................................................... 46
Holders..................................................................... 23
Indirect DTC Participants................................................... 22
Initial Yield Maintenance Amount............................................ 6
Insolvency Event............................................................ 31
Insufficiency Amount........................................................ 27
Insured Payment............................................................. 6
Issuer...................................................................... 3
Late Payment Rate........................................................... 28
Lenders..................................................................... 13
Liquidated Receivable....................................................... 28
Liquidation Proceeds........................................................ 28
Monthly Interest............................................................ 28
Monthly Principal........................................................... 28
Monthly Report.............................................................. 29
Moody's..................................................................... 8
Non-U.S. Person............................................................. 48
Obligor..................................................................... 4
Optional Termination........................................................ 7
Original Certificate Principal Balance...................................... 4
OTS......................................................................... 16
Participants................................................................ 20
Pass-Through Rate........................................................... 4
Pool Balance................................................................ 28
Pool Factor................................................................. 12
Pooling Agreement........................................................... 1
Purchase Amount............................................................. 25
Purchased Receivable........................................................ 28
Rating Agencies............................................................. 8
Receivable File............................................................. 24
Receivables................................................................. 1
Record Date................................................................. 4
Recoveries.................................................................. 29
Registration Statement...................................................... 2
Reimbursement Amount........................................................ 29
Relevant Depositary......................................................... 20
Required Payments........................................................... 29
Required Rate............................................................... 6
Reserve Account............................................................. 5
Reserve Initial Deposit..................................................... 5
Restricted Group............................................................ 41
Rules....................................................................... 23
S&P......................................................................... 8
SAIF........................................................................ 16
Securities Act.............................................................. 2
Seller...................................................................... 1
</TABLE>
51
<PAGE>
<TABLE>
<S> <C>
Service.................................................................. 8
Servicer................................................................. 1
Servicer Default......................................................... 31
Servicer's Certificate................................................... 27
Servicing Fee............................................................ 7
Servicing Fee Rate....................................................... 7
Specified Reserve Balance................................................ 5
Terms and Conditions..................................................... 22
Trust.................................................................... 1, 3
Trust Property........................................................... 3
Trustee.................................................................. 1
U.S. Person.............................................................. 39, 49
UCC...................................................................... 24
Underwriters............................................................. 43
Underwriting Agreement................................................... 43
Vehicles................................................................. 1
Yield Maintenance Payments............................................... 3
Yield Maintenance Amount................................................. 6
</TABLE>
52
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE BANK OR ANY UNDERWRITER. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY
OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT
IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS
OF THE BANK SINCE SUCH DATE OR THAT THE INFORMATION CONTAINED OR INCORPORATED
BY REFERENCE HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
-----------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information...................................................... 2
Incorporation of Certain Documents by
Reference................................................................. 2
Reports to the Certificateholders.......................................... 2
Summary of Terms........................................................... 3
Special Considerations..................................................... 9
Formation of the Trust..................................................... 10
The Trust Property......................................................... 11
Use of Proceeds............................................................ 11
Prepayment and Yield Considerations........................................ 11
Pool Factor and Other Information.......................................... 12
The Receivables Pool....................................................... 12
The Seller and the Servicer................................................ 16
The Certificates........................................................... 19
The Certificate Insurer.................................................... 33
The Certificate Insurance Policy........................................... 34
Certain Legal Aspects of the Receivables................................... 34
Certain Federal Income Tax Consequences.................................... 37
ERISA Considerations....................................................... 40
Ratings.................................................................... 42
Underwriting............................................................... 43
Notice to Canadian Residents............................................... 44
Report of Experts.......................................................... 44
Legal Matters.............................................................. 45
Annex I.................................................................... 46
</TABLE>
-----------
UNTIL , 1997 (90 DAYS AFTER THE COMMENCEMENT OF THE OFFERING), ALL
DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
CHEVY CHASE AUTO
RECEIVABLES TRUST 1997-1
$
% AUTO RECEIVABLES BACKED
CERTIFICATES
CHEVY CHASE BANK, F.S.B.
SELLER AND SERVICER
PROSPECTUS
CREDIT SUISSE FIRST BOSTON
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following is an itemized list of the estimated expenses to be incurred in
connection with the offering of the securities being offered hereunder other
than underwriting discounts and commissions.
<TABLE>
<S> <C>
Registration Fee.................................................... $303.03
Printing and Engraving.............................................. $ *
Trustee's Fees...................................................... $ *
Legal Fees and Expenses............................................. $ *
Blue Sky Fees and Expenses.......................................... $ *
Accountants' Fees and Expenses...................................... $ *
Rating Agency Fees.................................................. $ *
Miscellaneous Fees.................................................. $ *
-------
Total............................................................. $ *
</TABLE>
- --------
* To be completed 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, of (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 appears in the Registration Statement or the Prospectus.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
EXHIBITS
--------
<C> <S>
1.1 --Form of Underwriting Agreement.**
4.1 --Form of Pooling Agreement (including form of Certificate).**
4.2 --Form of Certificate Guaranty Insurance Policy.**
5.1 --Opinion of Shaw, Pittman, Potts & Trowbridge, Special Counsel to
the Bank, with respect to legality.**
8.1 --Opinion of Shaw, Pittman, Potts & Trowbridge, Special Counsel to
the Bank, with respect to tax matters.**
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBITS
--------
<C> <S>
-- Consent of Shaw, Pittman, Potts & Trowbridge, (included in its
23.1 opinion filed as Exhibit 5.1).**
-- Consent of Shaw, Pittman, Potts & Trowbridge, (included in its
23.2 opinion filed as Exhibit 8.1).**
23.3 -- Consent of .**
24.1 -- Powers of Attorney (included on the signature pages).**
</TABLE>
- --------
** To be filed by amendment.
(a) Financial Statements
All financial statements, schedules and historical financial information have
been omitted as they are not applicable.
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(a) That, for purposes of determining any liability under the Securities
Act of 1933, each filing of the registrant's annual report pursuant to
Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the registration statement shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(b) To provide to the underwriters at the closing specified in the
underwriting agreements certificates in such denominations and registered
in such names as required by the underwriters to permit prompt delivery to
each purchaser.
(c) That insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the provisions described
under Item 15 above, or otherwise, the registrant has been advised that in
the opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in
the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to
a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
(d) That, for purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed as
part of this Registration Statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act of 1933 shall be deemed
to be part of this Registration Statement as of the time it was declared
effective.
(e) That, 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-2
<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 13, 1997.
CHEVY CHASE BANK, F.S.B.
as Originator of the Trust 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 13, 1997 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
- ------------------------------------- (Principal Accounting Officer)
JOEL A. FRIEDMAN
II-3
<PAGE>
SIGNATURE TITLE
Director
- -------------------------------------
GILBERT M. GROSVENOR
/s/ Stephen R. Halpin, Jr. Executive Vice President
- ------------------------------------- (Principal Financial
STEPHEN R. HALPIN, JR. Officer)
/s/ Penne Percy Korth Director
- -------------------------------------
PENNE PERCY KORTH
Director
- -------------------------------------
LASALLE D. LEFFALL
/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
B. FRANCIS SAUL II Officer)
/s/ Leonard L. Silverstein Director
- -------------------------------------
LEONARD L. SILVERSTEIN
II-4
