<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 22, 1997
REGISTRATION NO. 333-35413; 333-35413-01
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------
HONDA AUTO RECEIVABLES 1997-B GRANTOR TRUST
(Issuer with respect to the Certificates)
AMERICAN HONDA RECEIVABLES CORP.
(Originator of the Trust described herein)
(Exact name of Registrant as specified in its charter)
CALIFORNIA 6146 33-0526079
(State or other (Primary Standard (I.R.S. Employer
Jurisdiction of Industrial Identification Number)
Incorporation or Classification Code
Organization) Number)
700 VAN NESS AVENUE
TORRANCE, CALIFORNIA 90501
(310) 781-4376
(Address, including zip code, and telephone number, including
area code, of Originator's principal executive offices)
Y. KOHAMA
PRESIDENT
700 VAN NESS AVENUE
TORRANCE, CALIFORNIA 90501
(310) 781-4100
(Name, address, including zip code, and telephone number, including
area code, of agent for service with respect to the Registrant)
----------------
COPIES TO:
Dale W. Lum, Esq. C. Thomas Kunz, Esq.
Brown & Wood LLP Skadden, Arps, Slate,
555 California Street Meagher & Flom LLP
San Francisco, California 919 Third Avenue
94104 New York, New York 10022
Telephone (415) 772-1299 Telephone (212) 735-3240
Fax (415) 397-4621 Fax (212) 735-2000
----------------
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
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
PROPOSED TITLE OF AMOUNT TO OFFERING AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED PRICE PER UNIT OFFERING PRICE REGISTRATION FEE
<S> <C> <C> <C> <C>
% Asset Backed Certificates, Class A......... 850,145,000.00 100% $850,145,000.00 $257,619.70(1)
</TABLE>
(1) Of this amount $303.03 has been previously paid.
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED OCTOBER 22, 1997
$850,145,000
HONDA AUTO RECEIVABLES 1997-B GRANTOR TRUST
% ASSET BACKED CERTIFICATES, CLASS A
AMERICAN HONDA RECEIVABLES CORP.
SELLER
AMERICAN HONDA FINANCE CORPORATION
SERVICER
--------------
The % Asset Backed Certificates (the "Certificates") will consist of one
class of senior certificates (the "Class A Certificates") and one class of
subordinated certificates (the "Class B Certificates"). The Class A Certificates
are the only Certificates offered hereby and will evidence in the aggregate an
undivided ownership interest of 94.0% of the Honda Auto Receivables 1997-B
Grantor Trust (the "Trust"). The Trust will be formed pursuant to a Pooling and
Servicing Agreement among American Honda Receivables Corp., as Seller (the
"Seller"), American Honda Finance Corporation, as Servicer ("AHFC" or the
"Servicer"), and Bank of Tokyo - Mitsubishi Trust Company, as Trustee. The Class
B Certificates, which initially will be retained by the Seller, will evidence in
the aggregate an undivided ownership interest of 6.0% of the Trust. The rights
of the Class B Certificateholders to receive distributions with respect to the
assets of the Trust will be subordinated to the rights of the Class A
Certificateholders to the limited extent described herein. See "The Certificates
- -- Subordination of the Class B Certificates; Reserve Fund".
Principal, and interest to the extent of the Pass-Through Rate of % per
annum, will be distributed to Certificateholders on the fifteenth day of each
month (or, if such day is not a Business Day, the next succeeding Business Day),
beginning November 15, 1997 (each, a "Distribution Date"). The Final Scheduled
Distribution Date will be the May, 2003 Distribution Date. The assets of the
Trust will primarily include a pool of retail installment sale and conditional
sale contracts (the "Receivables") secured by new Honda and Acura automobiles
and sport utility vehicles and Honda minivans financed thereby (the "Financed
Vehicles"), certain monies due or received under the Receivables on and after
October 1, 1997 and security interests in the Financed Vehicles. See "Property
of the Trust".
There currently is no secondary market for the Class A Certificates and
there is no assurance that one will develop. The Underwriters expect, but will
not be obligated, to make a market in the Class A Certificates. There is no
assurance that any such market will develop, or if one does develop, that it
will continue.
------------------
POTENTIAL INVESTORS SHOULD CONSIDER, AMONG OTHER THINGS, THE INFORMATION SET
FORTH IN "RISK FACTORS" BEGINNING ON PAGE 9.
THE CLASS A CERTIFICATES WILL REPRESENT INTERESTS IN THE TRUST AND WILL NOT
REPRESENT INTERESTS IN OR OBLIGATIONS OF AMERICAN HONDA RECEIVABLES CORP.,
AMERICAN HONDA FINANCE CORPORATION OR ANY OF THEIR RESPECTIVE
AFFILIATES.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO THE
PUBLIC(1) COMMISSIONS SELLER(1)(2)
<S> <C> <C> <C>
Per Class A Certificate..................... % % %
Total....................................... $ $ $
</TABLE>
(1) Plus accrued interest at the Pass-Through Rate from , 1997.
(2) Before deducting expenses payable by the Seller estimated at $683,000.
------------------
The Class A 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
delivery of the Class A Certificates, in book-entry form, will be made through
the facilities of The Depository Trust Company on or about October , 1997,
against payment in immediately available funds.
------------------
MERRILL LYNCH & CO.
CREDIT SUISSE FIRST BOSTON
J.P. MORGAN & CO.
The date of this Prospectus is , 1997.
<PAGE>
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE CLASS A
CERTIFICATES INCLUDING OVER-ALLOTMENT TRANSACTIONS, STABILIZING TRANSACTIONS,
SYNDICATE COVERING TRANSACTIONS AND PENALTY BIDS. FOR A DESCRIPTION OF THESE
ACTIVITIES, SEE "UNDERWRITING" HEREIN.
--------------
AVAILABLE INFORMATION
The Seller has filed with the Securities and Exchange Commission (the
"Commission") on behalf of the Trust a Registration Statement (together with all
amendments and exhibits thereto, the "Registration Statement"), of which this
Prospectus is a part, under the Securities Act of 1933, as amended (the
"Securities Act") with respect to the Class A Certificates being offered hereby.
This Prospectus does not contain all of the information set forth in the
Registration Statement, certain parts of which have been omitted in accordance
with the rules and regulations of the Commission. For further information,
reference is made to the Registration Statement which is available for
inspection without charge at the public reference facilities of the Commission
at Judiciary Plaza, Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549,
and the regional offices of the Commission at Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661-2511, and Seven World Trade Center,
Suite 1300, New York, New York 10048. Copies of such information can be obtained
from the Public Reference Section of the Commission at Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The Commission
maintains a Web Site that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission at http: //www.sec.gov. The Servicer, on behalf of the Trust, will
also file or cause to be filed with the Commission such periodic reports as are
required under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and the rules and regulations of the Commission thereunder. The filing
with the Commission of periodic reports with respect to the Trust will cease
following completion of the reporting period required by Rule 15d-1 under the
Exchange Act, which period is expected to end on March 31, 1998.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All reports and other documents filed by the Seller on behalf of the Trust,
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to
the date of this Prospectus and prior to the termination of the offering of the
Class A Certificates shall be deemed to be incorporated by reference into this
Prospectus and to be part hereof. Any statement contained in a document
incorporated or deemed to be incorporated by reference in this Prospectus shall
be deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained in this Prospectus or in any subsequently
filed document which also is or is deemed to be incorporated by reference in
this Prospectus modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
The Seller will provide without charge to each person to whom a copy of this
Prospectus is delivered, on the written or oral request of any such person, a
copy of any or all of the documents incorporated herein by reference, except the
exhibits to such documents (unless such exhibits are specifically incorporated
by reference in such documents). Written requests for such copies should be
directed to American Honda Receivables Corp., 700 Van Ness Avenue, Torrance,
California 90501 (Telephone: (310) 781-4376).
REPORTS TO CLASS A CERTIFICATEHOLDERS BY THE TRUSTEE
Bank of Tokyo - Mitsubishi Trust Company, as Trustee, will provide to Class
A Certificateholders (which is expected to be Cede & Co. as the nominee of The
Depository Trust Company ("DTC") unless Definitive Certificates are issued under
the limited circumstances described herein) unaudited monthly and annual reports
concerning the Receivables. See "The Certificates -- Statements to Class A
Certificateholders" and "-- Evidence as to Compliance".
2
<PAGE>
SUMMARY
The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus. Certain capitalized
terms used and not otherwise defined herein shall have the meanings ascribed
thereto elsewhere in this Prospectus. See the Index of Capitalized Terms at page
53 for the location herein of defined terms.
<TABLE>
<S> <C>
Trust............... Honda Auto Receivables 1997-B Grantor Trust.
Seller.............. American Honda Receivables Corp. (the "Seller"), a wholly
owned, limited purpose subsidiary of American Honda
Finance Corporation.
Servicer............ American Honda Finance Corporation ("AHFC" or, in its
capacity as Servicer, the "Servicer"), a wholly owned
subsidiary of American Honda Motor Co., Inc. ("AHMC").
AHMC is the exclusive distributor of Honda and Acura motor
vehicles, Honda motorcycles and power products and Honda
and Acura parts and accessories in the United States and
is a wholly owned subsidiary of Honda Motor Co., Ltd., a
Japanese corporation.
Securities The % Asset Backed Certificates (the "Certificates")
Offered............ will consist of one class of senior certificates (the
"Class A Certificates") and one class of subordinated
certificates (the "Class B Certificates"). Only the Class
A Certificates are being offered hereby. Each Certificate
will represent a fractional undivided interest in the
Trust. The assets of the Trust will primarily include a
pool of retail installment sale and conditional sale
contracts (the "Receivables") secured by the new Honda and
Acura automobiles and sport utility vehicles and Honda
minivans financed thereby (the "Financed Vehicles"), with
respect to Precomputed Receivables, certain monies due
under the Receivables on and after October 1, 1997 (the
"Cutoff Date"), and, with respect to Simple Interest
Receivables, certain monies received thereunder on or
after the Cutoff Date, security interests in the Financed
Vehicles, certain bank accounts and the proceeds thereof,
proceeds from claims under certain insurance policies in
respect of individual Financed Vehicles or Obligors and
certain rights under the Receivables Purchase Agreement,
to be dated as of October 1, 1997 (the "Receivables
Purchase Agreement"), among the Seller, the Servicer and
Bank of Tokyo - Mitsubishi Trust Company, as trustee (the
"Trustee"). See "Property of the Trust". The Trust will be
formed and the Certificates will be issued pursuant to the
Pooling and Servicing Agreement, to be dated as of October
1, 1997 (the "Agreement"), among the Seller, the Servicer
and the Trustee. The Class A Certificates will be offered
in minimum denominations of $1,000 and integral multiples
thereof.
The Class A Certificates will evidence in the aggregate an
undivided ownership interest (the "Class A Percentage") of
94.0% of the Trust (initially representing $850,145,000)
and the Class B Certificates will evidence in the
aggregate an undivided ownership interest (the "Class B
Percentage") of 6.0% of the Trust (initially representing
$54,264,897). The Class B Certificates will be
subordinated to the Class A Certificates to the limited
extent described under "Summary --
</TABLE>
3
<PAGE>
<TABLE>
<S> <C>
Subordination of the Class B Certificates; Reserve Fund",
"The Certificates -- Distributions on the Certificates"
and "-- Subordination of the Class B Certificates; Reserve
Fund". The Class B Certificates are not being offered
hereby and initially will be held by the Seller.
Registration of the
Class A
Certificates....... The Class A Certificates will initially be represented by
certificates registered in the name of Cede & Co.
("Cede"), the nominee of DTC. No beneficial owner of an
interest in the Class A Certificates (each, a "Certificate
Owner") will be entitled to receive a definitive
certificate representing such person's interest, except in
the event that Definitive Certificates are issued under
the limited circumstances described under "The
Certificates -- Definitive Certificates". Unless and until
Class A Certificates are issued in definitive form, all
references herein to distributions, notices, reports and
statements to and to actions by and to effects upon Class
A Certificateholders will refer to distributions, no-
tices, reports and statements to and to the same actions
and effects with respect to DTC or Cede, as the case may
be, for the benefit of the Certificate Owners in
accordance with DTC procedures. See "The Certificates --
General" and "-- Book-Entry Registration".
Pass-Through Rate... % per annum.
Distribution The fifteenth day of each month (or, if such day is not a
Dates.............. Business Day, the next succeeding Business Day), beginning
November 15, 1997. The final scheduled Distribution Date
(the "Final Scheduled Distribution Date") will be the May,
2003 Distribution Date, the Distribution Date in the sixth
month following the maturity of the Receivable having the
latest maturity as of the Cutoff Date. A "Business Day"
means any day other than a Saturday, a Sunday or a day on
which banking institutions in New York, New York or Los
Angeles, California are authorized or obligated by law,
executive order or governmental decree to be closed.
Interest............ On each Distribution Date, the Trustee will distribute, to
the extent of available funds, pro rata to the holders of
record of the Class A Certificates (the "Class A
Certificateholders") as of the day immediately preceding
such Distribution Date or, if Definitive Certificates are
issued, the last day of the immediately preceding calendar
month (each such date, a "Record Date"), interest in an
amount equal to one-twelfth of the product of the
Pass-Through Rate, calculated on the basis of a 360-day
year consisting of twelve 30-day months, and the Class A
Certificate Balance as of the immediately preceding
Distribution Date (after giving effect to distributions of
principal made on such immediately preceding Distribution
Date) or, in the case of the first Distribution Date, the
Original Class A Certificate Balance. The "Class A
Certificate Balance" will initially equal $850,145,000
(the "Original Class A Certificate Balance") and on each
Distribution Date will equal the Original Class A
Certificate Balance, reduced by all principal distri-
butions made on or prior to such Distribution Date on the
Class A Certificates.
Principal........... On each Distribution Date, the Trustee will distribute, to
the extent of available funds, pro rata to Class A
Certificateholders of record as of the related Record
Date, an amount equal to the Class A Percentage of
</TABLE>
4
<PAGE>
<TABLE>
<S> <C>
(i) the principal portion of all scheduled monthly
payments (each, a "Scheduled Payment") on Precomputed
Receivables due during the immediately preceding calendar
month (each, a "Collection Period") and the principal
portion of all Scheduled Payments on Simple Interest
Receivables actually received during such Collection
Period; (ii) the principal portion of all prepayments in
full on the Receivables and all partial prepayments on
Simple Interest Receivables, in each case received by the
Servicer during such Collection Period; (iii) the
principal balance of each Receivable that was purchased by
the Servicer or repurchased by the Seller, in either case
under an obligation that arose during such Collection
Period; and (iv) the principal balance of each Receivable
that became a Defaulted Receivable during such Collection
Period. See "The Certificates -- Distributions on the
Certificates -- Calculation of Distributable Amounts".
The Yield Supplement On or prior to the date of initial issuance of the
Account............ Certificates (the "Closing Date") a yield supplement
account will be established with the Trustee for the
benefit of the Certificateholders (the "Yield Supplement
Account"). The Yield Supplement Account is designed solely
to supplement the interest collections on those
Receivables (the "Discount Receivables") that have APRs
which are less than the sum of (i) the Pass-Through Rate
and (ii) the Servicing Fee Rate (the "Required Rate"). The
Yield Supplement Account will not be part of or otherwise
includible in the Trust and will be a segregated trust
account held by the Trustee for the benefit of the
Certificateholders.
The Yield Supplement Account will be funded on or prior to
the Closing Date by the Seller in an amount (the "Yield
Supplement Account Deposit") to be specified in the
Agreement. The Yield Supplement Account Deposit will equal
the aggregate amount as of the Cutoff Date by which
interest on the Principal Balance of each Discount
Receivable for the remaining term of such Receivable
(assuming no prepayments or delinquencies) at a rate equal
to the Required Rate exceeds interest on such Principal
Balance at the APR of such Receivable; provided, that such
aggregate amount may be discounted at a rate to be
specified in the Agreement.
On each Distribution Date, the Trustee shall withdraw from
monies on deposit in the Yield Supplement Account, for
distribution to Certificateholders, the aggregate amount
by which one month's interest on the Principal Balance as
of the first day of the related Collection Period of each
Discount Receivable (other than a Discount Receivable that
is a Defaulted Receivable) at a rate equal to the Required
Rate, exceeds one month's interest on such Principal
Balance at the APR of each such Receivable (the "Yield
Supplement Deposit Amount").
Amounts on deposit on any Distribution Date in the Yield
Supplement Account in excess of the Maximum Yield
Supplement Amount, after giving effect to all
distributions to be made on such Distribution Date, will
be paid to the Seller and the Certificateholders will have
no further rights in, or claims to, such amounts. The
Maximum Yield Supplement Amount will be calculated as
described under "The Certificates -- The Yield Supplement
Account".
</TABLE>
5
<PAGE>
<TABLE>
<S> <C>
Subordination of the
Class B
Certificates;
Reserve Fund....... The rights of the holders of record of the Class B
Certificates (the "Class B Certificateholders" and,
together with the Class A Certificateholders, the
"Certificateholders") to receive distributions with
respect to the Receivables will be subordinated to the
rights of the Class A Certificateholders to the limited
extent described herein. This subordination is intended to
enhance the likelihood of timely receipt by Class A
Certificateholders of the full amount of interest and
principal required to be paid to them, and to afford such
Class A Certificateholders limited protection against
losses in respect of the Receivables.
No distribution will be made to the Class B
Certificateholders on any Distribution Date in respect of
(i) interest until the full amount of interest on the
Class A Certificates payable on such Distribution Date has
been distributed to the Class A Certificateholders and
(ii) principal until the full amount of interest on and
principal of the Class A Certificates payable on such
Distribution Date has been distributed to the Class A
Certificateholders. Distributions of interest on the Class
B Certificates, to the extent of collections on or in
respect of the Receivables allocable to interest and
certain available amounts on deposit in the Reserve Fund,
will not be subordinated to the payment of principal on
the Class A Certificates.
The protection afforded to the Class A Certificateholders
by the subordination feature described above will be
effected both by the preferential right of the Class A
Certificateholders to receive, to the limited extent
described herein, current distributions from collections
on or in respect of the Receivables and by the
establishment of a segregated trust account held by the
Trustee for the benefit of the Certificateholders (the
"Reserve Fund"). The Reserve Fund will provide credit
enhancement and liquidity to Certificateholders that will
be available to the extent described herein in the event
that, as a result of defaults or delinquencies,
collections on the Receivables are insufficient to make
distributions on the Certificates. The Reserve Fund will
not be part of or otherwise includible in the Trust and
will be a segregated trust account held by the Trustee for
the benefit of the Certificateholders.
The Reserve Fund will be funded by the Seller on the
Closing Date in an amount equal to $6,783,074.23.
Thereafter, all Excess Amounts will be deposited from time
to time in the Reserve Fund to the extent necessary to
maintain the amount on deposit in the Reserve Fund at the
Specified Reserve Fund Balance. Excess Amounts in respect
of a Distribution Date generally will consist of all
interest collections on or in respect of the Receivables
on deposit in the Certificate Account in respect of such
Distribution Date, after the Servicer has been reimbursed
for any outstanding Advances and has been paid the
Servicing Fee with respect to the related Collection
Period (including any unpaid Servicing Fees with respect
to one or more prior Collection Periods) and after giving
effect to all distributions of interest and principal
required to be made to the Class A and Class B
Certificateholders on such Distribution Date and deposits
required to be made to the Payahead Account. The
"Specified Reserve Fund Balance" will be
</TABLE>
6
<PAGE>
<TABLE>
<S> <C>
$6,783,074.23. On each Distribution Date, funds will be
withdrawn from the Reserve Fund for distribution, first to
Class A Certificateholders to the extent of shortfalls in
the amounts available to make required distributions of
interest on the Class A Certificates, second to Class B
Certificateholders to the extent of shortfalls in the
amounts available to make required distributions of
interest on the Class B Certificates, third to Class A
Certificateholders to the extent of shortfalls in the
amounts available to make required distributions of
principal on the Class A Certificates and fourth to Class
B Certificateholders to the extent of shortfalls in the
amounts available to make required distributions of
principal on the Class B Certificates. If on any
Distribution Date the Class B Certificate Balance has been
reduced to zero and amounts on deposit in the Reserve Fund
have been depleted as a result of losses in respect of the
Receivables, the protection afforded to the Class A
Certificateholders by the subordination of the Class B
Certificates and by the Reserve Fund will be exhausted and
the Class A Certificateholders will bear directly the
risks associated with ownership of the Receivables.
Amounts on deposit in the Yield Supplement Account will
not be available to Certificateholders in the event that
defaults or delinquencies in collections on or in respect
of the Receivables result in shortfalls in amounts due to
Certificateholders (even in the circumstance described in
the preceding sentence) or for any other purpose other
than withdrawals of the Yield Supplement Deposit Amount on
each Distribution Date.
On each Distribution Date, after giving effect to all
distributions made on such Distribution Date, any amounts
in the Reserve Fund in excess of the Specified Reserve
Fund Balance will be distributed to the Seller and upon
such distribution the Certificateholders will have no
further rights in, or claims to, such amounts. See "The
Certificates -- Subordination of the Class B Certificates;
Reserve Fund".
Advances............ On the Business Day immediately preceding each
Distribution Date, the Servicer will advance to the Trust,
in respect of each (i) Precomputed Receivable, that
portion, if any, of the related Scheduled Payment that was
not timely made (each, a "Precomputed Advance") and (ii)
Simple Interest Receivable, an amount equal to the product
of the principal balance of such Receivable as of the
first day of the related Collection Period and one-twelfth
of its annual percentage rate ("APR"), minus the amount of
interest actually received on such Receivable during such
Collection Period (each, a "Simple Interest Advance" and,
together with Precomputed Advances, the "Advances"). If
such calculation in respect of a Simple Interest
Receivable results in a negative number, an amount equal
to such negative number shall be paid to the Servicer out
of interest collections in respect of the Receivables
during the related Collection Period in reimbursement of
outstanding Simple Interest Advances. The Servicer will be
required to make an Advance only to the extent that it
determines that such Advance will be recoverable from
future payments and collections on or in respect of such
Receivable. Upon the determination by the Servicer
</TABLE>
7
<PAGE>
<TABLE>
<S> <C>
that such reimbursement is unlikely, the Servicer will be
entitled to recover Advances from payments and collections
on or in respect of other Receivables. See "The
Certificates -- Advances".
Servicing Fee....... The Servicer will receive a monthly fee, payable on each
Distribution Date (the "Servicing Fee"), equal to
one-twelfth of the product of 1.00% (the "Servicing Fee
Rate") and the Pool Balance as of the first day of the
related Collection Period. The Servicer will be entitled
to receive additional servicing compensation in the form
of investment earnings on the amounts on deposit in the
Certificate Account and the Payahead Account plus any late
fees, prepayment charges and other administrative fees and
expenses or similar charges received by the Servicer
during such Collection Period. See "The Certificates --
Servicing Compensation".
Optional The Seller or the Servicer, or any successor to the
Termination........ Servicer, may purchase all the Receivables remaining in
the Trust on the Distribution Date following the last day
of any Collection Period as of which the aggregate unpaid
principal balance of the Receivables is 10% or less of the
Pool Balance as of the Cutoff Date (the "Cutoff Date Pool
Balance"), at a purchase price determined as described
under "The Certificates -- Termination".
Ratings............. It is a condition to the issuance of the Class A
Certificates that they be rated Aaa by Moody's Investors
Service, Inc. ("Moody's") and AAA by Standard & Poor's
Ratings Services, a division of The McGraw-Hill Companies,
Inc. ("Standard & Poor's" and, together with Moody's, the
"Rating Agencies"). A security rating is not a
recommendation to buy, sell or hold securities and may be
subject to revision or withdrawal at any time by the
assigning rating agency. The ratings on the Class A
Certificates do not assess the likelihood that principal
prepayments on the Receivables will occur, the degree to
which the rate of such prepayments might differ from that
originally anticipated or otherwise address the timing of
distributions of principal of the Class A Certificates
prior to the Final Scheduled Distribution Date. See
"Rating of the Class A Certificates".
Tax Status.......... In the opinion of counsel to the Seller, the Trust will be
classified as a grantor trust for federal income tax
purposes and not as an association taxable as a
corporation. For federal income tax purposes, the Certifi-
cateholders will be considered to own stripped bonds. See
"Federal Income Tax Consequences". Class A
Certificateholders should consult their own tax advisors
as to the proper treatment of original issue discount with
respect to the Receivables and the application of the
stripped bond rules.
ERISA Subject to the conditions described herein, the Class A
Considerations..... Certificates may be purchased by employee benefit plans
subject to the Employee Retirement Income Security Act of
1974, as amended. See "ERISA Considerations".
</TABLE>
8
<PAGE>
RISK FACTORS
Prospective investors should consider the following risk factors in
considering the purchase of Class A Certificates.
RISK OF TRUST NOT HAVING A PERFECTED SECURITY INTEREST IN THE FINANCED VEHICLES
IN ALL STATES
Pursuant to the Receivables Purchase Agreement, AHFC will sell and assign
its security interests in the Financed Vehicles to the Seller and, pursuant to
the Agreement, the Seller will sell and assign its security interests in the
Financed Vehicles to the Trustee. However, because of the administrative burden
and expense, neither AHFC, the Seller nor the Trustee will amend any certificate
of title to identify the Trustee as the new secured party on the certificates of
title relating to the Financed Vehicles. In the absence of such an amendment,
the Trustee may not have a perfected security interest in the Financed Vehicles
in all states.
If the protection provided to the Class A Certificateholders by the
subordination of the Class B Certificates and by the Reserve Fund is
insufficient, the Class A Certificateholders will have to look to payments made
by or on behalf of the Obligors on or in respect of the Receivables, the
proceeds from the repossession and sale of Financed Vehicles which secure
defaulted Receivables and the proceeds of any Dealer Recourse to make
distributions on the Class A Certificates. In such event, certain factors, such
as the possibility that the Trustee may not have a perfected security interest
in the Financed Vehicles in all states, may affect the Trust's ability to
repossess and sell the collateral securing the Receivables or may limit the
amount realized to less than the amount due by the related Obligors. Class A
Certificateholders may thus be subject to delays in payment and may incur losses
on their investment in the Class A Certificates as a result of defaults or
delinquencies by Obligors and because of depreciation in the value of the
related Financed Vehicles. See "The Certificates -- Subordination of the Class B
Certificates; Reserve Fund" and "--Insurance on Financed Vehicles" and "Certain
Legal Aspects of the Receivables".
RISK ASSOCIATED WITH INCREASES IN DELINQUENCIES, REPOSSESSIONS AND NET LOSSES
The number of delinquencies and repossessions and the amount of net losses
in AHFC's portfolio of new Honda and Acura motor vehicle retail installment sale
contracts have increased as the portfolio has grown. As more fully described
under "American Honda Finance Corporation -- Delinquencies, Repossessions and
Net Losses", total delinquencies and repossessions as a percentage of the
principal balance and unearned finance charges of all outstanding installment
sale contracts was 1.92% at March 31, 1997 and net losses as a percentage of the
average principal balance of all outstanding installment sale contracts was
0.57% for the year ended March 31, 1997. AHFC attributes the increased
percentages to the effect of general economic conditions which have been
reflected in increased delinquencies and losses in the consumer finance sector
generally. However, total delinquencies and repossessions decreased during the
five months ended August 31, 1997. Total delinquencies and repossessions as a
percentage of the principal balance and unearned finance charges of all
outstanding installment sale contracts was 1.51% as of August 31, 1997 and net
losses as a percentage of the average principal balance of all outstanding
installment sale contracts was 0.55% as of August 31, 1997. If the protection
provided to the Class A Certificateholders by the subordination of the Class B
Certificates and by the Reserve Fund is insufficient, as a result of defaults or
delinquencies on the Receivables, Class A Certificateholders could incur a loss
on their investment.
FORMATION OF THE TRUST
The Seller will establish the Trust by selling and assigning the assets of
the Trust to the Trustee in exchange for the Certificates. The Servicer will
service the Receivables pursuant to the Agreement and will be compensated for
such services. See "The Certificates -- Servicing Compensation". To facilitate
servicing and to minimize administrative burden and expense, the Servicer will
be appointed custodian for the Receivables and documents relating thereto by the
Trustee, but will not stamp the Receivables to reflect the sale and assignment
of the Receivables to the Trust, nor amend the certificates of title to the
Financed Vehicles to reflect the assignment of the security interest in the
Financed Vehicles to the Trustee. In the
9
<PAGE>
absence of such an amendment, the Trust's security interest in the Financed
Vehicles may not be perfected in all states. See "Risk Factors -- Risk of Trust
Not Having A Perfected Security Interest in the Financed Vehicles in All
States".
PROPERTY OF THE TRUST
Each Certificate will represent a fractional undivided interest in the
Trust. The property of the Trust will include, among other things, a pool of
retail installment sale contracts for new Honda and Acura automobiles and sport
utility vehicles and Honda minivans between dealers (the "Dealers") and retail
purchasers (the "Obligors") and certain monies due thereunder on and after the
Cutoff Date. The Receivables were originated by Dealers in accordance with
AHFC's requirements and subsequently purchased by AHFC. The Receivables evidence
the indirect financing made available by AHFC to the related Obligors. On or
before the Closing Date, AHFC will sell the Receivables to the Seller pursuant
to the Receivables Purchase Agreement. The Seller will, in turn, sell the
Receivables to the Trust on the Closing Date pursuant to the Agreement.
During the term of the Agreement, neither the Seller nor AHFC may substitute
any other retail installment sale contract for any Receivable sold to the Trust.
The assets of the Trust will also include: (i) such amounts as from time to time
may be held in the Certificate Account and the Payahead Account to be
established and initially maintained by the Servicer with the Trustee pursuant
to the Agreement; (ii) security interests in the Financed Vehicles and any
accessions thereto; (iii) the right to receive proceeds from physical damage,
credit life and disability insurance policies, if any, covering individual
Financed Vehicles or Obligors, as the case may be; (iv) the right to receive
proceeds of Dealer Recourse, if any; (v) the rights but not the obligations of
the Seller under the Receivables Purchase Agreement; (vi) the right to realize
upon any property (including the right to receive future proceeds of the
liquidation of Defaulted Receivables) that shall have secured a Receivable and
have been repossessed by or on behalf of the Trustee; and (vii) any and all
proceeds of the foregoing. The Reserve Fund and the Yield Supplement Account
will be maintained for the benefit of the Certificateholders, but will not be
part of the Trust.
Pursuant to agreements between AHFC and the Dealers, each Dealer is
obligated, after purchase by AHFC of retail installment sale contracts from such
Dealer, to repurchase from AHFC such contracts which do not meet certain
representations and warranties made by such Dealer (such Dealer repurchase
obligations, "Dealer Recourse"). Such representations and warranties relate
primarily to the origination of the contracts and the perfection of the security
interests in the related financed vehicles, and do not typically relate to the
creditworthiness of the related obligors or the collectability of such
contracts. Although the Dealer agreements with respect to the Receivables will
not be assigned to the Trustee, the Agreement will require that any recovery by
AHFC pursuant to any Dealer Recourse be deposited in the Certificate Account in
satisfaction of AHFC's repurchase obligations under the Agreement. It is
expected that the sales by the Dealers of installment sale contracts to AHFC do
not generally provide for recourse to the Dealer for unpaid amounts in the event
of a default by an obligor thereunder, other than in connection with the breach
of the foregoing representations and warranties.
THE RECEIVABLES
PAYMENTS ON THE RECEIVABLES
Except as otherwise described under "Selection Criteria", the Scheduled
Payment on each Receivable is a fixed level monthly payment which will amortize
the full amount of the Receivable over its term. Each Receivable provides for
allocation of payments according to (i) the "sum of periodic balances" or "sum
of monthly payments" method (each, a "Rule of 78s Receivable"), (ii) the
"actuarial" method (each, an "Actuarial Receivable" and, together with Rule of
78s Receivables, the "Precomputed Receivables") or (iii) the simple interest
method (each, a "Simple Interest Receivable").
10
<PAGE>
Each Rule of 78s Receivable provides for the payment by the Obligor of a
specified total amount of payments, payable in monthly installments on the
related due date, which total represents the principal amount financed and
finance charges in an amount calculated on the basis of a stated APR for the
term of such Receivable. The rate at which such amount of finance charges is
earned and, correspondingly, the amount of each Scheduled Payment allocated to
reduction of the outstanding principal balance of the related Receivable are
calculated in accordance with the Rule of 78s. Under the "Rule of 78s", the
portion of each payment allocable to interest is higher during the early months
of the term of a Rule of 78s Receivable and lower during later months than that
under a constant yield method for allocating payments between interest and
principal.
An Actuarial Receivable provides for amortization of the loan over a series
of fixed level monthly installments. Each Scheduled Payment is deemed to consist
of an amount of interest equal to 1/12 of the stated APR of the Receivable
multiplied by the scheduled principal balance of the Receivable and an amount of
principal equal to the remainder of the Scheduled Payment.
All payments received by the Servicer on or in respect of Precomputed
Receivables will be allocated pursuant to the Agreement on an actuarial basis,
under which each Scheduled Payment, including the final Scheduled Payment on a
Precomputed Receivable, consists of an amount of interest equal to 1/12 of the
APR of such Receivable multiplied by the unpaid principal balance of such
Receivable, and an amount of principal equal to the remainder of the Scheduled
Payment. No adjustment will be made in the event of early or late payments,
although in the latter case the Obligor will be subject to a late charge.
Payments on Simple Interest Receivables will be applied first to interest
accrued through the date immediately preceding the date of payment and then to
unpaid principal. Accordingly, if an Obligor pays an installment before its due
date, the portion of the payment allocable to interest for the payment period
will be less than if the payment had been made on the due date, the portion of
the payment applied to reduce the principal balance will be correspondingly
greater and the principal balance will be amortized more rapidly than scheduled.
Conversely, if an Obligor pays an installment after its due date, the portion of
the payment allocable to interest for the payment period will be greater than if
the payment had been made on the due date, the portion of the payment applied to
reduce the principal balance will be correspondingly less, and the principal
balance will be amortized more slowly than scheduled, in which case a larger
portion of the principal balance may be due on the final scheduled payment date.
In the event of a prepayment in full (voluntarily or by acceleration) of a
Precomputed Receivable, a "rebate" will be made to the related Obligor of that
portion of the total amount of payments under such Receivable allocable to
"unearned" finance charges. In the event of the prepayment in full (voluntarily
or by acceleration) of a Simple Interest Receivable, a "rebate" will not be made
to such Obligor, but the Obligor will be required to pay interest only to the
date immediately preceding the date of prepayment. The amount of a rebate under
a Precomputed Receivable will always be less than or equal to the remaining
scheduled payments of interest that would have been due under a Simple Interest
Receivable for which all remaining payments were made on schedule.
The amount of a rebate under a Rule of 78s Receivable calculated in
accordance with the Rule of 78s will always be less than had such rebate been
calculated on an actuarial basis. However, Rule of 78s Receivables originated in
certain states, including Colorado and Maryland, require rebates based on the
actuarial method. Distributions to Class A Certificateholders will not be
affected by Rule of 78s rebates under the Rule of 78s Receivables because
pursuant to the Agreement such distributions will be determined using the
actuarial method.
SELECTION CRITERIA
The Receivables were purchased by AHFC from Dealers through its nationwide
branch system in the ordinary course of business in accordance with AHFC's
ordinary underwriting standards. See "American Honda Finance Corporation --
Underwriting of Motor Vehicle Loans". The Receivables were randomly
11
<PAGE>
selected from AHFC's portfolio of retail installment sale contracts that met the
selection criteria described herein and under "The Certificates -- Sale and
Assignment of the Receivables". Such selection criteria included that (i) each
Receivable is secured by a new Honda or Acura automobile or sport utility
vehicle or Honda minivan; (ii) each Receivable was originated in the United
States; (iii) each Receivable provides for level monthly Scheduled Payments that
fully amortize the amount financed over its original term, except that the
payment in the first or last month in the life of the Receivable may be
minimally different from the level payment; (iv) each Receivable was originated
prior to October 1, 1997; (v) each Receivable has an original term of 12 to 60
months and, as of the Cutoff Date, had a remaining term to maturity of not less
than 3 months and not more than 60 months; (vi) each Receivable provides for the
payment of a finance charge based on an APR ranging from 1.90% to 20.06%; (vii)
each Receivable shall not have a payment that is more than 30 days past due as
of the Cutoff Date; (viii) to the best knowledge of the Seller, no Receivable
shall be due from any Obligor who is presently the subject of a bankruptcy
proceeding or is bankrupt or insolvent; and (ix) no Financed Vehicle has been
repossessed without reinstatement as of the Cutoff Date. This Prospectus
contains a summary of the material terms of the Receivables.
The Receivables represent financing of new Honda and Acura automobiles and
sport utility vehicles and Honda minivans. Based on the Cutoff Date Pool
Balance, 79.56% and 20.44% of the Receivables represented financing of Honda
motor vehicles and Acura motor vehicles, respectively. All of the Financed
Vehicles were manufactured by Honda Motor Co., Ltd. and its affiliates. Based on
the addresses of the originating Dealers, the Receivables were originated in 43
states. Except in the case of any breach of representations and warranties by
the related Dealer, as described under "Property of the Trust", none of the
Receivables provide for recourse to the Dealer who originated the related
Receivable.
12
<PAGE>
The composition, distribution by APR and geographical distribution of the
Receivables are as set forth in the following tables.
COMPOSITION OF THE RECEIVABLES
<TABLE>
<CAPTION>
Cutoff Date Pool Balance.................................... $904,409,897.07
<S> <C>
Number of Receivables....................................... 83,274
Average Cutoff Date Principal Balance....................... $10,860.65
Average Original Amount Financed............................ $15,372.20
Range of Original Amounts Financed........................ $1,303.46 to $88,335.99
Weighted Average APR (1).................................... 7.662%
Range of APRs............................................. 1.90% to 20.06%
Weighted Average Original Maturity (1)...................... 54.57 months
Range of Original Maturities.............................. 12 months to 60 months
Weighted Average Remaining Maturity (1)..................... 43.73 months
Range of Remaining Maturities as of the Cutoff Date....... 3 months to 60 months
</TABLE>
------------------
(1) Weighted by Principal Balance as of the Cutoff Date.
DISTRIBUTION OF THE RECEIVABLES BY APR
<TABLE>
<CAPTION>
NUMBER PERCENTAGE PERCENTAGE
OF OF AGGREGATE CUTOFF DATE OF CUTOFF DATE
RANGE OF APRS RECEIVABLES NUMBER OF RECEIVABLES(1) PRINCIPAL BALANCE POOL BALANCE (1)
- ------------------------------ ------------- ------------------------ ------------------- -------------------
<S> <C> <C> <C> <C>
1.000% to 1.999%............ 264 0.32% $ 835,802 0.09%
2.000% to 2.999%............ 1,283 1.54 17,235,361 1.91
3.000% to 3.999%............ 11,725 14.08 108,521,768 12.00
4.000% to 4.999%............ 7,987 9.59 65,876,852 7.28
5.000% to 5.999%............ 6,364 7.64 100,173,320 11.08
6.000% to 6.999%............ 4,080 4.90 26,772,428 2.96
7.000% to 7.999%............ 11,504 13.81 123,685,481 13.68
8.000% to 8.999%............ 17,436 20.94 203,761,958 22.53
9.000% to 9.999%............ 10,436 12.53 118,578,383 13.11
10.000% to 10.999%............ 5,544 6.66 57,368,529 6.34
11.000% to 11.999%............ 4,899 5.88 62,116,315 6.87
12.000% to 12.999%............ 1,655 1.99 18,473,835 2.04
13.000% to 13.999%............ 48 0.06 503,957 0.06
14.000% to 14.999%............ 19 0.02 193,198 0.02
15.000% to 15.999%............ 16 0.02 179,598 0.02
16.000% to 16.999%............ 7 0.01 75,832 0.01
17.000% to 17.999%............ 3 0.00 26,369 0.00
18.000% to 18.999%............ 2 0.00 17,355 0.00
19.000% to 20.999%............ 2 0.00 13,556 0.00
------ -------- ------------------- --------
Total....................... 83,274 100.00%(1) 904,409,897 100.00%(1)
------ -------- ------------------- --------
------ -------- ------------------- --------
</TABLE>
- --------------
(1) Percentages may not add up to 100% due to rounding.
13
<PAGE>
DISTRIBUTION OF THE RECEIVABLES BY STATE
<TABLE>
<CAPTION>
PERCENTAGE OF
CUTOFF DATE
CUTOFF DATE POOL
STATE(1) PRINCIPAL BALANCE BALANCE(2)
- ---------------------------------------- ------------------- -------------
<S> <C> <C>
Alabama................................. $ 9,106,543 1.01%
Alaska.................................. 368,451 0.04
Arizona................................. 9,627,965 1.06
Arkansas................................ 5,506,286 0.61
California.............................. 254,281,163 28.12
Colorado................................ 6,799,110 0.75
Delaware................................ 3,783,116 0.42
Florida................................. 30,119,149 3.33
Georgia................................. 43,600,891 4.82
Hawaii.................................. 3,766,899 0.42
Idaho................................... 906,900 0.10
Illinois................................ 72,516,084 8.02
Indiana................................. 9,454,546 1.05
Iowa.................................... 3,573,755 0.40
Kansas.................................. 2,992,632 0.33
Kentucky................................ 3,004,018 0.33
Louisiana............................... 13,516,448 1.49
Maryland................................ 60,730,543 6.71
Michigan................................ 12,066,402 1.33
Minnesota............................... 9,229,462 1.02
Mississippi............................. 6,592,061 0.73
Missouri................................ 8,910,780 0.99
Montana................................. 400,779 0.04
Nebraska................................ 1,625,788 0.18
Nevada.................................. 3,244,542 0.36
New Jersey.............................. 42,078,903 4.65
New Mexico.............................. 2,667,896 0.29
North Carolina.......................... 29,816,645 3.30
North Dakota............................ 392,860 0.04
Ohio.................................... 10,559,823 1.17
Oklahoma................................ 2,847,808 0.31
Oregon.................................. 10,250,412 1.13
Pennsylvania............................ 40,861,299 4.52
South Carolina.......................... 13,095,860 1.45
South Dakota............................ 721,551 0.08
Tennessee............................... 21,085,026 2.33
Texas................................... 82,393,977 9.11
Utah.................................... 1,495,776 0.17
Virginia................................ 46,437,759 5.13
Washington.............................. 16,431,157 1.82
West Virginia........................... 782,166 0.09
Wisconsin............................... 6,563,507 0.73
Wyoming................................. 203,159 0.02
------------------- ------
------------------- ------
Total................................. $ 904,409,897 100.00%
------------------- ------
------------------- ------
</TABLE>
- ----------------
(1) Based on the addresses of the originating Dealers.
(2) Percentages may not add up to 100% due to rounding.
14
<PAGE>
MATURITY AND PREPAYMENT CONSIDERATIONS
All of the Receivables are prepayable at any time without any penalty.
However, partial prepayments on Precomputed Receivables made by Obligors will
not be distributed on the Distribution Date following the Collection Period in
which they were received but will be retained and applied towards payments due
in one or more future Collection Periods. See "The Certificates -- Collections".
If prepayments in full are received on Precomputed Receivables or if full or
partial prepayments are received on Simple Interest Receivables, the actual
weighted average life of the Receivables can be shorter than the scheduled
weighted average life, which is calculated based on the assumption that payments
will be made as scheduled and that no such prepayments in full will be made. For
this purpose the term "prepayments in full" includes, among other items,
voluntary prepayments in full by Obligors, liquidations due to default, proceeds
from physical damage, credit life and credit disability insurance policies and
repurchases by the Seller or the Servicer, as the case may be, of certain
Receivables as described herein. Weighted average life means the average amount
of time during which each dollar of principal of a Receivable is outstanding.
The rate of prepayments on the Receivables may be influenced by a variety of
economic, social and other factors, including the fact that an Obligor may not
sell or transfer a Financed Vehicle without the consent of the Servicer. Any
reinvestment risk resulting from the rate of prepayments of the Receivables and
the distribution of such prepayments to Class A Certificateholders will be borne
entirely by the Class A Certificateholders. In addition, early retirement of the
Certificates may be effected by the exercise of the option of the Seller or the
Servicer, or any successor to the Servicer, to purchase all of the Receivables
remaining in the Trust when the Pool Balance is 10% or less of the Cutoff Date
Pool Balance. See "The Certificates -- Termination".
No prediction can be made as to the rate of prepayments on the Receivables
in either stable or changing interest rate environments. AHFC maintains limited
records of the historical prepayment experience of the retail installment sale
contracts included in its portfolio and its experience with respect to the
retail installment sale contracts included in its portfolio is insufficient to
draw any specific conclusions with respect to the expected rates of prepayments
in full on the Receivables. AHFC is not aware of any publicly available
statistics for the entire auto finance industry on an aggregate basis that set
forth principal prepayment experience for retail installment sale contracts
similar to the Receivables over an extended period of time.
YIELD CONSIDERATIONS
Interest on the Receivables will be passed through to Class A
Certificateholders on each Distribution Date to the extent of one-twelfth of the
Pass-Through Rate multiplied by the Class A Certificate Balance as of the
immediately preceding Distribution Date (after giving effect to distributions of
principal made on such immediately preceding Distribution Date) or, in the case
of the first Distribution Date, the Original Class A Certificate Balance.
The Receivables have different APRs, and the APR of some of the Receivables
may be less than the sum of (i) the Pass-Through Rate and (ii) the Servicing Fee
Rate. Because the Yield Supplement Account will be created with a deposit of an
amount equal to the aggregate amount as of the Cutoff Date by which interest on
the Principal Balance of each Discount Receivable for the remaining term of such
Receivable (assuming no prepayments or delinquencies) at a rate equal to the
Required Rate exceeds interest on such Principal Balance at the APR of such
Receivable (which aggregate amount may be discounted at a rate to be specified
in the Agreement), disproportionate rates of prepayments between Receivables
with higher and lower APRs should not affect the yield to Class A
Certificateholders on the outstanding principal balance of the Class A
Certificates.
CLASS A POOL FACTOR AND TRADING INFORMATION
The "Class A Pool Factor" will be a seven-digit decimal which the Servicer
will compute each month indicating the Class A Certificate Balance as of the
close of business on the Distribution Date in such month as a fraction of the
Original Class A Certificate Balance. The Class A Pool Factor will initially be
1.0000000; thereafter, it will decline to reflect reductions in the Class A
Certificate Balance. The portion of the Class A
15
<PAGE>
Certificate Balance for a given month allocable to a Class A Certificateholder
can be determined by multiplying the original denomination of the holder's Class
A Certificate by the Class A Pool Factor for that month. The Class A Pool Factor
will be provided to Class A Certificateholders of record on each Distribution
Date.
Pursuant to the Agreement, the Class A Certificateholders will receive
monthly reports concerning the payments received on the Receivables, the Pool
Balance, the Class A Pool Factor and various other items of information. Class A
Certificateholders during each calendar year will be furnished information for
tax reporting purposes not later than the latest date permitted by law. See "The
Certificates -- Statements to Class A Certificateholders".
USE OF PROCEEDS
The net proceeds from the sale of the Class A Certificates (I.E., the
proceeds of the public offering of the Class A Certificates minus expenses
relating thereto) will be applied by the Seller to the purchase of the
Receivables from AHFC pursuant to the Receivables Purchase Agreement.
THE SELLER
The Seller was incorporated in the State of California in August 1992 as a
wholly owned, limited purpose finance subsidiary of AHFC. The principal
executive offices of the Seller are located at 700 Van Ness Avenue, Torrance,
California 90501 and its telephone number is (310) 781-4376.
The Seller was organized primarily for the purpose of acquiring installment
sale contracts similar to the Receivables and associated rights from AHFC,
causing the issuance of certificates similar to the Certificates and engaging in
related transactions. The Seller's articles of incorporation limit the
activities of the Seller to the foregoing purposes and to any activities
incidental to and necessary for such purposes.
AMERICAN HONDA FINANCE CORPORATION
GENERAL
AHFC was incorporated in the State of California in February 1980. AHFC
provides wholesale and retail financing to authorized dealers of Honda and Acura
motor vehicles, Honda motorcycles and power products and Honda and Acura parts
and accessories, and their customers in the United States and Canada. AHFC also
offers retail leasing for Honda and Acura motor vehicles throughout the United
States and Canada, and administers the sale of vehicle service contracts for
AHMC throughout the United States.
AHFC is a wholly owned subsidiary of AHMC, a California corporation that is
the sole authorized distributor of Honda and Acura motor vehicles, Honda
motorcycles and power products and Honda and Acura parts and accessories in the
United States. AHMC is a wholly owned subsidiary of Honda Motor Co., Ltd., a
Japanese corporation which is a worldwide manufacturer of motorcycles, motor
vehicles and a variety of power products.
The principal executive offices of AHFC are located at 700 Van Ness Avenue,
Torrance, California 90501. Its telephone number is (310) 781-4100.
UNDERWRITING OF MOTOR VEHICLE LOANS
AHFC purchases retail installment sale contracts and conditional sales
agreements (collectively, "installment sale contracts") secured by new and used
Honda and Acura automobiles and sport utility vehicles and Honda minivans from
approximately 1,257 Dealers located throughout the United States. In keeping
with the practice of AHFC, the Receivables were originated by Dealers in
accordance with AHFC's requirements under existing agreements with such Dealers.
The Receivables were purchased in accordance with AHFC's underwriting standards,
which emphasize the prospective purchaser's ability to pay and creditworthiness,
as well as the asset value of the automobile to be financed.
16
<PAGE>
Applications submitted to AHFC must list sufficient information to process
the application, including the applicant's income, residential status, monthly
mortgage or rent payment and other personal information. Upon receipt of an
application, AHFC obtains a credit report from an independent credit bureau. The
credit report is reviewed by AHFC to determine the applicant's current credit
status and past credit performance. Factors considered negative generally
include past due credit, repossessions, loans charged off by other lenders and
previous bankruptcy. Positive factors such as amount of credit and favorable
payment history are also considered.
The credit decision is made utilizing a credit scoring system and other
considerations. The credit scoring system includes an assessment of residence
and employment stability and credit bureau information. Other considerations
include income requirements and the ratio of income to total debt. An assessment
is made of the relative degree of credit risk indicated by these criteria
pursuant to AHFC's automated processing system. The system will recommend
approval of applicants scoring above a predetermined threshold and will
recommend rejection for scores below that level, although the underwriting staff
for the appropriate region has the ultimate approval or rejection authority.
AHFC's retail installment sale contract requires that obligors maintain
specific levels and types of insurance coverage, including physical damage
insurance, to protect the related financed vehicle against loss. At the time of
purchase, an obligor signs a statement which indicates that he either has or
will have the necessary insurance, and which shows the name and address of the
insurance company along with a description of the type of coverage. Obligors are
generally required to provide AHFC with evidence of compliance with the
foregoing insurance requirements; however, AHFC performs no ongoing verification
of such insurance coverage.
The amount of a retail installment sale contract secured by a new or used
Honda or Acura motor vehicle generally will not exceed 120% of the dealer
invoice cost of the related vehicle plus optional features at the dealer cost,
sales tax, title and registration fees, insurance premiums for credit life and
credit disability insurance and certain fees for extended service contracts.
SERVICING OF MOTOR VEHICLE LOANS
AHFC considers a retail installment sale contract to be past due or
delinquent for servicing and enforcement of collection purposes when the obligor
fails to make a scheduled payment by the related due date; any portion of a
scheduled payment not paid on the related due date automatically becomes due
with the next scheduled payment. A computer generated delinquency notice is
mailed to the obligor on each of the eleventh and twenty-first day of
delinquency. If the delinquent contract cannot be brought current or completely
collected within approximately 60 days, AHFC generally attempts to repossess the
related vehicle. Repossessed vehicles are held in inventory to comply with
statutory requirements and then are sold (generally within 60 days after
repossession). Any deficiencies remaining after repossession and sale of the
vehicle or after the full charge-off of the related contract are pursued by AHFC
to the extent practicable and legally permitted. See "Certain Legal Aspects of
the Receivables -- Deficiency Judgments and Excess Proceeds". Obligors are
contacted and, when warranted by individual circumstances, repayment schedules
are established and monitored until the deficiencies are either paid in full or
become impractical to pursue.
DELINQUENCIES, REPOSSESSIONS AND NET LOSSES
Set forth below is certain information concerning AHFC's experience with
respect to its portfolio of new Honda and Acura motor vehicle retail installment
sale contracts. Credit losses are an expected cost in the business of extending
credit and are considered in AHFC's rate-setting process. AHFC's strategy is to
minimize credit losses while providing financing support for the sale of Honda
and Acura motor vehicles. Losses and delinquencies are affected by, among other
things, general and regional economic conditions and the supply of and demand
for motor vehicles.
17
<PAGE>
AHFC establishes an allowance for expected credit losses and deducts amounts
reflecting charged-off installment sale contracts against such allowance. For
retail financing, the account balance related to an installment sale contract is
charged against the allowance for credit losses when the contract has been
delinquent for 120 days unless AHFC has repossessed the collateral associated
with the contract. In such cases, the account balances are not charged against
the allowance for credit losses until either AHFC has sold the repossessed
collateral or has held it in repossession inventory for more than 90 days. Any
recoveries from charge offs related to a retail installment sale contract are
credited to the allowance.
The data presented in the following tables are for illustrative purposes
only. There is no assurance that AHFC's delinquency, credit loss and
repossession experience with respect to retail installment sale contracts in the
future, or the experience of the Trust with respect to the Receivables, will be
similar to that set forth below. See "Risk Factors -- Risk Associated with
Increases in Delinquencies, Repossessions and Net Losses".
HISTORICAL DELINQUENCY EXPERIENCE (1)
<TABLE>
<CAPTION>
AT AT MARCH 31,
AUGUST 31, ------------------------------------------
1997 1997 1996 1995 1994
-------------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Principal Balance Outstanding (2)................ $2,315,379 $2,219,282 $1,962,622 $1,280,792 $ 994,020
Delinquencies (3)
30-59 Days..................................... $ 23,300 $ 27,847 $ 15,671 $ 11,136 $ 6,885
60-89 Days..................................... 4,116 4,564 2,381 1,379 748
90 or More Days................................ 2,171 1,870 1,063 587 301
Repossessions (4)................................ 5,348 8,377 4,608 3,063 2,213
Total Delinquencies and Repossessions............ 34,935 42,658 23,723 16,165 10,147
Total Delinquencies and Repossessions as a
Percentage of Principal Balance Outstanding.... 1.51% 1.92% 1.21% 1.26% 1.02%
</TABLE>
- ------------------
(1) Includes contracts that have been sold but are still being serviced by AHFC.
(2) Remaining principal balance and unearned finance charges for all outstanding
contracts.
(3) The period of delinquency is based on the number of days any portion of a
scheduled payment is contractually past due.
(4) Amounts shown represent the outstanding principal balance for contracts for
which the related vehicle had been repossessed and not yet liquidated.
18
<PAGE>
NET LOSS AND REPOSSESSION EXPERIENCE (1)
<TABLE>
<CAPTION>
FIVE MONTHS AT OR FOR THE YEAR ENDED MARCH 31,
ENDED AUGUST ------------------------------------------
31, 1997 1997 1996 1995 1994
-------------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Principal Balance Outstanding (2)................ $2,315,379 $2,219,282 $1,962,622 $1,280,792 $ 994,020
Average Principal Amount Outstanding (3)......... $2,261,655 $2,295,436 $1,752,949 $1,011,659 $ 987,128
Number of Contracts Outstanding.................. 219,698 212,694 174,162 116,438 94,873
Average Number of Contracts Outstanding (3)...... 215,735 209,202 155,230 97,270 92,894
Number of Repossessions.......................... 1,050 2,440 1,810 1,434 1,382
Number of Repossessions as a Percentage of the
Average Number of Contracts Outstanding)....... 1.17%(6) 1.17% 1.17% 1.47% 1.49%
Gross Charge-Offs (4)............................ $ 7,552 $ 17,812 $ 11,075 $ 6,970 $ 5,526
Recoveries (5)................................... $ 2,387 $ 4,730 $ 3,427 $ 2,811 $ 1,892
Net Losses....................................... $ 5,165 $ 13,082 $ 7,648 $ 4,159 $ 3,634
Net Losses as a Percentage of Average Principal
Amount Outstanding............................. 0.55%(6) 0.57% 0.44% 0.41% 0.37%
</TABLE>
- ----------------
(1) Includes contracts that have been sold but are still being serviced by AHFC.
(2) Remaining principal balance and unearned finance charges for all outstanding
contracts.
(3) Average of the loan balance or number of contracts, as the case may be,
outstanding at the end of each quarter during the fiscal year.
(4) Amount charged off is the remaining principal balance, excluding any
expenses associated with collection, repossession or disposition of the
related vehicle, plus earned but not yet received finance charges, net of
any proceeds collected prior to charge-off.
(5) Proceeds received on previously charged-off contracts.
(6) Annualized.
19
<PAGE>
THE CERTIFICATES
The Class A Certificates offered hereby will be issued pursuant to the
Agreement, a form of which, together with a form of the Receivables Purchase
Agreement, has been filed as an exhibit to the Registration Statement of which
this Prospectus is a part. Copies of the Agreement (without exhibits) may be
obtained by Class A Certificateholders upon request in writing to the Trustee at
its Corporate Trust Office. Citations to the relevant sections of the Agreement
appear below in parentheses. The following summary describes the material terms
of the Agreement. The summary does not purport to be complete and is subject to,
and qualified in its entirety by, reference to all of the provisions of the
Agreement. Where particular provisions or terms used in the Agreement are
referred to, the actual provisions (including definitions of terms and section
references) are incorporated by reference as part of such summaries.
GENERAL
The Certificates will evidence fractional undivided interests in the Trust
created pursuant to the Agreement. The Class A Certificates will evidence in the
aggregate an undivided ownership interest of 94.0% of the Trust and the Class B
Certificates will evidence in the aggregate an undivided ownership interest of
6.0% of the Trust. The Class B Certificates, which are not being offered hereby,
will initially be held by the Seller. (Sections 1.01 and 15.03).
The Class A Certificates will be offered for purchase in minimum
denominations of $1,000 and integral multiples thereof in book-entry form. The
Class A Certificates will initially be represented by certificates registered in
the name of Cede, the nominee of DTC. No Certificate Owner will be entitled to
receive a certificate representing such owner's interest, except as set forth
below. Unless and until Class A Certificates are issued in fully registered
certificated form ("Definitive Certificates") under the limited circumstances
described below, all references herein to distributions, notices, reports and
statements to Class A Certificateholders will refer to the same actions made
with respect to DTC or Cede, as the case may be, for the benefit of Certificate
Owners in accordance with DTC procedures. (Sections 15.09 and 15.10). See
"Book-Entry Registration" and "Definitive Certificates".
BOOK-ENTRY REGISTRATION
DTC, New York, New York, will act as securities depository for the Class A
Certificates. The Class A Certificates will be issued as fully registered
securities registered in the name of Cede, the nominee of DTC. One fully
registered Class A Certificate will be issued with respect to each $200 million
in principal amount of Class A Certificates and an additional Class A
Certificate will be issued with respect to the remaining principal amount of
Class A Certificates, other than a minimal amount. As such, it is anticipated
that the only "Class A Certificateholder" will be Cede, the nominee of DTC.
Certificate Owners will not be recognized by the Trustee as "Class A
Certificateholders", as such term will be used in the Agreement, and Certificate
Owners will only be permitted to exercise the rights of Class A
Certificateholders indirectly through DTC and its Participants, as further
described below.
DTC is a limited-purpose trust company organized under the laws of the State
of New York, a "banking organization" within the meaning of the New York Banking
Law, a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the Uniform Commercial Code (the "UCC") in effect in the State of New
York and a "clearing agency" registered pursuant to the provisions of Section
17A of the Exchange Act. DTC was created to hold securities for its
participating members ("Participants") and to facilitate the clearance and
settlement of securities transactions between Participants through electronic
book-entry changes in accounts of its Participants, thereby eliminating the need
for physical movement of certificates. Participants include securities brokers
and dealers (including the Underwriters), banks, trust companies and clearing
corporations. Indirect access to the DTC system also is available to banks,
brokers, dealers and trust companies that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly (the "Indirect
Participants"). The rules applicable to DTC and its Participants are on file
with the Commission.
20
<PAGE>
Certificate Owners that are not Participants or Indirect Participants but
desire to purchase, sell or otherwise transfer ownership of, or an interest in,
Class A Certificates may do so only through Participants and Indirect
Participants. Participants will receive a credit for the Class A Certificates on
DTC's records. The ownership interest of each Certificate Owner will in turn be
recorded on the respective records of Participants and Indirect Participants.
Certificate Owners will not receive written confirmation from DTC of their
purchase of Class A Certificates, but Certificate Owners are expected to receive
written confirmations providing details of the transaction, as well as periodic
statements of their holdings, from the Participant or Indirect Participant
through which the Certificate Owner entered into the transaction. Transfers of
ownership interests in the Class A Certificates will be accomplished by entries
made on the books of Participants acting on behalf of Certificate Owners.
To facilitate subsequent transfers, all Class A Certificates deposited by
Participants with DTC will be registered in the name of Cede, the nominee of
DTC. The deposit of Class A Certificates with DTC and their registration in the
name of Cede will effect no change in beneficial ownership. DTC will have no
knowledge of the actual Certificate Owners and its records will reflect only the
identity of the Participants to whose accounts such Class A Certificates are
credited, which may or may not be the Certificate Owners. Participants and
Indirect Participants will remain responsible for keeping account of their
holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Participants, by
Participants to Indirect Participants and by Participants and Indirect
Participants to Certificate Owners will be governed by arrangements among them,
subject to any statutory or regulatory requirements as may be in effect from
time to time.
DTC's practice is to credit Participants' accounts on each Distribution Date
in accordance with their respective holdings of Class A Certificates shown on
DTC's records unless DTC has reason to believe that it will not receive payment
on such Distribution Date. Payments by Participants and Indirect Participants to
Certificate Owners will be governed by standing instructions and customary
practices, as is the case with securities held for the accounts of customers in
bearer form or registered in "street name", and will be the responsibility of
such Participants and not of DTC, the Trustee or the Seller, subject to any
statutory or regulatory requirements as may be in effect from time to time.
Payment of principal of and interest on the Class A Certificates to DTC will be
the responsibility of the Trustee, disbursement of such payments to Participants
will be the responsibility of DTC and disbursement of such payments to
Certificate Owners will be the responsibility of Participants and Indirect
Participants. As a result, under the book-entry format, Certificate Owners may
experience some delay in their receipt of payments. DTC will forward such
payments to its Participants which thereafter will forward them to Indirect
Participants or Certificate Owners.
Because DTC can only act on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of a Certificate
Owner to pledge Class A Certificates to persons or entities that do not
participate in the DTC system, or otherwise take actions with respect to such
Class A Certificates, may be limited due to the lack of a physical certificate
for such Class A Certificates.
Neither DTC nor Cede will consent or vote with respect to the Class A
Certificates. Under its usual procedures, DTC will mail an omnibus proxy to the
Trustee as soon as possible after each applicable record date for such a consent
or vote. The omnibus proxy will assign Cede's consenting or voting rights to
those Participants to whose accounts the Class A Certificates will be credited
on that record date (identified in a listing attached to the omnibus proxy).
None of the Servicer, the Seller or the Trustee will have any liability for
any aspect of the records relating to or payments made on account of beneficial
ownership interests of the Class A Certificates held by Cede, as nominee for
DTC, or for maintaining, supervising or reviewing any records relating to such
beneficial ownership interests.
21
<PAGE>
DEFINITIVE CERTIFICATES
Definitive Certificates will be issued in fully registered, certificated
form to Certificate Owners rather than to DTC, only if (i) DTC is no longer
willing or able to discharge its responsibilities as depository with respect to
the Class A Certificates, and neither the Trustee nor the Seller is able to
locate a qualified successor, (ii) the Seller, at its option, elects to
terminate the book-entry system through DTC or (iii) after an Event of Default,
Certificate Owners representing in the aggregate not less than 51% of the Voting
Interests of the Class A Certificates advise the Trustee through DTC and its
Participants in writing that the continuation of a book-entry system through DTC
or its successor is no longer in the best interest of Certificate Owners.
(Section 15.11).
Upon the occurrence of any of the events described in the immediately
preceding paragraph, the Trustee will be required to notify all Certificate
Owners, through Participants, of the availability through DTC of Definitive
Certificates. Upon surrender by DTC of the certificates representing all Class A
Certificates and the receipt of instructions for re-registration, the Trustee
will issue Definitive Certificates to Certificate Owners, who thereupon will
become Class A Certificateholders for all purposes of the Agreement.
Distributions on the Class A Certificates will thereafter be made by the
Trustee directly to holders of Definitive Certificates in accordance with the
procedures set forth herein and to be set forth in the Agreement. Interest and
principal payments on the Class A Certificates on each Distribution Date will be
made to holders in whose names the Definitive Certificates were registered at
the close of business on the Record Date with respect to such Distribution Date.
Distributions will be made by check mailed to the address of such holders as
they appear on the register for effecting registration, transfers and exchanges
of Certificates (the "Certificate Register"). The final payment on any Class A
Certificates (whether Definitive Certificates or certificates registered in the
name of Cede representing the Class A Certificates), however, will be made only
upon presentation and surrender of such Class A Certificates or certificates at
the office or agency specified in the notice of final distribution to Class A
Certificateholders. The Trustee or a paying agent will provide such notice to
registered Class A Certificateholders not more than 30 days and not less than 15
days prior to the date on which such final distribution is expected to occur.
(Section 20.01).
Definitive Certificates will be transferable and exchangeable at the offices
of the Trustee or the Certificate Registrar to be set forth in the Agreement. No
service charge will be imposed for any registration of transfer or exchange, but
the Trustee may require payment of a sum sufficient to cover any tax or other
governmental charge imposed in connection therewith. (Section 15.03).
SALE AND ASSIGNMENT OF THE RECEIVABLES
On or prior to the Closing Date, pursuant to the Receivables Purchase
Agreement, AHFC will sell and assign to the Seller, without recourse, its entire
interest in the Receivables, including the security interests in the Financed
Vehicles. On the Closing Date, the Seller will sell and assign to the Trustee,
without recourse, all of its right, title and interest in and to the
Receivables, including its interest in AHFC's security interests in the Financed
Vehicles. (Section 12.01). Each Receivable will be identified in a schedule
referred to in the Receivables Purchase Agreement and the Agreement and on file
with the Trustee (the "Schedule of Receivables"). The Trustee will, concurrently
with such sale and assignment, execute, authenticate and deliver the
Certificates to or upon the order of the Seller in exchange for the Receivables.
(Section 15.02). Thereafter, the Seller will sell the Class A Certificates to
the Underwriters.
As more fully described under "The Receivables -- Selection Criteria", AHFC,
pursuant to the Receivables Purchase Agreement, and the Seller, pursuant to the
Agreement, will make certain representations and warranties with respect to the
Receivables and the Financed Vehicles. In the Receivables Purchase Agreement,
AHFC will additionally represent and warrant to the Seller, and in the
Agreement, the Seller will additionally represent and warrant to the Trustee,
among other things, that (i) the information set forth in the Schedule of
Receivables is true and correct in all material respects; (ii) at the time of
origination of
22
<PAGE>
each Receivable, the related Obligor was required to maintain physical damage
insurance in accordance with AHFC's normal requirements; (iii) on the Cutoff
Date, to the best of its knowledge, the Receivables are free and clear of all
prior security interests, liens, charges and encumbrances and no offsets,
defenses or counterclaims have been asserted or threatened; (iv) on the Cutoff
Date, each of the Receivables is secured by a first priority perfected security
interest in the related Financed Vehicle in favor of AHFC; and (v) each
Receivable at the time it was originated complied, and on the Cutoff Date
complies, in all material respects with applicable state and federal laws,
including, without limitation, consumer credit, truth-in-lending, equal credit
opportunity and disclosure laws. (Section 12.04).
As of the last day of the second Collection Period (or, if the Seller so
elects, the last day of the first Collection Period) following the Collection
Period in which the Seller, the Servicer or the Trustee discovers a breach of
any representation or warranty of the Seller that materially and adversely
affects the interests of the Certificateholders in a Receivable, the Seller,
unless the breach is cured, will repurchase such Receivable (a "Warranty
Receivable") from the Trustee and, pursuant to the Receivables Purchase
Agreement, AHFC will purchase such Receivable from the Seller, at a price equal
to the Warranty Purchase Payment for such Receivable. The "Warranty Purchase
Payment" (1) for a Precomputed Receivable will be equal to (a) the sum of (i)
all remaining Scheduled Payments, (ii) all past due Scheduled Payments for which
an Advance has not been made, (iii) all outstanding Advances made by the
Servicer in respect of such Precomputed Receivable and (iv) an amount equal to
any reimbursements of outstanding Advances made to the Servicer with respect to
such Precomputed Receivable from collections made on or in respect of other
Receivables, minus (b) the sum (i) of all Payments Ahead in respect of such
Precomputed Receivable held by the Servicer or on deposit in the Payahead
Account, (ii) the rebate, calculated on an actuarial basis, that would be
payable to the Obligor on such Precomputed Receivable were the Obligor to prepay
such Precomputed Receivable in full on such day and (iii) any proceeds of the
liquidation of such Precomputed Receivable previously received (to the extent
applied to reduce the Principal Balance of such Precomputed Receivable) and (2)
for a Simple Interest Receivable, will be equal to its unpaid principal balance,
plus interest thereon at a rate equal to the Required Rate to the last day of
the Collection Period relating to such repurchase. This repurchase obligation
will constitute the sole remedy available to the Certificateholders or the
Trustee for any such uncured breach by the Seller. The obligation of the Seller
to repurchase a Receivable will not be conditioned on performance by AHFC of its
obligation to purchase such Receivable from the Seller pursuant to the
Receivables Purchase Agreement. (Sections 12.04 and 12.05).
To assure uniform quality in servicing both the Receivables and the
Servicer's own portfolio of retail installment sale contracts, as well as to
reduce administrative costs, pursuant to the Agreement, the Trustee will appoint
the Servicer as custodian of the Receivables and all documents related thereto.
(Section 12.02). The Receivables will not be physically segregated from other
retail installment sale contracts of the Servicer, or those which the Servicer
services for others, to reflect the transfer to the Trust. However, UCC
financing statements reflecting the sale and assignment of the Receivables by
AHFC to the Seller and by the Seller to the Trustee will be filed, and the
respective accounting records and computer files of AHFC and the Seller will
reflect such sale and assignment. Because the Receivables will remain in the
possession of the Servicer and will not be stamped or otherwise marked to
reflect the assignment thereof to the Trustee, if a subsequent purchaser were
able to take physical possession of the Receivables without knowledge of the
assignment, the Trustee's interest in the Receivables could be defeated. See
"Certain Legal Aspects of the Receivables -- General" and "-- Security Interests
in the Financed Vehicles". In addition, under certain circumstances the
Trustee's security interest in collections that have been received by the
Servicer but not yet remitted to the Certificate Account could be defeated. See
"Collections".
SERVICING PROCEDURES
The Servicer will make reasonable efforts to collect all payments due with
respect to the Receivables and, in a manner consistent with the Agreement, will
continue such collection procedures as it follows with respect to comparable
retail installment sale contracts it services for itself and others. (Section
13.01). The Servicer will be authorized to grant certain rebates, adjustments or
extensions with respect to a Receivable.
23
<PAGE>
See "American Honda Finance Corporation -- Servicing of Motor Vehicle Loans".
However, if any such modification of a Receivable alters the APR or the amount
financed or extends the maturity of a Receivable beyond six months after the
scheduled maturity of the Receivable with the latest scheduled maturity as of
the Cutoff Date, the Servicer will be obligated to purchase such Receivable as
described in the immediately succeeding paragraph. (Sections 13.07 and 13.08).
In the Agreement, the Servicer will covenant that except as otherwise
contemplated therein, (i) it will not release any Financed Vehicle from the
security interest created by the related Receivable, (ii) it will do nothing to
impair the rights of the Certificateholders in the Receivables and (iii) except
as otherwise provided in the Agreement, it will not amend any Receivable such
that the total number of Scheduled Payments is extended beyond six months after
the scheduled maturity of the Receivable with the latest scheduled maturity as
of the Cutoff Date, or either the amount financed or the APR is altered. As of
the last day of the second Collection Period (or, if the Servicer so elects, the
last day of the first Collection Period) following the Collection Period in
which the Seller, the Servicer or the Trustee discovers a breach of any such
covenant that materially and adversely affects the interests of the
Certificateholders in a Receivable, the Servicer, unless the breach is cured,
will purchase the Receivable (an "Administrative Receivable") from the Trustee
at a price equal to the Administrative Purchase Payment for such Receivable. The
"Administrative Purchase Payment" (1) for a Precomputed Receivable will be equal
to (a) the sum of (i) all remaining Scheduled Payments, (ii) an amount equal to
any reimbursements of outstanding Advances made by the Servicer with respect to
such Precomputed Receivable from the proceeds of other Receivables and (iii) all
past due Scheduled Payments for which an Advance has not been made, minus (b)
the sum of (i) all Payments Ahead in respect of such Precomputed Receivable held
by the Servicer or on deposit in the Payahead Account and (ii) the rebate,
calculated on an actuarial basis, that would be payable to the Obligor on such
Precomputed Receivable were the Obligor to prepay such Precomputed Receivable in
full on such day of purchase and (2) for a Simple Interest Receivable, will be
equal to its unpaid principal balance, plus interest thereon at a rate equal to
the Required Rate to the last day of the Collection Period relating to such
repurchase. Upon the repurchase of any Administrative Receivable, the Servicer
shall for all purposes of the Agreement be deemed to have released all claims
for the reimbursement of outstanding Advances made in respect of such
Receivable. This repurchase obligation will constitute the sole remedy available
to the Certificateholders or the Trustee for any such uncured breach by the
Servicer. (Sections 13.07 and 13.08).
If the Servicer determines that eventual payment in full of a Receivable is
unlikely, the Servicer will follow its normal practices and procedures to
recover all amounts due upon such Receivable, including the repossession and
disposition of the related Financed Vehicle at a public or private sale, or the
taking of any other action permitted by applicable law. (Section 13.04).
INSURANCE ON FINANCED VEHICLES
Each Receivable requires the related Obligor to maintain insurance covering
physical damage to the Financed Vehicle in an amount not less than the unpaid
principal balance of such Receivable pursuant to which AHFC is named as a loss
payee. Since the Obligors may select their own insurers to provide the requisite
coverage, the specific terms and conditions of their policies may vary. AHFC
does not monitor the maintenance of such insurance. A failure by an Obligor to
maintain such physical damage insurance will constitute a default under the
related Receivable. See "American Honda Finance Corporation -- Underwriting of
Motor Vehicle Loans". In the event that the failure of an Obligor to maintain
any such required insurance results in a shortfall in amounts to be distributed
to Class A Certificateholders and such shortfall is not covered by amounts
otherwise payable to the Class B Certificateholders pursuant to the
subordination of the Class B Certificates or from amounts on deposit in the
Reserve Fund, Class A Certificateholders could suffer a loss on their
investment.
24
<PAGE>
COLLECTIONS
The Servicer will establish two accounts in the name of the Trustee on
behalf of the Certificateholders, the first into which payments made on or in
respect of the Receivables will be deposited and from which all distributions
with respect to the Receivables and the Certificates will be made (the
"Certificate Account") and the second into which, to the extent required by the
Agreement, payments made by Obligors in respect of Precomputed Receivables in
excess of the related Scheduled Payments (each, a "Payment Ahead"), to the
extent that such payments do not constitute a prepayment in full of the related
Precomputed Receivable, will be deposited until the Collection Period in which
such payments become due (the "Payahead Account" and, together with the
Certificate Account, the "Accounts"). The Certificate Account and the Payahead
Account will be maintained with a depository institution or a trust company
(which may include the Trustee) so long as (i) the commercial paper or other
short-term unsecured debt obligations of the Trustee have a rating of Prime-1 by
Moody's and a rating of at least A-1+ by Standard & Poor's (the "Required
Rating") or (ii) such Accounts are maintained in a segregated trust account for
the benefit of the Certificateholders, located in the corporate trust department
of a depository institution or trust company having corporate trust powers
(which may include the Trustee) and a long-term deposit rating from Moody's of
at least Baa3 (or such lower rating as Moody's shall approve in writing).
Initially, the Accounts will be maintained in segregated trust accounts with
Bank of Tokyo - Mitsubishi Trust Company. (Section 14.01).
Funds on deposit in the Certificate Account may, at the direction of the
Servicer, be invested in Permitted Investments that mature on the Business Day
immediately preceding the Distribution Date next succeeding the date of
investment (other than instruments of the entity at which the Accounts are
located, which may mature on such Distribution Date). Funds on deposit in the
Payahead Account may, at the direction of the Servicer, be invested in money
market funds meeting certain criteria established by the Rating Agencies. All
income or other gain from such investments, net of investment expenses and any
loss resulting from such investment, shall be paid to the Servicer as additional
servicing compensation. Investment expenses and net loss resulting from such
investments shall be charged to the related Account and will be borne by the
Certificateholders. (Section 14.01). "Permitted Investments" will be (i)
obligations of, and obligations guaranteed by, the United States or any agency
thereof, backed by full faith and credit of the United States, (ii) securities
issued or guaranteed by the Federal National Mortgage Association or any state
rated in the highest applicable rating category of each Rating Agency (the
"Required Investment Rating"), (iii) securities bearing interest or sold at a
discount of any corporation incorporated in any state or under federal law the
unsecured debt or commercial paper of which has the Required Investment Rating,
(iv) certificates of deposit fully insured by the FDIC or otherwise issued by a
federal or state institution the short term unsecured debt of which has the
Required Investment Rating, (v) certain repurchase obligations with respect to
any security described in clause (i), (ii) or (vi) hereof, (vi) money market
funds meeting certain criteria established by the Rating Agencies or (vii) any
other investment approved by each Rating Agency.
The Servicer will deposit all payments received on or in respect of the
Receivables and all proceeds of Receivables collected into the Certificate
Account not later than two Business Days after receipt. However, the Servicer
may retain such amounts until the Business Day immediately preceding the related
Distribution Date so long as (i) AHFC is the Servicer, (ii) no Event of Default
exists and is continuing and (iii) either (a) the short-term unsecured debt of
AHFC is rated at least Prime-1 by Moody's and A-1+ by Standard & Poor's, or (b)
AHFC obtains a letter of credit, surety bond, insurance policy or otherwise
deposits cash or securities (collectively, the "Servicer Letter of Credit") as
provided in the Agreement under which demands for payment will be made to secure
timely remittance of monthly collections to the Certificate Account. The
Servicer expects to obtain a Servicer Letter of Credit on the Closing Date and,
accordingly, will be permitted to make remittances of collections to the
Certificate Account on a monthly basis. Pending deposit into the Certificate
Account, collections may be invested by the Servicer at its own risk and for its
own benefit and will not be segregated from its own funds. The Seller or the
Servicer, as the case may be, will remit the aggregate Warranty Purchase
Payments and Administrative Purchase Payments of any Receivables to be purchased
from the Trust into the Certificate Account on or before the Business Day
immediately preceding the related Distribution Date. (Sections 14.02 and 14.05).
25
<PAGE>
Collections on or in respect of a Receivable made during a Collection Period
(including Warranty Purchase Payments and Administrative Purchase Payments)
which are not late fees, prepayment charges, extension fees or certain other
similar fees or charges will be applied first to any outstanding Advances made
by the Servicer with respect to such Receivable, and then to the related
Scheduled Payment. Any collections on or in respect of a Receivable remaining
after such applications will be considered an "Excess Payment". Excess Payments
constituting a prepayment in full of Precomputed Receivables and any Excess
Payments relating to Simple Interest Receivables will be applied as a prepayment
of such Receivable (each, a "Prepayment"). All other Excess Payments in respect
of Precomputed Receivables will be held by the Servicer (or if the Servicer has
not satisfied the conditions in clauses (i) through (iii) in the immediately
preceding paragraph, deposited in the Payahead Account) as a Payment Ahead.
(Sections 14.02 and 14.03).
ADVANCES
If the Scheduled Payment due on a Precomputed Receivable is not received in
full by the end of the month in which it is due, whether as the result of any
extension granted to the Obligor or otherwise, the amount of Payments Ahead, if
any, not previously applied with respect to such Precomputed Receivable shall be
applied by the Servicer to the extent of the shortfall and the Payahead Account
shall be reduced accordingly. If any shortfall remains, the Servicer will make a
Precomputed Advance to the Trust in an amount equal to the amount of such
shortfall. In addition, if the Scheduled Payment on a Simple Interest Receivable
is not received in full by the end of the month in which it is due, the Servicer
will be required, subject to the limitations set forth below, to make a Simple
Interest Advance to the Trust in an amount equal to the product of the Principal
Balance of such Simple Interest Receivable as of the first day of the related
Collection Period and one-twelfth of its APR minus the amount of interest
actually received on such Simple Interest Receivable during the related
Collection Period. If such a calculation results in a negative number, an amount
equal to such negative amount shall be paid to the Servicer in reimbursement of
any outstanding Simple Interest Advances. In addition, in the event that a
Simple Interest Receivable becomes a Liquidated Receivable, the amount of
accrued and unpaid interest thereon (but not including interest for the current
Collection Period) shall, up to the amount of all outstanding Simple Interest
Advances in respect thereof, be withdrawn from the Certificate Account and paid
to the Servicer in reimbursement of such outstanding Simple Interest Advances.
No advances of principal will be made with respect to Simple Interest
Receivables.
The obligation of the Servicer to make an Advance (other than a Simple
Interest Advance in respect of an interest shortfall arising from the prepayment
of a Simple Interest Receivable) will be limited to the extent that it
determines, in its sole discretion, that such Advance will be recovered from
subsequent collections on or in respect of such Receivable. In making Advances,
the Servicer will endeavor to maintain monthly payments of interest at the
Pass-Through Rate to Certificateholders rather than to guarantee or insure
against losses. Accordingly, all Advances shall be reimbursable to the Servicer,
without interest, if and when a payment relating to a Receivable with respect to
which an Advance has previously been made is subsequently received. Upon the
determination by the Servicer that reimbursement from the preceding source is
unlikely, it will be entitled to recover unreimbursed Advances from collections
on or in respect of other Receivables. (Section 14.04).
The Servicer will make all Advances by depositing into the Certificate
Account any amount equal to the aggregate of the Precomputed Advances and Simple
Interest Advances due in respect of a Collection Period on the Business Day
immediately preceding the related Distribution Date.
NET DEPOSITS
The Servicer will be permitted to deposit in the Certificate Account only
the net amount distributable to Certificateholders on the related Distribution
Date. The Servicer, however, will account to the Trustee and
26
<PAGE>
to the Certificateholders as if all deposits and distributions were made
individually. (Section 14.08). Similarly, so long as the Seller is the only
holder of the Class B Certificates, it will be entitled to net its payment
obligations to the Trustee against any amounts distributable on the Class B
Certificates on the related Distribution Date.
SERVICING COMPENSATION
On each Distribution Date, the Servicer will receive the Servicing Fee for
the related Collection Period equal to one-twelfth of the Servicing Fee Rate
multiplied by the Pool Balance as of the first day of such Collection Period or,
in the case of the first Collection Period, the Cutoff Date Pool Balance. The
Servicing Fee will be calculated and paid based upon a 360-day year consisting
of twelve 30-day months. The Servicer will be entitled to collect and retain as
additional servicing compensation in respect of each Collection Period any late
fees, prepayment charges and other administrative fees and expenses or similar
charges collected during such Collection Period, plus any interest earned during
such Collection Period from the investment of monies on deposit in the Accounts,
net of investment expenses and any losses from such investments. See
"Collections".
The Servicing Fee will compensate the Servicer for performing the functions
of a third party servicer of the Receivables as an agent for the Trustee,
including collecting and posting payments, responding to inquiries of Obligors,
investigating delinquencies, sending payment statements and reporting tax
information to Obligors, paying costs of collections and policing the
collateral. The Servicing Fee will also compensate the Servicer for
administering the Receivables, including making Advances, accounting for
collections, furnishing monthly and annual statements to the Trustee with
respect to distributions and generating federal income tax information and
certain taxes, accounting fees, outside auditor fees, data processing costs and
other costs incurred in connection with administering the Receivables. (Sections
13.01 and 13.09).
The "Pool Balance" will equal the aggregate Principal Balance of the
Receivables (other than Defaulted Receivables). The "Principal Balance" of a
Receivable as of any date will equal the original principal balance of each
Receivable minus the sum of (i) in the case of a Precomputed Receivable, that
portion of all Scheduled Payments due on or prior to such date allocable to
principal, computed in accordance with the actuarial method, (ii) in the case of
a Simple Interest Receivable, that portion of all Scheduled Payments actually
received on or prior to such date allocable to principal, (iii) any Warranty
Purchase Payment or Administrative Purchase Payment with respect to such
Receivable allocable to principal (to the extent not included in clauses (i) and
(ii) above) and (iv) any Prepayments or other payments applied to reduce the
unpaid principal balance of such Receivable (to the extent not included in
clauses (i), (ii) and (iii) above).
DISTRIBUTIONS ON THE CERTIFICATES
On the tenth calendar day of each month or, if such day is not a Business
Day, the immediately succeeding Business Day (each, a "Determination Date"), the
Servicer will inform the Trustee of, among other things, the amount of funds
collected on or in respect of the Receivables, the Yield Supplement Deposit
Amount, if any, the amount of Advances to be made by the Servicer and the
Servicing Fee and other servicing compensation payable to the Servicer, in each
case with respect to the immediately preceding Collection Period. On or prior to
each Determination Date, the Servicer will also determine the Class A
Distributable Amount, the Class B Distributable Amount and, based on the
available funds and other amounts available for distribution on the related
Distribution Date as described below, the amount to be distributed to the Class
A Certificateholders and the Class B Certificateholders.
On each Distribution Date, the Trustee will cause Payments Ahead previously
deposited in the Payahead Account or held by the Servicer in respect of the
related Collection Period to be transferred to the Certificate Account and the
aggregate Yield Supplement Deposit Amount, if any, to be withdrawn from the
Yield Supplement Account and deposited in the Certificate Account. (Sections
14.01 and 14.06).
27
<PAGE>
The Trustee shall make distributions to the Certificateholders out of the
amounts on deposit in the Certificate Account. The amount to be distributed to
the Certificateholders shall be determined in the manner described below.
DETERMINATION OF AVAILABLE AMOUNTS. The amount of funds available for
distribution on a Distribution Date will generally equal the sum of Available
Interest and Available Principal.
"Available Interest" for a Distribution Date will equal the sum of the
following amounts allocable to interest received or allocated by the Servicer on
or in respect of the Receivables during the related Collection Period (computed,
in the case of Precomputed Receivables, by the actuarial method and, in the case
of Simple Interest Receivables, by the simple interest method): all (i)
collections on or in respect of the Receivables other than Defaulted Receivables
(including Payments Ahead being applied in such Collection Period but excluding
Payments Ahead to be applied in one or more future Collection Periods); (ii)
proceeds of the liquidation of Defaulted Receivables, net of expenses incurred
by the Servicer in accordance with its customary servicing procedures in
connection with such liquidation ("Net Liquidation Proceeds"); (iii) Advances
made by the Servicer; (iv) Warranty Purchase Payments with respect to Warranty
Receivables repurchased by the Seller and Administrative Purchase Payments with
respect to Administrative Receivables purchased by the Servicer, in either case
in respect of such Collection Period; and (v) the aggregate Yield Supplement
Deposit Amount for the related Distribution Date.
"Available Principal" for a Distribution Date will equal the sum of the
amounts described in clauses (i) through (iv) of the immediately preceding
paragraph received or allocated by the Servicer in respect of principal on or in
respect of the Receivables during the related Collection Period (computed, in
the case of Precomputed Receivables, by the actuarial method and, in the case of
Simple Interest Receivables, by the simple interest method).
Available Interest and Available Principal on any Distribution Date will
exclude (i) amounts received on a particular Receivable (other than a Defaulted
Receivable) to the extent that the Servicer has previously made an unreimbursed
Advance in respect of such Receivable and (ii) Net Liquidation Proceeds with
respect to a particular Receivable to the extent of unreimbursed Advances in
respect of such Receivable. A "Defaulted Receivable" will be a Receivable (other
than an Administrative Receivable or a Warranty Receivable) as to which (a) all
or any part of a Scheduled Payment is 120 or more days past due and the Servicer
has not repossessed the related Financed Vehicle or (b) the Servicer has, in
accordance with its customary servicing procedures, determined that eventual
payment in full is unlikely and has either repossessed and liquidated the
related Financed Vehicle or repossessed and held the related Financed Vehicle in
its repossession inventory for 90 days, whichever occurs first.
CALCULATION OF DISTRIBUTABLE AMOUNTS. The "Class A Distributable Amount"
with respect to a Distribution Date will equal the sum of (i) the "Class A
Principal Distributable Amount", consisting of the Class A Percentage of the
following items: (a) in the case of Precomputed Receivables, the principal
portion of all Scheduled Payments due during the related Collection Period,
computed in accordance with the actuarial method, (b) in the case of Simple
Interest Receivables, the principal portion of all Scheduled Payments actually
received during such Collection Period, (c) the principal portion of all
Prepayments received during the related Collection Period (to the extent such
amounts are not included in clauses (a) and (b) above) and (d) the Principal
Balance of each Receivable that the Servicer became obligated to purchase, the
Seller became obligated to repurchase or that became a Defaulted Receivable
during the related Collection Period (to the extent such amounts are not
included in clauses (a), (b) or (c) above) and (ii) the "Class A Interest
Distributable Amount", consisting of one month's interest at the Pass-Through
Rate on the Class A Certificate Balance as of the immediately preceding
Distribution Date (after giving effect to distributions of principal made on
such immediately preceding Distribution Date) or, in the case of the first
Distribution Date, the Original Class A Certificate Balance.
The "Class B Distributable Amount" with respect to a Distribution Date will
be an amount equal to the sum of (i) the "Class B Principal Distributable
Amount", consisting of the Class B Percentage of the
28
<PAGE>
amounts set forth under clauses (i)(a) through (i)(d) in the preceding paragraph
with respect to the Class A Principal Distributable Amount and (ii) the "Class B
Interest Distributable Amount", consisting of one month's interest at the
Pass-Through Rate on the Class B Certificate Balance as of the immediately
preceding Distribution Date (after giving effect to distributions of principal
made on such immediately preceding Distribution Date) or, in the case of the
first Distribution Date, the Original Class B Certificate Balance.
The "Class B Certificate Balance" will initially equal $54,264,897 (the
"Original Class B Certificate Balance") and, on any Distribution Date, will
equal the amount by which the Pool Balance on the last day of the related
Collection Period exceeds the Class A Certificate Balance on such Distribution
Date.
PAYMENT OF DISTRIBUTABLE AMOUNTS. Prior to each Distribution Date, the
Servicer will calculate the amount to be distributed to the Certificateholders.
On each Distribution Date, the Trustee will distribute to Certificateholders of
record the following amounts in the following order of priority, to the extent
of funds available for distribution on such Distribution Date:
(i) to the Class A Certificateholders, an amount equal to the Class A
Interest Distributable Amount and any unpaid Class A Interest Carryover
Shortfall, such amount to be paid from Available Interest (as Available
Interest has been reduced by reimbursing the Servicer for the interest
component of any outstanding Advances and paying the Servicer the Servicing
Fee, including any unpaid Servicing Fees with respect to one or more prior
Collection Periods and any additional servicing compensation as described
under "Servicing Compensation"); and if such Available Interest is
insufficient, the Class A Certificateholders will be entitled to receive
such deficiency first from the Class B Percentage of Available Principal and
second, if such amounts are still insufficient, from monies on deposit in
the Reserve Fund;
(ii) to the Class B Certificateholders, an amount equal to the Class B
Interest Distributable Amount and any unpaid Class B Interest Carryover
Shortfall, such amount to be paid from Available Interest (after giving
effect to the reduction in Available Interest described in clause (i)
above); and if such Available Interest is insufficient, the Class B
Certificateholders will be entitled to receive such deficiency from monies
on deposit in the Reserve Fund;
(iii) to the Class A Certificateholders, an amount equal to the Class A
Principal Distributable Amount and any unpaid Class A Principal Carryover
Shortfall, such amount to be paid from Available Principal (as Available
Principal has been reduced by reimbursing the Servicer for the principal
component of any outstanding Precomputed Advances and any reduction in
Available Principal described in clause (i) above); and if such Available
Principal is insufficient, the Class A Certificateholders will be entitled
to receive such deficiency first from Available Interest (after giving
effect to the reduction in Available Interest described in clauses (i) and
(ii) above) and second, if such amounts are still insufficient, from monies
on deposit in the Reserve Fund; and
(iv) to the Class B Certificateholders, an amount equal to the Class B
Principal Distributable Amount and any unpaid Class B Principal Carryover
Shortfall, such amount to be paid from Available Principal (after giving
effect to the reduction in Available Principal described in clauses (i) and
(iii) above); and if such Available Principal is insufficient, the Class B
Certificateholders will be entitled to receive such deficiency first from
Available Interest (after giving effect to the reduction in Available
Interest described in clauses (i), (ii) and (iii) above) and second, if such
amounts are still insufficient, from monies on deposit in the Reserve Fund.
(Section 14.06).
The "Class A Interest Carryover Shortfall" with respect to any Distribution
Date will mean the excess, if any, of the Class A Interest Distributable Amount
for such Distribution Date plus any outstanding Class A Interest Carryover
Shortfall with respect to the immediately preceding Distribution Date, plus
interest on such outstanding Class A Interest Carryover Shortfall, to the extent
permitted by law, at the Pass-Through Rate from such immediately preceding
Distribution Date to but not including the current Distribution Date, over the
amount of interest actually received by the Class A Certificateholders on such
current Distribution Date. The "Class A Principal Carryover Shortfall" with
respect to any Distribution Date will mean the
29
<PAGE>
excess, if any, of the Class A Principal Distributable Amount plus any
outstanding Class A Principal Carryover Shortfall with respect to one or more
prior Distribution Dates over the amount of principal that the holders of the
Class A Certificates actually received on such current Distribution Date. The
"Class B Interest Carryover Shortfall" and the "Class B Principal Carryover
Shortfall" shall have meanings correlative to the foregoing.
Any excess amounts in the Certificate Account with respect to any
Distribution Date, after giving effect to the distributions described in clauses
(i) through (iv) of the second preceding paragraph ("Excess Amounts"), will be
distributed in the following amounts and in the following order of priority: (i)
to the Reserve Fund until the amount on deposit therein equals the Specified
Reserve Fund Balance and (ii) to the Seller. (Section 14.06).
THE YIELD SUPPLEMENT ACCOUNT
The Yield Supplement Account is designed solely to supplement interest
collections on the Discount Receivables. The Yield Supplement Account will not
be part of or otherwise includible in the Trust and will be a segregated trust
account held by the Trustee for the benefit of the Certificateholders.
On each Distribution Date, the Trustee will transfer to the Certificate
Account from monies on deposit in the Yield Supplement Account an amount equal
to the Yield Supplement Deposit Amount in respect of the Discount Receivables
for such Distribution Date. See "Distributions on the Certificates". All or a
portion of the monies on deposit in the Yield Supplement Account may be invested
in Permitted Investments. All income and gain realized on such investments shall
be deposited in the Yield Supplement Account and shall be distributed as
required to the Certificate Account. Amounts on deposit on any Distribution Date
in the Yield Supplement Account in excess of the Maximum Yield Supplement
Amount, after giving effect to all distributions to be made on such Distribution
Date, will be paid to the Seller and the Certificateholders will have no further
rights in, or claims to, such amounts. The "Maximum Yield Supplement Amount" for
any Distribution Date will equal the aggregate amount, as of the last day of the
related Collection Period, by which interest on the Principal Balance of each
Discount Receivable (other than any such Receivable that is a Defaulted
Receivable) for the remaining term of such Receivable (assuming no prepayments
or delinquencies) at the Required Rate exceeds interest on such Principal
Balance at the APR of each such Receivable; provided, that such amount may be
discounted at a rate to be specified in the Agreement. Monies on deposit in the
Yield Supplement Account may be invested in Permitted Investments. Any monies
remaining on deposit in the Yield Supplement Account upon the termination of the
Trust pursuant to its terms will be paid to the Seller. (Section 14.11).
SUBORDINATION OF THE CLASS B CERTIFICATES; RESERVE FUND
The rights of the Class B Certificateholders to receive distributions with
respect to the Receivables will be subordinated to the rights of the Servicer
(to the extent that the Servicer is paid the Servicing Fee with respect to the
related Collection Period, including any unpaid Servicing Fees with respect to
one or more prior Collection Periods and any additional servicing compensation
as described under "Servicing Compensation", and to the extent the Servicer is
reimbursed for certain unreimbursed Advances) and the Class A Certificateholders
to the extent described above. This subordination is intended to enhance the
likelihood of timely receipt by Class A Certificateholders of the full amount of
interest and principal required to be paid to them, and to afford such
Certificateholders limited protection against losses in respect of the
Receivables.
No distribution will be made to the Class B Certificateholders on any
Distribution Date in respect of (i) interest until the full amount of interest
on the Class A Certificates payable on such Distribution Date has been
distributed to the Class A Certificateholders and (ii) principal until the full
amount of interest on and principal of the Class A Certificates payable on such
Distribution Date has been distributed to the Class A Certificateholders.
Distributions of interest on the Class B Certificates, to the extent of
collections on or in respect of the Receivables allocable to interest and
certain available amounts on deposit in the Reserve Fund, will not be
subordinated to the payment of principal on the Class A Certificates.
30
<PAGE>
In the event of delinquencies or losses on the Receivables, the protection
afforded to the Class A Certificateholders will be effected by the application
of Available Interest and Available Principal on each Distribution Date in the
priorities specified under "Distributions on the Certificates -- Payment of
Distributable Amounts", and by the establishment of the Reserve Fund. The
Reserve Fund will not be a part of or otherwise includible in the Trust and will
be a segregated trust account held by the Trustee for the benefit of the
Certificateholders. The Reserve Fund will be funded by the Seller on the Closing
Date in an amount equal to $6,783,074.23. Thereafter, all Excess Amounts will be
deposited from time to time in the Reserve Fund to the extent necessary to
maintain the amount in the Reserve Fund at the Specified Reserve Fund Balance.
The "Specified Reserve Fund Balance" with respect to any Distribution Date
will be $6,783,074.23, except that, if on any Distribution Date (i) the average
of the Charge-off Rates for the three preceding Collection Periods exceeds 1.50%
or (ii) the average of the Delinquency Percentages for the three preceding
Collection Periods exceeds 1.50%, then the Specified Reserve Fund Balance will
be an amount equal to a specified percentage of the Pool Balance as of the last
day of the immediately preceding Collection Period. Such percentage shall be
determined by deducting from 9.00% the following fraction, expressed as a
percentage: (a) one minus (b) a fraction, the numerator of which is the Class A
Certificate Balance with respect to such Distribution Date and the denominator
of which is such Pool Balance. Notwithstanding the foregoing, in no event will
the Specified Reserve Fund Balance be more than $27,132,296.92 or more than the
then outstanding Class A Certificate Balance or less than $6,783,074.23. As of
any Distribution Date, the amount of funds actually on deposit in the Reserve
Fund may, in certain circumstances, be less than the Specified Reserve Fund
Balance. Notwithstanding the foregoing, on any Distribution Date as to which the
Pool Balance as of the last day of the related Collection Period is
$271,322,969.12 or less, the Specified Reserve Fund Balance will be the greater
of the applicable balance determined as described above or $13,566,148.46.
The "Charge-off Rate" with respect to a Collection Period will equal the
Aggregate Net Losses with respect to the Receivables expressed, on an annualized
basis, as a percentage of the average of (i) the Pool Balance on the last day of
the immediately preceding Collection Period and (ii) the Pool Balance on the
last day of such current Collection Period. "Aggregate Net Losses" with respect
to a Collection Period will equal the Principal Balance of all Receivables newly
designated during such Collection Period as Defaulted Receivables minus Net
Liquidation Proceeds collected during such Collection Period with respect to all
Defaulted Receivables. The "Delinquency Percentage" with respect to a Collection
Period will equal the number of (a) all outstanding Receivables 61 days or more
delinquent (after taking into account permitted extensions) as of the last day
of such Collection Period, determined in accordance with the Servicer's normal
practices, plus (b) the number of Receivables the related Financed Vehicles of
which have been repossessed but have not been liquidated (to the extent the
related Receivable is not otherwise reflected in clause (a) above or is not a
Defaulted Receivable), expressed as a percentage of the aggregate number of
Current Receivables on the last day of such Collection Period. A "Current
Receivable" will be a Receivable that is not a Defaulted Receivable or a
Liquidated Receivable. A "Liquidated Receivable" will be a Receivable that has
been the subject of a Prepayment in full or otherwise has been paid in full or,
in the case of a Defaulted Receivable, a Receivable as to which the Servicer has
determined that the final amounts in respect thereof have been paid.
The Servicer may, from time to time after the date of this Prospectus,
request each Rating Agency to approve a formula for determining the Specified
Reserve Fund Balance that is different from the one described above and would
result in a decrease in the amount of the Specified Reserve Fund Balance or
change the manner by which the Reserve Fund is funded. If each Rating Agency
delivers a letter to the Trustee to the effect that the use of any such new
formulation will not result in the qualification, reduction or withdrawal of its
then-current rating of the Class A Certificates, then the Specified Reserve Fund
Balance will be determined in accordance with such new formula. The Agreement
will accordingly be amended to reflect such new calculation without the consent
of any Certificateholder. (Section 21.01).
31
<PAGE>
On each Distribution Date, funds will be withdrawn from the Reserve Fund as
described above for distribution first to Class A Certificateholders to the
extent of shortfalls in the amounts available to make required distributions of
interest on the Class A Certificates, second to Class B Certificateholders to
the extent of shortfalls in the amounts available to make required distributions
of interest on the Class B Certificates, third to Class A Certificateholders to
the extent of shortfalls in the amounts available to make required distributions
of principal on the Class A Certificates and fourth to Class B
Certificateholders to the extent of shortfalls in the amounts available to make
required distributions of principal on the Class B Certificates.
On each Distribution Date, the Trustee will deposit all Excess Amounts into
the Reserve Fund until the amount on deposit therein equals the Specified
Reserve Fund Balance. If the amount on deposit in the Reserve Fund on such
Distribution Date (after giving effect to all deposits thereto or withdrawals
therefrom on such Distribution Date) is greater than the Specified Reserve Fund
Balance, the Trustee will release and distribute such excess, together with any
Excess Amounts not required to be deposited into the Reserve Fund, to the
Seller. Upon any such release of amounts from the Reserve Fund, the
Certificateholders will have no further rights in, or claims to, such amounts.
Any monies remaining on deposit in the Reserve Fund upon the termination of the
Trust pursuant to its terms will be paid to the Seller. (Section 14.07).
Amounts held from time to time in the Reserve Fund will continue to be held
for the benefit of holders of the Certificates. Funds on deposit in the Reserve
Fund may be invested in Permitted Investments. Investment income on monies on
deposit in the Reserve Fund, net of investment expenses and losses on such
investments, will not be available for distribution to Certificateholders or
otherwise subject to any claims or rights of the Certificateholders and will be
paid to the Seller. Investment losses and any loss on such investments will be
charged to the Reserve Fund. (Section 14.07).
If on any Distribution Date the Class B Certificate Balance has been reduced
to zero and amounts on deposit in the Reserve Fund have been depleted as a
result of losses in respect of the Receivables, the protection afforded to the
Class A Certificateholders by the subordination of the Class B Certificates and
by the Reserve Fund will be exhausted and the Class A Certificateholders will
bear directly the risks associated with ownership of the Receivables. Amounts on
deposit in the Yield Supplement Account will not be available to
Certificateholders in the event that defaults or delinquencies in collections on
the Receivables result in shortfalls in amounts due to Certificateholders (even
in the circumstance described in the preceding sentence) or for any other
purpose other than withdrawals of the Yield Supplement Deposit Account on each
Distribution Date.
Neither the Class B Certificateholders, the Seller nor the Servicer will be
required to refund any amounts properly distributed or paid to them, whether or
not there are sufficient funds on any subsequent Distribution Date to make full
distributions to the Class A Certificateholders.
32
<PAGE>
EXAMPLE OF DISTRIBUTIONS
The following chart sets forth an example of the application of the
foregoing provisions to the first monthly distribution in respect of the
Certificates:
<TABLE>
<S> <C>
October 1........... CUTOFF DATE. The Pool Balance will equal the aggregate
Principal Balance of the Receivables as of the opening of
business on this date.
October 1 - 31...... COLLECTION PERIOD. The Servicer will receive Scheduled
Payments, Prepayments, Payments Ahead and other payments
made on or in respect of the Receivables.
November 10......... DETERMINATION DATE. On this date, the Servicer will notify
the Trustee of, among other things, the amounts to be
distributed on the Distribution Date.
November 14......... RECORD DATE. Distributions on the Distribution Date will
be made to Certificateholders of record at the close of
business on this date.
November 17......... DISTRIBUTION DATE. On this date, the Trustee will make the
distributions described above.
</TABLE>
STATEMENTS TO CLASS A CERTIFICATEHOLDERS
On each Distribution Date, the Trustee will include with each distribution
to each Class A Certificateholder as of the close of business on the related
Record Date (which shall be Cede as the nominee for DTC unless Definitive
Certificates are issued under the limited circumstances described herein) a
statement, setting forth with respect to the related Collection Period or such
Distribution Date, as the case may be, among other things, the following
information:
(i) the amount of the Class A Certificateholder's distribution allocable
to principal;
(ii) the amount of the Class A Certificateholder's distribution
allocable to interest;
(iii) the Pool Balance as of the close of business on the last day of
such Collection Period;
(iv) the Class A Certificateholder's pro rata portion of the Servicing
Fee and any additional servicing compensation paid to the Servicer with
respect to the related Collection Period;
(v) the amount of the Class A Interest Carryover Shortfall and Class A
Principal Carryover Shortfall, if any, on such Distribution Date and the
change in such amounts from those with respect to the immediately preceding
Distribution Date;
(vi) the Class A Pool Factor as of such Distribution Date;
(vii) the amount otherwise distributable to the Class B
Certificateholders that is being distributed to the Class A
Certificateholders on such Distribution Date;
(viii) the balance on deposit in the Reserve Fund on such Distribution
Date after giving effect to distributions made on such Distribution Date,
the change in such balance from the immediately preceding Distribution Date
and the Specified Reserve Fund Balance;
(ix) the aggregate amount of Payments Ahead on deposit in the Payahead
Account or held by the Servicer and the change in such amount from the
immediately preceding Distribution Date;
(x) the amount of Advances made in respect of such Collection Period and
the amount of unreimbursed Advances on such Distribution Date;
(xi) the Class A Certificate Balance as of such Distribution Date;
33
<PAGE>
(xii) the Yield Supplement Deposit Amount, the Maximum Yield Supplement
Amount and the amount on deposit in the Yield Supplement Account after
giving effect to distributions made on such Distribution Date; and
(xiii) the amount available under the Servicer Letter of Credit, if any,
and such amount as a percentage of the Pool Balance as of the last day of
such Collection Period.
Each amount set forth pursuant to subclauses (i), (ii), (iv) and (v) above
will be expressed in the aggregate and as a dollar amount per $1,000 of original
principal balance of a Class A Certificate. (Section 14.10). Copies of such
statements may be obtained by Certificate Owners by a request in writing
addressed to the Trustee. (Section 13.15). In addition, within the prescribed
period of time for tax reporting purposes after the end of each calendar year
during the term of the Agreement, the Trustee will mail to each person who at
any time during such calendar year shall have been a Class A Certificateholder a
statement containing the sum of the amounts described in clauses (i), (ii), (iv)
and (v) above for the purposes of such Class A Certificateholder's preparation
of federal income tax returns. (Section 14.10). See "Federal Income Tax
Consequences -- Information Reporting and Backup Withholding".
EVIDENCE AS TO COMPLIANCE
The Agreement will provide that a firm of nationally recognized independent
accountants will furnish to the Trustee on or before June 30 of each year,
beginning June 30, 1998, a statement as to compliance by the Servicer during the
preceding twelve months ended March 31 (or shorter period in the case of the
first such statement) with certain standards relating to the servicing of the
Receivables, the Servicer's accounting records and computer files with respect
thereto and certain other matters. (Section 13.12).
The Agreement will also provide for delivery to the Trustee, on or before
June 30 of such year, beginning June 30, 1998, of a certificate signed by an
officer of the Servicer stating that the Servicer has fulfilled its obligations
under the Agreement throughout the preceding twelve months ended March 31 (or
shorter period in the case of the first such certificate) or, if there has been
a default in the fulfillment of any such obligation, describing each such
default. (Section 13.11).
Copies of such statements and certificates may be obtained by Class A
Certificateholders by a request in writing addressed to the Trustee at 1251
Avenue of the Americas, 10th Floor, New York, New York 10020-1104, Attention:
Corporate Trust Services. (Section 13.15).
CERTAIN MATTERS REGARDING THE SERVICER
The Agreement will provide that the Servicer may not resign from its
obligations and duties as the Servicer thereunder, except upon determination
that its performance of such duties is no longer permissible under applicable
law. No such resignation will become effective until the Trustee or a successor
servicer has assumed the Servicer's servicing obligations and duties under the
Agreement. (Section 17.05).
The Agreement will further provide that neither the Servicer nor any of its
directors, officers, employees or agents will be under any liability to the
Trust or the Certificateholders for taking any action or for refraining from
taking any action required or prohibited by the Agreement, or for errors in
judgment; provided, however, that neither the Servicer nor any such person will
be protected against any liability that would otherwise be imposed by reason of
willful misfeasance, bad faith or negligence in the performance of duties or by
reason of reckless disregard of its obligations and duties thereunder. The
Servicer will be under no obligation to appear in, prosecute or defend any legal
action that is not incidental to its servicing responsibilities under the
Agreement and that, in its opinion, may cause it to incur any expense or
liability. (Section 17.04).
Any corporation into which the Servicer may be merged or consolidated, any
corporation resulting from any merger or consolidation to which the Servicer is
a party or any corporation succeeding to all or substantially all of the
business of the Servicer will be the successor to the Servicer under the
Agreement. (Section 17.03).
34
<PAGE>
EVENTS OF DEFAULT
"Events of Default" under the Agreement will consist of (i) failure by the
Servicer to deliver to the Trustee the Servicer's Certificate for the related
Collection Period, or any failure of the Servicer (or the Seller, so long as
AHFC is the Servicer) to deliver to the Trustee for distribution to the
Certificateholders any required payment, in each case which continues unremedied
for three Business Days after discovery of such failure by an officer of the
Servicer (or the Seller, so long as AHFC is the Servicer), or written notice of
such failure, requiring the same to be remedied, is given (a) to the Seller or
the Servicer, as the case may be, by the Trustee or (b) to the Seller or the
Servicer, as the case may be, and to the Trustee by holders of Certificates
evidencing not less than 25% of the Voting Interests of the Class A Certificates
and the Class B Certificates, voting together as a single class; (ii) failure by
the Servicer (or the Seller, so long as AHFC is the Servicer) duly to observe or
perform in any material respect any other covenants or agreements in the
Certificates or the Agreement which failure materially and adversely affects the
rights of Certificateholders and which continues unremedied for 90 days after
written notice of such failure, requiring the same to be remedied, is given (a)
to the Seller or the Servicer, as the case may be, by the Trustee or (b) to the
Seller or the Servicer, as the case may be, and to the Trustee by holders of
Certificates evidencing not less than 25% of the Voting Interests of the Class A
Certificates and the Class B Certificates, voting together as a single class; or
(iii) certain events of bankruptcy, insolvency, readjustment of debt,
marshalling of assets and liabilities or similar proceedings and certain actions
by the Servicer (or the Seller, so long as AHFC is the Servicer) indicating its
insolvency, reorganization pursuant to bankruptcy proceedings or inability to
pay its obligations. (Section 18.01).
RIGHTS UPON EVENT OF DEFAULT
As long as an Event of Default remains unremedied, the Trustee or holders of
Certificates evidencing not less than 51% of the Voting Interests of the Class A
Certificates and the Class B Certificates, voting together as a single class,
may terminate all of the rights and obligations of the Servicer under the
Agreement, whereupon the Trustee will succeed, without further action, to all
the responsibilities, duties and liabilities of the Servicer in its capacity as
such under the Agreement and will be entitled to similar compensation
arrangements. If, however, a bankruptcy trustee or similar official has been
appointed for the Servicer and no Event of Default other than such appointment
has occurred, such trustee or official may have the power to prevent the Trustee
or such Certificateholders from effecting a transfer of servicing. In the event
that the Trustee is unwilling or unable so to act, then it may appoint, or
petition a court of competent jurisdiction for the appointment of, a successor
with a net worth of at least $50,000,000 whose regular business includes the
servicing of motor vehicle receivables. The Trustee and such successor Servicer
may agree upon the servicing compensation to be paid, which in no event may be
greater than the servicing compensation to the Servicer under the Agreement.
(Sections 18.02 and 18.03). Notwithstanding such termination, the Servicer shall
be entitled to payment of certain amounts payable to it prior to such
termination for services rendered prior to such termination.
WAIVER OF PAST DEFAULTS
The holders of Certificates evidencing not less than 51% of the Voting
Interests of the Class A Certificates and the Class B Certificates, voting
together as a single class, may waive any default by the Servicer in the
performance of its obligations under the Agreement and its consequences, except
a default in making any required deposits to or payments from the Accounts or
the Reserve Fund in accordance with the Agreement or in respect of a covenant or
provision of the Agreement that cannot be modified or amended without the
consent of each Certificateholder (in which event the related waiver will
require the approval of holders of all of the Certificates). No such waiver will
impair the Certificateholders' rights with respect to subsequent defaults.
(Section 18.05).
35
<PAGE>
VOTING INTERESTS
The "Voting Interests" of the (i) Class A Certificates will be allocated
among the Class A Certificateholders or Certificate Owners, as the case may be,
in accordance with the Class A Certificate Balance represented thereby and (ii)
Class B Certificates will be allocated among the Class B Certificateholders in
accordance with the Class B Certificate Balance represented thereby; provided,
that, where the Voting Interests are relevant to determine whether the vote of
the requisite percentage of Certificateholders necessary to effect a consent,
waiver, request or demand shall have been obtained, any Class A Certificates or
Class B Certificates, as the case may be, held by the Seller, the Servicer or
any of their respective affiliates shall be excluded from such determination
except in the case of an amendment to the Agreement requiring the consent of the
holders of all of the relevant Class of Certificates as described under
"Amendment".
AMENDMENT
The Agreement may be amended by the Seller, the Servicer and the Trustee,
without the consent of the Certificateholders or any bank or insurance company
issuing the Servicer Letter of Credit (the "Letter of Credit Bank"), (i) to cure
any ambiguity, to correct or supplement any provision therein which may be
inconsistent with any other provision therein, to add, change or eliminate any
other provisions with respect to matters or questions arising under the
Agreement which are not inconsistent with the provisions of the Agreement, to
add or amend any provision therein in connection with permitting transfers of
the Class B Certificates or to add or provide credit enhancement for the Class B
Certificates, (ii) to permit certain changes with respect to the Specified
Reserve Fund Balance, the funding of the Reserve Fund and the remittance
schedule with respect to collections to be deposited into the Accounts or (iii)
to amend or modify any provision in the Agreement relating to the Servicer
Letter of Credit or the acquisition thereof; provided that any such action
pursuant to clause (iii) above will not be made without the consent of the
Letter of Credit Bank, which consent shall not be unreasonably withheld, and
will not, in the opinion of counsel satisfactory to the Trustee, materially and
adversely affect the interest of any Certificateholder and provided, further,
that in connection with any amendment pursuant to clause (ii) or (iii) above,
the Trustee receives a letter from each Rating Agency to the effect that its
then-current rating of the Class A Certificates will not be qualified, reduced
or withdrawn due to such amendment. See "Subordination of the Class B
Certificates; Reserve Fund".
The Agreement may also be amended from time to time by the Seller, the
Servicer and the Trustee with the consent of the holders of Certificates
evidencing not less than 51% of the Voting Interests of all Certificates, voting
together as a single class, for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of the Agreement or
of modifying in any manner the rights of either Class of Certificateholders or
the Letter of Credit Bank; provided, however, that no such amendment may (i)
except as described above, increase or reduce in any manner the amount of, or
accelerate or delay the timing of, collections of payments on or in respect of
the Receivables or distributions to be made to Certificateholders or to or by
the Letter of Credit Bank or (ii) reduce the aforesaid percentage of the Voting
Interests of which the holders of either Class of Certificates are required to
consent to any such amendment, without the consent of the holders of all of the
relevant Class of Certificates, and provided, further, that in the case of any
such amendment, the Trustee receives a letter from each Rating Agency to the
effect that its then-current rating of the Class A Certificates will not be
qualified, reduced or withdrawn due to such amendment. (Section 21.01).
LIST OF CERTIFICATEHOLDERS
Upon a written request of the Servicer, the Trustee, as Certificate
Registrar, will provide to the Servicer within 15 days after receipt of such
request a list of the names and addresses of all Certificateholders. In
addition, upon written request by three or more Certificateholders or holders of
either Class of Certificates evidencing not less than 25% of the Voting
Interests of such Class, and upon compliance by such Certificateholders with
certain provisions of the Agreement, such Certificateholders may request that
the Trustee, as
36
<PAGE>
Certificate Registrar, afford such Certificateholders access during business
hours to the current list of Certificateholders for purposes of communicating
with other Certificateholders with respect to their rights under the Agreement.
(Section 15.06).
The Agreement will not provide for the holding of any annual or other
meetings of Certificateholders.
TERMINATION
The respective obligations and responsibilities of the Seller, the Servicer
and the Trustee created by the Agreement will terminate upon the earliest to
occur of (i) the maturity or other liquidation of the last Receivable and the
disposition of any amounts received upon liquidation of any property remaining
in the Trust, (ii) the payment to Certificateholders of all amounts required to
be paid to them pursuant to the Agreement and (iii) the occurrence of the event
described below. In order to avoid excessive administrative expenses, the Seller
or the Servicer, or any successor to the Servicer, will be permitted at its
option to purchase from the Trust, on each Distribution Date following the last
day of any Collection Period as of which the Pool Balance is 10% or less of the
Cutoff Date Pool Balance, the corpus of the Trust at a price equal to the
aggregate Administrative Purchase Payments as of such last day for the
Receivables (including Receivables that became Defaulted Receivables in the
Collection Period preceding the Distribution Date on which such purchase is
effected) plus the related Yield Supplement Deposit Amount and the appraised
value of any other property held as part of the Trust (less liquidation
expenses); provided, however, that the purchase option may not be exercised if
the resulting final distribution on the Class A Certificates would not equal the
sum of the Class A Certificate Balance, the Class A Interest Distributable
Amount and any Class A Interest Carryover Shortfall for such final Distribution
Date. Exercise of such right will effect early retirement of the Certificates.
In the event that both the Seller and the Servicer, or any successor to the
Servicer, elect to purchase the Receivables as described above, the party first
notifying the Trustee (based on the Trustee's receipt of such notice) shall be
permitted to purchase the Receivables. The Trustee will give written notice of
termination to each Certificateholder of record.
The final distribution to any Certificateholder will be made only upon
surrender and cancellation of such Certificateholder's Certificate at an office
or agency of the Trustee specified in the notice of termination. Any funds
remaining in the Trust, after the Trustee has taken certain measures to locate a
Certificateholder and such measures have failed, will be distributed to the
United Negro College Fund. (Sections 20.01 and 20.02).
DUTIES OF THE TRUSTEE
The Trustee will make no representations as to the validity or sufficiency
of the Agreement, the Certificates (other than the execution and authentication
thereof) or of any Receivables or related documents, and will not be accountable
for the use or application by the Seller or the Servicer of any funds paid to
the Seller or the Servicer in respect of the Certificates or the Receivables, or
the investment of any monies by the Servicer before such monies are deposited
into the Certificate Account or the Payahead Account. The Trustee will not
independently verify the Receivables. If no Event of Default has occurred and is
continuing, the Trustee will be required to perform only those duties
specifically required of it under the Agreement. Generally, those duties will be
limited to the receipt of the various certificates, reports or other instruments
required to be furnished to the Trustee under the Agreement, in which case the
Trustee will only be required to examine them to determine whether they conform
to the requirements of the Agreement. The Trustee will not be charged with
knowledge of a failure by the Servicer or the Seller to perform its duties under
the Agreement which failure constitutes an Event of Default unless the Trustee
obtains actual knowledge of such failure as will be specified in the Agreement.
(Sections 19.01 and 19.05).
The Trustee will be under no obligation to exercise any of the rights or
powers vested in it by the Agreement or to make any investigation of matters
arising thereunder or to institute, conduct or defend any litigation thereunder
or in relation thereto at the request, order or direction of any of the
Certificateholders, unless such Certificateholders have offered to the Trustee
reasonable security or indemnity against the costs,
37
<PAGE>
expenses and liabilities that may be incurred therein or thereby. No
Certificateholder will have any right under the Agreement to institute any
proceeding with respect to the Agreement, unless such holder previously has
given to the Trustee written notice of default and the holders of Certificates
evidencing not less than 25% of the Voting Interests of the Class A Certificates
and the Class B Certificates, voting together as a single class, have made
written request upon the Trustee to institute such proceeding in its own name as
the Trustee thereunder and have offered to the Trustee reasonable indemnity and
the Trustee for 30 days has neglected or refused to institute any such
proceedings. (Section 21.03).
THE TRUSTEE
Bank of Tokyo - Mitsubishi Trust Company will be the Trustee under the
Agreement. The Trustee and any of its affiliates may hold Certificates in their
own names or as pledgees. (Section 19.06). For the purpose of meeting the legal
requirements of certain jurisdictions, the Servicer and the Trustee acting
jointly (or in some instances, the Trustee acting alone) will have the power to
appoint co-trustees or separate trustees of all or any part of the Trust. In the
event of such an appointment, all rights, powers, duties and obligations
conferred or imposed upon the Trustee by the Agreement will be conferred or
imposed upon the Trustee and each such separate trustee or co-trustee jointly,
or, in any jurisdiction in which the Trustee will be incompetent or unqualified
to perform certain acts, singly upon such separate trustee or co-trustee who
will exercise and perform such rights, powers, duties and obligations solely at
the direction of the Trustee. (Section 19.13).
The Trustee may resign at any time, in which event the Servicer will be
obligated to appoint a successor Trustee. The Servicer and the Seller may also
remove the Trustee if the Trustee ceases to be eligible to continue as such
under the Agreement, becomes legally unable to act or becomes insolvent. In such
circumstances, the Servicer will be obligated to appoint a successor Trustee.
Any resignation or removal of the Trustee and appointment of a successor Trustee
will not become effective until acceptance of the appointment by such successor
Trustee. (Section 19.10).
The Agreement will provide that the Servicer will pay the Trustee's fees and
expenses in connection with its duties under the Agreement. (Section 19.07). The
Agreement will further provide that the Trustee will be entitled to
indemnification by the Servicer for, and will be held harmless against, any
loss, liability or expense incurred by the Trustee not resulting from its own
willful misfeasance, bad faith or negligence (other than by reason of a breach
of any of its representations or warranties to be set forth in the Agreement).
(Sections 17.02 and 19.08).
The Trustee's Corporate Trust Office is located at 1251 Avenue of the
Americas, 10th Floor, New York, New York 10020-1104.
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES
GENERAL
The transfer of the Receivables to the Trustee, the perfection of the
security interests in the Receivables and the enforcement of rights to realize
on the Financed Vehicles as collateral for the Receivables are subject to a
number of federal and state laws, including the UCC as in effect in various
states. The Servicer and the Seller will take such action as is required to
perfect the rights of the Trustee in the Receivables. If, through inadvertence
or otherwise, another party purchases (including the taking of a security
interest in) the Receivables for new value in the ordinary course of its
business, without actual knowledge of the Trust's interest, and takes possession
of the Receivables, such purchaser would acquire an interest in the Receivables
superior to the interest of the Trust.
SECURITY INTERESTS IN THE FINANCED VEHICLES
GENERAL. Retail installment sale contracts such as the Receivables evidence
the credit sale of motor vehicles by dealers to obligors; the contracts also
constitute personal property security agreements and
38
<PAGE>
include grants of security interests in the related vehicles under the UCC.
Perfection of security interests in motor vehicles is generally governed by
state certificate of title statutes or by the motor vehicle registration laws of
the state in which each vehicle is located. In most states (including California
and Texas, the states in which the largest number of Financed Vehicles are
located), a security interest in a motor vehicle is perfected by notation of the
secured party's lien on the vehicle's certificate of title.
All retail installment sale contracts that AHFC acquires from Dealers name
AHFC as obligee or assignee and as the secured party. AHFC also takes all
actions necessary under the laws of the state in which the related vehicles are
located to perfect its security interest in such vehicles, including, where
applicable, having a notation of its lien recorded on the related certificate of
title and obtaining possession of the certificate of title.
PERFECTION. Pursuant to the Receivables Purchase Agreement, AHFC will sell
and assign its security interests in the Financed Vehicles to the Seller and,
pursuant to the Agreement, the Seller will sell and assign its security
interests in the Financed Vehicles to the Trustee. However, because of the
administrative burden and expense, neither AHFC, the Seller nor the Trustee will
amend any certificate of title to identify the Trustee as the new secured party
on the certificates of title relating to the Financed Vehicles. In the absence
of such an amendment and vehicle reregistration, the Trustee may not have a
perfected security interest in the Financed Vehicles in all states. However, UCC
financing statements with respect to the transfer to the Seller of AHFC's
security interest in the Financed Vehicles and the transfer to the Trustee of
the Seller's security interest in the Financed Vehicles will be filed. In
addition, the Servicer will continue to hold all certificates of title relating
to the Financed Vehicles in its possession as custodian for the Trustee pursuant
to the Agreement. See "Risk Factors -- Risk of Trust Not Having a Perfected
Security Interest in the Financed Vehicles in All States" and "The Certificates
- -- Sale and Assignment of the Receivables".
In most states, assignments such as those under the Receivables Purchase
Agreement and the Agreement are an effective conveyance of a security interest
without amendment of any lien noted on a vehicle's certificate of title, and the
assignee succeeds thereby to the assignor's rights as secured party. In such
states, although reregistration of the vehicle is not necessary to convey a
perfected security interest in the Financed Vehicles to the Trustee, because the
Trustee will not be listed as legal owner on the certificates of title to the
Financed Vehicles, its security interest could be defeated through fraud or
negligence. Moreover, in certain other states, in the absence of such amendment
and reregistration, a perfected security interest in the Financed Vehicles may
not have been effectively conveyed to the Trustee. Except in such event,
however, in the absence of fraud, forgery or administrative error, the notation
of AHFC's lien on the certificates of title will be sufficient to protect the
Trust against the rights of subsequent purchasers of a Financed Vehicle or
subsequent creditors who take a security interest in a Financed Vehicle. In the
Receivables Purchase Agreement, AHFC will represent and warrant, and in the
Agreement, the Seller will represent and warrant, that all action necessary for
AHFC to obtain a perfected security interest in each Financed Vehicle has been
taken. If there are any Financed Vehicles as to which AHFC failed to obtain a
first perfected security interest, its security interest would be subordinate
to, among others, subsequent purchasers of such Financed Vehicles and holders of
perfected security interests therein. Such a failure, however, would constitute
a breach of AHFC's representations and warranties under the Receivables Purchase
Agreement and the Seller's representations and warranties under the Agreement.
Accordingly, pursuant to the Agreement, the Seller would be required to
repurchase the related Receivable from the Trustee and, pursuant to the
Receivables Purchase Agreement, AHFC would be required to purchase such
Receivable from the Seller, in each case unless the breach were cured. See "The
Certificates -- Sale and Assignment of the Receivables". The Seller will assign
its rights under the Receivables Purchase Agreement to the Trustee.
CONTINUITY OF PERFECTION. Under the laws of most states, a perfected
security interest in a vehicle continues for four months after the vehicle is
moved to a new state from the one in which it is initially registered and
thereafter until the owner re-registers such vehicle in the new state. A
majority of states require surrender of the related certificate of title to
re-register a vehicle. In those states (such as California) that require a
secured party to hold possession of the certificate of title to maintain
perfection of the security
39
<PAGE>
interest, the secured party would learn of the re-registration through the
request from the obligor under the related installment sale contract to
surrender possession of the certificate of title. In the case of vehicles
registered in states providing for the notation of a lien on the certificate of
title but not possession by the secured party (such as Texas), the secured party
would receive notice of surrender from the state of re-registration if the
security interest is noted on the certificate of title. Thus, the secured party
would have the opportunity to re-perfect its security interest in the vehicles
in the state of relocation. However, these procedural safeguards will not
protect the secured party if through fraud, forgery or administrative error, the
debtor somehow procures a new certificate of title that does not list the
secured party's lien. Additionally, in states that do not require a certificate
of title for registration of a vehicle, re-registration could defeat perfection.
In the ordinary course of servicing the Receivables, AHFC will take steps to
effect re-perfection upon receipt of notice of re-registration or information
from the Obligor as to relocation. Similarly, when an Obligor sells a Financed
Vehicle, AHFC must surrender possession of the certificate of title or will
receive notice as a result of its lien noted thereon and accordingly will have
an opportunity to require satisfaction of the related Receivable before release
of the lien. Under the Agreement, the Servicer will be obligated to take
appropriate steps, at its own expense, to maintain perfection of security
interests in the Financed Vehicles.
PRIORITY OF CERTAIN LIENS ARISING BY OPERATION OF LAW. Under the laws of
most states (including California and Texas), liens for repairs performed on a
motor vehicle and liens for unpaid taxes take priority over even a first
perfected security interest in such vehicle. The Internal Revenue Code of 1986,
as amended, also grants priority to certain federal tax liens over the lien of a
secured party. The laws of certain states and federal law permit the
confiscation of motor vehicles by governmental authorities under certain
circumstances if used in unlawful activities, which may result in the loss of a
secured party's perfected security interest in a confiscated vehicle. AHFC will
represent and warrant to the Seller in the Receivables Purchase Agreement and
the Seller will represent and warrant to the Trustee in the Agreement that, as
of the Closing Date, the security interest in each Financed Vehicle is prior to
all other present liens upon and security interests in such Financed Vehicle.
However, liens for repairs or taxes could arise at any time during the term of a
Receivable. No notice will be given to the Trustee or Certificateholders in the
event such a lien or confiscation arises and any such lien or confiscation
arising after the Closing Date would not give rise to the Seller's repurchase
obligation under the Agreement or AHFC's repurchase obligation under the
Receivables Purchase Agreement.
REPOSSESSION
In the event of default by an obligor under a retail installment sale
contract, the holder of such retail installment sale contract has all the
remedies of a secured party under the UCC, except where specifically limited by
other state laws. The UCC remedies of a secured party include the right to
repossession of the related motor vehicle, by self-help means, unless such means
would constitute a breach of the peace. Unless a vehicle is voluntarily
surrendered, self-help repossession is the method employed by AHFC in most cases
and is accomplished simply by taking possession of the related vehicle. In cases
where the obligor objects or raises a defense to repossession, or if otherwise
required by applicable state law, a court order must be obtained from the
appropriate state court, and the vehicle must then be recovered in accordance
with that order. In some jurisdictions, the secured party is required to notify
the debtor of the default and the intent to repossess the collateral and be
given a time period within which to cure the default prior to repossession. In
most states, under certain circumstances after the vehicle has been repossessed,
the obligor may reinstate the related contract by paying the delinquent
installments and other amounts due.
NOTICE OF SALE; REDEMPTION RIGHTS
In the event of default by an obligor under a retail installment sale
contract, some jurisdictions require that the obligor be notified of the default
and be given a time period within which to cure the default prior to
repossession of the related motor vehicle. Generally, this right of cure may
only be exercised on a limited number of occasions during the term of the
related contract.
40
<PAGE>
The UCC and other state laws require the secured party to provide the
obligor with reasonable notice of the date, time and place of any public sale
and/or the date after which any private sale of the collateral may be held. In
most states, the obligor has the right to redeem the collateral prior to actual
sale by paying the secured party the unpaid principal balance of the obligation,
accrued interest thereon, plus reasonable expenses for repossessing, holding and
preparing the collateral for disposition and arranging for its sale, plus, in
some jurisdictions, reasonable attorneys' fees. In some states, the obligor has
the right to redeem the collateral prior to actual sale by payment of all
delinquent installments or the unpaid balance of the related contract.
DEFICIENCY JUDGMENTS AND EXCESS PROCEEDS
The proceeds of resale of repossessed vehicles generally will be applied
first to the expenses of resale and repossession and then to the satisfaction of
the indebtedness. While some states impose prohibitions or limitations on
deficiency judgments if the net proceeds from resale do not cover the full
amount of the indebtedness, a deficiency judgment can be sought in those states
that do not prohibit or limit such judgments. In addition to the notice
requirement, the UCC requires that every aspect of the sale or other
disposition, including the method, manner, time, place and terms, be
"commercially reasonable". Generally, courts have held that when a sale is not
"commercially reasonable", the secured party loses its right to a deficiency
judgment. In addition, the UCC permits the debtor or other interested party to
recover for any loss caused by noncompliance with the provisions of the UCC.
Also, prior to a sale, the UCC permits the debtor or other interested person to
prohibit the secured party from disposing of the collateral if it is established
that the secured party is not proceeding in accordance with the "default"
provisions under the UCC. However, the deficiency judgment would be a personal
judgment against the obligor for the shortfall, and a defaulting obligor can be
expected to have very little capital or sources of income available following
repossession. Therefore, in many cases, it may not be useful to seek a
deficiency judgment or, if one is obtained, it may be settled at a significant
discount or be uncollectible.
Occasionally, after resale of a repossessed vehicle and payment of all
expenses and indebtedness, there is a surplus of funds. In that case, the UCC
requires the creditor to remit the surplus to any holder of a subordinate lien
with respect to such vehicle or if no such lienholder exists, the UCC requires
the creditor to remit the surplus to the obligor.
CERTAIN BANKRUPTCY CONSIDERATIONS
The Seller has taken steps in structuring the transactions contemplated
hereby that are intended to make it unlikely that the voluntary or involuntary
application for relief by AHFC under the United States Bankruptcy Code or
similar applicable state laws (collectively, "Insolvency Laws") will result in
consolidation of the assets and liabilities of the Seller with those of AHFC.
These steps include the creation of the Seller as a wholly owned, limited
purpose subsidiary pursuant to articles of incorporation containing certain
limitations (including requiring that the Seller must have at least two
independent directors and restrictions on the nature of the Seller's business
and on its ability to commence a voluntary case or proceeding under any
Insolvency Law without the affirmative vote of a majority of its directors,
including each independent director). In addition, to the extent that the Seller
granted a security interest in the Receivables to the Trust, and that interest
was validly perfected before the bankruptcy or insolvency of AHFC and was not
taken or granted in contemplation of insolvency or with the intent to hinder,
delay or defraud AHFC or its creditors, that security interest should not be
subject to avoidance, and payments to the Trust with respect to the Receivables
should not be subject to recovery by a creditor or trustee in bankruptcy of
AHFC. If, notwithstanding the foregoing, (i) a court concluded that the assets
and liabilities of the Seller should be consolidated with those of AHFC in the
event of the application of applicable Insolvency Laws to AHFC or following the
bankruptcy or insolvency of AHFC the security interest in the Receivables
granted by the Seller to the Trustee should be avoided, (ii) a filing were made
under any Insolvency Law by or against the Seller, or (iii) an attempt were made
to litigate any of the foregoing issues, delays in payments on the Certificates
and possible reductions in the amount of such payments could occur. On the
Closing Date,
41
<PAGE>
Brown & Wood LLP, counsel to AHFC and the Seller, will render an opinion which
concludes that following the bankruptcy of AHFC, a court, applying the
principles set forth in such opinion, should not allow a creditor or trustee in
bankruptcy to consolidate the assets and liabilities of AHFC and the Seller on
the basis of any applicable legal theory theretofore recognized by a court of
competent jurisdiction so as to adversely affect the ultimate payment of all
amounts owing under the Class A Certificates.
AHFC will warrant in the Receivables Purchase Agreement that the sale of the
Receivables by it to the Seller is a valid sale. Notwithstanding the foregoing,
if AHFC were to become a debtor in a bankruptcy case and a creditor or
trustee-in-bankruptcy of such debtor or such debtor itself were to take the
position that the sale of Receivables to the Seller should instead be treated as
a pledge of such Receivables to secure a borrowing of such debtor, then delays
in payments of collections of Receivables to the Seller could occur or (should
the court rule in favor of any such trustee, debtor or creditor) reductions in
the amount of such payments could result. If the transfer of Receivables to the
Seller is treated as a pledge instead of a sale, a tax or government lien on the
property of AHFC arising before the transfer of a Receivable to the Seller may
have priority over the Seller's interest in such Receivable. If the transactions
contemplated herein are treated as a sale, the Receivables would not be part of
AHFC's bankruptcy estate and would not be available to AHFC's creditors, except
under certain limited circumstances. In addition, while AHFC is the Servicer,
cash collections on the Receivables may, under certain circumstances, be
commingled with the funds of AHFC and, in the event of the bankruptcy of AHFC,
the Trust may not have a perfected interest in such collections.
A case (OCTAGON GAS SYSTEMS, INC. V. RIMMER, 995 F.2d 948 (10th Cir.), CERT.
DENIED 114 S.Ct. 554 (1993)) decided by the United States Court of Appeals for
the Tenth Circuit contains language to the effect that under the UCC, accounts
sold by a debtor would remain property of the debtor's bankruptcy estate,
whether or not the sale of accounts was perfected under the UCC. UCC Article 9
applies to the sale of chattel paper as well as the sale of accounts and
although the Receivables constitute chattel paper under the UCC rather than
accounts, perfection of a security interest in both chattel paper and accounts
may be accomplished by the filing of a UCC-1 financing statement. If, following
a bankruptcy of AHFC, a court were to follow the reasoning of the Tenth Circuit
reflected in the case described above, then the Receivables would be included in
the bankruptcy estate of AHFC and delays in payments of collections on or in
respect of the Receivables could occur.
CONSUMER PROTECTION LAWS
Numerous federal and state consumer protection laws and related regulations
impose substantial requirements upon creditors and servicers involved in
consumer finance. These laws include the Truth-in-Lending Act, the Equal Credit
Opportunity Act, the Federal Trade Commission Act, the Fair Credit Billing Act,
the Fair Credit Reporting Act, the Fair Debt Collection Practices Act, the
Magnuson-Moss Warranty Act, the Federal Reserve Board's Regulations B and Z,
state adaptations of the National Consumer Act and of the Uniform Consumer
Credit Code and state motor vehicle retail installment sale acts, retail
installment sales acts and other similar laws. Also, the laws of certain states
impose finance charge ceilings and other restrictions on consumer transactions
and require contract disclosures in addition to those required under federal
law. These requirements impose specific statutory liabilities upon creditors who
fail to comply with their provisions. In some cases, this liability could affect
the ability of an assignee such as the Trustee to enforce consumer finance
contracts such as the Receivables.
The so-called "Holder-in-Due-Course Rule" of the Federal Trade Commission
(the "FTC Rule"), has the effect of subjecting a seller (and certain related
lenders and their assignees) in a consumer credit transaction to all claims and
defenses which the obligor in the transaction could assert against the seller of
the goods. Liability under the FTC Rule is limited to the amounts paid by the
obligor under the contract, and the holder of the contract may also be unable to
collect any balance remaining due thereunder from the obligor. The FTC Rule is
generally duplicated by the Uniform Consumer Credit Code, other state statutes
or the common law in certain states.
Most of the Receivables will be subject to the requirements of the FTC Rule.
Accordingly, the Trustee, as holder of the Receivables, will be subject to any
claims or defenses that the purchaser of a Financed Vehicle may assert against
the seller of the Financed Vehicle. Such claims are limited to a maximum
liability equal to the amounts paid by the Obligor on the Receivable.
42
<PAGE>
Any such loss, to the extent not covered by amounts otherwise payable to the
Class B Certificateholders as described herein pursuant to the subordination of
the Class B Certificates or from amounts on deposit in the Reserve Fund, could
result in losses to the Class A Certificateholders. In addition, if an Obligor
were successful in asserting any such claim or defense as described in the two
immediately preceding paragraphs, such claim or defense would constitute a
breach of a representation and warranty under the Receivables Purchase Agreement
and the Agreement and would create an obligation of AHFC and the Seller to
repurchase such Receivable unless the breach were cured. See "The Certificates
- -- Sale and Assignment of the Receivables".
Courts have applied general equitable principles to secured parties pursuing
repossession or litigation involving deficiency balances. These equitable
principles may have the effect of relieving an Obligor from some or all of the
legal consequences of a default.
In several cases, consumers have asserted that the self-help remedies of
secured parties under the UCC and related laws violate the due process
protection of the Fourteenth Amendment to the Constitution of the United States.
Courts have generally either upheld the notice provisions of the UCC and related
laws as reasonable or have found that the creditor's repossession and resale do
not involve sufficient state action to afford constitutional protection to
consumers.
From time to time, AHFC has been involved in litigation under consumer
protection laws. In addition, substantially all of the Receivables originated in
California (the "California Receivables") after 1990, having an aggregate
Principal Balance as of the Cutoff Date of approximately $254.3 million, provide
that the Receivable may be rescinded by the related Dealer if such Dealer is
unable to assign the Receivable to a lender within ten days of the date of such
Receivable. As of the date of this Prospectus, the ten day rescission period had
run in respect of all of the California Receivables in which the rescission
provision appears. Although there is authority, which is not binding upon any
court, providing that a conditional sale contract containing such a provision
does not comply with California law and would render the Receivable
unenforceable, to the knowledge of AHFC and the Seller, the issue has not been
presented before any California court. On the Closing Date, the Seller will
receive an opinion of counsel to the effect that all of the California
Receivables are enforceable under California law and applicable federal laws.
AHFC and the Seller will represent and warrant under the Receivables
Purchase Agreement and the Agreement, respectively, that each Receivable
complies with all requirements of law in all material respects. Accordingly, if
an Obligor has a claim against the Trustee for violation of any law or claims
that the related Receivable is unenforceable and such claim materially and
adversely affects the Trustee's interest in a Receivable, such violation would
constitute a breach of such representation and warranty under the Receivables
Purchase Agreement and the Agreement and will create an obligation of AHFC and
the Seller to repurchase such Receivable unless the breach were cured. The
foregoing repurchase obligations would similarly apply in the event that a court
found a California Receivable containing a rescission provision described above
to be unenforceable. See "The Certificates -- Sale and Assignment of the
Receivables".
OTHER LIMITATIONS
In addition to the laws limiting or prohibiting deficiency judgments,
numerous other statutory provisions, including federal bankruptcy laws and
related state laws, may interfere with or affect the ability of a creditor to
realize upon collateral or enforce a deficiency judgment. For example, in a
Chapter 13 proceeding under the federal bankruptcy law, a court may prevent a
creditor from repossessing a motor vehicle, and, as part of the rehabilitation
plan, reduce the amount of the secured indebtedness to the market value of the
motor vehicle at the time of bankruptcy (as determined by the court), leaving
the party providing financing as a general unsecured creditor for the remainder
of the indebtedness. A bankruptcy court may also reduce the monthly payments due
under the related contract or change the rate of interest and time of repayment
of
43
<PAGE>
the indebtedness. Any such shortfall, to the extent not covered by amounts
otherwise payable to the Class B Certificateholders pursuant to the
subordination of the Class B Certificates as described herein or from amounts on
deposit in the Reserve Fund, could result in losses to the Class A
Certificateholders.
FEDERAL INCOME TAX CONSEQUENCES
The following is a general discussion of all material federal income tax
consequences of the purchase, ownership and disposition of the Class A
Certificates. This summary is based upon laws, regulations, rulings and
decisions currently in effect, all of which are subject to change. The
discussion below addresses all material federal income tax consequences of the
purchase, ownership and disposition of the Class A Certificates generally
applicable to investors. However, it does not purport to deal with the federal
income tax consequences applicable to an investor which result from that
investor's own particular federal income tax status or situation. In addition,
this summary is generally limited to investors who will hold the Class A
Certificates as "capital assets" (generally, property held for investment)
within the meaning of Section 1221 of the Internal Revenue Code of 1986, as
amended (the "Code"). Investors should consult their own tax advisors to
determine the federal, state, local and other tax consequences of the purchase,
ownership and disposition of the Class A Certificates. Prospective investors
should note that no rulings have been or will be sought from the Internal
Revenue Service (the "IRS") with respect to any of the federal income tax
consequences discussed below, and no assurance can be given that the IRS will
not take contrary positions.
TAX STATUS OF THE TRUST
In the opinion of Brown & Wood LLP, counsel to the Seller, the Trust will be
classified as a grantor trust under subpart E, part I of subchapter J of the
Code and not as an association taxable as a corporation for federal income tax
purposes. Class A Certificateholders will be treated as the owners of the Trust,
except as described below.
In the opinion of Brown & Wood LLP, counsel to the Seller, each Class A
Certificateholder will be required to report on its federal income tax return,
in a manner consistent with its method of accounting, its pro rata share of the
entire gross income of the Trust, including interest or finance charges earned
on the Receivables, and any gain or loss upon collection or disposition of the
Receivables. In computing its federal income tax liability, a Class A
Certificateholder will be entitled to deduct, consistent with its method of
accounting, its pro rata share of reasonable fees payable to the Servicer that
are paid or incurred by the Trust as provided in Sections 162 or 212 of the
Code. If a Class A Certificateholder is an individual, estate or trust, the
deduction for its pro rata share of such fees will be allowed only to the extent
that all of its miscellaneous itemized deductions, including its share of such
fees, exceed 2% of its adjusted gross income. In addition, Code Section 68
provides that itemized deductions otherwise allowable for a taxable year of an
individual taxpayer will be reduced by the lesser of (i) 3% of the excess, if
any, of adjusted gross income over a specified amount or (ii) 80% of the amount
of itemized deductions otherwise allowable for such year. As a result, such
investors holding Class A Certificates, directly or indirectly through a
pass-through entity, may have aggregate taxable income in excess of the
aggregate amount of cash received on such Class A Certificates with respect to
interest at the Pass-Through Rate. A Class A Certificateholder using the cash
method of accounting must take into account its pro rata share of income and
deductions as and when collected by or paid by the Trust. A Class A
Certificateholder using the accrual method of accounting must take into account
its pro rata share of income and deductions as and when such amounts become due
to or payable by the Trust.
Guidance by the IRS suggests that a servicing fee in excess of reasonable
servicing will cause the Receivables to be treated under the stripped bond rules
promulgated by the IRS. It is expected that for federal income tax purposes, the
Seller will be viewed as having retained a portion of each interest payment on
each Receivable sold to the Trust. As a result, the Class A Certificates would
be treated under Code
44
<PAGE>
Section 1286 as "stripped bonds". For purposes of Code Section 1271 through
1288, Code Section 1286 treats a stripped bond or a stripped coupon as an
obligation issued on the date that such stripped interest is created.
STRIPPED BONDS AND STRIPPED COUPONS
Although the tax treatment of stripped bonds is not entirely clear, based on
guidance by the IRS, each purchaser of a Class A Certificate will be treated as
the purchaser of a stripped bond which generally should be treated as a single
debt instrument issued on the day it is purchased for purposes of calculating
any original issue discount. Generally, under Treasury regulations (the "Section
1286 Treasury Regulations"), if the discount on a stripped bond is larger than a
DE MINIMIS amount (as calculated for purposes of the original issue discount
rules of the Code) such stripped bond will be considered to have been issued
with original issue discount. See "Accrual of Original Issue Discount". Based on
the preamble to the Section 1286 Treasury Regulations, Brown & Wood LLP, counsel
to the Seller, is of the opinion that, although the matter is not entirely
clear, the interest income on the Class A Certificates at the sum of the
Pass-Through Rate and the portion of the Servicing Fee Rate that does not
constitute excess servicing will be treated as "qualified stated interest"
within the meaning of the Section 1286 Treasury Regulations and such income will
be so treated in the Trustee's tax information reporting. The effect of income
being characterized as "qualified stated interest" is described below under
"Accrual of Original Issue Discount".
ACCRUAL OF ORIGINAL ISSUE DISCOUNT
Under the foregoing rules, because the interest income on the Class A
Certificates constitutes qualified stated interest, it is likely that the Class
A Certificates in the hands of an initial purchaser will be considered to be
issued with DE MINIMIS original issue discount, which will therefore be
considered to be zero. If the Class A Certificates are issued with original
issue discount, because the interest income on the Class A Certificates does not
constitute qualified stated interest, the rules described in this paragraph
would apply. Generally, the owner of a stripped bond issued or acquired with
original issue discount must include in gross income the sum of the "daily
portions", as defined below, of the original issue discount on such Class A
Certificate for each day on which it owns a Class A Certificate, including the
date of purchase but excluding the date of disposition. In the case of an
original Class A Certificateholder, the daily portions of original issue
discount with respect to a Class A Certificate generally would be determined as
follows. A calculation will be made of the portion of original issue discount
that accrues on the Class A Certificate during each successive monthly accrual
period (or shorter period in respect of the date of original issue or the final
Distribution Date). This will be done, in the case of each full monthly accrual
period, by adding (i) the present value, as of the close of such accrual period,
of all remaining payments to be received on the Class A Certificate under the
prepayment assumption used in respect of the Class A Certificates and (ii) any
payments received during such accrual period, and subtracting from that total
the "adjusted issued price" of the Class A Certificate at the beginning of such
accrual period. No representation is made, nor is Brown & Wood LLP, counsel to
the Seller, able to give an opinion, that the Receivables will prepay at any
prepayment assumption. The "adjusted issue price" of a Class A Certificate at
the beginning of the first accrual period is its issue price (as determined for
purposes of the original issue discount rules of the Code) and the "adjusted
issue price" of a Class A Certificate at the beginning of a subsequent accrual
period is the "adjusted issued price" at the beginning of the immediately
preceding accrual period plus the amount of original issue discount allocable to
that accrual period and reduced by the amount of any payment made at the end of
or during that accrual period. The original issue discount accruing during such
accrual period will then be divided by the number of days in the period to
determine the daily portion of original issue discount for each day in the
period. With respect to an initial accrual period shorter than a full monthly
accrual period, the daily portions of original issue discount must be determined
using any reasonable method, provided that such method is consistent with the
method used to determine the yield to maturity of the Class A Certificates.
45
<PAGE>
With respect to the Class A Certificates, the method of calculating original
issue discount as described above will cause the accrual of original issue
discount to either increase or decrease (but never below zero) in any given
accrual period to reflect the fact that prepayments are occurring at a rate
faster or slower than the prepayment assumption used in respect of the Class A
Certificates.
Subsequent purchasers that purchase Class A Certificates at more than a DE
MINIMIS discount should consult their tax advisors with respect to the proper
method to accrue such original issue discount.
PREMIUM
The purchase of a Class A Certificate at more than its adjusted principal
amount will result in the creation of a premium with respect to the interest in
the underlying Receivables of the Trust represented by such Class A Certificate.
A purchaser (who does not hold the Class A Certificate for sale to customers or
in inventory) may elect under Section 171 of the Code to amortize such premium.
Under the Code, premium is allocated among the interest payments on the
Receivables to which it relates and is considered as an offset against (and thus
a reduction of) such interest payments. Such election would apply to all debt
instruments held or subsequently acquired by the electing holder. Absent such an
election, the premium (to the extent attributable to Receivables with respect to
which the Obligor is an individual) will only be deductible as an ordinary loss
pro rata as principal is paid on such Receivables.
Holders of Class A Certificates acquired at a premium are urged to consult
with their own tax advisors regarding the proper treatment of the Class A
Certificates for federal income tax purposes.
SALE OF A CLASS A CERTIFICATE
If a Class A Certificate is sold, gain or loss will be recognized equal to
the difference between the amount realized on the sale (exclusive of amounts
attributable to accrued and unpaid interest, which will be treated as ordinary
interest income) and the Class A Certificateholder's adjusted basis in the Class
A Certificate. A Class A Certificateholder's adjusted basis will equal the Class
A Certificateholder's cost for the Class A Certificate, increased by any
discount previously included in income, and decreased (but not below zero) by
any previously amortized premium and by the amount of payments (other than
qualified stated interest) previously received on the Receivables. Any gain or
loss will be capital gain or loss if the Class A Certificate was held as a
capital asset. A capital gain or loss will generally be long-term or short-term
depending on whether or not the Class A Certificates have been owned for more
than one year. The Taxpayer Relief Act of 1997 (the "Act") reduces the maximum
rates on long-term capital gains recognized on capital assets held by
individuals taxpayers for more than eighteen months as of the date of
disposition (and would further reduce the maximum rates on such gains in the
year 2001 and thereafter for certain individual taxpayers who meet specified
conditions). The Act makes no changes to the capital gain rates for
corporations. Prospective investors should consult their own tax advisors
concerning these tax law changes.
INFORMATION REPORTING AND BACKUP WITHHOLDING
The Trustee will furnish or make available, within the prescribed period of
time for tax reporting purposes after the end of each calendar year, to each
Class A Certificateholder or each person holding an Class A Certificate on
behalf of a Class A Certificateholder at any time during such year, such
information as the Trustee deems necessary or desirable to assist Class A
Certificateholders in preparing their federal income tax returns. Payments made
on the Class A Certificates and proceeds from the sale of the Class A
Certificates will not be subject to a "backup" withholding tax of 31% unless, in
general, a Class A Certificateholder fails to comply with certain reporting
procedures and is not an exempt recipient under applicable provisions of the
Code.
46
<PAGE>
FOREIGN CLASS A CERTIFICATEHOLDERS
Interest attributable to Receivables which is received by a foreign Class A
Certificateholder will generally not be subject to the normal 30% withholding
tax imposed with respect to such payments; provided that (i) the foreign Class A
Certificateholder does not own, directly or indirectly, 10% or more of, and is
not a controlled foreign corporation related to, the Seller and (ii) such holder
fulfills certain certification requirements. Under such requirements, the holder
must certify, under penalty of perjury, that is it not a "United States person"
and provide its name and address. Such certification would generally be made on
IRS Form W-8, although in certain cases it may be possible to submit other
documentary evidence. For this purpose, "United States person" means a citizen
or resident of the United States, a corporation, partnership or other entity
created or organized in or under the laws of the United States or any political
subdivision thereof (other than a partnership that is not treated as a United
States person under any applicable Treasury regulations), an estate the income
of which is includible in gross income for United States federal income tax
purposes, regardless of its source or a trust if a court within the United
States is able to exercise primary supervision of the administration of the
trust and one or more United States persons have the authority to control all
substantial decisions of the trust. Notwithstanding the preceding sentence, to
the extent provided in regulations, certain trusts in existence on August 20,
1996 and treated as United States persons prior to such date that elect to
continue to be so treated also shall be considered U.S. Persons. Gain realized
upon the sale of a Class A Certificate by a foreign Class A Certificateholder
generally will not be subject to United States withholding tax. If, however,
such interest or gain is effectively connected to the conduct of a trade or
business within the United States by such foreign Class A Certificateholder,
such holder will be subject to United States federal income tax thereon at
regular rates. Potential investors who are not United States persons should
consult their own tax advisors regarding the specific tax consequences to them
of owing a Class A Certificate.
NEW WITHHOLDING REGULATIONS
On October 6, 1997, the Treasury Department issued new regulations (the "New
Regulations") which make certain modifications to the withholding, backup
withholding and information reporting rules described above. The New Regulations
attempt to unify certification requirements and modify reliance standards. The
New Regulations will generally be effective for payments made after December 31,
1998, subject to certain transition rules. Prospective investors are urged to
consult their own tax advisors regarding the New Regulations.
ERISA CONSIDERATIONS
Section 406 of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), and Section 4975 of the Code prohibit (i) pension, profit
sharing or other "employee benefit plans" (as defined in Section 3(3) of ERISA)
subject to Title I of ERISA, (ii) "plans" (as defined in Section 4975 (e)(1) of
the Code) subject to Section 4975 of the Code and (iii) entities deemed to be
investing "plan assets" (including but not limited to an insurance company
general account) (each, a "Benefit Plan") from engaging in certain transactions
with persons that are "parties in interest" under ERISA or "disqualified
persons" under the Code with respect to such Benefit Plans. ERISA also imposes
certain duties on persons who are fiduciaries of Benefit Plans subject to ERISA.
Under ERISA, any person who exercises any authority or control with respect to
the management or disposition of the assets of a Benefit Plan is considered to
be a fiduciary of such Benefit Plan (subject to certain exceptions not here
relevant). A violation of these "prohibited transaction" rules may result in
liability under ERISA and the Code for such persons.
Neither ERISA nor the Code defines the terms "plan assets". Under Section
2510.3-101 of the United States Department of Labor ("DOL") regulations (the
"Regulation"), a Plan's assets may include an interest in the underlying assets
of an entity (such as a trust) for certain purposes, including the prohibited
transaction provisions of ERISA and the Code, if the Plan acquires an "equity
interest" in such entity. The Seller believes that the Certificates will give
Certificateholders an equity interest in the Trust for purposes of
47
<PAGE>
the Regulation. Under the Regulation, when a Plan acquires an equity interest
that is neither a "publicly offered security" nor a security issued by an
investment company registered under the Investment Company Act of 1940, as
amended (the "Investment Company Act"), the underlying assets of the entity will
be considered "plan assets" unless the entity is an "operating company" or
equity participation in the entity by benefit plan investors is not
"significant". For this purpose, such participation is significant if
immediately after the most recent acquisition of any equity interest in the
entity, whether or not from an issuer or an underwriter, 25% or more of the
value of any class of equity interest is held by "benefit plan investors", which
are defined to include both Benefit Plans and employee benefit plans not subject
to Title I of ERISA (E.G., governmental plans).
The Trust will not be an "operating company" as defined in the Regulation,
and it will not be an investment company registered under the Investment Company
Act. The Seller anticipates that the Certificates will not be considered
publicly offered securities within the meaning of the Regulation. Accordingly,
if at any time immediately after the most recent acquisition of any Class A
Certificate, 25% or more of the value of either Class of Certificates is held by
benefit plan investors, then all or some portion of the Receivables and other
assets of the Trust may constitute plan assets. There can be no assurance that
less than 25% of the value of each Class of Certificates will be held by benefit
plan investors.
The DOL has granted to Merrill Lynch, Pierce, Fenner & Smith Incorporated an
administrative exemption (Prohibited Transaction Exemption 90-29 (the
"Exemption"), from certain of the prohibited transaction rules of ERISA with
respect to the initial purchase, the holding and the subsequent resale by
Benefit Plans of certificates representing interests in asset backed
pass-through trusts that consist of certain receivables, loans and other
obligations that meet the conditions and requirements of the Exemption. The
receivables covered by the Exemption include motor vehicle installment
obligations such as the Receivables. The Seller believes that the Exemption will
apply to the acquisition, holding and resale of the Class A Certificates by a
Benefit Plan, provided that specified conditions (certain of which are described
below) are met.
Among the conditions that must be satisfied for the Exemption to apply to
the acquisition by a Benefit Plan of Class A Certificates are the following
(each of which, other than those within the control of the investors, the Seller
believes has been or will be met in connection with the Class A Certificates):
(i) The acquisition of the Class A Certificates by a Benefit Plan is on
terms (including the price for the Class A Certificates) that are at least
as favorable to the Benefit Plan as they would be in an arm's-length
transaction with an unrelated party.
(ii) The rights and interests evidenced by the Class A Certificates
acquired by the Benefit Plan are not subordinated to the rights and
interests evidenced by other certificates of the Trust.
(iii) The Class A Certificates acquired by the Benefit Plan have received
a rating at the time of such acquisition that is in one of the three highest
generic rating categories from Standard & Poor's, Moody's, Duff & Phelps
Inc. or Fitch Investors Service, Inc.
(iv) The Trustee is not an affiliate of any other member of the
"Restricted Group" which consists of the Underwriters, the Seller, the
Servicer, the Trustee and any Obligor with respect to the Receivables
included in the Trust constituting more than 5% of the aggregate unamortized
principal balance of the assets of the Trust as of the date of initial
issuance of the Class A Certificates (I.E., the initial principal amount of
the Certificates), and any affiliate of such parties.
(v) The sum of all payments made to the Underwriters in connection with
the distribution of the Class A Certificates represents not more than
reasonable compensation for underwriting the Class A Certificates. The sum
of all payments made to and retained by the Seller pursuant to the sale of
the Receivables to the Trust represents not more than the fair market value
of such Receivables. The sum of
48
<PAGE>
all payments made to and retained by the Servicer represents not more than
reasonable compensation for the Servicer's services under the Agreement and
reimbursement of the Servicer's reasonable expenses in connection therewith.
(vi) The Benefit Plan investing in the Class A Certificates is an
"accredited investor" as defined in Rule 501(a)(1) of Regulation D of the
Commission under the Securities Act.
Because the rights and interests evidenced by the Class A Certificates acquired
by a Benefit Plan are not subordinated to the rights and interests evidenced by
other Certificates of the Trust, the second general condition set forth above is
satisfied. It is a condition of the issuance of the Class A Certificates that
they be rated in the highest rating category by Standard & Poor's and Moody's. A
fiduciary of a Benefit Plan contemplating purchasing a Class A Certificate
(other than pursuant to the original issuance of the Class A Certificates) must
make its own determination that at the time of such acquisition, the Class A
Certificates continue to satisfy the third general condition set forth above.
The Seller and the Servicer expect that the fourth general condition set forth
above will be satisfied with respect to the Class A Certificates. A fiduciary of
a Benefit Plan contemplating purchasing a Class A Certificate must make its own
determination that the first, fifth and sixth general conditions set forth above
will be satisfied with respect to the Class A Certificates.
The Trust must also meet the following requirements:
(a) The corpus of the Trust must consist solely of assets of the type
that have been included in other investment pools.
(b) Certificates in such other investment pools must have been rated in
one of the three highest rating categories of Standard & Poor's, Moody's,
Duff & Phelps Inc. or Fitch Investors Service, Inc. for at least one year
prior to the Benefit Plan's acquisition of certificates.
(c) Certificates evidencing interests in such other investment pools
must have been purchased by investors other than Benefit Plans for at least
one year prior to any Benefit Plan's acquisition of certificates.
If the general conditions of the Exemption are satisfied, the Exemption
should provide relief from the restrictions imposed by Sections 406(a) and
407(a) of ERISA as well as the excise taxes imposed by Sections 4975(a) and (b)
of the Code by reason of Section 4975(c)(1)(A) through (D) of the Code, in
connection with the direct or indirect purchase, exchange, transfer or holding
of the Class A Certificates by a Benefit Plan. However, no exemption is provided
from the restrictions of Sections 406(a)(1)(E), 406(a)(2) and 407 of ERISA for
the acquisition or holding of a Class A Certificate on behalf of an Excluded
Plan by any person who has discretionary authority or renders investment advice
with respect to the assets of such Excluded Plan. For purposes of the Class A
Certificates, an "Excluded Plan" is a Benefit Plan sponsored by any member of
the Restricted Group.
If certain other specific conditions of the Exemption are also satisfied,
the Exemption should provide relief from the restrictions imposed by Sections
406(b)(1) and (b)(2) of ERISA and the taxes imposed by Section 4975(a) and (b)
of the Code by reason of Section 4975(c)(1)(E) of the Code in connection with
the direct or indirect sale, exchange, transfer or holding of Class A
Certificates in the initial issuance of Class A Certificates between the Seller
or Underwriter and a Benefit Plan other than an Excluded Plan when the person
who has discretionary authority or renders investment advice with respect to the
investment of Benefit Plan assets in the Class A Certificates is (a) an Obligor
with respect to 5% or less of the fair market value of the Receivables or (b) an
affiliate of such person. Such conditions include, among other requirements,
that (i) a Benefit Plan's investment in the Class A Certificates does not exceed
25% of all of the Class A Certificates outstanding at the time of the
acquisition and (ii) immediately after the acquisition, no more than 25% of the
assets of a Benefit Plan with respect to which a person has discretionary
authority or
49
<PAGE>
renders investment advice are invested in certificates representing interests in
trusts containing assets sold or serviced by the same entity. The Seller expects
such specific conditions to be satisfied with respect to the issuance of the
Class A Certificates.
The Exemption also applies to transactions in connection with the servicing,
management and operation of the Trust, provided that, in addition to the general
requirements described above, (a) such transactions are carried out in
accordance with the terms of a binding pooling and servicing agreement and (b)
the pooling and servicing agreement is provided to, or described in all material
respects in the prospectus provided to, investing Benefit Plans before their
purchase of Class A Certificates issued by the Trust. The Agreement is a pooling
and servicing agreement as defined in the Exemption. All transactions relating
to the servicing, management and operations of the Trust will be carried out in
accordance with the Agreement. See "The Certificates -- Servicing Procedures"
and " -- Servicing Compensation".
Due to the complexities of these rules and the penalties imposed upon
persons involved in prohibited transactions, it is important that the fiduciary
of a Benefit Plan considering the purchase of Class A Certificates consult with
its counsel regarding the applicability of the prohibited transaction provisions
of ERISA and the Code to such investment. Benefit Plan fiduciaries should also
take into account, among other considerations, whether the fiduciary has the
authority to make the investment; the tax effects of the investment; and whether
under the general fiduciary standards of investment procedure and
diversification an investment in the Class A Certificates is appropriate for the
Benefit Plan, taking into account the overall investment policy of the Benefit
Plan and the composition of the Benefit Plan's investment portfolio.
UNDERWRITING
Subject to the terms and subject to the conditions contained in an
Underwriting Agreement dated , 1997 (the "Underwriting Agreement"), the
seller has agreed to sell to the Underwriters named below (the "Underwriters"),
for whom Merrill Lynch, Pierce, Fenner & Smith Incorporated, is acting as
representative (the "Representative"), and each of the Underwriters have
severally but not jointly agreed to purchase from the Seller the following
respective principal amounts of the Class A Certificates.
<TABLE>
<CAPTION>
PRINCIPAL
UNDERWRITER AMOUNT
- ------------------------------------------------------------------------- -------------------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated...................................................
Credit Suisse First Boston Corporation...................................
J.P. Morgan & Co.........................................................
-------------------
Total.............................................................. $
-------------------
-------------------
</TABLE>
In the Underwriting Agreement the Underwriters have agreed, subject to
certain terms and conditions therein, to purchase all the Class A Certificates
if any are purchased. The Underwriting Agreement provides that, in the event of
a default by an Underwriter, in certain circumstances the purchase commitments
of the non-defaulting Underwriters may be increased or the Underwriting
Agreement may be terminated.
The Seller and AHFC have been advised by the Representative that the
Underwriters propose to offer the Class A Certificates to the public initially
at the public offering price set forth on the cover page of this Prospectus and,
through the Representative, to certain dealers at such price less a concession
not in excess of % of the principal amount per Class A Certificate, and the
Underwriters and such dealers may allow a concession not in excess of % of
such principal amount per Class A Certificate on sales to certain other dealers.
After the initial public offering, such prices and concessions may be changed.
Until the distribution of the Certificates is completed, rules of the
Commission may limit the ability of the Underwriters and certain selling group
members to bid for and purchase the Certificates. As an exemption to these
rules, Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"), on
behalf
50
<PAGE>
of the Underwriters is permitted to engage in over-allotment transactions,
stabilizing transactions, syndicate covering transactions and penalty bids with
respect to the Class A Certificates in accordance with Regulation M under the
Exchange Act.
Over-allotment transactions involve syndicate sales in excess of the
offering size, which create syndicate short positions. Stabilizing transactions
permit bids to purchase the Class A Certificates so long as the stabilizing bids
do not exceed a specified maximum. Syndicate covering transactions involve
purchases of the Class A Certificates in the open market after the distribution
has been completed in order to cover syndicate short positions. Penalty bids
permit the Merrill Lynch to reclaim a selling concession from a syndicate member
when the Class A Certificates originally sold by such syndicate member are
purchased in a syndicate covering transaction.
Such over-allotment transactions, stabilizing transactions, syndicate
covering transactions and penalty bids may cause the prices of the Class A
Certificates to be higher than they would otherwise be in the absence of such
transactions. Neither the Seller, AHFC nor any of the Underwriters makes any
representation or prediction as to the direction or magnitude of any effect that
the transactions described above may have on the price of the Class A
Certificates. In addition, neither the Seller, AHFC nor any of the Underwriters
represent that the Underwriters will engage in any such transactions or that
such tranactions, once commenced, will not be discontinued, without notice.
In the ordinary course of their respective businesses, the Underwriters and
their respective affiliates have engaged and may in the future engage in
investment banking or commercial banking transactions with the Seller, AHFC and
their affiliates.
The Seller and AHFC have agreed to indemnify, jointly and severally, the
Underwriters against certain liabilities, including civil liabilities under the
Securities Act, or contribute to payments that the Underwriter may be required
to make in respect thereof.
Upon receipt of a request by an investor who has received an electronic
Prospectus from an Underwriter or a request by such investor's representative
within the period during which there is an obligation to deliver a Prospectus,
the Seller or the Underwriter will promptly deliver, or cause to be delivered,
without charge, a paper copy of the Prospectus.
RATING OF THE CLASS A CERTIFICATES
It is a condition to issuance of the Class A Certificates that the Class A
Certificates will have been rated Aaa by Moody's and AAA by Standard & Poor's.
The rating of the Class A Certificates will be based primarily on the value of
the Receivables and the terms of the Class B Certificates and the Reserve Fund.
The ratings of the Class A Certificates should be evaluated independently from
similar ratings on other types of securities. A security rating is not a
recommendation to buy, sell or hold securities and may be subject to revision or
withdrawal at any time by the assigning rating agency. The ratings on the Class
A Certificates do not assess the likelihood that principal prepayments on the
Receivables will occur, the degree to which the rate of such prepayments might
differ from that originally anticipated or otherwise address the timing of
distributions of principal of the Class A Certificates prior to the Final
Scheduled Distribution Date.
There can be no assurance as to whether any rating agency other than the
Rating Agencies will rate the Class A Certificates, or, if one does, what rating
will be assigned by any such other rating agency.
LEGAL MATTERS
Certain legal matters with respect to the Class A Certificates, including
certain federal income tax consequences with respect thereto, will be passed
upon for the Seller by Brown & Wood LLP, San Francisco, California. Skadden,
Arps, Slate, Meagher & Flom LLP, New York, New York, will act as counsel for the
Underwriters.
51
<PAGE>
INDEX OF CAPITALIZED TERMS
Set forth below is a list of the capitalized or defined terms used in this
Prospectus and the pages on which the definitions of such terms may be found.
<TABLE>
<CAPTION>
TERM PAGE
- ------------------------------------------------------------------------ ------
<S> <C>
Accounts................................................................ 25
ACT..................................................................... 46
Actuarial Receivable.................................................... 10
Administrative Purchase Payment......................................... 24
Administrative Receivable............................................... 24
Advances................................................................ 7
Aggregate Net Losses.................................................... 31
Agreement............................................................... 3
AHFC.................................................................... 1,3
AHMC.................................................................... 3
APR..................................................................... 7
Available Interest...................................................... 28
Available Principal..................................................... 28
Benefit Plan............................................................ 47
Business Day............................................................ 4
California Receivables.................................................. 43
Cede.................................................................... 4
Certificate Account..................................................... 25
Certificate Owner....................................................... 4
Certificate Register.................................................... 22
Certificateholders...................................................... 6
Certificates............................................................ 1,3
Charge-off Rate......................................................... 31
Class A Certificates.................................................... 1,3
Class A Certificate Balance............................................. 4
Class A Certificateholders.............................................. 4
Class A Distributable Amount............................................ 28
Class A Interest Carryover Shortfall.................................... 29
Class A Interest Distributable Amount................................... 28
Class A Percentage...................................................... 3
Class A Pool Factor..................................................... 15
Class A Principal Carryover Shortfall................................... 29
Class A Principal Distributable Amount.................................. 28
Class B Certificates.................................................... 1,3
Class B Certificate Balance............................................. 29
Class B Certificateholders.............................................. 6
Class B Distributable Amount............................................ 28
Class B Interest Carryover Shortfall.................................... 30
Class B Interest Distributable Amount................................... 29
Class B Percentage...................................................... 3
Class B Principal Carryover Shortfall................................... 30
Class B Principal Distributable Amount.................................. 28
Closing Date............................................................ 5
Code.................................................................... 44
Collection Period....................................................... 5
Commission.............................................................. 2
<CAPTION>
TERM PAGE
- ------------------------------------------------------------------------ ------
<S> <C>
Current Receivable...................................................... 31
Cutoff Date............................................................. 3
Cutoff Date Pool Balance................................................ 8
Dealer Recourse......................................................... 10
Dealers................................................................. 10
Defaulted Receivable.................................................... 28
Definitive Certificates................................................. 20
Delinquency Percentage.................................................. 31
Determination Date...................................................... 27
Discount Receivables.................................................... 5
Distribution Date....................................................... 1,4
DOL..................................................................... 47
DTC..................................................................... 2
ERISA................................................................... 47
Events of Default....................................................... 35
Excess Amounts.......................................................... 30
Excess Payment.......................................................... 26
Exchange Act............................................................ 2
Excluded Plan........................................................... 49
Exemption............................................................... 48
Final Scheduled Distribution Date....................................... 4
Financed Vehicles....................................................... 1,3
FTC Rule................................................................ 42
Indirect Participants................................................... 20
Insolvency Laws......................................................... 41
installment sale contracts.............................................. 16
Investment Company Act.................................................. 48
IRS..................................................................... 44
Letter of Credit Bank................................................... 36
Liquidated Receivable................................................... 31
Maximum Yield Supplement Amount......................................... 30
Moody's................................................................. 8
Net Liquidation Proceeds................................................ 28
New Regulations......................................................... 47
Obligors................................................................ 10
Original Class A Certificate Balance.................................... 4
Original Class B Certificate Balance.................................... 29
Participants............................................................ 20
Pass-Through Rate....................................................... 4
Payahead Account........................................................ 25
Payment Ahead........................................................... 25
Permitted Investments................................................... 25
Pool Balance............................................................ 27
Precomputed Advance..................................................... 7
Precomputed Receivables................................................. 10
Prepayment.............................................................. 26
</TABLE>
52
<PAGE>
<TABLE>
<CAPTION>
TERM PAGE
- ------------------------------------------------------------------------ ------
Principal Balance....................................................... 27
<S> <C>
Rating Agencies......................................................... 8
Receivables............................................................. 1,3
Receivables Purchase Agreement.......................................... 3
Record Date............................................................. 4
Registration Statement.................................................. 2
Regulation.............................................................. 47
Representative.......................................................... 50
Required Investment Rating.............................................. 25
Required Rate........................................................... 5
Required Rating......................................................... 25
Reserve Fund............................................................ 6
Restricted Group........................................................ 48
Rule of 78s............................................................. 11
Rule of 78s Receivable.................................................. 10
Schedule of Receivables................................................. 22
Scheduled Payment....................................................... 5
Section 1286 Treasury Regulations....................................... 45
Securities Act.......................................................... 2
Seller.................................................................. 1,3
<CAPTION>
TERM PAGE
- ------------------------------------------------------------------------ ------
<S> <C>
Servicer................................................................ 1,3
Servicer Letter of Credit............................................... 25
Servicing Fee........................................................... 8
Servicing Fee Rate...................................................... 8
Simple Interest Advance................................................. 7
Simple Interest Receivable.............................................. 10
Specified Reserve Fund Balance.......................................... 6,31
Standard & Poor's....................................................... 8
Trust................................................................... 1,3
Trustee................................................................. 3
UCC..................................................................... 20
Underwriters............................................................ 50
Underwriting Agreement.................................................. 50
Voting Interests........................................................ 36
Warranty Purchase Payment............................................... 23
Warranty Receivable..................................................... 23
Yield Supplement Account................................................ 5
Yield Supplement Account Deposit........................................ 5
Yield Supplement Deposit Amount......................................... 5
</TABLE>
53
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE SELLER,
THE SERVICER OR ANY UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR
A SOLICITATION BY ANYONE IN ANY STATE IN WHICH SUCH OFFER OR SOLICITATION IS NOT
AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE SELLER OR THE SERVICER SINCE THE DATE
HEREOF 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 Class A Certificateholders by the Trustee...................... 2
Summary................................................................... 3
Risk Factors.............................................................. 9
Formation of the Trust.................................................... 9
Property of the Trust..................................................... 10
The Receivables........................................................... 10
Yield Considerations...................................................... 15
Class A Pool Factor and Trading Information............................... 15
Use of Proceeds........................................................... 16
The Seller................................................................ 16
American Honda Finance Corporation........................................ 16
The Certificates.......................................................... 20
Certain Legal Aspects of the Receivables.................................. 38
Federal Income Tax Consequences........................................... 44
ERISA Considerations...................................................... 47
Underwriting.............................................................. 50
Rating of the Class A Certificates........................................ 51
Legal Matters............................................................. 51
Index of Capitalized Terms................................................ 52
</TABLE>
--------------
UNTIL , 1998, ALL DEALERS EFFECTING TRANSACTIONS IN THE CLASS
A CERTIFICATES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE
REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF
DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO
THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS. UPON RECEIPT OF A REQUEST BY AN
INVESTOR, OR SUCH INVESTOR'S REPRESENTATIVE, WITHIN THE PERIOD DURING WHICH
THERE IS A PROSPECTUS DELIVERY OBLIGATION, THE SELLER OR THE UNDERWRITERS WILL
TRANSMIT OR CAUSE TO BE TRANSMITTED PROMPTLY, WITHOUT CHARGE AND IN ADDITION TO
ANY SUCH DELIVERY REQUIREMENTS, A PAPER COPY OF THE PROSPECTUS OR A PROSPECTUS
ENCODED IN AN ELECTRONIC FORMAT.
HONDA AUTO RECEIVABLES
1997-B GRANTOR TRUST
$850,145,000
% ASSET BACKED CERTIFICATES,
CLASS A
AMERICAN HONDA
RECEIVABLES CORP.
SELLER
AMERICAN HONDA
FINANCE CORPORATION
SERVICER
---------------------
P R O S P E C T U S
---------------------
MERRILL LYNCH & CO.
CREDIT SUISSE FIRST BOSTON
J.P. MORGAN & CO.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Expenses in connection with the offering of the Class A Certificates being
registered hereby are estimated as follows:
<TABLE>
<S> <C>
SEC registration fee.............................................. $257,619.70
Legal fees and expenses........................................... 125,000.00
Accounting fees and expenses...................................... 70,000.00
Blue sky fees and expenses........................................ 5,000.00
Rating agency fees................................................ 170,000.00
Trustee's fees and expenses....................................... 5,000.00
Printing.......................................................... 50,000.00
Miscellaneous..................................................... 380.30
-----------
Total........................................................... 683,000.00
-----------
-----------
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 317(b) of the California Corporations Code (the "Corporations Code")
provides that a corporation may indemnify any person who was or is a party or is
threatened to be made a party to any "proceeding" (as defined in Section 317(a)
of the Corporations Code), other than an action by or in the right of the
corporation to procure a judgment in its favor, by reason of the fact that such
person is or was a director, officer, employee or other agent of the corporation
(collectively, an "Agent"), against expenses, judgments, fines, settlements and
other amounts actually and reasonably incurred in connection with such
proceeding if the Agent acted in good faith and in a manner the Agent reasonably
believed to be in the best interest of the corporation and, in the case of a
criminal proceeding, had no reasonable cause to believe the conduct was
unlawful.
Section 317(c) of the Corporations Code provides that a corporation shall
have power to indemnify any Agent who was or is a party or is threatened to be
made a party to any threatened, pending or completed action by or in the right
of the corporation to procure a judgment in its favor by reason of the fact that
such person is or was an Agent, against expenses actually and reasonably
incurred by the Agent in connection with the defense or settlement of such
action if the Agent acted in good faith and in a manner such Agent believed to
be in the best interest of the corporation and its shareholders.
Section 317(c) further provides that no indemnification may be made
thereunder for any of the following: (i) in respect of any matter as to which an
Agent shall have been adjudged to be liable to the corporation, unless the court
in which such proceeding is or was pending shall determine that such Agent is
fairly and reasonably entitled to indemnity for expenses, (ii) amounts paid in
settling or otherwise disposing of a pending action without court approval and
(iii) expenses incurred in defending a pending action which is settled or
otherwise disposed of without court approval.
Section 317(d) of the Corporations Code requires that an Agent be
indemnified against expenses actually and reasonably incurred to the extent the
Agent has been successful on the merits in the defense of proceedings referred
to in subdivisions (b) or (c) of Section 317.
Except as provided in Section 317(d), and pursuant to Section 317(e),
indemnification under Section 317 shall be made by the corporation only if
specifically authorized and upon a determination that indemnification is proper
in the circumstances because the Agent has met the applicable standard of
conduct, by any of the following: (i) a majority vote of a quorum consisting of
directors who are not parties to
II-1
<PAGE>
the proceeding, (ii) if such a quorum of directors is not obtainable, by
independent legal counsel in a written opinion, (iii) approval of the
shareholders, provided that any shares owned by the Agent may not vote thereon,
or (iv) the court in which such proceeding is or was pending.
Pursuant to Section 317(f) of the Corporations Code, the corporation may
advance expenses incurred in defending any proceeding upon receipt of an
undertaking by the Agent to repay such amount if it is ultimately determined
that the Agent is not entitled to be indemnified.
Section 317(h) provides, with certain exceptions, that no indemnification
shall be made under Section 317 where it appears that it would be inconsistent
with a provision of the corporation's articles, bylaws, a shareholder resolution
or an agreement which prohibits or otherwise limits indemnification, or where it
would be inconsistent with any condition expressly imposed by a court in
approving a settlement.
Section 317(i) authorizes a corporation to purchase and maintain insurance
on behalf of an Agent for liabilities arising by reason of the Agent's status,
whether or not the corporation would have the power to indemnify the Agent
against such liability under the provisions of Section 317.
Reference is also made to Section 7 of the Underwriting Agreement among
Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, as
representative of the several Underwriters, the Registrant and American Honda
Finance Corporation (see Exhibit 1.1), which provides for indemnification of the
Registrant under certain circumstances.
Article IX of the Articles of Incorporation of the Registrant provides for
the indemnification of the directors of the Registrant to the fullest extent
permissible under California law.
Article IV, Section 4.01 of the Bylaws of the Registrant (see Exhibit 3.2)
requires that the Registrant indemnify, and, in certain instances, advance
expenses to, its agents, with respect to certain costs, expenses, judgments,
fines, settlements and other amounts incurred in connection with any proceeding,
to the full extent permitted by applicable law.
In addition, Article IV, Section 4.03 of the Bylaws of the Registrant
authorizes the Registrant to purchase and maintain insurance to the extent
provided by Section 3.17(i) of the Corporations Code.
II-2
<PAGE>
ITEM 16. EXHIBITS.
<TABLE>
<C> <S>
1.1 Form of Underwriting Agreement
3.1 Articles of Incorporation of American Honda Receivables Corp.**
3.2 Bylaws of American Honda Receivables Corp.**
4.1 Form of Pooling and Servicing Agreement among American Honda
Receivables Corp., as Seller, American Honda Finance Corporation, as
Servicer, and Bank of Tokyo - Mitsubishi Trust Company, as Trustee
(including forms of Class A and Class B Certificates and Servicer
Letter of Credit)
4.2 Form of Standard Terms and Conditions of Pooling and Servicing
Agreement
5.1 Opinion of Brown & Wood LLP with respect to legality
8.1 Opinion of Brown & Wood LLP with respect to tax matters
10.1 Form of Receivables Purchase Agreement
23.1 Consent of Brown & Wood LLP (included as part of Exhibit 5.1)
23.2 Consent of Brown & Wood LLP (included as part of Exhibit 8.1)
24.1 Powers of Attorney (included in the Registration Statement on page
II-5)*
</TABLE>
- ------------------------
*Previously filed.
**This exhibit is incorporated by reference from the Honda Auto Receivables
1997-A Grantor Trust registration statement on Form S-1 (File No. 333-18095)
originally filed on December 18, 1996.
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes as follows:
(a) For purposes of determining any liability under the Act, the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Act will be deemed to be part of this registration
statement as of the time it was declared effective.
(b) For purposes of determining any liability under the Act, each
post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time will be deemed to
be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
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 Amendment No. 1 to
the Registration Statement on Form S-3 to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Torrance and State of
California, on the 21st day of October, 1997.
AMERICAN HONDA RECEIVABLES CORP.
By: /s/ JOHN I. WEISICKLE
------------------------------------------
John I. Weisickle
TREASURER
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
* Director and President
- ------------------------------ (Principal Executive October 21, 1997
Y. Kohama Officer)
/s/ JOHN I. WEISICKLE Director and Treasurer
- ------------------------------ (Principal Financial and October 21, 1997
John I. Weisickle Accounting Officer)
* Director and
- ------------------------------ Secretary October 21, 1997
S. Moriguchi
*
- ------------------------------ Director October 21, 1997
Scott J. Ulm
*
- ------------------------------ Director October 21, 1997
Scott J. Nelson
*By: /s/ JOHN I. WEISICKLE
-------------------------
John I. Weisickle
ATTORNEY-IN-FACT
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBERED
EXHIBIT DESCRIPTION PAGE
- ----------- -------------------------------------------------------------------------------------------- -------------
<C> <S> <C>
1.1 Form of Underwriting Agreement
3.1 Articles of Incorporation of American Honda Receivables Corp.**
3.2 Bylaws of American Honda Receivables Corp.**
4.1 Form of Pooling and Servicing Agreement among American Honda Receivables Corp., as Seller,
American Honda Finance Corporation, as Servicer, and Bank of Tokyo - Mitsubishi Trust
Company, as Trustee (including forms of Class A and Class B Certificates and Servicer
Letter of Credit)
4.2 Form of Standard Terms and Conditions of Pooling and Servicing Agreement
5.1 Opinion of Brown & Wood LLP with respect to legality
8.1 Opinion of Brown & Wood LLP with respect to tax matters
10.1 Form of Receivables Purchase Agreement
23.1 Consent of Brown & Wood LLP (included as part of Exhibit 5.1)
23.2 Consent of Brown & Wood LLP (included as part of Exhibit 8.1)
24.1 Powers of Attorney (included in the Registration Statement on page II-5)*
</TABLE>
- ------------------------
*Previously filed.
**This exhibit is incorporated by reference from the Honda Auto Receivables
1997-A Grantor Trust registration statement on Form S-1 (File No. 333-18095)
originally filed on December 18, 1996.
<PAGE>
EXHIBIT 1.1
HONDA AUTO RECEIVABLES 1997-B GRANTOR TRUST
____% ASSET BACKED CERTIFICATES, CLASS A
AMERICAN HONDA RECEIVABLES CORP.
(SELLER)
AMERICAN HONDA FINANCE CORPORATION
(SERVICER)
UNDERWRITING AGREEMENT
October __, 1997
Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
As Representative of the Several Underwriters
World Financial Center
North Tower - 15th Floor
New York, New York 10281-1315
Dear Sirs:
1. INTRODUCTORY. American Honda Receivables Corp., a California
corporation (the "Seller"), proposes to sell $________________ principal amount
of ____% Asset Backed Certificates, Class A (the "Class A Certificates"), issued
by the Honda Auto Receivables 1997-B Grantor Trust (the "Trust"). Each Class A
Certificate will represent a fractional undivided interest in the Trust. The
assets of the Trust will include, among other things, a pool of retail
installment sale and conditional sale contracts secured by the new Honda and
Acura automobiles and sport utility vehicles and Honda minivans financed thereby
(the "Receivables") and certain monies due or received thereunder on or after
October 1, 1997 (the "Cutoff Date"), such Receivables to be sold to the Trust by
the Seller and to be serviced for the Trust by American Honda Finance
Corporation, a California corporation (the "Servicer"). The Class A
Certificates will be issued in an aggregate principal amount of
$________________, which is equal to _____% of the aggregate principal balance
of the Receivables as of the Cutoff Date. Simultaneously with the issuance and
sale of the Class A Certificates as contemplated herein, the Trust will also
issue the Asset Backed Certificates, Class B (the "Class B Certificates", and
together with the Class A Certificates, the "Certificates"), evidencing an
undivided ownership interest of ____% in the Trust, payments in
<PAGE>
respect of which are, to the extent specified in the Pooling and Servicing
Agreement (as defined below), subordinated to the rights of the holders of the
Class A Certificates. The Certificates will be issued pursuant to a Pooling and
Servicing Agreement (the "Pooling and Servicing Agreement") to be dated as of
October 1, 1997, among the Seller, the Servicer and Bank of Tokyo-Mitsubishi
Trust Company, as trustee (the "Trustee"). Merrill Lynch & Co., Merrill Lynch,
Pierce, Fenner & Smith Incorporated shall be the representative of the
Underwriters (the "Representative").
Capitalized terms used herein and not otherwise defined shall have the
meanings given them in the Pooling and Servicing Agreement.
2. REPRESENTATIONS AND WARRANTIES OF THE SELLER. The Seller represents
and warrants to and agrees with the several underwriters named in Schedule I
hereto (the "Underwriters") that:
(a) The Seller has prepared and filed with the Securities and Exchange
Commission (the "Commission") in accordance with the provisions of the
Securities Act of 1933, as amended, and the rules and regulations of the
Commission thereunder (collectively, the "Act"), a registration statement on
Form S-3 (No. 333-35413; 333-35413-01), including a form of prospectus, relating
to the Certificates. The registration statement as amended has been declared
effective by the Commission. If any post-effective amendment has been filed
with respect thereto, prior to the execution and delivery of this Agreement, the
most recent such amendment has been declared effective by the Commission. Such
registration statement, as amended at the time of effectiveness, including all
material incorporated by reference therein and including all information (if
any) deemed to be part of the registration statement at the time of
effectiveness pursuant to Rule 430A under the Act, is referred to in this
Agreement as the "Registration Statement." The Seller proposes to file with the
Commission pursuant to Rule 424(b) ("Rule 424(b)") under the Act a form of the
prospectus included in the Registration Statement relating to the Class A
Certificates and the method of distribution thereof, such prospectus in the form
in which it is filed pursuant to Rule 424(b) being hereinafter referred to as
the "Prospectus."
(b) The Registration Statement on Form S-3, including such amendments
thereto as may be required, relating to the Certificates, has been filed with
the Commission and such Registration Statement as amended has become effective.
The conditions to the use of a shelf registration statement on Form S-3 under
the Act, as set forth in the General Instructions to Form S-3, have been
satisfied with respect to the Seller and the Registration Statement;
(c) No stop order suspending the effectiveness of the Registration
Statement has been issued and no proceeding for that purpose has been instituted
or, to the knowledge of the Seller, threatened by the Commission, and on the
effective date of the Registration Statement, the Registration Statement and the
Prospectus conformed in all respects to the requirements of the Act and the
rules and regulations of the Commission under the Act (the "Rules and
Regulations"), and did not include any untrue statement of a material fact or
omit
2
<PAGE>
to state any material fact required to be stated therein or necessary to make
the statements therein not misleading, and on the date of this Agreement, the
Registration Statement conforms, and at the time of filing of the Prospectus
pursuant to Rule 424(b) such documents will conform in all respects to the
requirements of the Act and the Rules and Regulations, and on the Closing Date
the Registration Statement and the Prospectus will conform in all respects to
the requirements of the Act and the Rules and Regulations, and neither of such
documents will include on the date of this Agreement and on the Closing Date any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein not misleading;
PROVIDED, HOWEVER, that this representation and warranty shall not apply to any
statements or omissions made in reliance upon and in conformity with information
relating to any Underwriter furnished to the Seller in writing by such
Underwriter through the Representative expressly for use therein.
(d) The consummation of the transactions contemplated by this Agreement,
the Receivables Purchase Agreement and the Pooling and Servicing Agreement, and
the fulfillment of the terms thereof, will not conflict with or result in a
breach of any of the terms or provisions of, or constitute a default under, or
result in the creation of any lien, charge, or encumbrance upon any of the
property or assets of the Seller or the Servicer pursuant to the terms of, any
indenture, mortgage, deed of trust, loan agreement, guarantee, lease financing
agreement, or other agreement or instrument under which the Seller or the
Servicer is a debtor or guarantor or to which any of their respective property
or assets may be subject.
(e) No consent, approval, authorization or order of, or filing with, any
court or governmental agency or body is required to be obtained or made by the
Seller or the Servicer for the consummation of the transactions contemplated by
this Agreement except such as have been obtained and made under the Act or the
Rules and Regulations, such as may be required under state securities laws and
filing of any financing statements required to perfect the transfer of the
Receivables.
(f) Neither the Seller nor the Servicer is in violation of its articles of
incorporation or by-laws or in default in the performance or observance of any
obligation, agreement, covenant or condition contained in any agreement or
instrument to which it is a party or by which it or its properties are bound
which could have a material adverse effect on the transactions contemplated
herein, in the Receivables Purchase Agreement or in the Pooling and Servicing
Agreement.
(g) The execution, delivery and performance of this Agreement, the
Receivables Purchase Agreement and the Pooling and Servicing Agreement and the
issuance and sale of the Certificates and compliance with the terms and
provisions thereof will not, subject to obtaining any consents or approvals as
may be required under the securities or "blue sky" laws of various
jurisdictions, result in a breach or violation of any of the terms and
provisions of, or constitute a default under, any statute, rule, regulation or
order of any governmental agency or body or any court having jurisdiction over
the Seller or the Servicer or any of their respective properties or any
agreement or instrument to which the Seller or the Servicer is a party or by
which the Seller or the Servicer is bound or to which any of their
3
<PAGE>
respective properties is subject, or with the articles of incorporation or
by-laws of the Seller or the Servicer, and each of the Seller and the Servicer
has full corporate power and authority to enter into this Agreement, the
Receivables Purchase Agreement and the Pooling and Servicing Agreement and to
consummate the transactions contemplated hereby and thereby.
(h) Each of this Agreement and the Pooling and Servicing Agreement has
been duly authorized, executed and delivered by the Seller and the Servicer.
(i) This Agreement constitutes a valid and binding obligation of, each of
the Seller and the Servicer, enforceable against each of the Seller and the
Servicer in accordance with its terms, except as enforcement thereof may be
subject to or limited by (x) bankruptcy, insolvency, moratorium, reorganization
or other similar laws relating to or affecting the enforcement of creditors'
rights generally, (y) general equitable principles (regardless of whether such
enforceability is considered in a proceeding in equity or at law) and (z) rights
to indemnification and contribution which may be limited by applicable law or
equitable principles or otherwise unenforceable as against public policy.
3. PURCHASE, SALE, AND DELIVERY OF CLASS A CERTIFICATES. On the basis of
the representations, warranties and agreements herein contained, but subject to
the terms and conditions herein set forth, the Seller agrees to sell to the
Underwriters, and the Underwriters agree, severally and not jointly, to purchase
from the Seller, the aggregate principal amounts of the Class A Certificates set
forth opposite the names of the Underwriters in Schedule I hereto. The Class A
Certificates are to be purchased at the purchase price of _____% of the
aggregate principal amount thereof plus accrued interest at the Pass-Through
Rate calculated from (and including) October 15, 1997, to (but excluding) the
Closing Date.
Against payment of the purchase price in immediately available funds drawn
to the order of the Seller, the Seller will deliver the Class A Certificates to
the Representative, for the account of the Underwriters, at the office of Brown
& Wood LLP, 555 California Street, San Francisco, CA 94104, on October __, 1997,
at 10:00 a.m., California time, or at such other time not later than seven full
business days thereafter as the Representative and the Seller determine, such
time being herein referred to as the "Closing Date." The Class A Certificates
to be so delivered will be initially represented by one or more Class A
Certificates (the "DTC Certificates") registered in the name of Cede & Co., the
nominee of The Depository Trust Company ("DTC") and one certificate in
definitive form representing the remaining portion of the Original Class A
Certificate Balance shall be registered in the name of and delivered to the
Seller. The interests of beneficial owners of the DTC Certificates will be
represented by book entries on the records of DTC and participating members
thereof. Definitive Certificates will be available only under the limited
circumstances set forth in the Pooling and Servicing Agreement. The
Certificates will be made available for checking at the above office of Brown &
Wood LLP at least 24 hours prior to the Closing Date.
Pursuant to Rule 15c6-1(d) under the Securities Exchange Act of 1934, as
amended, the Trust, the Seller and the Underwriters have agreed that the Closing
Date will be not less than five business days following the date hereof.
4
<PAGE>
4. OFFERING BY UNDERWRITERS. It is understood that the several
Underwriters propose to offer the Class A Certificates for sale to the public as
set forth in the Prospectus.
5. COVENANTS OF THE SELLER. The Seller covenants and agrees with the
several Underwriters that:
(a) The Seller will transmit the Prospectus to the Commission pursuant to
Rule 424(b) by a means reasonably calculated to result in the timely filing of
such Prospectus with the Commission pursuant to Rule 424(b).
(b) Before filing any amendment or supplement to the Registration
Statement or the Prospectus, whether before or after the time the Registration
Statement becomes effective, the Seller will furnish to the Representative a
copy of the proposed amendment or supplement for review and will not file any
such proposed amendment or supplement to which the Representative reasonably
objects.
(c) The Seller will advise the Representative promptly, and will confirm
such advice in writing, (i) when any amendment to the Registration Statement
shall have become effective, (ii) of any request by the Commission for any
amendment to the Registration Statement or any amendment or supplement to the
Prospectus or for any additional information, (iii) of the issuance by the
Commission of any stop order suspending the effectiveness of the Registration
Statement or the initiation or threatening of any proceeding for that purpose,
and (iv) of the receipt by the Seller of any notification with respect to any
suspension of the qualification of the Certificates for offer and sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purpose; and to use its best efforts to prevent the issuance of any such stop
order or notification and, if issued, to obtain as soon as possible the
withdrawal thereof.
(d) The Seller will arrange for the qualification of the Class A
Certificates for offering and sale under the securities laws of such
jurisdictions in the United States as the Representative may reasonably
designate and to continue such qualifications in effect so long as necessary
under such laws for the distribution of such Class A Certificates, provided that
in connection therewith the Seller shall not be required to qualify as a foreign
corporation to do business, or to file a general consent to service of process,
in any jurisdiction.
(e) If, at any time when the delivery of a prospectus shall be required by
law in connection with sales of any Class A Certificates, either (i) any event
shall have occurred as a result of which the Prospectus would include any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading, or (ii) for any other reason it shall be
necessary to amend or supplement the Prospectus, the Seller will promptly notify
the Representative and will promptly prepare and file with the Commission, at
its own expense, an amendment or a supplement to the Prospectus which will
correct such statement or omission or effect such compliance. Neither your
consent to, nor the Underwriters'
5
<PAGE>
delivery of, any such amendment or supplement shall constitute a waiver of any
of the conditions set forth in Section 6 hereof.
(f) The Seller will cause the Trust to make generally available to Class A
Certificateholders, as soon as practicable, but no later than sixteen months
after the Effective Date, an earnings statement of the Trust covering a period
of at least twelve consecutive months beginning after such Effective Date and
satisfying the provisions of Section 11(a) of the Act (including Rule 158
promulgated thereunder).
(g) The Seller will furnish to you copies of the Registration Statement
(one of which will be signed and include all exhibits), each related preliminary
prospectus, the Prospectus and all amendments and supplements to such documents,
in each case as soon as available and in such quantities as the Representative
may from time to time reasonably request.
(h) So long as any of the Class A Certificates are outstanding, the Seller
will furnish to the Representative copies of all reports or other communications
(financial or otherwise) furnished or made available to Class A
Certificateholders, and deliver to the Representative during such same period,
(i) as soon as they are available, copies of any reports and financial
statements furnished to or filed with the Commission and (ii) such additional
information concerning the business and financial condition of the Seller as the
Representative may from time to time reasonably request.
(i) Whether or not the transactions contemplated by this Agreement are
consummated, the Seller, subject to the provisions of Section 8 hereof, will pay
or cause to be paid all costs and expenses incident to the performance of its
obligations hereunder, including (i) any filing fees, (ii) any fees charged by
Moody's Investors Service ("Moody's") and Standard & Poor's Ratings Services, a
Division of the McGraw-Hill Companies, Inc. ("Standard & Poor's" and, together
with Moody's, the "Rating Agencies") for the rating of the Class A Certificates,
(iii) the expenses incurred in printing, reproducing and distributing the
registration statement as filed, the Registration Statement, preliminary
prospectuses and the Prospectus (including any amendments and supplements
thereto required pursuant to Section 5(d) hereof) and (iv) the reasonable
expenses of the Representative, including the reasonable fees and disbursements
of counsel to the Representative, in connection with the initial qualification
of the Class A Certificates for sale in the jurisdictions that the
Representative may designate pursuant to Section 5(c) hereof.
(j) On or before the Closing Date, the Seller shall cause its and the
Servicer's computer records relating to the Receivables to be marked to show the
Trust's absolute ownership of the Receivables, and from and after the Closing
Date neither the Seller nor the Servicer shall take any action inconsistent with
the Trust's ownership of such Receivables, other than as permitted by the
Pooling and Servicing Agreement.
(k) To the extent, if any, that the rating provided with respect to the
Class A Certificates by either Rating Agency is conditional upon the furnishing
of documents or the
6
<PAGE>
taking of any other actions by the Seller, the Seller shall furnish such
documents and take any such other actions.
(l) On or before the Closing Date, the Seller shall furnish or make
available to the Underwriters or their counsel such additional documents and
information regarding the Seller and the Servicer and their affairs as the
Underwriters may from time to time reasonably request, including any and all
documentation reasonably requested in connection with their due diligence
efforts regarding information in the Prospectus and in order to evidence the
accuracy or completeness of any of the conditions contained in this Agreement.
6. CONDITIONS OF THE OBLIGATIONS OF THE UNDERWRITERS. The obligations of
the several Underwriters to purchase and pay for the Class A Certificates will
be subject to the accuracy of the representations and warranties on the part of
the Seller, to the accuracy of the statements of officers of the Seller made
pursuant to the provisions hereof, to the performance by the Seller of its
obligations hereunder and to the following additional conditions precedent:
(a) At the time this Agreement is executed and delivered by the Seller and
at the Closing Date, KPMG Peat Marwick shall have furnished to the
Representative letters dated, respectively, as of the date of this Agreement and
as of the Closing Date substantially in the forms of the drafts to which the
Representative previously agreed.
(b) The Prospectus shall have been filed with the Commission pursuant to
Rule 424(b) within the applicable time period prescribed for such filing by the
Rules and Regulations and in accordance with Section 5(a) of this Agreement;
and, as of the Closing Date, no stop order suspending the effectiveness of the
Registration Statement shall be in effect, and no proceedings for such purpose
shall be pending before or, to the knowledge of the Seller, threatened by the
Commission; and all requests for additional information from the Commission with
respect to the Registration Statement shall have been complied with to the
satisfaction of the Representative.
(c) You shall have received an officer's certificate, dated the Closing
Date, signed by the Chairman of the Board or the President and by a principal
financial or accounting officer of the Seller representing and warranting that,
as of the Closing Date, the representations and warranties of the Seller in this
Agreement are true and correct, that the Seller has complied with all agreements
and satisfied all conditions on its part to be performed or satisfied hereunder
at or prior to the Closing Date, that no stop order suspending the effectiveness
of the Registration Statement has been issued and no proceedings for that
purpose have been instituted or, to the best of their knowledge, are
contemplated by the Commission.
(d) Subsequent to the execution and delivery of this Agreement, there
shall not have occurred (i) any change, or any development involving a
prospective change, in or affecting particularly the business or properties of
the Seller, Honda Motor Co. Ltd., American Honda Motor Co., Inc. ("AHMC") or the
Servicer which, in the judgment of a
7
<PAGE>
majority in interest of the Underwriters including the Representative,
materially impairs the investment quality of the Class A Certificates or makes
it impractical or inadvisable to proceed with completion of the sale of and
payment for the Class A Certificates; (ii) any downgrading in the rating of any
debt securities of AHMC or any of its direct or indirect subsidiaries by any
"nationally recognized statistical rating organization" (as defined for purposes
of Rule 436(g) under the Act), or any public announcement that any such
organization has under surveillance or review its rating of any such debt
securities (other than an announcement with positive implications of a possible
upgrading, and no implication of a possible downgrading, of such rating); (iii)
any suspension or limitation of trading in securities generally on the New York
Stock Exchange or any setting of minimum prices for trading on such exchange;
(iv) any banking moratorium declared by Federal, California or New York
authorities; or (v) any outbreak or escalation of major hostilities in which the
United States is involved, any declaration of war by Congress or any other
substantial national or international calamity or emergency if, in the judgment
of a majority in interest of the Underwriters (including the Representative),
the effect of any such outbreak, escalation, declaration, calamity or emergency
makes it impractical or inadvisable to proceed with completion of the sale of
and payment for the Class A Certificates.
(e) Brown & Wood LLP will have furnished to the Representative their
written opinion, dated the Closing Date, to the effect that:
(i) Each of the Seller and the Servicer has been duly incorporated and
is validly existing as a corporation in good standing under the laws of the
State of California with full corporate power and authority to own its
properties and conduct its business as described in the Prospectus; and is
duly qualified to transact business and is in good standing in each
jurisdiction in which the conduct of its business or the ownership of its
property requires such qualification, except where the failure to be so
qualified and in good standing would not have a material adverse effect on
its obligations under this Agreement, the Receivables Purchase Agreement or
the Pooling or Servicing Agreement.
(ii) The Pooling and Servicing Agreement and the Receivables Purchase
Agreement have been duly authorized, executed and delivered by, and,
assuming the due authorization, execution and delivery thereof by the
Trustee, each constitutes a valid and binding obligation of, each of the
Seller and the Servicer, enforceable against each of the Seller and the
Servicer in accordance with their respective terms, except as enforcement
thereof may be subject to or limited by bankruptcy, insolvency, moratorium,
reorganization or other similar laws relating to or affecting the
enforcement of creditors' rights generally and by general equitable
principles (regardless of whether such enforceability is considered in a
proceeding in equity or at law).
(iii) The execution, delivery and performance of this Agreement, the
Pooling and Servicing Agreement and the Receivables Purchase Agreement by
each of the Seller and the Servicer will not conflict with or result in a
breach of any of the
8
<PAGE>
terms or provisions of, or constitute a default under, or result in the
creation or imposition of any lien, charge or encumbrance upon any of the
properties or assets of the Seller or the Servicer pursuant to the terms of
the Articles of Incorporation or the By-Laws of the Seller or the Servicer,
or to the best of such counsel's knowledge and information, any statute,
any rule, regulation or order of any governmental agency or body or any
court having jurisdiction over the Seller or the Servicer or any of their
respective properties or, to the best of their knowledge and information,
any agreement or instrument to which the Seller or the Servicer is a party
or by which either the Seller or the Servicer or any of their respective
properties is bound.
(iv) No authorization, approval or consent of, any court or
governmental agency or authority is necessary in connection with the
execution, delivery and performance by the Seller or the Servicer of this
Agreement, the Pooling and Servicing Agreement or the Receivables Purchase
Agreement, except for (x) such as may be required under the Act or the
Rules and Regulations, (y) such as may be required under state securities
laws, and (z) except for such authorizations, approvals or consents
specified in such opinion as are in full force and effect as of the
Effective Date and the Closing Date.
(v) The Class A Certificates have been duly authorized and, when
executed and authenticated by the Trustee in accordance with the Pooling
and Servicing Agreement and delivered and paid for pursuant to this
Agreement will be validly issued and outstanding and entitled to the
benefits provided by the Pooling and Servicing Agreement.
(vi) The Registration Statement has become effective under the Act and
the Prospectus has been filed with the Commission, pursuant to Rule 424(b)
promulgated under the Act; to the best of such counsel's knowledge, no stop
order suspending the effectiveness of the Registration Statement has been
issued and no proceedings for that purpose have been instituted or are
pending or contemplated under the Act; and the Registration Statement and
the Prospectus (other than the financial and statistical information
therein as to which such counsel express no opinion), as of their
respective effective date or date of issuance, complied as to form in all
material respects with the requirements of the Act and the rules and
regulations promulgated thereunder; such counsel has no reason to believe
that the Registration Statement contained any untrue statement of a
material fact or omitted to state any material fact required to be stated
therein or necessary to make the statements therein not misleading, or that
the Prospectus, included or includes an untrue statement of a material fact
or omitted or omits to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; it being understood that such counsel need express no
opinion as to the financial, numerical, statistical and quantitative
information contained in the Registration Statement or the Prospectus.
9
<PAGE>
(vii) Such counsel does not know of any contracts or documents of a
character required to be described in the Registration Statement or the
Prospectus which are not described and filed as required.
(viii) To the best of their knowledge, there are no legal or
governmental proceedings pending to which the Seller or the Servicer is a
party or of which any property of the Seller or the Servicer is the
subject, and no such proceedings are known by such counsel to be threatened
or contemplated by governmental authorities or threatened by others, in
each case (A) that are required to be disclosed in the Registration
Statement or the Prospectus or (B) (1) asserting the invalidity of all or
part of this Agreement, the Receivables Purchase Agreement, the Pooling and
Servicing Agreement or the Certificates, (2) seeking to prevent the
issuance of the Certificates, (3) that could materially and adversely
affect the Seller's or the Servicer's obligations under this Agreement, the
Receivables Purchase Agreement or the Pooling and Servicing Agreement or
(4) seeking to affect adversely the income tax attributes of the Trust or
the Class A Certificates.
(ix) Immediately prior to the transfer of Receivables by the Servicer
pursuant to the Receivables Purchase Agreement, the Servicer was the sole
owner of all right, title and interest in the Receivables and the other
property to be transferred by it to the Seller. The Servicer has full
power and authority to sell and assign the property to be sold and assigned
to the Seller pursuant to the Receivables Purchase Agreement and has duly
authorized such sale and assignment to the Seller by all necessary
corporate action.
(x) Assuming that the Receivables are in substantially one of the
forms attached to such opinion, the Receivables are "chattel paper" as
defined in the UCC.
(xi) Such counsel is familiar with the Servicer's standard operating
procedures relating to the Servicer's acquisition of a perfected first
priority security interest in the vehicles financed by the Servicer
pursuant to retail installment sale contracts in the ordinary course of the
Servicer's business. Assuming that the Servicer's standard procedures are
followed with respect to the perfection of security interests in the
Financed Vehicles (and such counsel has no reason to believe that the
Servicer has not or will not continue to follow its standard procedures in
connection with the perfection of security interests in the Financed
Vehicles), the Servicer has acquired or will acquire a perfected first
priority security interest in the Financed Vehicles.
(xii) The Seller has full power and authority to sell and assign the
property to be sold and assigned to the Trust pursuant to the Pooling and
Servicing Agreement and has duly authorized such sale and assignment to the
Trust by all necessary corporate action.
10
<PAGE>
(xiii) This Agreement has been duly authorized, executed and delivered
by the Seller and the Servicer.
(xiv) The statements in the Prospectus under the captions "Certain
Legal Aspects of the Receivables," to the extent they constitute matters of
law or legal conclusions, have been reviewed by such counsel and are
correct in all material respects.
(xv) The Pooling and Servicing Agreement is not required to be
qualified under the Trust Indenture Act of 1939, as amended, and the Trust
is not required to be registered as an "investment company" under the
Investment Company Act of 1940, as amended.
(xvi) The Class A Certificates, the Pooling and Servicing Agreement,
the Receivables Purchase Agreement and this Agreement each conform in all
material respects with the descriptions thereof contained in the
Registration Statement and the Prospectus.
(xvii) The Trust created by the Pooling and Servicing Agreement will
not be classified as an association (or publically traded partnership)
taxable as a corporation for federal income tax purposes and, instead,
under subpart E, part I, of subchapter J of the Internal Revenue Code of
1986, as amended, the Trust will be treated as a grantor trust and, subject
to possible recharacterization of certain fees paid by the Trust, each
Class A Certificateholder will be treated as the owner of an undivided
interest in the income and corpus attributable to the Trust.
(xviii) The Trust will not be classified as a separate entity subject
to California or New York income, franchise or other taxes measured by
income, profits, capital, or receipts.
(xix) Class A Certificateholders who would not otherwise be subject to
tax imposed by California or New York will not be subject to California or
New York income or franchise taxes with respect to interest or other
amounts (including payments from the Yield Supplement Account) which are
allocable to such Class A Certificateholders solely as a result of such
Class A Certificateholders' beneficial ownership of a Class A Certificate.
(xx) The statements in the Registration Statement and Prospectus under
the heading "ERISA Considerations" and "Federal Income Tax Consequences,"
to the extent that they constitute matters of law or legal conclusions with
respect thereto, have been prepared or reviewed by such counsel and are
correct in all material respects.
Such opinion may be made subject to the qualifications that the
enforceability of the terms of the Pooling and Servicing Agreement and the
Receivables Purchase
11
<PAGE>
Agreement may be subject to or limited by bankruptcy, insolvency, moratorium,
reorganization or other similar laws relating to or affecting the enforcement of
creditors' rights generally and by general equitable principles (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
(f) Brown & Wood LLP shall have furnished their written opinion, dated the
Closing Date, with respect to the characterization as a sale of the transfer of
the Receivables by the Servicer to the Seller and from the Seller to the Trust
and such opinion shall be in substantially the form previously discussed with
the Representative and its counsel and in any event satisfactory in form and in
substance to the Representative and its counsel.
(g) You shall have received an opinion of Skadden, Arps, Slate, Meagher &
Flom LLP, dated the Closing Date, with respect to the validity of the Class A
Certificates and such other related matters as the Representative shall require
and the Seller shall have furnished or caused to be furnished to such counsel
such documents as they may reasonably request for the purpose of enabling them
to pass upon such matters.
(h) You shall have received an opinion addressed to you, the Seller and
the Servicer of Pryor, Cashman, Sherman & Flynn, counsel to the Trustee, dated
the Closing Date and satisfactory in form and substance to the Representative
and its counsel, to the effect that:
(i) The Trustee has been duly incorporated and is validly existing as
a corporation in good standing under the laws of the State of New York with
full corporate trust power and authority to enter into and perform its
obligations under the Pooling and Servicing Agreement.
(ii) The Pooling and Servicing Agreement has been duly authorized,
executed and delivered by the Trustee, and assuming authorization,
execution and delivery thereof by the Seller and the Servicer, the Pooling
and Servicing Agreement constitutes a legal, valid and binding obligation
of the Trustee, enforceable against the Trustee in accordance with its
terms, except (1) the enforceability thereof may be subject to bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights, and (2) the remedy of
specific performance and injunctive and other forms of equitable relief may
be subject to equitable defenses and to the discretion of the court before
which any proceeding therefor may be brought.
(iii) The execution and delivery by the Trustee of the Pooling and
Servicing Agreement and the performance by the Trustee of its duties
thereunder do not conflict with or result in a violation of (a) any law or
regulation of the United States of America or the State of New York, (b)
the charter or by-laws of the Trustee, (c) any order, writ, judgment or
decree or (d) any agreement, instrument, order, writ judgment or decree
known to such counsel to which the Trustee is a party or is subject.
12
<PAGE>
(iv) The Class A Certificates have been duly executed, authenticated
and delivered by the Trustee.
(v) No consent, approval or authorization of, or registration,
declaration or filing with, any court or governmental agency or body of the
United States of America or the State of New York having jurisdiction over
the trust powers of the Trustee is required for the consummation on the
part of the Trustee of any of the transactions contemplated in the Pooling
and Servicing Agreement, except such as have been obtained.
(vi) If the Trustee were acting as Servicer under the Pooling and
Servicing Agreement at the date of this Agreement, the Trustee would have
the power and authority to perform the obligations of the Servicer as
provided in the Pooling and Servicing Agreement.
(i) Sheppard, Mullin, Richter & Hampton shall have furnished to the
Representative their written opinion, dated the Closing Date, to the effect that
the blank forms of contracts reviewed by such counsel comply, or complied when
in use, in all respects with all applicable disclosure requirements under the
Federal Consumer Credit Protection Act, 15 U.S.C. Sections 1601 ET SEQ., and
Regulation Z issued pursuant thereto, as interpreted in the Official Staff
Commentary, and applicable California disclosure laws.
(j) The Representative shall have received an officer's certificate dated
the Closing Date of the Chairman of the Board, the President or any Vice
President and by a principal financial or accounting officer of each of the
Seller and the Servicer in which each such officer shall state that, to the best
of such officer's knowledge after reasonable investigation, the representations
and warranties of the Seller or the Servicer, as applicable, contained in the
Pooling and Servicing Agreement and the representations and warranties of the
Seller or the Servicer, as applicable, contained in the Receivables Purchase
Agreement are true and correct in all material respects and that the Seller or
the Servicer, as applicable, has complied with all agreements and satisfied all
conditions on its part to be performed or satisfied under such agreements at or
prior to the Closing Date in all material respects.
(k) The Representative shall have received a letter or letters from each
counsel delivering any written opinion to any Rating Agency in connection with
the transaction described herein which is not otherwise described in this
Agreement allowing the Underwriters to rely on such opinion as if it were
addressed to the Underwriters.
(l) The Class A Certificates shall have been rated in the highest rating
category by Moody's and Standard & Poor's.
(m) The Seller will furnish the Representative with such conformed copies
of such opinions, certificates, letters and documents as the Representative
reasonably requests. The Representative may in its sole discretion waive on
behalf of the Underwriters compliance with any conditions to the obligations of
the Underwriters hereunder.
13
<PAGE>
7. INDEMNIFICATION AND CONTRIBUTION.(a) The Seller and the Servicer
will, jointly and severally, indemnify and hold each Underwriter harmless
against any losses, claims, damages or liabilities, joint or several, to which
such Underwriter may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any untrue statement or alleged untrue statement of any
material fact contained in the Registration Statement, the Prospectus, or any
amendment or supplement thereto, or any related preliminary prospectus, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse each Underwriter for any legal or
other expenses reasonably incurred by such Underwriter in connection with
investigating or defending any such loss, claim, damage, liability or action as
such expenses are incurred; provided, however, that neither the Seller nor the
Servicer will be liable in any such case to the extent that any such loss,
claim, damage or liability arises out of or is based upon an untrue statement or
alleged untrue statement in or omission or alleged omission from any of such
documents in reliance upon and in conformity with, written information furnished
to the Seller by any Underwriter through the Representative specifically for use
therein; it being understood and agreed that the only such information furnished
by any Underwriter consists of the information described as such in subsection
(b) below.
(b) Each Underwriter, severally and not jointly, will indemnify and hold
harmless the Seller and the Servicer against any losses, claims, damages or
liabilities to which the Seller or the Servicer may become subject, under the
Act or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact contained in the Registration
Statement, the Prospectus or any amendment or supplement thereto, or any related
preliminary prospectus, or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Seller by such Underwriter
through the Representative specifically for use therein, and will reimburse any
legal or other expenses reasonably incurred by the Seller or the Servicer in
connection with investigating or defending any such action or claim as such
expenses are incurred; it being understood and agreed that the only such
information furnished by any Underwriters consists of the following information
in the Prospectus furnished on behalf of the Underwriters: the last paragraph at
the bottom of the cover page concerning the terms of the offering by the
Underwriters, the legend concerning stabilizing on inside front cover page and
the third paragraph appearing under the caption "Underwriting".
(c) Promptly after receipt by an indemnified party under this Section of
written notice of the commencement of any action, such indemnified party will,
if a claim in respect thereof is to be made against the indemnifying party under
subsection (a) or (b) above, notify the indemnifying party of the commencement
thereof; but the omission so to notify the indemnifying party will not relieve
it from any liability which it may have to any indemnified
14
<PAGE>
party otherwise than under such subsection. In case any such action is brought
against any indemnified party and it notifies the indemnifying party of the
commencement thereof, the indemnifying party will be entitled to participate
therein and, to the extent that it may wish, jointly with any other indemnifying
party similarly notified, to assume the defense thereof, with counsel
satisfactory to such indemnified party (who shall not, except with the consent
of the indemnified party, be counsel to the indemnifying party), and after
notice from the indemnifying party to such indemnified party of its election so
to assume the defense thereof and after acceptance by the indemnified party of
counsel, the indemnifying party will not be liable to such indemnified party
under this Section for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation. No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement of any pending or
threatened action in respect of which any indemnified party is or could have
been a party and indemnity could have been sought hereunder by such indemnified
party unless such settlement includes an unconditional release of such
indemnified party from all liability on any claims that are the subject matter
of such action.
(d) If the indemnification provided for in this Section is
unavailable or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above, then each indemnifying party shall contribute to
the amount paid or payable by such indemnified party as a result of the losses,
claims, damages or liabilities referred to in subsection (a) or (b) above (i) in
such proportion as is appropriate to reflect the relative benefits received by
the Seller on the one hand and the Underwriters on the other from the offering
of the Class A Certificates or (ii) if the allocation provided by the
immediately preceding clause (i) is not permitted by applicable law, then each
indemnifying party shall contribute to such amount paid or payable by such
indemnified party in such proportion as is appropriate to reflect not only such
relative benefits referred to in clause (i) above but also the relative fault of
the Seller on the one hand and the Underwriters on the other in connection with
the statement or omission which resulted in such losses, claims, damages or
liabilities as well as any other relevant equitable considerations. The
relative benefits received by the Seller on the one hand and the Underwriters on
the other shall be deemed to be in the same proportion as the total net proceeds
from the offering (before deducting expenses) received by the Seller bear to the
total underwriting discounts and commissions received by the Underwriters. The
relative fault shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by the
Seller or by the Underwriters and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such untrue
statement or omission. The amount paid by an indemnified party as a result of
the losses, claims, damages or liabilities referred to in the first sentence of
this subsection (d) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any action or claim which is the subject of this subsection (d).
No person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The Underwriters' obligations in
this subsection (d) to contribute are several in proportion to their respective
underwriting obligations and not joint.
15
<PAGE>
(e) The obligations of the Seller and the Servicer under this Section
shall be in addition to any liability which the Seller or the Servicer may
otherwise have and shall extend, upon the same terms and conditions, to each
person, if any, who controls any Underwriter within the meaning of the Act; and
the obligations of the Underwriters under this Section shall be in addition to
any liability which the respective Underwriters may otherwise have and shall
extend, upon the same terms and conditions, to each director of the Seller or
the Servicer, to each officer of the Seller who has signed the Registration
Statement and to each person, if any, who controls the Seller or the Servicer
within the meaning of the Act.
8. SURVIVAL OF CERTAIN REPRESENTATIONS AND OBLIGATIONS. The respective
indemnities, agreements, representations, warranties and other statements of the
Seller or the Servicer or any of their officers and of the Underwriters set
forth in or made pursuant to this Agreement will remain in full force and
effect, regardless of any investigation or statement as to the results thereof,
made by or on behalf of any Underwriter, the Seller or the Servicer or any of
their respective representatives, officers or directors or any controlling
person, and will survive delivery of and payment for the Class A Certificates.
If this Agreement is terminated pursuant to Section 9 or if for any reason the
purchase of the Class A Certificates by the Underwriters is not consummated, the
Seller shall remain responsible for the expenses to be paid or reimbursed by it
pursuant to Section 5 hereof and the respective obligations of the Seller, the
Servicer and the Underwriters pursuant to Section 7 hereof shall remain in
effect. If the purchase of the Class A Certificates by the Underwriters is not
consummated for any reason other than solely because of the termination of this
Agreement pursuant to Section 9 or the occurrence of any event specified in
clause (iii), (iv) or (v) of Section 6(d) hereof, the Seller and the Servicer
will reimburse the Underwriters for all out-of-pocket expenses (including the
reasonable fees and disbursements of counsel) reasonably incurred by them in
connection with the offering of the Class A Certificates.
9. FAILURE TO PURCHASE THE CLASS A CERTIFICATES. If any Underwriter or
Underwriters default on its obligations to purchase Class A Certificates
hereunder on the Closing Date and the aggregate principal amount of Certificates
that such defaulting Underwriter or Underwriters agreed but failed to purchase
does not exceed 10% of the total principal amount of Certificate that the
Underwriters are obligated to purchase on such Closing Date, the Representative
may make arrangements satisfactory to the Seller for the purchase of such
Certificates by other persons, including any of the Underwriters, but if no such
arrangements are made by such Closing Date, the non-defaulting Underwriters
shall be obligated severally, in proportion to their respective commitments
hereunder, to purchase the Certificates such defaulting Underwriters agreed but
failed to purchase on such Closing Date. If any Underwriter or Underwriters so
default and the aggregate principal amount of Certificates with respect to which
such default or defaults exceeds 10% of the total principal amount of
Certificates that the Underwriters are obligated to purchase on such Closing
Date and arrangements satisfactory to the Representative and the Seller for the
purchase of such Certificates by other persons are not made within 36 hours
after such default, this Agreement will terminate without liability on the part
of any non-defaulting Underwriter or the Seller, except as provided in Section
8. As used in this Agreement, the term "Underwriter" includes
16
<PAGE>
any person substituted for an Underwriter under this Section. Nothing herein
will relieve a defaulting Underwriter or Underwriters from liability for its
default.
10. NOTICES. All communications hereunder will be in writing and, if sent
to the Representative or the Underwriters, will be mailed, delivered or sent by
facsimile transmission and confirmed to Merrill Lynch & Co., Merrill Lynch,
Pierce, Fenner & Smith Incorporated, World Financial Center, North Tower - 15th
Floor, New York, New York 10281-1315, Attention: Asset Backed Securities Group
(facsimile number (212) 449-9015); if sent to the Seller, will be mailed,
delivered or sent by facsimile transmission and confirmed to it at American
Honda Receivables Corp., 700 Van Ness Avenue, Torrance, California 90501,
attention of John I. Weisickle (facsimile number (310) 787-3910); and if sent to
the Servicer, will be mailed, delivered or sent by facsimile transmission and
confirmed to it at American Honda Finance Corporation, 700 Van Ness Avenue,
Torrance, California 90501, attention of John I. Weisickle (facsimile number
(310) 787-3910).
11. SUCCESSORS. This Agreement will inure to the benefit of and be
binding upon the Underwriters, the Seller and the Servicer and their respective
successors and the officers and directors and controlling persons referred to in
Section 7, and no other person will have any right or obligations hereunder.
12. REPRESENTATIONS OF UNDERWRITERS. The Representative will act for the
several Underwriters in connection with the transactions described in this
Agreement, and any action taken by the Representative under this Agreement will
be binding upon all the Underwriters.
13. APPLICABLE LAW. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York. The Seller and the Servicer
each submit to the non-exclusive jurisdiction of the Federal and state courts in
the Borough of Manhattan in The City of New York in any suit or proceeding
arising out of or relating to this Agreement or the transactions contemplated
hereby.
14. COUNTERPARTS. This agreement may be executed by each of the parties
hereto in any number of counterparts, and by each of the parties hereto on
separate counterparts, each of which counterparts, when so executed and
delivered, shall be deemed to be an original, but all such counterparts shall
together constitute but one and the same instrument.
17
<PAGE>
If the foregoing is in accordance with your understanding of our agreement,
please sign and return to us a counterpart hereof, whereupon it will become a
binding agreement among the Seller, the Servicer and the several Underwriters in
accordance with its terms.
Very truly yours,
AMERICAN HONDA RECEIVABLES CORP.,
By:
------------------------------------
Name: Y. Kohama
Title: President
AMERICAN HONDA FINANCE CORPORATION
By:
---------------------------------------
Name: Y. Kohama
Title: President
Accepted in New York, New York,
as of the date hereof:
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By:
-----------------------------------
Name:
Title:
Acting on behalf of itself and
as the Representative of the
several Underwriters.
<PAGE>
SCHEDULE I
Principal Amount
of Class A
Underwriter Certificates
- ----------- -----------------
Merrill Lynch, Pierce, Fenner & Smith
Incorporated . . . . . . . . . . . . . . . . . . _____________
Credit Suisse First Boston Corporation . . . . . . . . . . . _____________
J.P. Morgan & Co . . . . . . . . . . . . . . . . . . . . . . _____________
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . $
-------------
-------------
<PAGE>
EXHIBIT 4.1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AMERICAN HONDA RECEIVABLES CORP.,
as Seller
AMERICAN HONDA FINANCE CORPORATION,
as Servicer
and
BANK OF TOKYO-MITSUBISHI TRUST COMPANY,
as Trustee
on behalf of the Certificateholders
--------------------------------------
POOLING AND SERVICING AGREEMENT
Dated as of October 1, 1997
--------------------------------------
$_________________
Honda Auto Receivables 1997-B Grantor Trust
____% Asset Backed Certificates
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE ONE
DEFINITIONS AND TERMS
Section 1.01. Special Definitions and Terms . . . . . . . . 1
Section 1.02. Other Definitions and Terms . . . . . . . . . . . . . 3
ARTICLE TWO
CREATION OF TRUST
Section 2.01. Creation of Trust . . . . . . . . . . . . . . . . . . 3
ARTICLE THREE
CONVEYANCE OF RECEIVABLES; SERVICER LETTER OF CREDIT
Section 3.01. Conveyance of Receivables . . . . . . . . . . . . . . 4
Section 3.02. Servicer Letter of Credit . . . . . . . . . . 4
ARTICLE FOUR
ACCEPTANCE BY TRUSTEE
Section 4.01. Acceptance by Trustee . . . . . . . . . . . . 5
ARTICLE FIVE
INCORPORATION OF STANDARD
TERMS AND CONDITIONS
Section 5.01. Incorporation of Standard Terms and Conditions. . . 5
(i)
<PAGE>
Page
----
ARTICLE SIX
ADDITIONAL REPRESENTATIONS AND WARRANTIES
OF SELLER
Section 6.01. Additional Representations and Warranties of Seller 5
ARTICLE SEVEN
AMERICAN HONDA NOT TO RESIGN AS SERVICER
Section 7.01. American Honda Not to Resign as Servicer. . . 6
ARTICLE EIGHT
AGENT FOR SERVICE
Section 8.01. Agent for Service . . . . . . . . . . . . . . 6
ARTICLES NINE AND TEN
[Reserved]
SCHEDULES
Schedule A - Schedule of Receivables . . . . . . . . . . . SA-1
Schedule B - Locations of Receivable Files . . . . . . . . SB-1
EXHIBITS
Exhibit A - Form of Class A Certificate. . . . . . . . . . A-1
Exhibit B - Form of Class B Certificate. . . . . . . . . . B-1
Exhibit C - Form of Letter of Representations. . . . . . . C-1
Exhibit D - Form of Servicer Letter of Credit. . . . . . . D-1
Exhibit E - Form of Servicer Report. . . . . . . . . . . . E-1
(ii)
<PAGE>
This Pooling and Servicing Agreement, dated as of October 1, 1997, is made
with respect to the formation of the Honda Auto Receivables 1997-B Grantor
Trust, among American Honda Receivables Corp., a California corporation (the
"Seller"), American Honda Finance Corporation, a California corporation (the
"Servicer"), and Bank of Tokyo-Mitsubishi Trust Company, a New York banking
corporation, as trustee (the "Trustee").
W I T N E S S E T H:
In consideration of the premises and of the mutual agreements herein
contained, the parties hereto agree as follows:
ARTICLE ONE
DEFINITIONS AND TERMS
Section 1.01. SPECIAL DEFINITIONS AND TERMS. Whenever used in the Standard
Terms and Conditions and in this Agreement, the following words and phrases
shall have the following meanings, unless otherwise indicated by the context:
"AGREEMENT" means this Pooling and Servicing Agreement and all amendments
hereof and supplements hereto.
"AGGREGATE NET LOSSES" means, with respect to a Collection Period, an
amount equal to the aggregate Principal Balance of all Receivables that became
Defaulted Receivables during such Collection Period minus all Net Liquidation
Proceeds collected during such Collection Period with respect to Defaulted
Receivables.
"CERTIFICATE REGISTRAR" means the Trustee unless a successor Certificate
Registrar is appointed pursuant to Section 15.03 of the Standard Terms and
Conditions. The Certificate Registrar initially designates its offices at
1251 Avenue of the Americas, 10th Floor, New York, New York 10020-1104, as its
offices where Certificates may be surrendered for registration of transfer or
exchange as described in Section 15.07 of the Standard Terms and Conditions.
"CHARGE-OFF RATE" means, with respect to a Collection Period, the
percentage equivalent of a fraction, the numerator of which is the Aggregate Net
Losses for such Collection Period, and the denominator of which is the average
of (i) the Pool Balance on the last day of the Collection Period immediately
preceding such Collection Period and (ii) the Pool Balance on the last day of
such current Collection Period; such quotient is then multiplied by twelve to
arrive at an annualized percentage.
"CLASS A PERCENTAGE" means _____%.
"CLASS B PERCENTAGE" means ____%.
<PAGE>
"CLOSING DATE" means October __, 1997.
"CORPORATE TRUST OFFICE" means, as of the date hereof, the office of the
Trustee located at 1251 Avenue of the Americas, 10th Floor, New York, New York
10020-1104, Attention: Corporate Trust Department.
"CURRENT RECEIVABLE" means each Receivable that is not a Defaulted
Receivable or a Liquidated Receivable.
"CUTOFF DATE" means October 1, 1997.
"DELINQUENCY PERCENTAGE" means, with respect to a Collection Period, the
percentage equivalent of a fraction, the numerator of which is the number of (i)
all outstanding Receivables 61 days or more delinquent (after taking into
account permitted extensions) as of the last day of such Collection Period,
determined in accordance with the Servicer's normal practices, plus (ii) all
Receivables the related Financed Vehicles of which have been repossessed but
have not been liquidated (to the extent the related Receivable is not otherwise
reflected in clause (i) above or is not a Defaulted Receivable), and the
denominator of which is the aggregate number of Current Receivables on the last
day of such Collection Period.
"DISCOUNT RATE" means 2.5% per annum.
The first "DISTRIBUTION DATE" shall be November 15, 1997.
The "FINAL SCHEDULED DISTRIBUTION DATE" shall be May 15, 2003.
"INITIAL SERVICER LETTER OF CREDIT AMOUNT" means $_______________.
"LETTER OF REPRESENTATIONS" means the Letter of Representations among the
Seller, the Trustee and DTC, substantially in the form attached hereto as
Exhibit C.
"ORIGINAL POOL BALANCE" means $___________.
"ORIGINAL CLASS A CERTIFICATE BALANCE" means $_______________.
"ORIGINAL CLASS B CERTIFICATE BALANCE" means $_______________.
"PASS-THROUGH RATE" means ____% per annum.
"RATING AGENCY" means each of Moody's and Standard & Poor's.
"RECEIVABLES PURCHASE AGREEMENT" means that certain Receivables Purchase
Agreement, dated as of the Cutoff Date, between the Seller and American Honda.
"REQUIRED RATING" means a rating on commercial paper or other short-term
unsecured debt obligations of Prime-1 by Moody's and A-1+ by Standard & Poor's;
and any
2
<PAGE>
requirement that commercial paper or short-term unsecured debt obligations have
the "Required Rating" shall mean that such commercial paper or unsecured debt
obligations shall be rated at least equal to the foregoing ratings from Moody's
and Standard & Poor's.
"RESERVE FUND INITIAL DEPOSIT" means $_____________.
"SERVICING FEE RATE" means 1.00% per annum.
"SERVICER CERTIFICATE" means the monthly report by the Servicer,
substantially in the form attached hereto as Exhibit E.
"SPECIFIED RESERVE FUND BALANCE" means, with respect to any Distribution
Date, $_______________ except that, if on any Distribution Date (i) the average
of the Charge-off Rates for the preceding three Collection Periods exceeds 1.50%
or (ii) the average of the Delinquency Percentages for the preceding three
Collection Periods exceeds 1.50%, then the Specified Reserve Fund Balance for
such Distribution Date will be an amount equal to a specified percentage of the
Pool Balance as of the last day of the related Collection Period. Such
specified percentage shall be determined by deducting from 9.25% the following
fraction, expressed as a percentage: (a) one minus (b) a fraction, the numerator
of which is the Class A Certificate Balance on such Distribution Date (after
giving effect to distributions of principal made on such Distribution Date) and
the denominator of which is such Pool Balance. Notwithstanding the foregoing,
in no event will the Specified Reserve Fund Balance be more than $______________
or less than $____________. Finally, on any Distribution Date as to which the
Pool Balance as of the last day of the related Collection Period is
$______________ or less, the Specified Reserve Fund Balance for such
Distribution Date will be the greater of the applicable amount determined as set
forth above or $______________.
"STANDARD TERMS AND CONDITIONS" means the Standard Terms and Conditions of
Agreement (Senior/Subordinated) for Honda Auto Receivables Grantor Trust
effective October 1, 1997, in the form attached hereto.
"YIELD SUPPLEMENT ACCOUNT DEPOSIT" means $______________.
Section 1.02. OTHER DEFINITIONS AND TERMS. Capitalized terms used herein
that are not otherwise defined shall have the meanings ascribed thereto in the
Standard Terms and Conditions.
ARTICLE TWO
CREATION OF TRUST
Section 2.01. CREATION OF TRUST. Upon the execution of this Agreement by
the parties hereto, there is hereby created the Honda Auto Receivables 1997-B
Grantor Trust.
3
<PAGE>
ARTICLE THREE
CONVEYANCE OF RECEIVABLES; SERVICER LETTER OF CREDIT
Section 3.01. CONVEYANCE OF RECEIVABLES. In consideration of the
Trustee's delivery to the Seller of executed and authenticated Certificates, in
authorized denominations, in an aggregate amount equal to the Original Pool
Balance, the Seller does hereby sell, transfer, assign and otherwise convey to
the Trustee, in trust for the benefit of the Certificateholders, without
recourse (subject to the Seller's obligations herein) all right, title and
interest of the Seller in and to:
(i) the Receivables and all monies due thereon or paid
thereunder or in respect thereof (including proceeds of the repurchase of
Receivables by the Seller pursuant to Section 12.05 or 20.02 of the
Standard Terms and Conditions or the purchase of Receivables by the
Servicer pursuant to Section 13.08 or 20.02 of the Standard Terms and
Conditions) on and after the Cutoff Date;
(ii) the security interests in the Financed Vehicles;
(iii) any proceeds of any physical damage insurance policies
covering the Financed Vehicles and in any proceeds of any credit life or
credit disability insurance policies relating to the Receivables or the
Obligors;
(iv) any proceeds of Dealer Recourse;
(v) the Receivables Purchase Agreement but not the obligations
of the Seller thereunder;
(vi) the right to realize upon any property (including the right
to receive future Liquidation Proceeds) that shall have secured a
Receivable and have been repossessed by or on behalf of the Trustee;
(vii) all other assets comprising the Trust; and
(viii) all proceeds of the foregoing.
The parties hereto intend that the conveyance hereunder be a sale. In the
event that the conveyance hereunder is not for any reason considered a sale, the
Seller hereby grants to the Purchaser a first priority perfected security
interest in, all of its right, title and interest in, to and under the
Receivables, and all other property conveyed hereunder and all proceeds of any
of the foregoing and the parties intend that this Agreement constitute a
security agreement under applicable law.
Section 3.02. SERVICER LETTER OF CREDIT. Upon the obtaining of a Servicer
Letter of Credit pursuant to Sections 14.02(b) and 14.09 of the Standard Terms
and Conditions, the
4
<PAGE>
Trustee will hold the Servicer Letter of Credit and deliver demands for payment
pursuant thereto in accordance with its terms and the terms of this Agreement.
ARTICLE FOUR
ACCEPTANCE BY TRUSTEE
Section 4.01. ACCEPTANCE BY TRUSTEE. The Trustee does hereby accept all
consideration conveyed by the Seller pursuant to Section 3.01 hereof, together
with the Servicer Letter of Credit, and declares that the Trustee shall hold
such consideration upon the trusts herein set forth for the benefit of holders
of the Certificates, subject to the terms and provisions of this Agreement.
ARTICLE FIVE
INCORPORATION OF STANDARD
TERMS AND CONDITIONS
Section 5.01. INCORPORATION OF STANDARD TERMS AND CONDITIONS. This
Pooling and Servicing Agreement does hereby incorporate by reference the
Standard Terms and Conditions, in the form attached hereto.
ARTICLE SIX
ADDITIONAL REPRESENTATIONS AND WARRANTIES
OF SELLER
Section 6.01. ADDITIONAL REPRESENTATIONS AND WARRANTIES OF SELLER. The
Seller does hereby make the following representations and warranties on which
the Trustee shall rely in accepting the Receivables in trust and authenticating
the Certificates.
(i) MATURITY OF RECEIVABLES. Each Receivable shall have an
original maturity of not less than 12 months nor greater than 60 months
and, as of the Cutoff Date, a remaining maturity of not less than 1 month
nor greater than 60 months.
(ii) FINANCE CHARGE. Each Receivable provides for the payment of
a finance charge calculated on the basis of an APR ranging from 1.90% to
20.06%.
(iii) PRINCIPAL BALANCE. Each Receivable had an original
principal balance of not less than $1,303.46 nor more than $88,335.99 and
an average unpaid principal balance, as of the Cutoff Date, of $10,725.33.
5
<PAGE>
(iv) ORIGINATION. Each Receivable was originated on or before
October 1, 1997.
(v) NO OVERDUE PAYMENTS. No Receivable shall have a Scheduled
Payment that is more than 30 days past due as of the Cutoff Date.
(vi) LOCATION OF RECEIVABLE FILES. Each Receivable File shall be
kept at one of the locations listed in Schedule SB hereto.
(vii) NEW FINANCED VEHICLES. Each Financed Vehicle shall be a new
Honda or Acura automobile or sport utility vehicle or Honda minivan.
(viii) ADDRESSES OF OBLIGORS. The Obligor under each Receivable
had a current address in the United States as of the Cutoff Date.
ARTICLE SEVEN
AMERICAN HONDA NOT TO RESIGN AS SERVICER
Section 7.01. AMERICAN HONDA NOT TO RESIGN AS SERVICER. Subject to the
provisions of Section 17.03 of the Standard Terms and Conditions, the Servicer
shall not resign from the obligations and duties hereby imposed on it as
Servicer under this Agreement except upon determination that the performance of
its duties under this Agreement shall no longer be permissible under applicable
law. Notice of any such determination permitting the resignation of the
Servicer shall be communicated to the Trustee at the earliest practicable time
(and, if such communication is not in writing, shall be confirmed in writing at
the earliest practicable time) and any such determination shall be evidenced by
an Opinion of Counsel to such effect delivered to the Trustee concurrently with
or promptly after such notice. No such resignation shall become effective until
the Trustee or a successor Servicer shall have assumed the responsibilities and
obligations of the Servicer in accordance with Sections 17.05 and 18.03 of the
Standard Terms and Conditions.
ARTICLE EIGHT
AGENT FOR SERVICE
Section 8.01. AGENT FOR SERVICE. The agent for service for the Seller
shall be CT Corp., 818 West 7th Street, Second Floor, Los Angeles, California
90017, and the agent for service for the Servicer shall be its President, 700
Van Ness Avenue, Building 300, Torrance, California 90501.
6
<PAGE>
ARTICLES NINE AND TEN
[Reserved]
7
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Pooling and Servicing
Agreement to be duly executed by their respective officers as of the day and
year first above written.
AMERICAN HONDA RECEIVABLES CORP.,
as Seller
By:
------------------------------------
Y. Kohama
President
AMERICAN HONDA FINANCE CORPORATION,
as Servicer
By:
------------------------------------
Y. Kohama
President
BANK OF TOKYO-MITSUBISHI TRUST
COMPANY,
as Trustee
By:
------------------------------------
Name:
Title:
8
<PAGE>
SCHEDULE SA
SCHEDULE OF RECEIVABLES
Omitted - Originals on file at the offices of the Seller, the Servicer and
the Trustee.
SA-1
<PAGE>
SCHEDULE SB
LOCATIONS OF RECEIVABLE FILES
American Honda Finance Corporation
21041 South Western Avenue, Suite 200
Torrance, California 90501
American Honda Finance Corporation
1355 Northmeadow Parkway, Suite 100
Roswell, Georgia 30076
American Honda Finance Corporation
8505 Freeport Parkway, Suite 600
Irving, Texas 75063
American Honda Finance Corporation
8505 Freeport Parkway, Suite 625
Irving, Texas 75063
American Honda Finance Corporation
470 Granby Road, Suite 2
S. Hadley, Massachusetts 01075
American Honda Finance Corporation
601 Campus Drive, Suite C-7
Arlington Heights, Illinois 60004
American Honda Finance Corporation
2680 Bishop Drive, Suite 100
San Ramon, California 94583
American Honda Finance Corporation
8514 McAlpine Park Drive, Suite 100
Charlotte, North Carolina 28211
American Honda Finance Corporation
200 Continental Drive, Suite 301
Newark, Delaware 19713
American Honda Finance Corporation
700 Van Ness Avenue, Building 300
Torrance, California 90501
SB-1
<PAGE>
EXHIBIT A
FORM OF CLASS A CERTIFICATE
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO ISSUER OR ITS AGENT
FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO
SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.
HONDA AUTO RECEIVABLES 1997-B GRANTOR TRUST
____% ASSET BACKED CERTIFICATE, CLASS A
evidencing a fractional undivided interest in the Trust, as defined below,
the property of which includes a pool of retail installment sale contracts
secured by the new motor vehicles financed thereby and sold to the Trust by
American Honda Receivables Corp. The Final Scheduled Distribution Date is
May 15, 2003.
(This Certificate does not represent an interest in or obligation of
American Honda Receivables Corp., American Honda Finance Corporation or any
of their respective affiliates)
CUSIP ____________
NUMBER RA-1 $______________
THIS CERTIFIES THAT CEDE & CO. is the registered owner of a _____________
_________ dollar ($__________) nonassessable, fully-paid, fractional undivided
interest in the Honda Auto Receivables 1997-B Grantor Trust (the "Trust") formed
by American Honda Receivables Corp., a California corporation (the "Seller").
The Trust was created pursuant to a Pooling and Servicing Agreement, dated as of
October 1, 1997 (the "Agreement"), among the Seller, American Honda Finance
Corporation, as Servicer, and Bank of Tokyo-Mitsubishi Trust Company, as trustee
(the "Trustee"). A summary of certain of the pertinent provisions of the
Agreement is set forth below. To the extent not otherwise defined herein, the
capitalized terms used herein have the meanings assigned to them in the
Agreement.
This Certificate is one of the duly authorized Certificates issued under
the Agreement and designated as "Honda Auto Receivables 1997-B Grantor Trust
_____% Asset Backed
A-1
<PAGE>
Certificates, Class A" (the "Class A Certificates"). Also issued under the
Agreement are certificates designated as "Honda Auto Receivables 1997-B Grantor
Trust ____% Asset Backed Certificates, Class B" (the "Class B Certificates" and,
together with the Class A Certificates, the "Certificates"). The Class B
Certificates are subordinated to the Class A Certificates to the limited extent
described in the Agreement. The aggregate undivided interest in the Trust
evidenced by all Class A Certificates is _____%. This Class A Certificate is
issued under and is subject to the terms, provisions and conditions of the
Agreement, to which Agreement the Holder of this Class A Certificate by virtue
of the acceptance hereof assents and by which such Holder is bound. The
property of the Trust includes, among other things, a pool of retail installment
sale contracts (the "Receivables") for the new motor vehicles financed thereby
(the "Financed Vehicles") and certain monies due or received under the
Receivables on and after the Cutoff Date, security interests in the Financed
Vehicles and accessions thereto, certain bank accounts, proceeds from claims on
physical damage, credit life and disability insurance policies covering each of
the Financed Vehicles, the Receivables or the related Obligors, the rights of
the Seller under the Receivables Purchase Agreement, the right of the Seller to
receive the proceeds of Dealer Recourse and all proceeds of the foregoing.
Under the Agreement, there will be distributed on the fifteenth day of each
month or, if such day is not a Business Day, the next succeeding Business Day
(each, a "Distribution Date"), commencing on November 15, 1997, to the Person in
whose name this Class A Certificate is registered at the close of business on
the last calendar day immediately preceding the related Distribution Date or, if
Definitive Certificates are issued, the last day of the immediately preceding
calendar month (each, a "Record Date"), such Class A Certificateholder's
percentage interest in the Class A Distributable Amount for such Distribution
Date actually distributed, together with the payment of any outstanding Class A
Interest Carryover Shortfall and Class A Principal Carryover Shortfall actually
made on such Distribution Date, in each case to the extent and as more
specifically set forth in the Agreement.
Distributions on this Class A Certificate will be made by the Trustee by
check or money order mailed to the related Class A Certificateholder of record
in the Certificate Register without the presentation or surrender of this
Class A Certificate or the making of any notation hereon except that with
respect to Class A Certificates registered in the name of Cede & Co., the
nominee for DTC, distributions will be made in the form of immediately available
funds. Except as otherwise provided in the Agreement and notwithstanding the
foregoing, the final distribution on this Class A Certificate will be made after
due notice by the Trustee of the pendency of such distribution and only upon
presentation and surrender of this Class A Certificate at the office or agency
maintained for that purpose by the Trustee in the Borough of Manhattan, The City
of New York.
The Certificates do not represent an obligation of, or an interest in, the
Seller, the Servicer or any of their respective affiliates. The Certificates
are limited in right of payment to certain collections and recoveries respecting
the Receivables and the monies on deposit in the Reserve Fund and the Yield
Supplement Account, all as more specifically set forth in the Agreement. A copy
of the Agreement may be examined during normal business hours at the
A-2
<PAGE>
principal office of the Trustee, and at such other places, if any, designated by
the Trustee, by any Certificateholder upon request.
The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
parties thereto and the rights of the Certificateholders under the Agreement at
any time by the Seller, the Servicer and the Trustee with the consent of the
Holders of Certificates evidencing not less than 51% of the Voting Interests of
all Certificates, voting together as a single class. Any such consent by the
Holder of this Class A Certificate shall be conclusive and binding on such
Holder and on all future Holders of this Class A Certificate and of any Class A
Certificate issued upon the registration of transfer hereof or in exchange
herefor or in lieu hereof whether or not notation of such consent is made upon
this Class A Certificate. The Agreement also permits the amendment thereof, in
certain circumstances, without the consent of the Holders of any of the
Certificates.
As provided in the Agreement and subject to certain limitations therein set
forth, the transfer of this Class A Certificate is registrable in the
Certificate Register upon surrender of this Class A Certificate for registration
of transfer at the offices or agencies maintained by the Trustee in its capacity
as Certificate Registrar, or by any successor Certificate Registrar, in the
Borough of Manhattan, The City of New York, accompanied by a written instrument
of transfer in form satisfactory to the Trustee and the Certificate Registrar
duly executed by the Holder hereof or such Holder's attorney duly authorized in
writing, and thereupon one or more new Class A Certificates of authorized
denominations evidencing the same aggregate principal amount will be issued to
the designated transferee.
The Class A Certificates are issuable only as registered Certificates
without coupons in minimum denominations of $1,000 and integral multiples
thereof (except for one Class A Certificate in a smaller minimum denomination
representing any remaining portion of the Original Class A Certificate Balance).
As provided in the Agreement and subject to certain limitations therein set
forth, Class A Certificates are exchangeable for new Class A Certificates of
authorized denominations evidencing the same aggregate principal amount, as
requested by the Holder surrendering the same. No service charge will be made
for any such registration of transfer or exchange, but the Trustee may require
payment of a sum sufficient to cover any tax or governmental charges payable in
connection therewith.
Prior to due presentation of this Class A Certificate for registration of
transfer, the Trustee, the Certificate Registrar and any of their respective
agents may treat the Person in whose name this Class A Certificate is registered
as the owner hereof for the purposes of receiving distributions and for all
other purposes, and none of the Trustee, the Certificate Registrar nor any such
agent shall be affected by any notice to the contrary.
The obligations and responsibilities created by the Agreement and the Trust
created thereby shall terminate upon the payment to Certificateholders of all
amounts required to be paid to them pursuant to the Agreement or the maturity or
liquidation of the last Receivable and the disposition of all property held as
part of the Trust. The Seller or the Servicer, or any successor to the
Servicer, may, at its option, purchase the corpus of the Trust at a price
A-3
<PAGE>
specified in the Agreement, and such purchase of the Receivables and other
property of the Trust will effect early retirement of the Certificates; however,
such right of purchase is exercisable only on a Distribution Date following the
last day of any Collection Period as of which the Pool Balance is 10% or less of
the Original Pool Balance.
Unless the certificate of authentication hereon shall have been executed by
an authorized officer of the Trustee, by manual signature, this Class A
Certificate shall not entitle the Holder hereof to any benefit under the
Agreement or be valid for any purpose.
IN WITNESS WHEREOF, the Trustee, on behalf of the Trust and not in its
individual capacity, has caused this Class A Certificate to be duly executed.
Dated: HONDA AUTO RECEIVABLES 1997-B
GRANTOR TRUST
By: BANK OF TOKYO-MITSUBISHI TRUST
COMPANY, as Trustee of HONDA
AUTO RECEIVABLES 1997-B
GRANTOR TRUST
[SEAL]
By:
-------------------------------
Authorized Officer
ATTEST:
- ------------------------------
Authorized Officer
This is one of the Class A Certificates referred to in the within-mentioned
Agreement.
BANK OF TOKYO-MITSUBISHI TRUST
COMPANY, as Trustee of HONDA AUTO
RECEIVABLES 1997-B GRANTOR TRUST
By:
-------------------------------
Authorized Officer
A-4
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers unto
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER
OF ASSIGNEE
- --------------------------------------------------------------------------------
(Please print or typewrite name and address, including postal zip code, of
assignee)
- --------------------------------------------------------------------------------
the within Certificate, and all rights thereunder, hereby irrevocably
constituting and appointing
- --------------------------------------------------------------------------------
Attorney to transfer said Certificate on the books of the Certificate Registrar,
with full power of substitution in the premises.
Dated:
*
----------------------------------
Signature Guaranteed:
*
----------------------------------
* NOTICE: The signature to this assignment must correspond with the name as it
appears upon the face of the within Certificate in every particular, without
alteration, enlargement or any change whatever. Such signature must be
guaranteed by a member firm of the New York Stock Exchange or a commercial bank
or trust company.
A-5
<PAGE>
EXHIBIT B
FORM OF CLASS B CERTIFICATE
THIS CERTIFICATE IS SUBORDINATED IN RIGHT OF PAYMENT TO THE CLASS A CERTIFICATES
AS DESCRIBED IN THE AGREEMENT REFERRED TO HEREIN.
THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR THE APPLICABLE SECURITIES LAWS OF ANY STATE AND MAY
NOT BE RESOLD OR TRANSFERRED UNLESS IT IS REGISTERED PURSUANT TO SUCH ACT AND
STATE LAWS OR IS SOLD OR TRANSFERRED IN A TRANSACTION WHICH IS EXEMPT FROM
REGISTRATION UNDER SUCH ACT AND STATE LAWS AND IS TRANSFERRED IN ACCORDANCE WITH
THE PROVISIONS OF SECTION 15.03 OF THE AGREEMENT REFERRED TO HEREIN.
HONDA AUTO RECEIVABLES 1997-B GRANTOR TRUST
____% ASSET BACKED CERTIFICATE, CLASS B
evidencing a fractional undivided interest in the Trust, as defined below,
the property of which includes a pool of retail installment sale contracts
secured by the new motor vehicles financed thereby and sold to the Trust by
American Honda Receivables Corp. The Final Scheduled Distribution Date is
May 15, 2003.
(This Certificate does not represent an interest in or obligation of
American Honda Receivables Corp., American Honda Finance Corporation or any
of their respective affiliates)
NUMBER RB-1 $____________
THIS CERTIFIES THAT AMERICAN HONDA RECEIVABLES CORP. is the registered
owner of a _______________________________________ ($_____________)
nonassessable, fully-paid, fractional undivided interest in the Honda Auto
Receivables 1997-B Grantor Trust (the "Trust") formed by American Honda
Receivables Corp., a California corporation (the "Seller"). The Trust was
created pursuant to a Pooling and Servicing Agreement dated as of October 1,
1997 (the "Agreement"), among the Seller, American Honda Finance Corporation, as
Servicer, and Bank of Tokyo-Mitsubishi Trust Company, as trustee (the
"Trustee"). A summary of certain of the pertinent provisions of the Agreement
is set forth below. To the extent not otherwise defined herein, the capitalized
terms used herein have the meanings assigned to them in the Agreement.
This Certificate is one of the duly authorized Certificates issued under
the Agreement and designated as "Honda Auto Receivables 1997-B Grantor Trust
____% Asset Backed
B-1
<PAGE>
Certificates, Class B" (the "Class B Certificates"). Also issued under the
Agreement are certificates designated as "Honda Auto Receivables 1997-B Grantor
Trust _____% Asset Backed Certificates, Class A" (the "Class A Certificates"
and, together with the Class B Certificates, the "Certificates"). The Class B
Certificates are subordinated to the Class A Certificates to the limited extent
described in the Agreement. The aggregate undivided interest in the Trust
evidenced by all Class B Certificates is ____%. This Class B Certificate is
issued under and is subject to the terms, provisions and conditions of the
Agreement, to which Agreement the Holder of this Class B Certificate by virtue
of the acceptance hereof assents and by which such Holder is bound. The
property of the Trust includes, among other things, a pool of retail installment
sale contracts (the "Receivables") for the new motor vehicles financed thereby
(the "Financed Vehicles"), certain monies due or received under the Receivables
on and after the Cutoff Date, security interests in the Financed Vehicles and
accessions thereto, certain bank accounts, proceeds from claims on physical
damage, credit life and disability insurance policies covering any of the
Financed Vehicles, the Receivables or the related Obligors, the rights of the
Seller under the Receivables Purchase Agreement, the right of the Seller to
receive the proceeds of any Dealer Recourse and all proceeds of the foregoing.
Under the Agreement, there will be distributed on the fifteenth day of each
month or, if such day is not a Business Day, the next succeeding Business Day
(each, a "Distribution Date"), commencing on November 15, 1997, to the Person in
whose name this Class B Certificate is registered at the close of business on
the last day of the immediately preceding calendar month (each, a "Record
Date"), such Class B Certificateholder's percentage interest in the Class B
Distributable Amount for such Distribution Date actually distributed, together
with the payment of any outstanding Class B Interest Carryover Shortfall and any
outstanding Class B Principal Carryover Shortfall actually made on such
Distribution Date, in each case to the extent and as more specifically set forth
in the Agreement.
Distributions on this Class B Certificate will be made by the Trustee by
check or money order mailed to the related Class B Certificateholder of record
in the Certificate Register without the presentation or surrender of this
Class B Certificate or the making of any notation hereon. Except as otherwise
provided in the Agreement and notwithstanding the foregoing, the final
distribution on this Class B Certificate will be made after due notice by the
Trustee of the pendency of such distribution and only upon presentation and
surrender of this Class B Certificate at the office or agency maintained for
that purpose by the Trustee in the Borough of Manhattan, The City of New York.
The Certificates do not represent an obligation of, or an interest in, the
Seller, the Servicer or any of their respective affiliates. The Certificates
are limited in right of payment to certain collections and recoveries respecting
the Receivables and the monies on deposit in the Reserve Fund and the Yield
Supplement Account, all as more specifically set forth in the Agreement. A copy
of the Agreement may be examined during normal business hours at the principal
office of the Trustee, and at such other places, if any, designated by the
Trustee, by any Certificateholder upon request.
B-2
<PAGE>
The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
parties thereto and the rights of the Certificateholders under the Agreement at
any time by the Seller, the Servicer and the Trustee with the consent of the
Holders of Certificates evidencing not less than 51% of the Voting Interests of
all Certificates, voting together as a single class. Any such consent by the
Holder of this Class B Certificate shall be conclusive and binding on such
Holder and on all future Holders of this Class B Certificate and of any Class B
Certificate issued upon the registration of transfer hereof or in exchange
herefor or in lieu hereof whether or not notation of such consent is made upon
this Class B Certificate. The Agreement also permits the amendment thereof, in
certain circumstances, without the consent of the Holders of any of the
Certificates.
As provided in the Agreement and subject to certain limitations therein set
forth, the transfer of this Class B Certificate is registrable in the
Certificate Register upon surrender of this Class B Certificate for registration
of transfer at the offices or agencies maintained by the Trustee in its capacity
as Certificate Registrar, or by any successor Certificate Registrar, in the
Borough of Manhattan, The City of New York, accompanied by a written instrument
of transfer in form satisfactory to the Trustee and the Certificate Registrar
duly executed by the Holder hereof or such Holder's attorney duly authorized in
writing, and thereupon one or more new Class B Certificates of authorized
denominations evidencing the same aggregate principal amount will be issued to
the designated transferee.
The Class B Certificates are issuable only as registered Certificates
without coupons in minimum denominations of $100,000 and integral multiples
thereof (except for one Class B Certificate in a smaller minimum denomination
representing any remaining portion of the Original Class B Certificate Balance);
provided that for so long as there is only one Holder of the Class B
Certificates, one Class B Certificate may be issued in an amount representing
the entire Original Class B Certificate Balance. As provided in the Agreement
and subject to certain limitations therein set forth, Class B Certificates are
exchangeable for new Class B Certificates of authorized denominations evidencing
the same aggregate principal amount, as requested by the Holder surrendering the
same. No service charge will be made for any such registration of transfer or
exchange, but the Trustee may require payment of a sum sufficient to cover any
tax or governmental charges payable in connection therewith.
Prior to due presentation of this Class B Certificate for registration of
transfer, the Trustee, the Certificate Registrar and any of their respective
agents may treat the Person in whose name this Class B Certificate is registered
as the owner hereof for the purpose of receiving distributions and for all other
purposes, and none of the Trustee, the Certificate Registrar nor any such agent
shall be affected by any notice to the contrary.
The obligations and responsibilities created by the Agreement and the Trust
created thereby shall terminate upon the payment to Certificateholders of all
amounts required to be paid to them pursuant to the Agreement or the maturity or
liquidation of the last Receivable and the disposition of all property held as
part of the Trust. The Seller or the Servicer, or any successor to the
Servicer, may, at its option, purchase the corpus of the Trust at a price
specified in the Agreement, and such purchase of the Receivables and other
property of the
B-3
<PAGE>
Trust will effect early retirement of the Certificates; however, such right of
purchase is exercisable only on a Distribution Date following the last day of
any Collection Period as of which the Pool Balance is 10% or less of the
Original Pool Balance.
Unless the certificate of authentication hereon shall have been executed by
an authorized officer of the Trustee, by manual signature, this Class B
Certificate shall not entitle the Holder hereof to any benefit under the
Agreement or be valid for any purpose.
IN WITNESS WHEREOF, the Trustee, on behalf of the Trust and not in its
individual capacity, has caused this Class B Certificate to be duly executed.
Dated: HONDA AUTO RECEIVABLES 1997-B
GRANTOR TRUST
By: BANK OF TOKYO-MITSUBISHI TRUST
COMPANY, as Trustee of HONDA
AUTO RECEIVABLES 1997-B
GRANTOR TRUST
[SEAL]
By:
-------------------------------
Authorized Officer
ATTEST:
- ------------------------------
Authorized Officer
This is one of the Class B Certificates referred to in the within-mentioned
Agreement.
BANK OF TOKYO-MITSUBISHI TRUST
COMPANY, as Trustee of HONDA AUTO
RECEIVABLES 1997-B GRANTOR TRUST
By:
-------------------------------
Authorized Officer
B-4
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers unto
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER
OF ASSIGNEE
- --------------------------------------------------------------------------------
(Please print or typewrite name and address, including postal zip code, of
assignee)
- --------------------------------------------------------------------------------
the within Certificate, and all rights thereunder, hereby irrevocably
constituting and appointing
- --------------------------------------------------------------------------------
Attorney to transfer said Certificate on the books of the Certificate Registrar,
with full power of substitution in the premises.
Dated:
*
----------------------------------
Signature Guaranteed:
*
----------------------------------
* NOTICE: The signature to this assignment must correspond with the name as it
appears upon the face of the within Certificate in every particular, without
alteration, enlargement or any change whatever. Such signature must be
guaranteed by a member firm of the New York Stock Exchange or a commercial bank
or trust company.
B-5
<PAGE>
EXHIBIT C
LETTER OF REPRESENTATIONS
C-1
<PAGE>
EXHIBIT D
IRREVOCABLE LETTER OF CREDIT
October __, 1997
Credit No. _____________
Bank of Tokyo-Mitsubishi Trust Company
1251 Avenue of the Americas
10th Floor
New York, New York 10020
Attention: Corporate Trust Office
Dear Sirs:
At the request and for the account of our customer, American Honda Finance
Corporation, a California corporation ("American Honda"), we (the "Letter of
Credit Bank") hereby establish in your favor this Irrevocable Letter of Credit
(this "Letter of Credit"), wherein you, as trustee (the "Trustee") under the
Pooling and Servicing Agreement dated as of October 1, 1997 (the "Pooling and
Servicing Agreement") among American Honda Receivables Corp. ("AHRC"), American
Honda and you, pursuant to which $________________ aggregate principal amount of
____% Asset Backed Certificates (the "Certificates") of the Honda Auto
Receivables 1997-B Grantor Trust (the "Trust") have been issued, are hereby
irrevocably authorized to draw upon the terms and conditions hereinafter set
forth, in an aggregate amount not exceeding ____________ dollars ($____________)
(hereinafter, as reduced from time to time in accordance with the provisions
hereof, the "Servicer Letter of Credit Amount"). This Letter of Credit is
effective immediately, is irrevocable and expires at the close of business on
___________, 1998 (the "Expiration Date") at our counters.
Funds under this Letter of Credit are available to you in one or more
drawings against your draft, accompanied by your written certificate signed by
one who states therein that he or she is your duly authorized officer,
appropriately completed, in the form of Annex 1 hereto.
We hereby agree that each demand made under and in compliance with the
terms of this Letter of Credit will be duly honored by us upon due delivery of
the certificate(s), as specified above, appropriately completed (together with
such enclosures, if any, required thereby), if presented as specified on or
before the Termination Date (as hereinafter defined). If a presentation in
respect of payment is made by you hereunder at or prior to 11:00 a.m.,
D-1
<PAGE>
Los Angeles time, on a Business Day, and provided that the documents so
presented conform to the terms and conditions hereof, payment shall be made to
you of the amount specified in immediately available funds, not later than
1:00 p.m., Los Angeles time, on such Business Day. If a presentation in respect
of payment is made by you hereunder after 11:00 a.m., Los Angeles time, on a
Business Day, but prior to 2:00 p.m. Los Angeles time on such Business Day, and
provided that the documents so presented conform to the terms and conditions
hereof, payment shall be made to you of the amount specified in immediately
available funds, not later than 9:00 a.m. Los Angeles time on the next
succeeding Business Day. If such presentation in respect of payment is made by
you hereunder after 2:00 p.m. Los Angeles time, on a Business Day, such
presentation shall be deemed to have been made prior to 11:00 a.m., Los Angeles
time, on the next succeeding Business Day. You agree to use your best efforts
to provide us telephonic notice at the time any presentation in respect of
payment is made hereunder; provided, however, that failure to provide such
telephonic notice shall not affect our obligation to make payment in respect of
any such presentation in respect of payment. If requested by you, payment under
this Letter of Credit will be made by wire transfer to an account in the United
States specified by the Trustee in the related certificate. As used herein,
"Business Day" shall mean any day other than a Saturday, a Sunday or any other
day on which the Trustee or banking institutions in New York, New York or Los
Angeles, California shall be authorized or obligated by law, executive order or
governmental decree to be closed.
Only you, as Trustee (or any successor trustee as hereinafter provided),
may make a drawing under this Letter of Credit. Upon the payment of the amount
specified in the related certificate(s) presented hereunder, we shall be fully
discharged of our obligation under this Letter of Credit with respect to such
certificate(s), and we shall not thereafter be obligated to make any further
payments under this Letter of Credit in respect of such certificate(s) to you or
any other person. By paying to you an amount demanded in accordance herewith,
we make no representation as to the correctness of the amount demanded.
This Letter of Credit shall automatically terminate at our close of
business in New York, New York on the first to occur of the following dates (the
"Termination Date"): (i) the Expiration Date, or if said date shall not be a
Business Day, on the Business Day next succeeding said date, (ii) the date of
receipt by us of your written certificate signed by your authorized officer,
appropriately completed, in the form of Annex 2 hereto and (iii) the date of
payment by us of the final drawing available to be made hereunder. If we are
not then in default hereunder by reason of our having wrongfully failed to honor
a demand for payment hereunder, this Letter of Credit shall be promptly
surrendered to us upon the Termination Date.
Payments in respect of drawings hereunder honored by us shall not, in the
aggregate, exceed the initial Servicer Letter of Credit Amount. Each drawing
honored by us hereunder shall PRO TANTO reduce the Servicer Letter of Credit
Amount in effect immediately prior to such drawing.
D-2
<PAGE>
The Servicer Letter of Credit Amount under the Letter of Credit shall be
further reduced as specified in any certificate in the form of Annex 3 hereto
(each a "Reduction Certificate") that you may deliver to us.
This Letter of Credit shall be governed by the internal laws of the State
of New York, including, without limitation, Article 5 of the Uniform Commercial
Code as in effect in the State of New York. This Letter of Credit shall be
supplemented by the provisions (to the extent that such provisions are not
inconsistent with this Letter of Credit and said Article 5) of the Uniform
Customs and Practice for Documentary Credits (1993 Revision), International
Chamber of Commerce, Publication No. 500, except Article 41 thereof.
All documents presented to us in connection with any demand for payment
hereunder shall be in writing or shall be transmitted by telecopier (promptly
confirmed in writing) and shall be addressed to us at
___________________________________________, Attention:
___________________________, Telecopy: _________________ or ______________,
specifically referring thereon to this Letter of Credit by number. You shall
use your best efforts also to give written, telephonic or telecopied notice of
any demand for payment hereunder to the attention of our
____________________________________, Telecopy: ______________, Telephone:
______________, as promptly as practical on the day of such demand (but such
notice shall not be a condition to drawing hereunder and you shall have no
liability for not doing so). All notices and other communications to us in
respect of this Letter of Credit, other than demands for payment hereunder,
shall be in writing or shall be transmitted by telecopier (promptly confirmed in
writing) and shall be addressed to us at our Trade Services Department at the
address or telecopy number identified above and at our Asset Finance Department
at the address or telecopy number identified above, in each case specifically
referring thereon to this Letter of Credit by number and to American Honda.
You may transfer your rights under this Letter of Credit in their entirety
(but not in part) to any transferee who has succeeded you as Trustee pursuant to
the Pooling and Servicing Agreement and such transferred rights may be
successively transferred. The transfer of your rights under this Letter of
Credit to any such transferee shall be effected upon the presentation to us of
this Letter of Credit accompanied by a transfer letter in the form attached
hereto as Annex 4.
D-3
<PAGE>
This Letter of Credit sets forth in full our undertaking, and such
undertaking shall not in any way be modified, amended, amplified or limited by
reference to any document, instrument or agreement referred to herein except
only Annexes 1 through 4 hereto; and any such reference shall not be deemed to
incorporate herein by reference any document, instrument or agreement except as
set forth above.
Very truly yours,
---------------------------------------
Name:
Title:
---------------------------------------
Name:
Title:
D-4
<PAGE>
ANNEX 1 TO IRREVOCABLE
LETTER OF CREDIT NO. ____________
CERTIFICATE FOR DRAWING
The undersigned, Bank of Tokyo-Mitsubishi Trust Company, as trustee (the
"Trustee"), acting through the undersigned duly authorized officer of the
Trustee, hereby certifies to ___________________________________________ (the
"Letter of Credit Bank"), with reference to the Letter of Credit Bank's
Irrevocable Letter of Credit No. _____________ (the "Letter of Credit"; terms
defined in the Letter of Credit and not otherwise defined herein are used herein
as therein defined) issued in favor of the Trustee, that:
(1) The Trustee is the Trustee under the Pooling and Servicing
Agreement.
(2) American Honda, as servicer ("Servicer") under the Pooling and
Servicing Agreement, has notified us, as Trustee under the Pooling and
Servicing Agreement, pursuant to a Servicer's Certificate (as such term is
defined in the Pooling and Servicing Agreement) (a copy of which is
attached hereto) furnished pursuant to Section 13.10 of the Pooling and
Servicing Agreement, that the following amount was required to be remitted
by the Servicer to the Certificate Account (as such term is defined in the
Pooling and Servicing Agreement) pursuant to Section 14.02 of the Pooling
and Servicing Agreement with respect to the Distribution Date (as such term
is defined in the Pooling and Servicing Agreement) occurring on [insert
applicable Distribution Date]: $[insert amount required to be remitted
pursuant to Section 14.02].
(3) American Honda has failed to deposit the following portion of
amounts owed by it with respect to such Distribution Date as set forth in
paragraph (2) above: $[insert amount of deficiency].
(4) The Trustee is making a drawing under the Letter of Credit in the
amount of $____________, which amount equals the lesser of (a) the amount
set forth in paragraph (3) and (b) the amount available on the date hereof
to be drawn under the Letter of Credit, as set forth in the attached
Servicer's Certificate.
(5) The Trustee has not received notice from American Honda or any
other person or entity contesting the accuracy of such Servicer's
Certificate.
(6) The account to which payment under the Letter of Credit is to be
wire transferred is Account No. ____________, maintained at
________________________.
D-1-1
<PAGE>
IN WITNESS WHEREOF, the Trustee has executed and delivered this Certificate
as of the _____ day of ____________.
BANK OF TOKYO-MITSUBISHI TRUST
COMPANY, as Trustee
By:
-----------------------------
Name:
Title:
D-1-2
<PAGE>
ANNEX 2 TO
IRREVOCABLE LETTER OF CREDIT NO. _____________
CERTIFICATE FOR THE TERMINATION
OF IRREVOCABLE LETTER OF CREDIT NO. ___________
The undersigned, a duly authorized officer of Bank of Tokyo-Mitsubishi
Trust Company, as trustee (the "Trustee"), hereby certifies to
______________________________ (the "Letter of Credit Bank") with reference to
the Letter of Credit Bank's Irrevocable Letter of Credit No. _______________
(the "Letter of Credit"; terms defined in the Letter of Credit and not otherwise
defined herein are used herein as therein defined) issued in favor of the
Trustee, that [the Pooling and Servicing Agreement has been terminated in
accordance with its terms and the Certificate Account defined therein contains
sufficient funds to pay in full all outstanding Certificates issued thereunder]
or [this Letter of Credit is being terminated pursuant to Section 25 of the
related Servicer Letter of Credit Reimbursement Agreement upon request of the
Servicer and is being replaced by a security bond, insurance policy or deposit
of cash or securities satisfactory to the Trustee and the Rating Agencies] or
[the Letter of Credit has been terminated on the date hereof in accordance with
its terms] or [the Trustee has received a notification to the effect that the
short-term unsecured debt rating of the Letter of Credit Bank as assigned by
Standard & Poor's Ratings Services ("S&P") or Moody's Investors Service, Inc.
("Moody's") is not at least equal to the Required Rating] or [the Trustee has
received a notification to the effect that the short-term unsecured debt ratings
of American Honda as assigned by S&P and Moody's have been upgraded to at least
A-1 and P-1, respectively].(1) Accordingly, we herewith return to you for
cancellation the Letter of Credit, which is terminated, as of the date hereof,
pursuant to its terms.
Date: ____________ BANK OF TOKYO-MITSUBISHI TRUST
COMPANY, as Trustee
By:
-------------------------------
Name:
Title:
- -------------------------------
1 Select appropriate alternative.
D-2-1
<PAGE>
ANNEX 3 TO IRREVOCABLE
LETTER OF CREDIT NO. ____________
CERTIFICATE FOR THE REDUCTION OF THE STATED
AMOUNT OF IRREVOCABLE LETTER OF CREDIT NO. ___________
The undersigned, a duly authorized officer of Bank of Tokyo-Mitsubishi
Trust Company, as trustee (the "Trustee"), hereby certifies to
_______________________________ (the "Letter of Credit Bank"), with reference to
the Letter of Credit Bank's Irrevocable Letter of Credit No. _____________ (the
"Letter of Credit"; terms defined in the Letter of Credit and not otherwise
defined herein are used herein as therein defined) issued in favor of the
Trustee, that:
(1) The Trustee is the Trustee under the Pooling and Servicing
Agreement.
(2) On the basis of the Servicer's Certificate attached hereto, the
Trustee hereby confirms that, effective on the date hereof with respect to
the Reset Date on [insert appropriate Reset Date] the Servicer Letter of
Credit Amount of the Letter of Credit has been reduced from $____________
to $____________, which amount equals the product of $_____________ and the
Reset Percentage; provided that if the Servicer Letter of Credit Amount
would exceed the Pool Balance set forth in such certificate as of the end
of last month, the Servicer Letter of Credit Amount shall be reduced to the
amount of the Pool Balance, which is $____________.
(3) As used herein, the following terms shall have the following
respective meanings: (a) "Reset Date" means the 15th day of each calendar
month or, if such day is not a Business Day, the next following Business
Day; and (b) "Reset Percentage," as of any Reset Date, means a fraction the
numerator of which is the number of Receivables (as such term is defined in
the Pooling and Servicing Agreement) in the Trust at the close of business
on the last day of the calendar month preceding the calendar month in which
such Reset Date occurs, as evidenced by the Servicer's Certificate for such
calendar month, and the denominator of which is __________, which is the
number of Receivables in the Trust as of the close of business on
__________.
D-3-1
<PAGE>
IN WITNESS WHEREOF, the Trustee has executed and delivered this Certificate
as of the _____ day of ____________ 19___.
BANK OF TOKYO-MITSUBISHI TRUST
COMPANY, as Trustee
By:
-------------------------------
Name:
Title:
D-3-2
<PAGE>
ANNEX 4 TO IRREVOCABLE
LETTER OF CREDIT NO. _____________
___________________, 19__
[Letter of Credit Bank]
Re: Irrevocable Letter of Credit No.
-------------------------------------------
Dear Sirs:
For value received, the undersigned beneficiary hereby irrevocably
transfers to:
-----------------------------
(Name of Transferee)
-----------------------------
(Address)
all rights of the undersigned beneficiary to draw under the above-captioned
Irrevocable Letter of Credit (the "Letter of Credit"). The transferee has
succeeded the undersigned as Trustee under the Pooling and Servicing Agreement
(as such term is defined in the Letter of Credit).
By this transfer, all rights of the undersigned beneficiary in the Letter
of Credit are transferred to the transferee, and the transferee shall hereafter
have the sole right as beneficiary thereof; provided, however, that no rights
shall be deemed to have been transferred to the transferee until such transfer
complies with the requirements of the Letter of Credit pertaining to transfer.
D-4-1
<PAGE>
The Letter of Credit is returned herewith and in accordance therewith we
ask that this transfer be effective and that you cause the transfer of the
Letter of Credit to our transferee or that, if so requested by the transferee,
you cause the issuance of a new Letter of Credit in favor of the transferee with
provisions consistent with the Letter of Credit.
Very truly yours,
[Name of Trustee],
as predecessor Trustee
By:
-------------------------------
Name:
Title:
D-4-2
<PAGE>
EXHIBIT E
HONDA AUTO RECEIVABLES 1997-B
GRANTOR TRUST
Servicer's Certificate
For the Month of _______,_______
PRINCIPAL AND INTEREST COLLECTIONS
Beginning Pool Balance .......................................... (1)$_______
Beginning Pool Factor[(1)/$ ] ............................... (2) _______
Principal Collected (including from Applied Payments Ahead) ..... (3)$_______
Interest Collected (including from Applied Payments Ahead) ...... (4)$_______
Less: Outstanding Advances ................................ (5)$_______
Less: Total Servicing Fees ................................ (6)$_______
Total Interest Received [(4)-(5)+(6)] ........................... (7)$_______
Amount of Receivables which became Defaulted Receivables ........ (8)$_______
Additional Deposits
(i) Warranty Purchase Payments ............................ (9)$_______
(ii) Administrative Purchase Payments ...................... (10)$______
(iii) Advances .............................................. (11)$______
(iv) Prepayments ........................................... (12)$______
(v) Optional Termination Amount ........................... (13)$______
(vi) Yield Supplement Deposit Amount (as required).......... (14)$______
Total Additional Deposits ....................................... (15)$______
Total Available Funds [(3)+(7)+(15)] ............................ (16)$______
Ending Pool Balance [(1)-(3)] ................................... (17)$______
Ending Pool Factor [(17)/$ ] ................................ (18)$______
Class A Class B
------- -------
Distributions:
Class Percentage............................................ _______% _______%
Pool Factor................................................. _______ _______
Beginning Pool Balance...................................... _______ _______
Ending Pool Balance......................................... _______ _______
Available Principal(3)...................................... _______ _______
Available Interest(7)....................................... _______ _______
Basic Servicing Fee......................................... _______ _______
Total Servicing Fee......................................... _______ _______
E-1
<PAGE>
Class A Class B
------- -------
Total Available Funds(16)................................... _______ _______
PAYMENTS TO CERTIFICATEHOLDERS
Monthly Principal Payment [(3)]............................. _______ _______
Interest Distributable Amount [(1)x( %/12)]................ _______ _______
DISTRIBUTIONS:
Total payments to Certificateholders........................ _______
Amount due Class B but paid to Class A (subordination)...... _______
Class A Interest Carryover Shortfall........................ _______
Class A Principal Carryover Shortfall....................... _______
Class B Interest Carryover Shortfall........................ _______
Class B Principal Carryover Shortfall....................... _______
Amounts to be paid to the Seller............................ _______
CHANGE TO PAYMENTS AHEAD BALANCE
Beginning Balance of Payments Ahead......................... _______
Ending Balance of Payments Ahead............................ _______
Net gain (loss) to Payments Ahead........................... _______
Payments from/(to) Reserve Fund............................. _______
Specified Reserve Fund Balance.............................. _______
Payahead Account Balance or Payments Ahead held by Servicer. _______
CHANGE TO OUTSTANDING ADVANCES
Beginning Balance of Outstanding Advances................... _______
Ending Balance of Outstanding Advances...................... _______
Net gain (loss) to Outstanding Advances..................... _______
Class A Certificate Balance................................. _______
Class B Certificate Balance................................. _______
<TABLE>
<CAPTION>
Reconciliation of Yield Supplement Deposit Amount
- -------------------------------------------------
Class A/Class B Weighted Average Pass-Through Rate _____%
Servicing Fee Rate 1.00%
Yield Supplement Receivables
- ---------------------------------------------------------------
Interest at
Pass-Through Rate Yield
APR Number Total Interest at APR plus 100 b.p. Supplement
Rate of Accounts Balance (APR/12) (Rate/12) Account
<S> <C> <C> <C> <C> <C>
___% _____ $________________ $________________ $_________________ ($________)
___% _____ $________________ $________________ $_________________ ($________)
___% _____ $________________ $________________ $_________________ ($________)
___% _____ $________________ $________________ $_________________ ($________)
___% _____ $________________ $________________ $_________________ ($________)
___% _____ $________________ $________________ $_________________ ($________)
E-2
<PAGE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
___% _____ $________________ $________________ $_________________ ($________)
TOTAL _____ $________________ $________________ $_________________ ($________)
-------------------------------------------------------------------------------------------------------------------------
Weighted Average Rate _____%
Total Interest Due at APR $_________________
Total Interest Due at Pass-Through plus Servicing Rate $_________________
Total Monthly Yield Supplement Deposit Amount ($_________________)
</TABLE>
Maximum Yield Supplement Amount for __________ months $__________
Beginning Yield Supplement Account Balance $__________
plus: Investment Earnings $__________
less: Yield Supplement Deposit Amount $__________
Ending Yield Supplement Account Balance $__________
Release Amount Due Seller $__________
Ending Yield Supplement Account Balance to be Invested $__________
DETERMINATION OF THE SERVICER LETTER OF CREDIT AMOUNT
Number of Contracts -- End of Month................................ (42)_____
Original number of Contracts....................................... (43)_____
Percent of Original Contracts remaining [(42)/(43)x100]............ (44)____%
Original Servicer Letter of Credit Amount.......................... (45)$____
Revised Servicer Letter of Credit Amount [Lesser of [(44)x(45)
or the Ending Pool Balance(1)]..................................... (46)$____
Servicer Letter of Credit Fee [(46)x(0. /12)]..................... (47)$____
Reconciliation of Reserve Fund
Beginning Reserve Fund Balance..................................... (48)$____
Plus: Excess Amounts......................................... (49)$____
Less: Reserve Fund Payments.................................. (50)$____
Reserve Fund Prior to Payments to Certificateholders and Seller.... (51)$____
E-3
<PAGE>
Specified Reserve Fund Balance ("SRFB"):
(a) SRFB=$
Unless: average Charge-off Rate for preceding three Collection Periods is
greater than %, or
average Delinquency Percentage for preceding three Collection
Periods is greater than _____%
(b) Then SRFB= % x (1)
(c) Regardless of (a) or (b) above, SRFB must be greater than __________,
but less than __________.
(d) If Class A Certificate Balance is $ or less after giving
effect to distributions, then SRFB must be greater than the amount in
(b) or $ .
Required Reserve Fund Amount........................................ (52)$____
Amount of excess released [(51)-(52)]............................... (53)$____
Ending SRFB to be invested.......................................... (54)$____
Units Amount Percent of Pool
----- ------ ---------------
Delinquent Accounts
Period of Delinquency
30 - 59 days . . . . . . . . . . . _______ $_______ _______%
60 - 89 days . . . . . . . . . . . _______ (A) $_______ _______%
90 days or more . . . . . . . . . . _______ (B) $_______ _______%
Total . . . . . . . . . . . . _______ $_______ _______%
Repossession Inventory . . . . . . . . _______ $_______ _______%
First Second Third Average
Preceding Preceding Preceding of Three
Collection Collection Collection Collection
Period Period Period Periods
---------- ---------- ---------- ----------
Delinquency Percentage [(A)+(B) +
(repossessions)/number of
outstanding Receivables on last
day of preceding Collection
Period] . . . . . . . . . . . . _______% _______% _______% _______%
CHARGE-OFF RATE
Recoveries in respect of
Defaulted Receivables . . . . . $_______ $_______ $_______ $_______
Aggregate Net Losses . . . . . $_______ $_______ $_______ $_______
Aggregate Principal Balance on
last day of preceding Collection
Period . . . . . . . . . . . . $_______ $_______ $_______ $_______
Aggregate Principal Balance on
last day of current Collection
Period . . . . . . . . . . . . $_______ $_______ $_______ $_______
Charge-off Rate %
[Aggregate Net Losses/(x)+(y)]
2 _______% _______% _______% _______%
Proceeds from Insurance and
Dealer Recourse
---------------------------
Proceeds received during the
month from physical damage
insurance . . . . . . . . . . . $_______ $_______ $_______ $_______
E-4
<PAGE>
EXHIBIT 4.2
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AMERICAN HONDA RECEIVABLES CORP.,
as Seller
and
AMERICAN HONDA FINANCE CORPORATION,
as Servicer
Standard Terms And Conditions Of Agreement
(Senior/Subordinated)
Effective October 1, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLES ONE - TEN
[Reserved]
ARTICLE ELEVEN
DEFINITIONS
Section 11.01. Definitions. . . . . . . . . . . . . . . . . . . . . 1
Section 11.02. Usage of Terms . . . . . . . . . . . . . . . . . . 19
Section 11.03. Cutoff Date and Record Date. . . . . . . . . . . . 20
Section 11.04. Section References . . . . . . . . . . . . . . . . 20
Section 11.05. Separate Agreements. . . . . . . . . . . . . . . . 20
Section 11.06. Business Day Certificate . . . . . . . . . . . . . 20
ARTICLE TWELVE
CONVEYANCE OF RECEIVABLES;
CUSTODY OF RECEIVABLE FILES
Section 12.01. Conveyance of Receivables. . . . . . . . . . . . . 21
Section 12.02. Custody of Receivable Files. . . . . . . . . . . . 21
Section 12.03. Acceptance by Trustee. . . . . . . . . . . . . . . 22
Section 12.04. Representations and Warranties of Seller as to
the Receivables. . . . . . . . . . . . . . . . . . 22
Section 12.05. Repurchase of Receivables Upon Breach. . . . . . . 25
Section 12.06. Duties of Servicer as Custodian. . . . . . . . . . 26
Section 12.07. Instructions; Authority to Act . . . . . . . . . . 26
Section 12.08. Indemnification by Custodian . . . . . . . . . . . 26
Section 12.09. Effective Period and Termination . . . . . . . . . 27
ARTICLE THIRTEEN
ADMINISTRATION AND SERVICING OF RECEIVABLES
Section 13.01. Duties of Servicer . . . . . . . . . . . . . . . . 28
Section 13.02. Collection of Receivable Payments. . . . . . . . . 28
Section 13.03. Rebates on Full Prepayments. . . . . . . . . . . . 29
Section 13.04. Realization Upon Receivables . . . . . . . . . . . 29
Section 13.05. Maintenance of Physical Damage
Insurance Policies . . . . . . . . . . . . . . . . 30
(i)
<PAGE>
Page
----
Section 13.06. Maintenance of Security Interests in
Financed Vehicles. . . . . . . . . . . . . . . . . 30
Section 13.07. Covenants of Servicer. . . . . . . . . . . . . . . 30
Section 13.08. Purchase of Receivables Upon Breach. . . . . . . . 30
Section 13.09. Total Servicing Fee; Payment of Certain Expenses
by Servicer. . . . . . . . . . . . . . . . . . . . 31
Section 13.10. Servicer's Certificate . . . . . . . . . . . . . . 31
Section 13.11. Annual Statement as to Compliance; Notice
of Default . . . . . . . . . . . . . . . . . . . . 32
Section 13.12. Annual Accountants' Report . . . . . . . . . . . . 32
Section 13.13. Access to Certain Documentation and Information
Regarding Receivables. . . . . . . . . . . . . . . 32
Section 13.14. Amendments to Schedule of Receivables. . . . . . . 33
Section 13.15. Reports to Certificateholders and
Rating Agencies. . . . . . . . . . . . . . . . . . 33
ARTICLE FOURTEEN
DISTRIBUTIONS; RESERVE FUND; YIELD SUPPLEMENT ACCOUNT;
STATEMENTS TO CERTIFICATEHOLDERS
Section 14.01. Accounts . . . . . . . . . . . . . . . . . . . . . 34
Section 14.02. Collections. . . . . . . . . . . . . . . . . . . . 34
Section 14.03. Application of Collections . . . . . . . . . . . . 36
Section 14.04. Advances . . . . . . . . . . . . . . . . . . . . . 37
Section 14.05. Additional Deposits. . . . . . . . . . . . . . . . 38
Section 14.06. Distributions. . . . . . . . . . . . . . . . . . . 38
Section 14.07. Subordination; Reserve Fund; Priority
of Distributions . . . . . . . . . . . . . . . . . 40
Section 14.08. Net Deposits . . . . . . . . . . . . . . . . . . . 43
Section 14.09. Servicer Letter of Credit. . . . . . . . . . . . . 43
Section 14.10. Statements to Certificateholders . . . . . . . . . 45
Section 14.11. Yield Supplement Account . . . . . . . . . . . . . 46
ARTICLE FIFTEEN
THE CERTIFICATES
Section 15.01. The Certificates . . . . . . . . . . . . . . . . . 48
Section 15.02. Authentication and Delivery of Certificates. . . . 48
Section 15.03. Registration of Transfer and Exchange of
Certificates . . . . . . . . . . . . . . . . . . . 48
Section 15.04. Mutilated, Destroyed, Lost or
Stolen Certificates. . . . . . . . . . . . . . . . 50
Section 15.05. Persons Deemed Owners. . . . . . . . . . . . . . . 50
Section 15.06. Access to List of Certificateholders' Names
and Addresses. . . . . . . . . . . . . . . . . . . 50
Section 15.07. Maintenance of Office or Agency. . . . . . . . . . 51
Section 15.08. Temporary Certificates . . . . . . . . . . . . . . 51
Section 15.09. Book-Entry Certificates. . . . . . . . . . . . . . 51
(ii)
<PAGE>
Page
----
Section 15.10. Notices to Clearing Agency . . . . . . . . . . . . 52
Section 15.11. Definitive Certificates. . . . . . . . . . . . . . 52
ARTICLE SIXTEEN
THE SELLER
Section 16.01. Representations of Seller. . . . . . . . . . . . . 54
Section 16.02. Liability of Seller. . . . . . . . . . . . . . . . 55
Section 16.03. Merger, Consolidation or Assumption of the
Obligations of Seller; Certain Limitations . . . . 55
Section 16.04. Limitation on Liability of Seller and Others . . . 57
Section 16.05. Seller May Own Certificates. . . . . . . . . . . . 57
Section 16.06. No Transfer of Excess Amounts. . . . . . . . . . . 57
ARTICLE SEVENTEEN
THE SERVICER
Section 17.01. Representations of Servicer. . . . . . . . . . . . 58
Section 17.02. Liability of Servicer; Indemnities . . . . . . . . 59
Section 17.03. Merger, Consolidation or Assumption of
the Obligations of Servicer. . . . . . . . . . . . 60
Section 17.04. Limitation on Liability of Servicer and Others . . 60
Section 17.05. Servicer Not to Resign . . . . . . . . . . . . . . 61
ARTICLE EIGHTEEN
EVENTS OF DEFAULT
Section 18.01. Events of Default. . . . . . . . . . . . . . . . . 62
Section 18.02. Consequences of an Event of Default. . . . . . . . 63
Section 18.03. Trustee to Act; Appointment of
Successor Servicer . . . . . . . . . . . . . . . . 63
Section 18.04. Notification to Certificateholders . . . . . . . . 64
Section 18.05. Waiver of Past Defaults. . . . . . . . . . . . . . 64
Section 18.06. Repayment of Advances. . . . . . . . . . . . . . . 64
(iii)
<PAGE>
Page
----
ARTICLE NINETEEN
THE TRUSTEE
Section 19.01. Duties of Trustee. . . . . . . . . . . . . . . . . 65
Section 19.02. Trustee's Certificate. . . . . . . . . . . . . . . 66
Section 19.03. Trustee's Assignment of Administrative Receivables
and Warranty Receivables . . . . . . . . . . . . . 66
Section 19.04. Certain Matters Affecting the Trustee. . . . . . . 67
Section 19.05. Trustee Not Liable for Certificates or
Receivables. . . . . . . . . . . . . . . . . . . . 68
Section 19.06. Trustee May Own Certificates . . . . . . . . . . . 69
Section 19.07. Trustee's Fees and Expenses. . . . . . . . . . . . 69
Section 19.08. Indemnity of Trustee and Successor Servicer. . . . 69
Section 19.09. Eligibility Requirements for Trustee . . . . . . . 70
Section 19.10. Resignation or Removal of Trustee. . . . . . . . . 70
Section 19.11. Successor Trustee. . . . . . . . . . . . . . . . . 71
Section 19.12. Merger or Consolidation of Trustee . . . . . . . . 71
Section 19.13. Appointment of Co-Trustee or Separate Trustee. . . 72
Section 19.14. Representations and Warranties of Trustee. . . . . 73
Section 19.15. Tax Returns. . . . . . . . . . . . . . . . . . . . 74
Section 19.16. Trustee May Enforce Claims Without Possession of
Certificates . . . . . . . . . . . . . . . . . . . 74
Section 19.17. Suit for Enforcement . . . . . . . . . . . . . . . 74
Section 19.18. Rights of Certificateholders to Direct Trustee . . 74
ARTICLE TWENTY
TERMINATION
Section 20.01. Termination of the Trust . . . . . . . . . . . . . 76
Section 20.02. Optional Termination of All Receivables. . . . . . 77
ARTICLE TWENTY ONE
MISCELLANEOUS PROVISIONS
Section 21.01. Amendment. . . . . . . . . . . . . . . . . . . . . 78
Section 21.02. Protection of Title to Trust . . . . . . . . . . . 79
Section 21.03. Limitation on Rights of Certificateholders . . . . 81
Section 21.04. Governing Law. . . . . . . . . . . . . . . . . . . 82
Section 21.05. Notices. . . . . . . . . . . . . . . . . . . . . . 82
Section 21.06. Severability of Provisions . . . . . . . . . . . . 82
Section 21.07. Assignment . . . . . . . . . . . . . . . . . . . . 82
(iv)
<PAGE>
Page
----
Section 21.08. Certificates Nonassessable and Fully Paid. . . . . 82
Section 21.09. No Petition. . . . . . . . . . . . . . . . . . . . 82
EXHIBITS
Exhibit A - Form of Trustee's Certificate. . . . . . . . . . . . . A-1
Exhibit B - Form of Purchaser's Letter . . . . . . . . . . . . . . B-1
(v)
<PAGE>
Honda Auto Receivables Grantor Trusts
Standard Terms and Conditions of Agreement
(Senior/Subordinated)
Effective October 1, 1997
For Honda Auto Receivables Grantor Trusts formed
on or subsequent to the date specified above
INTRODUCTION
These Standard Terms and Conditions of Agreement (Senior/Subordinated)
effective October 1, 1997 (the "Standard Terms and Conditions"), shall be
applicable to Honda Auto Receivables Grantor Trusts formed on or after the
effective date hereof. For each Honda Auto Receivables Grantor Trust to which
the Standard Terms and Conditions are to be applicable, a Pooling and Servicing
Agreement shall be executed which incorporates by reference the Standard Terms
and Conditions and designates any exclusion from or exception to such
incorporation by reference or variation of the terms hereof for the purposes of
that Honda Auto Receivables Grantor Trust.
ARTICLE ELEVEN
DEFINITIONS
Section 11.01. DEFINITIONS. Except as otherwise provided in the
Agreement, whenever used in these Standard Terms and Conditions, the following
words and phrases, unless the context otherwise requires, shall have the
following meanings:
"ACCOUNTS" means the Certificate Account and the Payahead Account.
"ACTUAL PAYMENT" means, with respect to a Receivable and a Collection
Period, all payments received by the Servicer from or for the account of the
related Obligor on such Receivable during such Collection Period (and, in the
case of the first Collection Period, all payments received by the Servicer from
or for the account of such Obligor since the Cutoff Date through the last day of
such Collection Period), net of any Supplemental Servicing Fees attributable to
such Receivable. Actual Payments do not include Applied Payments Ahead.
"ACTUARIAL RECEIVABLE" means any Receivable which provides for the
allocation of payments according to the "actuarial" method.
"ADMINISTRATIVE PURCHASE PAYMENT" means, with respect to a Distribution
Date and to an Administrative Receivable purchased by the Seller or the Servicer
as of the end of the related Collection Period, which Receivable is (i) a
Precomputed Receivable, (a) the sum of (1) all Scheduled Payments on such
Receivable due after the last day of such Collection
<PAGE>
Period, (2) an amount equal to any reimbursement of Outstanding Advances made
pursuant to the first sentence of Section 14.04(c) with respect to such
Receivable (plus all Outstanding Advances made in respect of such Receivable, in
the case of an Administrative Purchase Payment made by the Seller) and (3) all
past due Scheduled Payments for which an Advance has not been made, minus (b)
the sum of (1) any Rebate and (2) all Payments Ahead in respect of such
Administrative Receivable held by the Servicer or on deposit in the Payahead
Account or (ii) a Simple Interest Receivable, the sum of (a) the unpaid
principal balance owed by the related Obligor in respect of such Receivable and
(b) interest on such unpaid principal balance at a rate equal to the sum of the
Pass-Through Rate and the Servicing Fee Rate to the last day of such Collection
Period.
"ADMINISTRATIVE RECEIVABLE" means a Receivable which the Servicer is
required to purchase pursuant to Section 13.02 or 13.08 or which the Seller or
the Servicer has elected to purchase pursuant to Section 20.02.
"ADVANCE" means a Precomputed Advance or a Simple Interest Advance.
"AFFILIATE" means, with respect to any specified Person, any other Person
controlling or controlled by or under common control with such specified Person.
For the purpose of this definition, "control", when used with respect to any
specified Person, means the power to direct the management and policies of such
Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"AGREEMENT" means a Pooling and Servicing Agreement executed by the Seller,
the Servicer and the Trustee as of the Cutoff Date, into which these Standard
Terms and Conditions shall be incorporated by reference, and all amendments
thereof and supplements thereto.
"AMERICAN HONDA" means American Honda Finance Corporation, and its
successors and assigns.
"AMOUNT FINANCED" in respect of a Receivable means the aggregate amount
advanced under such Receivable toward the purchase price of the related Financed
Vehicle and any related costs, including but not limited to accessories,
insurance premiums, service and warranty contracts and other items customarily
financed as part of retail motor vehicle installment sale contracts.
"ANNUAL PERCENTAGE RATE" or "APR" of a Receivable means the annual rate of
finance charges specified in such Receivable.
"APPLICANTS" shall have the meaning specified in Section 15.06.
"APPLIED PAYMENT AHEAD" means, with respect to a Precomputed Receivable and
a Collection Period as to which (i) the Actual Payment is less than the
Scheduled Payment and (ii) a Deferred Prepayment is on deposit in the Payahead
Account, an amount equal to the
2
<PAGE>
lesser of (a) such Deferred Prepayment and (b) the amount by which the Scheduled
Payment exceeds the Actual Payment.
"AVAILABLE INTEREST" means, with respect to any Distribution Date, the
total of the following amounts allocable to interest received by the Servicer on
or in respect of the Receivables during the related Collection Period (computed,
in the case of Precomputed Receivables, by the actuarial method and, in the case
of Simple Interest Receivables, by the simple interest method): (i) the sum of
the interest component of all (a) collections on or in respect of all
Receivables other than Defaulted Receivables (including Scheduled Surplus,
Prepayment Surplus and the interest portion of Applied Payments Ahead, but
otherwise excluding Payments Ahead), (b) Net Liquidation Proceeds, (c) Advances
made by the Servicer, (d) Warranty Purchase Payments and (e) Administrative
Purchase Payments, less (ii) the sum of all (a) amounts received on or in
respect of a particular Receivable (other than a Defaulted Receivable) to the
extent of the aggregate Outstanding Interest Advances in respect of such
Receivable and (b) Net Liquidation Proceeds with respect to a particular
Receivable to the extent of the aggregate Outstanding Interest Advances in
respect of such Receivable.
"AVAILABLE PRINCIPAL" means, with respect to any Distribution Date, the
total of the following amounts allocable to principal received by the Servicer
on or in respect of the Receivables during the related Collection Period
(computed, in the case of Precomputed Receivables, by the actuarial method and,
in the case of Simple Interest Receivables, by the simple interest method):
(i) the sum of the principal component of all (a) collections on or in respect
of all Receivables other than Defaulted Receivables (including the principal
portion of Applied Payments Ahead but excluding Payments Ahead), (b) Net
Liquidation Proceeds, (c) Advances made by the Servicer, (d) Warranty Purchase
Payments and (e) Administrative Purchase Payments, less (ii) an amount equal to
all (a) amounts received on or in respect of a particular Receivable (other than
a Defaulted Receivable) to the extent of the aggregate Outstanding Principal
Advances in respect of such Receivable and (b) Net Liquidation Proceeds with
respect to a particular Receivable to the extent of the aggregate Outstanding
Principal Advances in respect of such Receivable.
"BASIC SERVICING FEE" means the fee payable pursuant to Section 13.09 to
the Servicer on each Distribution Date for services rendered during the related
Collection Period, which shall be equal to one-twelfth of the Servicing Fee Rate
multiplied by the Pool Balance as of the first day of the related Collection
Period or, with respect to the first Distribution Date, the Original Pool
Balance.
"BOOK-ENTRY CERTIFICATES" means a beneficial interest in the Certificates,
ownership and transfers of which shall be made through book entries by a
Clearing Agency as described in Section 15.09.
"BUSINESS DAY" means any day other than a Saturday, a Sunday or a day on
which banking institutions in New York, New York or Los Angeles, California are
authorized or obligated by law, executive order or governmental decree to be
closed.
3
<PAGE>
"CERTIFICATE ACCOUNT" means the account or accounts designated as such and
established and maintained pursuant to Section 14.01.
"CERTIFICATE OWNER" means, with respect to a Book-Entry Certificate, the
Person who is the owner of such Book-Entry Certificate, as reflected on the
books of the Clearing Agency, or on the books of a Person maintaining an account
with such Clearing Agency (directly or as an indirect participant, in either
case in accordance with the rules of such Clearing Agency) and shall mean, with
respect to a Definitive Certificate, the related Certificateholder.
"CERTIFICATE REGISTER" and "CERTIFICATE REGISTRAR" mean the register
maintained and the registrar (or any successor thereto) appointed pursuant to
Section 15.03.
"CERTIFICATEHOLDER" or "HOLDER" means the Person in whose name a
Certificate is registered in the Certificate Register, except that, solely for
the purposes of giving any consent, waiver, request or demand pursuant to the
Agreement, the interest evidenced by any Class A Certificate registered in the
name of the Seller or the Servicer, or any Person known to a Responsible Officer
to be controlling, controlled by or under common control with the Seller or the
Servicer, shall not be taken into account in determining whether the requisite
percentage necessary to effect any such consent, waiver, request or demand shall
have been obtained.
"CERTIFICATES" means the Class A Certificates and the Class B Certificates.
"CLASS" means all Certificates whose form is identical except for variation
in denomination, principal amount or owner.
"CLASS A CERTIFICATE" means one of the Class A Certificates executed and
authenticated by the Trustee in substantially the form set forth as Exhibit A to
the Agreement.
"CLASS A CERTIFICATE BALANCE" shall initially equal the Original Class A
Certificate Balance and, on any date thereafter, shall equal the Original Class
A Certificate Balance, reduced by all amounts distributed on or prior to such
date on or in respect of the Class A Certificates and allocable to principal.
"CLASS A DISTRIBUTABLE AMOUNT" means, with respect to any Distribution
Date, the sum of the Class A Principal Distributable Amount and the Class A
Interest Distributable Amount.
"CLASS A INTEREST CARRYOVER SHORTFALL" means, with respect to any
Distribution Date, the excess, if any, of (i) the Class A Interest Distributable
Amount for such Distribution Date plus any outstanding Class A Interest
Carryover Shortfall from the immediately preceding Distribution Date plus
interest on such outstanding Class A Interest Carryover Shortfall, to the extent
permitted by law, at the Pass-Through Rate from such immediately preceding
Distribution Date to but not including the current Distribution Date, over (ii)
the amount of interest distributed to Class A Certificateholders on such current
Distribution Date.
4
<PAGE>
"CLASS A INTEREST DISTRIBUTABLE AMOUNT" means, with respect to any
Distribution Date, the product of one-twelfth of the Pass-Through Rate and the
Class A Certificate Balance as of the immediately preceding Distribution Date
(after giving effect to distributions of principal made on such immediately
preceding Distribution Date) or, in the case of the first Distribution Date, the
Original Class A Certificate Balance.
"CLASS A PERCENTAGE" shall have the meaning specified in the Agreement.
"CLASS A POOL FACTOR" means, with respect to any Distribution Date, a
seven-digit decimal figure equal to the Class A Certificate Balance as of such
Distribution Date divided by the Original Class A Certificate Balance.
"CLASS A PRINCIPAL CARRYOVER SHORTFALL" means, with respect to any
Distribution Date, the excess, if any, of (i) the Class A Principal
Distributable Amount plus any outstanding Class A Principal Carryover Shortfall
with respect to one or more prior Distribution Dates over (ii) the amount of
principal distributed to Class A Certificateholders on such current Distribution
Date.
"CLASS A PRINCIPAL DISTRIBUTABLE AMOUNT" means, with respect to any
Distribution Date, the sum of the Class A Percentage of the following amounts
(but not exceeding the Class A Certificate Balance as of such Distribution
Date): (i) in the case of Precomputed Receivables, the principal portion of all
Scheduled Payments due during the related Collection Period, computed in
accordance with the actuarial method, (ii) in the case of Simple Interest
Receivables, the principal portion of all Scheduled Payments actually received
during the related Collection Period, (iii) the principal portion of all
Prepayments received during such Collection Period (to the extent such amounts
are not included in clauses (i) or (ii) above) and (iv) the Principal Balance of
each Receivable that became an Administrative Receivable, a Warranty Receivable
or a Defaulted Receivable during such Collection Period (to the extent such
amounts are not included in clauses (i), (ii) or (iii) above). In addition,
with respect to the Final Scheduled Distribution Date or the Distribution Date
upon which all remaining Receivables are to be purchased pursuant to
Section 20.02, the Class A Principal Distributable Amount will include the
portion of such amount necessary (after giving effect to the other amounts to be
distributed to the Class A Certificateholders on the Final Scheduled
Distribution Date or such Distribution Date and allocable to principal) to
reduce the Class A Certificate Balance to zero.
"CLASS B CERTIFICATE" means any one of the Class B Certificates executed
and authenticated by the Trustee in substantially the form set forth as Exhibit
B to the Agreement.
"CLASS B CERTIFICATE BALANCE" shall initially equal the Original Class B
Certificate Balance and, on any Distribution Date, shall equal the amount by
which the Pool Balance as of the last day of the related Collection Period
exceeds the Class A Certificate Balance on such Distribution Date (after giving
effect to any distributions of principal on such Distribution Date).
5
<PAGE>
"CLASS B DISTRIBUTABLE AMOUNT" means, with respect to any Distribution
Date, the sum of the Class B Principal Distributable Amount and the Class B
Interest Distributable Amount.
"CLASS B INTEREST CARRYOVER SHORTFALL" means, with respect to any
Distribution Date, the excess, if any, of (i) the Class B Interest Distributable
Amount for such Distribution Date plus any outstanding Class B Interest
Carryover Shortfall from the immediately preceding Distribution Date plus
interest on such outstanding Class B Interest Carryover Shortfall, to the extent
permitted by law, at the Pass-Through Rate from such immediately preceding
Distribution Date through the current Distribution Date over (ii) the amount of
interest distributed to Class B Certificateholders on such current Distribution
Date.
"CLASS B INTEREST DISTRIBUTABLE AMOUNT" means, with respect to any
Distribution Date, the product of one-twelfth of the Pass-Through Rate and the
Class B Certificate Balance as of the immediately preceding Distribution Date
(after giving effect to distributions of principal made on such immediately
preceding Distribution Date) or, in the case of the first Distribution Date, the
Original Class B Certificate Balance.
"CLASS B PERCENTAGE" shall have the meaning specified in the Agreement.
"CLASS B PRINCIPAL CARRYOVER SHORTFALL" means, with respect to any
Distribution Date, the excess, if any, of (i) the Class B Principal
Distributable Amount and any outstanding Class B Principal Carryover Shortfall
with respect to one or more prior Distribution Dates over (ii) the amount of
principal distributed to Class B Certificateholders on such current Distribution
Date.
"CLASS B PRINCIPAL DISTRIBUTABLE AMOUNT" means, with respect to any
Distribution Date, the sum of the Class B Percentage of the following amounts
(but not exceeding the Class B Certificate Balance as of such Distribution
Date): (i) in the case of Precomputed Receivables, the principal portion of all
Scheduled Payments due during the related Collection Period, computed in
accordance with the actuarial method, (ii) in the case of Simple Interest
Receivables, the principal portion of all Scheduled Payments actually received
during the related Collection Period, (iii) the principal portion of all
Prepayments received during such Collection Period (to the extent such amounts
are not included in clauses (i) or (ii) above) and (iv) the Principal Balance of
each Receivable that became an Administrative Receivable, a Warranty Receivable
or a Defaulted Receivable during such Collection Period (to the extent such
amounts are not included in clauses (i), (ii) or (iii) above).
"CLEARING AGENCY" means an organization registered as a "clearing agency"
pursuant to Section 17A of the Exchange Act.
"CLEARING AGENCY PARTICIPANT" means a broker, dealer, bank, other financial
institution or other Person for whom from time to time a Clearing Agency effects
book-entry transfers and pledges of securities deposited with the Clearing
Agency.
"CLOSING DATE" shall have the meaning specified in the Agreement.
6
<PAGE>
"CODE" means the Internal Revenue Code of 1986, as amended.
"COLLECTION PERIOD" means, with respect to any Distribution Date, the
calendar month immediately preceding the month in which such Distribution Date
occurs (or, in the case of the first Distribution Date, the period of time since
the Cutoff Date through the last day of the calendar month immediately preceding
the month in which the first Distribution Date occurs).
"COMMISSION" means the Securities and Exchange Commission, and its
successors.
"CORPORATE TRUST OFFICE" means the office of the Trustee at which its
corporate trust business shall be administered, which office shall be specified
in the Agreement, or such office at some other address as the Trustee may
designate from time to time by notice to the Certificateholders, the Seller, the
Servicer and the Letter of Credit Bank, if any.
"CUTOFF DATE" shall have the meaning specified in the Agreement.
"DEALER" means the dealer of motor vehicles who sold a Financed Vehicle and
who originated and assigned the Receivable relating to such Financed Vehicle to
American Honda under an existing agreement between such dealer and American
Honda.
"DEALER RECOURSE" means, with respect to a Receivable, all recourse rights
against the Dealer which originated the Receivable, and any successor to such
Dealer.
"DEFAULTED RECEIVABLE" means a Receivable (other than an Administrative
Receivable or a Warranty Receivable) as to which (i) a Scheduled Payment is 120
or more days past due and the Servicer has not repossessed the related Financed
Vehicle or (ii) the Servicer has, in accordance with its customary servicing
procedures, determined that eventual payment in full is unlikely and either
repossessed and liquidated the related Financed Vehicle or repossessed and held
the related Financed Vehicle in its repossession inventory for 90 days,
whichever occurs first.
"DEFERRED PREPAYMENT" means, with respect to a Receivable and a Collection
Period, the aggregate amount, if any, of Payments Ahead remitted to the Servicer
in respect of such Receivable during one or more prior Collection Periods and
currently held by the Servicer or in the Payahead Account.
"DEFINITIVE CERTIFICATES" shall have the meaning specified in Section
15.09.
"DELIVERY" means, when used with respect to Reserve Fund Property:
(i) with respect to certificated securities, bankers' acceptances,
commercial paper, negotiable certificates of deposit and any other
obligations which evidence a right to the payment of money and is not
itself a security agreement or lease and is of a type which is in ordinary
course of business transferred by delivery with necessary endorsement or
assignment (collectively, "Physical Property"): (A) the Trustee or its
Financial Intermediary acquires possession of the Physical Property, and
evidence that
7
<PAGE>
any such Physical Property that is in registrable form has been registered
in the name of the Trustee, its Financial Intermediary, its custodian or
its nominee; (B) the Financial Intermediary, not a clearing corporation,
sends the Trustee confirmation of the transfer and also by book entry or
otherwise identifies as belonging to the Trustee the Physical Property in
the Financial Intermediaries possession; or (C) with respect to a clearing
corporation, appropriate entries to the account of the Trustee or a Person
designated by him or her and, if certificated, it is both, in the custody
of the clearing corporation or another clearing corporation, a custodian
bank or a nominee of any of them and, in bearer form or endorsed in blank
by the appropriate person or registered in the name of the clearing
corporation, custodian bank, or a nominee of any of them.
(ii) with respect to any Reserve Fund Property that is a book-entry
security held through the Federal Reserve System pursuant to federal
book-entry regulations, the following procedures, all in accordance with
applicable law, including applicable federal regulations and Articles 8 and
9 of the UCC: (A) book-entry registration of such book-entry security to an
appropriate book-entry account maintained with a Federal Reserve Bank, by
the Trustee or by a custodian and issuance to the Trustee or to such
custodian, as the case may be, of a deposit advice or other written
confirmation of such book-entry registration; (B) the making by any such
custodian of entries in its books and records identifying such book-entry
security held through the Federal Reserve System pursuant to federal
book-entry regulations as belonging to the Trustee and indicating that such
custodian holds such book-entry security solely as agent for the Trustee,
and the making by the Trustee of entries in its books and records
establishing that it holds such book-entry security solely as Trustee
pursuant to Section 14.07; and (C) such additional or alternative
procedures as may hereafter become necessary to effect complete transfer of
ownership of any such book-entry security to the Trustee, consistent with
changes in applicable law or regulations or the interpretation thereof; and
(iii) with respect to any Reserve Fund Property that is an
uncertificated security under Article 8 of the UCC and that is not governed
by clause (ii) above, registration of the transfer to, and ownership of
such uncertificated security by, the Trustee, its Financial Intermediary,
its custodian or its nominee by the issuer of such uncertificated security.
"DETERMINATION DATE" means, with respect to any Distribution Date, the
tenth calendar day of the month in which such Distribution Date occurs or, if
such day is not a Business Day, the immediately succeeding Business Day.
"DISCOUNT RATE" shall have the meaning specified in the Agreement.
"DISCOUNT RECEIVABLES" means those Receivables which have APRs which are
less than the sum of (i) the Pass-Through Rate and (ii) the Servicing Fee Rate.
8
<PAGE>
"DISTRIBUTION DATE" means, with respect to a Collection Period, the
fifteenth calendar day of the following month or, if such day is not a Business
Day, the next succeeding Business Day, commencing with the date specified in the
Agreement.
"DTC" means The Depository Trust Company, and its successors.
"DUFF & PHELPS" means Duff & Phelps Inc., and its successors.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"EVENT OF DEFAULT" shall have the meaning specified in Section 18.01.
"EXCESS AMOUNTS" shall have the meaning specified in Section 14.06(d).
"EXCESS PAYMENT" means, with respect to a Receivable and a Collection
Period, the amount, if any, by which the Actual Payment exceeds the sum of (i)
the Scheduled Payment and (ii) any Overdue Payment.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"FDIC" means the Federal Deposit Insurance Corporation, and its successors.
"FNMA" means the Federal National Mortgage Association, and its successors.
"FINAL SCHEDULED DISTRIBUTION DATE" shall have the meaning specified in the
Agreement.
"FINANCED VEHICLE" means, with respect to any retail installment sale or
conditional sale contract, the related Honda or Acura automobile or sport
utility vehicle or Honda minivan, together with all accessions thereto, securing
the related Obligor's indebtedness under such retail installment sale or
conditional sale contract.
"FINANCIAL INTERMEDIARY" means, a bank, broker, clearing corporation, or
other Person (or the nominee of any of them) which in the ordinary course of its
business maintains security accounts for its customers and is acting in that
capacity.
"INDEPENDENT DIRECTOR" means a director of the Seller who is not (i) a
director, officer or employee of any Affiliate of the Seller, (ii) a natural
person related to any director or officer of any Affiliate of the Seller, (iii)
a holder (directly or indirectly) of more than 10% of any voting securities of
any Affiliate of the Seller or (iv) a natural person related to a holder
(directly or indirectly) of more than 10% of any voting securities of any
Affiliate of the Seller.
"INITIAL SERVICER LETTER OF CREDIT AMOUNT" shall have the meaning specified
in the Agreement.
9
<PAGE>
"INSTALLMENT SALE CONTRACTS" means installment sale contracts and
conditional sale agreements.
"INSURANCE POLICY" means, with respect to a Receivable, an insurance policy
covering physical damage, credit life, credit disability, theft, mechanical
breakdown or any similar event relating to the related Financed Vehicle or
Obligor.
"INVESTMENT COMPANY ACT" means the Investment Company Act of 1940, as
amended.
"LETTER OF CREDIT BANK" means any Person which has provided a Servicer
Letter of Credit in accordance with Section 14.09.
"LETTER OF REPRESENTATIONS" shall have the meaning specified in the
Agreement.
"LIEN" means any security interest, lien, charge, pledge, equity or
encumbrance of any kind other than tax liens, mechanics' liens and any liens
that attach to a Receivable or any property, as the context may require, by
operation of law.
"LIQUIDATED RECEIVABLE" means a Receivable that (i) has been the subject of
a Prepayment in full, or (ii) has been paid in full or the final amounts in
respect of such payment have been paid with respect to a Defaulted Receivable,
regardless of whether all or any part of such payment has been made by the
Obligor under such Receivable, the Seller pursuant to the Agreement or pursuant
to the Receivables Purchase Agreement, the Servicer pursuant hereto, an insurer
pursuant to an Insurance Policy or otherwise.
"LIQUIDATION EXPENSES" means, with respect to a Defaulted Receivable, the
amount charged by the Servicer, in accordance with its customary servicing
procedures, to or for its account for repossessing, refurbishing and disposing
of the related Financed Vehicle and other out-of-pocket costs related to such
liquidation.
"LIQUIDATION PROCEEDS" means, with respect to a Defaulted Receivable, all
amounts realized with respect to such Receivable from whatever sources
(including, without limitation, proceeds of any Insurance Policy), net of
amounts that are required by law or such Receivable to be refunded to the
related Obligor.
"MAXIMUM YIELD SUPPLEMENT AMOUNT" for any Distribution Date will equal the
net present value (discounted at the Discount Rate) of the aggregate amount, as
of the last day of the related Collection Period, by which interest on the
Principal Balance of each Discount Receivable (other than any such Receivable
that is a Defaulted Receivable) for the remaining term of such Receivable
(assuming no prepayments or delinquencies) at the Required Rate exceeds interest
on such Principal Balance at the APR of each such Receivable; provided that,
each Yield Supplement Deposit Amount that would result from such aggregate
amount and such assumptions shall be discounted from the Distribution Date on
which such amount would be required to be withdrawn to the current Distribution
Date.
10
<PAGE>
"MONTHLY PAYMENT" means, with respect to any Receivable, the amount of each
fixed monthly payment payable to the obligee under such Receivable in accordance
with the terms thereof, net of any portion of such monthly payment that
represents late payment charges, extension fees or collections allocable to
payments to be made by Obligors for payment of insurance premiums, extended
service contracts or similar items.
"MOODY'S" means Moody's Investors Service, Inc., and its successors.
"MOTOR VEHICLE RECEIVABLES" shall have the meaning specified in
Section 16.03(b)(ii)(A).
"NET LIQUIDATION PROCEEDS" means, with respect to a Defaulted Receivable,
Liquidation Proceeds less Liquidation Expenses.
"NONRECOVERABLE ADVANCE" shall have the meaning specified in
Section 14.04(c).
"OBLIGOR" on a Receivable means the purchaser or co-purchasers of the
related Financed Vehicle purchased in part or in whole by the execution and
delivery of such Receivable or any other Person who owes or may be liable for
payments under such Receivable.
"OFFERED SECURITIES" shall have the meaning specified in Section
16.03(b)(ii)(B).
"OFFICER'S CERTIFICATE" means a certificate signed by the president, any
Vice President, the treasurer or the secretary of the Seller or the Servicer, as
the case may be, and delivered to the Trustee.
"OPINION OF COUNSEL" means a written opinion of counsel (who, in the case
of counsel to the Seller or the Servicer, may be an employee of or outside
counsel to the Seller or the Servicer), which counsel shall be acceptable to the
Trustee.
"ORIGINAL CLASS A CERTIFICATE BALANCE" shall have the meaning specified in
the Agreement.
"ORIGINAL CLASS B CERTIFICATE BALANCE" shall have the meaning specified in
the Agreement.
"ORIGINAL POOL BALANCE" shall have the meaning specified in the Agreement.
"OUTSTANDING ADVANCES" means, with respect to a Receivable and the last day
of a Collection Period, the sum of all Advances made as of or prior to such
date, minus all payments or collections as of or prior to such date which are
specified in Section 14.04(b) as applied to reimburse all unpaid Advances with
respect to such Receivable.
"OUTSTANDING INTEREST ADVANCES" means, as of the last day of a Collection
Period with respect to a Receivable, the portion of Outstanding Advances
allocable to interest.
11
<PAGE>
"OUTSTANDING PRINCIPAL ADVANCES" means, as of the last day of a Collection
Period with respect to a Receivable, the portion of Outstanding Advances
allocable to principal.
"OVERDUE PAYMENT" shall have the meaning specified in Section 14.03(a).
"PASS-THROUGH RATE" means the interest rate on the Certificates payable to
Certificateholders, as specified in the Agreement.
"PAYAHEAD ACCOUNT" means the account or accounts designated as such and
established and maintained pursuant to Section 14.01.
"PAYMENT AHEAD" means, with respect to a Precomputed Receivable and a
Collection Period, any Excess Payment (not representing prepayment in full of
such Precomputed Receivable) which the Servicer, in accordance with its
customary servicing practices, will apply towards the payment of Scheduled
Payments due in one or more future Collection Periods.
"PERMITTED INVESTMENTS" means, at any time, any one or more of the
following obligations and securities:
(i) obligations of, and obligations fully guaranteed as to timely
payment of principal and interest by, the United States or any agency
thereof, provided such obligations are backed by the full faith and credit
of the United States;
(ii) general obligations of or obligations guaranteed by FNMA, any
state of the United States, the District of Columbia or the Commonwealth of
Puerto Rico then rated the highest available credit rating of each Rating
Agency for such obligations;
(iii) securities bearing interest or sold at a discount issued by
any corporation incorporated under the laws of the United States, any state
thereof, the District of Columbia or the Commonwealth of Puerto Rico, so
long as at the time of such investment or contractual commitment providing
for such investment either the long-term unsecured debt of such corporation
has the highest available rating from each Rating Agency for such
obligations or the commercial paper or other short-term debt which is then
rated has the highest available credit rating of each Rating Agency for
such obligations;
(iv) certificates of deposit issued by any depository institution
or trust company (including the Trustee) incorporated under the laws of the
United States, any state thereof, the District of Columbia or the
Commonwealth of Puerto Rico and subject to supervision and examination by
banking authorities of one or more of such jurisdictions, provided that the
short-term unsecured debt obligations of such depository institution or
trust company has the highest available credit rating of each Rating Agency
for such obligations;
12
<PAGE>
(v) certificates of deposit issued by any bank, trust company,
savings bank or other savings institution and fully insured by the FDIC;
(vi) repurchase obligations held by the Trustee that are acceptable
to the Trustee with respect to any security described in clauses (i), (ii)
or (vii) hereof or any other security issued or guaranteed by any other
agency or instrumentality of the United States, in either case entered into
with a federal agency or a depository institution or trust company (acting
as principal) described in clause (iv) above;
(vii) any mutual fund, money market funds, common trust fund or
other pooled investment vehicle, the assets of which are limited to
instruments that otherwise would constitute Permitted Investments hereunder
and which has the highest applicable rating by each Rating Agency;
(viii) such other investments acceptable to each Rating Agency (as
approved in writing by each Rating Agency) as will not result in the
qualification, downgrading or withdrawal of the rating then assigned to the
Rated Certificates by such Rating Agency;
provided that each of the foregoing investments shall mature no later than the
Business Day prior to the Distribution Date immediately following the date of
purchase (other than in the case of the investment of monies in instruments of
which the entity at which the Certificate Account, the Payahead Account or the
Reserve Fund, as the case may be, is located is the obligor, which may mature on
the related Distribution Date), and shall be required to be held to such
maturity.
Notwithstanding anything to the contrary contained in this definition, (a)
no Permitted Investment may be purchased at a premium, (b) any of the foregoing
which constitutes a certificated security shall not be considered a Permitted
Investment unless it is registered in the name of the Trustee in its capacity as
such and (c) any of the foregoing which constitutes an uncertificated security
shall not be considered a Permitted Investment unless (i) it is registered in
the name of the Trustee in its capacity as such or in the name of its Financial
Intermediary; (ii) no notation of the right of the issuer thereof to a Lien
thereon is contained in the initial transaction statement therefor sent to the
Trustee; (iii) the Trustee does not have notice or actual knowledge of (A) any
restriction on the transfer thereof imposed by the issuer thereof or (B) any
adverse claim, and no notation of any such restriction or of any specific
adverse claim as to which the issuer has a duty under the law of the state in
which the Corporate Trust Office is located at the time of registration is
contained in the initial transaction statement therefor sent to the Trustee; and
(iv) to the Trustee's knowledge, no creditor has served legal process upon the
issuer thereof at its chief executive office in the United States which legal
process attempts to place a Lien thereon prior to the registration thereof in
the name of the Trustee.
For purposes of this definition, any reference to the highest available
credit rating of an obligation shall mean the highest available credit rating
for such obligation, or such lower credit rating (as approved in writing by each
Rating Agency) as will not result in the
13
<PAGE>
qualification, downgrading or withdrawal of the rating then assigned to the
Rated Certificates by such Rating Agency.
"PERSON" means any legal person, including any individual, corporation,
partnership, joint venture, association, joint stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"PHYSICAL PROPERTY" shall have the meaning specified in the definition of
the term "Delivery."
"POOL BALANCE" means, as of any date, the aggregate Principal Balance of
the Receivables (exclusive of all Administrative Receivables for which the
Servicer has paid the Administrative Purchase Payment, Warranty Receivables for
which the Seller has paid the Warranty Purchase Payment and Defaulted
Receivables) as of the close of business on such date.
"POOL FACTOR" as of any Distribution Date, means a seven-digit decimal
figure equal to the Pool Balance as of such Distribution Date divided by the
Original Pool Balance.
"PRECOMPUTED ADVANCE" shall have the meaning specified in Section 14.04(a).
"PRECOMPUTED RECEIVABLE" means any Actuarial Receivable or Rule of 78s
Receivable.
"PREPAYMENT" means (i) with respect to any Precomputed Receivable, any
Excess Payment other than a Payment Ahead or (ii) with respect to any Simple
Interest Receivable, any prepayment, whether in part or in full, in respect of
such Simple Interest Receivable.
"PREPAYMENT SURPLUS" means, with respect to any Distribution Date on which
a Prepayment is to be applied with respect to a Precomputed Receivable, that
portion of such Prepayment, net of any Rebate, which is not attributable to
principal in accordance with the actuarial method, net of one month's interest
at the Pass-Through Rate on the Principal Balance of such Receivable as of the
first day of the related Collection Period.
"PRINCIPAL BALANCE" means, with respect to any Receivable as of any date,
the Amount Financed minus the sum of the following amounts: (i) in the case of
a Precomputed Receivable, that portion of all Scheduled Payments due on or prior
to such date allocable to principal, computed in accordance with the actuarial
method, (ii) in the case of a Simple Interest Receivable, that portion of all
Scheduled Payments actually received on or prior to such date allocable to
principal, (iii) any Warranty Purchase Payment or Administrative Purchase
Payment with respect to such Receivable allocable to principal and (iv) any
Prepayments or other payments applied to reduce the unpaid principal balance of
such Receivable.
"PURCHASER'S LETTER" means a representation letter delivered pursuant to
Section 15.03(a) by a Person who is acquiring one or more Class B Certificates,
substantially in the form attached hereto as Exhibit B.
14
<PAGE>
"RATED CERTIFICATES" means each Class of Certificates that has been rated
by a Rating Agency at the request of the Seller.
"RATING AGENCY" means each nationally recognized rating agency specified in
the Agreement as from time to time shall be rating the Rated Certificates.
"REBATE" means, with respect to a Precomputed Receivable and any date, the
rebate, calculated in accordance with the actuarial method, under such
Receivable that is or would be payable to the related Obligor for unearned
finance charges or any other charges rebatable to the Obligor if such Obligor
were to prepay such Receivable in full on such date.
"RECEIVABLE" means any retail installment sale or conditional sale contract
executed by an Obligor in respect of a Financed Vehicle, and all proceeds
thereof and payments thereunder.
"RECEIVABLE FILE" means the documents specified in Section 12.02 pertaining
to a particular Receivable.
"RECEIVABLES PURCHASE AGREEMENT" shall have the meaning specified in the
Agreement.
"RECORD DATE" means, with respect to each Distribution Date, (i) in the
case of the Class A Certificates, the calendar day immediately preceding such
Distribution Date (or, if Definitive Certificates have been issued, the last day
of the month immediately preceding the month in which such Distribution Date
occurs) and (ii) in the case of the Class B Certificates, the last day of the
month immediately preceding the month in which such Distribution Date occurs.
Any amount stated "as of a Record Date" or "on a Record Date" shall give effect
to (i) all applications of collections and (ii) all distributions to any party
under the Agreement or to the related Obligor, as the case may be, in each case
as determined as of the related Record Date.
"REDUCTION CERTIFICATE" shall have the meaning specified in the Servicer
Letter of Credit.
"RELEASED ADMINISTRATIVE AMOUNT" means, with respect to a Distribution Date
and to an Administrative Receivable, the Deferred Prepayment, if any, for such
Administrative Receivable.
"RELEASED WARRANTY AMOUNT" means, with respect to a Distribution Date and
to a Warranty Receivable, the Deferred Prepayment, if any, for such Warranty
Receivable.
"REQUIRED RATE" means, with respect to Discount Receivables, the sum of the
(i) Pass-Through Rate and (ii) the Servicing Fee Rate.
"REQUIRED RATING" means, the rating or ratings specified in the Agreement.
15
<PAGE>
"REQUIRED SERVICER RATING" means a rating on short-term obligations of the
Servicer of at least Prime-1 by Moody's and A-1 by Standard & Poor's; and any
requirement that the Servicer have the "Required Servicer Rating" shall mean
that the short-term unsecured debt obligations of the Servicer shall be rated at
least equal to the foregoing ratings from Moody's and Standard & Poor's.
"RESERVE FUND" means the account designated as such and established and
maintained pursuant to Section 14.07.
"RESERVE FUND INITIAL DEPOSIT" shall have the meaning specified in the
Agreement.
"RESERVE FUND PROPERTY" shall have the meaning specified in Section
14.07(a)(ii).
"RESET DATE" shall have the meaning specified in the Servicer Letter of
Credit, if any.
"RESET PERCENTAGE" shall have the meaning specified in the Servicer Letter
of Credit, if any.
"RESIDUAL CERTIFICATE" shall have the meaning specified in Section 15.01.
"RESPONSIBLE OFFICER" means an officer of the Trustee assigned to the
Corporate Trust Office, including any Vice President, any trust officer or any
other officer performing functions similar to those performed by the individuals
who at the time shall be such officers, and any other officer of the Trustee to
whom a matter is referred because of his knowledge of and familiarity with the
particular subject.
"RULE OF 78s RECEIVABLE" means any Receivable which provides for the
allocation of payments according to the "sum of periodic balances" or "sum of
monthly payments" method.
"SCHEDULE OF RECEIVABLES" means the schedule of Receivables attached as
Schedule A to the Agreement, as it may be amended from time to time.
"SCHEDULED PAYMENT" means, with respect to any Distribution Date and to a
Receivable, the payment set forth in such Receivable as due from the Obligor in
the related Collection Period; provided, however, that in the case of the first
Collection Period, the Scheduled Payment shall include all such payments due
from the Obligor on or after the Cutoff Date.
"SCHEDULED SURPLUS" means, with respect to any Distribution Date for any
Receivable having an APR which exceeds the sum of the Pass-Through Rate and the
Servicing Fee Rate, the product of (i) the interest portion of the related
Scheduled Payment (determined in accordance with the actuarial method if such
Receivable is a Precomputed Receivable) and (ii) the remainder of (a) one minus
(b) a fraction, the numerator of which equals the sum of the Pass-Through Rate
and the Servicing Fee Rate and the denominator of which equals such APR.
16
<PAGE>
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SELLER" means American Honda Receivables Corp., in its capacity as seller
of the Receivables under the Agreement, and each successor thereto (in the same
capacity) pursuant to Section 16.03.
"SERVICER" means American Honda, in its capacity as servicer of the
Receivables pursuant to the Agreement, and each successor thereto (in the same
capacity) appointed pursuant to Section 18.03.
"SERVICER LETTER OF CREDIT" means, if the Servicer desires to remit
collections on or in respect of the Receivables to the Certificate Account on a
monthly basis upon satisfaction of the conditions described in clause (b) of the
second sentence of Section 14.02(b), (i) an irrevocable letter of credit, issued
by the Letter of Credit Bank and naming the Trustee as beneficiary,
substantially in the form attached as an Exhibit to the Agreement or (ii) a
surety bond, insurance policy or deposit of cash or securities satisfactory to
the Trustee and the Rating Agencies.
"SERVICER LETTER OF CREDIT AMOUNT" means the amount determined pursuant to
Section 14.09(a).
"SERVICER'S CERTIFICATE" means an Officer's Certificate of the Servicer
completed and executed pursuant to Section 13.10, substantially in the form
attached as an Exhibit to the Agreement.
"SERVICING FEE RATE" shall have the meaning specified in the Agreement.
"SIMPLE INTEREST ADVANCE" shall have the meaning specified in Section
14.04(a).
"SIMPLE INTEREST RECEIVABLE" means any Receivable which provides for the
allocation of payments according to the "simple interest" method.
"SPECIFIED RESERVE FUND BALANCE" shall have the meaning specified in the
Agreement.
"STANDARD & POOR'S" means Standard & Poor's Ratings Services, a division of
The McGraw-Hill Companies, Inc., and its successors.
"SUCCESSOR SERVICER" means any entity appointed as a successor to the
Servicer pursuant to Section 18.03.
"SUPPLEMENTAL SERVICING FEE" means any interest earned on investment of the
monies on deposit in the Accounts during a Collection Period, net of any losses
from such investments, plus all late fees, prepayment charges and other
administrative fees and expenses or similar charges allowed by applicable law
with respect to the Receivables, including, in the case of a Receivable that
provides for payments according to the Rule of 78s and that is prepaid in full,
the difference between the Principal Balance of such Receivable computed
17
<PAGE>
according to the Rule of 78s, minus the Principal Balance of such Receivable
computed according to the actuarial method (plus accrued interest to the date of
prepayment), received by the Servicer during such Collection Period.
"TOTAL SERVICING FEE" means the sum of the Basic Servicing Fee and the
Supplemental Servicing Fee.
"TRUST" means the trust created by the Agreement, the estate of which
consists of (i) the Receivables (other than Warranty Receivables for which the
Seller has paid the Warranty Purchase Payment and Administrative Receivables for
which the Servicer or the Seller has paid the Administrative Purchase Payment)
and all monies paid thereunder or due and to become due thereunder, in each case
on and after the Cutoff Date; (ii) security interests in the Financed Vehicles;
(iii) such assets as are from time to time deposited in the Accounts (other than
investment earnings thereon); (iv) proceeds from claims on any Insurance
Policies; (v) the right to realize upon any property (including the right to
receive future Liquidation Proceeds) that shall have secured a Receivable and
have been repossessed by or on behalf of the Trustee; (vi) an assignment of the
Seller's rights under the Receivables Purchase Agreement; (vii) the right of the
Seller to receive payments pursuant to any Dealer Recourse; (viii) the Servicer
Letter of Credit, if any; and (ix) all proceeds of the foregoing. The Reserve
Fund and the Yield Supplement Account shall not be a part of or otherwise
includible in the Trust.
"TRUSTEE" means the Person acting as Trustee under the Agreement, its
successor in interest, and any successor trustee appointed pursuant to Section
19.11.
"TRUSTEE'S CERTIFICATE" means a certificate completed and executed by a
Responsible Officer pursuant to Section 19.02 or 19.03, substantially in the
form attached hereto as Exhibit A.
"UCC" means the Uniform Commercial Code as in effect in the respective
jurisdiction.
"UNITED STATES" means the United States of America.
"VICE PRESIDENT" of any Person means any vice president of such Person,
whether or not designated by a number or words before or after the title "Vice
President", who is a duly elected officer of such Person.
"VOTING INTERESTS" means the aggregate voting strength evidenced by the
Class A Certificates or the Class B Certificates, as the case may be; provided,
however, that where the Voting Interests are relevant in determining whether the
vote of the requisite percentage of Class A Certificateholders or Class B
Certificateholders necessary to effect any consent, waiver, request or demand
shall have been obtained, the Voting Interests shall be deemed to be reduced,
except with respect to any amendment of the Agreement pursuant to the proviso in
the first sentence of Section 21.01(b), by the amount equal to the Voting
Interests (without giving effect to this provision) represented by the interests
evidenced by such Certificate registered in the name of the Seller, the Servicer
or any Person known to a Responsible
18
<PAGE>
Officer to be controlling, controlled by or under common control with the Seller
or the Servicer.
"WARRANTY PURCHASE PAYMENT" means, with respect to a Distribution Date and
to a Warranty Receivable repurchased by the Seller as of the end of the related
Collection Period, which Receivable is (i) a Precomputed Receivable, (a) the sum
of (1) all Scheduled Payments on such Receivable due after the last day of such
Collection Period, (2) all past due Scheduled Payments for which an Advance has
not been made, (3) an amount equal to any reimbursement of Outstanding Advances
made pursuant to the first sentence of Section 14.04(c) with respect to such
Receivable and (4) all Outstanding Advances made in respect of such Receivable,
minus (b) the sum of (1) all Payments Ahead in respect of such Warranty
Receivable held by the Servicer or on deposit in the Payahead Account, (2) any
Rebate and (3) any proceeds of the liquidation of such Receivable previously
received (to the extent applied to reduce the Principal Balance of such
Receivable) or (ii) a Simple Interest Receivable, the sum of (a) the unpaid
principal balance owed by the related Obligor in respect of such Receivable and
(b) interest on such unpaid principal balance at a rate equal to the sum of the
Pass-Through Rate and the Servicing Fee Rate to the last day of such Collection
Period.
"WARRANTY RECEIVABLE" means a Receivable which the Seller is required to
repurchase pursuant to Section 12.05.
"YIELD SUPPLEMENT ACCOUNT" means the account established and maintained
pursuant to Section 14.11.
"YIELD SUPPLEMENT ACCOUNT DEPOSIT" shall have the meaning specified in the
Agreement, which is, as of the Closing Date, the net present value (discounted
at the Discount Rate) of the aggregate amount as of the Cut-off Date by which
interest on the Principal Balance of each Discount Receivable for the remaining
term of such Receivable (assuming no prepayments or delinquencies) at a rate
equal to the Required Rate exceeds interest at the APR of such Receivable;
provided that, each Yield Supplement Deposit Amount that would result from such
aggregate amount and such assumptions shall be discounted from the Distribution
Date on which such amount would be required to be withdrawn to the Closing Date.
"YIELD SUPPLEMENT DEPOSIT AMOUNT" means with respect to all payments made
on or in respect of a Discount Receivable (other than a Discount Receivable that
is a Defaulted Receivable) and on any Distribution Date, the aggregate amount by
which one month's interest on the Principal Balance as of the first day of the
related Collection Period of each Discount Receivable at a rate equal to the
Required Rate exceeds interest on such Principal Balance at the APR of such
Receivable.
Section 11.02. USAGE OF TERMS. With respect to all terms in the
Agreement, the singular includes the plural and the plural the singular; words
importing any gender include the other genders; references to "writing" include
printing, typing, lithography and other means of reproducing words in a visible
form; references to agreements and other contractual
19
<PAGE>
instruments include all subsequent amendments thereto or changes therein entered
into in accordance with their respective terms and not prohibited by the
Agreement; references to Persons include their permitted successors and assigns;
and the term "including" means "including without limitation."
Section 11.03. CUTOFF DATE AND RECORD DATE. All references to the Record
Date prior to the first Record Date in the life of the Trust shall be to the
Cutoff Date.
Section 11.04. SECTION REFERENCES. All section references shall be to
Sections in these Standard Terms and Conditions.
Section 11.05. SEPARATE AGREEMENTS. Each Agreement which shall
incorporate by reference these Standard Terms and Conditions shall be separate
and distinct from each other such Agreement, no provision of any such Agreement
shall be applicable to any other such Agreement, and all references to "the
Agreement" and to provisions thereof shall be references to a particular
Agreement which incorporates these Standard Terms and Conditions.
Section 11.06. BUSINESS DAY CERTIFICATE. On the Closing Date (with
respect to the time between the Closing Date and the end of the related calendar
year) and thereafter within 15 days prior to the end of each calendar year (with
respect to all succeeding calendar years) while any Certificates shall remain
outstanding, the Servicer shall provide to the Trustee an Officer's Certificate
specifying with respect to the related calendar year (or portion thereof, in the
case of an Officer's Certificate delivered on the Closing Date) the days on
which banking institutions in Los Angeles, California are authorized or
obligated by law, executive order or governmental decree to be closed.
20
<PAGE>
ARTICLE TWELVE
CONVEYANCE OF RECEIVABLES;
CUSTODY OF RECEIVABLE FILES
Section 12.01. CONVEYANCE OF RECEIVABLES. The Seller, pursuant to the
mutually agreed upon terms contained in the Agreement, shall sell, transfer,
assign and otherwise convey to the Trustee, without recourse (but subject to the
Seller's obligations in the Agreement), all of its right, title and interest in
and to the Receivables and any proceeds related thereto, including any Dealer
Recourse and such other items as shall be specified in the Agreement. It is the
intention of the Seller that the transfer and assignment contemplated by the
Agreement shall constitute a sale of the Receivables from the Seller to the
Trust and the beneficial interest in and title to the Receivables shall not be
part of the Seller's estate in the event of the filing of a bankruptcy petition
by or against the Seller under any bankruptcy law. The Seller agrees to execute
and file all filings (including filings under the UCC) necessary in any
jurisdiction to provide third parties with notice of the sale of the Receivables
pursuant to Section 3.01 of the Agreement and to perfect such sale under the
UCC.
Although the parties to the Agreement intend that the transfer and
assignment contemplated by the Agreement be a sale, in the event such transfer
and assignment is deemed to be other than a sale, the parties intend that all
filings described in the foregoing paragraph shall give the Trustee on behalf of
the Trust a first priority perfected security interest in, to and under the
Receivables, and other property conveyed under the Agreement and all proceeds of
any of the foregoing. The Agreement shall be deemed to be the grant of a
security interest from the Seller to the Trustee on behalf of the Trust, and the
Trustee on behalf of the Trust shall have all the rights, powers and privileges
of a secured party under the UCC.
Section 12.02. CUSTODY OF RECEIVABLE FILES. To assure uniform quality in
servicing the Receivables and to reduce administrative costs, the Trustee, upon
the execution and delivery of the Agreement, revocably appoints the Servicer,
and the Servicer accepts such appointment, to act as the agent of the Trustee as
custodian of the following documents or instruments which are hereby
constructively delivered to the Trustee with respect to each Receivable:
(a) the fully executed original of the Receivable;
(b) documents evidencing or related to any Insurance Policy;
(c) the original credit application of each Obligor, fully
executed by such Obligor on American Honda's customary form, or on a form
approved by American Honda, for such application;
(d) the original certificate of title (or evidence that such
certificate of title has been applied for) or such documents that the
Servicer shall keep on file, in accordance with its customary procedures,
evidencing the security interest in the related Financed Vehicle; and
21
<PAGE>
(e) any and all other documents that the Seller or the Servicer,
as the case may be, shall keep on file, in accordance with its customary
procedures, relating to such Receivable or the related Obligor or Financed
Vehicle.
Section 12.03. ACCEPTANCE BY TRUSTEE. The Trustee shall acknowledge its
acceptance, pursuant to the Agreement, of all right, title and interest in and
to the Receivables conveyed by the Seller pursuant to the Agreement and shall
declare that the Trustee holds and shall hold such right, title and interest,
upon the trust set forth in the Agreement.
Section 12.04. REPRESENTATIONS AND WARRANTIES OF SELLER AS TO THE
RECEIVABLES. The Seller shall make the following representations and warranties
as to the Receivables on which the Trustee shall rely in accepting the
Receivables in trust and authenticating the Certificates. Such representations
and warranties shall speak as of the execution and delivery of the Agreement,
but shall survive the sale, transfer and assignment of the respective
Receivables to the Trustee.
(a) CHARACTERISTICS OF RECEIVABLES. Each Receivable (i) shall
have been originated in the United States by a Dealer for the retail sale
of the related Financed Vehicle in the ordinary course of such Dealer's
business, shall have been fully and properly executed by the parties
thereto, shall have been purchased by American Honda from such Dealer under
an existing agreement with American Honda and shall have been validly
assigned by such Dealer to American Honda in accordance with the terms of
such agreement and shall have been subsequently sold by American Honda to
the Seller pursuant to the Receivables Purchase Agreement, (ii) shall have
created or shall create a valid, subsisting and enforceable first priority
security interest in favor of American Honda in the related Financed
Vehicle, which security interest has been assigned by American Honda to the
Seller and shall be assignable, and shall be so assigned, by the Seller to
the Trustee, (iii) shall contain customary and enforceable provisions such
that the rights and remedies of the holder thereof shall be adequate for
realization against the collateral of the benefits of the security, (iv)
shall, except as otherwise provided in the Agreement, provide for level
Monthly Payments (provided that the payment in the first or last month in
the life of the Receivable may be minimally different from the level
payment) that fully amortize the Amount Financed over its original term and
shall provide for a finance charge or shall yield interest at its APR, (v)
shall provide for, in the event that such Receivable is prepaid, a
prepayment that fully pays the Principal Balance and includes accrued but
unpaid interest at least through the date of prepayment in an amount
calculated by using an interest rate at least equal to its APR, (vi) shall
have an Obligor that is not a federal, state or local governmental entity
and (vii) is a retail installment contract.
(b) SCHEDULE OF RECEIVABLES. The information set forth in the
Schedule of Receivables shall be true and correct in all material respects
as of the opening of business on the Cutoff Date, and no selection
procedures adverse to the Certificateholders shall have been utilized in
selecting the Receivables from those motor vehicle receivables of American
Honda which met the selection criteria set forth in this Section and the
Agreement.
22
<PAGE>
(c) COMPLIANCE WITH LAW. Each Receivable and each sale of the
related Financed Vehicle shall have complied at the time it was originated
or made, and shall comply at the time of execution of the Agreement, in all
material respects with all requirements of applicable federal, state and
local laws, and regulations thereunder, including usury laws, the Federal
Truth-in-Lending Act, the Equal Credit Opportunity Act, the Fair Credit
Billing Act, the Fair Credit Reporting Act, the Fair Debt Collection
Practices Act, the Federal Trade Commission Act, the Magnuson-Moss Warranty
Act, Federal Reserve Board Regulations B and Z, state adaptations of the
National Consumer Act and of the Uniform Consumer Credit Code and other
consumer credit, equal credit opportunity and disclosure laws.
(d) BINDING OBLIGATION. Each Receivable shall constitute the
genuine, legal, valid and binding payment obligation in writing of the
related Obligor, enforceable by the holder thereof in accordance with its
terms, except as enforceability may be subject to or limited by bankruptcy,
insolvency, reorganization, moratorium, liquidation or other similar laws
affecting the enforcement of creditors' rights in general and by general
principles of equity, regardless of whether such enforceability shall be
considered in a proceeding in equity or at law.
(e) NO BANKRUPT OBLIGORS. None of the Receivables shall be due,
to the best knowledge of the Seller, from any Obligor who is presently the
subject of a bankruptcy proceeding or is bankrupt or insolvent.
(f) SECURITY INTEREST IN FINANCED VEHICLES. Immediately prior to
the sale, assignment and transfer thereof, each Receivable shall be secured
by a validly perfected first priority security interest in the related
Financed Vehicle in favor of American Honda as secured party or all
necessary and appropriate action with respect to such Receivable shall have
been taken to perfect a first priority security interest in such Financed
Vehicle in favor of American Honda as secured party.
(g) RECEIVABLES IN FORCE. No Receivable shall have been
satisfied, subordinated or rescinded, nor shall any Financed Vehicle have
been released in whole or in part from the lien granted by the related
Receivable.
(h) NO WAIVERS. No provision of a Receivable shall have been
waived in such a manner that such Receivable fails to meet all of the other
representations and warranties made by the Seller herein with respect
thereto.
(i) NO AMENDMENTS. No Receivable shall have been amended or
modified in such a manner that the total number of Scheduled Payments has
been increased or that the related Amount Financed has been increased or
that such Receivable fails to meet all of the other representations and
warranties made by the Seller herein with respect thereto.
23
<PAGE>
(j) NO DEFENSES. No facts shall be known to the Seller which
would give rise to any right of rescission, setoff, counterclaim or
defense, nor shall the same have been asserted or threatened, with respect
to any Receivable.
(k) NO LIENS. To the knowledge of the Seller, no liens or claims
shall have been filed, including liens for work, labor or materials
relating to a Financed Vehicle, that shall be liens prior to, or equal or
coordinate with, the security interest in such Financed Vehicle granted by
the related Receivable.
(l) NO DEFAULT; NO REPOSSESSION. Except for payment defaults
that, as of the Cutoff Date, have been continuing for a period of not more
than 30 days, no default, breach, violation or event permitting
acceleration under the terms of any Receivable shall have occurred as of
the Cutoff Date; no continuing condition that with notice or the lapse of
time would constitute a default, breach, violation or event permitting
acceleration under the terms of any Receivable shall have arisen; the
Seller shall not have waived any of the foregoing; and no Financed Vehicle
has been repossessed without reinstatement as of the Cutoff Date.
(m) INSURANCE. At the time of origination of each Receivable,
each Obligor was required under the terms of such Receivable to obtain and
maintain physical damage insurance covering the related Financed Vehicle.
(n) GOOD TITLE. It is the intention of the Seller that the
transfer and assignment herein contemplated, taken as a whole, constitute a
sale of the Receivables from the Seller to the Trust and that the
beneficial interest in and title to the Receivables not be part of the
debtor's estate in the event of the filing of a bankruptcy petition by or
against the Seller under any bankruptcy law. No Receivable has been sold,
transferred, assigned or pledged by the Seller to any Person other than the
Trustee, and no provision of a Receivable shall have been waived, except as
provided in clause (h) above; immediately prior to the transfer and
assignment herein contemplated, the Seller had good and marketable title to
each Receivable free and clear of all Liens and rights of others;
immediately upon the transfer and assignment thereof, the Trustee for the
benefit of the Certificateholders shall have good and marketable title to
each Receivable, free and clear of all Liens and rights of others; and the
transfer and assignment herein contemplated has been perfected under the
UCC.
(o) LAWFUL ASSIGNMENT. No Receivable shall have been originated
in, or shall be subject to the laws of, any jurisdiction under which the
sale, transfer and assignment of such Receivable under the Agreement or
pursuant to a transfer of the related certificate of title shall be
unlawful, void or voidable.
(p) ALL FILINGS MADE. All filings (including UCC filings)
necessary in any jurisdiction to give the Trustee a first priority
perfected security interest in the Receivables shall have been made.
24
<PAGE>
(q) ONE ORIGINAL. There shall be only one original executed copy
of each Receivable.
(r) CHATTEL PAPER. Each Receivable constitutes "chattel paper" as
defined in the UCC.
(s) AGREEMENT. The additional representations and warranties as
to the Receivables contained in Article Six of the Agreement shall be true
and correct.
Section 12.05. REPURCHASE OF RECEIVABLES UPON BREACH. Upon discovery by
the Seller, the Servicer or the Trustee of a breach of any of the
representations and warranties of the Seller set forth in Article Six of the
Agreement or Section 12.04 hereof that materially and adversely affects the
interests of the Certificateholders in any Receivable, the party discovering
such breach shall give prompt written notice to the others. As of the last day
of the second Collection Period following the Collection Period in which it
discovers or receives notice of such breach (or, at the Seller's election, the
last day of the first Collection Period following the Collection Period in which
it discovers or receives notice of such breach), the Seller shall, unless such
breach shall have been cured in all material respects, repurchase such
Receivable, and, if necessary, the Seller shall enforce the obligation of
American Honda under the Receivables Purchase Agreement to repurchase such
Receivable from the Seller. This repurchase obligation shall apply to all
representations and warranties of the Seller contained in Article Six of the
Agreement or Section 12.04 hereof whether or not the Seller has knowledge of the
breach at the time of the breach or at the time the representations and
warranties were made. In consideration of the repurchase of any such
Receivable, on the Business Day immediately preceding the related Distribution
Date, the Seller shall remit the Warranty Purchase Payment of such Receivable to
the Certificate Account in the manner specified in Section 14.05 and shall be
entitled to receive the Released Warranty Amount. In the event that any Liens
or claims shall have been filed, including Liens for work, labor or materials
relating to a Financed Vehicle, that shall be prior to, or equal or coordinate
with, the lien granted by the related Receivable, which Liens or claims shall
not have been satisfied or otherwise released in full as of the Closing Date,
and such breach materially and adversely affects the interests of the Trust in
such Receivable, the Seller shall repurchase such Receivable on the terms and in
the manner specified above. Upon any such repurchase, the Trustee shall,
without further action, be deemed to transfer, assign, set-over and otherwise
convey to the Seller, all right, title and interest of the Trustee in, to and
under such repurchased Receivable, all monies due or to become due with respect
thereto and all proceeds thereof. The Trustee shall execute such documents and
instruments of transfer and assignment and take such other actions as shall be
reasonably requested by the Seller to effect the conveyance of such Receivable
pursuant to this Section. The sole remedy of the Trustee, the Trust or the
Certificateholders with respect to a breach of the Seller's representations and
warranties pursuant to Article Six of the Agreement or Section 12.04 hereof or
with respect to the existence of any such Liens or claims shall be to require
the Seller to repurchase the related Receivable pursuant to this Section and to
enforce American Honda's obligation to repurchase such Receivables from the
Seller pursuant to the Receivables Purchase Agreement. The Trustee shall have
no duty to conduct any affirmative investigation as to the occurrence of any
condition requiring the repurchase of any Receivable pursuant to this Section.
25
<PAGE>
Section 12.06. DUTIES OF SERVICER AS CUSTODIAN.
(a) SAFEKEEPING. The Servicer, in its capacity as custodian, shall hold
the Receivable Files on behalf of the Trustee for the use and benefit of all
present and future Certificateholders, and maintain such accurate and complete
accounts, records and computer systems pertaining to each Receivable File as
shall enable the Trustee to comply with these Standard Terms and Conditions. In
performing its duties as custodian, the Servicer shall act with reasonable care,
using that degree of skill and attention that it exercises with respect to the
receivable files of comparable motor vehicle receivables that the Servicer
services for itself or others. The Servicer shall conduct, or cause to be
conducted, periodic examinations of the files of all receivables owned or
serviced by it which shall include the Receivable Files held by it under the
Agreement, and of the related accounts, records and computer systems, in such a
manner as shall enable the Trustee to verify the accuracy of the Servicer's
record keeping. The Servicer shall promptly report to the Trustee any failure
on its part to hold the Receivable Files and maintain its accounts, records and
computer systems as herein provided and promptly take appropriate action to
remedy any such failure.
(b) MAINTENANCE OF AND ACCESS TO RECORDS. The Servicer shall maintain
each Receivable File solely in its capacity as Servicer at one of its offices
specified in a Schedule to the Agreement, or at such other office as shall be
specified to the Trustee by 30 days' prior written notice. The Servicer shall
make available to the Trustee or its duly authorized representatives, attorneys
or auditors the Receivable Files and the related accounts, records and computer
systems maintained by the Servicer at such times as the Trustee shall reasonably
instruct.
(c) RELEASE OF DOCUMENTS. Upon instruction from the Trustee, the Servicer
shall release any document in the Receivable Files to the Trustee or its agent
or designee, as the case may be, at such place or places as the Trustee may
designate, as soon as practicable. The Servicer shall not be responsible for
any loss occasioned by the failure of the Trustee to return any document or any
delay in doing so.
Section 12.07. INSTRUCTIONS; AUTHORITY TO ACT. The Servicer shall be
deemed to have received proper instructions with respect to the Receivable Files
upon its receipt of written instructions signed by a Responsible Officer. A
certified copy of a bylaw or of a resolution of the board of directors of the
Trustee shall constitute conclusive evidence of the authority of any such
Responsible Officer to act and shall be considered in full force and effect
until receipt by the Servicer of written notice to the contrary given by the
Trustee.
Section 12.08. INDEMNIFICATION BY CUSTODIAN. The Servicer, as custodian
of the Receivable Files, shall indemnify the Trustee for any and all
liabilities, obligations, losses, compensatory damages, payments, costs or
expenses of any kind whatsoever that may be imposed on, incurred or asserted
against the Trustee as the result of any improper act or omission in any way
relating to the maintenance and custody of the Receivable Files by the Servicer,
as custodian; provided, however, that the Servicer shall not be liable for any
portion of any such amount resulting from the willful misfeasance, bad faith or
negligence of the Trustee.
26
<PAGE>
Section 12.09. EFFECTIVE PERIOD AND TERMINATION. The Servicer's
appointment as custodian of the Receivable Files shall become effective as of
the Cutoff Date and shall continue in full force and effect until terminated
pursuant to this Section. If the Servicer shall resign as Servicer pursuant to
Section 17.05 or if all of the rights and obligations of the Servicer have been
terminated pursuant to Section 18.02, the appointment of the Servicer as
custodian of the Receivable Files shall be terminated by the Trustee, or by the
Holders of Certificates evidencing not less than 51% of the Voting Interests of
the Class A Certificates and the Class B Certificates, voting together as a
single class, in the same manner as the Trustee or such Holders may terminate
the rights and obligations of the Servicer under Section 18.02. The Trustee may
terminate the Servicer's appointment as custodian of the Receivable Files with
cause at any time immediately upon written notification to the Servicer. As
soon as practicable after any termination of such appointment, the Servicer
shall deliver the Receivable Files to the Trustee or its agent at such place or
places as the Trustee may reasonably designate. Notwithstanding the termination
of the Servicer as custodian of the Receivable Files, the Trustee agrees that
upon any such termination, the Trustee shall provide, or cause its agent to
provide, access to the Receivable Files to the Servicer for the purpose of
carrying out its duties and responsibilities with respect to the servicing of
the Receivables pursuant to the Agreement.
27
<PAGE>
ARTICLE THIRTEEN
ADMINISTRATION AND SERVICING OF RECEIVABLES
Section 13.01. DUTIES OF SERVICER. The Servicer shall manage, service,
administer and make collections on and in respect of the Receivables with
reasonable care, using that degree of skill and attention that the Servicer
exercises with respect to all comparable motor vehicle receivables that it
services for itself or others. The Servicer's duties shall include collecting
and posting of all payments, responding to inquiries of Obligors or by federal,
state or local government authorities with respect to the Receivables,
investigating delinquencies, sending payment coupons to Obligors, reporting tax
information to Obligors in accordance with its customary practices, policing the
collateral, accounting for collections and furnishing monthly and annual
statements to the Trustee with respect to distributions, generating federal
income tax information, making Advances and performing the other duties
specified herein. The Servicer shall follow its customary standards, policies
and procedures and shall have full power and authority, acting alone, to do any
and all things in connection with such managing, servicing, administration and
collection that it may deem necessary or desirable. Without limiting the
generality of the foregoing, the Servicer shall be authorized and empowered by
the Trustee to execute and deliver, on behalf of itself, the Trust, the Trustee
or the Certificateholders or any of them, any and all instruments of
satisfaction or cancellation, or of partial or full release or discharge and all
other comparable instruments, with respect to the Receivables and the Financed
Vehicles. The Servicer is hereby authorized to commence, in its own name or in
the name of the Trustee, a legal proceeding to enforce a Defaulted Receivable
pursuant to Section 13.04 or to commence or participate in a legal proceeding
(including without limitation a bankruptcy proceeding) relating to or involving
a Receivable, including a Defaulted Receivable. If the Servicer commences or
participates in such a legal proceeding in its own name, the Trustee shall
thereupon be deemed to have automatically assigned, solely for the purpose of
collection on behalf of the party retaining an interest in such Receivable, such
Receivable and the other property conveyed to the Trust pursuant to Section
12.01 with respect to such Receivable to the Servicer for purposes of commencing
or participating in any such proceeding as a party or claimant, and the Servicer
is authorized and empowered by the Trustee to execute and deliver in the
Servicer's name any notices, demands, claims, complaints, responses, affidavits
or other documents or instruments in connection with any such proceeding. If in
any enforcement suit or legal proceeding it shall be held that the Servicer may
not enforce a Receivable on the grounds that it shall not be a real party in
interest or a holder entitled to enforce such Receivable, the Trustee shall, at
the Servicer's expense and written direction, take steps to enforce such
Receivable, including bring suit in its name or the name of the
Certificateholders. The Trustee shall furnish the Servicer with any powers of
attorney and other documents and take any other steps which the Servicer may
deem necessary or appropriate to enable the Servicer to carry out its servicing
and administrative duties under the Agreement.
Section 13.02. COLLECTION OF RECEIVABLE PAYMENTS. The Servicer shall make
reasonable efforts to collect all payments called for under the terms and
provisions of the Receivables as and when the same shall become due, and shall
follow such collection procedures as it follows with respect to all comparable
motor vehicle receivables that it
28
<PAGE>
services for itself or others. The Servicer shall be authorized to grant
extensions, rebates or adjustments on a Receivable without the prior consent of
the Trustee. If, as a result of the extending of payments in accordance with
the customary servicing standards of the Servicer, any Receivable will be
outstanding later than the last day of the Collection Period immediately
preceding the Collection Period in which the Final Scheduled Distribution Date
occurs, the Servicer shall be obligated to repurchase such Receivable pursuant
to Section 13.08. In addition, in the event that any such rescheduling or
extension of a Receivable modifies the terms of such Receivable in such a manner
as to constitute a cancellation of such Receivable and the creation of a new
motor vehicle receivable that results in a deemed exchange thereof within the
meaning of Section 1001 of the Code, the Servicer shall purchase such Receivable
pursuant to Section 13.08, and the receivable created shall not be included in
the Trust. Notwithstanding the foregoing, extensions or modifications of the
payment schedule of a Receivable can be made only in accordance with the
customary servicing procedures of the Servicer, provided that the amount of any
extension fee charged in connection with the extension of a Receivable is
deposited into the Certificate Account by the Servicer in accordance with
Section 14.02. The Servicer may, in accordance with its customary servicing
procedures, waive any prepayment charge, late payment charge or any other fees
that may be collected in the ordinary course of servicing the Receivables.
Section 13.03. REBATES ON FULL PREPAYMENTS. In the event that the amount
of a full Prepayment by an Obligor under a Precomputed Receivable, after
adjustment for the applicable Rebate, is less than the amount that would be
payable under the actuarial method if a full Prepayment were made at the end of
the billing month under such Precomputed Receivable, either because the Rebate
calculated under the terms of such Precomputed Receivable is greater than the
amount calculable under the actuarial method or because the Servicer's customary
servicing procedure is to credit a greater Rebate, the Servicer, as part of its
servicing duties, shall remit such difference to the Trust by deposit into the
Certificate Account pursuant to Section 14.05.
Section 13.04. REALIZATION UPON RECEIVABLES. On behalf of the Trust, the
Servicer shall use its best efforts, consistent with its customary servicing
procedures, to repossess or otherwise comparably convert the ownership of any
Financed Vehicle that it has reasonably determined should be repossessed or
otherwise converted following a default under the Receivable secured by the
Financed Vehicle (and shall specify such Receivables to the Trustee no later
than the Determination Date following the end of the Collection Period in which
the Servicer shall have made such determination). The Servicer shall follow
such practices and procedures as it shall deem necessary or advisable and as
shall be customary and usual in its servicing of motor vehicle receivables,
which practices and procedures may include reasonable efforts to realize upon
any Dealer Recourse, selling the related Financed Vehicle at public or private
sale and other actions by the Servicer in order to realize upon such a
Receivable. The Servicer shall be entitled to recover its reasonable
Liquidation Expenses with respect to each Defaulted Receivable. All Net
Liquidation Proceeds realized in connection with any such action with respect to
a Receivable shall be deposited by the Servicer in the Certificate Account in
the manner specified in Section 14.02. The foregoing is subject to the proviso
that, in any case in which the Financed Vehicle shall have suffered damage, the
Servicer shall not expend funds in connection with any repair or towards the
repossession of such Financed
29
<PAGE>
Vehicle unless it shall determine in its discretion that such repair and/or
repossession shall increase the Liquidation Proceeds of the related Receivable
by an amount greater than the amount of such expenses.
Section 13.05. MAINTENANCE OF PHYSICAL DAMAGE INSURANCE POLICIES. The
Servicer shall, in accordance with its customary servicing procedures and
underwriting standards, require that each Obligor shall have obtained physical
damage insurance covering each Financed Vehicle as of the origination of the
related Receivable.
Section 13.06. MAINTENANCE OF SECURITY INTERESTS IN FINANCED VEHICLES.
The Servicer shall, in accordance with its customary servicing procedures and at
its own expense, take such steps as are necessary to maintain perfection of the
security interest created by each Receivable in the related Financed Vehicle.
The Trustee hereby authorizes the Servicer, and the Servicer hereby agrees, to
take such steps as are necessary to reperfect such security interest on behalf
of the Trust in the event of the relocation of a Financed Vehicle or for any
other reason. In the event that the assignment of a Receivable to the Trust is
insufficient, without a notation on the related Financed Vehicle's certificate
of title, to grant to the Trust a first priority perfected security interest in
the related Financed Vehicle, the Servicer hereby agrees to serve as the agent
of the Trust for the purpose of perfecting the security interest of the Trust in
such Financed Vehicle and agrees that the Servicer's listing as the secured
party on the certificate of title is in this capacity as agent of the Trust.
Section 13.07. COVENANTS OF SERVICER. The Servicer shall make the
following covenants on which the Trustee shall rely in accepting the Receivables
in trust and authenticating the Certificates:
(a) LIENS IN FORCE. Except as contemplated by the Agreement, the
Servicer shall not release in whole or in part any Financed Vehicle from
the security interest securing the related Receivable.
(b) NO IMPAIRMENT. The Servicer shall do nothing to impair the
rights of the Certificateholders in the Receivables.
(c) NO AMENDMENTS. Subject to Section 13.02, the Servicer shall
not amend or otherwise modify any Receivable such that the total number of
Scheduled Payments is extended beyond the last day of the Collection Period
immediately preceding the Collection Period in which the Final Scheduled
Distribution Date occurs, or either the Amount Financed or the APR is
altered.
Section 13.08. PURCHASE OF RECEIVABLES UPON BREACH. Upon discovery by the
Seller, the Servicer or the Trustee of a breach of any of the covenants of the
Servicer set forth in Section 13.07 that materially and adversely affects the
interests of the Certificateholders in a Receivable, or if an improper
extension, rescheduling or modification of a Receivable is made by the Servicer
as described in Section 13.02, the party discovering such breach shall give
prompt written notice to the others. As of the last day of the second
Collection Period following the Collection Period in which it discovers or
receives notice of such breach (or, at
30
<PAGE>
the Servicer's election, the last day of the first Collection Period following
the Collection Period in which it discovers or receives notice of such breach),
the Servicer shall, unless such breach or impropriety shall have been cured in
all material respects, purchase from the Trust such Receivable. In
consideration of the purchase of any such Receivable, on the Business Day
immediately preceding the related Distribution Date the Servicer shall remit the
Administrative Purchase Payment to the Certificate Account in the manner
specified in Section 14.05, and shall be entitled to receive the Released
Administrative Amount. Upon such deposit of the Administrative Purchase
Payment, the Servicer shall for all purposes of the Agreement be deemed to have
released all claims for reimbursement of Outstanding Advances made in respect of
such Receivable. The sole remedy of the Trustee, the Trust or the
Certificateholders against the Servicer with respect to a breach pursuant to
Section 13.02 or 13.07 shall be to require the Servicer to purchase the related
Receivables pursuant to this Section, except as otherwise provided in Section
17.02. The Trustee shall have no duty to conduct any affirmative investigation
as to the occurrence of any condition requiring the repurchase of any Receivable
pursuant to this Section except as otherwise provided in Section 17.02.
Section 13.09. TOTAL SERVICING FEE; PAYMENT OF CERTAIN EXPENSES BY
SERVICER. As compensation for the performance of its obligations hereunder, the
Servicer shall be entitled to receive on each Distribution Date, out of
Available Interest, the Total Servicing Fee. The Basic Servicing Fee in respect
of a Collection Period shall be calculated based on a 360 day year comprised of
twelve 30-day months. Except to the extent otherwise provided herein, the
Servicer shall be required to pay all expenses incurred by it in connection with
its activities under the Agreement (including fees and disbursements of the
Trustee and independent accountants, taxes imposed on the Servicer, expenses
incurred in connection with distributions and reports to Certificateholders and
all other fees and expenses not expressly stated under the Agreement to be for
the account of the Certificateholders).
Section 13.10. SERVICER'S CERTIFICATE. On or before each Determination
Date, the Servicer shall deliver to the Trustee, each Rating Agency and the
Letter of Credit Bank, if any, a Servicer's Certificate executed by the
President or any Vice President of the Servicer substantially in the form of
Exhibit E to the Agreement (and setting forth such additional information as
requested by the Trustee or any Rating Agency from time to time which
information the Servicer is able to reasonably provide) containing all
information necessary to make the distributions required by Sections 14.06 and
14.07 in respect of the Collection Period immediately preceding the date of such
Servicer's Certificate and all information necessary for the Trustee to send
statements to Certificateholders pursuant to Section 14.10(a). The Servicer
shall also specify to the Trustee, no later than the Determination Date
following the last day of a Collection Period as of which the Seller shall be
required to repurchase or the Servicer shall be required to purchase a
Receivable, the identity of any such Receivable and the identity of any
Receivable which the Servicer shall have determined to be a Defaulted Receivable
during such Collection Period. Receivables purchased or to be purchased by the
Servicer or the Seller and Receivables as to which the Servicer has determined
during such Collection Period to be Defaulted Receivables and with respect to
which payment of the Administrative Purchase Payment or Warranty Purchase
Payment has been provided from
31
<PAGE>
whatever source as of last day of such Collection Period shall be identified by
the Seller's account number with respect to such Receivable (as specified in the
Schedule of Receivables).
Section 13.11. ANNUAL STATEMENT AS TO COMPLIANCE; NOTICE OF DEFAULT.
(a) The Servicer shall deliver to the Trustee, on or before June 30 of
each year, beginning with the June 30 that is at least six months after the
Closing Date, an Officer's Certificate of the Servicer, stating that (i) a
review of the activities of the Servicer during the preceding 12-month period
ended March 31 (or, if applicable, such shorter period in the case of the first
such Officer's Certificate) and of its performance under the Agreement has been
made under such officer's supervision, and (ii) to such officer's knowledge,
based on such review, the Servicer has fulfilled all its obligations under the
Agreement throughout such period, or, if there has been a default in the
fulfillment of any such obligation, specifying each such default known to such
officer and the nature and status thereof.
(b) The Servicer shall deliver to the Trustee, promptly after having
obtained knowledge thereof, but in no event later than five Business Days
thereafter, an Officer's Certificate specifying the nature and status of any
event which with the giving of notice or lapse of time, or both, would become an
Event of Default.
Section 13.12. ANNUAL ACCOUNTANTS' REPORT. The Servicer shall cause a firm
of independent accountants (who may also render other services to the Servicer
or to the Seller) to deliver to the Trustee on or before June 30 of each year,
beginning with the June 30 that is at least six months after the Closing Date, a
report with respect to the preceding 12-month period ended March 31 (or, if
applicable, such shorter period in the case of the first such report) to the
effect that such accountants have examined certain records and documents
relating to the servicing of the Receivables under the Agreement (using
procedures specified in such report, which procedures shall be substantially in
compliance with generally accepted auditing standards) and that nothing has
come to their attention indicating that such servicing has not been conducted in
compliance with the customary servicing procedures of the Servicer, including
but not limited to the procedures set forth in the Agreement, except for
(i) such exceptions as such firm shall believe to be immaterial and (ii) such
other exceptions as shall be set forth in such report. Such report shall also
indicate that the firm is independent with respect to the Seller and the
Servicer within the meaning of the Code of Professional Ethics of the American
Institute of Certified Public Accountants.
Section 13.13. ACCESS TO CERTAIN DOCUMENTATION AND INFORMATION REGARDING
RECEIVABLES. The Servicer shall provide to the Trustee reasonable access to the
documentation regarding the Receivables. The Servicer shall provide such access
to any Certificateholder only in such cases where a Certificateholder is
required by applicable statutes or regulations to review such documentation. In
each case, such access shall be afforded without charge but only upon reasonable
request and during normal business hours at the respective offices of the
Servicer. Nothing in this Section shall derogate from the obligation of the
Servicer to observe any applicable law prohibiting disclosure of information
regarding the Obligors, and the failure of the Servicer to provide access as
provided in this Section as a result of such obligation shall not constitute a
breach of this Section.
32
<PAGE>
Section 13.14. AMENDMENTS TO SCHEDULE OF RECEIVABLES. If the Servicer,
during a Collection Period, assigns to a Receivable an account number that
differs from the original account number identifying such Receivable on the
Schedule of Receivables, the Servicer shall deliver to the Seller and the
Trustee on or before the Distribution Date relating to such Collection Period an
amendment to the Schedule of Receivables reporting the newly assigned account
number, together with the old account number of each such Receivable. The first
such delivery of amendments to the Schedule of Receivables to the Trustee shall
include monthly amendments reporting account numbers appearing on the Schedule
of Receivables with the new account numbers assigned to such Receivables during
any prior Collection Period.
Section 13.15. REPORTS TO CERTIFICATEHOLDERS AND RATING AGENCIES.
(a) The Trustee shall provide to any Certificateholder or Certificate
Owner who so requests in writing a copy of (i) any Servicer's Certificate, (ii)
any annual statement as to compliance described in Section 13.11(a), (iii) any
annual accountants' report described in Section 13.12, (iv) any statement to
Certificateholders pursuant to Section 14.10(a) or (v) the Agreement (without
Exhibits). The Trustee may require such Certificateholder or Certificate Owner
to pay a reasonable sum to cover the cost of the Trustee's complying with such
request.
(b) The Trustee shall forward to each Rating Agency a copy of each (i)
Servicer's Certificate, (ii) annual statement as to compliance described in
Section 13.11(a), (iii) Officer's Certificate of the Servicer described in
Section 13.11(b), (iv) annual accountants' report pursuant to Section 13.12, (v)
statement to Certificateholders pursuant to Section 14.10(a), (vi) Trustee's
Certificate delivered by the Trustee pursuant to Section 19.02 or 19.03 and
(vii) other report it may receive pursuant to the Agreement at its address
specified in Section 21.05 or in the Agreement.
33
<PAGE>
ARTICLE FOURTEEN
DISTRIBUTIONS; RESERVE FUND; YIELD SUPPLEMENT ACCOUNT;
STATEMENTS TO CERTIFICATEHOLDERS
Section 14.01. ACCOUNTS.
(a) The Servicer shall establish the Accounts in the name of the Trustee
for the benefit of the Certificateholders. Except as otherwise provided in the
Agreement, each Account shall be an account initially established with the
Trustee and maintained with the Trustee so long as (i) the commercial paper or
other short-term unsecured debt obligations of the Trustee have the Required
Rating, or (ii) such Account is a segregated trust account located in the
corporate trust department of the Trustee bearing a designation clearly
indicating that the funds deposited therein are held in trust for the benefit of
the Certificateholders, and the Trustee has a long-term deposit rating from
Moody's (so long as Moody's is a Rating Agency) of at least Baa3 (or such lower
rating as Moody's shall approve in writing) and corporate trust powers under
applicable federal and state laws (which may include the Trustee) and is
organized under the laws of the United States, any state thereof, the District
of Columbia or the Commonwealth of Puerto Rico. Except as otherwise provided in
the Agreement, in the event that the Trustee no longer meets either of the
foregoing requirements, then the Servicer shall, with the Trustee's assistance
as necessary, cause the Accounts to be moved to a bank or trust company that
satisfies either of such requirements.
(b) For so long as the depository institution or trust company then
maintaining the Accounts meets the requirements of Section 14.01(a)(i) or
(a)(ii), (i) all amounts held in the Certificate Account shall, to the extent
permitted by applicable laws, rules and regulations, be invested, as directed in
writing by the Servicer, in Permitted Investments; otherwise such amounts shall
be maintained in cash and (ii) all amounts held in the Payahead Account shall,
to the extent permitted by applicable laws, rules and regulations, be invested,
as directed in writing by the Servicer, in those investments defined in (vii) of
Permitted Investments. Earnings on investment of funds in the Accounts (net of
losses and investment expenses) shall be paid to the Servicer and any losses and
investment expenses shall be charged against the funds on deposit in the related
Account.
Section 14.02. COLLECTIONS.
(a) Except as otherwise provided in the Agreement, the Servicer shall
remit daily to the Certificate Account all payments received from or on behalf
of the Obligors on or in respect of the Receivables (other than, in the case of
Precomputed Receivables, payments constituting Payments Ahead) and all Net
Liquidation Proceeds within two Business Days after receipt thereof.
(b) Notwithstanding the provisions of Section 14.02(a), so long as
American Honda is acting as the Servicer, and subject to the conditions set
forth below, the Servicer may be permitted to make remittances of collections on
a less frequent basis than that specified in Section 14.02(a) upon compliance
with the specific terms and conditions set forth below in
34
<PAGE>
this Section and for so long as such terms and conditions are fulfilled.
Accordingly, notwithstanding the provisions of Section 14.02(a), the Servicer
will be permitted to remit such collections to the Certificate Account in
immediately available funds no later than 9:00 A.M., Los Angeles time, on the
Business Day immediately preceding each Distribution Date but only for so long
as (a)(i) the Servicer shall be American Honda, (ii) except as provided in
clause (b) below, the short-term credit rating of the Servicer is at least equal
to the Required Servicer Rating by each Rating Agency and (iii) no Event of
Default shall have occurred and be continuing, provided, however, that
immediately following the non-compliance with clause (ii) above or in the event
that an event of the nature specified in Section 18.01(c) has occurred
(notwithstanding any period of grace contained in such clause), the Servicer
shall remit such collections to the Certificate Account on a daily basis within
two Business Days of receipt thereof, or (b)(i) if the conditions specified in
clause (a)(i) and (iii) above are satisfied, and (ii) the Servicer shall have
obtained (A) a Servicer Letter of Credit issued in favor of the Trustee by a
depository institution or insurance company, as the case may be, having a
short-term credit rating at least equal to the Required Rating and providing
that the Trustee may draw thereon in the event that the Servicer fails to
deposit collections into the Certificate Account on a monthly basis or (B) a
surety bond, insurance policy or other deposit of cash or securities
satisfactory to the Trustee and the Rating Agencies; provided that in connection
with clause (b) above, the Servicer provides to the Trustee, from each Rating
Agency for which the Servicer's then-current short-term credit rating is not at
least equal to the Required Servicer Rating for such Rating Agency, a letter to
the effect that the satisfaction of the conditions in clause (b) above and
allowing the Servicer to make monthly deposits will not result in a
qualification, reduction or withdrawal of its then-current rating of the Rated
Certificates and, if applicable, an Officer's Certificate from the Servicer to
the effect that the Servicer's then-current short-term credit rating is at least
equal to the Required Servicer Rating from each other Rating Agency, if any;
and, provided further, that if the Servicer shall have obtained a Servicer
Letter of Credit in accordance with clause (b) above, the Servicer shall be
required to remit collections to the Certificate Account on each Business Day to
the extent provided for in Section 14.09(c). The Trustee shall not be deemed to
have knowledge of any event or circumstance under clause (a)(iii) above that
would require daily remittance by the Servicer to the Certificate Account unless
it has received notice of such event or circumstance from the Seller or the
Servicer in an Officer's Certificate, from Certificateholders as provided in
Section 18.01 or from the Letter of Credit Bank. For purposes of this Article
the phrase "payments made on behalf of Obligors" shall mean payments made by
Persons other than the Seller, the Servicer or the Letter of Credit Bank, if
any.
Any funds held by the Servicer which it determines are to be remitted (or
any of its own funds which the Seller or the Servicer determines to pay to the
Letter of Credit Bank) in respect of a failure previously to remit collections
which failure resulted in a payment under the Servicer Letter of Credit, if any,
pursuant to Section 14.09 shall not be remitted to the Certificate Account, but
shall instead be paid immediately and directly to the Letter of Credit Bank.
Any such payment to the Letter of Credit Bank shall be accompanied by a copy of
the Servicer's Certificate related to the previous failure to remit funds and an
Officer's Certificate which includes a statement identifying, by reference to
the items in such related Servicer's Certificate, each shortfall in Servicer
remittances to which such payment relates. The Servicer
35
<PAGE>
will also provide the Trustee with copies of each such Servicer's Certificate
and Officer's Certificate delivered with any such payment to the Letter of
Credit Bank.
(c) Except as otherwise provided in the Agreement, the Servicer shall
deposit all Payments Ahead in the Certificate Account within two Business Days
after receipt thereof, which Payments Ahead shall be transferred to the Payahead
Account pursuant to Section 14.06(a)(ii). Notwithstanding the foregoing, so
long as the Servicer is permitted to remit Collections to the Certificate
Account on a monthly basis pursuant to Section 14.02(b), the Servicer will not
be required to deposit Payments Ahead in the Payahead Account within two
Business Days after receipt thereof but shall be entitled to retain such
Payments Ahead, without segregation from its other funds, until such time as the
Servicer shall be required to remit Applied Payments Ahead to the Certificate
Account pursuant to Section 14.06(a)(ii). Commencing with the first day of the
first Collection Period that begins at least two Business Days after the day on
which the Servicer is no longer permitted to remit collections to the
Certificate Account on a monthly basis pursuant to Section 14.02(b), and until
such time as the Servicer is once again permitted by Section 14.02(b) to remit
collections to the Certificate Account on a monthly basis, all Payments Ahead
then held by the Servicer shall be immediately deposited into the Payahead
Account and all future Payments Ahead shall be remitted by the Servicer to the
Payahead Account within two Business Days after receipt thereof.
Section 14.03. APPLICATION OF COLLECTIONS. As of each Record Date, all
collections for the related Collection Period shall be applied by the Servicer
as follows:
(a) With respect to each Receivable (other than an Administrative
Receivable or a Warranty Receivable), payments made by or on behalf of the
Obligor which are not Supplemental Servicing Fees shall be applied first to
reimburse the Servicer for Outstanding Advances made with respect to such
Receivable (each such payment, an "Overdue Payment"). Next, the amount of
any payment in excess of Supplemental Servicing Fees and Outstanding
Advances with respect to such Receivable shall be applied to the Scheduled
Payment with respect to such Receivable. If the amount of such payment
remaining after the applications described in the two preceding sentences
(i) equals (together with any Deferred Prepayment) the unpaid principal
balance of such Receivable, it shall be applied to prepay the principal
balance of such Receivable, or (ii) is less than the unpaid principal
balance of such Receivable, it shall constitute an Excess Payment with
respect to such Receivable.
(b) With respect to each Administrative Receivable and Warranty
Receivable, payments made by or on behalf of the Obligor shall be applied
in the same manner, except that any Released Administrative Amount or
Released Warranty Amount shall be remitted to the Servicer or the Seller,
as applicable. A Warranty Purchase Payment or an Administrative Purchase
Payment shall be applied to reduce Outstanding Advances and such Warranty
Purchase Payment or Administrative Purchase Payment, as applicable, shall
be applied to the Scheduled Payment, in each case to the extent that the
payments by the Obligor shall be insufficient, and then to prepay the
unpaid principal balance of such Receivable in full.
36
<PAGE>
Section 14.04. ADVANCES.
(a) As of the last day of a Collection Period, if the payments during such
Collection Period by or on behalf of the Obligor on or in respect of a
Receivable (other than an Administrative Receivable or a Warranty Receivable)
after application under Section 14.03(a) shall be less than the Scheduled
Payment, whether as a result of any extension granted to the Obligor or
otherwise, then (i) in the case of a Precomputed Receivable, the Deferred
Prepayment, if any, with respect to such Precomputed Receivable shall be applied
by the Servicer to the extent of the shortfall, and such Deferred Prepayment
shall be reduced accordingly and the Servicer shall advance to the Trust an
amount equal to such shortfall (each, a "Precomputed Advance") and (ii) in the
case of a Simple Interest Receivable, the Servicer shall advance to the Trust an
amount equal to the product of the principal balance of such Receivable as of
the first day of such Collection Period and one-twelfth of its APR minus the
amount of interest actually received on such Receivable during such Collection
Period (each, a "Simple Interest Advance"). If the calculation in clause (ii)
above in respect of a Simple Interest Receivable results in a negative number,
an amount equal to such negative amount shall be paid to the Servicer in
reimbursement of any Outstanding Advances in respect of Simple Interest
Receivables. In addition, in the event that a Simple Interest Receivable
becomes a Liquidated Receivable, the amount of accrued and unpaid interest
thereon (but not including interest for the current Collection Period) shall, up
to the amount of Outstanding Advances in respect of Simple Interest Receivables
in respect thereof, be withdrawn from the Certificate Account and paid to the
Servicer in reimbursement of such Outstanding Advances. No Advances will be
made with respect to the Principal Balance of Simple Interest Receivables.
Notwithstanding the foregoing, the Servicer shall not be required to make any
Advance (other than a Simple Interest Advance in respect of an interest
shortfall arising from the Prepayment of a Simple Interest Receivable) to the
extent that the Servicer, in its sole discretion, shall determine that such
Advance is unlikely to be recovered from subsequent payments made by or on
behalf of the related Obligor, Liquidation Proceeds, by the Administrative
Purchase Payment or by the Warranty Purchase Payment, in each case, with respect
to such Receivable or otherwise. On the Business Day immediately preceding each
Distribution Date, the Servicer will deposit into the Certificate Account an
amount equal to all Advances to be made in respect of the related Collection
Period.
(b) The Servicer shall be entitled to reimbursement for Outstanding
Advances, without interest, with respect to a Receivable from the following
sources with respect to such Receivable: (i) subsequent payments made by or on
behalf of the related Obligor, (ii) Liquidation Proceeds, (iii) the
Administrative Purchase Payment and (iv) the Warranty Purchase Payment.
(c) To the extent that during any Collection Period any funds described
above in Section 14.04(b) with respect to a Receivable as to which the Servicer
previously has made an unreimbursed Advance are received by the Trustee or the
Servicer, and the Servicer determines that any Outstanding Advances with respect
to such Receivable are unlikely to be recovered from payments made on or with
respect to such Receivable (each, a "Nonrecoverable Advance"), then, on the
related Distribution Date, upon the Servicer providing the Seller and the
Trustee with an Officer's Certificate setting forth the basis for its
37
<PAGE>
determination of any such Nonrecoverable Advance, the Trustee shall promptly
remit to the Servicer from the Certificate Account, (i) from Available Interest
an amount equal to the portion of such Nonrecoverable Advance allocable to
interest and (ii) from Available Principal an amount equal to the portion of
such Nonrecoverable Advance allocable to principal, in each case without
interest, in accordance with Section 14.06(c)(i). In lieu of causing the
Trustee to remit any such amounts or the amounts described in clauses (i)
through (iv) in Section 14.04(b), the Servicer may deduct such amounts from
deposits otherwise to be made into the Certificate Account in accordance with
Section 14.08.
Section 14.05. ADDITIONAL DEPOSITS.
(a) The following additional deposits shall be made to the Certificate
Account: (i) the Seller shall remit the aggregate Warranty Purchase Payments
with respect to Warranty Receivables pursuant to Section 12.05 or the amount
required upon the optional termination of the Trust by the Seller pursuant to
Section 20.02, (ii) the Servicer shall remit (A) the amount required to be
remitted in respect of certain full Prepayments pursuant to Section 13.03,
(B) the aggregate Advances pursuant to Section 14.04(a), (C) the aggregate
Administrative Purchase Payments with respect to Administrative Receivables
pursuant to Sections 13.02 and 13.08 and (D) the amount required upon the
optional termination of the Trust by the Servicer pursuant to Section 20.02 and
(iii) the Trustee shall deposit the aggregate of any amounts received from any
Letter of Credit Bank pursuant to Section 14.09.
(b) All deposits required to be made in respect of a Collection Period
pursuant to this Section by the Seller or the Servicer, as the case may be, may
be made in the form of a single deposit and shall be made in immediately
available funds, no later than 2:00 P.M., Los Angeles time, on the Business Day
immediately preceding the related Distribution Date.
Section 14.06. DISTRIBUTIONS.
(a) On each Distribution Date (or, if both the Accounts are not maintained
by the Trustee, on the Business Day immediately preceding each Distribution
Date), the Trustee shall cause to be made the following transfers and
distributions in immediately available funds in the amounts set forth in the
Servicer's Certificate for such Distribution Date:
(i) from the Payahead Account (or directly from the Servicer in
the case of Payments Ahead held by the Servicer pursuant to Section
14.02(b) or (c)) to the Certificate Account, the aggregate Applied Payments
Ahead;
(ii) if the Servicer is not permitted to hold Payments Ahead
pursuant to Section 14.02(b) or (c), from the Certificate Account to the
Payahead Account, the aggregate Payments Ahead for the related Collection
Period; and
(iii) from monies on deposit in the Yield Supplement Account to the
Certificate Account, an amount equal to the Yield Supplement Deposit Amount
for such Distribution Date.
38
<PAGE>
(b) On each Determination Date, the Servicer shall calculate the Available
Interest, the Available Principal, the Class A Distributable Amount, the Class B
Distributable Amount, the amount to be distributed to Certificateholders of each
Class and all other distributions to be made on the related Distribution Date.
(c) The rights of the Class B Certificateholders to receive distributions
in respect of the Class B Certificates shall be and hereby are subordinated to
the rights of the Class A Certificateholders to receive distributions in respect
of the Class A Certificates to the limited extent provided in this Section. On
each Distribution Date, the Trustee shall, subject to Sections 14.06(d) and
14.06(e), make the following distributions from the Certificate Account in the
following order of priority and in the amounts set forth in the Servicer's
Certificate for such Distribution Date; provided, however, that except as
otherwise provided in Sections 14.05(a) or 14.06(a), such distributions shall be
made only from those funds deposited in the Certificate Account for the related
Collection Period:
(i) to the Servicer, from Available Interest or Available
Principal, an amount payable in respect of Nonrecoverable Advances pursuant
to Section 14.04(c);
(ii) to the Servicer, from Available Interest (after giving effect
to any reduction in Available Interest described in clause (i) above), the
Total Servicing Fee (including any unpaid Total Servicing Fees from one or
more prior Collection Periods);
(iii) to the Class A Certificateholders of record, from Available
Interest (after giving effect to the reduction in Available Interest
described in clauses (i) and (ii) above), an amount equal to the sum of the
Class A Interest Distributable Amount and any outstanding Class A Interest
Carryover Shortfall from the immediately preceding Distribution Date and,
if such Available Interest is insufficient, the Class A Certificateholders
will receive such shortfall first, from the Class B Percentage of Available
Principal and second, if such amounts are still insufficient, from monies
on deposit in the Reserve Fund;
(iv) to the Class B Certificateholders of record, from Available
Interest (after giving effect to the reduction in Available Interest
described in clauses (i), (ii) and (iii) above), an amount equal to the sum
of the Class B Interest Distributable Amount and any outstanding Class B
Interest Carryover Shortfall from the immediately preceding Distribution
Date and, if such Available Interest is insufficient, the Class B
Certificateholders will receive such shortfall from monies on deposit in
the Reserve Fund;
(v) to the Class A Certificateholders of record, from Available
Principal (after giving effect to any reduction in Available Principal
described in clauses (i) and (iii) above), an amount equal to the sum of
the Class A Principal Distributable Amount and any outstanding Class A
Principal Carryover Shortfall from the immediately preceding Distribution
Date and, if such Available Principal is insufficient, the Class A
Certificateholders will receive such shortfall first, from Available
Interest (after giving effect to the reduction in Available Interest
described in clauses (i) through (iv) above)
39
<PAGE>
and second, if such amounts are still insufficient, from monies on deposit
in the Reserve Fund; and
(vi) to the Class B Certificateholders of record, from Available
Principal (after giving effect to the reduction in Available Principal
described in clauses (i), (iii) and (v) above), an amount equal to the sum
of the Class B Principal Distributable Amount and any outstanding Class B
Principal Carryover Shortfall from the immediately preceding Distribution
Date and, if such Available Principal is insufficient, the Class B
Certificateholders will receive such shortfall first, from Available
Interest (after giving effect to the reduction in Available Interest
described in clauses (i) through (v) above) and second, if such amounts are
still insufficient, from monies on deposit in the Reserve Fund.
(d) On each Distribution Date, the Trustee shall, based on the information
set forth in the Servicer's Certificate for such Distribution Date, distribute
any excess amounts remaining in the Certificate Account after making the
distributions described in clauses (i) through (vi) above ("Excess Amounts") in
the following amounts and in the following order of priority: (i) into the
Reserve Fund until the amount on deposit therein equals the Specified Reserve
Fund Balance and (ii) to the Seller.
(e) Subject to Section 20.01 respecting the final payment upon retirement
of each Certificate, the Servicer shall on each Distribution Date instruct the
Trustee to distribute to each Certificateholder of record on the related Record
Date by check mailed to such Certificateholder at the address of such Holder
appearing in the Certificate Register (or, if DTC, its nominee or a Clearing
Agency is the relevant Certificateholder, by wire transfer of immediately
available funds or pursuant to other arrangements), the amount to be distributed
to such Certificateholder pursuant to such Holder's Certificates.
Section 14.07. SUBORDINATION; RESERVE FUND; PRIORITY OF DISTRIBUTIONS.
(a) (i) In order to effectuate the subordination provided for herein
and to assure that sufficient amounts to make required distributions to
Certificateholders will be available, the Servicer shall establish and maintain
with the Trustee a separate trust account (the "Reserve Fund") which will
include the money and other property deposited and held therein pursuant to
Section 14.06(d)(i) and this Section. Except as otherwise provided in the
Agreement, the Reserve Fund shall (A) be a segregated trust account initially
established with the Trustee and maintained with the Trustee so long as the
commercial paper or other short-term unsecured debt obligations of the Trustee
have the Required Rating and (B) in the event that the commercial paper or other
short-term unsecured debt obligations of the Trustee no longer have the Required
Rating, the Servicer shall, with the assistance of the Trustee as necessary,
cause the Reserve Fund to be moved to (1) a segregated deposit account bearing
designations clearly indicating the funds deposited therein are held in trust
for the benefit of the Certificateholders, in a bank or trust company the
commercial paper or other short-term unsecured debt obligations of which shall
have the Required Rating, or (2) one or more segregated trust accounts bearing
designations clearly indicating the funds deposited therein are held in trust
for the benefit of the Certificateholders, located in the corporate trust
40
<PAGE>
department of a depository institution or trust company (which may include the
Trustee) having a long-term deposit rating from Moody's (so long as Moody's is a
Rating Agency) of at least Baa3 (or such lower rating as Moody's shall approve
in writing) and corporate trust powers under applicable federal and state laws
and organized under the laws of the United States, any state thereof, the
District of Columbia or the Commonwealth of Puerto Rico.
On or prior to the Closing Date, the Seller shall deposit an amount
equal to the Reserve Fund Initial Deposit into the Reserve Fund. The Reserve
Fund shall not be part of the Trust but instead will be held for the benefit of
the Holders of the Certificates. The Seller hereby acknowledges that the
Reserve Fund Initial Deposit (and any investment earnings thereon) is owned
directly by it, and the Seller hereby agrees to treat the same as its assets
(and earnings) for federal income tax and all other purposes.
(ii) In order to give effect to the subordination provided for
herein and to assure availability of the amounts maintained in the Reserve Fund,
the Seller hereby sells, conveys and transfers to the Trustee, as collateral
agent, and its successors and assigns, the Reserve Fund Initial Deposit and all
proceeds thereof and hereby pledges to the Trustee as collateral agent, and its
successors and assigns, all other amounts deposited in or credited to the
Reserve Fund from time to time under the Agreement, all Permitted Investments
made with amounts on deposit therein, all earnings and distributions thereon and
proceeds thereof (other than proceeds constituting net investment earnings
attributable to the Reserve Fund Property) subject, however, to the limitations
set forth below, and solely for the purpose of securing and providing for
payment of the Class A and Class B Distributable Amounts, together with any
Class A and Class B Interest Carryover Shortfalls and Class A and Class B
Principal Carryover Shortfalls, in accordance with Section 14.06 and this
Section (all the foregoing, subject to the limitations set forth below, being
the "Reserve Fund Property"), to have and to hold all the aforesaid property,
rights and privileges unto the Trustee, its successors and assigns, in trust for
the uses and purposes, and subject to the terms and provisions, set forth in
this Section. The Trustee hereby acknowledges such transfer and accepts the
trusts hereunder and shall hold and distribute the Reserve Fund Property in
accordance with the terms and provisions of this Section.
(b) Consistent with the limited purposes for which such trust is granted,
on each Distribution Date the amounts on deposit in the Reserve Fund shall be
available for distribution as provided in Section 14.06, in accordance with and
subject to the following: if the amount on deposit in the Reserve Fund on any
Distribution Date (after giving effect to all deposits thereto and withdrawals
therefrom on such Distribution Date) is greater than the Specified Reserve Fund
Balance, the Trustee shall release and distribute any such excess amounts to the
Seller. Upon any such distribution to the Seller, the Certificateholders will
have no further rights in, or claims to, such amounts.
(c) (i) Amounts held in the Reserve Fund may be invested in the manner
specified in Section 14.01(b). Such investments shall not be sold or disposed
of prior to their maturity. All such investments shall be made in the name of
the Trustee, its Financial Intermediary or its nominee, in either case as
collateral agent, and all income and gain realized thereon shall be solely for
the benefit of the Seller and shall be payable by the
41
<PAGE>
Trustee to the Seller on each Distribution Date. Realized losses, if any, on
investment of the Reserve Fund Property and all investment expenses shall be
charged first against undistributed investment earnings attributable to the
Reserve Fund Property and then against the Reserve Fund Property.
(ii) With respect to the Reserve Fund Property, the Seller on
behalf of itself, its successors and assigns and the Trustee agree that:
(A) any Reserve Fund Property that is held in deposit
accounts shall be held solely in the name of the Trustee, as
collateral agent, at the Trustee (in a segregated trust account if the
deposits of the Trustee do not have the Required Rating) or at one or
more depository institutions which are eligible to maintain the
Reserve Fund as described in Section 14.07(a)(i); each such deposit
account shall be subject to the exclusive custody and control of the
Trustee, and the Trustee shall have sole signature authority with
respect thereto;
(B) any Reserve Fund Property that constitutes Physical
Property shall be delivered to the Trustee, as collateral agent, in
accordance with paragraph (i) of the definition of the term "Delivery"
and shall be held, pending maturity or disposition, solely by the
Trustee, as collateral agent, or by a Financial Intermediary acting
solely for the Trustee, as collateral agent;
(C) any Reserve Fund Property that is a book-entry security
held through the Federal Reserve System pursuant to federal book-entry
regulations shall be delivered in accordance with paragraph (ii) of
the definition of the term "Delivery" and shall be maintained by the
Trustee, as collateral agent, pending maturity or disposition, through
continued book-entry registration of such book-entry security as
described in such paragraph; and
(D) any Reserve Fund Property that is an "uncertificated
security" under Article 8 of the UCC and that is not governed by
clause (C) above shall be delivered to the Trustee, as collateral
agent, in accordance with paragraph (iii) of the definition of the
term "Delivery" and shall be maintained by the Trustee, as collateral
agent, pending maturity or disposition, through continued registration
of the Trustee's or its Financial Intermediary's (or its custodian's
or its nominee's) ownership of such security, in its capacity as
collateral agent.
Effective upon Delivery of any Reserve Fund Property in the form of
Physical Property, book-entry securities or uncertificated securities, the
Trustee shall be deemed to have purchased such Reserve Fund Property for
value, in good faith and without notice of any adverse claim thereto.
(iii) Each of the Seller and the Servicer agrees to take or cause to
be taken such further actions, to execute, deliver and file or cause to be
executed, delivered and filed such further documents and instruments
(including, without limitation, any UCC
42
<PAGE>
financing statements or the Agreement) as may be determined to be
necessary, in an Opinion of Counsel to the Seller delivered to the Trustee,
in order to perfect the interests created by this Section and otherwise
fully to effectuate the purposes, terms and conditions of this Section.
The Seller and/or the Servicer, as the case may be, shall:
(A) promptly execute, deliver and file any financing
statements, amendments, continuation statements, assignments,
certificates and other documents with respect to such interests and
perform all such other acts as may be necessary in order to perfect or
to maintain the perfection of the Trustee's security interest in the
Reserve Fund Property; and
(B) make the necessary filings of financing statements or
amendments thereto within five days after the occurrence of any of the
following (and promptly notify the Trustee of each such filing): (1)
any change in its corporate name or any trade name, (2) any change in
the location of its chief executive office or principal place of
business or (3) any merger or consolidation or other change in its
identity or corporate structure.
(iv) The Trustee shall not enter into any subordination or
intercreditor agreement with respect to the Reserve Fund Property.
(d) Upon termination of the Trust pursuant to Section 20.01, any amounts
on deposit in the Reserve Fund, after payment of all amounts due to the Class A
and Class B Certificateholders, shall be paid to the Seller.
Section 14.08. NET DEPOSITS. For so long as American Honda shall be the
Servicer, the Seller, the Servicer and the Trustee may make any remittances
pursuant to this Article net of amounts to be distributed by the applicable
recipient to such remitting party. Nonetheless, each such party shall account
for all of the above described remittances and distributions as if the amounts
were deposited and/or transferred separately.
Section 14.09. SERVICER LETTER OF CREDIT.
(a) If, with respect to any Distribution Date which immediately follows a
Collection Period during which the Servicer is permitted to remit collections on
a monthly rather than a daily basis pursuant to Section 14.02 because the
Servicer has obtained a Servicer Letter of Credit, the Servicer shall have
failed to make in full the remittances to the Certificate Account pursuant to
Section 14.02(b) required for distribution to Certificateholders on such
Distribution Date by 9:00 A.M., Los Angeles time, on the Business Day
immediately preceding such Distribution Date, the Trustee shall, by 11:00 A.M.,
Los Angeles time, deliver a demand for payment under the Servicer Letter of
Credit to the Letter
43
<PAGE>
of Credit Bank requesting payment in the amount of the shortfall between the
amount of funds that are required to be remitted by the Servicer to the
Certificate Account as set forth in the related Servicer's Certificate and the
amount of funds actually so remitted. Upon receipt of a completed demand for
payment by the Trustee under the Servicer Letter of Credit, the Letter of Credit
Bank shall pay or cause to be paid, at the time and in the manner provided in
the Servicer Letter of Credit, an amount equal to the lesser of (i) the amount
demanded by the Trustee and (ii) the amount available under the Servicer Letter
of Credit (the "Servicer Letter of Credit Amount") to the Trustee for credit to
the Certificate Account. Except as otherwise provided in the Servicer Letter of
Credit, the Servicer Letter of Credit Amount shall equal the lesser of (A) the
product of the Initial Servicer Letter of Credit Amount and the Reset
Percentage, or (B) the Pool Balance as of the last day of the related Collection
Period. The Trustee hereby agrees to deliver a Reduction Certificate
substantially in the form of an Annex to the Servicer Letter of Credit,
appropriately completed to the Letter of Credit Bank after each Reset Date if
doing so would have the effect of reducing the Servicer Letter of Credit Amount
as then in effect. For the purpose of Section 14.06 or 18.01(a), amounts
deposited by the Trustee pursuant to this Section shall be deemed to constitute
Servicer remittances with respect to which the demand on the Servicer Letter of
Credit was made.
(b) The Servicer Letter of Credit shall be terminated by the Trustee, at
the written direction of the Servicer, at any time when (i) American Honda is
the Servicer and (ii) American Honda's short-term debt obligations are at least
equal to the Required Servicer Rating by each Rating Agency; provided, however,
that prior to any such termination of the Servicer Letter of Credit, the
Servicer shall furnish to the Trustee, from each Rating Agency for which the
Servicer's then-current short-term credit rating is not at least as specified in
clause (b)(ii) above, a letter to the effect that the rating then assigned to
the Rated Certificates will not be qualified, reduced or withdrawn and, if
applicable, an Officer's Certificate of the Servicer to the effect that the
Servicer's then-current short-term credit rating is at least as specified in
clause (b)(ii) above from each other Rating Agency, if any. Notwithstanding the
foregoing, if the short-term debt obligations of the Servicer are subsequently
downgraded below the Required Servicer Rating by any Rating Agency, the Servicer
shall be required to obtain and deliver to the Trustee an insurance policy,
letter of credit or surety bond acceptable to each Rating Agency (as evidenced
by a letter from each Rating Agency to the effect that the rating then assigned
to the Rated Certificates will not be qualified, reduced or withdrawn) and
reasonably acceptable in form to the Trustee, or the Servicer shall remit
collections to the Certificate Account on a daily basis pursuant to Section
14.02(a). In addition, the Servicer may allow the Servicer Letter of Credit to
expire or direct the Trustee in writing to cancel the Servicer Letter of Credit,
in each case for so long as the Servicer is required to remit collections to the
Certificate Account on a daily basis pursuant to Section 14.02(a). The Servicer
shall provide prior notice of such cancellation of the Servicer Letter of Credit
pursuant to the immediately preceding sentence to each Rating Agency. The
Servicer shall also provide notice of the renewal or expiration, if any, of the
Servicer Letter of Credit to each Rating Agency and the Trustee.
(c) Notwithstanding the other provisions of this Section, in the event
that on any day during a Collection Period during which the Servicer is
permitted to remit collections on a monthly rather than a daily basis as a
result of having obtained a Servicer Letter of Credit pursuant to Section
14.02(b), and the aggregate amount of collections described in the first
sentence of Section 14.02 and received during such Collection Period exceeds the
Servicer Letter of Credit Amount, then the Servicer shall cause all collections
in excess of such
44
<PAGE>
amount and all other collections received during the remainder of such
Collection Period to be deposited into the Certificate Account on a daily basis
within two Business Days of receipt.
Section 14.10. STATEMENTS TO CERTIFICATEHOLDERS.
(a) On each Distribution Date, the Trustee shall include with each
distribution to each Certificateholder of record, a statement, prepared by the
Servicer, based on information in the Servicer's Certificate furnished pursuant
to Section 13.10, setting forth for the related Collection Period the following
information as of the last day of the related Collection Period or such
Distribution Date, as the case may be:
(i) the amount of such distribution allocable to principal;
(ii) the amount of such distribution allocable to interest;
(iii) the Pool Balance as of the close of business on the last day
of such Collection Period;
(iv) the amount of the Basic Servicing Fee paid to the Servicer
with respect to the related Collection Period and the Class A Percentage of
the Basic Servicing Fee;
(v) the amount of the Class A Principal and Interest Carryover
Shortfalls, if any, on such Distribution Date and the change in the Class A
Principal and Interest Carryover Shortfalls from the immediately preceding
Distribution Date;
(vi) the Pool Factor and the Class A Pool Factor as of such
Distribution Date, after giving effect to payments allocated to principal
reported under clause (i) above;
(vii) the amount otherwise distributable to the Class B
Certificateholders that is distributed to the Class A Certificateholders on
such Distribution Date;
(viii) the amount on deposit in the Reserve Fund on such Distribution
Date, after giving effect to distributions made on such Distribution Date,
and the change in such amount from the immediately preceding Distribution
Date and the Specified Reserve Fund Balance;
(ix) the amount on deposit in the Payahead Account or held by the
Servicer constituting Payments Ahead and the change in such amount from the
immediately preceding Distribution Date;
(x) the amount of Outstanding Advances on such Distribution Date
and the change in such amount from the immediately preceding Distribution
Date;
45
<PAGE>
(xi) the Class A Certificate Balance and the Class B Certificate
Balance as of such Distribution Date, after giving effect to payments
allocated to principal reported under clause (i) above;
(xii) the Yield Supplement Deposit Amount, the Maximum Yield
Supplement Amount and the amount on deposit in the Yield Supplement
Account, after giving effect to distributions made on such Distribution
Date; and
(xiii) the amount available under the Servicer Letter of Credit, if
any, the Servicer Letter of Credit Amount, if any, and such amount as a
percentage of the Pool Balance as of the last day of the related Collection
Period.
Each amount set forth pursuant to subclauses (i), (ii), (iv) or (v) above shall
be expressed as a dollar amount per $1,000 of original principal balance of a
Class A Certificate.
(b) Within a reasonable period of time after the end of each calendar
year, but not later than the latest date permitted by law, the Trustee shall
mail, to each Person who at any time during such calendar year shall have been a
Holder of a Class A Certificate, a statement or statements, prepared by the
Servicer, which in the aggregate contain the sum of the amounts set forth in
clauses (i), (ii), (iv) and (v) above for such calendar year or, in the event
such Person shall have been a Holder of a Class A Certificate during a portion
of such calendar year, for the applicable portion of such year, for the purposes
of such Certificateholder's preparation of federal income tax returns. In
addition, the Servicer shall furnish to the Trustee for distribution to such
Person at such time any other information necessary under applicable law for the
preparation of such income tax returns, including information relating to
original issue discount calculation if any.
Section 14.11. YIELD SUPPLEMENT ACCOUNT.
(a) The Seller shall establish the Yield Supplement Account in the name of
the Trustee for the benefit of the Certificateholders. Except as otherwise
provided in the Agreement, the Yield Supplement Account shall be initially
established with the Trustee and maintained with the Trustee so long as (i) the
commercial paper or other short-term unsecured debt obligations of the Trustee
have the Required Rating, or (ii) such Yield Supplement Account is a segregated
trust account located in the corporate trust department of the Trustee bearing a
designation clearly indicating that the funds deposited therein are held in
trust for the benefit of the Certificateholders, and the Trustee has a long-term
deposit rating from Moody's (so long as Moody's is a Rating Agency) of at least
Baa3 (or such lower rating as Moody's shall approve in writing) and corporate
trust powers under applicable federal and state laws (which may include the
Trustee) and is organized under the laws of the United States, any State
thereof, the District of Columbia or the Commonwealth of Puerto Rico. Except as
otherwise provided in the Agreement, in the event that the Trustee no longer
meets either of the foregoing requirements, then the Servicer shall, with the
Trustee's assistance as necessary, cause the Yield Supplement Account to be
moved to a bank or trust company that satisfies either of such requirements.
46
<PAGE>
(b) For so long as the depository institution or trust company then
maintaining the Yield Supplement Account meets the requirements of Section
14.11(a)(i) or (a)(ii), all amounts held in the Yield Supplement Account shall,
to the extent permitted by applicable laws, rules and regulations, be invested,
as directed by the Seller, in Permitted Investments; otherwise such amounts
shall be maintained in cash.
(c) On or prior to the Closing Date, the Seller shall deposit an amount
equal to the Yield Supplement Account Deposit into the Yield Supplement Account.
The Yield Supplement Account shall not be part of the Trust but instead will be
owned by the Seller and held for the benefit of the Holders of the Certificates.
(d) The Seller hereby sells, conveys and transfers to the Trustee and its
successors and assigns, the Yield Supplement Account, all funds on deposit
therein and all proceeds thereof, subject, however to the limitations set forth
below:
(i) all or a portion of the monies on deposit in the Yield
Supplement Account may be invested and reinvested in the manner specified
in Section 14.11(b). All such investments shall be made in the name of the
Trustee and all income and gain realized thereon shall remain in the Yield
Supplement Account and be distributed to the Certificate Account as
required by Section 14.06(a)(iii);
(ii) notwithstanding anything herein to the contrary, on each
Distribution Date the Trustee shall pay to the Seller the amount, if any,
of any funds on deposit in the Yield Supplement Account in excess of the
Maximum Yield Supplement Amount, after giving effect to all distributions
to be made on such date; and
(iii) upon termination of this Agreement in accordance with Article
Twenty or in the event that the Seller obtains a letter of credit, surety
bond or insurance policy or otherwise satisfies the requirements
established by the Rating Agencies, in either case as evidenced by a letter
to the Trustee from each Rating Agency to the effect that the foregoing
arrangements will not cause their then-current ratings of the Rated
Certificates to be qualified, reduced or withdrawn, all amounts on deposit
in the Yield Supplement Account shall be paid to the Seller.
47
<PAGE>
ARTICLE FIFTEEN
THE CERTIFICATES
Section 15.01. THE CERTIFICATES. The Class A Certificates and the Class B
Certificates shall be substantially in the form of Exhibits to the Agreement.
The Class A Certificates shall be issuable in minimum denominations of $1,000
and integral multiples in excess thereof and the Class B Certificates shall be
issuable in minimum denominations of $100,000 and integral multiples in excess
thereof; provided, however, that one Class A Certificate and one Class B
Certificate may be issued in a denomination that includes any remaining portion
of the Original Class A Certificate Balance and the Original Class B Certificate
Balance, respectively (each, a "Residual Certificate"). The Certificates shall
be executed on behalf of the Trust by manual or facsimile signature of a
Responsible Officer under the Trustee's seal imprinted thereon and authenticated
on behalf of the Trustee by the manual or facsimile signature of a Responsible
Officer. Certificates bearing the manual or facsimile signatures of individuals
who were, at the time when such signatures were affixed, authorized to sign on
behalf of the Trustee shall be valid and binding obligations of the Trust,
notwithstanding that such individuals or any of them have ceased to be so
authorized prior to the authentication and delivery of such Certificates or did
not hold such offices at the date of such Certificates. All Certificates shall
be dated the date of their authentication.
Section 15.02. AUTHENTICATION AND DELIVERY OF CERTIFICATES. The Trustee
shall cause to be authenticated and delivered to or upon the order of the
Seller, in exchange for the Receivables and the other assets of the Trust,
simultaneously with the sale, assignment and transfer to the Trustee of the
Receivables, and the constructive delivery to the Trustee of the Receivable
Files and the other components of the Trust, Certificates duly authenticated by
the Trustee, in authorized denominations equaling in the aggregate the Original
Pool Balance and evidencing the entire ownership of the Trust. No Certificate
shall be entitled to any benefit under the Agreement, or be valid for any
purpose, unless there appears on such Certificate a certificate of
authentication substantially in the form set forth in the form of such
Certificate appearing as an Exhibit to the Agreement, executed by the Trustee by
manual signature, and such certificate upon any Certificate shall be conclusive
evidence, and the only evidence, that such Certificate has been duly
authenticated and delivered under the Agreement.
Section 15.03. REGISTRATION OF TRANSFER AND EXCHANGE OF CERTIFICATES.
(a) The Certificate Registrar shall maintain a Certificate Register in
which, subject to such reasonable regulations as it may prescribe, the
Certificate Registrar shall provide for the registration of Certificates and
transfers and exchanges of Certificates as provided in the Agreement. The
Trustee is hereby initially appointed Certificate Registrar for the purpose of
registering Certificates and transfers and exchanges of Certificates as provided
in the Agreement. In the event that, subsequent to the Closing Date, the
Trustee notifies the Servicer that it is unable to act as Certificate Registrar,
the Servicer shall appoint another bank or trust company, having an office or
agency located in the Borough of Manhattan, The City of New York, agreeing to
act in accordance with the provisions of the Agreement
48
<PAGE>
applicable to it, and otherwise acceptable to the Trustee, to act as successor
Certificate Registrar under the Agreement.
The Class B Certificates shall initially be owned by the Seller. No
transfer of a Class B Certificate shall be made unless the registration
requirements of the Securities Act and any applicable state securities laws are
complied with, or such registration of transfer is exempt from the registration
requirements under the Securities Act and such state securities laws. In the
event that a transfer is to be made in reliance upon an exemption from the
Securities Act and such state securities laws in connection with such
registration of such transfer, (i) the Trustee shall require the Class B
Certificateholder desiring to effect such registration of transfer and such
Certificateholder's prospective transferee to deliver an Opinion of Counsel with
respect to the Securities Act and a memorandum of law with respect to any
applicable state securities laws acceptable to and in form and substance
satisfactory to the Trustee and the Seller upon which the Trustee and the Seller
may conclusively rely, to the effect that such registration of transfer may be
made pursuant to an exemption, describing the applicable exemption and the basis
therefor, from the Securities Act and such state securities laws or is being
made pursuant to the Securities Act and such state securities laws, which
Opinion of Counsel and memorandum of law, as the case may be, shall not be an
expense of the Trustee, the Seller or the Servicer, and (ii) the Trustee shall
require the transferee to deliver a Purchaser's Letter to the Seller and the
Trustee, which Purchaser's Letter shall not be an expense of the Trustee, the
Seller or the Servicer. The Holder of a Class B Certificate desiring to effect
such registration of transfer shall, and does hereby agree to, indemnify the
Trustee, the Seller and the Servicer against any liability that may result if
the transfer is not so exempt or is not made in accordance with the Securities
Act and such state laws. Neither the Seller, the Servicer nor the Trustee is
under any obligation to register the Class B Certificates under the Securities
Act or any state securities laws.
The Class B Certificates, this Agreement and related documents may be
amended or supplemented from time to time to modify restrictions on and
procedures for resale and other transfer of such Class B Certificates to reflect
any change in applicable law or regulation (or the interpretation thereof) or
practices relating to the resale or transfer of restricted securities generally.
(b) Subject to Section 15.03(a), upon surrender for registration of
transfer of any Certificate at the Corporate Trust Office, the Trustee on behalf
of the Trust shall execute, authenticate and deliver, in the name of the
designated transferee or transferees, one or more new Certificates of the same
Class in authorized denominations of a like aggregate principal amount.
(c) At the option of a Certificateholder, Certificates may be exchanged
for other Certificates of the same Class of authorized denominations of a like
aggregate principal amount, upon surrender of the Certificates to be exchanged
at any such office or agency. Whenever any Certificates are so surrendered for
exchange the Trustee on behalf of the Trust shall execute, authenticate and
deliver the Certificates that the Certificateholder making the exchange is
entitled to receive. Every Certificate presented or surrendered for
registration of transfer or exchange shall be accompanied by a written
instrument of transfer in form
49
<PAGE>
satisfactory to the Trustee and the Certificate Registrar duly executed by the
Holder thereof or his attorney duly authorized in writing.
(d) No service charge shall be made for any registration of transfer or
exchange of Certificates, but the Trustee may require payment of a sum
sufficient to cover any tax or governmental charge that may be imposed in
connection with any transfer or exchange of Certificates.
(e) All Certificates surrendered for registration of transfer or exchange
shall be cancelled and subsequently destroyed by the Trustee.
(f) The Class B Certificates shall initially be retained by the Seller.
No transfer of a Class B Certificate shall be made unless the Class B
Certificateholder desiring to effect such transfer shall have given the Seller,
the Trustee and each Rating Agency written notice of such proposed transfer, and
each Rating Agency shall have notified such Class B Certificateholder, the
Seller and the Trustee that such proposed transfer shall not result in the
qualification, reduction or withdrawal of its then-current rating of the Rated
Certificates.
Section 15.04. MUTILATED, DESTROYED, LOST OR STOLEN CERTIFICATES. If (i)
any mutilated Certificate is surrendered to the Certificate Registrar, or the
Certificate Registrar receives evidence to its satisfaction of the destruction,
loss or theft of any Certificate, and (ii) there is delivered to the Certificate
Registrar and the Trustee such security or indemnity as may be required by them
to save each of them harmless, then, in the absence of notice that such
Certificate has been acquired by a bona fide purchaser, the Trustee on behalf of
the Trust shall execute and the Trustee shall authenticate and deliver, in
exchange for or in lieu of any such mutilated, destroyed, lost or stolen
Certificate, a new Certificate of like tenor and fractional undivided interest.
In connection with the issuance of any new Certificate under this Section, the
Trustee may require the payment by the Holder of a sum sufficient to cover any
tax or other governmental charge that may be imposed in relation thereto. Any
duplicate Certificate issued pursuant to this Section shall constitute complete
and indefeasible evidence of ownership in the Trust, as if originally issued,
whether or not the lost, stolen or destroyed Certificate shall be found at any
time.
Section 15.05. PERSONS DEEMED OWNERS. Prior to due presentation of a
Certificate for registration of transfer, the Trustee, the Certificate Registrar
and any of their respective agents may treat the Person in whose name any
Certificate is registered as the owner of such Certificate for the purpose of
receiving distributions pursuant to Section 14.06 and for all other purposes
whatsoever, and neither the Trustee, the Certificate Registrar nor any of their
respective agents shall be affected by any notice to the contrary.
Section 15.06. ACCESS TO LIST OF CERTIFICATEHOLDERS' NAMES AND ADDRESSES.
The Certificate Registrar shall furnish or cause to be furnished to the
Servicer, within 15 days after receipt by the Certificate Registrar of a written
request therefor from the Servicer, a list, in such form as the Servicer may
reasonably require, of the names and addresses of the Certificateholders as of
the most recent Record Date. If three or more Certificateholders, or one or
more Holders of Class A Certificates or Class B Certificates evidencing not less
than
50
<PAGE>
25% of the Voting Interests of the Certificates of the related Class
(hereinafter referred to as "Applicants"), apply in writing to the Trustee, and
such application states that the Applicants desire to communicate with other
Certificateholders with respect to their rights under the Agreement or under the
Certificates and such application is accompanied by a copy of the communication
that such Applicants propose to transmit, then the Trustee shall, within five
Business Days after the receipt of such application, afford such Applicants
access, during normal business hours, to the current list of Certificateholders.
Every Certificateholder, by receiving and holding a Certificate, agrees with the
Servicer and the Trustee that neither the Servicer nor the Trustee shall be held
accountable by reason of the disclosure of any such information as to the names
and addresses of the Certificateholders under the Agreement, regardless of the
source from which such information was derived.
Section 15.07. MAINTENANCE OF OFFICE OR AGENCY. The Trustee shall
maintain in the Borough of Manhattan, The City of New York, an office or offices
or agency or agencies where Certificates may be surrendered for registration of
transfer or exchange and where notices and demands to or upon the Trustee in
respect of the Certificates and the Agreement may be served. Unless otherwise
provided in the Agreement, the Trustee shall designate the Corporate Trust
Office as its office for such purposes. The Trustee shall give prompt written
notice to the Seller, the Servicer and to Certificateholders of any change in
the location of the Certificate Register or any such office or agency.
Section 15.08. TEMPORARY CERTIFICATES. Pending the preparation of
definitive Class A Certificates, the Trustee, on behalf of the Trust, may
execute, authenticate and deliver temporary Class A Certificates that are
printed, lithographed, typewritten, mimeographed or otherwise produced, in any
authorized denomination, substantially of the tenor of the definitive Class A
Certificates in lieu of which they are issued. If temporary Class A
Certificates are issued, the Seller will cause definitive Class A Certificates
to be prepared without unreasonable delay. After the preparation of definitive
Class A Certificates, the temporary Class A Certificates shall be exchangeable
for definitive Class A Certificates upon surrender of the temporary Class A
Certificates at the office or agency to be maintained as provided in Section
15.07, without charge to the Holder. Upon surrender for cancellation of any one
or more temporary Class A Certificates, the Trustee on behalf of the Trust shall
execute and authenticate and deliver in exchange therefor a like principal
amount of definitive Class A Certificates in authorized denominations. Until so
exchanged the temporary Class A Certificates shall in all respects be entitled
to the same benefits under the Agreement as definitive Class A Certificates.
Section 15.09. BOOK-ENTRY CERTIFICATES. Unless otherwise specified in the
Agreement, the Class A Certificates, upon original issuance (except for the
Residual Certificate with respect to the Class A Certificates) will be issued in
the form of one or more typewritten certificates representing the Book-Entry
Certificates, to be delivered to DTC, the initial Clearing Agency, by, or on
behalf of, the Seller. The certificate or certificates delivered to DTC
evidencing such Class A Certificates shall initially be registered on the
Certificate Register in the name of Cede & Co., the nominee of the initial
Clearing Agency, and no Certificate Owner will receive a definitive certificate
representing such Certificate Owner's interest in the Class A Certificates,
except as provided in Section 15.11. Unless otherwise
51
<PAGE>
specified in the Agreement, subject to Section 15.11, unless and until
definitive, fully registered Class A Certificates (the "Definitive
Certificates") have been issued to Certificate Owners pursuant to Section 15.11:
(i) the provisions of this Section shall be in full force and
effect;
(ii) the Seller, the Servicer, the Certificate Registrar and the
Trustee may deal with the Clearing Agency for all purposes (including the
making of distributions on the Class A Certificates) as the authorized
representative of the Certificate Owners;
(iii) to the extent that the provisions of this Section conflict
with any other provisions of the Agreement, the provisions of this Section
shall control;
(iv) the rights of Certificate Owners shall be exercised only
through the Clearing Agency (or through procedures established by the
Clearing Agency) and shall be limited to those established by law and
agreements between such Certificate Owners and the Clearing Agency and/or
the Clearing Agency Participants. Pursuant to the Letter of
Representations, unless and until Definitive Certificates are issued
pursuant to Section 15.11, the initial Clearing Agency will make book-entry
transfers among the Clearing Agency Participants and receive and transmit
distributions of principal and interest on the Class A Certificates to such
Clearing Agency Participants; and
(v) whenever the Agreement requires or permits actions to be taken
based upon instructions or directions of Holders of Class A Certificates
evidencing a specified percentage of the Voting Interests thereof the
Clearing Agency shall be deemed to represent such percentage only to the
extent that it has received instructions to such effect from Certificate
Owners and/or Clearing Agency Participants owning or representing,
respectively, such required percentage of the beneficial interest in
Class A Certificates and has delivered such instructions to the Trustee.
Section 15.10. NOTICES TO CLEARING AGENCY. Whenever notice or other
communication to the Class A Certificateholders is required under the Agreement,
other than to the Holder of the Residual Certificate with respect to the Class A
Certificates, unless and until Definitive Certificates shall have been issued to
Certificate Owners pursuant to Section 15.11, the Trustee and the Servicer shall
give all such notices and communications specified herein to be given to Holders
of the Class A Certificates to the Clearing Agency.
Section 15.11. DEFINITIVE CERTIFICATES. If (i)(A) the Seller advises the
Trustee in writing that the Clearing Agency is no longer willing or able to
properly discharge its responsibilities as described in the Letter of
Representations and (B) the Trustee or the Seller is unable to locate a
qualified successor, (ii) the Seller at its option, advises the Trustee in
writing that it elects to terminate the book-entry system through the Clearing
Agency or (iii) after the occurrence of an Event of Default, Certificate Owners
representing beneficial interests in the Class A Certificates aggregating not
less than 51% of the Voting Interests thereof advise the Trustee and the
Clearing Agency through the Clearing Agency Participants in writing that the
continuation of a book-entry system through the Clearing Agency is no
52
<PAGE>
longer in the best interests of the Certificate Owners, then the Trustee shall
notify all Certificate Owners, through the Clearing Agency, of the occurrence of
any such event and of the availability of Definitive Certificates to Certificate
Owners requesting the same. Upon surrender to the Trustee of the Class A
Certificates by the Clearing Agency, accompanied by instructions from the
Clearing Agency for registration, the Trustee shall issue the Definitive
Certificates and deliver such Definitive Certificates in accordance with the
instructions of the Clearing Agency. Neither the Seller, the Certificate
Registrar nor the Trustee shall be liable for any delay in delivery of such
instructions and may conclusively rely on, and shall be protected in relying on,
such instructions. Upon the issuance of Definitive Certificates, the Trustee
shall recognize the Holders of the Definitive Certificates as Class A
Certificateholders hereunder. The Trustee shall not be liable if the Trustee or
the Seller is unable to locate a qualified successor Clearing Agency.
53
<PAGE>
ARTICLE SIXTEEN
THE SELLER
Section 16.01. REPRESENTATIONS OF SELLER. The Seller shall make the
following representations on which the Trustee shall rely in accepting the
Receivables in trust and executing and authenticating the Certificates. The
representations shall speak as of the execution and delivery of the Agreement
and shall survive the sale of the Receivables to the Trustee.
(a) ORGANIZATION AND GOOD STANDING. The Seller has been duly
organized and is validly existing as a corporation in good standing under
the laws of the State of California, with power and authority to own its
properties and to conduct its business as such properties are currently
owned and such business is presently conducted, and had at all relevant
times, and has, power, authority and legal right to acquire, own and sell
the Receivables.
(b) DUE QUALIFICATION. The Seller is duly qualified to do
business as a foreign corporation in good standing, and has obtained all
necessary licenses and approvals in all jurisdictions in which the
ownership or lease of property or the conduct of its business shall require
such qualifications.
(c) POWER AND AUTHORITY. The Seller has the power and authority
to execute and deliver the Agreement and to carry out its terms, the Seller
has full power and authority to sell and assign the property to be sold and
assigned to and deposited with the Trustee as part of the Trust and has
duly authorized such sale and assignment to the Trustee by all necessary
corporate action; and the execution, delivery and performance of the
Agreement has been duly authorized by the Seller by all necessary corporate
action.
(d) VALID SALE; BINDING OBLIGATION. The Agreement evidences a
valid sale, transfer and assignment of the Receivables, enforceable against
creditors of and purchasers from the Seller; and constitutes a legal, valid
and binding obligation of the Seller enforceable in accordance with its
terms, except as enforceability may be subject to or limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights in general and by general principles of
equity, regardless of whether such enforceability shall be considered in a
proceeding in equity or at law.
(e) NO VIOLATION. The execution, delivery and performance by the
Seller of this Agreement and the consummation of the transactions
contemplated by the Agreement and the fulfillment of the terms of the
Agreement shall not conflict with, result in any breach of any of the terms
and provisions of, nor constitute (with or without notice or lapse of time)
a default under, the articles of incorporation or bylaws of the Seller, or
conflict with or violate any of the material terms or provisions of, or
constitute (with or without notice or lapse of time) a default under, any
indenture,
54
<PAGE>
agreement or other instrument to which the Seller is a party or by which it
shall be bound; nor result in the creation or imposition of any Lien upon
any of its properties pursuant to the terms of any such indenture,
agreement or other instrument (other than the Agreement); nor violate any
law or, to the Seller's knowledge, any order, rule or regulation applicable
to the Seller of any court or of any federal or state regulatory body,
administrative agency or other governmental instrumentality having
jurisdiction over the Seller or its properties; which breach, default,
conflict, lien or violation would have a material adverse effect on the
earnings, business affairs or business prospects of the Seller.
(f) NO PROCEEDINGS. There are no proceedings or investigations
pending, or to the Seller's knowledge, threatened, before any court,
regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Seller or its properties: (i)
asserting the invalidity of the Agreement or the Certificates, (ii) seeking
to prevent the issuance of the Certificates or the consummation of any of
the transactions contemplated by the Agreement, (iii) seeking any
determination or ruling that might materially and adversely affect the
performance by the Seller of its obligations under, or the validity or
enforceability of, the Agreement or the Certificates or (iv) relating to
the Seller and which might adversely affect the federal income tax
attributes of the Certificates.
Section 16.02. LIABILITY OF SELLER. The Seller shall be liable in
accordance with the Agreement only to the extent of the obligations in the
Agreement specifically undertaken by the Seller in such capacity under the
Agreement and shall have no other obligations or liabilities hereunder.
Section 16.03. MERGER, CONSOLIDATION OR ASSUMPTION OF THE OBLIGATIONS OF
SELLER; CERTAIN LIMITATIONS.
(a) Any corporation (i) into which the Seller may be merged or
consolidated, (ii) which may result from any merger, conversion or consolidation
to which the Seller shall be a party or (iii) which may succeed to all or
substantially all of the business of the Seller, which corporation in any of the
foregoing cases executes an agreement of assumption to perform every obligation
of the Seller under the Agreement, shall be the successor to the Seller under
the Agreement without the execution or filing of any document or any further act
on the part of any of the parties to the Agreement, except that if the Seller in
any of the foregoing cases is not the surviving entity, then the surviving
entity shall execute an agreement of assumption to perform every obligation of
the Seller hereunder. The Seller shall provide notice of any merger,
consolidation or succession pursuant to this Section to each Rating Agency and
shall receive from each Rating Agency a letter to the effect that such merger,
consolidation or succession will not result in a qualification, downgrading or
withdrawal of its then-current rating of the Rated Certificates.
(b) (i) Subject to paragraph (ii) below, the purpose of the Seller
shall be to engage in any lawful activity for which a corporation may be
organized under the General
55
<PAGE>
Corporation Law of California other than the banking business, the trust company
business or the practice of a profession permitted to be incorporated by the
California Corporations Code.
(ii) Notwithstanding paragraph (b)(i) above, the purpose of the
Seller shall be limited to the following purposes, and activities incident to
and necessary or convenient to accomplish the following purposes: (A) to
acquire, own, hold, sell, transfer, assign, pledge, finance, refinance and
otherwise deal with, retail installment sale contracts or wholesale loans
secured by, new Honda and Acura motor vehicles (the "Motor Vehicle
Receivables"); (B) to authorize, issue, sell and deliver one or more series of
obligations, consisting of one or more classes of certificates or notes or other
evidence of indebtedness (the "Offered Securities") that are collateralized by
or evidence an interest in Motor Vehicle Receivables; and (C) to negotiate,
authorize, execute, deliver and assume the obligations or any agreement relating
to the activities set forth in clauses (A) and (B) above, including but not
limited to any pooling and servicing agreement, indenture, reimbursement
agreement, credit support agreement, receivables purchase agreement or
underwriting agreement and to engage in any lawful activity which is incidental
to the activities contemplated by any such agreement. So long as any
outstanding debt of the Seller or Offered Securities are rated by any nationally
recognized statistical rating organization, the Seller shall not issue notes or
otherwise borrow money unless (1) the Seller has made a written request to the
related nationally recognized statistical rating organization to issue notes or
incur borrowings which notes or borrowings are rated by the related nationally
recognized statistical rating organization the same as or higher than the rating
afforded any outstanding rated debt or Offered Securities, or (2) such notes or
borrowings (X) are fully subordinated (and which shall provide for payment only
after payment in respect of all outstanding rated debt and/or Offered
Securities) or are nonrecourse against any assets of the Seller other than the
assets pledged to secure such notes or borrowings, (Y) do not constitute a claim
against the Seller in the event such assets are insufficient to pay such notes
or borrowings and (Z) where such notes or borrowings are secured by the rated
debt or Offered Securities, are fully subordinated (and which shall provide for
payment only after payment in respect of all outstanding rated debt and/or
Offered Securities) to such rated debt or Offered Securities.
(c) Notwithstanding any other provision of this Section and any provision
of law, the Seller shall not do any of the following:
(i) engage in any business or activity other than as set forth in
clause (b) above;
(ii) without the affirmative vote of a majority of the members of
the Board of Directors of the Seller (which must include the affirmative
vote of all duly appointed Independent Directors, as required by the
articles of incorporation and bylaws of the Seller), (A) dissolve or
liquidate, in whole or in part, or institute proceedings to be adjudicated
bankrupt or insolvent, (B) consent to the institution of bankruptcy or
insolvency proceedings against it, (C) file a petition seeking or consent
to reorganization or relief under any applicable federal or state law
relating to bankruptcy, (D) consent to the appointment of a receiver,
liquidator, assignee, trustee, sequestrator or other similar official of
the corporation or a substantial part of its
56
<PAGE>
property, (E) make a general assignment for the benefit of creditors, (F)
admit in writing its inability to pay its debts generally as they become
due or (G) take any corporate action in furtherance of the actions set
forth in clauses (A) through (F) above; provided, however, that no director
may be required by any shareholder of the Seller to consent to the
institution of bankruptcy or insolvency proceedings against the Seller so
long as it is solvent; or
(iii) merge or consolidate with any other corporation, company or
entity or sell all or substantially all of its assets or acquire all or
substantially all of the assets or capital stock or other ownership
interest of any other corporation, company or entity (except for the
acquisition of Motor Vehicle Receivables of American Honda and the sale of
Motor Vehicle Receivables to one or more trusts in accordance with the
terms of clause (b)(ii) above, which shall not be otherwise restricted by
this Section 16.03(c)).
Section 16.04. LIMITATION ON LIABILITY OF SELLER AND OTHERS. The Seller
and any director, officer, employee or agent of the Seller may rely in good
faith on the advice of counsel or on any document of any kind, prima facie
properly executed and submitted by any Person respecting any matters arising
under the Agreement. The Seller shall not be under any obligation to appear in,
prosecute or defend any legal action that is not incidental to its obligations
as Seller of the Receivables under the Agreement and that in its opinion may
involve it in any expense or liability.
Section 16.05. SELLER MAY OWN CERTIFICATES. The Seller and any Person
controlling, controlled by or under common control with the Seller may in its
individual or any other capacity become the owner or pledgee of Certificates
with the same rights as it would have if it were not the Seller or an Affiliate
thereof except as otherwise specifically provided in the definition of the term
"Certificateholder." Certificates so owned by or pledged to the Seller or such
controlling or commonly controlled Person shall have an equal and proportionate
benefit under the provisions of the Agreement, without preference, priority or
distinction as among all of the Certificates.
Section 16.06. NO TRANSFER OF EXCESS AMOUNTS. The Seller hereby covenants
that, except as otherwise provided in the Agreement, it will not transfer,
pledge or assign to any Person any part of its right to receive any Excess
Amounts pursuant to Section 14.06(d)(ii) unless it has first delivered to the
Trustee and each Rating Agency an Opinion of Counsel in form and substance
satisfactory to the Trustee stating that such transfer will not (i) adversely
affect the status of the Trust as a grantor trust pursuant to subpart E, part I
of subchapter J of the Code or (ii) cause the Reserve Fund to be taxable as a
corporation under the Code. The Seller shall give written notice to each Rating
Agency of any proposed transfer, pledge or assignment to any Person of all or
any part of its right to receive Excess Amounts pursuant to
Section 14.06(d)(ii).
57
<PAGE>
ARTICLE SEVENTEEN
THE SERVICER
Section 17.01. REPRESENTATIONS OF SERVICER. The Servicer shall make the
following representations on which the Trustee shall rely in accepting the
Receivables in trust and executing and authenticating the Certificates. The
representations shall speak as of the execution and delivery of the Agreement
and shall survive the sale of the Receivables to the Trustee.
(a) ORGANIZATION AND GOOD STANDING. The Servicer has been duly
organized and is validly existing as a corporation in good standing under
the laws of the State of California, with power and authority to own its
properties and to conduct its business as such properties are currently
owned and such business is presently conducted, and had at all relevant
times, and has, power, authority and legal right to acquire, own, sell and
service the Receivables and to hold the Receivable Files as custodian on
behalf of the Trustee.
(b) DUE QUALIFICATION. The Servicer is duly qualified to do
business as a foreign corporation in good standing, and has obtained all
necessary licenses and approvals in all jurisdictions in which the
ownership or lease of property or the conduct of its business (including
the servicing of the Receivables as required by the Agreement) shall
require such qualifications.
(c) POWER AND AUTHORITY. The Servicer has the power and authority
to execute and deliver the Agreement and to carry out its terms; and the
execution, delivery and performance of the Agreement has been duly
authorized by the Servicer by all necessary corporate action.
(d) BINDING OBLIGATION. The Agreement constitutes a legal, valid
and binding obligation of the Servicer enforceable in accordance with its
terms, except as enforceability may be subject to or limited by bankruptcy,
insolvency, reorganization, moratorium, liquidation or other similar laws
affecting the enforcement of creditors' rights in general and by general
principles of equity, regardless of whether such enforceability shall be
considered in a proceeding in equity or in law.
(e) NO VIOLATION. The execution, delivery and performance by the
Servicer of this Agreement and the execution, delivery and performance by
the Seller of this Agreement and the consummation of the transactions
contemplated by the Agreement and the fulfillment of the terms of the
Agreement shall not conflict with, result in any breach of any of the terms
and provisions of, nor constitute (with or without notice or lapse of time)
a default under, the articles of incorporation or bylaws of the Servicer,
or conflict with or breach any of the material terms or provisions of, or
constitute (with or without notice or lapse of time) a default under, any
indenture, agreement or other instrument to which the Servicer is a party
or by which it shall be bound; nor result in the creation or imposition of
any Lien upon any of its properties pursuant to
58
<PAGE>
the terms of any such indenture, agreement or other instrument (other than
the Agreement); nor violate any law or, to the Servicer's knowledge, any
order, rule or regulation applicable to the Servicer of any court or of any
federal or state regulatory body, administrative agency or other
governmental instrumentality having jurisdiction over the Servicer or its
properties; which breach, default, conflict, lien or violation would have a
material adverse effect on the earnings, business affairs or business
prospects of the Servicer.
(f) NO PROCEEDINGS. There are no proceedings or investigations
pending, or to the Servicer's best knowledge, threatened, before any court,
regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Servicer or its properties:
(i) asserting the invalidity of the Agreement or the Certificates, (ii)
seeking to prevent the issuance of the Certificates or the consummation of
any of the transactions contemplated by the Agreement, (iii) seeking any
determination or ruling that might materially and adversely affect the
performance by the Servicer of its obligations under, or the validity or
enforceability of, the Agreement or the Certificates or (iv) relating to
the Servicer and which might adversely affect the federal income tax
attributes of the Certificates.
Section 17.02. LIABILITY OF SERVICER; INDEMNITIES.
(a) The Servicer shall be liable in accordance herewith only to the extent
of the obligations specifically undertaken by the Servicer under the Agreement
and shall have no other obligations or liabilities under the Agreement. Such
obligations shall include the following:
(i) the Servicer shall defend, indemnify and hold harmless the
Trustee, the Trust and the Certificateholders from and against any and all
costs, expenses, losses, damages, claims and liabilities, including
reasonable fees and expenses of counsel and expenses of litigation arising
out of or resulting from the use or operation by the Servicer or any
Affiliate thereof of any Financed Vehicle;
(ii) the Servicer shall indemnify, defend and hold harmless the
Trustee and the Trust from and against any taxes that may at any time be
asserted against the Trustee or the Trust with respect to the transactions
contemplated in the Agreement, including, without limitation, any sales,
gross receipts, general corporation, tangible or intangible personal
property, privilege or license taxes (but not including any taxes asserted
with respect to, and as of the date of, the sale of the Receivables to the
Trustee or the issuance and original sale of the Certificates, or asserted
with respect to ownership of the Receivables, or federal or other income
taxes arising out of distributions on the Certificates) and costs and
expenses in defending against the same;
(iii) the Servicer shall indemnify, defend and hold harmless the
Trustee, the Trust and the Certificateholders from and against any and all
costs, expenses, losses, claims, damages and liabilities to the extent that
such cost, expense, loss, claim, damage or liability arose out of, and was
imposed upon the Trustee, the Trust or the
59
<PAGE>
Certificateholders through the negligence, willful misfeasance or bad faith
of the Servicer in the performance of its duties under the Agreement or by
reason of reckless disregard of its obligations and duties under the
Agreement; and
(iv) the Servicer shall indemnify, defend and hold harmless the
Trustee from and against all costs, expenses, losses, claims, damages and
liabilities arising out of or incurred in connection with the acceptance or
performance of the trusts and duties contained in the Agreement, except to
the extent that such cost, expense, loss, claim, damage or liability: (A)
shall be due to the willful misfeasance, bad faith or negligence of the
Trustee, (B) shall arise from the breach by the Trustee of any of its
representations or warranties set forth in Section 19.14, (C) relates to
any tax other than the taxes with respect to which either the Seller or the
Servicer shall be required to indemnify the Trustee or (D) shall arise out
of or be incurred in connection with the performance by the Trustee of the
duties of a Successor Servicer under the Agreement.
(b) Indemnification under this Section shall include, without limitation,
reasonable fees and expenses of counsel and expenses of litigation. If the
Servicer has made any indemnity payments pursuant to this Section and the
recipient thereafter collects any of such amounts from others, the recipient
shall promptly repay such amounts collected to the Servicer, without interest.
(c) The provisions of this Section shall survive the resignation or
removal of the Trustee and the termination of the Agreement.
Section 17.03. MERGER, CONSOLIDATION OR ASSUMPTION OF THE OBLIGATIONS OF
SERVICER. Any corporation (i) into which the Servicer may be merged or
consolidated, (ii) which may result from any merger, conversion or consolidation
to which the Servicer shall be a party or (iii) which may succeed to all or
substantially all of the business of the Servicer, which corporation in any of
the foregoing cases executes an agreement of assumption to perform every
obligation of the Servicer under the Agreement, shall be the successor to the
Servicer under the Agreement without the execution or filing of any paper or any
further act on the part of any of the parties to the Agreement. The Servicer
shall provide notice of any merger, consolidation or succession pursuant to this
Section to the Trustee and each Rating Agency.
Section 17.04. LIMITATION ON LIABILITY OF SERVICER AND OTHERS.
(a) Neither the Servicer nor any of its directors, officers, employees or
agents shall be under any liability to the Trust, the Trustee or the
Certificateholders, except as provided in the Agreement, for any action taken or
for refraining from the taking of any action pursuant to the Agreement, or for
errors in judgment; provided, however, that this provision shall not protect the
Servicer or any such person 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 under the Agreement. The Servicer and any director, officer, employee or
agent of the Servicer may rely in good faith on any document of any kind
prima facie properly executed and submitted by any Person respecting any matters
arising under the Agreement.
60
<PAGE>
(b) Except as provided in the Agreement, the Servicer shall not be under
any obligation to appear in, prosecute or defend any legal action that shall not
be incidental to its duties to service the Receivables in accordance with the
Agreement, and that in its opinion may involve it in any expense or liability;
provided, however, that the Servicer may undertake any reasonable action that it
may deem necessary or desirable in respect of the Agreement and the rights and
duties of the parties to the Agreement and the interests of the
Certificateholders under the Agreement.
(c) The Servicer and any director, officer, employee or agent of the
Servicer may rely in good faith on the advice of counsel or on any document of
any kind prima facie properly executed and submitted by any Person respecting
any matters arising under the Agreement. The Servicer shall not be under any
obligation to appear in, prosecute, nor defend any legal action that shall not
be incidental to its obligations under the Agreement, and that in its opinion
may involve it in any expense or liability.
Section 17.05. SERVICER NOT TO RESIGN. Subject to the provisions of
Section 17.03, the Servicer shall not resign from the obligations and duties
imposed on it by the Agreement as Servicer except upon determination that the
performance of its duties under the Agreement is no longer permissible under
applicable law. Any such determination permitting the resignation of the
Servicer shall be evidenced by an Opinion of Counsel to such effect delivered to
the Trustee. No such resignation shall become effective until the Trustee or a
Successor Servicer shall have assumed the responsibilities and obligations of
the Servicer in accordance with Section 18.03.
61
<PAGE>
ARTICLE EIGHTEEN
EVENTS OF DEFAULT
Section 18.01. EVENTS OF DEFAULT. For purposes of the Agreement, each of
the following shall constitute an "Event of Default":
(a) failure by the Servicer to deliver to the Trustee the
Servicer's Certificate for the related Collection Period, or any failure by
the Servicer (or, so long as the Servicer is American Honda, the Seller) to
deliver to the Trustee, for distribution to Certificateholders, any
proceeds or payment required to be so delivered under the terms of the
Certificates or the Agreement, in each case that continues unremedied for a
period of three Business Days after discovery by an officer of the Servicer
(or, so long as the Servicer is American Honda, the Seller) or written
notice of such failure, requiring the same to be remedied, shall have been
given (i) to the Servicer or the Seller, as the case may be, by the Trustee
or (ii) to the Trustee and the Servicer or the Seller, as the case may be,
by the Holders of Certificates evidencing not less than 25% of the Voting
Interests of the Class A Certificates and the Class B Certificates, voting
together as a single class; or
(b) failure on the part of the Servicer (or so long as the
Servicer is American Honda, the Seller) duly to observe or to perform in
any material respect any other covenants or agreements of the Servicer (or
so long as the Servicer is American Honda, the Seller) set forth in the
Certificates or in the Agreement, which failure shall (i) materially and
adversely affect the rights of the Certificateholders and (ii) continue
unremedied for a period of 90 days after the date on which written notice
of such failure, requiring the same to be remedied, shall have been given
(A) to the Servicer or the Seller, as the case may be, by the Trustee or
(B) to the Trustee and the Servicer or the Seller, as the case may be, by
the Holders of Certificates evidencing not less than 25% of the Voting
Interests of the Class A Certificates and the Class B Certificates, voting
together as a single class; or
(c) the entry of a decree or order by a court or agency or
supervisory authority having jurisdiction in the premises for the
appointment of a trustee in bankruptcy, conservator, receiver or liquidator
for the Servicer (or, so long as the Servicer is American Honda, the
Seller) in any bankruptcy, insolvency, readjustment of debt, marshalling of
assets and liabilities or similar proceedings, or for the winding up or
liquidation of their respective affairs, and the continuance of any such
decree or order unstayed and in effect for a period of 90 consecutive days;
or
(d) the consent by the Servicer (or, so long as the Servicer is
American Honda, the Seller) to the appointment of a trustee in bankruptcy,
conservator or receiver or liquidator in any bankruptcy, insolvency,
readjustment of debt, marshalling of assets and liabilities or similar
proceedings of or relating to the Servicer (or, so long as the Servicer is
American Honda, the Seller)
62
<PAGE>
of or relating to substantially all of its property; or the Servicer (or,
so long as the Servicer is American Honda, the Seller) shall admit in
writing its inability to pay its debts generally as they become due, file a
petition to take advantage of any applicable insolvency or reorganization
statute, make an assignment for the benefit of its creditors or voluntarily
suspend payment of its obligations.
Section 18.02. CONSEQUENCES OF AN EVENT OF DEFAULT. If an Event of
Default shall occur and be continuing, so long as such Event of Default has not
been cured or waived, either the Trustee or the Holders of Certificates
evidencing not less than 51% of the Voting Interests of the Class A Certificates
and the Class B Certificates, voting together as a single class, by notice then
given in writing to the Servicer (and to the Trustee if given by
Certificateholders) may terminate all of the rights and obligations of the
Servicer under the Agreement. On or after the receipt by the Servicer of such
written notice, all authority and power of the Servicer under the Agreement,
whether with respect to the Certificates, the Receivables or otherwise, shall,
without further action, pass to and be vested in the Trustee pursuant to and
under this Section or such Successor Servicer as may be appointed under Section
18.03; and, without limitation, the Trustee shall be hereby authorized and
empowered to execute and deliver, on behalf of the predecessor Servicer, as
attorney-in-fact or otherwise, any and all documents and other instruments, and
to do or accomplish all other acts or things necessary or appropriate to effect
the purposes of such notice of termination, whether to complete the transfer and
endorsement of the Receivables and related documents, or otherwise. The
predecessor Servicer shall cooperate with the Successor Servicer and the Trustee
in effecting the termination of the responsibilities and rights of the
predecessor Servicer under the Agreement, including, without limitation, the
transfer to the Successor Servicer for administration by it of all cash amounts
that shall at the time be held by the predecessor Servicer for deposit, or have
been deposited by the predecessor Servicer, in the Accounts or the Reserve Fund
or thereafter received with respect to the Receivables and all Payments Ahead
that shall at that time be held by the predecessor Servicer. All reasonable
costs and expenses (including servicer conversion costs and attorneys' fees)
incurred in connection with transferring the Receivable Files to the Successor
Servicer and amending the Agreement to reflect such succession as Servicer
pursuant to this Section shall be paid by the predecessor Servicer (or, if the
predecessor Servicer is the initial Trustee, the initial Servicer) upon
presentation of reasonable documentation of such costs and expenses.
Section 18.03. TRUSTEE TO ACT; APPOINTMENT OF SUCCESSOR SERVICER. On and
after the time the Servicer receives a notice of termination pursuant to Section
18.02 or tenders its resignation pursuant to Section 17.05, the Trustee shall,
by an instrument in writing, assume the rights and responsibilities of the
Servicer in its capacity as Servicer under the Agreement and the transactions
set forth or provided for in the Agreement, and shall be subject to all the
responsibilities, restrictions, duties and liabilities relating thereto placed
on the Servicer by the terms and provisions of the Agreement. As compensation
therefor, the Trustee shall be entitled to such compensation (whether payable
out of the Certificate Account or otherwise) as the Servicer would have been
entitled to under the Agreement if no such notice of termination or resignation
had been given. Notwithstanding the foregoing, the Trustee may, if it shall be
unwilling so to act, or shall, if it is legally unable so to act, appoint, or
petition a court of competent jurisdiction to appoint, any established
institution, having a net worth of not less than $50,000,000 and whose regular
business includes the servicing of motor vehicles
63
<PAGE>
receivables, as the successor to the Servicer under the Agreement, provided that
the appointment of any such Successor Servicer will not result in the
qualification, reduction or withdrawal of the rating then assigned to the Rated
Certificates by each Rating Agency. In connection with such appointment and
assumption, the Trustee may make such arrangements for the compensation of such
Successor Servicer out of payments on or in respect of the Receivables as it and
such Successor Servicer shall agree; provided, however, that no such
compensation shall be in excess of that permitted the original Servicer under
the Agreement. The Trustee and such Successor Servicer shall take such action,
consistent with the Agreement, as shall be necessary to effectuate any such
succession. The Trustee shall not be relieved of its duties as Successor
Servicer under this Section until the newly appointed Servicer shall have
assumed the responsibilities and obligations of the Servicer under the
Agreement.
Section 18.04. NOTIFICATION TO CERTIFICATEHOLDERS. Upon a Responsible
Officer obtaining knowledge of (i) the occurrence of an Event of Default and the
expiration of any cure period applicable thereto or (ii) any termination of, or
appointment of a successor to, the Servicer pursuant to this Section, the
Trustee shall give prompt written notice thereof to Certificateholders at their
respective addresses appearing in the Certificate Register and to each Rating
Agency.
Section 18.05. WAIVER OF PAST DEFAULTS. The Holders of Certificates
evidencing not less than 51% of the Voting Interests of the Class A Certificates
and the Class B Certificates, voting together as a single class, may, on behalf
of all Holders of Certificates, waive any Event of Default or default by the
Servicer in the performance of its obligations hereunder and its consequences,
except a default in making any required deposits to or payments from the
Accounts or the Reserve Fund in accordance with the Agreement or in respect of a
covenant or provision of the Agreement that under Section 21.01 cannot be
modified or amended without the consent of the Holder of each Certificate. Upon
any such waiver of a past default, such default shall cease to exist, and any
Event of Default arising therefrom shall be deemed to have been remedied for
every purpose of the Agreement. No such waiver shall extend to any subsequent
or other default or impair any right consequent thereon except to the extent
expressly so waived.
Section 18.06. REPAYMENT OF ADVANCES. If a Successor Servicer replaces
the Servicer, the predecessor Servicer shall be entitled to receive
reimbursement for Outstanding Advances pursuant to Sections 14.03 and 14.04, in
the manner specified in Section 14.06, with respect to all Advances made by the
predecessor Servicer.
64
<PAGE>
ARTICLE NINETEEN
THE TRUSTEE
Section 19.01. DUTIES OF TRUSTEE.
(a) The Trustee, both prior to and after the occurrence of an Event of
Default, undertakes to perform such duties and only such duties as are
specifically set forth in the Agreement. If, to the knowledge of a Responsible
Officer, an Event of Default has occurred and has not been cured or waived, the
Trustee shall exercise such of the rights and powers vested in it by the
Agreement, and use the same degree of care and skill in their exercise, as a
prudent man would exercise or use under the circumstances in the conduct of his
own affairs; provided, however, that if the Trustee assumes the duties of the
Servicer pursuant to Section 18.03, the Trustee in performing such duties shall
use the degree of skill and attention customarily exercised by a servicer with
respect to motor vehicle receivables that it services for itself or others.
(b) The Trustee, upon receipt of all resolutions, certificates,
statements, opinions, reports, documents, orders or other instruments furnished
to the Trustee that shall be specifically required to be furnished pursuant to
any provision of the Agreement, shall examine them to determine whether they
conform to the requirements of the Agreement.
(c) No provision of the Agreement shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act, its own bad faith or its own willful misfeasance; provided, however,
that:
(i) prior to the occurrence of an Event of Default known to a
Responsible Officer, and after the curing or waiving of all such Events of
Default that may have occurred, the duties and obligations of the Trustee
shall be determined solely by the express provisions of the Agreement, the
Trustee shall not be liable except for the performance of such duties and
obligations as are specifically set forth in the Agreement, no implied
covenants or obligations shall be read into the Agreement against the
Trustee, the permissive right of the Trustee to do things enumerated in the
Agreement shall not be construed as a duty and, in the absence of bad faith
on the part of the Trustee, the Trustee may conclusively rely, as to the
truth of the statements and the correctness of the opinions expressed
therein, upon any certificates or opinions furnished to the Trustee and
conforming to the requirements of the Agreement;
(ii) the Trustee shall not be personally liable for an error of
judgment made in good faith by a Responsible Officer, unless it shall be
proved that the Trustee was negligent in performing its duties in
accordance with the terms of the Agreement; and
(iii) the Trustee shall not be personally liable with respect to any
action taken, suffered or omitted to be taken in good faith in accordance
with the direction of the Holders of Certificates evidencing not less than
25% of the Voting Interests of the Class A Certificates and the Class B
Certificates, voting together as a single class,
65
<PAGE>
relating to the time, method and place of conducting any proceeding for any
remedy available to the Trustee, or exercising any trust or power conferred
upon the Trustee, under the Agreement.
(d) The Trustee shall not be required to expend or risk its own funds or
otherwise incur financial liability in the performance of any of its duties
under the Agreement, or in the exercise of any of its rights or powers, if there
shall be reasonable grounds for believing that the repayment of such funds or
adequate indemnity against such risk or liability is not reasonably assured to
it, and none of the provisions contained in the Agreement shall in any event
require the Trustee to perform, or be responsible for the manner of performance
of, any of the obligations of the Servicer under the Agreement except during
such time, if any, as the Trustee shall be the successor to, and be vested with
the rights, duties, powers and privileges of, the Servicer in accordance with
the terms of the Agreement.
(e) Except for actions expressly authorized by the Agreement, the Trustee
shall take no action reasonably likely to impair the security interests created
or existing under any Receivable or to impair the value of any Receivable.
(f) All information obtained by the Trustee regarding the Obligors and the
Receivables, whether upon the exercise of its rights under the Agreement or
otherwise, shall be maintained by the Trustee in confidence and shall not be
disclosed to any other Person, unless such disclosure is required by the
Agreement or any applicable law or regulation.
Section 19.02. TRUSTEE'S CERTIFICATE. On or as soon as practicable after
each date on which the Seller or the Servicer shall purchase Administrative
Receivables or the Seller shall repurchase Warranty Receivables, the Trustee
shall, at the written request of the Servicer, submit to the Servicer or the
Seller, as applicable, a Trustee's Certificate, identifying the purchaser and
the Receivables so purchased, executed by the Trustee and completed as to its
date and the date of the Agreement, and accompanied by a copy of the Servicer's
Certificate for the related Collection Period. The Trustee's Certificate
submitted with respect to such Distribution Date shall operate, as of such
Distribution Date, as an assignment, without recourse, representation or
warranty, to the Seller or the Servicer, as the case may be, of all the
Trustee's right, title and interest in and to such Administrative Receivable or
Warranty Receivable and to the other property conveyed to the Trust pursuant to
Section 12.01 with respect to such Administrative Receivable or Warranty
Receivable, and all security and documents relating thereto, such assignment
being an assignment outright and not for security.
Section 19.03. TRUSTEE'S ASSIGNMENT OF ADMINISTRATIVE RECEIVABLES AND
WARRANTY RECEIVABLES. With respect to all Administrative Receivables and
Warranty Receivables, the Trustee shall at the written request of Servicer, by a
Trustee's Certificate assign, without recourse, representation or warranty, to
the Seller or the Servicer, as applicable, all the Trustee's right, title and
interest in and to each such repurchased Receivable and the other property
conveyed to the Trust pursuant to Section 12.01 with respect to such Receivable,
and all security and any documents relating thereto, such assignment being an
assignment outright and not for security; and the Seller or the Servicer, as
applicable, shall thereupon own such Receivable, and all such security and
documents, free of any further obligation to the Trustee
66
<PAGE>
or the Certificateholders with respect thereto. If in any enforcement suit or
legal proceeding it is held that the Servicer may not enforce a Receivable on
the ground that it is not a real party in interest or a holder entitled to
enforce the Receivable, the Trustee shall, at the Servicer's written direction
and expense, take such steps as the Trustee deems necessary to enforce the
Receivable, including bringing suit in the Trustee's name or the names of the
Certificateholders.
Section 19.04. CERTAIN MATTERS AFFECTING THE TRUSTEE.
(a) Except as otherwise provided in Section 19.01:
(i) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, Officer's Certificate,
certificate of auditors or any other certificate, statement, instrument,
opinion, report, notice, request, consent, order, appraisal, bond or other
paper or document believed by it to be genuine and to have been signed or
presented by the proper party or parties;
(ii) the Trustee may consult with counsel and any Opinion of
Counsel shall be full and complete authorization and protection in respect
of any action taken or suffered or omitted by it under the Agreement in
good faith and in accordance with such Opinion of Counsel;
(iii) the Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by the Agreement, or to institute,
conduct or defend any litigation under the Agreement or in relation to the
Agreement, at the request, order or direction of any of the
Certificateholders pursuant to the provisions of the Agreement, unless such
Certificateholders shall have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities that may be incurred
therein or thereby; nothing contained in the Agreement shall, however,
relieve the Trustee of the obligations, upon the occurrence of an Event of
Default known to a Responsible Officer (that shall not have been cured or
waived), to exercise such of the rights and powers vested in it by the
Agreement, and to use the same degree of care and skill in their exercise
as a prudent man would exercise or use under the circumstances in the
conduct of his own affairs;
(iv) the Trustee shall not be personally liable for any action
taken, suffered or omitted by it in good faith and believed by it to be
authorized or within the discretion or rights or powers conferred upon it
by the Agreement;
(v) prior to the occurrence of an Event of Default and after the
curing or waiving of all Events of Default that may have occurred, the
Trustee shall not be bound to make any investigation into the facts of
matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, consent, order, approval, bond or other
paper or document, unless requested in writing to do so by Holders of
Certificates evidencing not less than 25% of the Voting Interests of the
Class A Certificates and the Class B Certificates, voting together as a
single class;
67
<PAGE>
provided, however, that if the payment within a reasonable time to the
Trustee of the costs, expenses or liabilities likely to be incurred by it
in the making of such investigation is, in the opinion of the Trustee, not
reasonably assured to the Trustee by the security afforded to it by the
terms of the Agreement, the Trustee may require reasonable indemnity
against such cost, expense or liability as a condition to so proceeding;
the reasonable expense of every such examination shall be paid by the
Seller or, if paid by the Trustee, shall be reimbursed by the Servicer upon
demand; and nothing in this clause shall derogate from the obligation of
the Servicer to observe any applicable law prohibiting disclosure of
information regarding the Obligors; and
(vi) the Trustee may execute any of the trusts or powers under the
Agreement or perform any duties under the Agreement either directly or by
or through agents or attorneys or a custodian and shall not be liable or
responsible for the misconduct or negligence of any of its agents or
attorneys or a custodian appointed with due care by the Trustee.
(b) No Certificateholder will have any right to institute any proceeding
with respect to the Agreement, unless such Holder shall have given to the
Trustee written notice of default and (i) the Event of Default arises from the
Servicer's failure to remit collections or payments when due or (ii) the Holders
of Certificates evidencing not less than 25% of the Voting Interests of the
Class A Certificates and the Class B Certificates, voting together as a single
class, have made written request upon the Trustee to institute such proceeding
in its own name as Trustee thereunder, and have offered to the Trustee
reasonable indemnity, and the Trustee for 30 days has neglected or refused to
institute any such proceedings.
Section 19.05. TRUSTEE NOT LIABLE FOR CERTIFICATES OR RECEIVABLES. The
Trustee shall make no representations as to the validity or sufficiency of the
Agreement or of the Certificates (other than the execution by the Trustee on
behalf of the Trust of, or the certificate of authentication on, the
Certificates), or of any Receivable or related document. The Trustee shall have
no obligation to perform any of the duties of the Seller or the Servicer unless
explicitly set forth in the Agreement. The Trustee shall at no time have any
responsibility or liability for or with respect to the legality, validity and
enforceability of any security interest in any Financed Vehicle or any
Receivable, or the perfection and priority of such a security interest or the
maintenance of any such perfection and priority, or for or with respect to the
efficacy of the Trust or its ability to generate the payments to be distributed
to Certificateholders under the Agreement, including without limitation, the
existence, condition, location and ownership of any Financed Vehicle; the
existence and enforceability of any physical damage or credit life or credit
disability insurance; the existence and contents of any Receivable or any
computer or other record thereof; the validity of the assignment of any
Receivable to the Trust or of any intervening assignment; the completeness of
any Receivable; the performance or enforcement of any Receivable; the compliance
by the Seller or the Servicer with any covenant or the breach by the Seller or
the Servicer of any warranty or representation made under the Agreement or in
any related document and the accuracy of any such warranty or representation
prior to the Trustee's receipt of notice or other discovery of any noncompliance
therewith or any breach thereof; any investment of monies by the Servicer or any
loss resulting therefrom (it being understood that the Trustee shall remain
responsible
68
<PAGE>
for any Trust property that it may hold); the acts or omissions of the Seller,
the Servicer or any Obligor; any action of the Servicer taken in the name of or
as the agent of the Trustee; or any action by the Trustee taken at the
instruction of the Servicer; provided, however, that the foregoing shall not
relieve the Trustee of its obligation to perform its duties under the Agreement.
Except with respect to a claim based on the failure of the Trustee to perform
its duties under the Agreement or based on the Trustee's negligence or willful
misconduct, bad faith or negligence, no recourse shall be had for any claim
based on any provision of the Agreement, the Certificates or any Receivable or
assignment thereof against the institution serving as Trustee in its individual
capacity. The Trustee shall not have any personal obligation, liability or duty
whatsoever to any Certificateholder or any other Person with respect to any such
claim, and any such claim shall be asserted solely against the Trust or any
indemnitor who shall furnish indemnity as provided in the Agreement. The
Trustee shall not be accountable for the use or application by the Seller of any
of the Certificates or of the proceeds of such Certificates, or for the use or
application of any funds paid to the Servicer in respect of the Receivables.
The Trustee shall have no responsibility for filing any financing or
continuation statement in any public office at any time or to otherwise perfect
or maintain the perfection of any security interest or lien granted to it
hereunder (unless the Trustee shall have become the successor Servicer) or to
prepare or file any Commission filing for the Trust or to record this Agreement.
Section 19.06. TRUSTEE MAY OWN CERTIFICATES. The Trustee in its
individual or any other capacity may become the owner or pledgee of Certificates
with the same rights as it would have if it were not the Trustee.
Section 19.07. TRUSTEE'S FEES AND EXPENSES. The Servicer covenants and
agrees to pay to the Trustee from time to time, and the Trustee shall be
entitled to, reasonable compensation (which shall not be limited by any
provision of law in regard to the compensation of a trustee of an express trust)
for all services rendered by it in the execution of the trusts created by the
Agreement and in the exercise and performance of any of the powers and duties of
the Trustee under the Agreement, and the Servicer shall pay or reimburse the
Trustee upon its request for all reasonable expenses, disbursements and advances
(including the reasonable compensation and the expenses and disbursements of its
counsel and of all persons not regularly in its employ) incurred or made by the
Trustee in defense of any action brought against it in connection with the
Agreement except any such expense, disbursement or advance as may arise from its
negligence, willful misfeasance or bad faith or that is the responsibility of
Certificateholders under the Agreement. Additionally, the Servicer, pursuant to
Section 17.02, shall indemnify the Trustee with respect to certain matters.
Section 19.08. INDEMNITY OF TRUSTEE AND SUCCESSOR SERVICER. Upon the
appointment of a Successor Servicer pursuant to Section 18.03, such Successor
Servicer and the Trustee and their respective agents and employees shall be
indemnified by the Trust and held harmless against any loss, liability or
expense (including reasonable attorney's fees and expenses) arising out of or
incurred in connection with the acceptance of performance of the trusts and
duties contained in the Agreement to the extent that (i) the Successor Servicer
or the Trustee, as the case may be, shall not be indemnified for such loss,
liability or expense by the Servicer
69
<PAGE>
pursuant to Section 17.02; (ii) such loss, liability, or expense shall not have
been incurred by reason of the Successor Servicer's or the Trustee's wilful
misfeasance, bad faith or negligence; and (iii) such loss, liability or expense
shall not have been incurred by reason of the Successor Servicer's or the
Trustee's breach of its respective representations and warranties pursuant to
Sections 18.03, 19.09 and 19.14, respectively.
The Successor Servicer and/or the Trustee shall be entitled to the
indemnification provided by this Section only to the extent all amounts due the
Servicer and the Certificateholders with respect to any Distribution Date
pursuant to Sections 14.06 and 14.07 have been paid in full and all amounts
required to be deposited in the Reserve Fund with respect to any Distribution
Date pursuant to Section 14.07 have been so deposited.
Section 19.09. ELIGIBILITY REQUIREMENTS FOR TRUSTEE.
Except as otherwise provided in the Agreement, the Trustee under the
Agreement shall at all times (i) be a corporation having its corporate trust
office in the same state (or the District of Columbia or the Commonwealth of
Puerto Rico) as the location of the Corporate Trust Office; (ii) be organized
and doing business under the laws of such state (or the District of Columbia or
the Commonwealth of Puerto Rico) or the United States; (iii) be authorized under
such laws to exercise corporate trust powers; (iv) have a combined capital and
surplus of at least $50,000,000 and be subject to supervision or examination by
federal or state authorities; and (v) have a long-term deposit rating no lower
than Baa3 by Moody's (if Moody's is a Rating Agency), or be otherwise acceptable
to each Rating Agency, as evidenced by a letter to such effect (which acceptance
may be evidenced in the form of a letter, dated on or shortly before the Closing
Date, assigning an initial rating to the Rated Certificates).
If the Trustee shall publish reports of condition at least annually,
pursuant to law or to the requirements of the aforesaid supervising or examining
authority, then for the purpose of this Section, the combined capital and
surplus of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published. In
case at any time the Trustee shall cease to be eligible in accordance with the
provisions of this Section, the Trustee shall resign immediately in the manner
and with the effect specified in Section 19.10.
Section 19.10. RESIGNATION OR REMOVAL OF TRUSTEE.
(a) The Trustee may at any time resign and be discharged from the trusts
created by the Agreement by giving written notice thereof to the Seller and the
Servicer. Upon receiving such notice of resignation, the Servicer shall
promptly appoint a successor Trustee by written instrument, in duplicate, one
copy of which instrument shall be delivered to the resigning Trustee and one
copy to the successor Trustee. If no successor Trustee shall have been so
appointed and have accepted appointment within 30 days after the giving of such
notice of resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor Trustee.
70
<PAGE>
(b) If at any time the Trustee shall cease to be eligible in accordance
with the provisions of Section 19.09 and shall fail to resign after written
request therefor by the Seller or the Servicer, or if at any time the Trustee
shall be legally unable to act, or shall be adjudged a bankrupt or insolvent, or
a receiver of the Trustee or of its property shall be appointed, or any public
officer shall take charge or control of the Trustee or of its property or
affairs for the purpose of rehabilitation, conservation or liquidation, then the
Seller or the Servicer may remove the Trustee. If it shall remove the Trustee
under the authority of the immediately preceding sentence, the Servicer shall
promptly appoint a successor Trustee by written instrument, in duplicate, one
copy of which instrument shall be delivered to the Trustee so removed and one
copy to the successor Trustee, and shall promptly pay all fees owed to the
outgoing Trustee.
(c) Any resignation or removal of the Trustee and appointment of a
successor Trustee pursuant to any of the provisions of this Section shall not
become effective until acceptance of appointment by the successor Trustee as
provided in Section 19.11. The Servicer shall give each Rating Agency notice of
any such resignation or removal of the Trustee and appointment and acceptance of
a successor Trustee.
Section 19.11. SUCCESSOR TRUSTEE. Any successor Trustee appointed as
provided in Section 19.10 shall execute, acknowledge and deliver to the Servicer
and to its predecessor Trustee an instrument accepting such appointment under
the Agreement, and thereupon the resignation or removal of the predecessor
Trustee shall become effective and such successor Trustee, without any further
act, deed or conveyance, shall become fully vested with all the rights, powers,
duties and obligations of its predecessor under the Agreement, with like effect
as if originally named as Trustee. The predecessor Trustee shall deliver to the
successor Trustee all documents and statements held by it under the Agreement;
and the Servicer and the predecessor Trustee shall execute and deliver such
instruments and do such other things as may reasonably be required for fully and
certainly vesting and confirming in the successor Trustee all such rights,
powers, duties and obligations. No successor Trustee shall accept appointment
as provided in this Section unless at the time of such acceptance such successor
Trustee shall be eligible under the provisions of Section 19.09. Upon
acceptance of appointment by a successor Trustee as provided in this Section,
the Servicer shall mail notice of the successor of such Trustee under the
Agreement to all Certificateholders at their addresses as shown in the
Certificate Register and shall give notice by mail to each Rating Agency. If
the Servicer fails to mail such notice within ten days after acceptance of
appointment by the successor Trustee, the successor Trustee shall cause such
notice to be mailed at the expense of the Servicer.
Section 19.12. MERGER OR CONSOLIDATION OF TRUSTEE. Any corporation (i)
into which the Trustee may be merged or consolidated, (ii) which may result from
any merger, conversion or consolidation to which the Trustee shall be a party or
(iii) which may succeed to all or substantially all the corporate trust business
of the Trustee, which corporation executes an agreement of assumption to perform
every obligation of the Trustee under the Agreement, shall be the successor of
the Trustee hereunder, provided such corporation shall be eligible pursuant to
Section 19.09, without the execution or filing of any instrument or any further
act on the part of any of the parties hereto, anything herein to the contrary
71
<PAGE>
notwithstanding. Notice of any such merger shall be given by the Trustee to
each Rating Agency.
Section 19.13. APPOINTMENT OF CO-TRUSTEE OR SEPARATE TRUSTEE.
Notwithstanding any other provisions of the Agreement, at any time, for the
purpose of meeting any legal requirements of any jurisdiction in which any part
of the Trust or any Financed Vehicle may at the time be located, the Servicer
and the Trustee acting jointly shall have the power and shall execute and
deliver all instruments to appoint one or more Persons approved by the Trustee
to act as co-trustee, jointly with the Trustee, or separate trustee or separate
trustees, of all or any part of the Trust, and to vest in such Person, in such
capacity and for the benefit of the Certificateholders, such title to the Trust,
or any part thereof, and, subject to the other provisions of this Section, such
powers, duties, obligations, rights and trusts as the Servicer and the Trustee
may consider necessary or desirable. If the Servicer shall not have joined in
such appointment within 15 days after the receipt by it of a request so to do,
or in the case an Event of Default shall have occurred and be continuing, the
Trustee alone shall have the power to make such appointment. No co-trustee or
separate trustee under the Agreement shall be required to meet the terms of
eligibility as a successor trustee pursuant to Section 19.09 and no notice of a
successor Trustee pursuant to Section 19.11 and no notice to Certificateholders
of the appointment of any co-trustee or separate trustee shall be required
pursuant to Section 19.11.
Each separate trustee and co-trustee shall, to the extent permitted by law,
be appointed and act subject to the following provisions and conditions:
(i) all rights, powers, duties and obligations conferred or
imposed upon the Trustee shall be conferred upon and exercised or performed
by the Trustee and such separate trustee or co-trustee jointly (it being
understood that such separate trustee or co-trustee is not authorized to
act separately without the Trustee joining in such act), except to the
extent that under any law of any jurisdiction in which any particular act
or acts are to be performed (whether as Trustee under the Agreement or as
successor to the Servicer under the Agreement), the Trustee shall be
incompetent or unqualified to perform such act or acts, in which event such
rights, powers, duties and obligations (including the holding of title to
the Trust or any portion thereof in any such jurisdiction) shall be
exercised and performed singly by such separate trustee or co-trustee, but
solely at the direction of the Trustee;
(ii) no trustee under the Agreement shall be personally liable by
reason of any act or omission of any other trustee under the Agreement; and
(iii) the Servicer and the Trustee acting jointly (or during the
continuation of an Event of Default, the Trustee alone) may at any time
accept the resignation of or remove any separate trustee or co-trustee.
Any notice, request or other writing given to the Trustee shall be deemed
to have been given to each of the then-separate trustees and co-trustees, as
effectively as if given to each of them. Every instrument appointing any
separate trustee or co-trustee shall refer to the
72
<PAGE>
Agreement and the conditions of this Section. Each separate trustee and
co-trustee, upon its acceptance of the trusts conferred, shall be vested with
the estates or property specified in its instrument of appointment, either
jointly with the Trustee or separately, as may be provided therein, subject to
all the provisions of the Agreement, including, but not limited to, every
provision of the Agreement relating to the conduct of, affecting the liability
of, or affording protection to, the Trustee. Each such instrument shall be
filed with the Trustee and a copy thereof given to the Servicer.
Any separate trustee or co-trustee may at any time appoint the Trustee its
agent or attorney-in-fact with full power and authority, to the extent not
prohibited by law, to do any lawful act under or in respect of the Agreement on
its behalf and in its name. If any separate trustee or co-trustee shall die,
become incapable of acting, resign or be removed, all of its estates,
properties, rights, remedies and trusts shall vest in and be exercised by the
Trustee, to the extent permitted by law, without the appointment of a new or
successor trustee. Notwithstanding anything to the contrary in the Agreement,
the appointment of any separate trustee or co-trustee shall not relieve the
Trustee of its obligations and duties under the Agreement.
Section 19.14. REPRESENTATIONS AND WARRANTIES OF TRUSTEE. The Trustee
shall make the following representations and warranties on which the Seller and
Certificateholders may rely:
(i) ORGANIZATION AND GOOD STANDING. The Trustee is a New York
banking corporation duly organized, existing and in good standing under the
laws of the State of New York.
(ii) POWER AND AUTHORITY. The Trustee has full power, authority
and right to execute, deliver and perform the Agreement and has taken all
necessary action to authorize the execution, delivery and performance by it
of the Agreement.
(iii) NO VIOLATION. The execution, delivery and performance by the
Trustee of the Agreement (a) shall not violate any provision of any law
governing the banking and trust powers of the Trustee or, to the best of
the Trustee's knowledge, any order, writ, judgment or decree of any court,
arbitrator or governmental authority applicable to the Trustee or any of
its assets, (b) shall not violate any provision of the corporate charter or
by-laws of the Trustee and (c) shall not violate any provision of, or
constitute, with or without notice or lapse of time, a default under, or
result in the creation or imposition of any Lien on any properties included
in the Trust pursuant to the provisions of any mortgage, indenture,
contract, agreement or other undertaking to which it is a party, which
violation, default or Lien could reasonably be expected to materially and
adversely affect the Trustee's performance or ability to perform its duties
under the Agreement or the transactions contemplated in the Agreement.
(iv) NO AUTHORIZATION REQUIRED. The execution, delivery and
performance by the Trustee of the Agreement shall not require the
authorization, consent or approval of, the giving of notice to, the filing
or registration with or the taking of any
73
<PAGE>
other action in respect of, any governmental authority or agency regulating
the banking and corporate trust activities of the Trustee.
(v) DULY EXECUTED. The Agreement shall have been duly executed
and delivered by the Trustee and shall constitute the legal, valid and
binding obligation of the Trustee, enforceable in accordance with its
terms, except as enforceability may be subject to or limited by bankruptcy,
insolvency, reorganization, moratorium, liquidation or other similar laws
affecting the enforcement of creditors' rights in general and by general
principles of equity, regardless of whether such enforceability shall be
considered in a proceeding in equity or in law.
Section 19.15. TAX RETURNS. In the event the Trust shall be required to
file tax returns, the Servicer shall prepare or shall cause to be prepared any
tax returns required to be filed by the Trust and shall remit such returns to
the Trustee for signature at least five days before such returns are due to be
filed. The Trustee, upon request, shall furnish the Servicer with all such
information known to the Trustee as may be reasonably required in connection
with the preparation of all tax returns of the Trust, and shall, upon request,
execute such returns.
Section 19.16. TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF
CERTIFICATES. All rights of action and claims under the Agreement or the
Certificates may be prosecuted and enforced by the Trustee without the
possession of any of the Certificates or the production thereof in any
proceeding relating thereto, and any such proceeding instituted by the Trustee
shall be brought in its own name as Trustee. Any recovery of judgment shall,
after provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, be for the
ratable benefit of the Certificateholders in respect of which such judgment has
been obtained.
Section 19.17. SUIT FOR ENFORCEMENT. If an Event of Default shall occur
and be continuing, the Trustee, in its discretion may, subject to the provisions
of Section 19.01, proceed to protect and enforce its rights and the rights of
the Certificateholders under the Agreement by a suit, action or proceeding in
equity or at law or otherwise, whether for the specific performance of any
covenant or agreement contained in the Agreement or in aid of the execution of
any power granted in the Agreement or for the enforcement of any other legal,
equitable or other remedy as the Trustee, being advised by counsel, shall deem
most effectual to protect and enforce any of the rights of the Trustee or the
Certificateholders.
Section 19.18. RIGHTS OF CERTIFICATEHOLDERS TO DIRECT TRUSTEE. Holders of
Certificates evidencing not less the 25% of the Voting Interests of the Class A
Certificates and the Class B Certificates, voting together as a single class,
shall have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee, or exercising any trust or
power conferred on the Trustee; provided, however, that subject to Section
19.01, the Trustee shall have the right to decline to follow any such direction
if the Trustee being advised by counsel determines that the action so directed
may not lawfully be taken, or if the Trustee in good faith shall, by a
Responsible Officer, determine that the proceedings so directed would be illegal
or subject it to personal liability or be unduly
74
<PAGE>
prejudicial to the rights of Certificateholders not parties to such direction;
and provided further that nothing in the Agreement shall impair the right of the
Trustee to take any action deemed proper by the Trustee and which is not
inconsistent with such direction by the Certificateholders.
75
<PAGE>
ARTICLE TWENTY
TERMINATION
Section 20.01. TERMINATION OF THE TRUST.
(a) The Trust and the respective obligations and responsibilities of the
Seller, the Servicer, any Servicer Letter of Credit Bank and the Trustee shall
terminate upon (i) the purchase as of any Distribution Date by the Seller or
Servicer, or any successor to the Servicer, at its option of the corpus of the
Trust as described in Section 20.02, (ii) the payment to Certificateholders of
all amounts required to be paid to them pursuant to the Agreement or (iii) the
maturity or liquidation of the last Receivable and the disposition of all
property held as part of the Trust; provided, however, that in no event shall
the trust created by the Agreement continue beyond the expiration of 21 years
from the death of the last survivor of the descendants of George Herbert Walker
Bush of the State of Texas, living on the date of the Agreement. The Servicer
shall promptly notify the Trustee and each Rating Agency of any prospective
termination pursuant to this Section.
(b) Notice of any termination, specifying the Distribution Date upon which
the Certificateholders must surrender their Certificates to the Trustee for
payment of the final distribution and retirement of the Certificates, shall be
given promptly by the Trustee (at the written direction of the Servicer) by
letter to Certificateholders mailed not later than the 15th day and not earlier
than the 30th day prior to the date on which such final distribution is expected
to occur specifying (i) the Distribution Date upon which final payment of the
Certificates shall be made upon presentation and surrender of Certificates at
the office of the Trustee therein specified, (ii) the amount of any such final
payment and (iii) if applicable, that the Record Date otherwise applicable to
such Distribution Date is not applicable, payments being made only upon
presentation and surrender of the Certificates at the office of the Trustee
therein specified. The Trustee shall give such notice to the Certificate
Registrar (if other than the Trustee) at the time such notice is given to
Certificateholders. In the event such notice is given, the Seller, the
Servicer, or any successor to the Servicer, or the Trustee, as the case may be,
shall make deposits into the Certificate Account in accordance with Section
14.05, or, in the case of an optional purchase of Receivables pursuant to
Section 20.02, shall deposit the amount specified in Section 20.02. Upon
presentation and surrender of the Certificates, the Trustee shall cause to be
distributed to Certificateholders amounts distributable on such Distribution
Date pursuant to Section 14.06.
(c) In the event that all of the Certificateholders shall not surrender
their Certificates for retirement within six months after the date specified in
the above-mentioned written notice, the Trustee shall give a second written
notice to the remaining Certificateholders to surrender their Certificates for
retirement and receive the final distribution with respect thereto. If within
one year after the second notice all the Certificates shall not have been
surrendered for retirement, the Trustee may take appropriate steps, or may
appoint an agent to take appropriate steps, to contact the remaining
Certificateholders concerning surrender of their Certificates, and the cost
thereof shall be paid out of the funds and other assets that remain subject to
the Agreement. Any funds remaining in the Trust after
76
<PAGE>
exhaustion of such remedies shall be distributed by the Trustee to the United
Negro College Fund.
Section 20.02. OPTIONAL TERMINATION OF ALL RECEIVABLES. On each
Distribution Date following the last day of a Collection Period as of which the
Pool Balance is 10% or less of the Original Pool Balance, the Seller or the
Servicer, or any successor to the Servicer, shall have the option to purchase
the corpus of the Trust; provided that the option to purchase provided in this
Section shall not be exercised if the final distribution to Certificateholders
would be less than the aggregate outstanding principal amount of the
Certificates plus the sum of (i) the Class A Interest Distributable Amount for
the related Distribution Date, (ii) any outstanding Class A Interest Carryover
Shortfall, (iii) the Class B Interest Distributable Amount for such Distribution
Date and (iv) any outstanding Class B Interest Carryover Shortfall. To exercise
such option, the Seller or the Servicer, or any successor to the Servicer, as
the case may be, shall notify the Trustee in writing, no later than the tenth
day of the month preceding the month in which the Distribution Date as of which
such purchase is to be effected and shall deposit pursuant to Section 14.05 in
the Certificate Account an amount equal to the aggregate Administrative Purchase
Payments for the Receivables (including Defaulted Receivables), plus the related
Yield Supplement Deposit Amount and the appraised value of any other property
held by the Trust (less liquidation expenses to be incurred in connection with
the recovery thereof), such value to be determined by an appraiser mutually
agreed upon by the Seller, the Servicer and the Trustee, and shall succeed to
all interests in and to the Trust. Notwithstanding the foregoing, if Moody's is
a Rating Agency, the Seller or the Servicer, or any Successor Servicer, as the
case may be, may not effect any such purchase if the long-term unsecured debt
obligations of the related entity are rated less than Baa3, unless the Trustee
shall have received an Opinion of Counsel that such purchase will not constitute
a fraudulent conveyance, or Moody's is otherwise satisfied, as evidenced by
written notice from Moody's to the Trustee. Upon such deposit of the amount
necessary to purchase the corpus of the Trust, the Servicer shall for all
purposes of the Agreement be deemed to have released all claims for
reimbursement of Outstanding Advances made in respect of the Receivables. The
payment shall be made in the manner specified in Section 14.05, and shall be
distributed pursuant to Section 14.06. In the event that both the Seller and
the Servicer, or any successor to the Servicer, elect to purchase the
Receivables pursuant to this Section, the party first notifying the Trustee
(based on the Trustee's receipt of such notice) shall be permitted to purchase
the Receivables.
77
<PAGE>
ARTICLE TWENTY ONE
MISCELLANEOUS PROVISIONS
Section 21.01. AMENDMENT.
(a) The Agreement may be amended by the Seller, the Servicer and the
Trustee, without the consent of any of the Certificateholders or the Letter of
Credit Bank, if any, (i) to cure any ambiguity, to correct or supplement any
provision in the Agreement which may be inconsistent with any other provision of
the Agreement, to add, change or eliminate any other provision of the Agreement
with respect to matters or questions arising under the Agreement that shall not
be inconsistent with the provisions of the Agreement, to add or amend any
provision therein in connection with permitting transfers of the Class B
Certificates or to add or provide for any credit enhancement for the Class B
Certificates, (ii) to change the formula for determining the Specified Reserve
Fund Balance or the manner in which the Reserve Fund is funded or to amend or
modify any provisions of the Agreement relating to the remittance schedule with
respect to collections deposited into the Certificate Account or the Payahead
Account pursuant to Section 14.02 or (iii) to amend or modify any provisions in
the Agreement relating to the Servicer Letter of Credit, if any, or the
acquisition thereof and including replacing the Servicer Letter of Credit with a
surety bond, insurance policy or deposit of cash or securities satisfactory to
the Trustee and the Rating Agencies (provided that no such amendment or
modification pursuant to this clause (iii) shall be made without the consent of
the Letter of Credit Bank, which consent shall not be unreasonably withheld);
provided, however, that any such action shall not, as evidenced by an Opinion of
Counsel, adversely affect in any material respect the interests of any
Certificateholder and provided, further, that in connection with any amendment
pursuant to clause (ii) or (iii) above, the Servicer shall deliver to the
Trustee a letter from each Rating Agency to the effect that such amendment will
not cause its then-current rating on the Rated Certificates to be qualified,
reduced or withdrawn.
(b) The Agreement may also be amended from time to time by the Seller, the
Servicer and the Trustee, with the consent of the Holders of Certificates (which
consent of any Holder of a Certificate given pursuant to this Section or
pursuant to any other provision of the Agreement shall be conclusive and binding
on such Holder and on all future Holders of such Certificate and of any
Certificate issued upon the transfer thereof or in exchange thereof or in lieu
thereof whether or not notation of such consent is made upon the Certificate),
evidencing not less than 51% of the Voting Interests of the Class A Certificates
and the Class B Certificates, voting together as a single class, for the purpose
of adding any provisions to or changing in any manner or eliminating any of the
provisions of the Agreement, or of modifying in any manner the rights of either
Class of Certificateholders or the Letter of Credit Bank, if any; provided,
however, that no such amendment shall (i) except as otherwise provided in
Section 21.01(a), increase or reduce in any manner the amount of, or accelerate
or delay the timing of, collections of payments on Receivables or distributions
that shall be required to be made on any Certificate or to or by the Letter of
Credit Bank, if any, or the Pass-Through Rate or the Specified Reserve Fund
Balance or (ii) reduce the aforesaid percentage of the Voting Interests of the
Certificates of either Class required to consent to any
78
<PAGE>
such amendment, without the consent of the Holders of all Certificates of the
relevant Class then outstanding and provided, further, that in connection with
any amendment pursuant to this clause (b), the Servicer shall deliver to the
Trustee a letter from each Rating Agency to the effect that such amendment will
not cause its then-current rating on the Rated Certificates to be qualified,
reduced or withdrawn.
(c) Prior to the execution of any such amendment or consent, the Trustee
shall furnish written notification of the substance of such amendment or consent
to each Rating Agency and the Letter of Credit Bank, if any.
(d) Promptly after the execution of any such amendment or consent, the
Trustee shall furnish written notification of the substance of such amendment or
consent to each Certificateholder. It shall not be necessary for the consent of
Certificateholders pursuant to Section 21.01(b) to approve the particular form
of any proposed amendment or consent, but it shall be sufficient if such consent
shall approve the substance thereof. The manner of obtaining such consents and
of evidencing the authorization by Certificateholders of the execution thereof
shall be subject to such reasonable requirements as the Trustee may prescribe.
(e) Prior to the execution of any amendment to the Agreement, the Trustee
shall be entitled to receive and rely upon an Opinion of Counsel stating that
the execution of such amendment is authorized or permitted by the Agreement.
The Trustee may, but shall not be obligated to, enter into any such amendment
which affects the Trustee's own rights, duties or immunities under the Agreement
or otherwise.
Section 21.02. PROTECTION OF TITLE TO TRUST.
(a) Each of the Seller and the Servicer or both shall execute and file
such financing statements and cause to be executed and filed such continuation
and other statements, all in such manner and in such places as may be required
by law fully to preserve, maintain and protect the interests of the
Certificateholders, the Letter of Credit Bank, if any, and the Trustee under the
Agreement in the Receivables and in the proceeds thereof. Each of the Seller
and the Servicer shall deliver (or cause to be delivered) to the Trustee
file-stamped copies of, or filing receipts for, any document filed as provided
above, as soon as available following such filing.
(b) Neither the Seller nor the Servicer shall change its name, identity or
corporate structure in any manner that would, could or might make any financing
statement or continuation statement filed by the Seller in accordance with
Section 21.02(a) seriously misleading within the meaning of Section 9-402(7) of
the UCC in effect in New York, unless it shall have given the Trustee and the
Letter of Credit Bank, if any, at least 60 days' prior written notice thereof
and shall have promptly filed appropriate amendments to all previously filed
financing statements or continuation statements.
(c) Each of the Seller and the Servicer shall give the Trustee and the
Letter of Credit Bank, if any, at least 60 days' prior written notice of any
relocation of its principal
79
<PAGE>
executive office if, as a result of such relocation, the applicable provisions
of the UCC would require the filing of any amendment of any previously filed
financing or continuation statement or of any new financing statement and shall
promptly file any such amendment. The Servicer shall at all times maintain each
office from which it services Receivables and its principal executive office
within the United States.
(d) The Servicer shall maintain accounts and records as to each Receivable
accurately and in sufficient detail to permit (i) the reader thereof to know at
any time the status of such Receivable, including payments and recoveries made
and payments owing (and the nature of each) and (ii) reconciliation between
payments or recoveries on (or with respect to) each Receivable and the amounts
from time to time deposited in the Accounts and any Payments Ahead held by the
Servicer in respect of such Receivable.
(e) The Servicer shall maintain its computer systems so that, from and
after the time of sale under the Agreement of the Receivables to the Trustee,
the Servicer's master computer records (including any back-up archives) that
refer to any Receivable indicate clearly the interest of the particular grantor
trust in such Receivable and that the Receivable is owned by the Trustee.
Indication of the Trustee's ownership of a Receivable shall be deleted from or
modified on the Servicer's computer systems when, and only when, the Receivable
has been paid in full, repurchased or assigned pursuant to the Agreement.
(f) If at any time the Seller or the Servicer shall propose to sell, grant
a security interest in or otherwise transfer any interest in motor vehicle
receivables to any prospective purchaser, lender or other transferee, the
Servicer shall give to such prospective purchaser, lender or other transferee
computer tapes, records or print-outs (including any restored from back-up
archives) that, if they refer in any manner whatsoever to any Receivable,
indicate clearly that such Receivable has been sold and is owned by the Trustee
unless such Receivable has been paid in full, repurchased or assigned pursuant
to the Agreement.
(g) The Servicer shall permit the Trustee and its agents at any time to
inspect, audit and make copies of and abstracts from the Servicer's records
regarding any Receivables then or previously included in the Trust.
(h) Upon request, the Servicer shall furnish to the Trustee, within five
Business Days, a list of all Receivables (by contract number and name of
Obligor) then held as part of the Trust, together with a reconciliation of such
list to the Schedule of Receivables and to each of the Servicer's Certificates
furnished before such request indicating removal of Receivables from the Trust.
(i) The Servicer shall deliver to the Trustee promptly after the execution
and delivery of each amendment to any financing statement, an Opinion of Counsel
either (i) stating that, in the opinion of such Counsel, all financing
statements and continuation statements have been executed and filed that are
necessary fully to preserve and protect the interest of the Trustee in the
Receivables, and reciting the details of such filings or referring to prior
Opinions of Counsel in which such details are given, or (ii) stating that, in
the opinion of such Counsel, no such action is necessary to preserve and protect
such interest.
80
<PAGE>
(j) The Seller shall, to the extent required by applicable law, cause the
Certificates to be registered with the Commission pursuant to Section 12(b) or
Section 12(g) of the Exchange Act within the time periods specified in such
Sections.
(k) The Agreement may be executed simultaneously in any number of
counterparts, each of which counterparts shall be deemed to be an original, and
all of which counterparts shall constitute but one and the same instrument.
Section 21.03. LIMITATION ON RIGHTS OF CERTIFICATEHOLDERS.
(a) The death or incapacity of any Certificateholder shall not operate to
terminate the Agreement or the Trust, nor entitle such Certificateholder's legal
representatives or heirs to claim an accounting or to take any action or
commence any proceeding in any court for a partition or winding up of the Trust,
nor otherwise affect the rights, obligations and liabilities of the parties to
the Agreement or any of them.
(b) No Certificateholder shall have any right to vote (except as provided
in Sections 18.05 and 21.01) or in any manner otherwise control the operation
and management of the Trust, or the obligations of the parties to the Agreement,
nor shall anything set forth in the Agreement, or contained in the terms of the
Certificates, be construed so as to constitute the Certificateholders from time
to time as partners or members of an association; nor shall any
Certificateholder be under any liability to any third person by reason of any
action pursuant to any provision of the Agreement.
(c) No Certificateholder shall have any right by virtue or by availing
itself of any provisions of the Agreement to institute any suit, action or
proceeding in equity or at law upon or under or with respect to the Agreement,
unless such Holder previously shall have given to the Trustee a written notice
of default and of the continuance thereof, as hereinbefore provided, and unless
also the Holders of Certificates evidencing not less the 25% of the Voting
Interests of the Class A Certificates and the Class B Certificates, voting
together as a single class, shall have made written request upon the Trustee to
institute such action, suit or proceeding in its own name as Trustee under the
Agreement and shall have offered to the Trustee such reasonable indemnity as it
may require against the costs, expenses and liabilities to be incurred therein
or thereby, and the Trustee, for 30 days after its receipt of such notice,
request and offer of indemnity, shall have neglected or refused to institute any
such action, suit or proceeding and during such 30-day period, no request or
waiver inconsistent with such written request has been given to the Trustee
pursuant to this Section or Section 19.04; it being understood and intended, and
being expressly covenanted by each Certificateholder with every other
Certificateholder and the Trustee, that no one or more Holders of Certificates
shall have any right in any manner whatever by virtue or by availing itself or
themselves of any provisions of the Agreement to affect, disturb or prejudice
the rights of the Holders of any other of the Certificates, or to obtain or seek
to obtain priority over or preference to any other such Holder or to enforce any
right under the Agreement, except in the manner provided in the Agreement and
for the equal, ratable and common benefit of all Certificateholders. For the
protection and enforcement of the provisions of this Section, each and every
81
<PAGE>
Certificateholder and the Trustee shall be entitled to such relief as can be
given either at law or in equity.
Section 21.04. GOVERNING LAW. The Agreement shall be governed by and
construed in accordance with the laws of the State of New York and the
obligations, rights and remedies of the parties under the Agreement shall be
determined in accordance with such laws.
Section 21.05. NOTICES. All demands, notices and communications under the
Agreement shall be in writing, personally delivered or mailed by certified mail,
return receipt requested, and shall be deemed to have been duly given upon
receipt (i) in the case of the Seller or the Servicer, to the agent for service
as specified in the Agreement, or at such other address as shall be designated
by the Seller or the Servicer in a written notice to the Trustee; (ii) in the
case of the Trustee, at the Corporate Trust Office; (iii) in the case of
Standard & Poor's, at 26 Broadway, 15th Floor, New York, New York 10004,
Attention: Asset Backed Surveillance Department; (iv) in the case of Moody's,
at 99 Church Street, New York, New York 10007 Attention: ABS Monitoring
Department; (v) in the case of Duff & Phelps, at 55 East Monroe, Chicago,
Illinois 60603; and (vi) in the case of a Letter of Credit Bank, if any, to the
address provided in the Servicer Letter of Credit. Any notice required or
permitted to be mailed to a Certificateholder shall be given by first class
mail, postage prepaid, at the address of such Holder as shown in the Certificate
Register. Any notice so mailed within the time prescribed in the Agreement
shall be conclusively presumed to have been duly given, whether or not the
Certificateholder shall receive such notice.
Section 21.06. SEVERABILITY OF PROVISIONS. If any one or more of the
covenants, agreements, provisions or terms of the Agreement shall be for any
reason whatsoever held invalid, then such covenants, agreements, provisions or
terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of the Agreement and shall in no way affect the validity or
enforceability of the other covenants, agreements, provisions or terms of the
Agreement or of the Certificates or the rights of the Holders thereof.
Section 21.07. ASSIGNMENT. Notwithstanding anything to the contrary
contained in the Agreement, except as provided in Sections 16.03 and 17.03 and
as provided in the provisions of the Agreement concerning the resignation of the
Servicer, the Agreement may not be assigned by the Seller or the Servicer
without the prior written consent of Holders of Certificates evidencing not less
than 51% of the Voting Interests of the Class A Certificates and the Class
B Certificates, voting together as a single class.
Section 21.08. CERTIFICATES NONASSESSABLE AND FULLY PAID.
Certificateholders shall not be personally liable for obligations of the Trust.
The interests represented by the Certificates shall be nonassessable for any
losses or expenses of the Trust or for any reason whatsoever, and, upon the
authentication thereof by the Trustee pursuant to Section 15.02, 15.03, 15.04,
15.08, 15.09 or 15.11, the Certificates are and shall be deemed fully paid.
Section 21.09. NO PETITION. Each of the Servicer and the Trustee (not in
its individual capacity but solely as Trustee) covenants and agrees that prior
to the date which is one year and one day after the date upon which each Class
of Certificates has been paid in full, it will
82
<PAGE>
not institute against, or join any other Person in instituting against the
Seller any bankruptcy, reorganization arrangement, insolvency or liquidation
proceeding or other proceedings under any federal or state bankruptcy or similar
law. This Section shall survive the termination of the Agreement or the
termination of the Servicer or the Trustee, as the case may be, under the
Agreement.
* * * * *
83
<PAGE>
EXHIBIT A
TRUSTEE'S CERTIFICATE
PURSUANT TO SECTION 19.02 OR 19.03
OF THE POOLING AND SERVICING
AGREEMENT
____________________, as trustee (the "Trustee") of the Honda Auto
Receivables 199__-__ Grantor Trust created pursuant to the Pooling and Servicing
Agreement (the "Agreement") dated as of __________, 199__ among American Honda
Receivables Corp., as Seller, American Honda Finance Corporation, as Servicer,
and the Trustee, does hereby sell, transfer, assign and otherwise convey to the
[Seller][Servicer], without any recourse, representation or warranty, all of the
Trustee's right, title and interest in and to all of the Receivables identified
in the attached Servicer's Certificate as "Repurchased Receivables," which are
to be repurchased by the [Seller pursuant to Section 12.05 or 20.02] [Servicer
pursuant to Section 13.02, 13.08 or 20.02] of the Agreement, and all security
and documents relating thereto.
Capitalized terms used herein that are not otherwise defined shall have the
meanings ascribed thereto in the Agreement.
IN WITNESS WHEREOF, I have hereunto set my hand this __th day of _________,
____.
____________________,
as Trustee
By: ___________________________________
Title:
A-1
<PAGE>
EXHIBIT B
PURCHASER'S LETTER
PURSUANT TO SECTION 15.03(a)
___________, ____
American Honda Receivables Corp.
700 Van Ness Avenue
Torrance, California 90501
____________________
____________________
____________________
____________________
Attention: Corporate Trust Office
Re: Honda Auto Receivables 199__-__ Grantor Trust
Class B Certificates
---------------------------------------------
Dear Sirs:
Reference is made to that certain pooling and servicing agreement, dated as
of __________, 199_ (the "Pooling and Servicing Agreement"), among American
Honda Receivables Corp. (the "Seller"), American Honda Finance Corporation and
____________________, as trustee. In connection with our acquisition of the
above Certificates we certify that (a) we understand that the Certificates are
not being registered under the Securities Act of 1933, as amended (the "Act"),
or any state securities laws and are being transferred to us in a transaction
that is exempt from the registration requirements of the Act and any such laws,
(b) we are an "accredited investor," as defined in Regulation D under the Act,
and have such knowledge and experience in financial and business matters that we
are capable of evaluating the merits and risks of investments in the
Certificates, (c) we have had the opportunity to ask questions of and receive
answers from the Seller concerning the purchase of the Certificates and all
matters relating thereto or any additional information deemed necessary to our
decision to purchase the Certificates, (d) we are not an employee benefit plan
that is subject to the Employee Retirement Income Security Act of 1974, as
amended, nor are we acting on behalf of any such plan, (e) we are acquiring the
Certificates for investment for our own account and not with a view to any
distribution of such Certificates (but without prejudice to our right at all
times to sell or otherwise dispose of the Certificates in accordance with clause
(g) below), (f) we have not offered or sold any Certificates to, or solicited
offers to buy any Certificates from, any person, or otherwise approached or
negotiated with any person with respect thereto, or taken any other action
B-1
<PAGE>
which would result in a violation of Section 5 of the Act and (g) we will not
sell, transfer or otherwise dispose of any Certificates unless (1) such sale,
transfer or other disposition is made pursuant to an effective registration
statement under the Act or is exempt from such registration requirements, and if
requested, we will at our expense provide an opinion of counsel satisfactory to
the addressees of this Certificate that such sale, transfer or other disposition
may be made pursuant to an exemption from the Act, (2) the purchaser or
transferee of such Certificate has executed and delivered to you a certificate
to substantially the same effect as this certificate and (3) the purchaser or
transferee has otherwise complied with any conditions for transfer set forth in
the Pooling and Servicing Agreement.
Capitalized terms used herein that are not otherwise defined shall have the
meanings ascribed thereto in the Pooling and Servicing Agreement.
Very truly yours,
___________________________________
By: ______________________________
Name:
Title:
B-2
<PAGE>
EXHIBIT 5.1
October 21, 1997
American Honda Receivables Corp.
700 Van Ness Avenue
Torrance, California 90501
Re: Honda Auto Receivables 1997-B Grantor Trust
ASSET BACKED CERTIFICATES, CLASS A
Dear Sirs:
We have acted as counsel to American Honda Receivables Corp., a California
corporation (the "Company") and a wholly owned subsidiary of American Honda
Finance Corporation ("American Honda"), in connection with the issuance of Asset
Backed Certificates, Class A (the "Certificates") representing undivided
interests in the Honda Auto Receivables 1997-B Grantor Trust (the "Trust") and
the sale of the Certificates by the Company. A registration statement on
Form S-3 (File No. 333-35413; 333-35413-01) relating to the Certificates has
been filed with the Securities and Exchange Commission under the Securities Act
of 1933, as amended. Such registration statement, as amended by Amendment No. 1
thereto, is referred to herein as the "Registration Statement."
We have examined copies of the Company's Articles of Incorporation and
Bylaws, minutes of meetings of the Company's Board of Directors, the form of
pooling and servicing agreement filed as an exhibit to the Registration
Statement pursuant to which the Trust will be created and the Certificates will
be issued (the "Pooling and Servicing Agreement"), the form of Certificate
included in the Pooling and Servicing Agreement and such other records and
documents, certificates of corporate and public officials and statutes as we
have considered necessary or appropriate for the purpose of this opinion.
Based upon the foregoing, we are of the opinion that appropriate action has
been taken by the Company to authorize the execution and delivery of the Pooling
and Servicing Agreement and that the Certificates, in substantially the form
included in the Pooling and Servicing Agreement, when executed, authenticated
and delivered in accordance with the terms of the Pooling and Servicing
Agreement against payment of the consideration therefor (subject to the terms
thereof being otherwise in compliance with then-applicable law), will be legally
issued,
<PAGE>
fully paid and non-assessable, and the holders thereof will be entitled to the
benefits of the Pooling and Servicing Agreement.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name in the Registration Statement
under the captions "Certain Legal Aspects of the Receivables -- Certain
Bankruptcy Considerations" and "Legal Matters."
Very truly yours,
/s/ Brown & Wood llp
<PAGE>
EXHIBIT 8.1
October 21, 1997
American Honda Receivables Corp.
700 Van Ness Avenue
Torrance, California 90501
Re: Honda Auto Receivables 1997-A Grantor Trust
ASSET BACKED CERTIFICATES, CLASS A
Dear Sirs:
We have acted as counsel to American Honda Receivables Corp., a California
corporation (the "Company") and a wholly owned subsidiary of American Honda
Finance Corporation ("American Honda"). You have asked our opinion in
connection with certain federal income tax matters arising under the Company's
Registration Statement on Form S-3 (No. 333-35413; 333-35413-01), including all
amendments thereto (collectively, the "Registration Statement"), filed with the
Securities and Exchange Commission pursuant to the Securities Act of 1933, as
amended.
As such counsel, we have examined originals or copies, certified or
otherwise identified to our satisfaction as being true copies of originals, of
the following (collectively, the "Documents"):
1. The Registration Statement;
2. The Articles of Incorporation and Bylaws of the Company and
American Honda, in each case as now in effect;
3. The Pooling and Servicing Agreement to be dated as of October 1,
1997 (the "Agreement"), among the Company, as seller, American Honda, as
servicer (in such capacity, the "Servicer"), and Bank of Tokyo-Mitsubishi
Trust Company, as trustee (the "Trustee"); and
4. The Receivables Purchase Agreement to be dated as of October 1,
1997 (the "Receivables Purchase Agreement"), between American Honda and the
Company.
<PAGE>
We understand that the structure of the proposed transaction is as set
forth in the Registration Statement. Pursuant to the Receivables Purchase
Agreement, American Honda will transfer certain retail installment sale and
conditional sale contracts secured by the new Honda and Acura automobiles and
sport utility vehicles and Honda minivans, financed thereby (the "Receivables")
generated in the ordinary course of its business to the Company. The Company
will in turn transfer the Receivables to the Honda Auto Receivables 1997-B
Grantor Trust (the "Trust") which will be formed pursuant to the Pooling and
Servicing Agreement and will cause Asset Backed Certificates (the
"Certificates") to be issued thereunder. The Certificates will represent
undivided interests in the assets of the Trust and will consist of one class of
senior certificates (the "Class A Certificates") and one class of subordinated
certificates (the "Class B Certificates"). The Company will sell the Class A
Certificates to Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated, who in turn will sell the Class A Certificates to investors.
Initially, the Company will retain the Class B Certificates. The Trustee will
hold legal title to the Receivables and other assets of the Trust for the
benefit of the Certificateholders, but will have no power to reinvest proceeds
attributable to the Receivables or other assets of the Trust or to vary
investments in the Trust in any manner.
In rendering this opinion, we have relied, as to factual matters, solely
upon the Registration Statement and on representations of the Servicer that,
among other things, the Servicing Fee to be received by the Servicer pursuant to
the Pooling and Servicing Agreement will be an ordinary and customary charge for
the performance of management and servicing functions described in the Pooling
and Servicing Agreement and that the terms of the Receivables Purchase Agreement
and the Pooling and Servicing Agreement are fair and arm's-length. Our opinion
is subject to the qualification that facts materially different from those set
forth above may affect the opinion as expressed herein or prevent us from
rendering this opinion. Capitalized terms used herein that are not otherwise
defined shall have the meanings ascribed thereto in the Pooling and Servicing
Agreement.
In addition, we have made such investigations of such matters of law as we
deemed appropriate as a basis for the opinion expressed below. Further, we have
assumed the genuineness of all signatures and the authenticity of all documents
submitted to us as originals. Our opinion is also based on the assumption that
there are no agreements or understandings with respect to the transactions
contemplated in the Documents other than those contained in the Documents.
On the basis of the foregoing and in reliance thereon and our consideration
of such other matters of fact and questions of law as we have deemed necessary,
we are of the opinion that, subject to the assumptions, qualifications and
limitations set forth herein, the Trust will be classified as a "grantor" trust
and not as an association taxable as a corporation for Federal income tax
purposes.
The opinion set forth herein is based on the exiting provisions of the Code
and Treasury regulations issued or proposed thereunder, published Revenue
Rulings and releases of the Internal Revenue Service and existing case law, any
of which could be changed at any
<PAGE>
time. Any such changes may be retroactive in application and could modify the
legal conclusions on which such opinion is based. The opinion expressed herein
is limited as described above, and we do not express an opinion on any other
legal or income tax aspect of the transactions contemplated by the Documents
relating to the transaction.
In rendering the foregoing opinion, we express no opinion as to the laws of
any jurisdiction other than the federal income tax laws of the United State.
This opinion is rendered as of the date hereof and we undertake no obligation to
update this opinion or advise you of changes in the event that there is any
change in legal authorities, facts, assumptions or Documents on which this
opinion is based (including the taking of any action by any party to the
Documents pursuant to any opinion of counsel or a waiver), or any inaccuracy in
any of the representations, warranties or assumptions upon which we have relied
in rendering this opinion, unless we are specifically engaged to do so. This
opinion is rendered only to those to whom it is addressed and may not be relied
on in connection with any transactions other than the transactions contemplated
herein. This opinion may not be relied upon for any other purpose, or relied
upon by any other person, firm or corporation for any purpose, without our prior
written consent.
We consent to the filing of this opinion as an exhibit to the Registration
Statement and to the use of our name in the Registration Statement under the
captions "Federal Income Tax Consequences" and "Legal Matters."
Very truly yours,
/s/ Brown & Wood llp
<PAGE>
EXHIBIT 10.1
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
AMERICAN HONDA FINANCE CORPORATION,
as Seller
and
AMERICAN HONDA RECEIVABLES CORP.,
as Purchaser
--------------------------------------------------------
RECEIVABLES PURCHASE AGREEMENT
Dated as of October 1, 1997
--------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE ONE
DEFINITIONS
Section 1.01. Definitions . . . . . . . . . . . . . . . . . . . . . 1
Section 1.02. Other Definitional Provisions . . . . . . . . . . . . 2
ARTICLE TWO
CONVEYANCE OF RECEIVABLES
Section 2.01. Conveyance of Receivables . . . . . . . . . . . . . . 2
Section 2.02. Representations and Warranties of the Seller and the
Purchaser . . . . . . . . . . . . . . . . . . . . . . 3
Section 2.03. Representations and Warranties as to the
Receivables . . . . . . . . . . . . . . . . . . . . . 6
Section 2.04. Covenants of the Seller . . . . . . . . . . . . . . . 10
ARTICLE THREE
PAYMENT OF RECEIVABLES PURCHASE PRICE
Section 3.01. Payment of Receivables Purchase Price . . . . . . . . 10
ARTICLE FOUR
TERMINATION
Section 4.01. Termination . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE FIVE
MISCELLANEOUS PROVISIONS
Section 5.01. Amendment . . . . . . . . . . . . . . . . . . . . . . 11
Section 5.02. Protection of Right, Title and Interest
to Receivables . . . . . . . . . . . . . . . . . . . 11
Section 5.03. Governing Law . . . . . . . . . . . . . . . . . . . . 12
Section 5.04. Notices . . . . . . . . . . . . . . . . . . . . . . . 12
(i)
<PAGE>
Section 5.05. Severability of Provisions . . . . . . . . . . . . . 12
Section 5.06. Assignment . . . . . . . . . . . . . . . . . . . . . 12
Section 5.07. Further Assurances . . . . . . . . . . . . . . . . . 13
Section 5.08. No Waiver; Cumulative Remedies . . . . . . . . . . . 13
Section 5.09. Counterparts . . . . . . . . . . . . . . . . . . . . 13
Section 5.10. Third-Party Beneficiaries . . . . . . . . . . . . . . 13
Section 5.11. Merger and Integration . . . . . . . . . . . . . . . 13
Section 5.12. Headings . . . . . . . . . . . . . . . . . . . . . . 13
Section 5.13. Seller Indemnification . . . . . . . . . . . . . . . 13
Section 5.14. Merger, Consolidation or Assumption
of the Obligations of the Seller. . . . . . . . . . . 14
SCHEDULES
Schedule A - Schedule of Receivables . . . . . . . . . . . . . . . . . A-1
(ii)
<PAGE>
This Receivables Purchase Agreement, dated as of October 1, 1997, is
between American Honda Finance Corporation, a California corporation, as seller,
and American Honda Receivables Corp., a California corporation, as purchaser.
In consideration of the premises and mutual agreements herein contained,
each party agrees as follows for the benefit of the other party and for the
benefit of the Trustee:
ARTICLE ONE
DEFINITIONS
Section 1.01. DEFINITIONS. Whenever used in this Agreement, the following
words and phrases shall have the following meanings:
"AGREEMENT" means this Receivables Purchase Agreement and all amendments
hereof and supplements hereto.
"CLOSING DATE" means October __, 1997.
"CUTOFF DATE" means October 1, 1997.
"POOLING AND SERVICING AGREEMENT" means the Pooling and Servicing Agreement
dated as of the date hereof, among American Honda Receivables Corp., as seller,
American Honda Finance Corporation, as servicer, and the Trustee.
"PURCHASER" means American Honda Receivables Corp., in its capacity as
purchaser of the Receivables under this Agreement, and its successors and
assigns.
"RECEIVABLES PURCHASE PRICE" means $_____________.
"SELLER" means American Honda Finance Corporation, in its capacity as
seller of the Receivables under this Agreement, and its successors and assigns.
"SCHEDULE OF RECEIVABLES" means the schedule of receivables attached as
Schedule A hereto.
"TRUSTEE" means Bank of Tokyo-Mitsubishi Trust Company, as trustee under
the Pooling and Servicing Agreement, or any successor trustee thereunder.
"WARRANTY RECEIVABLE" means a Receivable purchased by the Seller pursuant
to Section 2.03(c).
<PAGE>
Section 1.02. OTHER DEFINITIONAL PROVISIONS.
(a) All capitalized terms not otherwise defined in this Agreement shall
have the defined meanings used in the Pooling and Servicing Agreement.
(b) The words "hereof," "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement; Section, subsection and
Schedule references contained in this Agreement are references to Sections,
subsections and Schedules in or to this Agreement unless otherwise specified;
and the word "including" means including without limitation.
ARTICLE TWO
CONVEYANCE OF RECEIVABLES
Section 2.01. CONVEYANCE OF RECEIVABLES.
(a) On the Closing Date the Seller agrees to sell, transfer, assign and
otherwise convey to the Purchaser, and the Purchaser agrees to purchase from the
Seller, without recourse (subject to the Seller's obligations hereunder) all of
the right, title and interest of the Seller in and to the following:
(i) the Receivables listed in the Schedule of Receivables and all
monies due thereon or paid thereunder or in respect thereof (including
proceeds of the repurchase of Receivables by the Seller pursuant to Section
2.03(c) hereof) on or after the Cutoff Date;
(ii) the security interests in the Financed Vehicles;
(iii) any proceeds of any physical damage insurance policies covering
the Financed Vehicles and in any proceeds of any credit life or credit
disability insurance policies relating to the Receivables or the Obligors;
(iv) any proceeds of Dealer Recourse;
(v) the right to realize upon any property (including the right to
receive future Liquidation Proceeds) that shall have secured a Receivable
and have been repossessed by or on behalf of the Trustee; and
(vi) all proceeds of the foregoing.
(b) In connection with the foregoing conveyance, the Seller agrees to
record and file, at its own expense, one or more financing statements with
respect to the Receivables now
2
<PAGE>
existing and hereafter created for the sale of accounts (as defined in Section
9106 of the UCC as in effect in the State of California) meeting the
requirements of applicable state law in such manner as is necessary to perfect
the sale of the Receivables to the Purchaser, and the proceeds thereof (and any
continuation statements as are required by applicable state law), and to deliver
a file-stamped copy of each such financing statement (or continuation statement)
or other evidence of such filings (which may, for purposes of this Section,
consist of telephone confirmation of such filings with the file stamped copy of
each such filings to be provided to the Purchaser in due course), as soon as is
practicable after receipt by the Seller thereof.
In connection with the foregoing conveyance, the Seller further agrees, at
its own expense, on or prior to the Closing Date (i) to annotate and indicate in
its computer files that the Receivables have been transferred to the Purchaser
pursuant to this Agreement, (ii) to deliver to the Purchaser a computer file or
printed or microfiche list containing a true and complete list of all such
Receivables, identified by account number and by the Principal Balance of each
Receivable as of the Cutoff Date, which file or list shall be marked as
Schedule A to this Agreement and is hereby incorporated into and made a part of
this Agreement and (iii) to deliver the Receivable Files to or upon the order of
the Purchaser.
The parties hereto intend that the conveyance hereunder be a sale. In the
event that the conveyance hereunder is not for any reason considered a sale, the
Seller hereby grants to the Purchaser a first priority perfected security
interest in, all of its right, title and interest in, to and under the
Receivables, and all other property conveyed hereunder and listed in
Section 2.01 hereof and all proceeds of any of the foregoing and the parties
intend that this Agreement constitute a security agreement under applicable law.
Section 2.02. REPRESENTATIONS AND WARRANTIES OF THE SELLER AND THE
PURCHASER.
(a) The Seller hereby represents and warrants to the Purchaser as of the
date of this Agreement and the Closing Date that:
(i) ORGANIZATION AND GOOD STANDING. The Seller is a corporation duly
organized, validly existing and in good standing under the laws of the
State of California, and has power and authority to own its properties and
to conduct its business as such properties are currently owned and such
business is presently conducted, and had at all relevant times, and shall
have, power, authority and legal right to acquire, own and sell the
Receivables.
(ii) DUE QUALIFICATION. The Seller is duly qualified to do business
as a foreign corporation in good standing, and has obtained all necessary
licenses and approvals in all jurisdictions in which the ownership or lease
of property or the conduct of its business (including the servicing of the
Receivables as required by the Pooling and Servicing Agreement) shall
require such qualifications.
(iii) POWER AND AUTHORITY. The Seller shall have the power and
authority to execute and deliver this Agreement and to carry out its terms;
and the execution,
3
<PAGE>
delivery and performance of this Agreement shall have been duly authorized
by the Seller by all necessary corporate action.
(iv) BINDING OBLIGATION. This Agreement constitutes a legal, valid
and binding obligation of the Seller, enforceable against it in accordance
with its terms, except as enforceability may be subject to or limited by
bankruptcy, insolvency, reorganization, moratorium, liquidation or other
similar laws affecting the enforcement of creditors' rights in general and
by general principles of equity, regardless of whether such enforceability
shall be considered in a proceeding in equity or at law.
(v) NO VIOLATION. The execution, delivery and performance by the
Seller of this Agreement and the consummation of the transactions
contemplated by this Agreement and the fulfillment of the terms hereof
shall not conflict with, result in any breach of any of the terms and
provisions of, nor constitute (with or without notice or lapse of time) a
default under, the articles of incorporation or bylaws of the Seller, or
conflict with or breach any of the material terms or provisions of, or
constitute (with or without notice or lapse of time) a default under, any
indenture, agreement or other instrument to which the Seller is a party or
by which it may be bound or any of its properties are subject; nor result
in the creation or imposition of any lien upon any of its properties
pursuant to the terms of any such indenture, agreement or other instrument
(other than this Agreement); nor violate any law or, to the knowledge of
the Seller, any order, rule or regulation applicable to it or its
properties of any court or of any federal or state regulatory body,
administrative agency or other governmental instrumentality having
jurisdiction over the Seller or any of its properties.
(vi) NO PROCEEDINGS. There are no proceedings or investigations
pending or, to the knowledge of the Seller, threatened against the Seller,
before any court, regulatory body, administrative agency or other tribunal
or governmental instrumentality (i) asserting the invalidity of this
Agreement, (ii) seeking to prevent the consummation of any of the
transactions contemplated by this Agreement or (iii) seeking any
determination or ruling that, in the reasonable judgment of the Seller,
would materially and adversely affect the performance by the Seller of its
obligations under this Agreement.
(b) The Purchaser hereby represents and warrants to the Seller as of the
date of this Agreement and the Closing Date that:
(i) ORGANIZATION AND GOOD STANDING. The Purchaser is a corporation
duly organized, validly existing and in good standing under the laws of the
State of California, and has power and authority to own its properties and
to conduct its business as such properties are currently owned and such
business is presently conducted, and had at all relevant times, and shall
have, power, authority and legal right to acquire, own and sell the
Receivables.
4
<PAGE>
(ii) DUE QUALIFICATION. The Purchaser is duly qualified to do
business as a foreign corporation in good standing, and has obtained all
necessary licenses and approvals in all jurisdictions in which the
ownership or lease of property or the conduct of its business shall require
such qualifications.
(iii) POWER AND AUTHORITY. The Purchaser shall have the power and
authority to execute and deliver this Agreement and to carry out its terms;
and the execution, delivery and performance of this Agreement shall have
been duly authorized by the Purchaser by all necessary corporate action.
(iv) BINDING OBLIGATION. This Agreement constitutes a legal, valid
and binding obligation of the Purchaser, enforceable against it in
accordance with its terms, except as enforceability may be subject to or
limited by bankruptcy, insolvency, reorganization, moratorium, liquidation
or other similar laws affecting the enforcement of creditors' rights in
general and by general principles of equity, regardless of whether such
enforceability shall be considered in a proceeding in equity or at law.
(v) NO VIOLATION. The execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated by this
Agreement and the fulfillment of the terms hereof shall not conflict with,
result in any breach of any of the terms and provisions of, nor constitute
(with or without notice or lapse of time) a default under, the articles of
incorporation or bylaws of the Purchaser, or conflict with or breach any of
the material terms or provisions of, or constitute (with or without notice
or lapse of time) a default under, any indenture, agreement or other
instrument to which the Purchaser is a party or by which it may be bound or
any of its properties are subject; nor result in the creation or imposition
of any lien upon any of its properties pursuant to the terms of any such
indenture, agreement or other instrument (other than this Agreement); nor
violate any law or, to the knowledge of the Purchaser, any order, rule or
regulation applicable to it or its properties of any court or of any
federal or state regulatory body, administrative agency or other
governmental instrumentality having jurisdiction over the Purchaser or any
of its properties.
(vi) NO PROCEEDINGS. There are no proceedings or investigations
pending or, to the knowledge of the Purchaser, threatened against the
Purchaser, before any court, regulatory body, administrative agency or
other tribunal or governmental instrumentality (i) asserting the invalidity
of this Agreement, (ii) seeking to prevent the consummation of any of the
transactions contemplated by this Agreement or (iii) seeking any
determination or ruling that, in the reasonable judgment of the Purchaser,
would materially and adversely affect the performance by the Purchaser of
its obligations under this Agreement.
(c) The representations and warranties set forth in this Section shall
survive the sale of the Receivables by the Seller to the Purchaser and the sale
of the Receivables by the Purchaser to the Trust. Upon discovery by the Seller,
the Purchaser or the Trustee of a
5
<PAGE>
breach of any of the foregoing representations and warranties, the party
discovering such breach shall give prompt written notice to the others.
Section 2.03. REPRESENTATIONS AND WARRANTIES AS TO THE RECEIVABLES.
(a) ELIGIBILITY OF RECEIVABLES. The Seller hereby represents and warrants
as of the Cutoff Date that:
(i) CHARACTERISTICS OF RECEIVABLES. Each Receivable (A) shall have
been originated in the United States by a Dealer for the retail sale of the
related Financed Vehicle in the ordinary course of such Dealer's business,
shall have been fully and properly executed by the parties thereto, shall
have been purchased by the Seller from such Dealer under an existing
agreement with the Seller and shall have been validly assigned by such
Dealer to the Seller in accordance with its terms, (B) shall have created
or shall create a valid, subsisting and enforceable first priority security
interest in favor of the Seller in the related Financed Vehicle, (C) shall
contain customary and enforceable provisions such that the rights and
remedies of the holder thereof shall be adequate for realization against
the collateral of the benefits of the security, (D) shall provide for level
Monthly Payments (provided that the payment in the first or last month in
the life of the Receivable may be minimally different from the level
payment) that fully amortize the Amount Financed over its original term and
shall provide for a finance charge or shall yield interest at its APR, (E)
shall provide for, in the event that such Receivable is prepaid, a
prepayment that fully pays the Principal Balance and includes accrued but
unpaid interest at least through the date of prepayment in an amount
calculated by using an interest rate at least equal to its APR, (F) shall
have an Obligor that is not a federal, state or local governmental entity
and (G) is a retail installment sale or conditional sale contract ("retail
installment contracts").
(ii) SCHEDULE OF RECEIVABLES. The information set forth in the
Schedule of Receivables shall be true and correct in all material respects
as of the opening of business on the Cutoff Date, the Receivables were
selected at random from the retail installment sale contracts included in
the portfolio of the Seller meeting the selection criteria set forth in
this Section and no selection procedures believed to be adverse to the
Certificateholders shall have been utilized in selecting the Receivables.
(iii) COMPLIANCE WITH LAW. Each Receivable and each sale of the
related Financed Vehicle shall have complied at the time it was originated
or made, and shall comply at the time of execution of this Agreement in all
material respects with all requirements of applicable federal, state and
local laws, and regulations thereunder, including usury laws, the Federal
Truth-in-Lending Act, the Equal Credit Opportunity Act, the Fair Credit
Billing Act, the Fair Credit Reporting Act, the Fair Debt Collection
Practices Act, the Federal Trade Commission Act, the Magnuson-Moss Warranty
Act, Federal Reserve Board Regulations B and Z, state adaptations of the
6
<PAGE>
National Consumer Act and of the Uniform Consumer Credit Code and other
consumer credit, equal credit opportunity and disclosure laws.
(iv) BINDING OBLIGATION. Each Receivable shall constitute the
genuine, legal, valid and binding payment obligation in writing of the
related Obligor, enforceable by the holder thereof in accordance with its
terms, except as enforceability may be subject to or limited by bankruptcy,
insolvency, reorganization or other similar laws affecting the enforcement
of creditors' rights in general and by general principles of equity,
regardless of whether such enforceability shall be considered in a
proceeding in equity or at law.
(v) NO BANKRUPT OBLIGORS. According to the records of the Seller, as
of the Cutoff Date, no Obligor is the subject of a bankruptcy proceeding.
(vi) SECURITY INTEREST IN FINANCED VEHICLES. According to the records
of the Seller, as of the Cutoff Date no Financed Vehicle has been
repossessed and not reinstated and immediately prior to the sale,
assignment and transfer thereof, each Receivable shall be secured by a
validly perfected first priority security interest in the related Financed
Vehicle in favor of the Seller as secured party or all necessary and
appropriate action with respect to such Receivable shall have been taken to
perfect a first priority security interest in such Financed Vehicle in
favor of the Seller as secured party.
(vii) RECEIVABLES IN FORCE. No Receivable shall have been satisfied,
subordinated or rescinded, nor shall any Financed Vehicle have been
released from the lien granted by the related Receivable in whole or in
part.
(viii) NO WAIVERS. No provision of a Receivable shall have been waived
in such a manner that such Receivable fails to meet all of the other
representations and warranties made by the Seller herein with respect
thereto.
(ix) NO AMENDMENTS. No Receivable shall have been amended in such a
manner that the number of Scheduled Payments has been increased or that the
related Amount Financed has been increased or such Receivable fails to meet
all of the other representations and warranties made by the Seller herein
with respect thereto.
(x) NO DEFENSES. No facts shall be known to the Seller which would
give rise to any right of rescission, setoff, counterclaim or defense, nor
shall the same have been asserted or threatened, with respect to any
Receivable.
(xi) NO LIENS. To the knowledge of the Seller, no liens or claims
shall have been filed, including liens for work, labor or materials
relating to a Financed Vehicle, that shall be liens prior to, or equal or
coordinate with, the security interest in such Financed Vehicle granted by
the related Receivable.
7
<PAGE>
(xii) NO DEFAULTS. Except for payment defaults continuing for a period
of not more than 30 days as of the Cutoff Date, no default, breach,
violation or event permitting acceleration under the terms of any
Receivable shall have occurred and no continuing condition that with notice
or the lapse of time would constitute a default, breach, violation or event
permitting acceleration under the terms of any Receivable shall have
arisen; and the Seller shall not have waived any of the foregoing except as
otherwise permitted hereunder.
(xiii) INSURANCE. Pursuant to the Receivables, each Obligor has been
required to obtain physical damage insurance covering the related Financed
Vehicle and the Obligor is required under the terms of the related
Receivable to maintain such insurance.
(xiv) GOOD TITLE. It is the intention of the Seller that the transfer
and assignment herein contemplated, taken as a whole, constitute a sale of
the Receivables from the Seller to the Purchaser and that the beneficial
interest in and title to the Receivables not be part of the debtor's estate
in the event of the filing of a bankruptcy petition by or against the
Seller under any bankruptcy law. No Receivable has been sold, transferred,
assigned or pledged by the Seller to any Person other than the Purchaser,
and no provision of a Receivable shall have been waived, except as provided
in clause (viii) above; immediately prior to the transfer and assignment
herein contemplated, the Seller had good and marketable title to each
Receivable, free and clear of all Liens and rights of others; immediately
upon the transfer and assignment thereof, the Purchaser shall have good and
marketable title to each Receivable, free and clear of all Liens and rights
of others; and the transfer and assignment herein contemplated has been
perfected under the UCC.
(xv) LAWFUL ASSIGNMENT. No Receivable shall have been originated in,
or shall be subject to the laws of, any jurisdiction under which the sale,
transfer and assignment of such Receivable under this Agreement or pursuant
to transfers of the Certificates shall be unlawful, void or voidable.
(xvi) ALL FILINGS MADE. All filings (including UCC filings) necessary
in any jurisdiction to give the Trustee a first priority perfected
ownership interest in the Receivables shall have been made.
(xvii) ONE ORIGINAL. There shall be only one original executed copy of
each Receivable.
(xviii) CHATTEL PAPER. Each Receivable constitutes "chattel paper" as
defined in the UCC.
(xix) ADDITIONAL REPRESENTATIONS AND WARRANTIES. (A) Each Receivable
shall have an original maturity of at least 12 months and not more than 60
months and, as of the Cutoff Date, a remaining maturity of not less than 1
month nor greater than 60
8
<PAGE>
months; (B) each Receivable shall provide for payment of a finance charge
or shall yield interest calculated on the basis of an APR ranging from
1.90% to 20.06%; (C) each Receivable shall have had an original principal
balance of not less than $1303.46 nor more than $88,335.99 and, as of the
Cutoff Date, an average unpaid principal balance of $10,725.00; (D) each
Receivable was originated on or before October 1, 1997; (E) each Financed
Vehicle shall be a new Honda or Acura automobile or sport utility vehicle
or Honda minivan; (F) the Obligor under each Receivable had a current
billing address in the United States as of the Cutoff Date; and (G) no
Receivable shall have a Scheduled Payment that is more than 30 days past
due as of the Cutoff Date.
(b) NOTICE OF BREACH. The representations and warranties set forth in
this Section shall speak as of the execution and delivery of this Agreement, but
shall survive the sale, transfer and assignment of the Receivables to the
Purchaser and any subsequent assignment or transfer pursuant to Article Three of
the Pooling and Servicing Agreement. The Purchaser, the Seller or the Trustee,
as the case may be, shall inform the other parties promptly, in writing, upon
discovery of any breach of the Seller's representations and warranties pursuant
to this Section which materially and adversely affects the interests of the
Certificateholders in any Receivable.
(c) REPURCHASE OF RECEIVABLES. In the event of a breach of any
representation or warranty set forth in Section 2.03(a) which materially and
adversely affects the interests of the Certificateholders in any Receivable and
unless the breach shall have been cured by the last day of the second Collection
Period following the Collection Period in which the discovery of the breach is
made or notice is received, as the case may be (or, at option of the Seller, the
last day in the first Collection Period following the Collection Period in which
such discovery is made), the Seller shall repurchase such Receivable. In
consideration of the purchase of any such Receivable, the Seller shall remit an
amount equal to the Warranty Purchase Payment in respect of such Receivable to
the Purchaser and shall be entitled to receive the Released Warranty Amount. In
the event that, as of the date of execution and delivery of this Agreement, any
Liens or claims shall have been filed, including Liens for work, labor or
materials relating to a Financed Vehicle, that shall be liens prior to, or equal
or coordinate with, the lien granted by the related Receivable (whether or not
the Seller has knowledge thereof), and such breach materially and adversely
affects the interests of the Certificateholders in such Receivable, the Seller
shall repurchase such Receivable on the terms and in the manner specified above.
Upon any such repurchase, the Purchaser shall, without further action, be deemed
to transfer, assign, set-over and otherwise convey to the Seller, without
recourse, representation or warranty, all the right, title and interest of the
Purchaser in, to and under such repurchased Receivable, all monies due or to
become due with respect thereto and all proceeds thereof. The Purchaser or the
Trustee, as applicable, shall execute such documents and instruments of transfer
or assignment and take such other actions as shall reasonably be requested by
the Seller to effect the conveyance of such Receivable pursuant to this Section.
The sole remedy of the Purchaser with respect to a breach of the Seller's
representations and warranties pursuant to Section 2.03(a) or with respect to
the existence of
9
<PAGE>
any such Liens or claims shall be to require the Seller to repurchase the
related Receivables pursuant to this Section.
Section 2.04. COVENANTS OF THE SELLER. The Seller hereby covenants that:
(a) SECURITY INTERESTS. Except for the conveyances hereunder, the
Seller will not sell, pledge, assign or transfer to any other Person, or
grant, create, incur, assume or suffer to exist any Lien on any Receivable,
whether now existing or hereafter created, or any interest therein; the
Seller will immediately notify the Purchaser of the existence of any Lien
on any Receivable and, in the event that the interests of the
Certificateholders in such Receivable are materially and adversely
affected, such Receivable shall be repurchased from the Purchaser by the
Seller in the manner and with the effect specified in Section 2.03(c), and
the Seller shall defend the right, title and interest of the Purchaser in,
to and under the Receivables, whether now existing or hereafter created,
against all claims of third parties claiming through or under the Seller;
provided, however, that nothing in this subsection shall prevent or be
deemed to prohibit the Seller from suffering to exist upon a Receivable any
Lien for municipal or other local taxes if such taxes shall not at the time
be due and payable or if the Seller shall currently be contesting the
validity of such taxes in good faith by appropriate proceedings and shall
have set aside on its books adequate reserves with respect thereto.
(b) DELIVERY OF PAYMENTS. The Seller agrees to deliver in kind upon
receipt to the Servicer under the Pooling and Servicing Agreement (if other
than the Seller) all payments received by the Seller in respect of the
Receivables as soon as practicable after receipt thereof by the Seller.
(c) CONVEYANCE OF RECEIVABLES. The Seller covenants and agrees that
it will not convey, assign, exchange or otherwise transfer the Receivables
to any Person prior to the termination of this Agreement pursuant to
Article Four hereof.
(d) NO IMPAIRMENT. The Seller shall take no action, nor omit to take
any action, which would impair the rights of the Purchaser in any
Receivable, nor shall it, except as otherwise provided in this Agreement or
the Pooling and Servicing Agreement, reschedule, revise or defer payments
due on any Receivable.
ARTICLE THREE
PAYMENT OF RECEIVABLES PURCHASE PRICE
Section 3.01. PAYMENT OF RECEIVABLES PURCHASE PRICE. In consideration of
the sale of the Receivables from the Seller to the Purchaser as provided in
Section 2.01, on the Closing Date the Purchaser agrees to pay the Seller an
amount equal to the Receivables Purchase Price. The Receivables Purchase Price
shall be paid in the form of (i) $______________, the
10
<PAGE>
net cash proceeds from the public offering by the Purchaser of the Class A
Certificates and (ii) $_____________, being deemed paid and returned to the
Purchaser as a capital contribution.
ARTICLE FOUR
TERMINATION
Section 4.01. TERMINATION. The respective obligations and
responsibilities of the Seller and the Purchaser created hereby shall terminate,
except for the indemnity obligations of the Seller as provided herein, upon the
termination of the Trust as provided in Article Twenty of the Standard Terms and
Conditions.
ARTICLE FIVE
MISCELLANEOUS PROVISIONS
Section 5.01. AMENDMENT.
(a) This Agreement may be amended from time to time by the Purchaser and
the Seller to cure any ambiguity, to correct or supplement any provision herein
which may be inconsistent with any other provision herein or to add any other
provision with respect to matters or questions arising under this Agreement
which shall not be inconsistent with the provisions of this Agreement or the
Pooling and Servicing Agreement; provided, however, that such action shall not,
as evidenced by an Opinion of Counsel to the Purchaser delivered to the Trustee,
adversely affect in any material respect the interests of the Trust.
(b) This Agreement may also be amended from time to time by the Purchaser
and the Seller with the consent of the Trustee for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
this Agreement.
Section 5.02. PROTECTION OF RIGHT, TITLE AND INTEREST TO RECEIVABLES.
(a) The Seller, at its expense, shall cause this Agreement and/or all
financing statements and continuation statements and any other necessary
documents covering the Purchaser's right, title and interest to the Receivables
and other property conveyed by the Seller to the Purchaser hereunder to be
promptly recorded, registered and filed, and at all times to be kept recorded,
registered and filed, all in such manner and in such places as may be required
by law fully to preserve and protect the right, title and interest of the
Purchaser hereunder to all of the Receivables and such other property. The
Seller shall deliver to the Purchaser file-stamped copies of, or filing receipts
for, any document recorded, registered or filed as provided above, as soon as
available following such recording, registration or filing. The Purchaser and
the Trustee shall cooperate fully with the Seller in connection with the
11
<PAGE>
obligations set forth above and will execute any and all documents reasonably
required to fulfill the intent of this subsection.
(b) Within 30 days after the Seller makes any change in its name, identity
or corporate structure which would make any financing statement or continuation
statement filed in accordance with Section 5.02(a) seriously misleading within
the meaning of Section 9402(7) of the UCC as in effect in the applicable state,
the Seller shall give the Purchaser notice of any such change and shall execute
and file such financing statements or amendments as may be necessary to continue
the perfection of the Purchaser's security interest in the Receivables and the
proceeds thereof.
(c) The Seller will give the Purchaser prompt written notice of any
relocation of any office from which the Seller keeps records concerning the
Receivables or of its principal executive office and whether, as a result of
such relocation, the applicable provisions of the UCC would require the filing
of any amendment of any previously filed financing or continuation statement or
of any new financing statement and shall execute and file such financing
statements or amendments as may be necessary to continue the perfection of the
interest of the Purchaser in the Receivables and the proceeds thereof.
Section 5.03. GOVERNING LAW. This Agreement shall be construed in
accordance with the laws of the State of New York, and the obligations, rights
and remedies of the parties hereunder shall be determined in accordance with
such laws.
Section 5.04. NOTICES. All demands, notices and communications hereunder
shall be in writing and shall be deemed to have been duly given if personally
delivered at or mailed by registered mail, return receipt requested, to (a) in
the case of the Purchaser, to American Honda Receivables Corp., 700 Van Ness
Avenue, Building 300, Torrance, California 90501, Attention: President; (b) in
the case of American Honda Finance Corporation, 700 Van Ness Avenue, Building
300, Torrance, California 90501, Attention: President; and (c) in the case of
the Trustee, to the 1251 Avenue of the Americas, 10th Floor, New York, New York
10020-1104, Attention: Corporate Trust Department; or, as to any of such
Persons, at such other address as shall be designated by such Person in a
written notice to the other Persons.
Section 5.05. SEVERABILITY OF PROVISIONS. If any one or more of the
covenants, agreements, provisions or terms of this Agreement shall for any
reason whatsoever be held invalid, then such covenants, agreements, provisions
or terms shall be deemed severable from the remaining covenants, agreements,
provisions and terms of this Agreement and shall in no way affect the validity
or enforceability of the other provisions of this Agreement.
Section 5.06. ASSIGNMENT. This Agreement may not be assigned by the
Purchaser or the Seller except as contemplated by this Section and the Pooling
and Servicing Agreement; provided, however, that simultaneously with the
execution and delivery of this Agreement, the Purchaser shall assign all of its
right, title and interest herein to the Trustee for the benefit of the
Certificateholders as provided in Section 2.01 of the Pooling and Servicing
Agreement, to which the Seller hereby expressly consents. The Seller agrees to
perform its obligations
12
<PAGE>
hereunder for the benefit of the Trust and that the Trustee may enforce the
provisions of this Agreement, exercise the rights of the Purchaser and enforce
the obligations of the Seller hereunder without the consent of the Purchaser.
Section 5.07. FURTHER ASSURANCES. The Seller and the Purchaser agree to
do and perform, from time to time, any and all acts and to execute any and all
further instruments required or reasonably requested by the other party hereto
or by the Trustee more fully to effect the purposes of this Agreement,
including, without limitation, the execution of any financing statements,
amendments, continuation statements or releases relating to the Receivables for
filing under the provisions of the UCC or other law of any applicable
jurisdiction.
Section 5.08. NO WAIVER; CUMULATIVE REMEDIES. No failure to exercise and
no delay in exercising, on the part of the Purchaser, the Trustee or the Seller,
any right, remedy, power or privilege hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise of any right, remedy, power or
privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, remedy, power or privilege. The rights, remedies,
powers and privileges herein provided are cumulative and not exhaustive of any
rights, remedies, powers and privileges provided by law.
Section 5.09. COUNTERPARTS. This Agreement may be executed in two or more
counterparts (and by different parties on separate counterparts), each of which
shall be an original, but all of which together shall constitute one and the
same instrument.
Section 5.10. THIRD-PARTY BENEFICIARIES. This Agreement will inure to the
benefit of and be binding upon the parties hereto, and the Trustee for the
benefit of the Certificateholders, which shall be considered to be a third-party
beneficiary hereof. Except as otherwise provided in this Agreement, no other
Person will have any right or obligation hereunder.
Section 5.11. MERGER AND INTEGRATION. Except as specifically stated
otherwise herein, this Agreement sets forth the entire understanding of the
parties relating to the subject matter hereof, and all prior understandings,
written or oral, are superseded by this Agreement. This Agreement may not be
modified, amended, waived or supplemented except as provided herein.
Section 5.12. HEADINGS. The headings herein are for purposes of reference
only and shall not otherwise affect the meaning or interpretation of any
provision hereof.
Section 5.13. SELLER INDEMNIFICATION.
(a) PURCHASER AND TRUST. The Seller shall indemnify and hold harmless the
Purchaser, the Trust and the Certificateholders from and against any loss,
liability, expense or damage suffered or sustained by reason of any acts,
omissions or alleged acts or omissions arising out of activities of the Seller
pursuant to this Agreement or as a result of the transactions contemplated
hereby, including, but not limited to, any judgment, award,
13
<PAGE>
settlement, reasonable attorneys' fees and other costs or expenses incurred in
connection with the defense of any actual or threatened action, proceeding or
claim; provided, however, that the Seller shall not indemnify the Purchaser, the
Trust or the Certificateholders if such acts, omissions or alleged acts or
omissions constitute negligence or willful misconduct by the Purchaser or the
Certificateholders.
(b) TRUSTEE. The Seller shall indemnify, defend and hold harmless the
Trustee from and against any and all costs, expenses, losses, claims, damages
and liabilities to the extent that such cost, expense, loss, claim, damage or
liability arose out of, and was imposed upon the Trustee through the negligence,
willful misfeasance or bad faith of the Seller in the performance of its duties
under this Agreement or by reason of reckless disregard of its obligations and
duties under this Agreement.
Section 5.14. MERGER, CONSOLIDATION OR ASSUMPTION OF THE OBLIGATIONS OF
THE SELLER.
(a) The Seller shall not consolidate with or merge into any other
corporation or convey or transfer its properties and assets substantially as an
entirety to any Person, unless:
(i) the corporation formed by such consolidation or into which the
Seller is merged or the Person which acquires by conveyance or transfer the
properties and assets of the Seller substantially as an entirety shall be
organized and existing under the laws of the United States, any State or
the District of Columbia, and, if the Seller is not the surviving entity,
shall expressly assume, by an agreement supplemental hereto, executed and
delivered to the Purchaser and the Trustee, in form satisfactory to the
Purchaser and the Trustee, the performance of every covenant and obligation
of the Seller hereunder and shall benefit from all the rights granted to
the Seller hereunder; and
(ii) the Seller shall have delivered to the Purchaser and the Trustee
an Officer's Certificate of the Seller and an Opinion of Counsel each
stating that such consolidation, merger, conveyance or transfer and such
supplemental agreement comply with this Section and that all conditions
precedent herein provided for relating to such transaction have been
complied with.
(b) The obligations of the Seller hereunder shall not be assignable nor
shall any Person succeed to the obligations of the Seller hereunder except in
each case in accordance with the provisions of Section 5.06 and this Section.
14
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective officers as of the day and year first above
written.
AMERICAN HONDA FINANCE
CORPORATION,
as Seller
By:
------------------------------------
Y. Kohama
President
AMERICAN HONDA RECEIVABLES CORP.,
as Purchaser
By:
------------------------------------
Y. Kohama
President
ACCEPTED:
BANK OF TOKYO-MITSUBISHI TRUST
COMPANY,
as Trustee
By:
-------------------------------------
Name:
Title:
15
<PAGE>
SCHEDULE A
SCHEDULE OF RECEIVABLES
Omitted -- originals on file at the offices
of the Seller, the Purchaser and the Trustee
A-1
