<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 19, 1999
REGISTRATION NO. 333-30037
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
AMENDMENT NO. 4
TO
FORM S-3*
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------
HONDA AUTO RECEIVABLES 1999-1 OWNER TRUST
(Issuer with respect to the Securities)
AMERICAN HONDA RECEIVABLES CORP.
(Originator of the Trust described herein)
(Exact name of Co-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) 781-4100
----------------
(Address, including zip code, and telephone number, including
area code, of Originator's principal executive offices)
Y. KOHAMA
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 originator)
----------------
COPIES TO:
Dale W. Lum, Esq. C. Thomas Kunz, Esq.
Brown & Wood LLP Skadden, Arps, Slate, Meagher & Flom
LLP
555 California Street 919 Third Avenue
San Francisco, California 94104 New York, New York 10022
----------------
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. / /
* This Registration Statement was initially filed on Form S-1.
----------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
PROPOSED TITLE OF AMOUNT TO AGGREGATE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED PRICE PER UNIT OFFERING PRICE REGISTRATION FEE
<S> <C> <C> <C> <C>
Asset Backed Notes.................. $693,032,000.00 100%(1) $693,032,000.00(1) $192,687.93(2)
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee on the
basis of the proposed maximum offering price per unit.
(2) 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, DATED JANUARY 19, 1999
$693,032,000
Honda Auto Receivables 1999-1 Owner Trust
$179,424,000 % Asset Backed Notes, Class A-1
$195,000,000 % Asset Backed Notes, Class A-2
$208,000,000 % Asset Backed Notes, Class A-3
$110,608,000 % Asset Backed Notes, Class A-4
American Honda Receivables Corp.
Seller
American Honda Finance Corporation
Servicer
The Honda Auto Receivables 1999-1 Owner Trust (the "Trust") will be governed by
an Amended and Restated Trust Agreement to be dated as of January 1, 1999,
between American Honda Receivables Corp. and The Bank of New York (Delaware),
as Owner Trustee. The Trust will issue four classes of Notes (respectively,
the "Class A-1 Notes", the "Class A-2 Notes", the "Class A-3 Notes" and the
"Class A-4 Notes") pursuant to an Indenture to be dated as of January 1,
1999, between the Trust and Bankers Trust Company, as Indenture Trustee.
The Trust will also issue one class of certificates which will
represent fractional undivided interests in the Trust (the
"Certificates"). The Certificates are not being offered hereby. The
assets of the Trust will primarily include a pool of retail
installment sale contracts (the "Receivables") secured by the new
or used Honda and Acura motor vehicles financed thereby, certain
monies due or received under the Receivables on or after January
1, 1999 and monies on deposit in the Reserve Fund and the Yield
Supplement Account described herein. The Receivables will be
serviced by American Honda Finance Corporation ("AHFC" or the
"Servicer"). The Notes will be secured by the assets of the Trust
pursuant to the Indenture.
Interest on the Notes at the related Interest Rates specified above will be
distributed to Noteholders on the fifteenth day of each month or, if any such
day is not a Business Day, on the immediately succeeding Business Day (each,
a "Distribution Date"), commencing February 16, 1999. Principal on the
Notes will be payable on each Distribution Date to the extent described
herein; however, unless the Notes have been accelerated following an
event of default under the Indenture, no principal payments will be
made on the (i) Class A-2 Notes until the Class A-1 Notes have been
paid in full, (ii) Class A-3 Notes until the Class A-1 and Class
A-2 Notes have been paid in full or (iii) Class A-4 Notes until the
Class A-1, Class A-2 and Class A-3 Notes have been paid in full.
Payments in respect of the Certificates will be subordinated to
payments on the Notes to the extent described herein.
To the extent not previously paid prior to such dates, the outstanding principal
amount of each Class of Notes will be payable in full on the following
dates, in the case of (i) the Class A-1 Notes, the February 2000
Distribution Date, (ii) the Class A-2 Notes, the June 2001
Distribution Date, (iii) the Class A-3 Notes, the September 2002
Distribution Date and (iv) the Class A-4 Notes, the October 2004
Distribution Date.
For a discussion of certain factors that should be considered in connection with
an investment in the Notes, see "Risk Factors" on Page 11.
For the purposes hereof, AHFC considers a Receivable to be past due or
delinquent when an obligor fails to make at least 60% of a scheduled monthly
payment on a cumulative basis by the related due date. If a Receivable was
considered delinquent when an obligor failed to pay any portion of a
scheduled monthly payment, AHFC's historical delinquency experience may
have been materially higher than its historical delinquency experience
disclosed in this prospectus. Therefore, AHFC's historical delinquency
experience, as disclosed in this prospectus, may not be comparable
to the historical delinquency information disclosed by other
issuers.
THE NOTES WILL REPRESENT OBLIGATIONS OF, AND THE CERTIFICATES WILL REPRESENT
BENEFICIAL INTERESTS IN, THE TRUST AND WILL NOT REPRESENT OBLIGATIONS OF OR
INTERESTS IN AMERICAN HONDA RECEIVABLES CORP., AMERICAN HONDA FINANCE
CORPORATION OR ANY OF THEIR RESPECTIVE AFFILIATES.
THE NOTES 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(2)
------------------ ------------------ ------------------
<S> <C> <C> <C>
Per Class A-1 Note.................................... % % %
Per Class A-2 Note....................................
Per Class A-3 Note....................................
Per Class A-4 Note....................................
Total................................................. $ $ $
</TABLE>
(1) Plus accrued interest, if any, from , 1999.
(2) Before deducting expenses payable by the Seller estimated at $1,114,688.
The Notes 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
Notes, in book-entry form, will be made through the facilities of The Depository
Trust Company on or about January , 1999, against payment in immediately
available funds.
Credit Suisse First Boston
Chase Securities Inc.
NationsBanc Montgomery Securities LLC
Selling Group Members
Barclays Capital
Salomon Smith Barney
SG Cowen
Utendahl Capital Partners, L.P.
Prospectus dated January , 1999.
<PAGE>
Certain persons participating in this offering may engage in transactions
that stabilize, maintain or otherwise affect the price of any Class of Notes.
Such transactions may include stabilizing. For a description of these
activities, see "Underwriting".
--------------
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 Notes 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.
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 Securities Exchange Act of
1934, as amended (the "Exchange Act"), subsequent to the date of this Prospectus
and prior to the termination of the offering of the Notes 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 that 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) 781-4100).
REPORTS TO NOTEHOLDERS
The Servicer, on behalf of the Trust, will prepare and the Indenture Trustee
will provide to Noteholders of record (which shall be Cede & Co. as the nominee
of DTC unless Definitive Notes are issued under the limited circumstances
described herein) monthly and annual unaudited reports concerning the
Receivables. The Seller, as originator of the Trust, will also file or cause to
be filed with the Commission such periodic reports as are required under 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, 1999.
2
<PAGE>
SUMMARY
The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus. Capitalized terms
used and not otherwise defined herein shall have the meanings ascribed thereto
elsewhere in this Prospectus. See Index of Capitalized Terms at page 65 for the
location herein of defined terms.
<TABLE>
<S> <C>
Trust............... Honda Auto Receivables 1999-1 Owner Trust (the "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.
Owner Trustee....... The Bank of New York (Delaware) (the "Owner Trustee").
Indenture Trustee... Bankers Trust Company (the "Indenture Trustee" and,
together with the Owner Trustee, the "Trustees").
Securities The Trust will issue four classes of Notes (each, a
Offered............ "Class") pursuant to an indenture to be dated as of
January 1, 1999 (the "Indenture"), between the Trust and
the Indenture Trustee, as follows: (i) $179,424,000
aggregate principal amount of % Asset Backed Notes,
Class A-1 (the "Class A-1 Notes"), (ii) $195,000,000
aggregate principal amount of % Asset Backed Notes,
Class A-2 (the "Class A-2 Notes"), (iii) $208,000,000
aggregate principal amount of % Asset Backed Notes,
Class A-3 (the "Class A-3 Notes") and (iv) $110,608,000
aggregate principal amount of % Asset Backed Notes,
Class A-4 (the "Class A-4 Notes" and, together with the
Class A-1 Notes, the Class A-2 Notes and the Class A-3
Notes, the "Notes"). Payments of principal and interest on
the Notes will be made in accordance with the priorities
set forth under "Certain Information Regarding the
Securities -- Distributions on the Securities -- Deposits
to the Distribution Accounts; Priority of Payments". The
Notes will be secured by the assets of the Trust pursuant
to the Indenture.
Each Class of Notes will be issued in minimum
denominations of $1,000 and integral multiples of $1,000
in excess thereof. Definitive Notes will be issued only
under the limited circumstances described herein. See
"Description of the Notes -- Book-Entry Registration" and
"-- Definitive Notes".
Securities Not The Trust will also issue $36,475,751 aggregate principal
Offered............ amount of % Asset Backed Certificates (the
"Certificates" and, together with the Notes, the
"Securities") pursuant to an amended and restated trust
agreement to be dated as of January 1, 1999 (the "Trust
Agreement"), between the Seller and the Owner Trustee. The
Certificates will represent fractional undivided interests
in the Trust. Payments in respect of the Certificates will
be subordinated to payments on the Notes to the limited
extent described herein. The Certificates are not being
offered
</TABLE>
3
<PAGE>
<TABLE>
<S> <C>
hereby and initially will be retained by the Seller. The
information set forth in this Prospectus regarding the
Certificates is intended only to give the investors in the
Notes a fuller understanding of the Notes.
The Receivables..... On the date of initial issuance of the Securities (the
"Closing Date"), pursuant to a sale and servicing
agreement to be dated as of January 1, 1999 (the "Sale and
Servicing Agreement"), among the Trust, the Seller and the
Servicer, the Trust will purchase from the Seller a pool
of retail installment sale contracts (the "Receivables")
secured by the new or used Honda and Acura motor vehicles
financed thereby (the "Financed Vehicles"). The
Receivables will be purchased by the Seller from AHFC
pursuant to a receivables purchase agreement, to be dated
as of January 1, 1999 (the "Receivables Purchase
Agreement"), between the Seller and AHFC, providing for
such purchase on or prior to the Closing Date. The
Receivables will be selected by AHFC from its portfolio of
retail motor vehicle installment sale contracts based upon
the criteria to be specified in the Sale and Servicing
Agreement and described herein. As of January 1, 1999 (the
"Cutoff Date"), the Receivables had an aggregate unpaid
principal balance of $729,507,751.69 (the "Cutoff Date
Pool Balance"). Based on the Cutoff Date Pool Balance, the
Receivables had a weighted average annual percentage rate
(the "APR") of 7.03%, a weighted average original maturity
of approximately 53 months and a weighted average
remaining maturity of approximately 48 months. See "The
Receivables".
Distribution Distributions of interest and principal on the Securities
Dates.............. will be made on the fifteenth day of each month or, if any
such day is not a Business Day, on the next succeeding
Business Day (each, a "Distribution Date"), commencing
February 16, 1999. Payments on the Securities on each
Distribution Date will be paid to the holders of record of
the related Securities on the Business Day immediately
preceding such Distribution Date or, if Definitive Notes
are issued under the limited circumstances described
herein, on the last day of the immediately preceding month
(each, a "Record Date").
A "Business Day" will be any day other than a Saturday, a
Sunday or a day on which banking institutions or trust
companies in New York, New York, Newark, Delaware or Los
Angeles, California are authorized or obligated by law,
regulation, executive order or government decree to remain
closed.
To the extent not previously paid prior to such dates, the
outstanding principal amount of (i) the Class A-1 Notes
will be payable on the February 2000 Distribution Date
(the "Class A-1 Final Distribution Date"), (ii) the Class
A-2 Notes will be payable on the June 2001 Distribution
Date (the "Class A-2 Final Distribution Date"), (iii) the
Class A-3 Notes will be payable on the September 2002
Distribution Date (the "Class A-3 Final Distribution
Date") and (iv) the Class A-4 Notes will be payable on the
October 2004 Distribution Date (the "Class A-4 Final
Distribution Date" and, together with the Class A-1 Final
Distribution Date, the Class A-2 Final Distribution Date
and the Class A-3 Final Distribution Date, the "Final
Distribution Dates").
</TABLE>
4
<PAGE>
<TABLE>
<S> <C>
Terms of the The principal terms of the Notes will be as described
Notes.............. below:
A. Interest Rates... Interest will be borne on (i) the Class A-1 Notes at the
rate of % per annum (the "Class A-1 Rate"), (ii) the
Class A-2 Notes at the rate of % per annum (the "Class
A-2 Rate"), (iii) the Class A-3 Notes at the rate of %
per annum (the "Class A-3 Rate") and (iv) the Class A-4
Notes at the rate of % per annum (the "Class A-4 Rate"
and, together with the Class A-1 Rate, the Class A-2 Rate
and the Class A-3 Rate, the "Interest Rates"). Interest on
the Class A-1 Notes and the Class A-2 Notes will be
calculated on the basis of the actual number of days in
the related Accrual Period divided by 360 and interest on
the Class A-3 Notes and the Class A-4 Notes will be
calculated on the basis of a 360-day year consisting of
twelve 30-day months.
B. Interest......... Interest on the outstanding principal amount of each Class
of Notes will accrue at the related Interest Rate from and
including the most recent Distribution Date on which
interest has been paid (or from and including the Closing
Date with respect to the first Distribution Date) to but
excluding the current Distribution Date (each, an "Accrual
Period"). Interest on the Notes for any Distribution Date
due but not paid on such Distribution Date will be due on
the immediately succeeding Distribution Date, together
with, to the extent permitted by applicable law, interest
on such shortfall at the related Interest Rate. See
"Description of the Notes -- Payments of Interest" and
"Certain Information Regarding the Securities --
Distributions on the Securities -- Deposits to the
Distribution Accounts; Priority of Payments".
C. Principal........ On each Distribution Date, as described under "Certain
Information Regarding the Securities -- Distributions on
the Securities -- Deposits to the Distribution Accounts;
Priority of Payments", principal on the Notes will be
payable generally in an amount equal to the Note Per-
centage of the Principal Distributable Amount. Principal
payments on the Notes will be made from the Available
Amount after the Total Servicing Fee, non-recoverable
Advances and Trust Fees and Expenses have been paid and
after the Note Interest Distributable Amount has been
distributed. Allocations of principal payments will be
made to the Notes so that no principal payments will be
made on the (i) Class A-2 Notes until the Class A-1 Notes
have been paid in full, (ii) Class A-3 Notes until the
Class A-1 and Class A-2 Notes have been paid in full or
(iii) Class A-4 Notes until the Class A-1, Class A-2 and
Class A-3 Notes have been paid in full.
Notwithstanding the foregoing, on each Distribution Date
after the Notes have been accelerated following an Event
of Default, the Notes will receive 100% of the Principal
Distributable Amount until the Notes have been paid in
full. Such principal payments will be made to holders of
record of the Notes (the "Noteholders") on a pro rata
basis based on the principal balance of each Class of
outstanding Notes.
If the principal amount of a Class of Notes has not been
paid in full prior to its Final Distribution Date, the
Note Principal Distributable Amount for such Final
Distribution Date will, to the extent the remaining
Available Amount is sufficient, include an amount
sufficient to reduce the unpaid principal amount of such
Class of Notes to zero on
</TABLE>
5
<PAGE>
<TABLE>
<S> <C>
such Final Distribution Date. See "Description of the
Notes -- Payments of Principal" and "Certain Information
Regarding the Securities -- Distributions on the
Securities -- Deposits to the Distribution Accounts;
Priority of Payments".
D. Optional In the event of an Optional Termination, each Class of
Redemption......... outstanding Notes will be redeemed in whole, but not in
part, at a redemption price equal to the unpaid principal
amount of such Class of Notes plus accrued interest
thereon at the related Interest Rate. See "Summary --
Optional Termination" and "Description of the Notes --
Optional Redemption".
Terms of the The principal terms of the Certificates will be as
Certificates....... described below:
A. Interest......... On each Distribution Date, the Owner Trustee or the Paying
Agent will distribute to holders of record of the
Certificates (the "Certificateholders") as of the related
Record Date accrued interest for the related Accrual
Period at the rate of % per annum (the "Certificate
Rate") on the Certificate Balance as of the immediately
preceding Distribution Date (after giving effect to
distributions of principal to be made on such immediately
preceding Distribution Date) or, in the case of the first
Distribution Date, the Original Certificate Balance.
Interest on the Certificates will be calculated on the
basis of a 360-day year consisting of twelve 30-day
months. See "Description of the Certificates -- Distri-
butions of Interest" and "Certain Information Regarding
the Securities -- Distributions on the Securities --
Deposits to the Distribution Accounts; Priority of
Payments".
The "Certificate Balance" will initially equal $36,475,751
(the "Original Certificate Balance") and on any
Distribution Date will equal the Original Certificate
Balance reduced by all distributions of principal
previously made in respect of the Certificates.
Distributions on the Certificates will be subordinated to
payments of interest and principal on the Notes to the
limited extent described under "Description of the
Certificates" and "Certain Information Regarding the
Securities -- Distributions on the Securities".
B. Principal........ No principal will be paid on the Certificates until the
Distribution Date on which the principal amount of the
Class A-1 Notes has been reduced to zero. On such
Distribution Date and each Distribution Date thereafter
until the Class A-2, Class A-3 and Class A-4 Notes have
been paid in full, as described under "Certain Information
Regarding the Securities -- Distributions on the
Securities -- Deposits to the Distribution Accounts;
Priority of Payments", principal on the Certificates will
be payable in an amount equal to the Certificate
Percentage of the Principal Distributable Amount.
Principal payments on the Certificates will be made from
the Available Amount after the Total Servicing Fee, non-
recoverable Advances and Trust Fees and Expenses have been
paid, after the Note Distributable Amount has been paid,
after giving effect to any reduction in the Available
Amount by virtue of any deposit into the Reserve Fund and
after payment of interest to Certificateholders on such
Distribution Date.
</TABLE>
6
<PAGE>
<TABLE>
<S> <C>
Notwithstanding the foregoing, on each Distribution Date
after the Notes have been accelerated following an Event
of Default, the Certificates will not receive any of the
Principal Distributable Amount until the Notes have been
paid in full.
C. Optional In the event of an Optional Termination, the Certificates
Prepayment......... will be prepaid in whole, but not in part, at a prepayment
price equal to the Certificate Balance plus accrued
interest thereon at the Certificate Rate. See "Summary --
Optional Termination" and "Description of the Certificates
-- Optional Prepayment".
The Reserve Fund.... The Noteholders will be afforded certain limited
protection, to the extent described herein, against losses
in respect of the Receivables by the establishment of a
segregated trust account in the name of the Indenture
Trustee for the sole benefit of the Noteholders (the
"Reserve Fund").
The Reserve Fund will be funded by the Seller on the
Closing Date in an amount equal to $5,471,308.14 (the
"Reserve Fund Initial Deposit"). On each Distribution
Date, any Available Amount remaining after the Total
Servicing Fee, non-recoverable Advances and all Trust Fees
and Expenses have been paid and after the Noteholders have
been paid all interest and principal required to be paid
("Excess Amounts") will be deposited in the Reserve Fund
to the extent necessary to maintain the amount on deposit
in the Reserve Fund at the Specified Reserve Fund Balance.
The "Specified Reserve Fund Balance" for any Distribution
Date will be $5,471,308.14, or under certain
circumstances, the amount calculated as described under
"Certain Information Regarding the Securities -- The
Reserve Fund". On each Distribution Date, funds will be
withdrawn from the Reserve Fund for distribution to
Noteholders to cover any shortfalls in interest and
principal required to be paid on the Notes.
The Yield Supplement
Account............ On or prior to the Closing Date, a yield supplement
account will be established with the Indenture Trustee for
the benefit of the Noteholders and the Certificateholders
(collectively, the "Securityholders") (the "Yield
Supplement Account"). The Yield Supplement Account is de-
signed solely to supplement the interest collections on
those Receivables (the "Discount Receivables") that have
APRs which are less than the sum of (i) the Class A-4 Rate
and (ii) the Servicing Fee Rate (the "Required Rate").
The Yield Supplement Account will be funded by the Seller
on the Closing Date with an initial deposit in an amount
(the "Yield Supplement Account Deposit") to be specified
in the Indenture; provided, that such aggregate amount may
be discounted at a rate to be specified in the Sale and
Servicing Agreement.
On the Business Day immediately preceding each
Distribution Date (each, a "Deposit Date"), the Indenture
Trustee shall withdraw from monies on deposit in the Yield
Supplement Account and deposit into the Collection Account
to be included in amounts distributed on the related
Distribution Date (i) the aggregate amount by which one
month's interest on the Principal Balance as of the first
day of the
</TABLE>
7
<PAGE>
<TABLE>
<S> <C>
calendar month immediately preceding the month in which
such Distribution Date occurs (the "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 Amount") and (ii) after giving effect to
the withdrawal of the amount described in clause (i)
above, the amount by which the amount on deposit in the
Yield Supplement Account exceeds the maximum amount
required to be on deposit therein on the immediately
succeeding Distribution Date (together with the Yield
Supplement Amount, the "Yield Supplement Withdrawal
Amount"). On each Distribution Date, the amount required
to be on deposit in the Yield Supplement Account will
decline and be equal to the sum of all Yield Supplement
Amounts for all future Distribution Dates, assuming that
future scheduled payments on the Discount Receivables are
made on the date on which they are scheduled as being due.
The amount on deposit in the Yield Supplement Account will
decrease as payments are made with respect to the Yield
Supplement Amount and funds in excess of the maximum
required balance are released as described above. See
"Certain Information Regarding the Securities -- The Ac-
counts -- The Yield Supplement Account".
Advances............ On each Deposit Date, the Servicer will advance to the
Trust, in respect of the related Collection Period and
each (i) Precomputed Receivable, that portion, if any, of
the related Scheduled Payment that was not timely made
after application of any Payments Ahead (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 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" 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 in reimbursement of outstanding Simple
Interest Advances. The Servicer will be required to make
an Advance only to the extent that it determines such
Advance will be recoverable from future payments and
collections on or in respect of the related Receivable.
Upon the determination by the Servicer that such
reimbursement is unlikely, the Servicer will be entitled
to recover such non-recoverable Advances from payments and
collections on or in respect of other Receivables. See
"Certain Information Regarding the Securities --
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 respect of
each Collection Period in the form of any interest earned
from investment of monies on deposit in the Trust Accounts
(excluding the Yield Supplement Account and the Reserve
Fund) net of investment expenses and any losses
</TABLE>
8
<PAGE>
<TABLE>
<S> <C>
from such investments plus any late fees, prepayment
charges and other administrative fees and expenses or
similar charges received by the Servicer during such
Collection Period (collectively, the "Supplemental
Servicing Fee" and, together with the Servicing Fee, the
"Total Servicing Fee"). See "Certain Information Regarding
the Securities -- Servicing Compensation".
Optional The Seller or the Servicer, or any successor to the
Termination........ Servicer, may purchase all the Receivables 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 Cutoff Date Pool
Balance, at a purchase price determined as described under
"Certain Information Regarding the Securities --
Termination". The exercise of such purchase option is
referred to herein as an "Optional Termination".
Ratings............. It is a condition to the issuance of the Notes that the
Class A-1 Notes be rated F1+ by Fitch IBCA, Inc. ("Fitch
IBCA"), P-1 by Moody's Investors Service, Inc.
("Moody's"), A-1+ by Standard & Poor's Ratings Services, a
division of The McGraw-Hill Companies, Inc. ("Standard &
Poor's" and, together with Fitch IBCA and Moody's, the
"Rating Agencies"), and that the Class A-2, Class A-3 and
Class A-4 Notes each be rated Aaa by Moody's and AAA by
each of Standard & Poor's and Fitch IBCA. 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 Notes 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 on the Notes prior to their
respective Final Distribution Dates. See "Rating of the
Notes".
Tax Status.......... In the opinion of counsel to the Seller, for both federal
and California income tax purposes, the Notes will be
characterized as debt and the Trust will not be
characterized as an association (or a publicly traded
partnership) taxable as a corporation. Each Noteholder, by
the acceptance of a Note (or a beneficial interest
therein), will agree to treat the Notes as indebtedness.
See "Material Federal Income Tax Consequences" and
"Certain California Income Tax Consequences".
ERISA Subject to the considerations discussed under "ERISA
Considerations..... Considerations", the Notes may, in general, be purchased
by or on behalf of employee benefit plans that are subject
to the Employee Retirement Income Security Act of 1974, as
amended. Any benefit plan fiduciary considering purchasing
Notes should, among other things, consult with its counsel
regarding the availability of an exemption from the
prohibited transaction rules of ERISA and Section 4975 of
the Internal Revenue Code of 1986, as amended, and whether
such purchase is consistent with its fiduciary duties
under ERISA in determining whether all required conditions
have been satisfied. See "ERISA Considerations".
</TABLE>
9
<PAGE>
<TABLE>
<S> <C>
Legal Investment.... The Class A-1 Notes have been structured to be eligible
securities for purchase by money market funds under Rule
2a-7 of the Investment Company Act of 1940, as amended. A
money market fund should consult its legal advisors
regarding the eligibility of the Class A-1 Notes under
Rule 2a-7, the fund's investment policies and objectives
and an investment in the Class A-1 Notes.
</TABLE>
10
<PAGE>
RISK FACTORS
Prospective investors should consider the following risk factors in
considering the purchase of Notes.
PERFECTION OF SECURITY INTERESTS IN THE FINANCED VEHICLES
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 Sale and Servicing Agreement, the Seller will sell and assign its security
interests in the Financed Vehicles to the Trust. However, because of the
administrative burden and expense, neither AHFC, the Seller nor the Trustees
will amend any certificate of title to identify the Trust as the new secured
party on the certificates of title relating to the Financed Vehicles. In the
absence of such an amendment, the Trust may not have a perfected security
interest in the Financed Vehicles in all states.
If the protection provided to the Noteholders by the Reserve Fund and by the
subordination of payments on the Certificates to the extent described herein is
insufficient, the Noteholders will have to look to payments made by or on behalf
of the obligors on or in respect of the Receivables (the "Obligors"), amounts in
deposit in the Yield Supplement Account, 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 Notes. In such event, certain
factors, such as the possibility that the Trust 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.
Noteholders may thus be subject to delays in payment and may incur losses on
their investment in the Notes as a result of defaults or delinquencies by
Obligors and because of depreciation in the value of the related Financed
Vehicles. See "Certain Information Regarding the Securities -- The Reserve
Fund", "-- Insurance on Financed Vehicles" and "Certain Legal Aspects of the
Receivables".
DELINQUENCIES, REPOSSESSIONS AND NET LOSSES
The number of delinquencies and repossessions and the amount of net losses
in AHFC's portfolio of new and used Honda and Acura motor vehicle retail
installment sale and conditional sale contracts ("installment sale contracts")
have increased as the portfolio has grown. See "American Honda Finance
Corporation -- Delinquency, Repossession and Loan Loss Information". If the
protection provided to the Noteholders by the subordination of the Certificates
and by the Reserve Fund is insufficient, as a result of defaults or
delinquencies on the Receivables, Noteholders could incur a loss on their
investment.
AHFC HISTORICAL DELINQUENCY EXPERIENCE MAY BE MATERIALLY HIGHER IF REPORTED
DIFFERENTLY
AHFC considers an installment sale contract to be past due or delinquent for
servicing and enforcement of collection purposes when the obligor fails to make
at least 60% of the scheduled monthly payment on a cumulative basis (after
giving effect to any past due payments) by the related due date. If AHFC
considered an installment sale contract to be delinquent when an obligor failed
to pay any portion of a scheduled monthly payment, then its historical
delinquency experience may have been materially higher in each period for which
historical delinquency information has been disclosed in this prospectus. See
"American Honda Finance Corporation -- Servicing of Motor Vehicle Loans".
RISKS DUE TO POTENTIAL YEAR 2000 ISSUES
The inability of AHFC and its vendors and the parties with whom it contracts
to address the necessary year 2000 modifications of computerized information
systems could result in a significant adverse effect on AHFC's operations and
financial results, including the inability to collect receivables, pay
obligations and process loan and obligor data. Any such inability could have a
material adverse effect on Noteholders. See "American Honda Finance Corporation
- - -- Year 2000 Issues" and "Description of the Notes -- DTC's Year 2000 Efforts".
11
<PAGE>
FORMATION OF THE TRUST
GENERAL
The Trust is a business trust formed under the laws of the State of Delaware
pursuant to the Trust Agreement for the transactions described herein. The Trust
will not engage in any activity other than (i) acquiring, holding and managing
the Receivables and the other assets of the Trust and proceeds therefrom; (ii)
issuing the Notes and the Certificates; (iii) making payments on the Notes and
the Certificates; and (iv) engaging in other activities that are necessary,
suitable or convenient to accomplish the foregoing purposes or are incidental
thereto or connected therewith.
On the Closing Date, the Seller will sell and assign the Receivables and the
related assets to the Trust. AHFC will act as Servicer of the Receivables and
will be compensated for such services. To facilitate servicing and to minimize
administrative burden and expense, pursuant to the Sale and Servicing Agreement,
the Servicer will be appointed custodian for the Receivables and documents
relating thereto by the Owner 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 Trust. In the absence of such
an amendment, the Trust's security interest in the Financed Vehicles may not be
perfected in all states. See "Certain Information Regarding the Securities --
Sale and Assignment of the Receivables" and "Certain Legal Aspects of the
Receivables -- Security Interests in the Financed Vehicles".
The Trust's principal offices will be in Newark, Delaware in care of The
Bank of New York (Delaware), as Owner Trustee, at the address listed below under
"The Owner Trustee".
CAPITALIZATION
The following table illustrates the capitalization of the Trust as of the
Closing Date, as if the issuance and sale of the Securities had taken place on
such date:
<TABLE>
<S> <C>
Class A-1 Notes....................................... $179,424,000
Class A-2 Notes....................................... 195,000,000
Class A-3 Notes....................................... 208,000,000
Class A-4 Notes....................................... 110,608,000
Certificates.......................................... 36,475,751
-----------
Total............................................. $729,507,751
-----------
-----------
</TABLE>
THE OWNER TRUSTEE
The Bank of New York (Delaware) will be the Owner Trustee under the Trust
Agreement. The Bank of New York (Delaware) is a Delaware corporation and its
Corporate Trust Office is located at White Clay Center, Route 273, Newark,
Delaware 19711.
The Owner Trustee will have the rights and duties set forth herein under
"Certain Information Regarding the Securities -- The Trustees" and "-- Duties of
the Trustees".
12
<PAGE>
PROPERTY OF THE TRUST
Each Note will represent an obligation of, and each Certificate will
represent a fractional undivided interest in, the Trust. The property of the
Trust will include, among other things, the Receivables and certain monies due
thereunder on and after the Cutoff Date. The Receivables were originated by
motor vehicle dealers (the "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 and the related assets to the Seller pursuant to
the Receivables Purchase Agreement. The Seller will, in turn, sell the
Receivables and the related assets to the Trust pursuant to the Sale and
Servicing Agreement.
During the term of the Sale and Servicing 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 Trust Accounts; (ii)
security interests in the Financed Vehicles and any accessions thereto; (iii)
the rights to 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 of the Seller under the Receivables Purchase Agreement and
Sale and Servicing Agreement; (vi) the right to realize upon any property
(including the right to receive future proceeds from liquidating the assets)
that shall have secured a Receivable and have been repossessed on behalf of the
Trust; and (vii) any and all proceeds of the foregoing. The Reserve Fund will be
maintained for the benefit of the Noteholders and the Yield Supplement Account
will be maintained for the benefit of the Securityholders.
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 Trust, the Sale and Servicing Agreement will require that
any recovery by AHFC pursuant to any Dealer Recourse be deposited in the
Collection Account in satisfaction of its repurchase obligations under the
Receivables Purchase Agreement. It is expected that substantially all sales by
the Dealers of installment sale contracts to AHFC do not 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
monthly payment on each Receivable (each, a "Scheduled Payment") 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").
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
13
<PAGE>
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 one-twelfth of the 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 Sale and Servicing Agreement on an
actuarial basis, under which each Scheduled Payment, including the final
Scheduled Payment, consists of an amount of interest equal to one-twelfth 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 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
the 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 in no event cause the unrebated portion to be less
than 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 require rebates based on the actuarial method. Distributions to
Noteholders will not be affected by Rule of 78s rebates under the Rule of 78s
Receivables because pursuant to the Sale and Servicing 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
underwriting standards. See "American Honda Finance Corporation -- Underwriting
of Motor Vehicle Loans". The Receivables were randomly selected from AHFC's
portfolio of installment sale contracts that met the selection criteria
described herein and under "Certain Information Regarding the Securities -- Sale
and Assignment of the Receivables". Such selection criteria included, among
other things, that (i) each Receivable is secured by a new or used Honda or
Acura motor vehicle; (ii) each Receivable was originated in the United States
and the Obligor is not a federal, state or local governmental entity; (iii) each
Receivable provides for level 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
14
<PAGE>
originated prior to January 1, 1999; (v) each Receivable had 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 20.31%; (vii) no portion of any payment on each Receivable shall be 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 and used Honda and Acura motor
vehicles manufactured by Honda Motor Co., Ltd. and its affiliates. Based on the
Cutoff Date Pool Balance, 91.35% and 8.65% of the Receivables represented
financing of Honda motor vehicles and Acura motor vehicles, respectively, and
91.50% and 8.50% of the Receivables represented financing of new and used motor
vehicles, respectively. Based on the addresses of the originating Dealers, the
Receivables were originated in 48 states, excluding New York and Wisconsin.
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>
Aggregate Cutoff Date Principal Balance..................... $729,507,751.69
<S> <C>
Number of Receivables....................................... 58,899
Average Cutoff Date Principal Balance....................... $12,385.74
Average Original Amount Financed............................ $14,576.48
Range of Original Amounts Financed........................ $1,176.35 to $55,779.32
Weighted Average APR (1).................................... 7.03%
Range of APRs............................................. 1.90% to 20.31%
Weighted Average Original Maturity (1)...................... 53.38 months
Range of Original Maturities.............................. 12 months to 60 months
Weighted Average Remaining Maturity (1)..................... 47.86 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.
15
<PAGE>
DISTRIBUTION OF THE RECEIVABLES BY APR
<TABLE>
<CAPTION>
PERCENTAGE OF PERCENTAGE OF
AGGREGATE CUTOFF DATE CUTOFF DATE
NUMBER OF NUMBER OF PRINCIPAL POOL
RANGE OF APRS RECEIVABLES RECEIVABLES BALANCE BALANCE
- - --------------------------------------------- ----------- ------------- ----------------- -------------
<S> <C> <C> <C> <C>
1.000% to 1.999%........................... 3 0.01% $ 12,669.33 0.00%
2.000% to 2.999%........................... 74 0.13 448,658.77 0.06
3.000% to 3.999%........................... 17,091 29.02 194,270,257.80 26.63
4.000% to 4.999%........................... 4,950 8.40 58,670,325.21 8.04
5.000% to 5.999%........................... 4,293 7.29 54,821,018.95 7.51
6.000% to 6.999%........................... 2,230 3.79 31,779,432.74 4.36
7.000% to 7.999%........................... 9,325 15.83 130,821,779.70 17.93
8.000% to 8.999%........................... 7,406 12.57 96,683,659.65 13.25
9.000% to 9.999%........................... 5,013 8.51 62,284,392.00 8.54
10.000% to 10.999%........................... 3,161 5.37 39,596,849.61 5.43
11.000% to 11.999%........................... 3,375 5.73 41,648,844.83 5.71
12.000% to 12.999%........................... 1,106 1.88 11,558,276.89 1.58
13.000% to 13.999%........................... 525 0.89 4,581,155.96 0.63
14.000% to 14.999%........................... 238 0.40 1,696,571.37 0.23
15.000% to 15.999%........................... 95 0.16 543,672.72 0.07
16.000% to 16.999%........................... 6 0.01 33,085.93 0.00
17.000% to 17.999%........................... 5 0.01 38,599.04 0.01
18.000% to 18.999%........................... 1 0.00 4,154.90 0.00
19.000% to 19.999%........................... 1 0.00 4,907.08 0.00
20.000% to 20.999%........................... 1 0.00 9,439.21 0.00
----------- ------ ----------------- ------
Total...................................... 58,899 100.00%(1) $ 729,507,751.69 100.00%(1)
----------- ------ ----------------- ------
----------- ------ ----------------- ------
</TABLE>
- - --------------
(1) Percentages may not add up to 100% due to rounding.
16
<PAGE>
DISTRIBUTION OF THE RECEIVABLES BY STATE
<TABLE>
<CAPTION>
PERCENTAGE OF
CUTOFF DATE
CUTOFF DATE POOL
STATE(1) PRINCIPAL BALANCE BALANCE
- - ---------------------------------------- ----------------- -------------
<S> <C> <C>
Alabama................................. $ 7,881,354.11 1.08%
Alaska.................................. 78,018.52 0.01
Arizona................................. 7,347,110.72 1.01
Arkansas................................ 2,640,725.50 0.36
California.............................. 248,527,827.10 34.07
Colorado................................ 5,486,565.44 0.75
Connecticut............................. 18,798,613.59 2.58
Delaware................................ 3,038,567.10 0.42
Florida................................. 23,500,561.16 3.22
Georgia................................. 24,186,840.29 3.32
Hawaii.................................. 2,671,042.20 0.37
Idaho................................... 724,993.90 0.10
Illinois................................ 42,114,913.38 5.77
Indiana................................. 6,533,737.06 0.90
Iowa.................................... 2,779,500.47 0.38
Kansas.................................. 2,384,965.41 0.33
Kentucky................................ 3,709,342.74 0.51
Louisiana............................... 8,613,113.44 1.18
Maine................................... 1,813,702.91 0.25
Maryland................................ 34,107,062.10 4.68
Massachusetts........................... 29,951,504.11 4.11
Michigan................................ 13,204,652.71 1.81
Minnesota............................... 7,816,604.49 1.07
Mississippi............................. 2,429,602.24 0.33
Missouri................................ 6,569,839.17 0.90
Montana................................. 290,562.13 0.04
Nebraska................................ 1,069,430.35 0.15
Nevada.................................. 2,393,406.20 0.33
New Hampshire........................... 3,784,101.16 0.52
New Jersey.............................. 42,480,653.05 5.82
New Mexico.............................. 1,772,647.75 0.24
North Carolina.......................... 15,195,717.35 2.08
North Dakota............................ 378,826.35 0.05
Ohio.................................... 15,958,193.30 2.19
Oklahoma................................ 2,018,253.75 0.28
Oregon.................................. 5,779,154.72 0.79
Pennsylvania............................ 27,427,760.23 3.76
Rhode Island............................ 2,214,883.87 0.30
South Carolina.......................... 7,720,751.95 1.06
South Dakota............................ 344,932.63 0.05
Tennessee............................... 10,562,569.97 1.45
Texas................................... 45,919,051.16 6.29
Utah.................................... 2,031,442.59 0.28
Vermont................................. 1,836,126.87 0.25
Virginia................................ 21,774,673.56 2.98
Washington.............................. 10,819,903.76 1.48
West Virginia........................... 637,762.54 0.09
Wyoming................................. 186,186.59 0.03
----------------- ------
Total................................. $ 729,507,751.69 100.00%(2)
----------------- ------
----------------- ------
</TABLE>
- - --------------
(1) Based on the addresses of the originating Dealers.
(2) Percentages may not add up to 100% due to rounding.
17
<PAGE>
WEIGHTED AVERAGE LIFE OF THE NOTES
The weighted average life of the Notes will generally be influenced by the
rate at which the principal balances of the Receivables are paid, which payment
may be in the form of scheduled amortization or prepayments.
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 "Certain Information Regarding the
Securities -- 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, repurchases by the Seller or the Servicer, as the case may
be, of certain Receivables and the sale of the Receivables and other property of
the Trust following the occurrence of certain specified Events of Default, 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 generally 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 Noteholders will be borne entirely by
the Noteholders. In addition, early retirement of the Notes 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 in
connection with an Optional Termination. See "Certain Information Regarding the
Securities -- 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 motor vehicle retail
installment sale contracts included in its portfolio and its experience 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.
Prepayments on motor vehicle receivables can be measured relative to a
prepayment standard or model. The model used herein, the Absolute Prepayment
Model ("ABS"), represents an assumed rate of prepayment each month relative to
the original number of receivables in a pool of receivables. ABS further assumes
that all the receivables are the same size and amortize at the same rate and
that each receivable in each month of its life will either be paid as scheduled
or be prepaid in full. For example, in a pool of receivables originally
containing 10,000 receivables, a 1% ABS rate means that 100 receivables prepay
each month. ABS does not purport to be an historical description of prepayment
experience or a prediction of the anticipated rate of prepayment of any pool of
receivables, including the Receivables.
In light of the foregoing considerations, there can be no assurance as to
the amount of principal payments to be made on the Notes on each Distribution
Date since such amount will depend, in part, on the amount of principal
collected on the related Receivables during the related Collection Period.
Unless the Notes have been accelerated following an Event of Default, no
principal payments will be made on the (i) Class A-2 Notes until the Class A-1
Notes have been paid in full, (ii) Class A-3 Notes until the Class A-1 and Class
A-2 Notes have been paid in full and (iii) the Class A-4 Notes until the Class
A-1, Class A-2 and Class A-3 Notes have been paid in full. Additionally, no
principal payments will be made on the Certificates until the Class A-1 Notes
have been paid in full.
18
<PAGE>
Because the rate of distribution of principal on the Notes will depend on
the rate of payment (including prepayments) on the Receivables, the final
distribution on each Class of Notes could occur significantly earlier than the
related Final Distribution Date. Any reinvestment risk resulting from a faster
or slower incidence of payments on the Receivables will be borne entirely by the
related Noteholders.
The tables captioned "Percent of Initial Class A-1 Note and Class A-2 Note
Principal Balances at Various ABS Percentages" and "Percent of Initial Class A-3
Note and Class A-4 Note Principal Balances at Various ABS Percentages" (the "ABS
Tables") have been prepared on the basis of the characteristics of the
Receivables. The ABS Tables assume that (a) the Receivables prepay in full at
the specified constant percentage of ABS monthly, (b) no defaults,
delinquencies, losses or repurchases occur with respect to the Receivables, (c)
each Scheduled Payment on the Receivables is made on the last day of each month
and each month has 30 days, (d) payments on the Notes are made on each
Distribution Date (and each such date is assumed to be the fifteenth day of each
applicable month) and (e) an Optional Termination occurs at the earliest time
permitted, causing a redemption of the outstanding Notes. The ABS Tables
indicate the projected weighted average life of each Class of Notes and set
forth the percent of the initial principal amount of each Class of Notes that is
projected to be outstanding after each of the Distribution Dates shown at
various constant ABS percentages.
The ABS Tables also assume that the Receivables have been aggregated into
hypothetical pools with all of the Receivables within each such pool having the
following characteristics and that the level of scheduled monthly payment for
each of the pools (which is based on its aggregate principal balance, APR,
original number of scheduled payments and remaining number of scheduled payments
as of the Cutoff Date) will be such that each pool will be fully amortized by
the end of its remaining term to maturity. Each hypothetical pool has an assumed
cutoff date of the Cutoff Date.
<TABLE>
<CAPTION>
REMAINING TERM TO
AGGREGATE MATURITY SEASONING
POOL PRINCIPAL BALANCE APR (IN MONTHS) (IN MONTHS)
- - ------------------------------ ----------------- --------- ----------------------- -----------------
<S> <C> <C> <C> <C>
1 $ 8,474,726.65 9.082% 9 48
2 $ 13,116,391.51 8.678% 17 30
3 $ 63,010,845.11 6.273% 32 7
4 $ 281,820,979.83 5.467% 43 5
5 $ 363,084,808.59 8.275% 56 3
</TABLE>
The actual characteristics and performance of the Receivables will differ
from the assumptions used in constructing the ABS Tables. The assumptions used
are hypothetical and have been provided only to give a general sense of how the
principal cash flows might behave under varying prepayment scenarios. For
example, it is very unlikely that the Receivables will prepay at a constant
level of ABS until maturity or that all of the Receivables will prepay at the
same level of ABS. Moreover, the diverse terms of Receivables within each of the
hypothetical pools could produce slower or faster principal distributions than
indicated in the ABS Tables at the various constant percentages of ABS
specified, even if the original and remaining terms to maturity of the
Receivables are as assumed. Any difference between such assumptions and the
actual characteristics and performance of the Receivables, or actual prepayment
experience, will affect the percentages of initial balances outstanding over
time and the weighted average lives of each Class of Notes.
THE FOLLOWING ABS TABLES HAVE BEEN PREPARED BASED ON THE ASSUMPTIONS
DESCRIBED ABOVE (INCLUDING THE ASSUMPTIONS REGARDING THE CHARACTERISTICS AND
PERFORMANCE OF THE RECEIVABLES, WHICH WILL DIFFER FROM THE ACTUAL
CHARACTERISTICS AND PERFORMANCE THEREOF) AND SHOULD BE READ IN CONJUNCTION
THEREWITH.
19
<PAGE>
PERCENT OF INITIAL CLASS A-1 NOTE AND CLASS A-2 NOTE PRINCIPAL BALANCES AT
VARIOUS ABS PERCENTAGES
<TABLE>
<CAPTION>
CLASS A-2
CLASS A-1 NOTES NOTES
--------------------------------------------------------------- -----------
DISTRIBUTION DATE 0.5% 1.0% 1.5% 1.7% 2.0% 0.5%
- - -------------------------------------------- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Closing Date................................ 100% 100% 100% 100% 100% 100%
February 1999............................... 90 88 85 84 81 100
March 1999.................................. 80 75 71 68 63 100
April 1999.................................. 69 63 56 53 47 100
May 1999.................................... 59 51 42 38 31 100
June 1999................................... 49 39 29 24 16 100
July 1999................................... 39 27 15 10 1 100
August 1999................................. 29 16 2 0 0 100
September 1999.............................. 19 4 0 0 0 100
October 1999................................ 9 0 0 0 0 100
November 1999............................... 0 0 0 0 0 100
December 1999............................... 0 0 0 0 0 92
January 2000................................ 0 0 0 0 0 83
February 2000............................... 0 0 0 0 0 75
March 2000.................................. 0 0 0 0 0 67
April 2000.................................. 0 0 0 0 0 59
May 2000.................................... 0 0 0 0 0 51
June 2000................................... 0 0 0 0 0 43
July 2000................................... 0 0 0 0 0 36
August 2000................................. 0 0 0 0 0 28
September 2000.............................. 0 0 0 0 0 21
October 2000................................ 0 0 0 0 0 13
November 2000............................... 0 0 0 0 0 6
December 2000............................... 0 0 0 0 0 0
January 2001................................ 0 0 0 0 0 0
February 2001............................... 0 0 0 0 0 0
March 2001.................................. 0 0 0 0 0 0
April 2001.................................. 0 0 0 0 0 0
May 2001.................................... 0 0 0 0 0 0
June 2001................................... 0 0 0 0 0 0
July 2001................................... 0 0 0 0 0 0
August 2001................................. 0 0 0 0 0 0
September 2001.............................. 0 0 0 0 0 0
October 2001................................ 0 0 0 0 0 0
November 2001............................... 0 0 0 0 0 0
December 2001............................... 0 0 0 0 0 0
January 2002................................ 0 0 0 0 0 0
February 2002............................... 0 0 0 0 0 0
March 2002.................................. 0 0 0 0 0 0
April 2002.................................. 0 0 0 0 0 0
May 2002.................................... 0 0 0 0 0 0
June 2002................................... 0 0 0 0 0 0
July 2002................................... 0 0 0 0 0 0
August 2002................................. 0 0 0 0 0 0
September 2002.............................. 0 0 0 0 0 0
Weighted Average Life (years)(1)............ 0.42 0.35 0.30 0.28 0.25 1.36
<CAPTION>
DISTRIBUTION DATE 1.0% 1.5% 1.7% 2.0%
- - -------------------------------------------- ----- ----- ----- -----
<S> <C> <C> <C> <C>
Closing Date................................ 100% 100% 100% 100%
February 1999............................... 100 100 100 100
March 1999.................................. 100 100 100 100
April 1999.................................. 100 100 100 100
May 1999.................................... 100 100 100 100
June 1999................................... 100 100 100 100
July 1999................................... 100 100 100 100
August 1999................................. 100 100 96 88
September 1999.............................. 100 90 85 76
October 1999................................ 94 79 73 64
November 1999............................... 85 69 62 52
December 1999............................... 75 58 51 40
January 2000................................ 66 48 41 29
February 2000............................... 57 38 30 18
March 2000.................................. 48 29 20 8
April 2000.................................. 40 19 11 0
May 2000.................................... 31 10 1 0
June 2000................................... 22 1 0 0
July 2000................................... 14 0 0 0
August 2000................................. 6 0 0 0
September 2000.............................. 0 0 0 0
October 2000................................ 0 0 0 0
November 2000............................... 0 0 0 0
December 2000............................... 0 0 0 0
January 2001................................ 0 0 0 0
February 2001............................... 0 0 0 0
March 2001.................................. 0 0 0 0
April 2001.................................. 0 0 0 0
May 2001.................................... 0 0 0 0
June 2001................................... 0 0 0 0
July 2001................................... 0 0 0 0
August 2001................................. 0 0 0 0
September 2001.............................. 0 0 0 0
October 2001................................ 0 0 0 0
November 2001............................... 0 0 0 0
December 2001............................... 0 0 0 0
January 2002................................ 0 0 0 0
February 2002............................... 0 0 0 0
March 2002.................................. 0 0 0 0
April 2002.................................. 0 0 0 0
May 2002.................................... 0 0 0 0
June 2002................................... 0 0 0 0
July 2002................................... 0 0 0 0
August 2002................................. 0 0 0 0
September 2002.............................. 0 0 0 0
Weighted Average Life (years)(1)............ 1.16 1.00 0.94 0.86
</TABLE>
- - ------------------
(1) The weighted average life of a Note is determined by (a) multiplying the
amount of each principal payment of such Note by the number of years from
the date of the issuance of such Note to the related Distribution Date, (b)
adding the results and (c) dividing the sum by the related initial principal
amount of such Note.
20
<PAGE>
PERCENT OF INITIAL CLASS A-3 NOTE AND CLASS A-4 NOTE PRINCIPAL BALANCES AT
VARIOUS ABS PERCENTAGES
<TABLE>
<CAPTION>
CLASS A-4
CLASS A-3 NOTES NOTES
--------------------------------------------------------------- -----------
DISTRIBUTION DATE 0.5% 1.0% 1.5% 1.7% 2.0% 0.5%
- - -------------------------------------------- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Closing Date................................ 100% 100% 100% 100% 100% 100%
February 1999............................... 100 100 100 100 100 100
March 1999.................................. 100 100 100 100 100 100
April 1999.................................. 100 100 100 100 100 100
May 1999.................................... 100 100 100 100 100 100
June 1999................................... 100 100 100 100 100 100
July 1999................................... 100 100 100 100 100 100
August 1999................................. 100 100 100 100 100 100
September 1999.............................. 100 100 100 100 100 100
October 1999................................ 100 100 100 100 100 100
November 1999............................... 100 100 100 100 100 100
December 1999............................... 100 100 100 100 100 100
January 2000................................ 100 100 100 100 100 100
February 2000............................... 100 100 100 100 100 100
March 2000.................................. 100 100 100 100 100 100
April 2000.................................. 100 100 100 100 98 100
May 2000.................................... 100 100 100 100 88 100
June 2000................................... 100 100 100 92 79 100
July 2000................................... 100 100 92 84 71 100
August 2000................................. 100 100 84 76 62 100
September 2000.............................. 100 99 77 68 54 100
October 2000................................ 100 91 69 60 46 100
November 2000............................... 100 84 62 53 38 100
December 2000............................... 99 77 55 45 31 100
January 2001................................ 92 70 48 38 24 100
February 2001............................... 85 63 41 31 17 100
March 2001.................................. 78 57 34 25 11 100
April 2001.................................. 71 50 28 19 5 100
May 2001.................................... 65 44 22 13 0 100
June 2001................................... 58 37 16 7 0 100
July 2001................................... 51 31 10 1 0 100
August 2001................................. 45 25 4 0 0 100
September 2001.............................. 38 19 0 0 0 100
October 2001................................ 32 14 0 0 0 100
November 2001............................... 27 8 0 0 0 100
December 2001............................... 21 3 0 0 0 100
January 2002................................ 16 0 0 0 0 100
February 2002............................... 10 0 0 0 0 100
March 2002.................................. 4 0 0 0 0 100
April 2002.................................. 0 0 0 0 0 98
May 2002.................................... 0 0 0 0 0 88
June 2002................................... 0 0 0 0 0 77
July 2002................................... 0 0 0 0 0 67
August 2002................................. 0 0 0 0 0 57
September 2002.............................. 0 0 0 0 0 0
Weighted Average Life (years)(1)............ 2.54 2.27 2.00 1.89 1.73 3.54
<CAPTION>
DISTRIBUTION DATE 1.0% 1.5% 1.7% 2.0%
- - -------------------------------------------- ----- ----- ----- -----
<S> <C> <C> <C> <C>
Closing Date................................ 100% 100% 100% 100%
February 1999............................... 100 100 100 100
March 1999.................................. 100 100 100 100
April 1999.................................. 100 100 100 100
May 1999.................................... 100 100 100 100
June 1999................................... 100 100 100 100
July 1999................................... 100 100 100 100
August 1999................................. 100 100 100 100
September 1999.............................. 100 100 100 100
October 1999................................ 100 100 100 100
November 1999............................... 100 100 100 100
December 1999............................... 100 100 100 100
January 2000................................ 100 100 100 100
February 2000............................... 100 100 100 100
March 2000.................................. 100 100 100 100
April 2000.................................. 100 100 100 100
May 2000.................................... 100 100 100 100
June 2000................................... 100 100 100 100
July 2000................................... 100 100 100 100
August 2000................................. 100 100 100 100
September 2000.............................. 100 100 100 100
October 2000................................ 100 100 100 100
November 2000............................... 100 100 100 100
December 2000............................... 100 100 100 100
January 2001................................ 100 100 100 100
February 2001............................... 100 100 100 100
March 2001.................................. 100 100 100 100
April 2001.................................. 100 100 100 100
May 2001.................................... 100 100 100 97
June 2001................................... 100 100 100 87
July 2001................................... 100 100 100 77
August 2001................................. 100 100 92 67
September 2001.............................. 100 98 82 58
October 2001................................ 100 89 74 0
November 2001............................... 100 80 66 0
December 2001............................... 100 72 58 0
January 2002................................ 97 64 0 0
February 2002............................... 88 57 0 0
March 2002.................................. 79 0 0 0
April 2002.................................. 71 0 0 0
May 2002.................................... 62 0 0 0
June 2002................................... 0 0 0 0
July 2002................................... 0 0 0 0
August 2002................................. 0 0 0 0
September 2002.............................. 0 0 0 0
Weighted Average Life (years)(1)............ 3.30 3.01 2.86 2.62
</TABLE>
- - ------------------
(1) The weighted average life of a Note is determined by (a) multiplying the
amount of each principal payment of such Note by the number of years from
the date of the issuance of such Note to the related Distribution Date, (b)
adding the results and (c) dividing the sum by the related initial principal
amount of such Note.
21
<PAGE>
USE OF PROCEEDS
The net proceeds from the sale of the Notes (I.E., the proceeds of the
public offering of the Notes minus expenses relating thereto) will be applied by
the Seller to the purchase of the Receivables from AHFC.
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 securities similar to the Securities 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 and
its wholly owned subsidiary, Honda Canada Finance, Inc. ("HCFI"), provide
wholesale and retail financing to authorized dealers of Honda and Acura motor
vehicles, Honda motorcycles, including scooters and all terrain vehicles, and
power products such as lawn and garden products, snow throwers, water pumps,
outboard motors, outboard marine engines and generators, and Honda and Acura
parts and accessories to their customers in the United States and Canada. AHFC
and HCFI also offer retail leasing for Honda and Acura motor vehicles throughout
the United States and Canada. AHFC and its wholly owned subsidiary, American
Honda Service Contracts Corporation, administer the sale of vehicle service
contracts for AHMC throughout the United States. AHFC has three wholly owned
special purpose finance subsidiaries, American Honda Receivables Corp., American
Honda Receivables Corp. II and Honda Titling Inc.
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 installment sale contracts secured by new and used Honda and
Acura motor vehicles from approximately 1,256 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 motor
vehicle to be financed.
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
22
<PAGE>
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 and
the decision to grant or deny credit is made at the appropriate management
level. 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 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 an installment sale contract secured or, in the case of used
motor vehicles, the NADA average trade-in value (as adjusted for higher/lower
mileage) 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 an installment sale contract to be past due or delinquent for
servicing and enforcement of collection purposes when the obligor fails to make
at least 60% of a scheduled payment on a cumulative basis (after giving effect
to any past due payments) 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 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. See "Risk Factors -- AHFC Historical Delinquency Experience May Be
Materially Higher If Reported Differently".
YEAR 2000 ISSUES
AHFC has an ongoing program designed to address the potential impact of the
year 2000 on the ability of AHFC's computerized information systems to
accurately process information that may be date sensitive. AHFC has identified
the critical data storage and operating systems and developed plans to ensure
the readiness of AHFC's system to process dates beyond the year 2000. It is
anticipated that AHFC's systems will be year 2000 compliant by the end of 1999.
The inability of AHFC and its vendors and the parties with whom it contracts
to address the necessary year 2000 modifications of computerized information
systems could result in a significant adverse effect on AHFC's operations and
financial results, including the inability to collect receivables, pay
obligations and
23
<PAGE>
process loan and obligor data. Any such inability could have a material adverse
effect on Noteholders. See "Risk Factors -- Risks Due To Potential Year 2000
Issues" and "Description of the Notes -- DTC's Year 2000 Efforts".
FORWARD LOOKING STATEMENTS
Certain statements included or incorporated by reference herein constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995, that involve a number of risks and uncertainties.
Certain such forward-looking statements can be identified by the use of forward-
looking terminology such as "believes," "expects," "may," "will," "should,"
"seeks," or "anticipates" or similar expressions or the negative thereof or
other variations thereof or comparable terminology, or by discussions of
strategy, plans or intentions. In addition, all information included herein with
respect to projected or future results of operations, financial condition,
financial performance or other financial or statistical matters constitute such
forward-looking statements. Such forward-looking statements are necessarily
dependent on assumptions, data or methods that may be incorrect or imprecise and
that may be incapable of being realized and in some instances are based on
consensus estimates of analysts not affiliated with the Seller. The following
factors, among others, could cause actual results and other matters to differ
materially from those in such forward-looking statements: increases in defaults
by obligors on installment sale contracts; increases in the provision for credit
losses for installment sale contracts; renewal or prepayment of installment sale
contracts prior to contractual maturity dates; the highly competitive nature of
the motor vehicle financing business; government regulation and tax matters; the
outcome of pending or threatened legal or regulatory disputes and proceedings;
credit and other risks of lending and investment activities; and changes in
regional and national business and economic conditions and inflation.
DELINQUENCY, REPOSSESSION AND LOAN LOSS INFORMATION
Set forth below is certain information concerning AHFC's experience with
respect to its portfolio of new and used Honda and Acura motor vehicle
installment sale contracts, which includes contracts that have been sold but are
still being serviced by AHFC. 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.
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 an 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 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 -- AHFC Historical
Delinquency Experience May Be Materially Higher If Reported Differently" and "--
Delinquencies, Repossessions and Net Losses".
24
<PAGE>
IN THE TABLE BELOW, THE PERIOD OF DELINQUENCY IS BASED ON THE NUMBER OF DAYS
MORE THAN 40% OF A SCHEDULED PAYMENT ON A CUMULATIVE BASIS IS CONTRACTUALLY PAST
DUE. IF THE PERIOD OF DELINQUENCY USED BY AHFC WAS BASED ON THE NUMBER OF DAYS
ANY PORTION OF A SCHEDULED PAYMENT ON A CUMULATIVE BASIS WAS CONTRACTUALLY PAST
DUE, THEN ITS HISTORICAL DELINQUENCY EXPERIENCE MAY HAVE BEEN MATERIALLY HIGHER
IN EACH OF THE YEARS PRESENTED BELOW.
DELINQUENCY EXPERIENCE (1)
<TABLE>
<CAPTION>
AT MARCH 31,
AT OCTOBER 31, ------------------------------------------
1998 1998 1997 1996 1995
--------------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Principal Amount Outstanding (2)................... $ 3,958,102 $2,929,360 $2,486,957 $2,149,145 $1,396,919
Delinquencies (3)
30-59 Days....................................... $ 35,173 $ 29,330 $ 37,070 $ 19,222 $ 12,727
60-89 Days....................................... 5,840 4,400 6,327 2,937 1,573
90 or More Days.................................. 2,327 1,699 2,911 1,322 636
Repossessions (4).................................. 6,437 7,438 13,334 5,423 3,412
--------------- --------- --------- --------- ---------
Total Delinquencies and Repossessions.............. $ 49,777 $ 42,867 $ 59,642 $ 28,904 $ 18,348
Total Delinquencies and Repossessions as a
Percentage of Principal Amount Outstanding....... 1.26% 1.46% 2.40% 1.35% 1.31%
</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 more than 40% 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.
NET CREDIT LOSS AND REPOSSESSION EXPERIENCE (1)
<TABLE>
<CAPTION>
AT OR FOR THE
SEVEN MONTHS AT OR FOR THE YEAR ENDED MARCH 31,
ENDED OCTOBER ------------------------------------------
31, 1998 1998 1997 1996 1995
--------------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Principal Amount Outstanding (2)................ $ 3,958,102 $2,929,360 $2,486,957 $2,149,145 $1,396,919
Average Principal Amount Outstanding (3)........ $ 3,556,664 $2,675,524 $2,545,288 $1,842,750 $1,173,715
Number of Contracts Outstanding................. 369,625 278,261 235,521 190,042 126,046
Average Number of Contracts Outstanding (3)..... 331,349 252,723 228,287 162,955 109,142
Number of Repossessions......................... 1,743 3,576 3,166 2,175 1,551
Number of Repossessions as a Percentage of the
Average Number of Contracts Outstanding....... 0.90%(6) 1.42% 1.39% 1.34% 1.42%
Gross Charge-Offs (4)........................... $ 14,182 $ 32,598 $ 25,857 $ 14,701 $ 7,927
Recoveries (5).................................. 6,710 8,245 6,014 3,940 2,904
--------------- --------- --------- --------- ---------
Net Losses...................................... $ 7,472 $ 24,353 $ 19,843 $ 10,761 $ 5,023
Net Losses as a Percentage of Average Principal
Amount Outstanding............................ 0.36%(6) 0.91% 0.78% 0.58% 0.43%
</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, is
calculated for a period by dividing the total monthly amounts by the number
of months in the period.
(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.
25
<PAGE>
POOL FACTORS AND TRADING INFORMATION
The "Note Pool Factor" for each Class of Notes will be a seven-digit decimal
which the Servicer will compute prior to each Distribution Date indicating the
unpaid principal amount of such Class of Notes, after giving effect to payments
to be made on such Distribution Date, as a fraction of the initial outstanding
principal amount of such Class of Notes. The "Certificate Pool Factor" for the
Certificates will be a seven-digit decimal which the Servicer will compute prior
to each Distribution Date indicating the remaining Certificate Balance, after
giving effect to payments to be made on such Distribution Date, as a fraction of
the Original Certificate Balance. Each Note Pool Factor and the Certificate Pool
Factor will be 1.0000000 as of the Closing Date, and thereafter will decline to
reflect reductions in the outstanding principal amount of the applicable Class
of Notes, or the reduction in the Certificate Balance, as the case may be. A
Noteholder's portion of the aggregate outstanding principal amount of the
related Class of Notes will be the product of (i) the original denomination of
such Noteholder's Note and (ii) the applicable Note Pool Factor at the time of
determination.
Noteholders will receive reports on or about each Distribution Date
concerning payments received on the Receivables, the Pool Balance, each Note
Pool Factor, the Certificate Pool Factor and various other items of information.
In addition, Noteholders of record during any calendar year will be furnished
information for tax reporting purposes not later than the latest date permitted
by law. See "Certain Information Regarding the Securities -- Statements to
Securityholders".
DESCRIPTION OF THE NOTES
GENERAL
The Notes will be issued pursuant to the Indenture, a form of which has been
filed as an exhibit to the Registration Statement. Copies of the Indenture
(without exhibits) may be obtained by Noteholders upon request in writing to the
Indenture Trustee at its Corporate Trust Office. The following summary describes
the material terms of the Notes and the Indenture. The summary does not purport
to be complete and is subject to, and is qualified in its entirety by reference
to, all the provisions of the Notes and the Indenture. Where particular
provisions or terms used in the Notes or the Indenture are referred to, the
actual provisions of such documents (including definitions of terms) are
incorporated by reference as part of such summaries.
PAYMENTS OF INTEREST
Interest on the outstanding principal amount of each Class of Notes will
accrue during each Accrual Period at the applicable Interest Rate and will be
payable to the Noteholders of such Class on the related Distribution Date.
Interest accrued but not paid on any Distribution Date will be due on the
immediately succeeding Distribution Date, together with, to the extent permitted
by applicable law, interest on such shortfall at the related Interest Rate.
Interest payments on the Notes generally will be made from the Available Amount
and from amounts on deposit in the Reserve Fund after the Total Servicing Fee,
non-recoverable Advances and all accrued and unpaid Trustees' fees, any amounts
due to the Trustees for reimbursement of expenses or in respect of
indemnification and other administrative fees of the Trust ("Trust Fees and
Expenses") have been paid. See "Certain Information Regarding the Securities --
Distributions on the Securities -- Deposits to the Distribution Accounts;
Priority of Payments".
Interest payments to all Classes of Notes will have the same priority. Under
certain circumstances, the amount available for interest payments on any
Distribution Date could be less than the amount of interest due on the Notes, in
which case each Class of Notes will receive their ratable share (based on the
aggregate amount of interest due on such Class of Notes) of the aggregate amount
available to be distributed in respect of interest on the Notes, and an Event of
Default will occur if the full amount of interest due is not paid within five
days.
26
<PAGE>
PAYMENTS OF PRINCIPAL
Until the Notes have been paid in full, principal payments to Noteholders
will be made on each Distribution Date in the amount and order of priority
described under "Summary -- Terms of the Notes -- Principal" and "Certain
Information Regarding the Securities -- Distributions on the Securities --
Deposits to the Distribution Accounts; Priority of Payments". Principal payments
on the Notes generally will be made from the Principal Distributable Amount and
from amounts on deposit in the Reserve Fund after the Total Servicing Fee,
non-recoverable Advances and all Trust Fees and Expenses have been paid and
after the Note Interest Distributable Amount has been distributed to
Noteholders.
The principal amount of each Class of Notes, to the extent not previously
paid, will be payable on the related Final Distribution Date. The actual
Distribution Date on which the outstanding principal amount of any Class of
Notes is paid may be significantly earlier than its Final Distribution Date
based on a variety of factors, including the factors described under "Weighted
Average Life of the Notes".
OPTIONAL REDEMPTION
Each Class of outstanding Notes will be subject to redemption in whole, but
not in part, on any Distribution Date relating to an Optional Termination. The
redemption price will equal the unpaid principal amount of such Class of Notes
plus accrued interest thereon at the applicable Interest Rate. See "Certain
Information Regarding the Securities -- Termination".
THE INDENTURE TRUSTEE
Bankers Trust Company will be the Indenture Trustee. The Indenture Trustee
is a Delaware banking corporation and its Corporate Trust Office is located at
Four Albany Street, 10th Floor, New York, New York 10006.
The Indenture Trustee will have the rights and duties set forth under
"Certain Information Regarding the Securities -- The Trustees" and " -- Duties
of the Trustees".
EVENTS OF DEFAULT; RIGHTS UPON EVENT OF DEFAULT
"Events of Default" under the Indenture will consist of: (i) a default for
five days or more in the payment of any interest on the Notes of any Class when
the same becomes due and payable; (ii) a default in the payment of the principal
of or any installment of the principal of the Notes of any Class when the same
becomes due and payable; (iii) a default in the observance or performance of any
covenant or agreement of the Trust made in the Indenture or any representation
or warranty made by the Trust in the Indenture or in any certificate delivered
pursuant thereto or in connection therewith having been incorrect in a material
respect as of the time made, and the continuation of any such default for a
period of 30 days after notice thereof is given to the Trust by the Indenture
Trustee or to the Trust and the Indenture Trustee by the holders of Notes
evidencing at least 25% of the voting interests thereof, voting together as a
single class; and (iv) certain events of bankruptcy, insolvency, receivership or
liquidation relating to the Trust. However, the amount of principal required to
be paid to Noteholders under the Indenture will generally be limited to amounts
available to be deposited in the Note Distribution Account and amounts on
deposit in the Reserve Fund. Therefore, the failure to pay principal on a Class
of Notes generally will not result in the occurrence of an Event of Default
until the related Final Distribution Date.
Upon the occurrence of an Event of Default, the Indenture Trustee may, or if
so requested in writing by holders of Notes evidencing a majority of the voting
interests thereof, voting together as a single class, shall, declare the Notes
to be immediately due and payable. Notwithstanding the foregoing, such
declaration may, under certain circumstances, be rescinded by the holders of
Notes evidencing a majority of the voting interests thereof, voting together as
a single class.
27
<PAGE>
If the Notes have been declared due and payable following an Event of
Default, the Indenture Trustee may institute proceedings to collect amounts due
or foreclose on the property of the Trust, exercise remedies as a secured party,
sell the Receivables and other property of the Trust or elect to have the Trust
maintain possession and continue to apply collections on or in respect of the
Receivables as if there had been no event of acceleration. Notwithstanding the
foregoing, the Indenture Trustee will be prohibited from selling the Receivables
and other property of the Trust following an Event of Default, other than a
default in the payment of any principal of, or a default for five days or more
in the payment of any interest on, any Note, unless (i) holders of Notes
evidencing 100% of the voting interests thereof, voting together as a single
class, consent to such sale or liquidation, (ii) the proceeds of such sale are
sufficient to pay in full the principal of and accrued interest on the Notes at
the date of such sale or (iii) the Indenture Trustee determines that the
proceeds of the Receivables would not be sufficient on an ongoing basis to make
all payments on the Notes as such payments would have become due if such
obligations had not been declared due and payable, and the Indenture Trustee
obtains the consent of holders of Notes evidencing 66 2/3% of the voting
interests thereof, voting together as a single class.
In the event of the sale of the property of the Trust following the
occurrence of an Event of Default, the proceeds of such sale will be distributed
first to the Servicer in respect of Total Servicing Fee and non-recoverable
Advances, if any; second to the Trustee(s) for amounts due as Trust Fees and
Expenses; third, to the Noteholders for interest which is due and unpaid; and
fourth, to the Noteholders for principal which is due and unpaid. Any remaining
amounts will be distributed to the Certificateholders for amounts due and unpaid
in accordance with the Trust Agreement and the Sale and Servicing Agreement.
Subject to the provisions of the Indenture relating to the duties of the
Indenture Trustee, if an Event of Default occurs and is continuing, the
Indenture Trustee will be under no obligation to exercise any of the rights or
powers under the Indenture at the request or direction of any of the holders of
the Notes, if the Indenture Trustee reasonably believes it will not be
adequately indemnified against the costs, expenses and liabilities which might
be incurred by it in complying with such request. Subject to the provisions for
indemnification and certain limitations contained in the Indenture, the holders
of Notes evidencing at least a majority of the voting interests thereof, voting
together as a single class, will have the right to direct the time, method and
place of conducting any proceeding or any remedy available to the Indenture
Trustee, and the holders of Notes evidencing at least a majority of the voting
interests thereof, voting together as a single class, may, in certain cases,
waive any default with respect thereto, except a default in the payment of
principal or interest or a default in respect of a covenant or provision of such
Indenture that cannot be modified without the waiver or consent of all holders
of outstanding Notes.
No holder of a Note will have the right to institute any proceeding with
respect to the related Indenture, unless (i) such holder previously has given to
the Indenture Trustee written notice of a continuing Event of Default, (ii) the
holders of Notes evidencing at least 25% of the voting interests thereof, voting
together as a single class, have made written request to the Indenture Trustee
to institute such proceeding in its own name as Indenture Trustee, (iii) such
holder or holders have offered the Indenture Trustee reasonable indemnity
against the costs, expenses and liabilities to be incurred with complying with
such request, (iv) the Indenture Trustee has for 60 days failed to institute
such proceeding and (v) no direction inconsistent with such written request has
been given to the Indenture Trustee during such 60-day period by the holders of
Notes evidencing at least a majority of the voting interests thereof, voting
together as a single class.
CERTAIN COVENANTS
The Indenture will provide that the Trust may not consolidate with or merge
into any other entity, unless (i) the entity formed by or surviving such
consolidation or merger is organized under the laws of the United States, any
state or the District of Columbia and such entity expressly assumes the Trust's
obligation to make due and punctual payments upon the Notes and the performance
or observance of every agreement and covenant of the Trust under the Indenture,
(ii) no Event of Default shall have occurred and be continuing immediately after
such merger or consolidation, (iii) each Rating Agency delivers a letter to the
Indenture
28
<PAGE>
Trustee to the effect that such consolidation or merger will not result in a
qualification, reduction or withdrawal of its then-current rating on any Class
of Notes, (iv) the Trust has received an opinion of counsel to the effect that
such consolidation or merger would have no material adverse tax consequence to
the Trust or to any Securityholder, (v) any action that is necessary to maintain
the lien and security interest created by the Indenture shall have been taken
and (vi) the Indenture Trustee has received an officer's certificate and an
opinion of counsel stating that such consolidation or merger complies with the
terms of the Indenture and all conditions precedent provided in the Indenture
relating to such transaction have been taken.
The Trust will not, among other things, (i) except as expressly permitted by
the Indenture, Sale and Servicing Agreement or certain related documents with
respect to the Trust, sell, transfer, exchange or otherwise dispose of any of
its assets, (ii) claim any credit on or make any deduction from the principal
and interest payable in respect of the Notes (other than amounts withheld under
the Code or applicable state law) or assert any claim against any present or
former holder of Notes because of the payment of taxes levied or assessed upon
the Trust, (iii) dissolve or liquidate in whole or in part, (iv) permit the
validity or effectiveness of the Indenture to be impaired or permit any person
to be released from any covenants or obligations with respect to the Notes under
the Indenture except as may be expressly permitted thereby or (v) permit any
lien, charge, excise, claim, security interest, mortgage or other encumbrance to
be created on or extend to or otherwise arise upon or burden the assets of the
Trust or any part thereof, or any interest therein or the proceeds thereof.
SATISFACTION AND DISCHARGE OF INDENTURE
The Indenture will be discharged with respect to the collateral securing the
Notes upon the delivery to the Indenture Trustee for cancellation of all the
Notes or, with certain limitations, upon deposit with such Indenture Trustee of
funds sufficient for the payment in full of all the Notes.
ADDITIONAL INFORMATION
Certain additional information regarding the Indenture and the Indenture
Trustee may be found under "Certain Information Regarding the Securities --
Amendment -- The Indenture" and " -- The Trustees".
BOOK-ENTRY REGISTRATION
Each Class of Notes will be offered for purchase in denominations of $1,000
and integral multiples thereof in book-entry form. Each Class of Notes will
initially be represented by certificates registered in the name of Cede & Co.
("Cede"), the nominee of The Depository Trust Company ("DTC"). No beneficial
owner of a Note (a "Note Owner") will be entitled to receive a certificate
representing such owner's interest, except as set forth below. Unless and until
Notes are issued in fully registered certificated form ("Definitive Notes")
under the limited circumstances described below, all references herein to
distributions, notices, reports and statements to Noteholders will refer to the
same actions made with respect to DTC or Cede, as the case may be, for the
benefit of the related Note Owners in accordance with DTC procedures. Note
Owners will only be permitted to exercise the rights of Noteholders indirectly
through DTC and its Participants, as more fully 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 ("DTC Participants") and to facilitate the clearance and
settlement of securities transactions between DTC Participants through
electronic book-entry changes in accounts of its Participants, thereby
eliminating the need for physical movement of certificates. DTC 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
29
<PAGE>
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 DTC Participants are
on file with the Commission.
Note Owners that are not DTC Participants or Indirect Participants but
desire to purchase, sell or otherwise transfer ownership of, or an interest in,
Notes may do so only through DTC Participants and Indirect Participants. DTC
Participants will receive a credit for the related Notes on DTC's records. The
ownership interest of each Note Owner will in turn be recorded on the respective
records of Participants and Indirect Participants. Note Owners will not receive
written confirmation from DTC of their purchase, but Note Owners are expected to
receive written confirmations providing details of the transaction, as well as
periodic statements of their holdings, from the DTC Participant or Indirect
Participant through which the Note Owner entered into the transaction. Transfers
of ownership interests in the Notes will be accomplished by entries made on the
books of DTC Participants acting on behalf of Note Owners.
To facilitate subsequent transfers, all Notes deposited by DTC Participants
with DTC will be registered in the name of Cede, as nominee of DTC. The deposit
of Notes 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 Note
Owners and its records will reflect only the identity of the DTC Participants to
whose accounts such Notes are credited, which may or may not be the Note Owners.
DTC 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 DTC Participants,
by DTC Participants to Indirect Participants and by DTC Participants and
Indirect Participants to Note Owners will be governed by arrangements among
them, subject to any statutory or regulatory requirements as may be in effect
from time to time.
Neither DTC nor Cede will consent or vote with respect to the Notes. Under
its usual procedures, DTC will mail an "Omnibus Proxy" to the Indenture Trustee
or the Owner Trustee, as the case may be, 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 DTC Participants to whose accounts
the related Notes will be credited on that record date (identified in a listing
attached to the Omnibus Proxy).
Payments on the Notes will be made to DTC. DTC's practice is to credit DTC
Participants' accounts on each Distribution Date in accordance with their
respective holdings of Notes shown on DTC's records unless DTC has reason to
believe that it will not receive payment on such Distribution Date. Payments by
DTC Participants and Indirect Participants to Note 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 DTC Participant or Indirect
Participant and not of DTC, the Indenture 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 Notes to DTC will be the
responsibility of the Indenture Trustee, disbursement of such payments to DTC
Participants will be the responsibility of DTC and disbursement of such payments
to Note Owners will be the responsibility of DTC Participants and Indirect
Participants. As a result, under the book-entry format, Note Owners may
experience some delay in their receipt of payments. DTC will forward such
payments to its DTC Participants which thereafter will forward them to Indirect
Participants or Note Owners.
Because DTC can only act on behalf of DTC Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of a Note Owner
to pledge Notes to persons or entities that do not participate in the DTC
system, or otherwise take actions with respect to such Notes, may be limited due
to the lack of a physical certificate for such Notes.
30
<PAGE>
DTC has advised the Seller that it will take any action permitted to be
taken by a Noteholder under the Indenture only at the direction of one or more
DTC Participants to whose accounts with DTC the applicable Notes are credited.
DTC may take conflicting actions with respect to other undivided interests to
the extent that such actions are taken on behalf of DTC Participants whose
holdings include such undivided interests.
Except as required by law, none of the Administrator, the Servicer, the
Seller, the Indenture Trustee or the Owner Trustee will have any liability for
any aspect of the records relating to or payments made on account of beneficial
ownership interests of the Notes held by Cede, as nominee for DTC, or for
maintaining, supervising or reviewing any records relating to such beneficial
ownership interests.
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of Notes among participants of DTC, it is under no obligation to
perform or continue to perform such procedures and such procedures may be
discontinued at any time. In the event that DTC should discontinue its services,
the Administrator would seek an alternative depository (if available) or cause
the issuance of Definitive Notes to the owners thereof or their nominees in the
manner described under "-- Definitive Notes".
DTC'S YEAR 2000 EFFORTS
DTC management is aware that some computer applications, systems and the
like for processing data ("Systems") that are dependent upon calendar dates,
including dates before, on and after January 1, 2000, may encounter "Year 2000
problems". DTC has informed its Participants and other members of the financial
community (the "Industry") that it has developed and is implementing a program
so that its Systems, as the same relate to the timely payment of distributions
(including principal and income payments) to securityholders, book-entry
deliveries and settlement of trades within DTC, continue to function
appropriately. This program includes a technical assessment and a remediation
plan, each of which is complete. Additionally, DTC's plan includes a testing
phase, which is expected to be completed within appropriate time frames.
However, DTC's ability to perform properly its services is also dependent
upon other parties, including but not limited to issuers and their agents, as
well as third party vendors from whom DTC licenses software and hardware, and
third party vendors on whom DTC relies for information and the provision of
services, including telecommunication and electrical utility service providers,
among others. DTC has informed the Industry that it is contacting (and will
continue to contact) third party vendors from whom DTC acquires services to: (i)
impress upon them the importance of such services being Year 2000 compliant and
(ii) determine the extent of their efforts for Year 2000 remediation (and, as
appropriate, testing) of their services. In addition, DTC is in the process of
developing such contingency plans as it deems appropriate.
According to DTC, the foregoing information with respect to DTC has been
provided to the Industry for informational purposes only and is not intended to
serve as a representation, warranty or contract modification of any kind.
DEFINITIVE NOTES
Definitive Notes representing any Class of Notes will be issued to the
related Note 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 Notes,
and neither the Indenture Trustee nor the Administrator is able to locate a
qualified successor, (ii) the Administrator, at its option, elects to terminate
the book-entry system through DTC or (iii) after an Event of Default or Servicer
Default, as described under "-- Events of Default; Rights Upon Event of Default"
and "Certain Information Regarding the Securities -- Servicer Default", Note
Owners evidencing not less than 51% of the voting interests of the related Notes
advise the related 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 the related Note Owners.
31
<PAGE>
Upon the occurrence of any of the events described in the immediately
preceding paragraph, the Indenture Trustee will be required to notify the
related Note Owners, through DTC Participants, of the availability through DTC
of Definitive Notes. Upon surrender by DTC of the certificates representing all
Notes of any affected Class and the receipt of instructions for re-registration,
the Trustee will issue Definitive Notes to the related Note Owners, who
thereupon will become Noteholders for all purposes of the Indenture.
Distributions on the Definitive Notes will thereafter be made by the
Indenture Trustee directly to holders of such Definitive Notes in accordance
with the procedures described herein and to be set forth in the Indenture.
Interest payments and any principal payments on the Notes on each Distribution
Date will be made to holders in whose names the Definitive Notes 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 specified in the Indenture. The final payment on
any Notes (whether Definitive Notes or Notes registered in the name of Cede),
however, will be made only upon presentation and surrender of such Notes at the
office or agency specified in the notice of final distribution to Noteholders.
The Indenture Trustee will mail such notice to registered Noteholders within
five Business Days of receipt from the Servicer of notice of termination of the
Trust.
Definitive Notes will be transferable and exchangeable at the offices of the
Indenture Trustee (or any security registrar appointed thereby), as will be set
forth in the Indenture. No service charge will be imposed for any registration
of transfer or exchange, but the Indenture Trustee may require payment of a sum
sufficient to cover any tax or other governmental charge imposed in connection
therewith.
DESCRIPTION OF THE CERTIFICATES
GENERAL
The Certificates will be issued pursuant to the Trust Agreement, a form of
which has been filed as an exhibit to the Registration Statement of which this
Prospectus is a part. Copies of the Trust Agreement (without exhibits) may be
obtained by holders of Notes upon request in writing to the Owner Trustee at its
Corporate Trust Office. The Certificates have not been registered under the
Securities Act or listed on any securities exchange. The following summary
describes the material terms of the Certificates and the Trust 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 Certificates and the
Trust Agreement. Where particular provisions or terms used in the Trust
Agreement are referred to, the actual provisions (including definitions of terms
and section references) are incorporated by reference as part of such summaries.
The Certificates are not being offered hereby and initially will be retained by
the Seller. The information set forth in this Prospectus regarding the
Certificates is intended only to give the investors in the Notes a fuller
understanding of the Notes.
DISTRIBUTIONS OF INTEREST
Interest on the Certificate Balance will accrue during each Accrual Period
at the Certificate Rate and will be payable to Certificateholders on the related
Distribution Date. Interest distributions with respect to the Certificates
generally will be made from the Available Amount after non-recoverable Advances,
the Total Servicing Fee and all Trust Fees and Expenses have been paid, after
the Note Distributable Amount has been distributed to Noteholders and after the
amount on deposit in the Reserve Fund equals the Specified Reserve Fund Balance.
See "Certain Information Regarding the Securities -- Distributions on the
Securities -- Deposits to the Distribution Accounts; Priority of Payments".
DISTRIBUTIONS OF PRINCIPAL
No principal will be paid on the Certificates until the Distribution Date on
which the principal amount of the Class A-1 Notes has been paid in full. On such
Distribution Date and each Distribution Date
32
<PAGE>
thereafter, principal payments to Certificateholders will be made in the amount
and order of priority described under "Summary -- Terms of the Certificates --
Principal" and "Certain Information Regarding the Securities -- Distributions on
the Securities -- Deposits to the Distribution Accounts; Priority of Payments".
Distributions with respect to principal payments generally will be made from a
designated portion of the Available Amount remaining after non-recoverable
Advances, the Total Servicing Fee and all Trust Fees and Expenses have been
paid, the Note Distributable Amount has been distributed to the Noteholders, the
amount on deposit in the Reserve Fund equals the Specified Reserve Fund Balance
and after the Certificate Interest Distributable Amount has been distributed to
Certificateholders.
OPTIONAL PREPAYMENT
The Certificates will be subject to prepayment in whole, but not in part, on
any Distribution Date relating to an Optional Termination. Certificateholders
will receive an amount in respect of the Certificates equal to the Certificate
Balance, together with accrued interest at the Certificate Rate. Any such
distribution will effect early retirement of the Certificates. See "Certain
Information Regarding the Securities -- Termination".
ADDITIONAL INFORMATION
Certain additional information regarding the Trust Agreement and the Owner
Trustee may be found under "Certain Information Regarding the Securities --
Evidence as to Compliance", "-- Insolvency Event" and "-- The Trustees".
CERTAIN INFORMATION REGARDING THE SECURITIES
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, pursuant to the Sale and Servicing Agreement, the
Seller will sell and assign to the Trust, without recourse, all of its right,
title and interest in and to the Receivables, including its security interests
in the Financed Vehicles. Each Receivable will be identified in a schedule
referred to in the Sale and Servicing Agreement and the Trust Agreement and on
file with the Trustees (the "Schedule of Receivables"). The applicable Trustee
will, concurrently with such transfer and assignment, execute, authenticate and
deliver the Notes or the Certificates, as the case may be, to or upon the order
of the Seller. Thereafter, the Seller will sell the Notes 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
Sale and Servicing Agreement, will make certain representations and warranties
with respect to the Receivables and the Financed Vehicles. Such representations
and warranties will include, among other things, that (i) on the Cutoff Date,
the information set forth in the Schedule of Receivables is true and correct in
all material respects; (ii) at the time of origination of each Receivable, the
related Obligor was required to maintain physical damage insurance in accordance
with AHFC's normal requirements; (iii) 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) 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
Closing 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.
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 Owner Trustee discovers a breach
of any representation or warranty of the Seller that materially and adversely
affects the interests of the Noteholders in a Receivable, the Seller, unless the
breach is cured, will repurchase such
33
<PAGE>
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 Warranty 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 (a "Rebate") 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
APR to the last day of the Collection Period relating to such repurchase. This
repurchase obligation will constitute the sole remedy available to the
Noteholders and the Indenture 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.
Pursuant to the Sale and Servicing Agreement, to assure uniform quality in
servicing both the Receivables and other motor vehicle installment sale
contracts serviced by the Servicer, as well as to reduce administrative costs,
the Owner Trustee will appoint the Servicer as custodian of the Receivables and
all documents related thereto. The Receivables will not be physically segregated
from other motor vehicle 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 Trust 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 Trust, if a subsequent purchaser were able
to take physical possession of the Receivables without knowledge of the
assignment, the Trust'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 Trust's
security interest in collections that have been received by the Servicer but not
yet remitted to the Collection 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 Sale and
Servicing Agreement, will continue such collection procedures as it follows with
respect to comparable motor vehicle installment sale contracts it services for
itself and others. The Servicer will be authorized to grant certain rebates,
adjustments or extensions with respect to a Receivable. See "American Honda
Finance Corporation -- Servicing of Motor Vehicle Loans". However, if any such
modification of a Receivable 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.
In the Sale and Servicing 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 Trust in the Receivables and (iii) except as
otherwise provided in the Sale and Servicing Agreement, it will not amend any
Receivable such that the total number of Scheduled Payments, the amount financed
or the APR is altered or the maturity of a Receivable is extended beyond six
months after the scheduled maturity of the Receivable with the latest scheduled
maturity as of the Cutoff Date. As of the last day of the second Collection
Period (or, if the Servicer so elects,
34
<PAGE>
the last day of the first Collection Period) following the Collection Period in
which the Seller, the Servicer or the Owner Trustee discovers a breach of any
such covenant that materially and adversely affects the interests of the
Noteholders in a Receivable, the Servicer, unless the breach is cured, will
purchase the Receivable (an "Administrative Receivable") from the Owner 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) all past due
Scheduled Payments for which an Advance has not been made, and (iii) an amount
equal to any reimbursements of outstanding Advances made by the Servicer with
respect to such Administrative Receivable from the proceeds of other Receivables
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, (ii) the
Rebate and (iii) any proceeds of the liquidation of such Receivable previously
received (to the extent applied to reduce the Principal Balance of such
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 APR 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 Sale and Servicing 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
Noteholders and the Indenture Trustee for any such uncured breach by the
Servicer.
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.
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 of their policies may vary. AHFC will not be
required to 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 Noteholders and such shortfall is not covered by amounts on deposit in the
Reserve Fund or by subordination of payments on the Certificates to the extent
described herein, the Noteholders could suffer a loss on their investment.
THE ACCOUNTS
THE COLLECTION AND PAYAHEAD ACCOUNTS. The Servicer will establish and
maintain in the name of the Indenture Trustee on behalf of the Securityholders,
(i) one or more accounts into which all payments made on or in respect of the
Receivables will be deposited (the "Collection Account") and (ii) an account
into which payments made by Obligors in excess of the related Scheduled Payments
on Precomputed Receivables (each, a "Payment Ahead"), to the extent that such
payments do not constitute a prepayment in full of the related Receivable, will
be deposited until the Deposit Date relating to the Collection Period in which
such payments become due (the "Payahead Account") or, if the Servicer has
satisfied certain conditions set forth under "Collections", the Servicer may
retain such amounts as Payments Ahead.
THE DISTRIBUTION ACCOUNTS. The Servicer will establish and maintain an
account, in the name of the Indenture Trustee on behalf of the Noteholders, in
which amounts released from the Collection Account for distribution to
Noteholders will be deposited and from which all distributions to Noteholders
will be made (the "Note Distribution Account"). The Owner Trustee shall
establish and maintain in the name of the Trust an account on behalf of the
Certificateholders, in which amounts released from the Collection Account for
35
<PAGE>
distribution to Certificateholders will be deposited and from which all
distributions to Certificateholders will be made (the "Certificate Distribution
Account" and, together with the Note Distribution Account, the "Distribution
Accounts").
THE YIELD SUPPLEMENT ACCOUNT. The Servicer will establish and maintain the
Yield Supplement Account in the name of the Indenture Trustee for the benefit of
the Securityholders. The Yield Supplement Account is designed solely to
supplement the interest collections on the Receivables that have APRs which are
less than the Required Rate.
The Yield Supplement Account will be funded on the Closing Date with the
Yield Supplement Deposit Amount. On each Distribution Date, the amount required
to be on deposit in the Yield Supplement Account will decline and be equal to
the sum of all projected Yield Supplement Amounts for all future Distribution
Dates, assuming that future scheduled payments on the Receivables are made on
the date on which they are scheduled as being due. The amount on deposit in the
Yield Supplement Account will decrease on each Deposit Date as the Yield
Supplement Withdrawal Amount is deposited into the Collection Account for
distribution on the related Distribution Date. See "Summary -- The Yield
Supplement Account".
MAINTENANCE OF TRUST ACCOUNTS. The Collection Account, Payahead Account,
Distribution Accounts, Yield Supplement Account and the Reserve Fund
(collectively, the "Trust Accounts") will be maintained with a depository
institution or a trust company (which may include the related Trustee) (i) the
commercial paper or other short-term unsecured debt obligations of which is
rated at least P-1 by Moody's and A-1+ by Standard & Poor's or (ii) having
corporate trust powers and organized under the laws of the United States or any
state thereof, the District of Columbia or the Commonwealth of Puerto Rico with
a long-term deposit rating from (A) Moody's of at least Baa3 or (B) Standard and
Poor's of at least BBB- (or such lower rating as either Rating Agency shall
approve in writing). Initially, all Trust Accounts other than the Certificate
Distribution Account will be maintained with the Indenture Trustee and the
Certificate Distribution Account will be maintained with the Owner Trustee.
INVESTMENT OF TRUST ACCOUNT MONIES. Funds on deposit in the Trust Accounts
may, at the direction of the Servicer, be invested in Permitted Investments that
mature on the Deposit Date immediately succeeding the date of investment (other
than instruments of the entity at which the related Trust Account is located,
which may mature on the related Distribution Date). With the exception of the
Yield Supplement Account and the Reserve Fund, all income or other gain from
such investments, net of any loss and investment expenses resulting from such
investment, shall be paid to the Servicer as additional servicing compensation.
Any net loss and investment expenses resulting from such investment shall be
charged to the related Trust Account. "Permitted Investments" will be specified
in the Sale and Servicing Agreement and will be limited to investments which
meet the criteria of each Rating Agency from time to time as being consistent
with its then-current ratings of the Notes.
COLLECTIONS
The Servicer will deposit all payments on or in respect of the Receivables
received from or on behalf of Obligors and all proceeds of Receivables collected
during each Collection Period into the Collection Account not later than two
Business Days after receipt. However, the Servicer may retain such amounts until
the related Deposit Date so long as (i) AHFC is the Servicer, (ii) no Servicer
Default exists and is continuing and (iii) either (a) the short-term unsecured
debt of AHFC is rated at least P-1 by Moody's, A-1 by Standard & Poor's and F1
by Fitch IBCA or (b) AHFC obtains a letter of credit, surety bond or insurance
policy (the "Servicer Letter of Credit") as provided in the Sale and Servicing
Agreement under which demands for payment will be made to secure timely
remittance of monthly collections to the Collection Account and, in the case of
clause (b) above, the Indenture Trustee is provided with a letter from each
Rating Agency to the effect that the utilization of such alternative remittance
schedule will not result in a qualification, reduction or withdrawal of its
then-current rating of any Class of Notes. Pending deposit into the
36
<PAGE>
Collection 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
Administrative Purchase Payments and Warranty Purchase Payments of any
Receivables to be repurchased from the Trust into the Collection Account on or
before each Deposit Date.
Collections on or in respect of a Receivable made during a Collection Period
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 the related Receivable will be applied as a
prepayment in full of such Receivable (each, a "Prepayment") and all other
Excess Payments on Precomputed Receivables will be held by the Servicer as a
Payment Ahead (or if the Servicer has not satisfied the conditions in clauses
(i) through (iii) of the immediately preceding paragraph, deposit in the
Payahead Account) and on Simple Interest Receivables will be applied as a
partial prepayment.
On each Deposit Date, the Indenture Trustee will cause (i) 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 Collection Account and
(ii) the Yield Supplement Withdrawal Amount to be deposited into the Collection
Account.
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 Payments Ahead 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 such 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
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 Collection 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 to
Securityholders at the related Interest Rate or Certificate Rate 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.
37
<PAGE>
The Servicer will make all Advances by depositing into the Collection
Account any amount equal to the aggregate of the Precomputed Advances and Simple
Interest Advances due in respect of a Collection Period on the related Deposit
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 the Total Servicing
Fee. The Servicer shall pay all expenses incurred by it in connection with its
servicing activities under the Sale and Servicing Agreement and shall not be
entitled to reimbursement of such expenses except to the extent they constitute
liquidation expenses or expenses recoverable under an applicable insurance
policy.
The Servicing Fee will compensate the Servicer for performing the functions
of a third party servicer of the Receivables as an agent for the Trust,
including collecting and posting all 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 Indenture Trustee
and the Owner 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.
The "Pool Balance" will equal 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). The
"Principal Balance" of a Receivable as of any date will equal the original
principal balance of such Receivable 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, computed in accordance with the simple interest method,
(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.
NET DEPOSITS
For so long as AHFC is the Servicer, the Servicer will cause to be deposited
into the Trust Accounts only the net amount distributable to Securityholders on
the related Distribution Date. The Servicer, however, will account to the
Trustees and the Securityholders as if all deposits and distributions were made
individually.
DISTRIBUTIONS ON THE SECURITIES
GENERAL. On or before 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 (each, a "Determination Date"), the Servicer will
deliver to the Indenture Trustee, the Owner Trustee and each Rating Agency a
statement (the "Distribution Date Statement") setting forth, among other things,
the following amounts with respect to such Distribution Date: (i) Payments Ahead
and Applied Payments Ahead; (ii) the Total Servicing Fee; (iii) Trust Fees and
Expenses; (iv) the amount of funds in the Collection Account allocable to
collections on or in respect of the Receivables during the related Collection
Period (excluding any Advances, Administrative Purchase Payments and Warranty
Purchase Payments); (v) the Administrative Purchase Payments and Warranty
Purchase Payments of all Receivables repurchased by the Seller or the Servicer
during such
38
<PAGE>
Collection Period; (vi) the Advances made by the Servicer, the amounts for which
the Servicer is entitled to be reimbursed for unreimbursed Advances and the
amount of nonrecoverable Advances; (vii) the Available Amount; (viii) the Note
Interest Distributable Amount; (ix) the Note Principal Distributable Amount; (x)
the Note Distributable Amount; (xi) the Certificate Interest Distributable
Amount; (xii) the Certificate Principal Distributable Amount (xiii) the
Principal Distributable Amount; (xiv) the Yield Supplement Deposit Amount, if
any; and (xv) the maximum amount required to be on deposit in the Yield
Supplement Account on the immediately succeeding Distribution Date and the Yield
Supplement Withdrawal Amount, if any.
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 (collectively, the "Available Amount").
"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 ("Applied
Payments Ahead") 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
in respect of such Collection Period; (v) Administrative Purchase Payments with
respect to Administrative Receivables purchased by the Servicer, in respect of
such Collection Period; and (vi) the Yield Supplement Withdrawal Amount.
"Available Principal" for a Distribution Date will equal the sum of the
amounts described in clauses (i) through (v) 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, in accordance with 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.
DEPOSITS TO THE DISTRIBUTION ACCOUNTS; PRIORITY OF PAYMENTS. On each
Distribution Date, the Servicer will allocate amounts on deposit in the
Collection Account with respect to the related Collection Period as described
below and will instruct the Indenture Trustee to make the following deposits and
distributions in the following amounts and order of priority:
(i) to the Servicer, the Total Servicing Fee, including any unpaid
Servicing Fees with respect to one or more prior Collection Periods, and
non-recoverable Advances;
39
<PAGE>
(ii) to the Indenture Trustee and the Owner Trustee, any accrued and
unpaid Trust Fees and Expenses, in each case to the extent such fees and
expenses have not been previously paid by the Servicer; provided that, until
the Notes have been paid in full, the annual amount paid to the Trustees out
of the Available Amount allocation described in this clause (ii) shall not
exceed $100,000;
(iii) to the Note Distribution Account, from the Available Amount (after
giving effect to the reduction in the Available Amount described in clauses
(i) and (ii) above), the Note Interest Distributable Amount to be
distributed to the holders of the Notes at their respective Interest Rates;
(iv) to the Note Distribution Account, from the Available Amount (after
giving effect to the reduction in the Available Amount described in clauses
(i) through (iii) above), the Note Principal Distributable Amount to be
distributed to the related Noteholders;
(v) to the Reserve Fund, from the Available Amount (after giving effect
to the reduction in the Available Amount described in clauses (i) through
(iv) above), an amount until the amount on deposit therein equals the
Specified Reserve Fund Balance;
(vi) to the Certificate Distribution Account, from the Available Amount
(after giving effect to the reduction in the Available Amount described in
clauses (i) through (v) above), the Certificate Interest Distributable
Amount to be distributed to the Certificateholders;
(vii) to the Certificate Distribution Account, from the Available Amount
(after giving effect to the reduction in the Available Amount described in
clauses (i) through (vi) above), the Certificate Principal Distributable
Amount to be distributed to the Certificateholders; and
(viii) any Available Amount remaining after giving effect to the reduction
in the Available Amount described in clauses (i) through (vii) above, to the
Seller.
Allocations of the Note Principal Distributable Amount will be allocated
among the Notes so that no principal payments will be made on the (i) Class A-2
Notes until the Class A-1 Notes have been paid in full, (ii) Class A-3 Notes
until the Class A-1 and the Class A-2 Notes have been paid in full or (iii)
Class A-4 Notes until the Class A-1, Class A-2 and Class A-3 Notes have been
paid in full.
Notwithstanding the foregoing, to the extent that the amount on deposit in
the Note Distribution Account with respect to a Distribution Date is less than
the Note Distributable Amount, funds will be withdrawn from the Reserve Fund and
deposited in the Note Distribution Account for distribution to the Noteholders.
In addition, if at any time that the Notes have not been paid in full and
the principal balance of the Notes has been declared due and payable following
the occurrence of an Event of Default under the Indenture, until such time as
the Notes have been paid in full or such declaration has been rescinded and any
continuing Events of Default have been waived pursuant to the Indenture, no
amounts will be distributed to the Certificateholders. Any such amounts
otherwise distributable to the Certificateholders will be distributed instead as
payments of principal on the Notes. Furthermore, any Trust Fees and Expenses
shall not be limited as described in clause (ii) above.
For the purposes hereof, the following terms will have the following
meanings:
The "Certificate Interest Distributable Amount" will mean, with respect to
any Distribution Date, interest accrued for the related Accrual Period at the
Certificate Rate on the Certificate Balance on the immediately preceding
Distribution Date, after giving effect to all payments of principal to
Certificateholders on or prior to such Distribution Date (or, in the case of the
first Distribution Date, on the Original Certificate Balance).
The "Certificate Monthly Principal Distributable Amount" will mean, with
respect to any Distribution Date, the Certificate Percentage of the Principal
Distributable Amount for such Distribution Date.
40
<PAGE>
The "Certificate Percentage" will mean (i) for each Distribution Date until
the principal amount of the Class A-1 Notes has been paid in full, 0%; (ii) for
each Distribution Date to and including the Distribution Date on which the
principal amount of the Class A-4 Notes is reduced to zero, 5%; and (iii) for
each Distribution Date after the Distribution Date on which the principal amount
of the Class A-4 Notes is reduced to zero, 100%.
The "Certificate Principal Carryover Shortfall" will mean, with respect to
any Distribution Date, the excess of the Certificate Monthly Principal
Distributable Amount plus any outstanding Certificate Principal Carryover
Shortfall for the preceding Distribution Date, over the amount in respect of
principal that is actually deposited in the Certificate Distribution Account on
such Distribution Date.
The "Certificate Principal Distributable Amount" will mean, with respect to
any Distribution Date, the sum of the Certificate Monthly Principal
Distributable Amount for each Distribution Date and any outstanding Certificate
Principal Carryover Shortfall as of the close of the immediately preceding
Distribution Date; provided, however, that the Certificate Principal
Distributable Amount shall not exceed the Certificate Balance. In addition, on
the Certificate Final Distribution Date, the principal required to be deposited
into the Certificate Distribution Account will include the amount necessary to
reduce the Certificate Balance to zero.
The "Note Distributable Amount" will mean, with respect to any Distribution
Date, the sum of the Note Interest Distributable Amount and the Note Principal
Distributable Amount for such Distribution Dates.
The "Note Interest Carryover Shortfall" will mean, with respect to any
Distribution Date and a Class of Notes, the excess, if any, of the sum of the
Note Monthly Interest Distributable Amount for such Class for the preceding
Distribution Date plus any outstanding Note Interest Carryover Shortfall for
such Class on such preceding Distribution Date, over the amount in respect of
interest that is actually paid on the Notes on such preceding Distribution Date,
plus, to the extent permitted by applicable law, interest on the Note Interest
Carryover Shortfall at the related Interest Rate for the related Accrual Period.
The "Note Interest Distributable Amount" will mean, with respect to any
Distribution Date and a Class of Notes, the sum of the Note Monthly Interest
Distributable Amount and the Note Interest Carryover Shortfall for such Class of
Notes for one or more prior Distribution Dates.
The "Note Monthly Interest Distributable Amount" will mean, with respect to
any Distribution Date, interest accrued for the related Accrual Period at the
related Interest Rate for each Class of Notes on the outstanding amount of the
Notes of each such Class on the immediately preceding Distribution Date, after
giving effect to all payments of principal to Noteholders of such Class on or
prior to such Distribution Date (or, in the case of the first Distribution Date,
on the original principal amount of such Class of Notes).
The "Note Monthly Principal Distributable Amount" will mean, with respect to
any Distribution Date, the Note Percentage of the Principal Distributable Amount
for such Distribution Date.
The "Note Percentage" will mean (i) for each Distribution Date until the
principal amount of the Class A-1 Notes has been paid in full, 100%; (ii) for
each Distribution Date on or after the principal amount of the Class A-1 Notes
has been paid in full to and including the Distribution Date on which the
principal amount of the Class A-4 Notes is reduced to zero, 95%; and (iii) for
each Distribution Date after the Distribution Date on which the principal amount
of the Class A-4 Notes is reduced to zero, 0%.
The "Note Principal Carryover Shortfall" will mean, with respect to any
Distribution Date, the excess, if any, of the Note Monthly Principal
Distributable Amount plus any outstanding Note Principal Carryover Shortfall for
the preceding Distribution Date over the amount in respect of principal that is
actually paid as principal on the Notes on such Distribution Date.
The "Note Principal Distributable Amount" will mean, with respect to any
Distribution Date, the sum of (i) the Note Monthly Principal Distributable
Amount, (ii) any outstanding Note Principal Carryover
41
<PAGE>
Shortfall as of the close of the immediately preceding Distribution Date and
(iii) on the Final Distribution Date for a Class of Notes, the amount necessary
to reduce the outstanding principal amount of such Class of Notes to zero;
provided, however, that the Note Principal Distributable Amount with respect to
a Class of Notes shall not exceed the outstanding amount of such Class of Notes.
The "Principal Distributable Amount" will mean, with respect to any
Distribution Date and the related Collection Period, the sum of the following
amounts (i) in the case of (a) Precomputed Receivables, the principal portion of
all Scheduled Payments due during such Collection Period, computed in accordance
with the actuarial method, and (b) Simple Interest Receivables, the principal
portion of all Scheduled Payments actually received during such Collection
Period, computed in accordance with the simple interest method, (ii) the
principal portion of all Prepayments, and in the case of Simple Interest
Receivables, partial prepayments, received during such Collection Period (to the
extent such amounts are not included in clause (i) above) and (iii) 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 such Collection Period (to the extent such amounts are not
included in clauses (i) or (ii) above).
THE RESERVE FUND
GENERAL. The rights of the Noteholders to receive distributions with
respect to the Receivables will be subordinated to the rights of the Servicer
(to the extent that the Servicer has not been reimbursed for any non-recoverable
Advances and has not been paid the Total Servicing Fee), the Trustees and
certain other entities (to the extent the Trustees and such other entities have
not received all Trust Fees and Expenses payable to them). In addition, the
rights of the Noteholders to receive distributions with respect to the
Receivables will be subject to the priorities set forth under "-- Distributions
on the Securities -- Deposits to the Distribution Accounts; Priority of
Payments", and the rights of the Certificateholders to receive distributions
with respect to the Receivables will be subordinated to the rights of the
Noteholders and the maintenance of amounts on deposit in the Reserve Fund at the
Specified Reserve Fund Balance, in each case to the extent described herein.
The foregoing protection afforded to the Noteholders will be effected both
by the preferential right of the Noteholders to receive, to the extent described
herein, current distributions with respect to the Receivables and by the
establishment of the Reserve Fund. The Reserve Fund will be a segregated account
in the name of the Indenture Trustee. The Reserve Fund will be created with an
initial deposit by the Seller on the Closing Date of an amount equal to the
Reserve Fund Initial Deposit. The Reserve Fund will thereafter be funded by the
deposit therein of all Excess Amounts, if any, in respect of each Distribution
Date to the extent necessary to restore the amount on deposit in the Reserve
Fund to the Specified Reserve Fund Balance.
Amounts held from time to time in the Reserve Fund will continue to be held
for the benefit of holders of the Notes and may be invested in Permitted
Investments. Investment income on such investments (net of losses and expenses)
will be paid to the Seller, upon the direction of the Servicer, to the extent
that funds on deposit therein exceed the Specified Reserve Fund Balance.
The Reserve Fund and the subordination of the Certificates are intended to
enhance the likelihood of receipt by Noteholders of the full amount of principal
and interest due them and to decrease the likelihood that the Noteholders will
experience losses. However, in certain circumstances, the Reserve Fund could be
depleted. If the amount required to be deposited into or required to be
withdrawn from the Reserve Fund to cover shortfalls in collections on the
Receivables exceeds the amount of available cash in the Reserve Fund,
Noteholders could incur losses or a temporary shortfall in the amounts
distributed to the Noteholders could result.
The "Specified Reserve Fund Balance" with respect to any Distribution Date
will be $5,471,308.14, except that, if on any Distribution Date (i) the average
of the Charge-off Rates for the three preceding Collection Periods exceeds 2.25%
or (ii) the average of the Delinquency Percentages for the three preceding
Collection Periods exceeds 2.25%, then the Specified Reserve Fund Balance will
be an amount equal to a
42
<PAGE>
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 8.00% the following fraction, expressed as a percentage: (a) one minus (b)
a fraction, the numerator of which is the outstanding principal amount of the
Notes 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 $21,885,232.55 or more than the then
outstanding principal amount of the Notes or less than $5,471,308.14. 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.
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 or funding the Reserve Fund that is different from that
described above and would result in a decrease in the amount of the Specified
Reserve Fund Balance or the manner by which the Reserve Fund is funded. If each
Rating Agency delivers a letter to the Indenture Trustee and the Owner Trustee
to the effect that the use of any such new formulation will not in and of itself
result in a qualification, reduction or withdrawal of its then-current rating of
any Class of Notes, then the Specified Reserve Fund Balance or the funding of
the Reserve Fund, as the case may be, will be determined in accordance with such
new formula. The Sale and Servicing Agreement will accordingly be amended to
reflect such new calculation without the consent of any Securityholder.
WITHDRAWALS. Amounts held from time to time in the Reserve Fund will be
held for the benefit of the Noteholders. On each Distribution Date, funds will
be withdrawn from the Reserve Fund to the extent that the amount on deposit in
the Note Distribution Account with respect to such Distribution Date is less
than the Note Distributable Amount and will be deposited in the Note
Distribution Account for distribution to the Noteholders.
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 for such
Distribution Date, subject to certain limitations, the Indenture Trustee will
include the amount of such excess in the amounts to be distributed to
Certificateholders pursuant to clauses (vi) and (vii) in the first paragraph
under "-- Distributions on the Securities -- Deposits to the Distribution
Accounts; Priority of Payments". Upon any distribution to the Certificateholders
of amounts in excess of the Specified Reserve Fund Balance, the Noteholders will
not have any rights in, or claims to, such amounts. Any excess amounts remaining
thereafter shall be paid to the Seller.
43
<PAGE>
None of the Securityholders, the Indenture Trustee, the Owner Trustee or the
Seller 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 Securityholders.
STATEMENTS TO SECURITYHOLDERS
On or prior to each Distribution Date, the Servicer will prepare and provide
to the Indenture Trustee and the Owner Trustee a statement to be delivered to
each Noteholder on such Distribution Date (the "Statement to Securityholders"),
setting forth with respect to the related Distribution Date or Collection
Period, as applicable, among other things, the following information:
(i) total Payments Ahead and the Applied Payments Ahead;
(ii) the amount of the Total Servicing Fee paid to the Servicer with
respect to such Collection Period;
(iii) the amount of non-recoverable Advances;
(iv) the amount of Trust Fees and Expenses;
(v) the amount of the Noteholder's or Certificateholder's distribution
allocable to interest (stated separately for each Class of Notes and the
Certificates);
(vi) the amount of the Noteholder's or Certificateholder's distribution
allocable to principal (stated separately for each Class of Notes and the
Certificates);
(vii) the Note Distributable Amount;
(viii) the Certificate Distributable Amount;
(ix) the Available Amount;
(x) the Yield Supplement Withdrawal Amount, if any and the amount on
deposit in the Yield Supplement Account after giving effect to the
distributions made on such Distribution Date;
(xi) the Pool Balance as of the close of business on the last day of
such Collection Period, after giving effect to payments allocated to
principal reported under clause (vi) above;
(xii) the amount of any Note Interest Carryover Shortfall and Note
Principal Carryover Shortfall on such Distribution Date and the change in
such amounts from those with respect to the immediately preceding
Distribution Date;
(xiii) the Note Pool Factor for each Class of Notes and the Certificate
Pool Factor, in each case as of such Distribution Date;
(xiv) the balance 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 balance from the immediately preceding Distribution
Date; and
(xv) 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 (ii), (v), (vi) and (xii) above
will be expressed in the aggregate and as a dollar amount per $1,000 of original
principal amount of a Note or the original Certificate Balance of a Certificate,
as the case may be. Copies of such statements may be obtained by any Noteholder
by a request in writing addressed to the Indenture Trustee or by any
Certificateholder by a request in writing addressed to the Owner Trustee, in
either case addressed to its applicable Corporate Trust Office. In addition,
within the prescribed period of time for tax reporting purposes after the end of
each calendar year during the term of the Sale and Servicing Agreement, the
Indenture Trustee will mail to each person who at
44
<PAGE>
any time during such calendar year shall have been a Noteholder a statement
containing certain information for the purposes of such holder's preparation of
federal income tax returns. See "Material Federal Income Tax Consequences".
EVIDENCE AS TO COMPLIANCE
THE SALE AND SERVICING AGREEMENT. The Sale and Servicing Agreement will
provide that a firm of independent public accountants will furnish to the
Indenture Trustee and the Owner Trustee, on or before June 30, beginning June
30, 1999, a statement as to compliance by the Servicer during the preceding
fiscal year (or since the Closing Date in the case of the first such statement)
with certain standards relating to the servicing of the Receivables.
The Sale and Servicing Agreement will also provide for delivery to the
Indenture Trustee and the Owner Trustee, on or before 90 days after the end of
each fiscal year of the Servicer, commencing with the fiscal year ended March
31, 1999, of a certificate signed by an officer of the Servicer stating that the
Servicer has fulfilled its obligations under the Sale and Servicing Agreement
throughout the preceding fiscal year (or since the Closing Date 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.
Copies of such statements and certificates may be obtained by any Noteholder
by request in writing addressed to the Indenture Trustee, or by any
Certificateholder by request in writing to the Owner Trustee, in either case
addressed to its applicable Corporate Trust Office.
THE INDENTURE. The Trust will be required to file annually with the
Indenture Trustee a written statement as to the fulfillment of its obligations
under the Indenture.
The Indenture Trustee will be required to mail each year to all related
Noteholders a brief report relating to, among other things, the following events
which may have occurred within the previous 12 months (but if no such event has
occurred no report need be transmitted), any change to its eligibility and
qualification to continue as Indenture Trustee under the Indenture, any amounts
advanced by it under the Indenture, the amount, interest rate and maturity date
of certain indebtedness owing by the Trust to the Indenture Trustee in its
individual capacity, the property and funds physically held by such Indenture
Trustee as such and any action taken by it that materially affects the Notes and
that has not been previously reported.
CERTAIN MATTERS REGARDING THE SERVICER
The Sale and Servicing Agreement will provide that the Servicer may not
resign from its obligations and duties as Servicer thereunder except upon
determination that the Servicer's performance of such duties is no longer
permissible under applicable law. No such resignation will become effective
until the Indenture Trustee or a successor servicer has assumed the Servicer's
servicing obligations and duties under the Sale and Servicing Agreement.
The Sale and Servicing Agreement will further provide that neither the
Servicer nor any of its directors, officers, employees or agents shall be under
any liability to the Trust or the Securityholders for taking any action or for
refraining from taking any action pursuant to the Sale and Servicing Agreement,
or for errors in judgment; provided, however, that neither the Servicer nor any
such person will be protected against any liability that would otherwise be
imposed by reason of willful misfeasance, bad faith or negligence in the
performance of duties or by reason of reckless disregard of 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 Sale and Servicing Agreement and that, in its
opinion, may cause it to incur any expense or liability. The Servicer may,
however, undertake any reasonable action that it may deem necessary or desirable
in respect of the Sale and Servicing Agreement and the rights and duties of the
parties thereto and the interests of the Securityholders. In any event, the
legal expenses and costs of such action and
45
<PAGE>
any liability resulting therefrom will be expenses, costs and liabilities of the
Trust, and the Servicer will be entitled to be reimbursed therefor out of funds
on deposit in the Collection Account. Any such indemnification or reimbursement
could reduce the amount otherwise available for distribution to Noteholders.
Any corporation into which the Servicer may be merged or consolidated, or
any corporation resulting from any merger, conversion 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 of the Servicer under
the Sale and Servicing Agreement.
SERVICER DEFAULT
"Servicer Defaults" under the Sale and Servicing Agreement will consist of
(i) any failure by the Servicer to deposit in or credit to any Trust Account any
amount required to be so deposited or credited or to make the required
distributions therefrom, which failure continues unremedied for three Business
Days after discovery thereof by the Servicer or after the giving of written
notice of such failure to (a) the Servicer by the Indenture Trustee or the Owner
Trustee or (b) the Servicer and the Trustees by holders of Notes or
Certificateholders evidencing not less than 25% of the voting interests thereof,
voting together as a single class, (ii) any 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 covenant or agreement in the Sale and Servicing
Agreement, which failure materially and adversely affects the rights of
Securityholders and which continues unremedied for 90 days after the giving of
written notice of such failure (a) to the Servicer or the Seller, as the case
may be, by the Owner Trustee or the Indenture Trustee or (b) to the Servicer or
the Seller, as the case may be, and to the Indenture Trustee or the Owner
Trustee by holders of Notes or Certificateholders evidencing not less than 25%
of the voting interests thereof, 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 or similar proceedings or
inability to pay its obligations (each, an "Insolvency Event").
RIGHTS UPON SERVICER DEFAULT
As long as a Servicer Default remains unremedied, the Indenture Trustee or
holders of Notes representing not less than 25% of the voting interests thereof,
voting together as a single class (or, if the Notes have been paid in full and
the Indenture has been discharged in accordance with its terms, by holders of
Certificates evidencing not less than 25% of the voting interests thereof), may
terminate all the rights and obligations of the Servicer under the Sale and
Servicing Agreement, whereupon the Indenture Trustee or a successor servicer
appointed by the Indenture Trustee will succeed to all the responsibilities,
duties and liabilities of the Servicer in its capacity as such under the Sale
and Servicing 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 Servicer Default other than such appointment
has occurred, such trustee or official may have the power to prevent the
Indenture Trustee or the Noteholders (or Certificateholders) from effecting a
transfer of servicing. In the event that the Indenture Trustee is unwilling or
unable so to act, it may appoint or petition a court of competent jurisdiction
to appoint a successor with a net worth of at least $50,000,000 and whose
regular business includes the servicing of motor vehicle receivables. The
Indenture Trustee may make such arrangements for compensation to be paid, which
in no event may be greater than the servicing compensation paid to the Servicer
under the Sale and Servicing Agreement. 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 Notes evidencing at least a majority of the voting interests
thereof, voting together as a single class (or the holders of Certificates
evidencing not less than a majority of the voting interests thereof,
46
<PAGE>
in the case of any Servicer Default that does not adversely affect the Indenture
Trustee or the Noteholders), may, on behalf of all Securityholders, waive any
default by the Servicer in the performance of its obligations under the Sale and
Servicing Agreement and its consequences, except a default in making any
required deposits to or payments from any Trust Account in accordance with the
Sale and Servicing Agreement. No such waiver will impair the Securityholders'
rights with respect to subsequent Servicer Defaults.
VOTING INTERESTS
The "voting interests" of the (i) Notes of a Class or Classes will be
allocated among the Noteholders or related Note Owners, as the case may be, in
accordance with the unpaid principal amount of the Notes of such Class or
Classes represented thereby and (ii) Certificates will be allocated among the
Certificateholders or related Certificate Owners, as the case may be, in
accordance with the Certificate Balance represented thereby; provided, that,
where the voting interests are relevant to determine whether the vote of the
requisite percentage of Securityholders necessary to effect a consent, waiver,
request or demand shall have been obtained, any Class of Notes or Certificates,
as the case may be, held by the Seller, the Servicer or any of their respective
affiliates shall be excluded from such determination.
AMENDMENT
THE SALE AND SERVICING AGREEMENT. The Sale and Servicing Agreement may be
amended, without the consent of any Securityholders, to cure any ambiguity,
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 thereunder which are not inconsistent
with the provisions thereof or to permit certain changes with respect to the
Specified Reserve Fund Balance, the funding of the Reserve Fund, the remittance
schedule with respect to collections to be deposited into the Trust Accounts or
the Servicer Letter of Credit or the acquisition thereof; provided, that any
such action will not, in the opinion of counsel satisfactory to the Trustees,
materially and adversely affect the interests of any such Securityholder, and
provided further, that in the case of a change with respect to the Specified
Reserve Fund Balance or any Servicer Letter of Credit, the Trustee receives a
letter from each Rating Agency to the effect that its then-current rating on
each Class of Notes will not be qualified, reduced or withdrawn due to such
amendment.
The Sale and Servicing Agreement may also be amended from time to time with
the consent of the holders of Notes evidencing at least a majority of the voting
interests thereof, voting together as a single class, and the holders of
Certificates evidencing at least a majority of the voting interests thereof, for
the purpose of adding any provisions to or changing in any manner or eliminating
any of the provisions of such agreement or of modifying in any manner the rights
of the related Securityholders of each Class; provided, 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, required distributions on the Notes or the Certificates or
(ii) reduce the aforesaid percentage of the voting interests of which the
holders of any Class of Securities are required to consent to any such
amendment, without the consent of the holders of all of the relevant Class of
Securities.
THE TRUST AGREEMENT. The Trust Agreement may be amended, without the
consent of the Securityholders, to cure any ambiguity, to correct or supplement
any provision therein which may be inconsistent with any other provision
therein, to add any other provisions with respect to matters or questions
arising thereunder which are not inconsistent with the provisions thereof;
provided, that any such action will not, in the opinion of counsel satisfactory
to the related Trustee, materially and adversely affect the interests of any
Securityholder.
The Trust Agreement may also be amended from time to time with the consent
of the holders of Notes evidencing at least a majority of the voting interests
thereof, voting together as a single class, and the holders of Certificates
evidencing at least a majority of the voting interests thereof, for the purpose
of adding any provisions to or changing in any manner or eliminating any of the
provisions of such agreement or of
47
<PAGE>
modifying in any manner the rights of the Noteholders or the Certificateholders;
provided, that no such amendment may (i) increase or reduce in any manner the
amount of or accelerate or delay the timing of collections of payments on or in
respect of the Receivables or required distributions on the Notes or the
Certificates or any Interest Rate or the Certificate Rate or (ii) reduce the
aforesaid percentage of the voting interests of which the holders of any Class
of Securities are required to consent to any such amendment, without the consent
of the holders of all of the relevant Class of Securities.
THE INDENTURE. The Trust and the Indenture Trustee (on behalf of the Trust)
may, without the consent of the Noteholders, enter into one or more supplemental
indentures for any of the following purposes: (i) to correct or amplify the
description of the property subject to the lien of the Indenture or to subject
additional property to the lien of the Indenture; (ii) to provide for the
assumption of the Notes and the Indenture obligations by a permitted successor
to the Trust; (iii) to add additional covenants for the benefit of the related
Noteholders or to surrender any rights or powers conferred upon the Trust; (iv)
to convey, transfer, assign, mortgage or pledge any property to the Indenture
Trustee; (v) to cure any ambiguity or correct or supplement any provision in the
Indenture or in any supplemental indenture which may be inconsistent with any
other provision in the Indenture, any supplemental indenture, the Sale and
Servicing Agreement or certain other agreements; provided, that any such action
shall not adversely affect the interests of any Noteholder; (vi) to provide for
the acceptance of the appointment of a successor Indenture Trustee or to add to
or change any of the provisions of the Indenture as shall be necessary and
permitted to facilitate the administration by more than one trustee; (vii) to
modify, eliminate or add to the provisions of the Indenture in order to comply
with the Trust Indenture Act of 1939, as amended; and (viii) to add any
provisions to, change in any manner, or eliminate any of the provisions of, the
Indenture or modify in any manner the rights of Noteholders under the Indenture;
provided that any such action specified in clause (viii) shall not, as evidenced
by any opinion of counsel, adversely affect in any material respect the
interests of any Noteholder unless such Noteholder's consent is otherwise
obtained as described below.
Without the consent of the holder of each outstanding Note affected thereby,
no supplemental indenture may: (i) change the due date of any installment of
principal of or interest on any Note or reduce the principal amount thereof, the
Interest Rate thereon or the redemption price with respect thereto or change any
place of payment where or the coin or currency in which any such Note or any
interest thereon is payable or impair the right to institute suit for the
enforcement of provisions of the Indenture regarding payment; (ii) reduce the
percentage of the voting interests of the Notes, the consent of the holders of
which is required for any such supplemental indenture or the consent of the
holders of which is required for any waiver of compliance with certain
provisions of the Indenture or of certain defaults thereunder and their
consequences as provided for in the Indenture; (iii) modify or alter the
provisions of the Indenture regarding the voting of Notes held by the Trust, any
other obligor on such Notes, the Seller or any of their respective affiliates;
(iv) reduce the percentage of the voting interests of the Notes, the consent of
the holders of which is required to direct the Indenture Trustee to sell or
liquidate the property of the Trust if the proceeds of such sale or liquidation
would be insufficient to pay the principal amount and accrued but unpaid
interest on the outstanding Notes; (v) modify the provisions of the Indenture
except to increase any percentage specified therein or to provide certain
additional provisions in the Indenture or the other related documents cannot be
modified or waived without the consent of all Noteholders affected thereby; (vi)
modify the provisions of the Indenture to affect the calculation of the amount
of any payment of interest or principal due on any Note on any Distribution Date
or to affect the rights of Noteholders to the benefits of any mandatory
redemption of the Notes contained in the Indenture; or (vii) permit the creation
of any lien ranking prior to or on a parity with the lien of the Indenture with
respect to any of the collateral for the Notes or, except as otherwise permitted
or contemplated in the Indenture, terminate the lien of the Indenture on any
such collateral or deprive the holder of any such Note of the security afforded
by the lien of the Indenture.
48
<PAGE>
ACCESS TO NOTEHOLDER LISTS
Three or more holders of Notes may, by written request to the Indenture
Trustee, obtain access to the list of all Noteholders maintained by such
Indenture Trustee for the purpose of communicating with the other Noteholders
with respect to their rights under the Indenture or under the Notes. The
Indenture Trustee may elect not to afford the requesting Noteholders access to
the list of Noteholders if it agrees to mail the desired communication or proxy,
on behalf of and at the expense of the requesting Noteholders, to all
Noteholders.
Neither the Trust Agreement nor the Indenture will provide for the holding
of any annual or other meetings of Securityholders.
INSOLVENCY EVENT
The Sale and Servicing Agreement will provide that the Servicer and the
Seller shall agree not to institute, or cause the Trust to institute, a
proceeding in bankruptcy with respect to the Trust for a period of one year and
one day after the termination of the Sale and Servicing Agreement.
The Trust Agreement will provide that the Owner Trustee will not have the
power to commence a voluntary proceeding in bankruptcy with respect to the Trust
without the unanimous prior approval of all Certificateholders (including the
Seller) and the delivery to the Trustee by each such Certificateholder of a
certificate certifying that such Certificateholder reasonably believes that the
Trust is insolvent.
The Trust Agreement will provide that the Owner Trustee, each
Certificateholder, the Indenture Trustee and each Noteholder, shall agree that
they will not at any time institute, or join in any institution against, the
Trust or the Seller, any bankruptcy proceedings relating to the Certificates,
the Notes, the Trust Agreement, the Indenture or certain other agreements.
PAYMENT IN FULL OF NOTES
Upon the payment in full of all outstanding Notes and the satisfaction and
discharge of the Indenture, the Owner Trustee will succeed to all the rights of
the Indenture Trustee, and the Certificateholders will succeed to all the rights
of the Noteholders, under the Sale and Servicing Agreement, except as otherwise
provided therein.
TERMINATION
The obligations of the Servicer, the Seller, the Owner Trustee and the
Indenture Trustee with respect to the related Securityholders pursuant to the
Trust Agreement, Sale and Servicing Agreement or Indenture will terminate upon
the earliest to occur of (i) the payment to such Securityholders of all amounts
required to be paid to them pursuant to such agreement and (ii) the occurrence
of the event described below.
In order to avoid excessive administrative expenses, the Seller, the
Servicer, or any successor to the Servicer will be permitted to purchase the
remaining Receivables from the Trust on any Distribution Date following a
Collection Period as of which the Pool Balance is less than 10% of the Cutoff
Date Pool Balance at a price equal to the aggregate Administrative Purchase
Payments for the Receivables (including Defaulted Receivables), plus the
appraised value of any such other property held by the Trust other than the
Trust Accounts. Notwithstanding the foregoing, no purchase will be permitted
unless the price to be paid is greater than or equal to the sum of the
outstanding principal balance of the Notes and all accrued interest thereon
together with the unpaid principal amount of the Certificates and all accrued
but unpaid interest thereon. 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 Indenture Trustee (based on the Indenture
Trustee's receipt of such notice) shall be permitted to purchase the
Receivables. The related Trustee will give written notice of termination to each
Securityholder of record.
49
<PAGE>
The Owner Trustee and Indenture Trustee will give written notice of
termination to each Securityholder of record. The final distribution to each
Securityholder will be made only upon surrender and cancellation of such
holder's Securities at the office or agency of the related Trustee specified in
the notice of termination. Any funds remaining in the Trust, after such Trustee
has taken certain measures to locate a Securityholder and such measures have
failed, will be distributed by the Owner Trustee to the Issuer.
Any outstanding Notes will be redeemed concurrently with any Optional
Termination described above, and the subsequent distribution to the related
Certificateholders of all amounts required to be distributed to them pursuant to
the Trust Agreement will effect early retirement of the Certificates.
THE TRUSTEES
A Trustee may resign at any time, in which event the Administrator, or its
successor, will be obligated to appoint a successor trustee. The Administrator
may also remove the Owner Trustee or the Indenture Trustee, in each case if such
Trustee becomes insolvent or ceases to be eligible to continue as such under the
Trust Agreement or Indenture, as the case may be. In such event, the
Administrator will be obligated to appoint a successor Trustee. Any resignation
or removal of a Trustee and appointment of a successor Trustee will not become
effective until acceptance of the appointment by the successor Trustee.
Each Trustee and any of its affiliates may hold Securities in their own
names or as pledgees. For the purpose of meeting the legal requirements of
certain jurisdictions, the Administrator and the Owner Trustee or Indenture
Trustee acting jointly (or in some instances, the Owner Trustee and Indenture
Trustee acting without the Administrator) 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 related Trustee by the Indenture, Sale and Servicing Agreement
or Trust Agreement will be conferred or imposed upon such Trustee and such
separate trustee or co-trustee jointly, or, in any jurisdiction in which such
Trustee will be incompetent or unqualified to perform certain acts, singly upon
such separate trustee or cotrustee who will exercise and perform such rights,
powers, duties and obligations solely at the direction of such Trustee.
The Trust Agreement will provide that the Seller will pay the fees of the
Owner Trustee and the Indenture will provide that the Trust will, or will cause
the Administrator to, pay the fees of the Indenture Trustee. The Trust Agreement
will further provide that the Owner Trustee will be held harmless against, any
loss, liability or expense incurred by such Trustee not resulting from its own
willful misconduct, bad faith or negligence (other than by reason of a breach of
any of its representations or warranties set forth in such agreement). The
Indenture will further provide that the Indenture Trustee will be entitled to
indemnification by the Trust or the Administrator for any loss, liability or
expense incurred by such Trustee not resulting from its own willful misconduct,
negligence or bad faith.
DUTIES OF THE TRUSTEES
Neither Trustee will make any representations as to the validity or
sufficiency of the Trust Agreement or the Indenture, the Securities issued
pursuant thereto (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 such Securities or the related Receivables, or the
investment of any monies by the Servicer before such monies are deposited into
the Collection Account. The Trustees will not independently verify the existence
or characteristics of the Receivables. If no Event of Default or Servicer
Default has occurred and is continuing, each Trustee will be required to perform
only those duties specifically required of it under the Indenture, Trust
Agreement or the Sale and Servicing Agreement, as the case may be. Generally
those duties will be limited to the receipt of the various certificates and
reports or other instruments required to be furnished to such Trustee under such
agreements, in which case it will only be required to examine them to determine
whether they conform to the
50
<PAGE>
requirements of such agreements. No Trustee will be charged with knowledge of a
failure by the Servicer to perform its duties under the relevant agreements
which failure constitutes an Event of Default or a Servicer Default unless such
Trustee obtains actual knowledge of such failure as specified in such
agreements.
No Trustee will be under any obligation to exercise any of the rights or
powers vested in it by the Trust Agreement or Indenture, as the case may be, 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 Securityholders, unless such Securityholders have
offered to such Trustee reasonable security or indemnity against the costs,
expenses and liabilities that may be incurred therein or thereby.
No Noteholder will have any right under the Indenture to institute any
proceeding with respect thereto, unless such holder previously has given to the
Indenture Trustee written notice of default and the holders of Notes evidencing
not less than 25% of the voting interests of all Notes, voting together as a
single class, have made written request upon the Indenture Trustee to institute
such proceeding in its own name as Indenture Trustee thereunder and have offered
to the Indenture Trustee reasonable indemnity and the Indenture Trustee for 60
days has neglected or refused to institute any such proceedings.
ADMINISTRATION AGREEMENT
AHFC, in its capacity as administrator (the "Administrator"), will enter
into an agreement (the "Administration Agreement") with the Trust, the Seller
and the Indenture Trustee pursuant to which the Administrator will agree, to the
extent provided in the Administration Agreement, to provide the notices and to
perform other administrative obligations required to be provided or performed by
the Trust or the Owner Trustee under the Indenture. As compensation for the
performance of the Administrator's obligations under the Administration
Agreement and as reimbursement for its expenses related thereto, the
Administrator will be entitled to a monthly administration fee payable by the
Seller.
51
<PAGE>
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES
GENERAL
The transfer of the Receivables to the Owner 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 Owner 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 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, the state in which the
largest number of Financed Vehicles is 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 Sale and Servicing Agreement, the Seller will sell and assign
its security interests in the Financed Vehicles to the Trust. However, because
of the administrative burden and expense, neither AHFC, the Seller nor either
Trustee will amend any certificate of title to identify the Trust 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 Trust 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 Trust
of the Seller's security interest in the Financed Vehicles will be filed. In
addition, the Servicer will continue to hold any certificates of title relating
to the Financed Vehicles in its possession as custodian for the Owner Trustee
pursuant to the Sale and Servicing Agreement. See "Risk Factors -- Perfection of
Security Interests in the Financed Vehicles" and "Certain Information Regarding
the Securities -- Sale and Assignment of the Receivables".
In most states, assignments such as those under the Receivables Purchase
Agreement and the Sale and Servicing 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 re-registration of the vehicle is not necessary
to convey a perfected security interest in the Financed Vehicles to the Trust,
because the Trust 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 Trust. 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 Sale and Servicing Agreement, the Seller will represent and warrant,
that all action necessary for AHFC to obtain a perfected security interest in
each
52
<PAGE>
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 Sale and Servicing Agreement. Accordingly, pursuant to the
Sale and Servicing Agreement, the Seller would be required to repurchase the
related Receivable from the Trust 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 "Certain Information Regarding
the Securities -- Sale and Assignment of the Receivables". The Seller will
assign its rights under the Receivables Purchase Agreement to the Trust.
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 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, 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 Sale and Servicing
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, the state in which the largest number of
Receivables were originated), 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 in
the Receivables Purchase Agreement and the Seller will represent and warrant in
the Sale and Servicing 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 Trustees or Securityholders 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 Sale and Servicing
Agreement or AHFC's repurchase obligation under the Receivables Purchase
Agreement.
REPOSSESSION
In the event of default by an obligor, the holder of the related installment
sale contract has all the remedies of a secured party under the UCC, except
where specifically limited by other state laws. The UCC remedies of a secured
party include the right to repossession by self-help means, unless such means
would
53
<PAGE>
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 the obligor, 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. Generally, this right of cure may only
be exercised on a limited number of occasions during the term of the related
contract.
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. 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 or in some states, by payment of
delinquent installments or the unpaid balance.
DEFICIENCY JUDGMENTS AND EXCESS PROCEEDS
The proceeds of resale of the 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 maintenance 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
54
<PAGE>
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 Owner 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 Securities and possible reductions in the amount of such payments could
occur. On the Closing Date, counsel to 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 Securities.
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,
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 papers 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. Counsel to AHFC has advised AHFC that
the reasoning in the Tenth Circuit case appears to be inconsistent with other
precedent. In addition, the Permanent Editorial Board of the UCC has issued an
official commentary (PEB Commentary No. 14) which characterizes the Tenth
Circuit Court's interpretation of Article 9 of the UCC as erroneous. Such
commentary states that nothing in Article 9 is intended to prevent the transfer
of ownership of accounts or chattel paper.
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
55
<PAGE>
Act, the Federal Reserve Board's Regulations B and Z, the Soldiers' and Sailors'
Civil Relief Act of 1940, the Military Reservist Relief Act, 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 Indenture 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 Trust, 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.
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 Sale and Servicing Agreement and would create an
obligation of AHFC and the Seller to repurchase such Receivable unless the
breach were cured, See "Certain Information Regarding the Securities -- 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 $248.5 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 Sale and Servicing Agreement, respectively, that each
Receivable complies with all requirements of law in all material respects.
Accordingly, if an Obligor has a claim against the Trust for violation of any
law or claims that the related Receivable is unenforceable and such claim
materially and adversely affects the Owner Trustee's interest in a Receivable,
such violation would constitute a breach of such representation and warranty
under the Receivables Purchase Agreement and the Sale and Servicing Agreement
and will create
56
<PAGE>
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 "Certain Information
Regarding the Securities -- 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 the indebtedness.
57
<PAGE>
MATERIAL 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 Notes. This
summary is based upon laws, regulations, rulings and decisions currently in
effect, all of which are subject to change. The discussion does not deal with
all federal tax consequences applicable to all categories of investors, some of
which may be subject to special rules. In addition, this summary is generally
limited to investors who will hold the Notes 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").
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. Moreover, there are no cases or
IRS rulings on transactions similar to those described herein with respect to
the Trust, involving both debt and equity interests issued by a trust with terms
similar to those of the Notes and the Certificates. Prospective investors are
urged to consult their own tax advisors in determining the federal, state,
local, foreign and any other tax consequences to them of the purchase, ownership
and disposition of the Notes.
TAX CHARACTERIZATION OF TRUST
In the opinion of Brown & Wood LLP, counsel to the Seller, the Trust will
not be an association (or a publicly traded partnership) taxable as a
corporation for federal income tax purposes. This opinion will be based on the
assumption that the terms of the Trust Agreement and related documents will be
complied with, and on such counsel's conclusions that the nature of the income
of the Trust will exempt it from the rule that certain publicly traded
partnerships are taxable as corporations.
If the Trust were taxable as a corporation for federal income tax purposes,
it would be subject to corporate income tax on its taxable income. The Trust's
taxable income would include all its income on the related Receivables, which
may be reduced by its interest expense on the Notes. Any such corporate income
tax could materially reduce cash available to make payments on the Notes and
distributions on the Certificates, and Certificateholders could be liable for
any such tax that is unpaid by the Trust.
TREATMENT OF THE NOTES AS INDEBTEDNESS
The Seller will agree, and the Noteholders will agree by their purchase of
Notes, to treat the Notes as debt for federal income tax purposes. Brown & Wood
LLP, counsel to the Seller, will render an opinion that the Notes will be
classified as debt for federal income tax purposes. The discussion below assumes
this characterization of the Notes is correct.
OID
The discussion below assumes that all payments on the Notes are denominated
in U.S. dollars. Moreover, the discussion assumes that the interest formula for
the Notes meets the requirements for "qualified stated interest" under Treasury
regulations relating to original issue discount ("OID"), and that any OID on the
Notes (I.E., any excess of the principal amount of the Notes over their issue
price) does not exceed a DE MINIMIS amount (I.E., 1/4% of their principal amount
multiplied by the number of full years included in their term), all within the
meaning of such OID regulations.
INTEREST INCOME ON THE NOTES
Based on the above assumptions, except as discussed in the following
paragraph, the Notes will not be considered issued with OID. The stated interest
thereon will be taxable to a Noteholder as ordinary interest income when
received or accrued in accordance with such Noteholder's method of tax
accounting. Under the OID regulations, a holder of a Note issued with a DE
MINIMIS amount of OID must include such OID in
58
<PAGE>
income, on a pro rata basis, as principal payments are made on the Note. A
purchaser who buys a Note for more or less than its principal amount will
generally be subject, respectively, to the premium amortization or market
discount rules of the Code.
However, because a failure to pay interest currently on the Notes is not a
default and does not give rise to a penalty, under the OID regulations the Notes
might be viewed as having been issued with OID. This interpretation would not
significantly affect accrual basis holders of Notes, although it would somewhat
accelerate taxable income to cash basis holders by, in effect, requiring them to
report interest income on the accrual basis.
SALE OR OTHER DISPOSITION
If a Noteholder sells a Note, the holder will recognize gain or loss in an
amount equal to the difference between the amount realized on the sale and the
holder's adjusted tax basis in the Note. The adjusted tax basis of a Note to a
particular Noteholder will equal the holder's cost for the Note, increased by
any market discount, acquisition discount, OID and gain previously included by
such Noteholder in income with respect to the Note and decreased by the amount
of bond premium (if any) previously amortized and by the amount of principal
payments previously received by such Noteholder with respect to such Note. Any
such gain or loss will be capital gain or loss if the Note was held as a capital
asset except for amounts representing accrued interest and accrued market
discount not previously included in income and will generally be long-term
capital gain or loss if the Noteholder held the Notes for more than one year.
Long-term capital gains of non-corporate taxpayers are subject to reduced
maximum tax rates. The use of capital losses is subject to limitations.
FOREIGN HOLDERS
Interest payments made (or accrued) to a Noteholder who is a nonresident
alien, foreign corporation or other non-United States person (a "foreign
person") generally will be considered "portfolio interest", and generally will
not be subject to United States federal income tax and withholding tax, if the
interest is not effectively connected with the conduct of a trade or business
within the United States by the foreign person and the foreign person (i) is not
actually or constructively a "10 percent shareholder", within the meaning of the
Code, of the Trust or the Seller (including a holder of 10% or more of the
outstanding Certificates) or a "controlled foreign corporation" with respect to
which the Trust or the Seller is a "related person" within the meaning of the
Code and (ii) provides the Owner Trustee or other person who is otherwise
required to withhold U.S. tax with respect to the Notes with an appropriate
statement (on Form W-8 or a similar form), signed under penalty of perjury,
certifying that the beneficial owner of the Note is a foreign person and
providing the foreign person's name and address. If a Note is held through a
securities clearing organization or certain other financial institutions, the
organization or institution may provide the relevant signed statement to the
withholding agent; in that case, however, the signed statement must be
accompanied by a Form W-8 or substitute form provided by the foreign person that
owns the Note. If such interest is not portfolio interest and is not effectively
connected with the conduct of a trade or business within the United States, then
it will be subject to United States federal income and withholding tax at a rate
of 30%, unless reduced or eliminated pursuant to an applicable tax treaty. See
"Annex A-1".
Any capital gain realized on the sale, redemption, retirement or other
taxable disposition of a Note by a foreign person will be exempt from United
States federal income and withholding tax, provided that (i) such gain is not
effectively connected with the conduct of a trade or business in the United
States by the foreign person and (ii) in the case of an individual foreign
person, the foreign person is not present in the United States for 183 days or
more in the taxable year and certain other requirements are satisfied.
59
<PAGE>
BACKUP WITHHOLDING
Each holder of a Note (other than an exempt holder such as a corporation,
tax exempt organization, qualified pension and profit sharing trust, individual
retirement account or nonresident alien who provides certification as to status
as a nonresident) will be required to provide, under penalty of perjury, a
certificate containing the holder's name, address, correct federal taxpayer
identification number and a statement that the holder is not subject to backup
withholding. Should a nonexempt Noteholder fail to provide the required
certification, the Trust will be required to withhold 31% of the amount
otherwise payable to the holder, and remit the withheld amount to the IRS as a
credit against the holder's federal income tax liability. See "Annex A-1"
NEW WITHHOLDING REGULATIONS
Recently, the Treasury Department issued new regulations (the "New
Regulations") which make certain modifications to the 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,
1999, subject to certain transition rules. Prospective investors are urged to
consult their own tax advisors regarding the New Regulations.
POSSIBLE ALTERNATIVE TREATMENTS OF THE NOTES
If, contrary to the opinion of counsel to the Seller, the IRS successfully
asserted that one or more Classes of Notes did not represent debt for federal
income tax purposes, the Notes might be treated as equity interests in the
Trust. In the view of counsel to the Seller, the Trust would be treated as a
partnership that would not be taxable as a corporation (even if the
recharacterization of the Notes caused it to be treated as a publicly traded
partnership) because it would meet certain qualifying income tests. Nonetheless,
treatment of the Notes as equity interests in such a partnership could have
adverse tax consequences to certain holders. For example, income to certain
tax-exempt entities (including pension funds) could be "unrelated business
taxable income" on such recharacterized Notes if some but not all Notes
outstanding were recharacterized, income to foreign holders generally would be
subject to United States tax and withholding requirements and possibly United
States tax return filing requirements and individual holders would be subject to
certain limitations on their ability to deduct their share of Trust expenses.
CERTAIN CALIFORNIA INCOME TAX CONSEQUENCES
In the opinion of Brown & Wood LLP, counsel to the Seller, the Trust will
not be an association taxable as a corporation for California income tax
purposes. This opinion will be based on the assumption that the terms of the
Trust Agreement and related documents will be followed. Brown & Wood LLP will
further render an opinion that Noteholders who are not residents of, or
otherwise subject to tax in, California will not, solely by reason of their
acquisition of an interest in any Class of Notes, be subject to California
income, franchise, excise or similar taxes with respect to interest on any Class
of Notes.
Investors should consult their own tax advisors to determine the state,
local and other tax consequences to them of the purchase, ownership and
disposition of the Notes.
60
<PAGE>
ERISA CONSIDERATIONS
The Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
and the Code impose certain restrictions on (a) employee benefit plans (as
defined in Section 3(3) of ERISA) that are subject to Title I of ERISA, (b)
plans described in Section 4975(e)(1) of the Code that are subject to Section
4975 of the Code, including individual retirement accounts or Keogh Plans, (c)
any entities whose underlying assets include plan assets by reason of a plan's
investment in such entities (each of (a), (b) and (c), a "Benefit Plan") and (d)
persons who have certain specified relationships to a Benefit Plan
("Parties-in-Interest" under ERISA and "Disqualified Persons" under the Code).
Moreover, based on the reasoning of the United States Supreme Court in JOHN
HANCOCK LIFE INS. CO. v. HARRIS TRUST AND SAV. BANK, 114 S.Ct. 517 (1993), the
general account of an insurance company may be deemed to include assets of
Benefit Plans investing in the general account (E.G., through the purchase of an
annuity contract), and the insurance company might be treated as a
Party-in-Interest with respect to a Benefit Plan by virtue of such an
investment. ERISA also imposes certain duties on persons who are fiduciaries of
Benefit Plans subject to ERISA, and ERISA and Section 4975 of the Code prohibit
certain transactions between a Benefit Plan and Parties-in-Interest or
Disqualified Persons with respect to such Benefit Plan. Violation of these rules
may result in the imposition of excise taxes and other penalties and liabilities
under ERISA and the Code.
PLAN ASSETS AND PROHIBITED TRANSACTIONS ISSUES
Certain transactions involving the Trust might be deemed to constitute
prohibited transactions under ERISA and the Code if assets of the Trust were
deemed to constitute assets of a Benefit Plan investing in the Notes. Under a
regulation issued by the United States Department of Labor (the "Plan Assets
Regulation"), the assets of the Trust would be treated as plan assets of a
Benefit Plan for purposes of ERISA and Section 4975 of the Code only if the
Benefit Plan acquires an "Equity Interest" in the Trust and none of the
exceptions contained in the Plan Assets Regulation is applicable. An Equity
Interest is defined under the Plan Assets Regulation as an interest other than
an instrument which is treated as indebtedness under applicable local law and
which has no substantial equity features. Although there can be no assurance in
this regard, the Seller believes that the Notes should be treated as
indebtedness without substantial equity features for purposes of the Plan Assets
Regulation. However, without regard to whether the Notes are treated as an
Equity Interest for such purposes, the acquisition or holding of Notes by or on
behalf of a Benefit Plan could be considered to give rise to a prohibited
transaction if the Trust, the Owner Trustee, the Indenture Trustee, any holder
of the Certificates (including any holder to whom the Seller transfers
Certificates) or any of their respective affiliates, is or becomes a party in
interest or a disqualified person with respect to such Benefit Plan. In such
case, certain exemptions from the prohibited transaction rules could be
applicable depending on the type and circumstances of the Benefit Plan fiduciary
making the decision to acquire a Note. These exemptions include Prohibited
Transaction Class Exemption ("PTCE") 90-1, regarding investments by insurance
company pooled separate accounts, PTCE 91-38, regarding investments by bank
collective investment funds, PTCE 84-14, regarding transactions effected by
"qualified professional asset managers", PTCE 95-60, regarding investments by
insurance company general accounts and PTCE 96-23, regarding transactions
effected by "in-house asset managers". A violation of the prohibited transaction
rules may result in the imposition of an excise tax and other liabilities under
ERISA and Section 4975 of the Code, unless one or more statutory or
administrative exemptions is available.
Prior to making an investment in the Notes, each prospective Benefit Plan
investor should consult with its legal advisors concerning the impact of ERISA
and the Code and the potential consequences of such investment in its specific
circumstances. Moreover, each Benefit Plan fiduciary should take into account,
among other considerations, whether the fiduciary has the authority to make the
investment, the composition of the Benefit Plan's portfolio with respect to
diversification by type of asset, the Benefit Plan's funding objectives, the tax
effects of the investment and whether under the general fiduciary standards of
investment prudence and diversification an investment in the Notes 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.
Governmental plans, church plans and foreign plans are not generally subject
to the prohibited transaction rules of ERISA and Section 4975 of the Code.
However, such plans may be subject to similar provisions of state, local and
federal law.
61
<PAGE>
UNDERWRITING
Under the terms and subject to the conditions contained in an Underwriting
Agreement dated January , 1999 (the "Underwriting Agreement"), the
Underwriters named below (the "Underwriters"), for whom Credit Suisse First
Boston Corporation is acting as representative, have severally but not jointly
agreed to purchase, from the Seller the principal amount of the Notes set forth
opposite its name below:
<TABLE>
<CAPTION>
CLASS A-1 CLASS A-2 CLASS A-3 CLASS A-4
UNDERWRITERS NOTES NOTES NOTES NOTES
- - -------------------------------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Credit Suisse First Boston
Corporation.......................... $ $ $ $
Chase Securities Inc..................
NationsBanc Montgomery
Securities LLC.......................
-------------- -------------- -------------- --------------
Total................................. $ 179,424,000 $ 195,000,000 $ 208,000,000 $ 110,608,000
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
</TABLE>
The Underwriting Agreement provides that the obligations of the Underwriters
are subject to certain conditions precedent and that the Underwriters will be
obligated to purchase all of the Notes, 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 Underwriter may be
increased or the Underwriting Agreement may be terminated.
The Seller has been advised by the Underwriters that the Underwriters
propose to offer the Notes to the public initially at the offering price set
forth on the cover page of this Prospectus, and to certain dealers at such price
less a concession of, in the case of (i) the Class A-1 Notes, % of the
principal amount per Note, (ii) the Class A-2 Notes, % of the principal
amount per Note, (iii) the Class A-3 Notes, % of the principal amount per
Note and (iv) the Class A-4 Notes, % of the principal amount per Note and the
Underwriters and such dealers may allow a discount of, in the case of (i) the
Class A-1 Notes, % of the principal amount per Note, (ii) the Class A-2
Notes, % of the principal amount per Note, (iii) the Class A-3 Notes, % of
the principal amount per Note and (iv) the Class A-4 Notes, % of the principal
amount per Note.
There currently is no secondary market for any Class of Notes and there is
no assurance that one will develop. The Underwriters expect, but will not be
obligated, to make a market in each Class of Notes. There is no assurance that
any such market will develop, or if one does develop, that it will continue or
that it will provide sufficient liquidity.
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 Underwriters may be required
to make in respect thereof.
Until the distribution of the Notes is completed, rules of the Commission
may limit the ability of the Underwriters and certain selling group members to
bid for and purchase the Notes. As an exemption to these rules, the Underwriters
are permitted to engage in certain transactions that stabilize the price of each
Class of Notes. Such transactions may consist of bids or purchases for the
purpose of pegging, fixing or maintaining the price of the Notes. The closing of
the sale of the Notes is conditioned upon the closing of the sale of the
Certificates.
Neither the Seller nor any Underwriter makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the prices of the Notes. In addition, neither the
Seller nor any Underwriter makes any representation the Underwriters will engage
in such transactions or that such transactions, once commenced, will not be
discontinued without notice.
62
<PAGE>
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.
NOTICE TO CANADIAN RESIDENTS
RESALE RESTRICTIONS
The distribution of the Notes in Canada is being made only on a private
placement basis exempt from the requirement that the Seller, on behalf of the
Trust, prepare and file a prospectus with the securities regulatory authorities
in each province where trades of Notes are effected. Accordingly, any resale of
the Notes in Canada must be made in accordance with applicable securities laws
which will vary depending on the relevant jurisdiction, and which may require
resales to be made in accordance with available statutory exemptions or pursuant
to a discretionary exemption granted by the applicable Canadian securities
regulatory authority. Purchasers are advised to seek legal advice prior to any
resale of the Notes.
REPRESENTATIONS OF PURCHASERS
Each purchaser of Notes in Canada who receives a purchase confirmation will
be deemed to represent to the Seller, the Servicer, the related Trustee, the
Trust and the dealer from whom such purchase confirmation is received that (i)
such purchaser is entitled under applicable provincial securities laws to
purchase such Notes without the benefit of a prospectus qualified under such
securities laws, (ii) where required by law, that such purchaser is purchasing
as principal and not as agent, and (iii) such purchaser has reviewed the text
above under "Resale Restrictions".
RIGHTS OF ACTION AND ENFORCEMENT
The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
Section 32 of the Regulation under the SECURITIES ACT (Ontario). As a result,
Ontario purchasers must rely on other remedies that may be available, including
common law rights of action for damages or rescission or rights of action under
the civil liability provisions of the U.S. federal securities laws.
All of the issuer's directors and officers as well as the experts named
herein may be located outside of Canada and, as a result, it may not be possible
for Ontario purchasers to effect service of process within Canada upon the
issuer or such persons. All or a substantial portion of the assets of the issuer
and such persons may be located outside of Canada and, as a result, it may not
be possible to satisfy a judgment against the issuer or such persons in Canada
or to enforce a judgment obtained in Canadian courts against such issuer or
persons outside of Canada.
NOTICE TO BRITISH COLUMBIA RESIDENTS
A purchaser of Notes to whom the SECURITIES ACT (British Columbia) applies
is advised that such purchaser is required to file with the British Columbia
Securities Commission a report within ten days of the sale of any Notes acquired
by such purchaser pursuant to this offering. Such report must be in the form
attached to British Columbia Securities Commission Blanket Order BOR #95/17, a
copy of which may be obtained from the Seller. Only one such report must be
filed in respect of Notes acquired on the same date and under the same
prospectus exemption.
RATING OF THE NOTES
It is a condition to issuance of the Notes that the Class A-1 Notes will be
rated F1+ by Fitch IBCA, P-1 by Moody's and A-1+ by Standard & Poor's, and that
each of the Class A-2, Class A-3 and Class A-4 Notes
63
<PAGE>
will be rated Aaa by Moody's and AAA by each of Standard & Poor's and Fitch
IBCA. The ratings of the Notes will be based primarily on the value of the
Receivables, the terms of the Notes and the Reserve Fund and the subordination
of the Certificates to the extent described herein. The ratings of the Notes
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 Notes 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 on the Notes prior to
their respective Final Distribution Dates.
There can be no assurance as to whether any rating agency other than the
Rating Agencies will rate the Notes, or, if one does, what rating will be
assigned by any such other rating agency. A rating on any or all of the Notes by
other rating agencies, if assigned at all, may be lower than the rating assigned
to such Notes by the Rating Agencies.
LEGAL MATTERS
Certain legal matters with respect to the Notes, 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.
64
<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>
ABS........................................... 18
ABS Tables.................................... 19
Accrual Period................................ 5
Actuarial Receivable.......................... 13
Administrator................................. 51
Administration Agreement...................... 51
Administrative Purchase Payment............... 35
Administrative Receivable..................... 35
Advances...................................... 8
Aggregate Net Losses.......................... 43
AHFC.......................................... 1, 3
AHMC.......................................... 3
APR........................................... 4
Applied Payments Ahead........................ 39
Available Amount.............................. 39
Available Interest............................ 39
Available Principal........................... 39
Benefit Plan.................................. 61
Business Day.................................. 4
California Receivables........................ 56
Cede.......................................... 29
Certificate Balance........................... 6
Certificate Distribution Account.............. 36
Certificate Interest Distributable Amount..... 40
Certificate Monthly Principal Distributable
Amount...................................... 40
Certificate Percentage........................ 41
Certificate Pool Factor....................... 26
Certificate Principal Carryover Shortfall..... 41
Certificate Principal Distributable Amount.... 41
Certificate Rate.............................. 6
Certificateholders............................ 6
Certificates.................................. 1, 3
Charge-off Rate............................... 43
Class......................................... 3
Class A-1 Final Distribution Date............. 4
Class A-1 Notes............................... 1, 3
Class A-1 Rate................................ 5
Class A-2 Final Distribution Date............. 4
Class A-2 Notes............................... 1, 3
Class A-2 Rate................................ 5
Class A-3 Final Distribution Date............. 4
Class A-3 Notes............................... 1, 3
Class A-3 Rate................................ 5
Class A-4 Final Distribution Date............. 4
<CAPTION>
TERM PAGE
- - ---------------------------------------------- ---------
<S> <C>
Class A-4 Notes............................... 1, 3
Class A-4 Rate................................ 5
Closing Date.................................. 4
Code.......................................... 58
Collection Account............................ 35
Collection Period............................. 8
Commission.................................... 2
Current Receivable............................ 43
Cutoff Date................................... 4
Cutoff Date Pool Balance...................... 4
Dealer Recourse............................... 13
Dealers....................................... 13
Defaulted Receivable.......................... 39
Definitive Notes.............................. 29
Delinquency Percentage........................ 43
Deposit Date.................................. 7
Determination Date............................ 38
Discount Receivables.......................... 7
Distribution Accounts......................... 36
Distribution Date............................. 1, 4
Distribution Date Statement................... 38
DTC........................................... 29
DTC Participants.............................. 29
Equity Interest............................... 61
ERISA......................................... 61
Events of Default............................. 27
Excess Amounts................................ 7
Excess Payment................................ 37
Exchange Act.................................. 2
Final Distribution Dates...................... 4
Financed Vehicles............................. 4
Fitch IBCA.................................... 9
foreign person................................ 59
FTC Rule...................................... 56
Global Securities............................. A-1
HCFI.......................................... 22
Indenture..................................... 3
Indenture Trustee............................. 3
Indirect Participants......................... 30
Industry...................................... 31
Insolvency Event.............................. 46
Insolvency Laws............................... 54
installment sale contracts.................... 11
Interest Rates................................ 5
IRS........................................... 58
Liquidated Receivable......................... 43
</TABLE>
65
<PAGE>
<TABLE>
<CAPTION>
TERM PAGE
- - ---------------------------------------------- ---------
<S> <C>
Moody's....................................... 9
Net Liquidation Proceeds...................... 39
New Regulations............................... 60
Note Distributable Amount..................... 41
Note Distribution Account..................... 35
Note Interest Carryover Shortfall............. 41
Note Interest Distributable Amount............ 41
Note Monthly Interest Distributable Amount.... 41
Note Monthly Principal Distributable Amount... 41
Note Owner.................................... 29
Note Percentage............................... 41
Note Pool Factor.............................. 26
Note Principal Carryover Shortfall............ 41
Note Principal Distributable Amount........... 41
Noteholders................................... 5
Notes......................................... 3
Obligors...................................... 11
OID........................................... 58
Omnibus Proxy................................. 30
Optional Termination.......................... 9
Original Certificate Balance.................. 6
Owner Trustee................................. 3
Parties-in-Interest........................... 61
Payahead Account.............................. 35
Payment Ahead................................. 35
Permitted Investments......................... 36
Plan Assets Regulation........................ 61
Pool Balance.................................. 38
Precomputed Advance........................... 8
Precomputed Receivable........................ 13
Prepayment.................................... 37
Principal Balance............................. 38
Principal Distributable Amount................ 42
PTCE.......................................... 61
Rating Agencies............................... 9
Rebate........................................ 34
Receivables................................... 1,4
Receivables Purchase Agreement................ 4
Record Date................................... 4
<CAPTION>
TERM PAGE
- - ---------------------------------------------- ---------
<S> <C>
Registration Statement........................ 2
Required Rate................................. 7
Reserve Fund.................................. 7
Reserve Fund Initial Deposit.................. 7
Rule of 78s Receivable........................ 13
Sale and Servicing Agreement.................. 4
Schedule of Receivables....................... 33
Scheduled Payment............................. 13
Securities.................................... 3
Securities Act................................ 2
Securityholders............................... 7
Seller........................................ 3
Servicer...................................... 1, 3
Servicer Defaults............................. 46
Servicer Letter of Credit..................... 36
Servicing Fee................................. 8
Servicing Fee Rate............................ 8
Simple Interest Advance....................... 8
Simple Interest Receivable.................... 13
Specified Reserve Fund Balance................ 7,42
Standard & Poor's............................. 9
Statement to Securityholders.................. 44
Supplemental Servicing Fee.................... 9
Systems....................................... 31
Total Servicing Fee........................... 9
Trust......................................... 1,3
Trust Accounts................................ 36
Trust Agreement............................... 3
Trust Fees and Expenses....................... 26
Trustees...................................... 3
UCC........................................... 29
Underwriters.................................. 62
Underwriting Agreement........................ 62
voting interests.............................. 47
Warranty Purchase Payment..................... 34
Warranty Receivable........................... 34
Yield Supplement Account...................... 7
Yield Supplement Account Deposit.............. 7
Yield Supplement Amount....................... 8
Yield Supplement Withdrawal Amount............ 8
</TABLE>
66
<PAGE>
- - -------------------------------------------
-------------------------------------------
No dealer, salesperson or other person has been authorized to give any
information or to make any representations other than those contained in or
incorporated by reference in this Prospectus and, if given or made, such
information or representations must not be relied upon as having been authorized
by the Seller or any Underwriter. Neither the delivery of this Prospectus nor
any sale made hereunder shall under any circumstance create an implication that
there has been no change in the affairs of the Seller or the Receivables since
the date thereof. This Prospectus does not constitute an offer or 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.
--------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Available Information..................................................... 2
Incorporation of Certain Documents by Reference........................... 2
Reports to Noteholders.................................................... 2
Summary................................................................... 3
Risk Factors.............................................................. 11
Formation of the Trust.................................................... 12
Property of the Trust..................................................... 13
The Receivables........................................................... 13
Weighted Average Life of the Notes........................................ 18
Use of Proceeds........................................................... 22
The Seller................................................................ 22
American Honda Finance Corporation........................................ 22
Pool Factors and Trading Information...................................... 26
Description of the Notes.................................................. 26
Description of the Certificates........................................... 32
Certain Information Regarding the Securities.............................. 33
Certain Legal Aspects of the Receivables.................................. 52
Material Federal Income Tax Consequences.................................. 58
Certain California Income Tax Consequences................................ 60
ERISA Considerations...................................................... 61
Underwriting.............................................................. 62
Notice to Canadian Residents.............................................. 63
Rating of the Notes....................................................... 63
Legal Matters............................................................. 64
Index of Capitalized Terms................................................ 65
Annex I................................................................... A-1
</TABLE>
--------------
Until , 1999 (90 days after the date of this Prospectus), all
dealers effecting transactions in the Notes, whether or not participating in
this distribution, may be required to deliver a Prospectus. This delivery
requirement 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.
Honda Auto Receivables
1999-1 Owner Trust
$179,424,000
% Asset Backed Notes,
Class A-1
$195,000,000
% Asset Backed Notes,
Class A-2
$208,000,000
% Asset Backed Notes,
Class A-3
$110,608,000
% Asset Backed Notes,
Class A-4
American Honda
Receivables Corp.
Seller
American Honda
Finance Corporation
Servicer
P R O S P E C T U S
Credit Suisse First Boston
Chase Securities Inc.
NationsBanc Montgomery Securities LLC
Selling Group Members
Barclays Capital
Salomon Smith Barney
SG Cowen
Utendahl Capital Partners, L.P.
- - -------------------------------------------
-------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Expenses in connection with the offering of the Securities being registered
hereby are estimated as follows:
<TABLE>
<S> <C>
SEC registration fee.............................................. $192,687.93
Legal fees and expenses........................................... 400,000.00
Accounting fees and expenses...................................... 90,000.00
Blue sky fees and expenses........................................ 7,000.00
Rating agency fees................................................ 260,000.00
Trustee's fees and expenses....................................... 40,000.00
Printing and engraving............................................ 120,000.00
Miscellaneous..................................................... 5,000.00
-----------
Total........................................................... $1,114,687.93
-----------
-----------
</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
authorized in the specific case, 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 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.
II-1
<PAGE>
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 of the Underwriting Agreement among the
underwriters named therein, 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.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
A. EXHIBITS:
<TABLE>
<C> <S>
1.1 Form of Underwriting Agreement
4.1(a) Trust Agreement dated June 16, 1998 between American Honda
Receivables Corp., as depositor, and The Bank of New York
(Delaware), as trustee*
4.1(b) Form of Amended and Restated Trust Agreement between American Honda
Receivables Corp., as depositor, and The Bank of New York
(Delaware), as owner trustee (including form of Certificates)*
4.2 Form of Indenture between Honda Auto Receivables 1999-1 Owner
Trust, as issuer and Bankers Trust Company, as indenture trustee
(including forms of Notes)*
5.1(a) Opinion of Brown & Wood LLP with respect to legality*
5.1(b) Opinion of Richards, Layton & Finger PA with respect to legality*
8.1 Opinion of Brown & Wood LLP with respect to tax matters*
10.1 Form of Sale and Servicing Agreement between American Honda
Receivables Corp., as seller, American Honda Finance Corporation,
as servicer and The Bank of New York (Delaware), as owner
trustee*
10.2 Form of Administration Agreement among Honda Auto Receivables
1999-1 Owner Trust, as issuer, American Honda Finance
Corporation, as servicer, American Honda Receivables Corp., as
seller and Bankers Trust Company, as indenture trustee*
23.1 Consent of Brown & Wood LLP (included as part of Exhibit 5.1 (a))*
23.2 Consent of Brown & Wood LLP (included as part of Exhibit 8.1)*
</TABLE>
II-2
<PAGE>
<TABLE>
<C> <S>
23.3 Consent of Richards, Layton & Finger PA (included as part of
Exhibit 5.1(b))*
24.1 Power of Attorney of Y. Kohama, John I. Weisickle and S. Ulm*
24.2 Power of Attorney of S. Moriguchi*
24.3 Power of Attorney of S. Nelson*
25.1 Statement of Eligibility and Qualification of Indenture Trustee*
</TABLE>
- - --------------
* Previously filed.
B. FINANCIAL STATEMENT SCHEDULES:
Not applicable.
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes as follows:
(a) For purposes of determining any liability under the Securities Act
of 1933 (the "Act"), each filing of the Registrant's annual report pursuant
to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report pursuant
to Section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in this registration statement shall be deemed to
be a new registration statement relating to the securities offered herein,
and the offering of such securities at the time shall be deemed to be the
intitial BONA FIDE offering thereof.
(b) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to directors, officers
and controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is therefore
unenforceable. In the event that a claim for indemnification against such
liabilities (other than payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of such Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
(c) 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.
(d) For purposes of determining any liability under the Act, each
post-effective amendment that contains a form of prospectus will 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, as amended, the
Registrant and the Trust certify that each party has reasonable grounds to
believe that the Registrant and the Trust meet all of the requirements for
filing on Form S-3 and have duly caused this Amendment No. 4 to the Registration
Statement on Form S-3 to be signed on behalf of each party by the undersigned,
thereunto duly authorized, in the City of Torrance and State of California, on
the 19th day of January 1999.
AMERICAN HONDA RECEIVABLES CORP.,
AS ORIGINATOR OF
HONDA AUTO RECEIVABLES 1999-1 OWNER TRUST
By: /s/ Y. KOHAMA
------------------------------------------
Y. Kohama
President
AMERICAN HONDA RECEIVABLES CORP.
By: /s/ Y. KOHAMA
------------------------------------------
Y. Kohama
President
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 4 to the Registration Statement has been signed below by the
following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- - --------------------------------------------- --------------------------------------------- -------------------
<C> <C> <S>
/s/ Y. KOHAMA Director and President (Principal Executive January 19, 1999
----------------------------------- Officer)
Y. Kohama
/s/ JOHN I. WEISICKLE* Director and Treasurer (Principal Financial
----------------------------------- and Accounting Officer) January 19, 1999
John I. Weisickle
/s/ S. MORIGUCHI*
----------------------------------- Director and Secretary January 19, 1999
S. Moriguchi
/s/ SCOTT J. NELSON*
----------------------------------- Director January 19, 1999
Scott J. Nelson
/s/ SCOTT J. ULM*
----------------------------------- Director January 19, 1999
Scott J. Ulm
</TABLE>
* By: /s/ Y. KOHAMA
----------------------------------------
Y. Kohama
ATTORNEY-IN-FACT
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
- - -----------
<C> <S>
1.1 Form of Underwriting Agreement
4.1(a) Trust Agreement dated June 16, 1998 between American Honda Receivables Corp., as depositor, and The Bank
of New York (Delaware), as trustee*
4.1(b) Form of Amended and Restated Trust Agreement between American Honda Receivables Corp., as seller, and
The Bank of New York (Delaware), as owner trustee (including form of Certificates)*
4.2 Form of Indenture between Honda Auto Receivables 1999-1 Owner Trust, as issuer, and Bankers Trust
Company, as indenture trustee (including forms of Notes)*
5.1(a) Opinion of Brown & Wood LLP with respect to legality*
5.1(b) Opinion of Richards, Layton & Finger PA with respect to legality*
8.1 Opinion of Brown & Wood LLP with respect to tax matters*
10.1 Form of Sale and Servicing Agreement between American Honda Receivables Corp., as seller, American Honda
Finance Corporation, as servicer and The Bank of New York (Delaware), as owner trustee*
10.2 Form of Administration Agreement among Honda Auto Receivables 1999-1 Owner Trust, as issuer, American
Honda Finance Corporation, as servicer, American Honda Receivables Corp., as seller, and Bankers Trust
Company, as indenture trustee*
23.1 Consent of Brown & Wood LLP (included as part of Exhibit 5.1(a))*
23.2 Consent of Brown & Wood LLP (included as part of Exhibit 8.1)*
23.3 Consent of Richards, Layton & Finger PA (included as part of Exhibit 5.1(b))*
24.1 Power of Attorney of Y. Kohama, John I. Weisickle and Scott J. Ulm (included on page II-4)*
24.2 Power of Attorney of S. Moriguchi (included on page II-4)*
24.3 Power of Attorney of Scott J. Nelson (included on page II-4)*
25.1 Statement of Eligibility and Qualification of Indenture Trustee*
</TABLE>
- - --------------
* Previously filed.
<PAGE>
$
---------------------------
HONDA AUTO RECEIVABLES 1999-1 OWNER TRUST
$ % ASSET BACKED NOTES, CLASS A-1
-------------------- ---
$ % ASSET BACKED NOTES, CLASS A-2
-------------------- ---
$ % ASSET BACKED NOTES, CLASS A-3
-------------------- ---
$ % ASSET BACKED NOTES, CLASS A-4
------------------- ---
AMERICAN HONDA RECEIVABLES CORP.
UNDERWRITING AGREEMENT
January __, 1999
CREDIT SUISSE FIRST BOSTON CORPORATION,
As Representative of the Several Underwriters
Eleven Madison Avenue
New York, New York 10010
Ladies and Gentlemen:
1. INTRODUCTORY. American Honda Receivables Corp., a California
corporation (the "COMPANY"), proposes, subject to the terms and conditions
stated herein, to cause the Honda Auto Receivables 1999-1 Owner Trust. (the
"TRUST") to issue and sell $___ aggregate principal amount of ___% Asset Backed
Notes, Class A-1 (the "CLASS A-1 NOTES"), $___ aggregate principal amount of
___% Asset Backed Notes, Class A-2 (the "CLASS A-2 NOTES"), $_____ aggregate
principal amount of ___% Asset Backed Notes, Class A-3 (the "CLASS A-3
NOTES") and $___ aggregate principal amount of ___% Asset Backed Notes, Class
A-4 (the "CLASS A-4 NOTES" and together with the Class A-1 Notes, the Class
A-2 Notes and the Class A-3 Notes, the "NOTES"). The Notes will be issued
<PAGE>
pursuant to the Indenture dated as of January 1, 1999 (the "INDENTURE"), between
the Trust and Bankers Trust Company, as indenture trustee (the "INDENTURE
TRUSTEE").
Concurrently with the issuance and sale of the Notes as contemplated
herein, the Trust will issue $___ aggregate principal amount of certificates
of beneficial interest (the "CERTIFICATES"), each representing an interest in
the Trust Estate. The Company will retain the Certificates. The Certificates
will be issued pursuant to the Amended and Restated Trust Agreement, dated as
of January 1, 1999 (the "TRUST AGREEMENT"), between the Company and The Bank
of New York (Delaware), as Owner Trustee. The Certificates are subordinated
to the Notes.
The assets of the Trust will include, among other things, a pool of
retail installment sale and conditional sale contracts secured by new and used
Honda and Acura motor vehicles (the "RECEIVABLES"), with respect to Actuarial
Receivables, certain monies due thereunder on or after January 1, 1999 (the
"CUTOFF DATE"), and, with respect to Simple Interest Receivables, certain monies
due or received thereun der on or after the Cutoff Date, such Receivables to be
sold to the Trust by the Company and to be serviced for the Trust by American
Honda Finance Corporation ("AHFC" or, in its capacity as servicer, the
"SERVICER"). Capitalized terms used but not defined herein have the meanings
ascribed thereto in the Sale and Servicing Agreement to be dated as of January
1, 1999 (the "SALE AND SERVICING AGREEMENT"), by and among the Trust, the
Company and the Servicer or, if not defined therein, in the Indenture, the Trust
Agreement or the Receivables Purchase Agreement, as the case may be. As used
herein, "BASIC DOCUMENTS" shall have the meaning specified in the Sale and
Servicing Agreement. The Company hereby agrees with the several Underwriters
named in Schedule A hereto (collectively, the "UNDERWRITERS") as follows:
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND AHFC. The Company
and AHFC, jointly and severally, represent and warrant to, and agree with, the
several Underwriters that:
(a) A registration statement on Form S-3 (No. 333-30037)
relating to the Notes, including a form of prospectus, has been filed
with the Securities and Exchange Commission (the "COMMISSION") and
either (i) has been declared effective under the Securities Act of
1933, as amended (the "ACT"), and is not proposed to be amended or (ii)
is proposed to be amended by amendment or post-effective amendment. If
the Company does not propose to amend the registration statement, and
if any post-effective amend
2
<PAGE>
ment to the registration statement has been filed with the Commission
prior to the execution and delivery of this Agreement, the most recent
post-effec tive amendment has been declared effective by the Commission
or has become effective upon filing pursuant to Rule 462(c) under the
Act ("RULE 462(c)"). For purposes of this Agreement, "EFFECTIVE TIME"
means (i) if the Company has advised Credit Suisse First Boston
Corporation, as representative of the several Underwriters (in such
capacity, the "REPRESENTATIVE"), that it does not propose to amend the
registration statement, the date and time as of which the registration
statement, or the most recent post-effective amend ment thereto (if
any) filed prior to the execution and delivery of this Agree ment, was
declared effective by the Commission or has become effective upon
filing pursuant to Rule 462(c), or (ii) if the Company has advised the
Representative that it proposes to file an amendment or post-effective
amendment to the registration statement, the date and time as of which
the registration statement, as amended by such amendment or
post-effective amendment, as the case may be, is declared effective by
the Commission. "EFFECTIVE DATE" means the date of the Effective Time.
The registration statement, as amended at the Effective Time, including
all information (if any), deemed to be a part of the registration
statement as of the Effective Time pursuant to Rule 430A(b) ("RULE
430A(b)") under the Act, is hereinaf ter referred to as the
"Registration Statement". The form of prospectus relating to the Notes,
as first filed with the Commission pursuant to and in accordance with
Rule 424(b) under the Act ("RULE 424(b)") or, if no such filing is
required, as included in the Registration Statement, is hereinafter
referred to as the "PROSPECTUS". No document has been or will be
prepared or distributed in reliance on Rule 434 under the Act.
(b) If the Effective Time is prior to the execution and
delivery of this Agreement: (i) on the Effective Date, the Registration
Statement con formed in all respects to the requirements of the Act and
the rules and regulations of the Commission (collectively, the "RULES
AND REGULATIONS") and did not include any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading, and
(ii) on the date of this Agreement, the Registration Statement
conforms, and at the time of filing of the Prospectus pursuant to Rule
424(b) 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 includes, or will include,
any untrue statement of a material fact or omits or will omit to state
any material
3
<PAGE>
fact required to be stated therein or necessary to make the statements
therein not misleading. If the Effective Time is subsequent to the
execution and delivery of this Agreement: (i) on the Effective Date,
the Registration Statement and the Prospectus will conform in all
respects to the requirements of the Act and the Rules and Regulations,
(ii) neither of such documents will include any untrue statement of a
material fact or will omit to state any material fact required to be
stated therein or necessary to make the statements therein not
misleading and (iii) no additional registration statement related to
the Notes pursuant to Rule 462(b) has been or will be filed. The two
preced ing sentences do not apply to statements in, or omissions from,
the Registration Statement or the Prospectus based upon written
information furnished to the Company by any Underwriter through the
Representative specifically for use therein, it being understood and
agreed that the only such information is that described as such in
Section 7(b).
(c) Each of the Company and AHFC has been duly incorporated
and is an existing corporation in good standing under the laws of the
State of California, with power and authority (corporate and other) to
own its properties and conduct its business as described in the
Prospectus; and each of the Company and AHFC is duly qualified to do
business as a foreign corporation in good standing in all other
jurisdictions in which its ownership or lease of property or the
conduct of its business requires such qualification.
(d) No consent, approval, authorization or order of, or filing
with, any governmental agency or body or any court is required to be
obtained or made by the Company, AHFC or the Trust for the consummation
of the transactions contemplated by this Agreement and the Basic
Documents in connection with the issuance of the Notes and the
Certificates and the sale by the Company of the Notes, except such as
have been obtained and made under the Act, such as may be required
under state securities laws and the filing of any financing statements
required to perfect the Company's, the Trust's and the Indenture
Trustee's interest in the Receivables, which financ ing statements will
be filed in the appropriate offices prior to the Closing Date (as such
term is defined in Section 3).
(e) Neither the Company nor AHFC is in violation of its
Certifi cate of Incorporation or By-laws or in default in the
performance or obser vance 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
4
<PAGE>
are bound which could have a material adverse effect on the
transactions contemplated herein or in the Basic Documents. The
execution, delivery and performance of this Agreement and the Basic
Documents by the Company and AHFC, and the issuance of the Notes and
the Certificates and the sale by the Company of the Notes and the
compliance by the Company and AHFC with the terms and provisions hereof
and thereof will not, subject to obtain ing 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, any rule,
regulation or order of any governmental agency or body or any court,
domestic or foreign, having jurisdiction over the Company or AHFC or
any of their respective properties, or any agreement or instrument to
which the Company or AHFC is a party or by which the Company or AHFC is
bound or to which any of the properties of the Company or AHFC is
subject, or the Certificate of Incorporation or By-laws of the Company
and AHFC, and the Company has full power and authority to authorize the
issuance of the Notes and the Certificates and to sell the Notes as
contemplated by this Agreement, the Indenture and the Trust Agreement,
and each of the Company and AHFC has full power and authority to enter
into this Agreement and the Basic Documents and to consummate the
transactions contemplated hereby and thereby.
(f) On the Closing Date, the Company will have directed the
Owner Trustee to authenticate and execute the Certificates and, when
deliv ered and paid for pursuant to the Trust Agreement, the
Certificates will have been duly issued and delivered and will
constitute valid and legally binding obligations of the Trust, entitled
to the benefits provided in the Trust Agree ment and enforceable in
accordance with their terms.
(g) Except as disclosed in the Prospectus, there are no
pending actions, suits or proceedings against or affecting the Company
or AHFC or any of their respective properties that, if determined
adversely to the Com pany or AHFC, would individually or in the
aggregate have a material adverse effect on the condition (financial or
other), business or results of operations of the Company or AHFC,
respectively, or would materially and adversely affect the ability of
the Company or AHFC to perform its obliga tions under this Agreement or
the other Basic Documents to which it is a party, or which are
otherwise material in the context of the issuance and sale of the Notes
or the issuance of the Certificates; and no such actions, suits or
5
<PAGE>
proceedings are threatened or, to the Company's or AHFC's knowledge
contemplated.
(h) As of the Closing Date, the representations and warranties
of the Company and AHFC contained in the Basic Documents will be true
and correct.
(i) This Agreement has been duly authorized, executed and
delivered by each of the Company and AHFC.
(j) The Company has authorized the conveyance of the Receiv
ables to the Trust, and, as of the Closing Date, the Company has
directed the Trust to execute and issue the Notes and the Certificates
and to sell the Notes.
(k) The Company's assignment and delivery of the Receivables
to the Trust as of the Closing Date will vest in the Trust all of the
Company's right, title and interest therein, subject to no prior lien,
mortgage, security interest, pledge, adverse claim, charge or other
encumbrance.
(l) The Trust's assignment of the Receivables to the Indenture
Trustee pursuant to the Indenture will vest in the Indenture Trustee,
for the benefit of the Noteholders, a first priority perfected security
interest therein, subject to no prior lien, mortgage, security
interest, pledge, adverse claim, charge or other encumbrance.
(m) The Computer Tape of the Receivables created as of January
__, 1999, and made available to the Representative by the Servicer was
complete and accurate as of the date thereof and includes an
identifying description of the Receivables that are listed on Schedule
A to the Sale and Servicing Agreement.
(n) Any taxes, fees and other governmental charges in
connection with the execution, delivery and performance of this
Agreement, the Basic Documents, the Notes and the Certificates and any
other agreements contem plated herein or therein shall have been paid
or will be paid by the Company at or prior to the Closing Date to the
extent then due.
(o) The consummation of the transactions contemplated by this
Agreement and the Basic Documents, and the fulfillment of the terms
hereof
6
<PAGE>
and 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 Company or AHFC pursuant to the terms of, any indenture,
mortgage, deed of trust, loan agreement, guarantee, lease financing
agreement or similar agreement or instrument under which the Company or
AHFC is a debtor or guarantor.
(p) The Company is not and, after giving effect to the
issuance of the Certificates and the offering and sale of the Notes and
the application of the proceeds thereof as described in the Prospectus,
will not be required to be registered as an "investment company" as
defined in the Investment Company Act of 1940, as amended (the
"INVESTMENT COMPANY ACT").
3. PURCHASE, SALE AND DELIVERY OF NOTES. On the basis of the representa
tions, warranties and agreements herein contained, but subject to the terms and
conditions herein set forth, the Company agrees to sell to the Underwriters, and
the Underwriters agree, severally and not jointly, to purchase from the Company,
at a purchase price of, in the case of (i) the Class A-1 Notes, ___% of the
principal amount thereof, (ii) the Class A-2 Notes, ___% of the principal amount
thereof, (iii) the Class A-3 Notes, ___% of the principal amount thereof; and
(iv) the Class A-4 Notes, ___% of the principal amount thereof, the respective
principal amounts of each Class of the Notes set forth opposite the names of the
Underwriters in Schedule A hereto.
The Company will deliver against payment of the purchase price, the
Notes of each Class in the form of one or more permanent global securities in
definitive form (the "GLOBAL NOTES") deposited with the Indenture Trustee as
custodian for The Depository Trust Company ("DTC") and registered in the name of
Cede & Co., as nominee for DTC. Interests in any permanent Global Notes will be
held only in book-entry form through DTC, except in the limited circumstances
described in the Prospectus. Payment for the Notes shall be made by the
Underwriters in Federal (same day) funds by official check or checks or wire
transfer to an account in New York previously designated to the Representative
by the Company at a bank accept able to Credit Suisse First Boston, at the
offices of Brown & Wood LLP, San Francisco, California, at 10:00 A.M., New York
time, on January __, 1999, or at such other time not later than seven full
business days thereafter as the Representa tive and the Company determine, such
time being herein referred to as the "CLOSING DATE", against delivery to the
Indenture Trustee as custodian for DTC of the Global
7
<PAGE>
Notes representing all of the Notes. The Global Notes will be made available for
checking at the above office of Brown & Wood LLP at least 24 hours prior to the
Closing Date.
The Company will deliver the Certificates to the above office of Brown
& Wood LLP on the Closing Date. The certificate for the Certificates so to be
deliv ered will be in definitive form, in authorized denominations and
registered in the name of the Company and 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 "EXCHANGE ACT"), the parties hereto have agreed that the Closing
Date will be not later than January __, 1999, unless otherwise agreed to as
described above.
4. OFFERING BY UNDERWRITERS. It is understood that the several Under
writers propose to offer the Notes for sale to the public as set forth in the
Prospectus.
5. CERTAIN AGREEMENTS OF THE COMPANY. The Company agrees with the
several Underwriters:
(a) If the Effective Time is prior to the execution and
delivery of this Agreement, the Company will file the Prospectus with
the Commission pursuant to and in accordance with subparagraph (1) (or,
if applicable and if consented to by Credit Suisse First Boston,
subparagraph (4)) of Rule 424(b) not later than the earlier of (i) the
second business day following the execution and delivery of this
Agreement or (ii) the fifteenth business day after the Effective Date.
The Company will advise the Representative promptly of any such filing
pursuant to Rule 424(b).
(b) The Company will advise the Representative promptly of any
proposal to amend or supplement the registration statement as filed or
the related prospectus, or the Registration Statement or the
Prospectus, and will not effect such amendment or supplementation
without the Representative's reasonable consent; and the Company will
also advise the Representative promptly of the effectiveness of the
Registration Statement (if its Effective Time is subsequent to the
execution and delivery of this Agreement) and of any amendment or
supplementation of the Registration Statement or the Prospectus and of
the institution by the Commission of any stop order
8
<PAGE>
proceedings in respect of the Registration Statement and will use its
best efforts to prevent the issuance of any such stop order and to
obtain as soon as possible its lifting, if issued.
(c) If, at any time when a prospectus relating to the Notes is
required to be delivered under the Act in connection with sales by any
Underwriter or dealer, any event occurs as a result of which the
Prospectus as then amended or supplemented would include an 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 if it is
necessary at any time to amend the Prospectus to comply with the Act,
the Company will promptly notify the Representative of such event and
will promptly prepare and file with the Commission (subject to the
Representative's prior review pursuant to Section 5(b)), at its own
expense, an amendment or supplement which will correct such statement
or omission, or an amendment which will effect such compliance. Neither
the Representative's consent to, nor the Underwriters delivery of, any
such amendment or supplement shall constitute a waiver of any of the
conditions set forth in Section 6.
(d) As soon as practicable, but not later than the
Availability Date (as defined below), the Company will cause the Trust
to make generally available to the Noteholders an earnings statement of
the Trust covering a period of at least 12 months beginning after the
Effective Date which will satisfy the provisions of Section 11 (a) of
the Act. For the purpose of the preceding sentence, "AVAILABILITY DATE"
means the 90th day after the end of the Trust's fourth fiscal quarter
following the fiscal quarter that includes such Effective Date.
(e) The Company will furnish to the Representative copies of
the Registration Statement (including all exhibits), each related
preliminary prospectus, and, so long as delivery of a prospectus
relating to the Notes is required to be delivered under the Act in
connection with sales by any Underwriter or dealer, the Prospectus and
all amendments and supplements to such documents, in each case as soon
as available and in such quantities as the Representative reasonably
requests. The Prospectus shall be so furnished on or prior to 3:00
P.M., New York time, on the business day following the later of the
execution and delivery of this Agreement or the Effective Time. All
other such documents shall be so furnished as soon as available. The
9
<PAGE>
Company will pay the expenses of printing and distributing to the
Underwriters all such documents.
(f) The Company will arrange for the qualification of the
Notes for offering and sale and the determination of their eligibility
for investment under the laws of such jurisdictions as the
Representative may reasonably designate and will continue such
qualifications in effect so long as required for the distribution of
the Notes; PROVIDED that in connection therewith the Company 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 such jurisdiction.
(g) For a period from the date of this Agreement until the
retire ment of the Notes (i) the Company will furnish to the
Representative and, upon request, to each of the other Underwriters,
copies of each certificate and the annual statements of compliance
delivered to the Indenture Trustee pursuant to Section 3.09 of the
Indenture and Sections 3.10 and 3.11 of the Sale and Servicing
Agreement and the annual independent certified public accountant's
servicing reports furnished to the Indenture Trustee pursuant to
Section 3.12 of the Sale and Servicing Agreement, by first-class mail
as soon as practicable after such statements and reports are furnished
to the Indenture Trustee, and (ii) such other forms of periodic
certificates or reports as may be delivered to the Indenture Trustee,
the Owner Trustee or the Noteholders under the Indenture, the Sale and
Servicing Agreement or the other Basic Documents.
(h) So long as any Note is outstanding, the Company will
furnish to the Representative by first-class mail as soon as
practicable, (i) all documents distributed, or caused to be
distributed, by the Company to Noteholders, (ii) all documents filed or
caused to be filed by the Company with the Commission pursuant to the
Exchange Act or any order of the Commission thereunder and (iii) such
other information in the possession of the Company concerning the Trust
as the Representative from time to time may reasonably request.
(i) Subject to the provisions of Section 9 hereof, the Company
will pay all expenses incident to the performance of its obligations
under this Agreement and will reimburse the Underwriters (if and to the
extent incurred by them) for any filing fees and other expenses
(including fees and disburse-
10
<PAGE>
ments of counsel) incurred by them in connection with qualification of
the Notes for sale in jurisdictions that the Representative may
designate pursuant to Section 5 hereof and determination of their
eligibility for investment under the laws of such jurisdictions as the
Representative reasonably designates and the printing of memoranda
relating thereto, for any fees charged by invest ment rating agencies
for the rating of the Notes, for any travel expenses of the Company's
officers and employees and any other expenses of the Company in
connection with attending or hosting meetings with prospective
purchasers of the Notes and for expenses incurred in distributing the
preliminary prospectuses and the Prospectus (including any amendments
and supplements thereto).
(j) To the extent, if any, that the rating provided with
respect to the Notes by Moody's Investors Service, Inc. ("MOODY'S") and
Standard & Poor's, a division of The McGraw-Hill Companies, Inc.
("STANDARD & POOR'S" and, together with Moody's, the "RATING AGENCIES")
is conditional upon the furnishing of documents or the taking of any
other action by the Company, the Company shall furnish such documents
and take any such other action.
(k) On or before the Closing Date, the Company shall cause the
computer records of the Company and AHFC 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 Company nor AHFC shall
take any action inconsistent with the Trust's ownership of such
Receivables, other than as permitted by the Sale and Servicing
Agreement.
6. CONDITIONS OF THE OBLIGATIONS OF THE UNDERWRITERS. The obligations
of the several Underwriters to purchase and pay for the Notes on the Closing
Date will be subject to the accuracy of the representations and warranties on
the part of the Company and AHFC herein, to the accuracy of the statements of
Company and AHFC officers made pursuant to the provisions hereof, to the
performance by the Company and AHFC of their respective obligations hereunder
and to the following additional conditions precedent:
(a) The Representative shall have received a letter, dated the
date of delivery thereof (which, if the Effective Time is prior to the
execution and delivery of this Agreement, shall be on or prior to the
date of this Agreement or, if the Effective Time is subsequent to the
execution and delivery of this Agreement, shall be prior to the filing
of the amendment or post-effective
11
<PAGE>
amendment to the registration statement to be filed shortly prior to
such Effective Time), of KPMG Peat Marwick LLP, in form and substance
satisfactory to the Representative and counsel for the Underwriters,
confirm ing that they are independent public accountants within the
meaning of the Act and the applicable Rules and Regulations and stating
in effect that (i) they have performed certain specified procedures as
a result of which they determined that certain information of an
accounting, financial or statistical nature (which is limited to
accounting, financial or statistical information derived from the
general accounting records of the Trust, AHFC and the Company) set
forth in the Registration Statement and the Prospectus (and any
supplements thereto), agrees with the accounting records of the Trust,
AHFC and the Company, excluding any questions of legal interpretation,
and (ii) they have performed certain specified procedures with
respect to the Receivables.
For purposes of this subsection, (i) if the Effective Time is
subsequent to the execution and delivery of this Agreement,
"REGISTRATION STATEMENT" shall mean the registration statement as
proposed to be amended by the amendment or post-effective amendment to
be filed shortly prior to the Effective Time, including all information
(if any) deemed to be a part of the initial registration statement as
of such time pursuant to Rule 430A(b), and (ii) "PROSPECTUS" shall mean
the prospectus included in the Registration Statement. All financial
statements and schedules included in material incorporated by reference
into the Prospectus shall be deemed included in the Registration
Statement for purposes of this subsection.
(b) If the Effective Time is not prior to the execution and
delivery of this Agreement, the Effective Time shall have occurred not
later than 10:00 p.m., New York time, on the date of this Agreement or
such later date as shall have been consented to by the Representative.
If the Effective Time is prior to the execution and delivery of this
Agreement, the Prospectus shall have been filed with the Commission in
accordance with the Rules and Regulations and Section 5(a). Prior to
the Closing Date, no stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceedings for
that purpose shall have been instituted or, to the knowledge of the
Company or the Representative, shall be contemplated by the Commission.
(c) Subsequent to the execution and delivery of this
Agreement, there shall not have occurred (i) any change, or any
development or event
12
<PAGE>
involving a prospective change, in or affecting particularly the
business, properties or financial condition of the Company or AHFC
which, in the judgment of a majority in interest of the Underwriters
(including the Representative), materially impairs the investment
quality of each Class of the Notes or makes it impractical or
inadvisable to proceed with completion of the public offering or the
sale of and payment for each Class of the Notes; (ii) 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; (iii) any banking moratorium declared by Federal, California
or New York authorities; or (iv) any outbreak or escalation of major
hostilities in which the United States is involved, any declaration of
war by Congress or any substantial national or international calamity
or emergency if, in the judgement 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 public
offering or the sale of and payment for each Class of the Notes.
(d) The Representative, shall have received an opinion of
Brown & Wood LLP, special counsel to the Company and AHFC, dated the
Closing Date and satisfactory in form and substance to the
Representative and counsel for the Underwriters, to the effect that:
(i) the Company has been duly incorporated and is an
existing 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; the Company is duly qualified to do
business and is in good standing in each jurisdiction in which
its ownership or lease of property or the conduct of its
business 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 the Basic
Documents;
(ii) AHFC has been duly incorporated and is an
existing corporation in good standing under the laws of the
State of California, with corporate power and authority to own
its properties and conduct its business as described in the
Prospectus; AHFC is duly qualified to do business and is in
good standing in each jurisdiction in which its ownership or
lease of property or the conduct of its business requires
13
<PAGE>
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 the Basic Documents;
(iii) each of the direction by the Company to the
Indenture Trustee to authenticate the Notes and the direction
by the Company to the Owner Trustee to execute the Notes has
been duly authorized by the Company and, when the Notes have
been duly executed and delivered by the Owner Trustee and,
when authenticated by the Indenture Trustee in accordance with
the terms of the Indenture and delivered to and paid for by
the Underwriters pursuant to this Agreement, will be duly and
validly issued and outstanding and will be entitled to the
benefits of the Indenture;
(iv) the direction by the Company to the Owner
Trustee to authenticate and execute the Certificates has been
duly authorized by the Company and, when the Certificates have
been duly executed, authenticated and delivered in accordance
with the terms of the Trust Agreement and the Certificates
have been delivered to and paid for by the Company pursuant to
the Sale and Servicing Agreement and the Trust Agreement, the
Certificates will be duly and validly issued and outstanding
and will be entitled to the benefits of the Trust Agreement;
(v) each Basic Document to which the Company or AHFC
is a party has been duly authorized, executed and delivered by
the Company and AHFC, respectively;
(vi) no consent, approval, authorization or order of,
or filing with any governmental agency or body or any court is
required for the execution, delivery and performance by the
Company of this Agreement and the Basic Documents to which it
is a party, for the execution, delivery and performance by
AHFC of the Basic Documents to which it is a party or for the
consummation of the transactions contemplated by this
Agreement or the Basic Documents, except for (A) such as have
been obtained and made under the Act, (B) such as may be
required under state securities laws and (C) 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;
14
<PAGE>
(vii) the execution, delivery and performance of this
Agreement and the Basic Documents by the Company, the
execution, delivery and performance of the Basic Documents by
AHFC 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 or imposition of any lien, charge or
encumbrance upon any of the property or assets of AHFC or the
Company pursuant to the terms of the Certificate of
Incorporation or the By-Laws of AHFC or the Company or, to the
best of such counsel's knowledge and information, any statute,
rule, regulation or order of any governmental agency or body,
or any court having jurisdiction over AHFC or the Company or
their respective properties, or any agreement or instrument
known to such counsel after due investigation to which AHFC or
the Company is a party or by which AHFC or the Company or any
of their respective properties is bound;
(viii) such counsel has no reason to believe that the
Registration Statement or any amendment thereto, as of its
effective date or as of such Closing Date, contained any
untrue statement of a material fact or omitted to state any
material fact required to be stated therein or necessary to
make the statements therein not misleading or that the
Prospectus or any amendment or supplement thereto, as of its
issue date or as of such Closing Date, contained any untrue
statement of a material fact or omitted to state any material
fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances
under which they were made, not misleading; the Registration
Statement and the Prospectus complies in all material respects
with the requirements of the Act and the rules and regulations
promulgated thereunder; and such counsel does not know of any
legal or governmental proceedings required to be described in
the Registration Statement or the Prospectus which are not
described as required or of any contracts or documents of a
character required to be described in the Registration
Statement or the Prospectus or to be filed as exhibits to the
Registration Statement which are not described and filed as
required; it being understood that such counsel need express
no opinion as to the financial statements or other financial,
numerical, statistical and quantitative information contained
in the Registration Statement or the Prospectus;
15
<PAGE>
(ix) there are no actions, proceedings or
investigations to which the Company or AHFC is a party or, to
the best knowledge of such counsel after due inquiry,
threatened before any court, administrative agency or other
tribunal having jurisdiction over AHFC or the Company, (i)
that are required to be disclosed in the Registration
Statement, (ii) asserting the invalidity of this Agreement,
any Basic Document, the Notes or the Certificates, (iii)
seeking to prevent the issuance of the Notes or the
Certificates or the consummation of any of the transactions
contemplated by this Agreement or the Basic Documents, (iv)
which might materially and adversely affect the performance by
the Company or AHFC of its obligations under, or the validity
or enforceability of, this Agreement, any Basic Document, the
Notes or the Certificates, or (v) seeking adversely to affect
the federal income tax attributes of the Notes as described in
the Prospectus under the heading "CERTAIN FEDERAL INCOME TAX
CONSEQUENCES";
(x) the statements in the Registration Statement
under the heading "CERTAIN LEGAL ASPECTS OF THE RECEIVABLES",
to the extent they constitute statements of matters of law or
legal conclusions with respect thereto, are correct in all
material respects;
(xi) this Agreement has been duly authorized,
executed and delivered by the Company;
(xii) such counsel is familiar with AHFC's standard
operat ing procedures relating to AHFC's acquisition of a
perfected first priority security interest in the vehicles
financed by AHFC pursuant to retail installment sale contracts
in the ordinary course of AHFC's business; assuming that
AHFC'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 AHFC has not or
will not continue to follow its standard procedures in
connection with the perfection of security interests in the
Financed Vehicles), AHFC has acquired or will acquire a
perfected first priority security interest in the Financed
Vehicles;
16
<PAGE>
(xiii) 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 as in
effect in the States of New York and California; and
(xiv) immediately prior to the sale of Receivables by
AHFC to the Company pursuant to the Receivables Purchase
Agreement, AHFC was the sole owner of all right, title and
interest in, to and under the Receivables and the other
property to be transferred by it to the Company. AHFC has full
power and authority to sell and assign the property to be sold
and assigned to the Company pursuant to the Receivables
Purchase Agreement and has duly authorized such sale and
assignment to the Company by all necessary corporate action.
(e) The Representatives shall have received an opinion of
Brown & Wood LLP, special counsel to the Company and AHFC, dated the
Closing Date and satisfactory in form and substance to the
Representative and counsel for the Underwriters, to the effect that:
(i) the Receivables Purchase Agreement either (A)
transfers an ownership interest in the Receivables and the
proceeds thereof (subject to Section 9-306 of the California
UCC) from AHFC to the Company or (B) creates a valid security
interest in AHFC's rights in the Receivables and the proceeds
thereof (subject to Section 9-306 of the California UCC) as
security for the obligations of AHFC thereunder;
(ii) the Receivables Purchase Agreement either (A)
transfers an ownership interest in the Receivables and the
proceeds thereof (subject to Section 9-306 of the California
UCC) from AHFC to the Company or (B) creates a valid security
interest in AHFC's rights in the Receivables and the proceeds
thereof (subject to Section 9-306 of the California UCC) as
security for the obligations of AHFC thereunder;
(iii) the Sale and Servicing Agreement either (A)
transfers an ownership interest in the Receivables and the
proceeds thereof (subject to Section 9-306 of the California
UCC) from the Company to the Trust or (B) creates a valid
security interest in the Company's
17
<PAGE>
rights in the Receivables and the proceeds thereof (subject to
Section 9-306 of the California UCC) as security for the
obligations of the Company thereunder;
(iv) the financing statement on Form UCC-1 naming the
AHFC as debtor is in appropriate form for filing in the
relevant filing office under the California UCC. Upon the
filing of such financing Statement in the relevant filing
office, the security interest in favor of the Company in the
Receivables and proceeds thereof will be perfected, and no
other security interest of any other creditor of AHFC will be
equal or prior to such security interest;
(v) the financing statement on Form UCC-1 naming the
Company as debtor is in appropriate form for filing in the
relevant filing office under the California UCC. Upon the
filing of such financing Statement in the relevant filing
office, the security interest in favor of the Owner Trustee in
the Receivables and proceeds thereof will be perfected, and no
other security interest of any other creditor of the Company
will be equal or prior to such security interest;
(vi) the provisions of the Indenture are effective to
create in favor of the Indenture Trustee, a valid security
interest (as such term is defined in Section 1-201 of the
California UCC) in the Receivables and proceeds thereof to
secure payment of the Notes;
(vii) the Trust Agreement is not required to be
qualified under the Trust Indenture Act of 1939, as amended
(the "TRUST INDENTURE ACT");
(viii) the Indenture has been duly qualified under
the Trust Indenture Act;
(ix) the Registration Statement was declared
effective under the Act as of the date specified in such
opinion, the Prospectus either was filed with the Commission
pursuant to the subparagraph of Rule 424(b) specified in such
opinion on the date specified therein or was included in the
Registration Statement, and, to the best of the knowledge of
such counsel, no stop order suspending the effectiveness of
the Registration Statement or any part thereof has been issued
18
<PAGE>
and no proceedings for that purpose have been instituted or
are pending or contemplated under the Act, and the
Registration Statement and the Prospectus, and each amendment
or supplement thereof, as of their respective effective or
issue dates, complies as to form in all material respects with
the requirements of the Act and the Rules and Regulations;
(x) each of the Trust Agreement, the Sale and
Servicing Agreement and the Administration Agreement
constitutes the legal, valid and binding agreement of the
Company and AHFC, in each case as to those documents to which
it is a party, enforceable against the Company and AHFC in
accordance with their terms (subject to applicable bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium
and other similar laws affecting creditors' rights generally
from time to time in effect, and subject, as to
enforceability, to general principles of equity, regardless of
whether such enforceability is considered in a proceeding in
equity or at law) except, as applicable, that such counsel
need not express an opinion with respect to indemnification or
contribution provisions which may be deemed to be in violation
of the public policy underlying any law or regulation;
(xi) assuming due authorization, execution and
delivery by the Indenture Trustee and the Owner Trustee, the
Indenture constitutes the legal, valid and binding agreement
of the Trust, enforceable against the Trust in accordance with
its terms (subject to applicable bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and other
similar laws affecting creditors' rights generally from time
to time in effect, and subject, as to enforceability, to
general principles of equity, regardless of whether such
enforceability is considered in a proceeding in equity or at
law) except, as applicable, that such counsel need not express
an opinion with respect to indemnification or contribution
provisions which may be deemed to be in violation of the
public policy underlying any law or regulation;
(xii) neither the Trust nor the Company is and, after
giving effect to the issuance and sale of the Notes and the
Certificates and the application of the proceeds thereof, as
described in the Prospectus, neither the Trust nor the Company
will be, an "investment company" as defined in the Investment
Company Act of 1940, as amended; and
19
<PAGE>
(xiii) this Agreement has been duly authorized,
executed and delivered by the Company and AHFC.
(f) The Representative shall have received an opinion of Brown
& Wood LLP, special tax counsel for the Company, dated the Closing Date
and satisfactory in form and substance to the Representative and
counsel for the Underwriters, to the effect that for federal income tax
purposes (i) the Notes will be characterized as indebtedness of the
Trust that is secured by the Receivables, (ii) the Trust will not be
classified as an association (or publicly traded partnership) taxable
as a corporation and (iii) the statements set forth in the Prospectus
under the headings "SUMMARY--ERISA Considerations", "ERISA
CONSIDERATIONS", "SUMMARY-Tax Status" and "CERTAIN FEDERAL INCOME TAX
CONSEQUENCES", to the extent such state ments constitute matters of law
or legal conclusions with respect thereto, are correct in all material
respects.
(g) The Representative shall have received an opinion of Brown
& Wood LLP, special tax counsel for the Company, dated the Closing Date
and satisfactory in form and substance to the Representative and
counsel for the Underwriters, to the effect that for California and
Delaware state fran chise and California and Delaware state income tax
purposes (i) the Notes will be characterized as indebtedness of the
Trust that is secured by the Receivables, (ii) the Trust will not be
classified as an association (or publicly traded partnership) taxable
as a corporation and (iii) the statements set forth in the Prospectus
under the headings "SUMMARY--Tax Status" and "CERTAIN STATE TAX
CONSEQUENCES", to the extent such statements constitute matters of law
or legal conclusions with respect thereto, are correct in all material
respects.
(h) The Representative shall have received from Skadden, Arps,
Slate, Meagher & Flom LLP, counsel for the Underwriters, such opinion
or opinions, dated the Closing Date, with respect to the validity of
the Notes, the Registration Statement, the Prospectus and other related
matters as the Representative may require, and the Company shall have
furnished to such counsel such documents as it may request for the
purpose of enabling it to pass upon such matters.
20
<PAGE>
(i) The Representative shall have received a certificate,
dated the Closing Date, of the Chairman of the Board, the President or
any Vice-President and a principal financial or accounting officer of
each of the Company and AHFC in which such officers, to the best of
their knowledge after reasonable investigation, shall state that: the
representations and warranties of the Company and AHFC in this
Agreement are true and correct in all material respects; the Company or
AHFC, as applicable, 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 in all material respects; the representations
and warranties of the Company or AHFC, as applicable, in the Basic
Documents are true and correct as of the dates specified in such
agreements in all material respects; the Company or AHFC, 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; no stop order suspending
the effectiveness of the Registration Statement has been issued and no
proceedings for that purpose have been instituted or are contemplated
by the Commission; and, subsequent to the date of the Prospectus,
there has been no material adverse change, nor any development or event
involving a prospective material adverse change, in the condition
(financial or otherwise), business, properties or results of operations
of the Company or AHFC or their respective businesses except as set
forth in or contemplated by the Prospectus or as described in such
certificate.
(j) The Representative shall have received an opinion of
Emmett, Marvin and Martin, counsel to the Indenture Trustee, dated the
Closing Date and satisfactory in form and substance to the
Representative and counsel for the Underwriters, to the effect that:
(i) the Indenture Trustee is a banking corporation
duly incorporated and validly existing under the laws of the
State of New York;
(ii) the Indenture Trustee has the full corporate
trust power to accept the office of indenture trustee under
the Indenture and to enter into and perform its obligations
under the Indenture, the Sale and Servicing Agreement and the
Administration Agreement;
(iii) the execution and delivery of the Indenture and
the Administration Agreement and the acceptance of the Sale
and Servic-
21
<PAGE>
ing Agreement and the performance by the Indenture Trustee of
its obligations under the Indenture, the Sale and Servicing
Agreement and the Administration Agreement have been duly
authorized by all necessary corporate action of the Indenture
Trustee, and each has been duly executed and delivered on
behalf of the Indenture Trustee;
(iv) the Indenture, the Sale and Servicing Agreement
and, the Administration Agreement constitute valid and binding
obligations of the Indenture Trustee enforceable against the
Indenture Trustee in accordance with their terms under the
laws of the State of New York and the federal laws of the
United States;
(v) the execution and delivery by the Indenture
Trustee of the Indenture and the Administration Agreement and
the acceptance of the Sale and Servicing Agreement do not
require any consent, approval or authorization of, or any
registration or filing with, any California or United States
federal governmental authority, other than the qualification
of the Indenture Trustee under the Trust Indenture Act;
(vi) each of the Notes has been duly authenticated by
the Indenture Trustee;
(vii) neither the consummation by the Indenture
Trustee of the transactions contemplated in the Sale and
Servicing Agreement, the Indenture or the Administration
Agreement nor the fulfillment of the terms thereof by the
Indenture Trustee will conflict with, result in a breach or
violation of, or constitute a default under any law or the
charter, By-laws or other organizational documents of the
Indenture Trustee or the terms of any indenture or other
agreement or instrument known to such counsel and to which
the Indenture Trustee or any of its subsidiaries is a party or
is bound or any judgment, order or decree known to such
counsel to be applicable to the Indenture Trustee or any of
its subsidiaries of any court, regulatory body, administrative
agency, governmental body or arbitrator having jurisdiction
over the Indenture Trustee or any of its subsidiaries;
(viii) to such counsel's knowledge there is no
action, suit or proceeding pending or threatened against the
Indenture Trustee (as
22
<PAGE>
trustee under the indenture or in its individual capacity)
before or by any governmental authority that if adversely
decided, would materially adversely affect the ability of the
Indenture Trustee to perform its obligations under the
Indenture, the Sale and Servicing Agreement or the
Administration Agreement; and
(ix) the execution, delivery and performance by the
Indenture Trustee of the Sale and Servicing Agreement, the
Indenture and the Administration Agreement will not subject
any of the property or assets of the Trust or any portion
thereof to any lien created by or arising with respect to the
Indenture Trustee that are unrelated to the transactions
contemplated in such Agreements.
(k) The Representative shall have received an opinion of
Richards, Layton & Finger, counsel to the Owner Trustee, dated the
Closing Date and satisfactory in form and substance to the
Representative and counsel for the Underwriters, to the effect that:
(i) the Owner Trustee has been duly incorporated and
is validly existing as a banking corporation in good standing
under the laws of the State of Delaware;
(ii) the Owner Trustee has full corporate trust power
and authority to enter into and perform its obligations under
the Trust Agreement and, on behalf of the Trust, under the
other Basic Documents to which it is a party and has duly
authorized, executed and delivered such Basic Documents and
such Basic Documents constitute the legal, valid and binding
agreement of the Owner Trustee, enforceable in accordance with
their terms, except that certain of such obligations may be
enforceable solely against the Trust Estate (subject to
applicable bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and other similar laws affecting
creditors' rights generally from time to time in effect, and
subject, as to enforceability, to general principles of
equity, regardless of whether such enforceability is
considered in a proceeding in equity or at law);
(iii) the Certificates have been duly executed,
authenticated and delivered by the Owner Trustee as owner
trustee and authenticat-
23
<PAGE>
ing Agent; each of the Notes has been duly executed and
delivered by the Owner Trustee, on behalf of the Trust;
(iv) the execution and delivery by the Owner Trustee
of the Trust Agreement and, on behalf of the Trust, of the
other Basic Documents to which it is a party and the
performance by the Owner Trustee of its obligations thereunder
do not conflict with, result in a breach or violation of, or
constitute a default under the Articles of Association or
By-laws of the Owner Trustee; and
(v) the execution, delivery and performance by the
Owner Trustee of the Trust Agreement and, on behalf of the
Trust, of the other Basic Documents to which it is a party do
not require any consent, approval or authorization of, or any
registration or filing with, any Delaware or United States
federal governmental authority having jurisdiction over the
trust power of the owner Trustee, other than those consents,
approvals or authorizations as have been ob tained and the
filing of the Certificate of Trust with the Secretary of State
of the State of Delaware.
(l) The Representative shall have received an opinion of Rich
ards, Layton & Finger, special Delaware counsel to the Trust, dated the
Closing Date and satisfactory in form and substance to the
Representative and counsel for the Underwriters, to the effect that:
(i) the Trust has been duly formed and is validly
existing as a business trust under the Delaware Business Trust
Act, 12 DEL.C. Section 3801 ET SEQ. (the "DELAWARE ACT");
(ii) the Trust has the power and authority under the
Delaware Act and the Trust Agreement, and the Trust Agreement
authorizes the Owner Trustee, to execute, deliver and perform
its obligations under the Sale and Servicing Agreement, the
Indenture, the Administration Agreement, the Note Depository
Agreement, the Notes and the Certificates;
(iii) assuming that the security interest created by
the Indenture in the Receivables has been duly created and has
attached, upon the filing of a financing statement with the
Secretary of State of
24
<PAGE>
Delaware the Indenture Trustee will have a perfected security
interest in the Trust's rights in such Receivables and the
proceeds thereof, and such security interest will be prior to
any other security interest granted by the Trust that is
perfected solely by the filing of financing statements under
the UCC as in effect in the State of Delaware (the "DELAWARE
UCC"), excluding purchase money security interests under
Section 9-312(4) of the Delaware UCC and temporarily perfected
security interests in proceeds under Section 9-306(3) of the
Delaware UCC;
(iv) no re-filing or other action is necessary under
the Delaware UCC in order to maintain the perfection of such
security interest except for the filing of continuation
statements at five year intervals;
(v) assuming that the Certificates have been duly
authorized, executed and authenticated by the Owner Trustee
on behalf of the Trust, when the Certificates have been issued
and delivered in accordance with the instructions of the
Company, the Certificates will be validly issued and entitled
to the benefits of the Trust Agreement; and
(vi) under 12 DEL.C. Section 3805(b), no creditor
of any Certificateholder
25
<PAGE>
(including creditors of the Company in its capacity as
Certificateholder) shall have any right to obtain possession
of, or otherwise exercise legal or equitable remedies with
respect to, the, property of the Trust except in accordance
with the terms of the Trust Agreement.
(m) The Representative shall have received an opinion of Brown
& Wood LLP, counsel to the Company, dated the Closing Date and
satisfactory in form and substance to the Representative and counsel
for the Underwriters, (i) with respect to the characterization of the
transfer of the Receivables by AHFC to the Company and from the
Company to the Trust and (ii) to the effect that should AHFC become the
debtor in a case under the Bankruptcy Code, and the Company would not
otherwise properly be a debtor in a case under the Bankruptcy Code,
and if the matter were properly briefed and presented to a court
exercising bankruptcy jurisdiction, the court, exercising reasonable
judgment after full consideration of all relevant factors, should not
order, over the objection of the Certificateholders or the
Noteholders, the substantive consolidation of the assets and
liabilities of the Company with those of AHFC and such opinion shall be
in substantially the form previously discussed with the Representative
and counsel for the Underwriters and in any event satisfactory in form
and in substance to the Representative and counsel for the
Underwriters.
(n) The Representative shall have received evidence
satisfactory to it and its counsel that, on or before the Closing Date,
UCC-1 financing statements have been or are being filed in the office
of the Secretary of State of the state of (i) California reflecting the
transfer of the interest of AHFC in the Receivables and the proceeds
thereof to the Company and the transfer of the interest of the Company
in the Receivables and the proceeds thereof to the Trust and (ii)
Delaware reflecting the grant of the security interest by the Trust in
the Receivables and the proceeds thereof to the Indenture Trustee.
(o) The Representative shall have received an opinion of Brown
& Wood LLP, special counsel to the Company, dated the Closing Date and
satisfactory in form and substance to the Representative and the
counsel for the Underwriters to the effect that (i) the provisions of
the Indenture are effective to create a valid security interest in
favor of the Indenture Trustee, to secure payment of the Notes, in all
"securities entitlements" (as defined in Section 8-102(a)(17) of the
[California][New York] UCC) with respect to "financial assets" (as
defined in Section 8-102(a)(9) of the [California][New York] UCC) now
or hereafter credited to the Reserve Account (such securities
entitlements, the "SECURITIES ENTITLEMENTS"), (ii) the provisions of
the control agreement for purposes of Article 8 of the [California][New
York] UCC are effective to perfect the security interest of the
Indenture Trustee in the Securities Entitlements and (iii) no security
interest of any other creditor of the Trust will be prior to the
security interest of the Indenture Trustee in such Securities
Entitlements.
(p) Each Class of the Notes shall have been rated in the
highest rating category by either Moody's or Standard & Poor's.
26
<PAGE>
(q) The Representative shall have received a letter, dated the
Closing Date, of KPMG Peat Marwick which meets the requirements of
subsection (a) of this Section, except that the specified date referred
to in such subsection will be a date not more than five days prior to
such Closing Date for purposes of this subsection.
(r) On or prior to the Closing Date, the Certificates shall
have been issued to the Company.
(s) The Representative shall have received from Brown & Wood
LLP and each other counsel for the Company, a letter dated the Closing
Date to the effect that the Underwriters may rely upon each opinion
rendered by such counsel to either Standard & Poor's or Moody's in
connection with the rating of any Class of the Notes, as if each such
opinion were addressed to the Underwriters.
The Company 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.
7. INDEMNIFICATION AND CONTRIBUTION.
(a) The Company and AHFC will, jointly and severally,
indemnify and hold harmless each Underwriter 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
27
<PAGE>
are incurred; provided, however, that neither the Company nor AHFC 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 Company or AHFC 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;
and PROVIDED, FURTHER, that with respect to any untrue statement or
omission or alleged untrue statement or omission made in any
preliminary prospectus, the indemnity agreement contained in this
subsection (a) shall not inure to the benefit of any Underwriter from
whom the person asserting any such losses, claims, damages or
liabilities purchased the Notes concerned, to the extent that the
untrue statement or omission or alleged untrue statement or omission
was eliminated or remedied in the Prospectus, which Prospectus was
required to be delivered by such Underwriter under the Act to such
person and was not so delivered if the Company or AHFC had previously
furnished copies thereof to such Underwriter.
(b) Each Underwriter will severally and not jointly indemnify
and hold harmless the Company and AHFC against any losses, claims,
damages or liabilities to which the Company or AHFC 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 Company by such Underwriter through the Representative specifically
for use therein, and will reimburse any legal or other expenses
reasonably incurred by the Company or AHFC in connection with
investigating or defending any such loss, claim, damage, liability or
action as such expenses are incurred, it being understood and agreed
that the only such information furnished by any Underwriter consists of
the following information in the
28
<PAGE>
Prospectus furnished on behalf of each Underwriter: the last paragraph
at the bottom of the cover page concerning the terms of the offering by
the Underwriters, the legend concerning over allotments and stabilizing
on the inside front cover page, the concession and reallowance figures
appearing in the third paragraph under the caption "Underwriting" and
the information contained in the fourth paragraph under the caption
"Underwriting".
(c) Promptly after receipt by an indemnified party under this
Section of notice of the commencement of any action, such indemnified
party will, if a claim in respect thereof is to be made against the
indemnifying party under subsection (a) or (b) above, notify the
indemnifying party of the commencement thereof; but the omission so to
notify the indemnifying party will not relieve it from any liability
which it may have to any indemnified party otherwise than under
subsection (a) or (b) above. In case any such action is brought against
any indemnified party and it notifies the indemnify ing 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 such 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 if
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
29
<PAGE>
proportion as is appropriate to reflect the relative benefits received
by the Company on the one hand and the Underwriters on the other from
the offering of the Notes or (ii) if the allocation provided by clause
(i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in
clause (i) above but also the relative fault of the Company on the one
hand and the Underwriters on the other in connection with the
statements or omissions which resulted in such losses, claims, damages
or liabilities as well as any other relevant equitable considerations.
The relative benefits received by the Company 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 Company 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 Company or the Underwriters and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent
such untrue statement or omission. The amount paid by an indemnified
party as a result of the losses, claims, damages or liabilities
referred to in the first sentence of this 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).
Notwithstanding the provisions of this subsection (d), no Underwriter
shall be required to contribute any amount in excess of the amount by
which the total price at which the Notes underwritten by it and
distributed to the public were offered to the public exceeds the amount
of any damages which such Underwriter has otherwise been required to
pay by reason of such untrue or alleged untrue statement or omission or
alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section II(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.
(e) The obligations of the Company or AHFC under this Section
shall be in addition to any liability which the Company or AHFC 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;
30
<PAGE>
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 Company or AHFC, to each officer of the Company
and AHFC who has signed the Registration Statement and to each person,
if any, who controls the Company or AHFC within the meaning of the Act.
8. DEFAULT OF UNDERWRITERS. If any Underwriter or Underwriters default
in their obligations to purchase Notes hereunder on the Closing Date and the
aggregate principal amount of Notes that such defaulting Underwriter or
Underwriters agreed but failed to purchase does not exceed 10% of the total
principal amount of Notes that the Underwriters are obligated to purchase on
such Closing Date, the Representative may make arrangements satisfactory to the
Company for the purchase of such Notes by other persons, including any of the
Underwriters, but if no such arrangements are made by such Closing Date, the
nondefaulting Underwriters shall be obligated severally, in proportion to their
respective commitments hereunder, to purchase the Notes that 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
Notes with respect to which such default or defaults occur exceeds 10% of the
total principal amount of Notes that the Underwriters are obligated to purchase
on such Closing Date and arrangements satisfactory to the Representative and the
Company for the purchase of such Notes 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 Company, except as provided in
Section 9. As used in this Agreement, the term "Underwriter" includes any person
substituted for an Underwriter under this Section. Nothing herein will relieve a
defaulting Underwriter from liability for its default.
9. SURVIVAL OF CERTAIN REPRESENTATIONS AND OBLIGATIONS. The respective
indemnities, agreements, representations, warranties and other statements of the
Company or AHFC or their respective officers and of the several Underwriters set
forth in or made pursuant to this Agreement will remain in full force and
effect, regardless of any investigation, or statement as to the results thereof,
made by or on behalf of any Underwriter or the Company or AHFC or any of their
respective representatives, officers or directors or any controlling person, and
will survive delivery of and payment for the Notes. If this Agreement is
terminated pursuant to Section 8 or if for any reason the purchase of the Notes
by the Underwriters is not consummated, the Company shall remain responsible for
the expenses to be paid or reimbursed by it pursuant to Section 5 and the
respective obligations of the Company, AHFC and the Underwriters pursuant to
Section 7 shall remain in effect. If the purchase of the Notes by the
Underwriters is not consummated for any reason other than solely because of the
termination of this Agreement pursuant to Section 8 or the occurrence of any
event specified in clause (ii), (iii) or (iv) of Section 6(c), the Company and
AHFC, jointly and severally, will reimburse the Underwriters for all out-of
pocket expenses (including fees and disbursements of counsel) reasonably
incurred by them in connection with the offering of the Notes.
31
<PAGE>
10. NOTICES. All communications hereunder will be in writing and, if
sent to the Underwriters, will be mailed, delivered or sent by facsimile and
confirmed to the Representative at Eleven Madison Avenue, 23rd Floor, New York,
New York 10010, Attention: Investment Banking Department--Transactions Advisory
Group (facsimile: (212) 325-8261) or, if sent to the Company, will be mailed,
delivered or sent by facsimile transmission and confirmed to it at 700 Van Ness
Avenue, Torrance, California 90501, Attention: John I. Weisickle, (facsimile:
(310) 787- 3910), and if to AHFC, will be mailed, delivered or sent by facsimile
transmission and confirmed to it at 700 Van Ness Avenue, Torrance, California
90501, Attention: John I. Weisickle, (facsimile: (310) 787-3910); PROVIDED that
any notice to an Underwriter pursuant to Section 7 will be mailed, delivered or
telecopied and confirmed to such Underwriter.
11. NO BANKRUPTCY PETITION. Each Underwriter agrees that, prior to the
date which is one year and one day after the payment in full of all securities
issued by the Company or by a trust for which the Company was the depositor
which securities were rated by any nationally recognized statistical rating
organization, it will not institute against, or join any other person in
instituting against, the Company any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceedings or other proceedings under any Federal or
state of bankruptcy or similar law.
12. SUCCESSORS. This Agreement will inure to the benefit of and be
binding upon to the parties hereto 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 obligation hereunder.
13. REPRESENTATION OF UNDERWRITERS. The Representative will act for the
several Underwriters in connection with this financing, and any action under
this Agreement taken by the Representative will be binding upon all the
Underwriters.
14. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original but all such
counter parts shall together constitute one and the same Agreement.
15. APPLICABLE LAW; SUBMISSION TO JURISDICTION.
(a) This Agreement shall be governed by, and construed in accordance
with, the laws of the State of New York.
(b) Each of the Company and AHFC hereby submits to the nonexclusive
jurisdiction of the Federal and state courts in the Borough of Manhattan in The
City of New York in any suit or proceeding arising out of or relating to this
Agreement or the transactions contemplated hereby.
32
<PAGE>
If the foregoing is in accordance with the Representative's
understanding of our agreement, kindly sign and return to each of the Company
and AHFC one of the counterparts hereof, whereupon it will become a binding
agreement between the Company, AHFC and the Several Underwriters in accordance
with its terms.
Very truly yours,
AMERICAN HONDA
RECEIVABLES CORP.
By:
----------------------------
Name:
Title:
AMERICAN HONDA
FINANCE CORPORATION
By:
----------------------------
Name:
Title:
The foregoing Underwriting Agreement is hereby confirmed and accepted as of the
date first above written:
CREDIT SUISSE FIRST BOSTON
CORPORATION, acting on behalf of itself
and as the Representative of the several Underwriters
By:
---------------------------
Name:
Title:
33
<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
Underwriter Amount of Amount of Amount of Amount of
----------- Class A-1 Class A-2 Class A-3 Class A-4
Notes Notes Notes Notes
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Credit Suisse First Boston Corporation
Total:
</TABLE>
A-1
