<PAGE>
<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 27, 1997
REGISTRATION NO. 333-37471
________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
- ----------------------------------------------------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
- ----------------------------------------------------------
USAA FEDERAL SAVINGS BANK
(ORIGINATOR OF THE TRUST DESCRIBED HEREIN)
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
USAA AUTO LOAN GRANTOR TRUST 1997-1
(ISSUER WITH RESPECT TO CERTIFICATES)
<TABLE>
<S> <C> <C>
UNITED STATES 0749 74-2291652
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
------------------------
10750 MCDERMOTT FREEWAY
SAN ANTONIO, TEXAS 78288
(210) 498-2265
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
MICHAEL J. BROKER, ESQ.
VICE PRESIDENT AND
BANKING COUNSEL
10750 MCDERMOTT FREEWAY
SAN ANTONIO, TEXAS 78288
(210) 498-2265
(NAME, ADDRESS, INCLUDING ZIP CODE AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
COPIES TO:
<TABLE>
<S> <C> <C>
STEPHEN L. FLUCKIGER, ESQ. GLENN S. ARDEN, ESQ. RICHARD S. FORTUNATO, ESQ.
JONES, DAY, REAVIS & POGUE JONES, DAY, REAVIS & POGUE SKADDEN, ARPS, SLATE,
2001 ROSS AVE., SUITE 2300 599 LEXINGTON AVENUE MEAGHER & FLOM LLP
DALLAS, TEXAS 75201 NEW YORK, NEW YORK 10022 919 THIRD AVENUE
NEW YORK, NEW YORK 10022
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as
practicable on or after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ] ____________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] ____________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED
MAXIMUM
OFFERING PROPOSED
PRICE MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE PER AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED UNIT OFFERING PRICE FEE(1)
<S> <C> <C> <C> <C>
% Automobile Loan Pass-Through Certificates, Class A................. $ 679,200,000 100% $ 679,200,000 $ 205,818.18
% Automobile Loan Pass-Through Certificates, Class B................. $ 21,005,448.34 100% $ 21,005,448.34 $ 6,365.29
Total............................................................. $700,205,448.34 $700,205,448.34 $ 212,183.47
</TABLE>
(1) $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 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
________________________________________________________________________________
<PAGE>
<PAGE>
PRELIMINARY PROSPECTUS
SUBJECT TO COMPLETION DATED OCTOBER 27, 1997
USAA AUTO LOAN GRANTOR TRUST 1997-1
$679,200,000 % AUTOMOBILE LOAN PASS-THROUGH CERTIFICATES, CLASS A
$21,005,448.34 % AUTOMOBILE LOAN PASS-THROUGH CERTIFICATES, CLASS B
[LOGO]
USAA FEDERAL SAVINGS BANK, SELLER AND SERVICER
----------------
The % Automobile Loan Pass-Through Certificates, Class A (the 'Class A
Certificates') and the % Automobile Loan Pass-Through Certificates, Class B
(the 'Class B Certificates'; the Class A Certificates and the Class B
Certificates are collectively referred to herein as the 'Certificates') offered
hereby evidence undivided interests in the USAA Auto Loan Grantor Trust 1997-1
(the 'Trust') created pursuant to a Pooling and Servicing Agreement (the
'Agreement') among USAA Federal Savings Bank, as seller and as servicer
('Seller' and 'Servicer' in such respective capacities), and The Chase Manhattan
Bank, as trustee (the 'Trustee') and as collateral agent (the 'Collateral
Agent'). The property of the Trust will include a pool of fixed rate simple
interest motor vehicle installment loans secured by new and used automobiles and
light-duty trucks (the 'Receivables'), certain monies due thereunder on or after
October 1, 1997 (the 'Cutoff Date'), security interests in the vehicles financed
thereby, benefits of a Reserve Account and certain other property, all as more
fully described herein. The aggregate principal balance of the Receivables as of
the Cutoff Date was $700,205,448.34.
Principal and interest at the applicable Pass-Through Rate will be
distributed to the Certificateholders on the 15th day of each month (or, if such
day is not a business day, the next succeeding business day), beginning November
17, 1997 (each, a 'Distribution Date'). The final scheduled Distribution Date is
the May 15, 2004 Distribution Date (the 'Final Scheduled Distribution Date').
Payments of interest and principal on the Class B Certificates will be
subordinated in priority of payment to payments of interest and principal on the
Class A Certificates to the extent described herein.
The Certificates initially will be represented by Certificates registered in
the name of Cede & Co., as nominee of The Depository Trust Company ('DTC'). The
interests of beneficial owners of the Certificates will be represented by book
entries on the records of DTC and participating members thereof. Definitive
Certificates will be available only under the limited circumstances described
herein.
There currently is no secondary market for the Certificates and there is no
assurance that one will develop. The Underwriters expect, but are not obligated,
to make a market in the Certificates. There is no assurance that any such market
will develop, or if one does develop, that it will continue.
------------------------
PROSPECTIVE INVESTORS SHOULD CONSIDER THE FACTORS SET FORTH UNDER 'RISK
FACTORS' ON PAGES 8 THROUGH 10 HEREIN.
THE CERTIFICATES REPRESENT INTERESTS IN THE TRUST ONLY AND DO NOT REPRESENT
INTERESTS IN OR OBLIGATIONS OF USAA FEDERAL SAVINGS BANK OR UNITED
SERVICES AUTOMOBILE ASSOCIATION OR ANY OF THEIR RESPECTIVE AFFILIATES.
A CERTIFICATE IS NOT A DEPOSIT AND IS NOT INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION (THE 'FDIC'). THE RECEIVABLES ARE
NOT INSURED OR GUARANTEED BY THE FDIC OR ANY OTHER GOVERNMENTAL
AGENCY AND ARE SUBJECT TO INVESTMENT RISKS, INCLUDING
POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
PROCEEDS TO THE
PRICE TO PUBLIC(1) UNDERWRITING DISCOUNT SELLER(1)(2)
<S> <C> <C> <C>
Per Class A Certificate...................... % % %
Per Class B Certificate...................... % % %
Total........................................ $ $ $
</TABLE>
(1) Plus accrued interest at the applicable Pass-Through Rate from October 15,
1997.
(2) Before deducting expenses estimated at $ .
------------------------
The Certificates are being offered by the Underwriters, subject to prior
sale, when, as and if issued to and accepted by the Underwriters and subject to
their right to reject orders in whole or in part. It is expected that the
Certificates will be delivered in book-entry form, on or about , 1997,
through the facilities of DTC.
------------------------
Underwriters of the Class A Certificates
MERRILL LYNCH & CO.
CITICORP SECURITIES, INC.
J.P. MORGAN & CO.
UBS
SECURITIES
Underwriter of the Class B Certificates
MERRILL LYNCH & CO.
------------------------
The date of this Prospectus is , 1997.
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>
<PAGE>
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE CERTIFICATES. SUCH
TRANSACTIONS MAY INCLUDE STABILIZING AND THE PURCHASE OF CERTIFICATES TO COVER
SYNDICATE SHORT POSITIONS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
'UNDERWRITING.'
REPORTS TO CERTIFICATEHOLDERS
Unless and until Definitive Certificates are issued (which will occur under
the limited circumstances described herein), unaudited monthly and annual
reports, containing information concerning the Trust and prepared by the
Servicer, will be sent by the Trustee only to the registered holders of the
Class A Certificates and the Class B Certificates (the 'Certificateholders')
pursuant to the Agreement. The registered holder of the Class A Certificates and
the Class B Certificates is Cede & Co., as nominee of DTC. Such reports will not
constitute financial statements prepared in accordance with generally accepted
accounting principles. Persons acquiring an interest in the Certificates through
DTC may obtain these reports free of charge (except for copying and postage
costs) by a request in writing to the Trustee at 450 West 33rd Street, 15th
Floor, New York, NY 10001, Attention: Structured Finance Services. See 'The
Certificates -- General,' ' -- Book-Entry Registration' and 'Statements to
Certificateholders.' The Seller does not intend to send any of its financial
reports to Certificateholders.
AVAILABLE INFORMATION
The Seller has filed with the Securities and Exchange Commission (the
'Commission') on behalf of the Trust a Registration Statement under the
Securities Act of 1933, as amended (the 'Securities Act'), with respect to the
Certificates offered pursuant to this Prospectus. For further information,
reference is made to such Registration Statement, the amendments thereof and the
exhibits thereto, which are available for inspection without charge at the
public reference facilities of the Commission at 450 Fifth Street, N.W., Room
1024, Washington, D.C. 20549, as well as the Regional Offices of the Commission
at Citicorp Center, 500 West Madison, Suite 1400, Chicago, Illinois 60661, and 7
World Trade Center, Suite 1300, New York, New York 10048. Copies of such
information can be obtained by mail from the Public Reference Section of the
Commission, 450 Fifth Street, N.W., Washington D.C. 20549, at prescribed rates.
The Commission also maintains a website, located at http://www.sec.gov, that
contains reports, proxy statements and other information regarding registrants
that file electronically with the Commission. The Servicer, on behalf of the
Trust, will also file or cause to be filed with the Commission such periodic
reports as are required under the Securities Exchange Act of 1934, as amended
(the 'Exchange Act') and the rules and regulations of the Commission thereunder.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All reports and other documents filed by the Servicer, on behalf of the
Trust, pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act
subsequent to the date of this Prospectus and prior to the termination of the
offering of the Certificates offered hereby shall be deemed to be incorporated
by reference into this Prospectus and to be part hereof. Any statement contained
herein or in a document deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained in any other subsequently filed document which
also is deemed to be incorporated by reference herein modifies or supersedes
such statement. Any such statement so modified or superseded shall not be
deemed, except as modified or superseded, to constitute a part of this
Prospectus.
The Seller will provide without charge to each person, including any
beneficial owner of the Certificates, to whom a copy of this Prospectus is
delivered, on the written or verbal request of any such person, a copy of any or
all of the documents incorporated by reference herein, 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 the
Seller, 10750 McDermott Freeway, San Antonio, Texas 75288, Attention: Edwin T.
McQuiston, Vice President, Treasurer. Telephone requests for such copies should
be directed to Mr. McQuiston at (210) 498-2296.
2
<PAGE>
<PAGE>
PROSPECTUS SUMMARY
This Summary is qualified in its entirety by reference to the detailed
information appearing elsewhere in this Prospectus. Certain capitalized terms
used in the Summary are defined elsewhere in this Prospectus. Reference is made
to the 'Glossary of Terms' for the location herein of defined terms.
<TABLE>
<S> <C>
Issuer.............................. USAA Auto Loan Grantor Trust 1997-1 (the 'Trust').
Seller/Servicer..................... USAA Federal Savings Bank (the 'Seller' and 'Servicer' in its respective
capacities as such, otherwise referred to herein as the 'Bank').
Securities Offered.................. % Automobile Loan Pass-Through Certificates, Class A (the 'Class A
Certificates') and % Automobile Loan Pass-Through Certificates, Class B
(the 'Class B Certificates'; the Class A Certificates and the Class B
Certificates are collectively referred to herein as the 'Certificates')
representing fractional undivided interests in the Trust. The Trust
property will include a pool of fixed rate simple interest motor vehicle
installment loans (the 'Receivables') secured by new and used automobiles
and light-duty trucks (the 'Financed Vehicles'), all monies due under the
Receivables on or after October 1, 1997 (the 'Cutoff Date'), security
interests in the Financed Vehicles, proceeds from claims on certain
insurance policies, and certain rights under the Pooling and Servicing
Agreement (the 'Agreement') between the Bank, as Seller and Servicer, and
The Chase Manhattan Bank, as Trustee. The Certificates will be offered for
purchase in denominations of $1,000 and integral multiples thereof. See
'The Trust' and 'The Certificates -- General.'
Certificates........................ The Class A Certificates will be issued in an initial principal amount
equal to $679,200,000 (the 'Original Class A Certificate Balance'), and the
Class B Certificates will be issued in an initial principal amount equal to
$21,005,448.34 (the 'Original Class B Certificate Balance' and, together
with the Original Class A Certificate Balance, the 'Original Certificate
Balance'). The Original Class A Certificate Balance will equal
approximately 97% of the aggregate outstanding principal balance of the
Receivables determined in accordance with the Agreement (the 'Pool
Balance') as of the Cutoff Date (the 'Original Pool Balance'). The Original
Class B Certificate Balance will equal approximately 3% of the Original
Pool Balance.
Registration of the
Certificates...................... The Class A Certificates and the Class B Certificates will each be
initially represented by one or more global certificates registered in the
name of Cede & Co. ('Cede'), as the nominee of The Depository Trust Company
('DTC'). No person acquiring an interest in a Certificate through the
facilities of DTC (a 'Certificate Owner') will be entitled to receive a
Definitive Certificate representing such person's interest in the Trust,
except in the event that Definitive Certificates are issued under the
limited circumstances described herein. All references herein to
Certificateholders shall reflect the rights of Certificate Owners, as such
rights may be exercised through DTC and its Participants, except as
otherwise
</TABLE>
3
<PAGE>
<PAGE>
<TABLE>
<S> <C>
specified herein. See 'The Certificates -- Book-Entry Registration' and
' -- Definitive Certificates.'
Pass-Through Rate................... % per annum with respect to the Class A Certificates (the 'Class A
Pass-Through Rate'), and % per annum with respect to the Class B
Certificates (the 'Class B Pass-Through Rate'), in each case calculated on
the basis of a 360-day year consisting of twelve 30-day months. The Class A
Pass-Through Rate and the Class B Pass-Through Rate are both sometimes
referred to as the applicable 'Pass-Through Rate.'
Distribution Date................... The 15th day of each month (or, if such 15th day is not a day on which the
Trustee and banks located in New York, New York are open for the purpose of
conducting a commercial banking business (a 'Business Day'), the next
following Business Day) commencing November 17, 1997.
Interest............................ On each Distribution Date, interest at the applicable Pass-Through Rate,
calculated on the basis of a 360-day year consisting of twelve 30-day
months, on the Class A Certificate Balance and the Class B Certificate
Balance, respectively, in each case as of the preceding Distribution Date
(after giving effect to all payments of principal made on such preceding
Distribution Date) or, in the case of the first Distribution Date, as of
the Closing Date, will be distributed to the registered holders of the
Class A Certificates (the 'Class A Certificateholders') and the registered
holders of the Class B Certificates (the 'Class B Certificateholders' and,
together with the Class A Certificateholders, the 'Certificateholders') as
of the day immediately preceding such Distribution Date (the 'Record
Date'), to the extent that sufficient funds are on deposit in the
Certificate Account or available in the Reserve Account to make such
distributions. A 'Collection Period' means the calendar month preceding
each Distribution Date, or in the case of the initial Collection Period,
the period from the Cutoff Date to October 31, 1997. See 'The
Certificates -- Distributions on Certificates' and ' -- The Reserve
Account.' The rights of the Class B Certificateholders to receive
distributions of interest will be subordinated to the rights of the Class A
Certificateholders to receive distributions of interest to the extent
described herein. See 'Risk Factors -- Limited Assets' and
' -- Subordination of Class B Certificates.'
Principal........................... On each Distribution Date, as described more fully herein, all payments of
principal on the Receivables received by the Servicer during the preceding
Collection Period, plus an amount equal to the principal balance of any
Receivables which became Defaulted Receivables during the preceding
Collection Period, will be distributed by the Trustee to the Class A
Certificateholders and to the Class B Certificateholders of record on the
preceding Record Date, to the extent that sufficient funds are available
therefor on deposit in the Certificate Account or available in the Reserve
Account to make such distributions. See 'The Certificates -- Distributions
on Certificates' and ' -- The Reserve Account.' The rights of the Class B
Certificateholders to receive distributions of principal will be
subordinated to the rights of the Class A Certificateholders to receive
distributions of interest and principal to the extent described herein.
Subordination of Class B
Certificates...................... Distributions of interest on the Class B Certificates will be
</TABLE>
4
<PAGE>
<PAGE>
<TABLE>
<S> <C>
subordinated in priority of payment to distributions of interest (but not
principal) due on the Class A Certificates, and distributions of principal
on the Class B Certificates will be subordinated in priority of payment to
distributions of interest and principal due on the Class A Certificates, in
the event of defaults on the Receivables to the extent described herein.
The Class B Certificateholders will not receive any distributions of
interest with respect to a Collection Period until the full amount of
interest on the Class A Certificates relating to such Collection Period has
been deposited in the Class A Distribution Account. The Class B
Certificateholders will not receive any distributions of principal with
respect to a Collection Period until the full amount of interest on and
principal of the Class A Certificates relating to such Collection Period
has been deposited in the Class A Distribution Account. See 'Risk
Factors -- Limited Assets' and ' -- Subordination of Class B Certificates.'
Advances............................ On the Business Day preceding each Distribution Date (each, a 'Deposit
Date'), the Servicer may, in its sole discretion, make a payment with
respect to each Receivable (other than a Defaulted Receivable) equal to the
excess, if any, of (x) the product of the principal balance of such
Receivable as of the first day of the related Collection Period and
one-twelfth of its Contract Rate (calculated on the basis of a 360-day year
of twelve 30-day months), over (y) the interest actually received by the
Servicer with respect to such Receivable from the Obligor or from payment
of the Repurchase Amount during or with respect to such Collection Period
(any such payment, an 'Advance'). The Servicer may elect not to make any
Advance with respect to a Receivable to the extent that the Servicer, in
its sole discretion, determines that such Advance is not recoverable from
subsequent payments on such Receivable, from subsequent payments of the
Servicing Fee or from funds in the Reserve Account. See 'The
Certificates -- Advances.'
Servicing Fee....................... The Servicer will be entitled to receive a monthly fee (the 'Servicing
Fee'), payable on each Distribution Date, in an amount equal to the product
of one-twelfth of 1.00% (the 'Servicing Fee Rate') and the Pool Balance as
of the first day of the related Collection Period. In addition, the
Servicer will be entitled to receive as additional compensation investment
earnings on amounts on deposit (or to be deposited) in the Certificate
Account; provided, however, that if the Servicer fails to deposit an
Advance with respect to a Receivable other than because such Receivable has
been declared a Defaulted Receivable, such investment income will not be
paid to the Servicer, but will be treated as Available Interest pursuant to
the Agreement. See 'The Certificates -- Servicing Compensation.'
Reserve Account..................... A reserve account (the 'Reserve Account') will be established by the Seller
and maintained by the Collateral Agent with an initial deposit of cash of
$10,503,081.73 (the 'Reserve Account Initial Deposit'). In addition, on
each Distribution Date, any amounts remaining in the Certificate Account
with respect to the related Collection Period (after all payments to the
Certificateholders and the Servicer have been made) will be deposited into
the Reserve Account until the amount on deposit in the Reserve Account is
equal to the Specified Reserve Account Balance. On any Distribu-
</TABLE>
5
<PAGE>
<PAGE>
<TABLE>
<S> <C>
tion Date, the 'Specified Reserve Account Balance' will equal the greater
of (i) 2% of the Pool Balance as of the last day of the preceding
Collection Period and (ii) 1% of the initial Pool Balance (such amount not
to exceed the outstanding Pool Balance as of the last day of the preceding
Collection Period). The Specified Reserve Account Balance may be increased
under certain circumstances described herein.
On each Deposit Date, the Collateral Agent will withdraw funds from the
Reserve Account, to the extent of the funds therein (exclusive of any
investment earnings on such funds), (i) first to reimburse the Servicer for
certain Advances previously made but not reimbursed ('Outstanding
Advances') and (ii) second to make available to Certificateholders the
excess, if any, of (x) the sum of the amounts required to be distributed to
Certificateholders and the Servicer on the related Distribution Date over
(y) the amount to be deposited in the Certificate Account with respect to
the preceding Collection Period (exclusive of investment earnings thereon).
If the amount in the Reserve Account is reduced to zero, Certificate-
holders will bear directly the credit and other risks associated with
ownership of the Receivables, including the risk that the Trust may not
have a perfected security interest in the Financed Vehicles. See 'Risk
Factors,' 'The Certificates -- The Reserve Account' and 'Certain Legal
Aspects of the Receivables.'
Optional Purchase................... The Servicer may purchase all of the Receivables on any Distribution Date
following a Record Date as of which the Pool Balance has declined to 5% or
less of the Pool Balance as of the Cutoff Date. See 'The
Certificates -- Termination.'
Trustee and Collateral Agent........ The Chase Manhattan Bank, a New York banking corporation.
Tax Status.......................... In the opinion of Jones, Day, Reavis & Pogue, special tax counsel to the
Bank, the Trust will be classified for Federal income tax purposes as a
grantor trust and not as an association taxable as a corporation, and
accordingly, Certificateholders must report their respective allocable
shares of income earned on the assets of the Trust and, subject to certain
limitations applicable to individuals, estates and trusts, may deduct their
respective allocable shares of reasonable servicing and other fees. See
'Certain Federal Income Tax Consequences.'
Rating.............................. It is a condition to the issuance of the Certificates that the Class A
Certificates be rated in the highest rating category, and the Class B
Certificates be rated in one of the three highest rating categories, in
each case by at least one nationally recognized rating agency (a 'Rating
Agency'). There can be no assurance that a rating will not be lowered or
withdrawn if, in the sole judgment of a rating agency, circumstances so
warrant. A security rating is not a recommendation to buy, sell or hold
securities and may be revised or withdrawn at any time by the assigning
Rating Agency.
ERISA Considerations................ The Class A Certificates may be purchased by or on behalf of employee
benefit plans that are subject to the Employee Retirement Income Security
Act of 1974, as amended ('ERISA'), upon satisfaction of certain conditions
described herein. In contrast, the Class B Certificates may be purchased by
employee benefit plans
</TABLE>
6
<PAGE>
<PAGE>
<TABLE>
<S> <C>
subject to ERISA only if such acquisition and subsequent holding
of the Class B Certificates is exempt from the prohibited
transaction rules of ERISA and the Code by means of
the application of one or more statutory or administrative exemptions.
Such exemptions may apply with respect to certain insurance
company general accounts, insurance company pooled separate accounts,
bank collective investment funds and qualified professional asset managers.
Each investor purchasing the Class B Certificates by or on behalf of an
employee benefit plan subject to ERISA will be deemed to have represented
that such acquisition and the subsequent holding of the Class B
Certificates will be exempt from the prohibited transaction rules of
ERISA and the Code by means of the application of one or more of
such exemptions.
Any benefit plan fiduciary considering a purchase of Certificates should,
among other things, consult with experienced legal counsel in determining
whether all required conditions have been satisfied. See 'ERISA
Considerations.'
</TABLE>
7
<PAGE>
<PAGE>
RISK FACTORS
An investment in the Certificates involves certain risks. Prospective
investors should carefully consider the following factors, in addition to the
matters set forth elsewhere in this Prospectus prior to investing in the
Certificates.
LIMITED LIQUIDITY
There currently is no secondary market for the Class A Certificates or the
Class B Certificates, and there is no assurance that one will develop. The
Underwriters expect, but are not obligated, to make a market in the
Certificates. There is no assurance that any such market will develop or, if one
does develop, that it will provide liquidity of investment or will continue for
the life of the Class A Certificates or the Class B Certificates, as the case
may be.
THE TRUST
The Seller will establish the Trust by selling and assigning the
Receivables to the Trust in exchange for the Certificates. After formation, the
Trust will not engage in any activity other than acquiring and holding the
Receivables, issuing the Certificates, distributing payments thereon and as
otherwise described herein and as provided in the Agreement.
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES
In order to protect the Trust's ownership interest in the Receivables, the
Bank will file UCC-1 financing statements with the appropriate governmental
authorities in the State of Texas to give notice of the Trust's ownership of the
Receivables and their proceeds. Under the Agreement, the Bank will be obligated
to maintain the perfection of the Trust's ownership interest in the Receivables.
It should be noted, however, that a purchaser of chattel paper who gives new
value and takes possession of it in the ordinary course of such purchaser's
business has priority over a security interest in the chattel paper which is
perfected by filing UCC-1 financing statements and not by possession by the
original secured party, if such purchaser acts in good faith without knowledge
that the specific chattel paper is subject to a security interest. Any such
purchaser would not be deemed to have such knowledge by virtue of the UCC
filings and would not learn of the sale of the Receivables from a review of the
Receivables since they would not be marked to show such sale, although the
Bank's master computer records will evidence such sale.
The Bank will assign its security interest in the individual Financed
Vehicles to the Trust. However, because of the administrative burden and
expense, and since the Bank remains as Servicer with respect to the Receivables,
neither the Bank nor the Trustee will amend the certificates of title to
identify the Trust as the new secured party and, accordingly, the Bank will
continue to be named as the secured party on the certificates of title relating
to the Financed Vehicles. In certain states, in the absence of such endorsement
and delivery, the Trustee may not have a perfected security interest in such
Financed Vehicles. See 'Certain Legal Aspects of the Receivables.'
PREPAYMENT CONSIDERATIONS
The weighted average life of the Certificates may be reduced by full or
partial prepayments on the Receivables. The Receivables are prepayable by the
obligors thereunder (the 'Obligors') at any time without penalty. Prepayments
may also result from liquidations due to default; the receipt of proceeds from
theft, physical damage, credit life and credit disability insurance policies;
repurchases by the Seller as a result of the failure of a Receivable to meet
certain criteria set forth in the Agreement; purchases by the Servicer as a
result of a breach of certain of its covenants with respect to the Receivables
made by it in the Agreement; or as a result of an exercise by the Servicer of
its option to purchase the Receivables Pool. The rate of prepayments on the
Receivables may be influenced by a variety of economic, social and other
factors, including the fact that an Obligor may not sell or transfer the
Financed Vehicle securing a Receivable without the Seller's consent.
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The Bank does not believe that the records maintained by the Bank of the
historical prepayment experience of its portfolio of Motor Vehicle Loans are
adequate to provide meaningful information with respect to the Receivables. No
assurance can be given that prepayments on the Receivables would conform to any
historical experience, and no prediction can be made as to the actual prepayment
experience to be expected with respect to the Receivables. Certificateholders
will bear any reinvestment risk resulting from the prepayment of the
Receivables. See 'The Receivables Pool -- Maturity and Prepayment Assumptions.'
GEOGRAPHIC CONCENTRATION
Economic conditions in states where Obligors reside may affect the
delinquency, loan loss and repossession experience of the Trust with respect to
the Receivables. Based on the location of the Obligor at the time each Motor
Vehicle Loan was advanced and the principal balance of each Receivable as of the
Cutoff Date, the states which accounted for more than 5% of the Pool Balance
were: Texas, 16.43%; California, 10.45%; Florida, 5.77%; and Virginia, 5.30%.
See 'The Receivables Pool -- Geographic Distribution of the Receivables.'
LIMITED ASSETS
The Trust does not have, nor is it permitted or expected to have, any
significant assets or sources of funds other than the Receivables and the right
to receive payments under certain circumstances from the Reserve Account. The
Certificates represent interests solely in the Trust and will not be insured or
guaranteed by the Seller, the Servicer, the Trustee, the Collateral Agent or any
other person or entity. Consequently, holders of the Certificates will only be
able to look to payments on the Receivables and, if and to the extent available,
amounts on deposit in the Reserve Account, for payment. Amounts to be deposited
in the Reserve Account are limited in amount and will be reduced as the Pool
Balance declines.
Amounts on deposit in the Reserve Account will be available on any
Distribution Date first to cover shortfalls in reimbursement of Outstanding
Advances to the extent then reimbursable and payment of the Servicing Fee to the
Servicer, then to cover shortfalls in distributions of interest on the Class A
Certificates and then shortfalls in distributions of interest on the Class B
Certificates. After distributions of interest on the Certificates have been
made, the remaining amounts on deposit in the Reserve Account will be available
first to cover shortfalls in distributions of principal on the Class A
Certificates and then shortfalls in distributions of principal on the Class B
Certificates. If the Reserve Account is exhausted (and not replenished), the
Trust will depend solely on payments on the Receivables to make distributions on
the Certificates, and Certificateholders will bear directly, without any
additional credit enhancement (except to the extent that the Reserve Account is
replenished from Collections on Receivables), the risk of delinquencies, loan
losses and repossessions with respect to the Receivables. There can be no
assurance that the future delinquency, loan loss or repossession experience of
the Trust with respect to the Receivables will be better or worse than that set
forth herein with respect to the Bank's portfolio of Motor Vehicle Loans owned
and serviced by the Bank. See 'The Certificates -- The Reserve Account' and
' -- Distributions on Certificates.'
SUBORDINATION OF CLASS B CERTIFICATES
Distributions of interest on the Class B Certificates will be subordinated
in priority of payment to distributions of interest on the Class A Certificates,
and distributions of principal on the Class B Certificates will be subordinated
to distributions of interest and principal on the Class A Certificates, to the
extent described herein. In particular, the Class B Certificateholders will not
receive any distributions of interest with respect to a Collection Period until
the full amount of interest on the Class A Certificates relating to such
Collection Period has been deposited in the Class A Distribution Account. Class
B Certificateholders will not receive any distributions of principal with
respect to a Collection Period until the full amount of interest on and
principal of the Class A Certificates relating to such Collection Period has
been deposited in the Class A Distribution Account. However, distributions of
interest on the Class B Certificates, to the extent of collections on the
Receivables
9
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allocable to interest and the amounts on deposit in the Reserve Account
available after the distribution of interest on the Class A Certificates has
been made, will not be subordinated to the distribution of principal of the
Class A Certificates. See 'The Certificates -- Distributions on Certificates.'
RATING
It is a condition to the issuance of the Certificates that the Class A
Certificates be rated in the highest rating category, and the Class B
Certificates be rated in one of the three highest rating categories, in each
case by at least one Rating Agency. A security rating is not a recommendation to
buy, sell, or hold securities and may be revised or withdrawn at any time by the
assigning Rating Agency. There can be no assurance that a rating will not be
lowered or withdrawn if, in the sole judgment of a rating agency, circumstances
in the future so warrant. The Seller cannot predict with certainty what effect
any revision or withdrawal of a rating may have on the liquidity or market value
of the Class A Certificates or the Class B Certificates.
THE CERTIFICATES
The Class A Certificates and the Class B Certificates will each be
represented initially by one or more global certificates registered in the name
of Cede, as nominee of DTC. No Certificate Owner will be entitled to receive a
Definitive Certificate representing such person's interest in the Trust except
in certain limited circumstances. Under the terms of the Agreement, Certificate
Owners will not be recognized as Certificateholders, and will be permitted to
exercise the rights of the Certificateholders only indirectly through DTC. See
'The Certificates.'
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THE BANK'S PORTFOLIO OF MOTOR VEHICLE LOANS
ORIGINATION OF MOTOR VEHICLE LOANS
The Bank has a portfolio of motor vehicle installment loans secured by new
and used automobiles and light-duty trucks ('Motor Vehicle Loans') all of which
are originated directly by the Bank. Applications for Motor Vehicle Loans are
made by individuals to the Bank's office in San Antonio, Texas and are reviewed
by the Bank in accordance with the Bank's underwriting procedures. Applications
are accepted in person, by mail or by telephone.
The Bank services all of its Motor Vehicle Loans. The servicing functions
performed by the Bank include customer service, document file keeping,
computerized account record keeping, vehicle title processing and collections.
The servicing policies and practices of the Bank may change over time in
accordance with the Bank's business judgment.
UNDERWRITING OF MOTOR VEHICLE LOANS
The Bank makes credit decisions with respect to Motor Vehicle Loans in two
alternative ways: on a judgmental basis, which, since September 1992, has
included a credit scoring process, or on a pre-approved basis.
Other than customers who are pre-approved for Motor Vehicle Loans, the Bank
requires each applicant for a Motor Vehicle Loan (an 'Applicant') to complete an
application which sets forth the Applicant's income, liabilities, credit and
employment history, and other personal information as well as a description of
the Financed Vehicle which is intended to secure a Motor Vehicle Loan. Each
application is reviewed for completeness and for compliance with the Bank's
guidelines and applicable consumer regulations. The Bank evaluates the
applications by considering, based on information provided in the application
and the credit bureau reports referred to below, the relationship of the
Applicant's income to expenses, including expenses relating to such Motor
Vehicle Loan.
Each Applicant for a Motor Vehicle Loan is evaluated using uniform
underwriting standards developed by the Bank. These underwriting standards are
intended to assess the Applicant's ability to repay such Motor Vehicle Loan and
the adequacy of the Financed Vehicle as collateral, based upon a review of the
information contained in the Applicant's loan application. Each application is
reviewed by a credit analyst. Among the criteria considered in evaluating the
individual applications are (i) stability of the Applicant with specific regard
to the Applicant's occupation and length of employment, (ii) the Applicant's
payment history based on information known directly by the Bank or as provided
by various credit reporting agencies with respect to present and past debt,
(iii) a debt service to gross monthly income ratio test, and (iv) a loan to
value ratio test taking into account the age, type and market value of the
Financed Vehicle. The Bank's general policy has been not to allow an Applicant's
debt service to gross monthly income ratio to exceed 55%.
An empirically based credit scoring process using credit scores provided by
credit bureaus is used to objectively assess an Applicant's creditworthiness.
This scoring process was created using historical information from the database
of Motor Vehicle Loans owned and serviced by the Bank. Through credit scoring,
the Bank evaluates credit profiles to quantify credit risk. The credit scoring
process entails the use of statistics to correlate common characteristics with
credit risk. The credit scoring process used by the Bank is periodically
reviewed and, if necessary, updated to reflect current statistical data. The
Bank's scoring process is intended to provide a basis for lending decisions, not
to supersede the judgment of the credit analyst.
Applications are reviewed using the credit scoring process and are approved
without further review if the resulting credit score exceeds pre-set parameters.
Applications that are not so approved are reviewed by a credit analyst using the
criteria described above.
Motor Vehicle Loan approval at variance with standard credit guidelines has
occurred, both before and after implementation of the credit scoring process,
but generally has required concurrent approval of a second, designated senior
credit analyst or credit manager of the Bank. Motor Vehicle Loans which do not
comply with all the Bank's guidelines must have strong compensating factors
which indicate a high ability of the Applicant to repay the loan. Generally in
such cases, if a Motor Vehicle Loan is
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approved it is because the Applicant has made a down payment and the amount
financed is lower than the maximum permitted by the Bank's guidelines.
The Bank has a program of pre-approving potential customers for Motor
Vehicle Loans. The Bank obtains names of potential customers from its existing
Motor Vehicle Loan database, credit card database, database of requests for
automobile pricing lists, and various other sources. The potential customer
names are screened against the Bank's credit card database and the database
maintained by the Bank's parent company, United Services Automobile Association
('USAA'). The Bank's credit card database must show that the potential customer
has an active credit card account at the Bank that (i) is current and has been
active more than twelve months, (ii) has not exceeded its credit limit nor been
more than 30 days delinquent on more than two occasions in any 36-month period,
(iii) has had no record of bankruptcy, closed account or collection problems and
(iv) has no lost or stolen account or fraudulent activity record. USAA's
database must show that the potential customer (i) is an active, or is eligible
to be a, USAA insurance policyholder, (ii) has a social security number in
USAA's database which matches the social security number in the Bank's credit
card database, (iii) is not identified in USAA's database as a customer who
should not receive advertising from USAA or its subsidiary companies and (iv)
has an address within the United States.
A potential customer who is pre-approved using the prescreening process
described above is offered a Motor Vehicle Loan in an amount determined by the
credit limit amount of the individual's credit card accounts with the Bank.
Pre-approved potential customers with Gold MasterCard or VISA'r'. credit card
accounts with the Bank or its subsidiary, USAA Savings Bank ('USAA SB') are
offered a $25,000 loan. Pre-approved potential customers with Standard
MasterCard or VISA'r'. credit card accounts with a credit limit exceeding $5,000
are offered a $20,000 loan; those potential customers with Standard MasterCard
or VISA'r'. credit card accounts with the Bank or USAA SB with a credit limit
between $2,500 and $5,000 are offered a $15,000 loan. The Bank notifies
potential customers that they have been pre-approved for a Motor Vehicle Loan by
direct mail under certain circumstances and, if a pre-approved individual calls
the Bank to inquire about a Motor Vehicle Loan, by telephone. A potential
customer who has been pre-approved identifies the make, model, year and price of
the Financed Vehicle and, because of the information known by the Bank through
USAA's database and the Bank's credit card database, is not required to provide
additional credit related information.
The amount advanced by the Bank under any Motor Vehicle Loan (including
Motor Vehicle Loans offered pursuant to the pre-approval program) generally has
not exceeded (i) for a new Financed Vehicle, the manufacturer's suggested retail
price plus taxes, and title and license fees on the Financed Vehicle or (ii) for
a used Financed Vehicle, 110% of the 'retail' value stated in the most recently
published National Automobile Dealers Association Used Car Price Guide, adjusted
for high or low mileage and before credit for any optional equipment. However,
the maximum amount advanced for Motor Vehicle Loans is often less than such
amounts depending on a number of factors, including the length of the Motor
Vehicle Loan term and the model and year of the Financed Vehicle. These
adjustments are made to assure that the Financed Vehicle constitutes adequate
collateral to secure the Motor Vehicle Loan. In addition, whether a Financed
Vehicle is new or used, the Bank will also finance service warranties under a
Motor Vehicle Loan.
Periodically, the Bank makes a detailed analysis of its portfolio to
evaluate the effectiveness of the Bank's credit guidelines and scoring process.
If external economic factors, credit delinquencies or credit losses change,
credit guidelines are adjusted to maintain the asset quality deemed acceptable
by the Bank's management. The Bank reviews, on an annual basis, the quality of
its Motor Vehicle Loans by conducting internal audits of certain randomly
selected Motor Vehicle Loans to ensure compliance with established policies and
procedures.
INSURANCE
Each Motor Vehicle Loan requires the Obligor to obtain comprehensive and
collision insurance with respect to the Financed Vehicle. Most Obligors obtain
the required comprehensive and collision insurance from USAA or an affiliate
thereof. USAA's insurance financial strength is rated 'Aaa' by Moody's Investors
Service, Inc. and USAA's insurer's claims-paying ability is rated 'AAA' by
Standard & Poor's Ratings Group.
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If an Obligor fails to maintain the required insurance, the Bank may, but
is not obligated to, purchase limited comprehensive and collision insurance to
protect the interests of the Bank and the Obligor and charge the Obligor for the
cost of such insurance ('Force Placed Insurance'). The Bank currently does not
obtain Forced Placed Insurance if the Obligor fails to maintain the required
insurance.
COLLECTION PROCEDURES
Collection activities with respect to delinquent Motor Vehicle Loans are
performed by the Bank. Collection activities include prompt investigation and
evaluation of the causes of any delinquency. An Obligor is considered delinquent
when he or she makes any payment that is less than 100% of a scheduled monthly
payment.
The Bank maintains an on-line collection system for use in collection
efforts. The collection system provides relevant Obligor information (for
example, current addresses, phone numbers and loan information) and records of
all contact of the Bank with Obligors. The system also records an Obligor's
promise to pay, affords supervisors the ability to review collection personnel
activity and modify priorities with respect to Obligor contacts and provides
reports concerning Motor Vehicle Loan delinquencies. Under the Bank's current
practices, contact by mail is initiated with an Obligor whose Motor Vehicle Loan
has become ten days delinquent. An additional mail contact is initiated with an
Obligor when his or her Motor Vehicle Loan has become 20 days delinquent. In the
event that such contacts fail to result in a payment sufficient to bring
scheduled payments current under the Motor Vehicle Loan, telephone contact with
the Obligor is attempted not later than the 22nd day of delinquency. Generally,
after a Motor Vehicle Loan continues to be delinquent for 35 days, an additional
mail contact is made. Repossession procedures generally will be initiated after
a Motor Vehicle Loan continues to be delinquent for 60 days. However, if a Motor
Vehicle Loan is deemed uncollectible, if the Financed Vehicle is deemed by
collection personnel to be in danger of being damaged, destroyed or made
unavailable for repossession, or if the Obligor voluntarily surrenders the
Financed Vehicle, a repossession may occur without regard to the length or
existence of payment delinquency. Repossessions are conducted by third parties
who are engaged in the business of repossessing vehicles for secured parties.
After repossession, the Obligor generally has an additional 15 days to redeem
the Financed Vehicle before the Financed Vehicle is resold.
Losses may occur in connection with delinquent Motor Vehicle Loans and can
arise in several ways, including inability to locate the Financed Vehicle or the
Obligor, or because of a discharge of the Obligor in a bankruptcy proceeding.
The current policy of the Bank is to recognize losses at the time the Motor
Vehicle Loan is deemed uncollectible, or during the month the Motor Vehicle Loan
becomes 120 days delinquent, whichever occurs first.
Upon repossession and sale of the Financed Vehicle, any deficiency
remaining is pursued to the extent deemed practical by the Bank and to the
extent permitted by law. The loss recognition and collection policies and
practices of the Bank may change over time in accordance with the Bank's
business judgment.
The Bank offers certain Obligors credit-related extensions. Generally,
these extensions are offered only when (i) the Bank believes that the Obligor's
financial difficulty has been resolved or will no longer impair the Obligor's
ability to make future payments, (ii) the extension will result in the Obligor's
payments being brought current, (iii) the total number of credit-related
extensions granted on the Motor Vehicle Loan will not exceed two and the total
credit-related extensions granted on the Motor Vehicle Loan will not exceed four
months in the aggregate and (iv) there have been no credit-related extensions
granted on the Motor Vehicle Loan in the immediately preceding twelve months.
Any deviation from this policy requires the concurrence of the Bank's collection
manager and a representative of the Bank's Senior Officers Credit Committee. See
'The Certificates -- Servicing Procedures' for certain additional conditions on
credit-related extensions which must be satisfied with respect to Receivables in
the Trust.
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DELINQUENCY AND LOAN LOSS AND RECOVERY INFORMATION
The following tables set forth information with respect to the Bank's
experience relating to delinquencies, loan losses and recoveries for each of the
periods shown for the portfolio of Motor Vehicle Loans owned and serviced by the
Bank. The portfolio of Motor Vehicle Loans owned and serviced by the Bank during
the periods shown includes both fixed rate Motor Vehicle Loans and variable rate
Motor Vehicle Loans. The Bank does not maintain separate records with respect to
fixed rate Motor Vehicle Loans and variable rate Motor Vehicle Loans regarding
delinquency, loan loss and recovery experience. The Receivables include only
fixed rate Motor Vehicle Loans. The Bank believes that the inclusion of variable
rate Motor Vehicle Loans has an immaterial effect on the information set forth
in the following tables with respect to the Bank's experience relating to
delinquencies, loan losses and recoveries.
DELINQUENCY EXPERIENCE(1)
<TABLE>
<CAPTION>
AT SEPTEMBER 30, AT DECEMBER 31,
--------------------- --------------------------------------------------------------------
1997 1996 1995 1994
--------------------- --------------------- --------------------- ------------------
NUMBER NUMBER NUMBER NUMBER
DOLLARS OF DOLLARS OF DOLLARS OF DOLLARS OF
(000'S) LOANS (000'S) LOANS (000'S) LOANS (000'S) LOANS
---------- ------- ---------- ------- ---------- ------- -------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Outstandings............... $1,952,541 172,501 $1,639,800 147,830 $1,319,295 121,009 $891,794 88,876
Delinquencies over 30
days(2)(3)............... $ 4,914 575 $ 8,083 972 $ 4,028 439 $ 1,579 197
Delinquencies over 30
days(%)(4)............... 0.25% 0.33% 0.49% 0.66% 0.31% 0.36 % 0.18% 0.22%
</TABLE>
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(1) The figures shown include information with respect to certain consumer loans
which are not Motor Vehicle Loans but for which the Bank does not maintain
separate records regarding delinquency experience. These other consumer
loans were approximately 12% of outstandings as of each of the dates shown
in the table. The Bank believes that the inclusion of these other consumer
loans has an immaterial effect on the data shown.
(2) Delinquencies include principal amounts only.
(3) The period of delinquency is based on the number of days payments are
contractually past due.
(4) As a percent of outstandings.
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LOAN LOSS EXPERIENCE(1)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
----------------- --------------------------------------
1997 1996 1995 1994
----------------- ---------- ---------- ----------
(DOLLARS IN 000'S)
<S> <C> <C> <C> <C>
Number of Loans(2)....................................... 172,501 147,930 121,009 88,876
Period Ending Outstandings............................... $ 1,952,541 $1,639,800 $1,319,295 $ 891,794
Average Outstandings(3).................................. $ 1,776,715 $1,444,769 $1,100,209 $ 724,815
Number of Gross Charge-Offs.............................. 579 736 348 224
Gross Charge-Offs(4)..................................... $ 4,158 $ 3,676 $ 1,661 $ 857
Gross Charge-Offs as a % of Period End Outstandings...... 0.21% 0.22% 0.12% 0.10%
Gross Charge-Offs as a % of Average Outstandings......... 0.23% 0.25% 0.15% 0.12%
Recoveries(5)............................................ $ 1,095 $ 725 $ 376 $ 294
Net Charge-Offs(6)....................................... $ $3,063 $ 2,951 $ 1,285 $ 563
Net Charge-Offs as a % of Period End Outstandings........ 0.16% 0.18% 0.10% 0.06%
Net Charge-Offs as a % of Average Outstandings........... 0.17% 0.20% 0.12% 0.08%
</TABLE>
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(1) The figures shown include information with respect to certain consumer loans
which are not Motor Vehicle Loans but for which the Bank does not maintain
separate records regarding loan loss experience. These other consumer loans
were approximately 12% of outstandings for each of the periods shown in the
table. The Bank believes that the inclusion of these other consumer loans
has an immaterial effect on the data shown.
(2) Number of loans as of period end.
(3) Averages were computed by taking a simple average of month-end outstandings
for each period presented.
(4) Amount charged off is remaining principal balance less proceeds from sale of
repossessed vehicles, or, in the case of repossessed vehicles which have not
yet been sold, the remaining principal balance less estimated proceeds from
the sale of such repossessed vehicles.
(5) Recoveries generally include amounts received with respect to loans
previously charged off, except for proceeds realized in connection with the
sale of the financed vehicles.
(6) Net charge-offs means gross charge-offs minus recoveries of loans previously
charged off.
------------------------
The data presented in the foregoing tables are for illustrative purposes
only. Delinquency and loan loss experience may be influenced by a variety of
economic, social and other factors. No assurance can be given that the
delinquency and loan loss information of the Bank, or of the Trust with respect
to the Receivables, in the future will be similar to that set forth above.
THE TRUST
The Seller will establish the Trust by selling and assigning the
Receivables to the Trust in exchange for the Certificates. Each Certificate will
represent a fractional undivided interest in the Trust. The Trust property will
include a pool (the 'Receivables Pool') of fixed rate simple interest motor
vehicle installment loans for the purchase of new and used automobiles and
light-duty trucks (the 'Receivables') and all monies due thereunder on or after
the Cutoff Date. The Trust property will also include (i) such amounts as from
time to time may be held in the Certificate Account, the Class A Distribution
Account and the Class B Distribution Account; (ii) security interests in the
vehicles securing the Receivables (the 'Financed Vehicles'); (iii) the benefit
of the right to payments from the Reserve Account; (iv) an assignment of the
rights of the Seller to receive proceeds from claims on theft, physical damage,
credit life and credit disability insurance policies covering the Financed
Vehicles or the Obligors, as the case may be, to the extent that such insurance
policies relate to the Receivables; and (v) the rights with respect to any
Financed Vehicle that has been repossessed by the Servicer on behalf of the
Trustee.
The Trust will be formed for this transaction pursuant to the Agreement and
prior to formation will have had no assets or obligations. After formation, the
Trust will not engage in any activity other than acquiring and holding the
Receivables, issuing the Certificates, distributing payments thereon and as
otherwise described herein and as provided in the Agreement. The Trust will not
acquire any contracts or assets other than the Trust property described above
and will not have any need for additional capital resources. As the Trust does
not have any operating history and will not engage in any activity other than
issuing the Certificates and making distributions thereon, there has not been
included any historical or pro forma financial statements or ratio of earnings
to fixed charges with respect to the
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Trust. While management of the Bank believes that the figures and statistics
contained herein for recent periods are representative of past performance of
Motor Vehicle Loans owned and serviced by the Bank, there is no assurance that
such performance is indicative of the future performance of the Receivables,
since future performance is dependent, among other things, on general economic
conditions and economic conditions in the geographical areas in which the
Obligors reside including, for example, unemployment rates.
THE RECEIVABLES POOL
The Receivables represent Motor Vehicle Loans from the portfolio of the
Bank that:
(a) were made to Obligors located in a state of the United States or
the District of Columbia;
(b) are secured by a new or used automobile or light-duty truck;
(c) have a remaining maturity, as of the Cutoff Date, of at least 6
months and not more than 72 months;
(d) with respect to loans secured by new Financed Vehicles, had an
original maturity of at least 12 months and not more than 72 months; with
respect to loans secured by used Financed Vehicles, had an original
maturity of at least 9 months and not more than 60 months;
(e) are fully-amortizing, fixed rate simple interest contracts which
provide for level scheduled monthly payments (except for the last payments,
which may be minimally different from the level payments) over their
respective remaining terms and have a simple interest contract rate (a
'Contract Rate') that equals or exceeds 7.5%, are not secured by any
interest in real estate, and have not been identified on the computer files
of the Bank as relating to Obligors who had requested a reduction in the
periodic finance charges, as of the Cutoff Date, by application of the
Soldiers' and Sailors' Civil Relief Act of 1940, as amended;
(f) are secured by Financed Vehicles that, as of the Cutoff Date, had
not been repossessed without reinstatement;
(g) have not been identified on the computer files of the Bank as
relating to Obligors who were in bankruptcy proceedings as of the Cutoff
Date;
(h) have no payment more than 30 days past due as of the Cutoff Date;
and
(i) have remaining principal balances, as of the Cutoff Date, of at
least $500.00.
The Receivables were selected in an unbiased manner from the Motor Vehicle
Loans in the portfolio of the Bank that met the above criteria. No selection
procedures were used which were believed by the Bank to be adverse to the
Certificateholders. Approximately 80.29% of the aggregate principal balance of
the Receivables, as of the Cutoff Date, were secured by new Financed Vehicles
and approximately 19.71% of the aggregate principal balance of the Receivables,
as of the Cutoff Date, were secured by used Financed Vehicles. The Seller may
not substitute other Motor Vehicle Loans from the portfolio of the Bank, or any
other motor vehicle receivables, for the Receivables at any time during the term
of the Agreement.
All of the Receivables are simple interest contracts. As payments are
received under a simple interest contract, the finance charges accrued to date
are paid first, and then the remaining payment is applied to the unpaid amount
financed. See 'The Certificates -- Servicing Procedures.' Accordingly, if an
Obligor pays the fixed monthly installment in advance of the date on which a
payment is due (the 'Due Date'), the portion of the payment allocable to finance
charges for the period since the preceding payment will be less than it would be
if the payment were made on the Due Date, and the portion of the payment
allocable to reduce the amount financed will be correspondingly greater.
Conversely, if an Obligor pays the fixed monthly installment after its Due Date,
the portion of the payment allocable to finance charges for the period since the
preceding payment will be greater than it would be if the payment were made on
the Due Date, and the portion of the payment allocable to reduce the amount
financed will be correspondingly smaller. When necessary, an adjustment is made
at the maturity of the loan to the scheduled final payment to reflect the larger
or smaller, as the case may be, allocations of
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payments to the amount financed under the Receivable as a result of early or
late payments, as the case may be.
In the case of the liquidation of a Receivable or repossession of a
Financed Vehicle, amounts recovered will be applied first to the expenses of
liquidation or repossession, second, to unpaid interest and third to unpaid
principal. The Bank reserves the right to change its policy with respect to the
application of amounts recovered from a liquidated Receivable or a repossessed
Financed Vehicle.
The composition of the Receivables, distribution by Contract Rate of the
Receivables and geographic distribution of the Receivables, as of the Cutoff
Date are set forth in the following tables.
COMPOSITION OF THE RECEIVABLES
<TABLE>
<S> <C>
Aggregate Principal Balance............................................ $700,205,448.34
Number of Receivables.................................................. 60,285
Average Principal Balance.............................................. $11,614.92
Average Original Amount Financed....................................... $15,548.88
Original Amount Financed (Range)....................................... $2,359.92 to $104,889.26
Weighted Average Contract Rate......................................... 8.459%
Contract Rate (Range).................................................. 7.50% to 14.74%
Weighted Average Original Term......................................... 55.20 months
Original Term (Range).................................................. 9 months to 72 months
Weighted Average Remaining Term........................................ 43.66 months
Remaining Term (Range)................................................. 6 months to 72 months
</TABLE>
DISTRIBUTION BY CONTRACT RATE OF THE RECEIVABLES
<TABLE>
<CAPTION>
PERCENTAGE OF
PRINCIPAL AGGREGATE
RATE LOANS BALANCE POOL BALANCE
- --------------------------------------------------------------------- ------ --------------- -------------
<S> <C> <C> <C>
7.50% to 8.00%..................................................... 20,637 $ 237,811,917 33.96%
8.01% to 9.00%..................................................... 26,291 346,517,755 49.49
9.01% to 10.00%..................................................... 8,108 81,210,554 11.60
10.01% to 11.00%..................................................... 3,646 24,465,063 3.49
11.01% to 12.00%..................................................... 1,141 7,499,678 1.07
12.01% to 13.00%..................................................... 380 2,261,147 0.32
13.01% to 14.00%..................................................... 77 403,483 0.06
14.01% to 15.00%..................................................... 5 35,852 0.01
------ --------------- -------------
Totals.......................................................... 60,285 $ 700,205,448 100.00%
------ --------------- -------------
------ --------------- -------------
</TABLE>
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<PAGE>
GEOGRAPHIC DISTRIBUTION* OF THE RECEIVABLES
<TABLE>
<CAPTION>
PERCENTAGE OF
NUMBER OF AGGREGATE
STATE RECEIVABLES PRINCIPAL BALANCE POOL BALANCE
- ----------------------------------------------------------------- ----------- ----------------- -------------
<S> <C> <C> <C>
Alabama.......................................................... 941 $ 11,640,837 1.66%
Alaska........................................................... 374 4,732,795 0.68
Arizona.......................................................... 1,826 22,000,456 3.14
Arkansas......................................................... 569 6,602,028 0.94
California....................................................... 6,221 73,181,602 10.45
Colorado......................................................... 1,594 19,652,915 2.81
Connecticut...................................................... 969 9,950,166 1.42
Delaware......................................................... 228 2,401,199 0.34
District of Columbia............................................. 146 1,684,664 0.24
Florida.......................................................... 3,527 40,380,952 5.77
Georgia.......................................................... 2,752 33,072,532 4.72
Hawaii........................................................... 564 6,599,353 0.94
Idaho............................................................ 225 2,730,913 0.39
Illinois......................................................... 1,186 13,738,898 1.96
Indiana.......................................................... 452 5,064,765 0.72
Iowa............................................................. 166 1,876,204 0.27
Kansas........................................................... 623 7,317,517 1.05
Kentucky......................................................... 578 6,979,432 1.00
Louisiana........................................................ 926 11,092,407 1.58
Maine............................................................ 262 2,771,885 0.40
Maryland......................................................... 1,877 21,559,540 3.08
Massachusetts.................................................... 1,098 11,233,404 1.60
Michigan......................................................... 686 7,350,968 1.05
Minnesota........................................................ 611 6,685,291 0.95
Mississippi...................................................... 444 4,985,929 0.71
Missouri......................................................... 948 10,476,237 1.50
Montana.......................................................... 203 2,271,501 0.32
Nebraska......................................................... 289 3,333,405 0.48
Nevada........................................................... 647 8.060,999 1.15
New Hampshire.................................................... 462 4,489,310 0.64
New Jersey....................................................... 1,715 18,018,423 2.57
New Mexico....................................................... 822 9,937,427 1.42
New York......................................................... 2,447 27,343,488 3.91
North Carolina................................................... 2,205 25,701,026 3.67
North Dakota..................................................... 132 1,714,411 0.24
Ohio............................................................. 1,082 12,155,664 1.74
Oklahoma......................................................... 846 10,039,380 1.43
Oregon........................................................... 646 7,509,708 1.07
Pennsylvania..................................................... 596 7,705,743 1.10
Rhode Island..................................................... 269 2,581,111 0.37
South Carolina................................................... 942 10,981,479 1.57
South Dakota..................................................... 105 1,441,514 0.21
Tennessee........................................................ 1,125 13,436,879 1.92
Texas............................................................ 9,808 115,057,965 16.43
Utah............................................................. 356 4,472,305 0.64
Vermont.......................................................... 145 1,453,436 0.21
Virginia......................................................... 3,219 37,142,108 5.30
Washington....................................................... 1,742 21,757,759 3.11
West Virginia.................................................... 192 2,257,575 0.32
Wisconsin........................................................ 354 3,844,583 0.55
Wyoming.......................................................... 143 1,735,360 0.25
----------- ----------------- -------------
Totals...................................................... 60,285 $ 700,205,448 100.00%
----------- ----------------- -------------
----------- ----------------- -------------
</TABLE>
- ------------
* Based on the location of the Obligor at the time each Motor Vehicle Loan was
advanced.
MATURITY AND PREPAYMENT ASSUMPTIONS
The Receivables are prepayable by the Obligors at any time without penalty.
To the extent that prepayments are received on the Receivables, the actual
weighted average life of the Receivables will
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be shorter than a weighted average life calculation based on the assumptions
that payments will be made on schedule and that no prepayments will be made.
Weighted average life means the average amount of time in which each dollar of
principal on a Receivable is repaid. Prepayments may also result from
liquidations due to default; receipt of proceeds from theft, physical damage,
credit life and credit disability insurance policies, repurchases by the Seller
as a result of the failure of a Receivable to meet certain criteria set forth in
the Agreement; purchases by the Servicer as a result of a breach of certain of
its covenants with respect to the Receivables made by it in the Agreement; or as
a result of an exercise by the Servicer of its option to purchase the
Receivables Pool. Prepayments may also result from payments from the Reserve
Account with respect to Defaulted Receivables. The rate of prepayments on the
Receivables may be influenced by a variety of economic, social and other
factors, including the fact that an Obligor may not sell or transfer the
Financed Vehicle securing a Receivable without the Seller's consent. These
factors may also include unemployment, servicing decisions, seasoning of loans,
destruction of vehicles by accident, sales of vehicles and market interest
rates. A predominant factor affecting the prepayment of a large group of loans
is the difference between the interest rates on the loans and prevailing
interest rates. If the prevailing market interest rates were to fall
significantly below the interest rates on the Receivables, the rate of
prepayment (and refinancings) would be expected to increase. Conversely, if
prevailing interest rates were to increase significantly above the interest
rates on the Receivables, the rate of prepayments (and refinancings) would be
expected to decrease.
The Bank maintains certain records of the historical prepayment experience
of its portfolio of Motor Vehicle Loans. The Bank does not believe that such
records are adequate to provide meaningful information with respect to the
Receivables. In any event, no assurance can be given that prepayments on the
Receivables would conform to any historical experience, and no prediction can be
made as to the actual prepayment experience to be expected with respect to the
Receivables. All reinvestment risks resulting from any prepayments of
Receivables will be borne by the Certificateholders.
YIELD CONSIDERATIONS
On each Distribution Date, interest on the Certificates will be distributed
at the applicable Pass-Through Rate on the Class A Certificate Balance and the
Class B Certificate Balance, respectively, as of the preceding Distribution Date
(after giving effect to all distributions made on such preceding Distribution
Date) or, in the case of the first Distribution Date, as of the Closing Date. In
the event of a principal prepayment on a Receivable during a Collection Period,
Certificateholders will receive their pro rata share of interest for the full
Collection Period with respect to the unpaid principal balance of such
Receivable as of the first day of such Collection Period to the extent that
amounts on deposit in the Certificate Account and in the Reserve Account are
available for such purpose. See 'The Certificates -- Distributions on
Certificates.'
Although the Receivables have different Contract Rates, each Receivable's
Contract Rate exceeds the sum of the weighted average of the Pass-Through Rates
and the Servicing Fee Rate. Therefore, disproportionate rates of prepayments
between Receivables with higher and lower Contract Rates will not affect the
yield to Certificateholders.
POOL FACTORS
The 'Class A Pool Factor' and the 'Class B Pool Factor' will each be a
seven-digit decimal that the Servicer will compute each month indicating the
remaining Class A Certificate Balance and Class B Certificate Balance,
respectively, as of the close of business on the Distribution Date, as a
fraction of the respective initial outstanding principal balance of the Class A
Certificates and the Class B Certificates. The Class A Pool Factor and the Class
B Pool Factor will each be 1.0000000 as of the date of the initial issuance of
the Certificates (the 'Closing Date'), and thereafter will decline to reflect
reductions in the respective outstanding principal balances of the Class A
Certificates and Class B Certificates.
A Class A Certificateholder's portion of the aggregate outstanding
principal balance of the Class A Certificates is the product of (i) the original
denomination of the holder's Class A Certificate and (ii) the Class A Pool
Factor. A Certificate Owner's portion of the aggregate outstanding principal
balance of the Class A Certificates is the product of (i) the original principal
amount of the Certificate Owner's interest in the Class A Certificates and (ii)
the Class A Pool Factor. A Class B Certificateholder's portion of the aggregate
outstanding principal balance of the Class B Certificates is the product of (i)
the original
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<PAGE>
denomination of the holder's Class B Certificate and (ii) the Class B Pool
Factor. A Certificate Owner's portion of the aggregate outstanding principal
balance of the Class B Certificates is the product of (i) the original principal
amount of the Certificate Owner's interest in the Class B Certificates and (ii)
the Class B Pool Factor.
Pursuant to the Agreement, the Certificateholders will receive from the
Trustee monthly reports concerning the payments received on the Receivables, the
Pool Balance, the Class A Pool Factor and the Class B Pool Factor, and various
other items of information. Certificateholders of record during any calendar
year will be furnished information by the Trustee for tax reporting purposes not
later than the latest date permitted by law. Certificate Owners may obtain such
information from the Trustee, as described in 'The Certificates -- Statements to
Certificateholders.'
Pursuant to the Agreement, Certificateholders will receive monthly reports
from the Paying Agent concerning payments received on the Receivables, the Pool
Balance, the Class A Pool Factor, the Class B Pool Factor, and various other
items of information. Certificateholders of record during any calendar year will
be furnished information for tax reporting purposes not later than the latest
date permitted by law. See 'The Certificates -- General' and ' -- Statements to
Certificateholders.'
USE OF PROCEEDS
The net proceeds to be received by the Seller from the sale of the
Receivables to the Trust and the sale of the Certificates will be used for the
initial Reserve Account deposit and the remainder added to Seller's general
funds.
USAA FEDERAL SAVINGS BANK
The Bank is a federally chartered savings association and a member of the
Federal Home Loan Bank System. The Bank is subject to the primary supervision of
the Office of Thrift Supervision. The Bank's deposits are insured by the Savings
Association Insurance Fund. The Bank is an indirect wholly-owned subsidiary of
United Services Automobile Association ('USAA'). The Bank is engaged in
providing consumer banking products and services primarily to the USAA
membership, concentrating its efforts in marketing consumer loan products as
well as deposit products. As of December 31, 1996, the total assets and total
common and preferred stockholders' equity of the Bank were $6.3 billion and $646
million, respectively.
The executive offices of the Bank are located at 10750 McDermott Freeway,
San Antonio, Texas 78288 and its telephone number is (210) 498-2265.
UNITED SERVICES AUTOMOBILE ASSOCIATION
USAA is a reciprocal interinsurance exchange formed in 1922. The reciprocal
form of ownership allows member policyholders to pool their insurance risks by
exchanging insurance contracts through an attorney-in-fact. As of December 31,
1996, there were approximately 3.0 million USAA member and associate member
policyholders. USAA members are principally active, retired and former United
States military officers. The associate membership is primarily comprised of the
ex-dependents of USAA members and enlisted military personnel.
USAA and its various property and casualty subsidiaries provide personal
lines insurance, which includes automobile, homeowners, renters and condominium
insurance, to its members and associate members. In addition, through its
various wholly-owned subsidiaries and affiliates, USAA offers personal financial
service products, including life insurance, mutual funds, financial planning and
banking services. USAA is the fifth largest private passenger automobile and the
sixth largest homeowner insurer in the United States. USAA markets its products
and services principally through a direct mail and telecommunication program.
USAA is headquartered in San Antonio, Texas and employs approximately 17,000
people.
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<PAGE>
THE CERTIFICATES
The Certificates offered hereby will be issued pursuant to the Agreement.
Copies of the Agreement (without exhibits) may be obtained by Certificateholders
upon request in writing to the Servicer at the address set forth above. The
following summary, while addressing all of the terms material to an investor,
does not purport to be complete and is subject to, and qualified in its entirety
by reference to, the Agreement.
GENERAL
On each Distribution Date, the Trustee will distribute to
Certificateholders of record on the preceding Record Date all payments of
principal on the Receivables received by the Servicer during the preceding
Collection Period (and, to the extent funds are available as described herein,
the amount of Realized Losses realized during such Collection Period), plus
interest in respect of such Collection Period of the applicable Pass-Through
Rate, calculated on the basis of a 360-day year consisting of twelve 30-day
months, on the Class A Certificate Balance and the Class B Certificate Balance,
respectively, in each case as of the preceding Distribution Date (after giving
effect to any payments made on such preceding Distribution Date) or, in the case
of the first Distribution Date, as of the Closing Date, to the extent that
sufficient funds are on deposit in the Certificate Account or available in the
Reserve Account to make such distributions. See ' -- Distributions on
Certificates' and ' -- The Reserve Account.' Principal and interest to be
distributed to Certificateholders may be provided by payments made by or on
behalf of Obligors, Advances, the payment of Repurchase Amounts by the Seller or
the Servicer, withdrawals from the Reserve Account, repossession of, or other
enforcement measures taken with respect to, Financed Vehicles after default by
Obligors and the realization of net liquidation proceeds with respect thereto,
or recoveries (if any) of deficiencies from Obligors after the repossession and
sale of Financed Vehicles. See ' -- Sale and Assignment of the Receivables' and
' -- Servicing Procedures.' In the event that, on any Distribution Date, funds
available from the foregoing sources are insufficient to provide for such
distributions, any shortfall will be payable on the subsequent Distribution
Date, to the extent funds are available therefor.
The Certificates will be offered for purchase in denominations of $1,000
and integral multiples thereof and will initially be represented by Certificates
registered in the name of the nominee of The Depository Trust Company ('DTC',
and together with any successor depository selected by the Seller, the
'Depository'), except as provided below. The Seller has been informed by DTC
that DTC's nominee will be Cede & Co. ('Cede'). No person acquiring an interest
in the Certificates through the facilities of DTC (a 'Certificate Owner') will
be entitled to receive a certificate representing such person's interest in the
Certificates, except as set forth below under 'Definitive Certificates'. Unless
and until Definitive Certificates are issued under the limited circumstances
described herein, all references herein to actions by Certificateholders shall
refer to actions taken by DTC upon instructions from its Participants, and all
references herein to distributions, notices, reports and statements to
Certificateholders shall refer to distributions, notices, reports and statements
to DTC or Cede, as the registered holder of the Certificates, as the case may
be, for distribution to Certificate Owners in accordance with DTC procedures.
See 'Definitive Certificates'.
Distributions of principal of and interest on the Certificates with respect
to each Collection Period will be made by, or on behalf of, the Paying Agent on
the Distribution Date immediately succeeding such Collection Period, commencing
November 17, 1997. Each Collection Period will be one calendar month, or in the
case of the initial Collection Period, the period from the Cutoff Date to
October 31, 1997.
BOOK-ENTRY REGISTRATION
DTC is a limited purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a 'clearing
corporation' within the meaning of the New York Uniform Commercial Code, 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
organizations ('Participants') and facilitate the clearance and settlement of
securities transactions between
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Participants through electronic book-entry changes in accounts of its
Participants, thereby eliminating the need for physical movement of
certificates. Participants include securities brokers and dealers (including the
Underwriters), banks, trust companies and clearing corporations and may include
certain other organizations. Indirect access to the DTC system also is available
to others such as banks, brokers, dealers and trust companies that clear through
or maintain a custodial relationship with a Participant, either directly or
indirectly ('Indirect Participants').
Certificate Owners that are not Participants or Indirect Participants but
desire to purchase, sell or otherwise transfer ownership of, or other interests
in, Certificates may do so only through Participants and Indirect Participants.
In addition, Certificate Owners will receive all distributions of principal and
interest from the Trustee through DTC and its Participants. Under a book-entry
format, Certificate Owners may experience some delay in their receipt of
payments, since such payments will be forwarded by the Trustee to Cede, as
nominee for DTC. DTC will forward such payments to its Participants which
thereafter will forward them to Indirect Participants or Certificate Owners.
Certificate Owners will not be recognized by the Trustee as Certificateholders,
as such term is used in the Agreement, and Certificate Owners will only be
permitted to exercise the rights of Certificateholders indirectly through DTC
and its Participants.
Under the rules, regulations and procedures creating and affecting DTC and
its operations, DTC is required to make book-entry transfers among Participants
on whose behalf it acts with respect to the Certificates and is required to
receive and transmit distributions of principal of and interest on the
Certificates. Participants and Indirect Participants with which Certificate
Owners have accounts with respect to the Certificates similarly are required to
make book-entry transfers and receive and transmit such payments on behalf of
their respective Certificate Owners.
Because DTC can only act on behalf of Participants, who in turn act on
behalf of Indirect Participants, the ability of a Certificate Owner to pledge
Certificates to persons or entities that do not participate in the DTC system,
or otherwise take actions in respect of such Certificates, may be limited due to
the lack of physical certificates for such Certificates.
DTC has advised the Seller that it will take any action permitted to be
taken by a Certificateholder under the Agreement only at the direction of one or
more Participants to whose accounts with DTC the Certificates are credited.
Additionally, DTC has advised the Seller that it will take such actions with
respect to specified percentages of the Pool Balance evidenced by the Class A
Certificates or the Class B Certificates only at the direction of and on behalf
of Participants whose holdings include undivided interests that satisfy such
specified percentages. DTC may take conflicting actions with respect to other
undivided interests to the extent that such actions are taken on behalf of
Participants whose holdings include such undivided interests.
DEFINITIVE CERTIFICATES
The Certificates will be issued in fully registered, certificated form
('Definitive Certificates') to Certificate Owners or their nominees, rather than
to DTC or its nominee only if (i) the Servicer advises the Trustee in writing
that DTC is no longer willing or able to discharge properly its responsibilities
as Depository with respect to the Certificates and the Trustee or the Servicer
is unable to locate a qualified successor, (ii) the Servicer, at its option,
elects to terminate the book-entry system through DTC or (iii) after the
occurrence of an Event of Servicing Termination, Certificate Owners representing
in the aggregate not less than 50% of the Pool Balance advise DTC through
Participants in writing that the continuation of a book-entry system through DTC
(or a successor thereto) is no longer in the best interest of the Certificate
Owners.
Upon the occurrence of any of the events described in the immediately
preceding paragraph, DTC is required to notify all Participants of the
availability through DTC of Definitive Certificates. Upon surrender by DTC of
the definitive certificates representing the Certificates and instructions for
re-registrations, the Trustee will issue the Certificates as Definitive
Certificates, and thereafter the Trustee will recognize the holders of such
Definitive Certificates as Certificateholders under the Agreement ('Holders').
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Distributions of principal of and interest on the Definitive Certificates
will be made by the Paying Agent directly to Holders in accordance with the
procedures set forth herein and in the Agreement. Distributions of principal and
interest on each Distribution Date will be made to Holders in whose names the
Definitive Certificates were registered at the close of business on the last day
of the related Collection Period, which date shall thereafter be the new Record
Date. Such distributions will be made by check mailed to the address of such
Holder as it appears on the register maintained by the Trustee. The final
payment on any Certificate (whether a Definitive Certificate or the Certificates
registered in the name of Cede representing the Certificates), however, will be
made only upon presentation and surrender of such Certificate at the office or
agency specified in the notice of final distribution to Certificateholders.
Definitive Certificates will be transferable and exchangeable at the
offices of the transfer agent and registrar, which initially shall be the
Trustee (in such capacity, the 'Transfer Agent and Registrar'). No service
charge will be imposed for any registration of transfer or exchange, but the
Trustee or Transfer Agent and Registrar may require payment of a sum sufficient
to cover any tax or other governmental charge imposed in connection therewith.
SALE AND ASSIGNMENT OF THE RECEIVABLES
At the time of issuance of the Certificates, the Seller will sell and
assign to the Trust, without recourse, the Seller's entire interest in the
Receivables and the proceeds thereof, including its security interests in the
Financed Vehicles. Each Receivable will be identified in a schedule appearing as
an exhibit to the Agreement. The Trustee will, concurrently with such sale and
assignment, execute, authenticate and deliver the definitive certificates
representing the Certificates to the Underwriters against payment to the Seller
of the net purchase price of the sale of the Certificates.
The Agreement sets forth criteria that must be satisfied by each
Receivable. The criteria in the Agreement include, among others, the following:
(i) each Receivable (a) has been originated for the retail financing of a
Financed Vehicle by an Obligor located in one of the States of the United States
or the District of Columbia and (b) contains customary and enforceable
provisions such that the rights and remedies of the holder thereof shall be
adequate for realization against the collateral of the benefits of the security;
(ii) each Receivable and the sale of the related Financed Vehicle complies in
all material respects with all requirements of applicable federal, state, and
local laws, and regulations thereunder, including usury laws, the Federal
Truth-in-Lending Act, the Equal Credit Opportunity Act, the Fair Credit
Reporting Act, the Federal Trade Commission Act, the Magnuson-Moss Warranty Act,
Federal Reserve Board Regulations B and Z, state adaptations of the National
Consumer Act and of the Uniform Consumer Credit Code, and any other consumer
credit, equal opportunity and disclosure laws applicable to such Receivable and
sale; (iii) each Receivable constitutes the legal, valid, and binding payment
obligation in writing of the Obligor, enforceable by the holder thereof in all
material respects in accordance with its terms, subject, as to enforcement, to
applicable bankruptcy, insolvency, reorganization, liquidation and other similar
laws and equitable principles relating to or affecting the enforcement of
creditors' rights; (iv) immediately prior to the sale and assignment thereof to
the Trust, each Receivable was secured by a validly perfected first priority
security interest in the Financed Vehicle in favor of the Seller as secured
party or all necessary action with respect to such Receivable has been taken to
perfect a first priority security interest in the related Financed Vehicle in
favor of the Seller as secured party, which security interest is assignable and
has been so assigned by the Seller to the Trust; (v) as of the Cutoff Date,
there are no rights of rescission, setoff, counterclaim, or defense, and the
Seller has no knowledge of the same being asserted or threatened, with respect
to any Receivable; (vi) as of the Cutoff Date, the Seller had no knowledge of
any liens or claims that have been filed, including liens for work, labor,
materials or unpaid taxes relating to a Financed Vehicle, that would be liens
prior to, or equal or coordinate with, the lien granted by the Receivable; (vii)
except for payment defaults continuing for a period of not more than 30 days as
of the Cutoff Date, the Seller has no knowledge that a default, breach,
violation, or event permitting acceleration under the terms of any Receivable
exists; the Seller has no knowledge that a continuing condition that with notice
or lapse of time would constitute a default, breach, violation or event
permitting acceleration under the terms of any Receivable exists, and the Seller
has not waived any of the foregoing; (viii) each Receivable
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requires that the Obligor thereunder obtain comprehensive and collision
insurance covering the Financed Vehicle; and (ix) each Receivable satisfies the
criteria specified above under 'The Receivables Pool'. As of the last day of the
Collection Period following the Collection Period (or, if the Seller elects, the
last day of such Collection Period) during which the Seller becomes aware or
receives written notice from the Trustee or the Servicer that a Receivable did
not meet any of such criteria in the Agreement as of the date sold to the
Trustee and such failure materially and adversely affects the interests of the
Certificateholders in a Receivable, the Seller, unless it cures the failed
criterion, will repurchase the Receivable from the Trustee at a price equal to
the unpaid principal balance thereof plus accrued interest thereon at the
weighted average Certificate Rate through the date of the repurchase (the
'Repurchase Amount'). The repurchase obligation will constitute the sole remedy
available to the Certificateholders or the Trustee for the failure of a
Receivable to meet any of the criteria set forth in the Agreement. In the event
that the Bank, as Seller, fails to satisfy its regulatory capital requirements
in the future, it may be prohibited from repurchasing any of the Receivables.
To ensure uniform quality in the servicing of the Receivables and to reduce
administrative costs, the Trustee will appoint the Servicer as initial custodian
of the Receivables. The Receivables will not be stamped or otherwise marked to
reflect the transfer of the Receivables to the Trust and will not be segregated
from the other motor vehicle installment loans of the Servicer. The Obligors
under the Receivables will not be notified of the transfer of the Receivables to
the Trust, but the Seller's accounting records and computer systems will reflect
the sale and assignment of the Receivables to the Trust. See 'Certain Legal
Aspects of the Receivables'.
ACCOUNTS
The Servicer will establish and maintain a segregated account (the
'Certificate Account'), in the name of the Trustee on behalf of the
Certificateholders, into which all payments made on or with respect to the
Receivables will be deposited. The Trustee will also establish a segregated
account in the name of the Trustee on behalf of the Trust and for the benefit of
the Class A Certificateholders (the 'Class A Distribution Account'), and a
segregated account in the name of the Trustee on behalf of the Trust and for the
benefit of the Class B Certificateholders (the 'Class B Distribution Account'),
from which all distributions with respect to the Class A Certificates and the
Class B Certificates, respectively, will be made. The Certificate Account, the
Class A Distribution Account and the Class B Distribution Account are
collectively referred to as the 'Accounts'.
Each Account will be maintained at all times (a) with a depository
institution organized under the laws of the United States or any state thereof
or incorporated under the laws of a foreign jurisdiction with a branch or agency
located in the United States and subject to supervision and examination by
federal or state banking authorities, having a short-term certificate of deposit
rating of A-1+ and P-1 or a long-term unsecured debt rating of not less than AA
and Aa2 assigned by Standard & Poor's and Moody's, respectively, and in the case
of an institution organized under the laws of the United States, the deposits of
which are insured by the FDIC (a 'Qualified Institution') or (b) in the trust
department of an institution organized under the laws of the United States or
any state thereof or incorporated under the laws of a foreign jurisdiction with
a branch or agency located in the United States and subject to supervision and
examination by federal or state banking authorities with authority to act under
such laws as trustee or in any other fiduciary capacity, having not less than $1
billion in assets under fiduciary management has a minimum net worth of
$50,000,000 and a long-term deposit rating of not less than BBB- and Baa3
assigned by Standard & Poor's and Moody's, respectively (a 'Qualified Trust
Company'). The Certificate Account (and the Reserve Account discussed below)
will be maintained with a Qualified Trust Company. Should any depository of an
Account cease to be a Qualified Institution or Qualified Trust Company, as
applicable, such Account shall be transferred to a Qualified Institution or
Qualified Trust Company, as applicable, provided that such Account may remain at
such depository if the Rating Agency Condition is satisfied. The Chase Manhattan
Bank, in its capacity as the initial paying agent (the 'Paying Agent'), will
have the revocable right to withdraw funds from the Accounts for the purpose of
making distributions to Certificateholders in the manner provided in the
Agreement.
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COLLECTIONS ON THE RECEIVABLES
The Servicer will deposit all payments on Receivables made by or on behalf
of Obligors into the Certificate Account on a daily basis within forty-eight
hours of receipt.
In the event that, subsequent to the Closing Date, (i) the Bank obtains a
short-term certificate of deposit rating of the Bank from Standard & Poor's
Corporation ('Standard & Poor's') and Moody's Investors Service, Inc.
('Moody's') of A-1 and P-1, respectively, or certain conditions satisfactory to
Standard & Poor's and Moody's are satisfied, and (ii) the Bank is the Servicer,
the Servicer will no longer be required to make such deposits on a daily basis,
but instead will be permitted to make such deposits into the Certificate Account
on or before the related Deposit Date. Pending deposit into the Certificate
Account in such case, collections may be invested by the Servicer at its own
risk and for its own benefit and will not be segregated from other funds of the
Bank.
SERVICING PROCEDURES
The Servicer will make reasonable efforts to collect all payments due with
respect to the Receivables and, in a manner consistent with the Agreement and
with the terms of the Receivables, will continue such collection procedures as
it follows with respect to comparable new or used automobile and light-duty
truck receivables that it services for itself or others and that is consistent
with prudent industry standards. The Agreement will provide that the Servicer
may not change the amount of or reschedule the Due Date of any scheduled payment
to a date more than 30 days from the original Due Date, change the Contract Rate
of, or extend any Receivable or change any material term of a Receivable, except
as provided by the terms of the Receivable or of the Agreement or as required by
law or court order; provided, however, that the Servicer may extend any
Receivable for credit-related reasons that would be acceptable to the Servicer
with respect to comparable new or used automobile and light-duty truck
receivables that it services for itself or others if (a) the amount on deposit
in the Reserve Account is greater than zero at the time of such extension, (b)
the total credit-related extensions granted on the Receivable will not exceed
four months in the aggregate, (c) the total number of credit-related extensions
granted on the Receivable will not exceed two, (d) the maturity of such
Receivable would not be extended beyond the Collection Period immediately
preceding the Final Distribution Date and (e) the rescheduling or extension
would not modify the terms of such Receivable in such a manner as to constitute
a cancellation of such Receivable and the creation of a new receivable. (The
Servicer also considers other criteria when making credit-related extensions as
described under 'The Bank's Portfolio of Motor Vehicle Loans -- Collection
Procedures'.) In the event that the Servicer fails to comply with the foregoing
terms of the Agreement, it will be required to purchase the affected Receivable
for the Repurchase Amount as of the last day of the Collection Period following
the Collection Period (or, if the Servicer elects, the last day of the
Collection Period) during which it became aware, or receives written notice from
the Trustee, of such failure. The purchase obligation will constitute the sole
remedy available to the Certificateholders or the Trustee for any such uncured
breach. In the event that the Bank, as Servicer, fails to satisfy its regulatory
capital requirements in the future, it may be prohibited from purchasing any of
the Receivables.
Under the Agreement, the Servicer, in accordance with its customary
servicing procedures and underwriting standards, will require the Obligors to
obtain comprehensive and collision insurance on the Financed Vehicles in
accordance with the policies and procedures employed by the Servicer with
respect to comparable new or used automobile and light-duty truck receivables
that it services for itself or others. See 'The Bank's Portfolio of Motor
Vehicle Loans -- Insurance'.
The Agreement provides that the Servicer, based upon its collection
practices and procedures for comparable new or used automobile and light-duty
truck receivables that it services for itself or others, may repossess a
Financed Vehicle relating to a Receivable that is delinquent prior to such
Receivable being designated a Defaulted Receivable. The Agreement will also
require the Servicer to follow such normal collection practices and procedures
as it deems necessary or advisable to realize upon any Receivable with respect
to which: (i) the Servicer determines based upon its normal collection practices
and procedures, during any Collection Period, that eventual payment in full of
the amount financed is unlikely or (ii) more than 10 percent of a scheduled
payment is 120 or more days delinquent as of the last day of such Collection
Period (each such Receivable, a 'Defaulted Receivable'). See 'The Bank's
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Portfolio of Motor Vehicle Loans -- Collection Procedures'. The Servicer may
sell the repossessed Financed Vehicle securing a Receivable at judicial sale, or
take any other action permitted by applicable law. See 'Certain Legal Aspects of
the Receivables'. The net proceeds of such realization will be deposited in the
Certificate Account.
ADVANCES
The Servicer may, in its sole discretion, make a payment with respect to
each Receivable (other than a Defaulted Receivable) equal to the excess, if any,
of (x) the product of the principal balance of such Receivable as of the first
day of the related Collection Period and one-twelfth of its Contract Rate
(calculated on the basis of a 360-day year consisting of twelve 30-day months),
over (y) the interest actually received by the Servicer with respect to such
Receivable from the Obligor or from the payment of the Repurchase Amount during
or with respect to such Collection Period. The Servicer may elect not to make
any Advance with respect to a Receivable to the extent that the Servicer, in its
sole discretion, determines that such Advance is not recoverable from subsequent
payments on such Receivable or from funds on deposit in the Reserve Account. In
the event that the Servicer does not make an Advance, any Payment Deficiency
resulting therefrom will be funded by the application of available amounts in
the Reserve Account.
To the extent that the amount set forth in clause (y) above with respect to
a Receivable is greater than the amount set forth in clause (x) above with
respect thereto, such amount shall be distributed by the Paying Agent to the
Servicer on the related Distribution Date to reimburse the Servicer for previous
unreimbursed Advances with respect to such Receivable. Any such reimbursement
will only be from accrued interest due from the Obligor under such Receivable.
The Servicer will deposit all Advances into the Certificate Account on the
Business Day immediately preceding the related Distribution Date.
SERVICING COMPENSATION
The Servicer will be entitled to receive the Servicing Fee for each
Collection Period, in an amount equal to the product of one-twelfth of 1.00%
(the 'Servicing Fee Rate') and the Pool Balance as of the first day of the
related Collection Period. In addition, the Servicer will receive as additional
compensation investment earnings on amounts on deposit (and to be deposited) in
the Certificate Account, except that beginning with the Collection Period for
which the Servicer fails to deposit an Advance with respect to a Receivable
other than because such Receivable is a Defaulted Receivable and thereafter,
such investment earnings will not be paid to the Servicer, but will be treated
as Available Interest pursuant to the Agreement.
The Servicing Fee will compensate the Servicer for performing the functions
of a third party servicer of motor vehicle receivables as an agent for the
Trust, including collecting and posting all payments, responding to inquiries of
Obligors, investigating delinquencies, reporting tax information to Obligors,
advancing costs of disposition of defaults, and monitoring the collateral in
cases of Obligor default. The Servicing Fee also will compensate the Servicer
for administering the Receivables, including accounting for collections and
furnishing monthly and annual statements to the Trustee with respect to
distributions, and generating federal income tax information. The Servicing Fee
also will compensate the Servicer for certain taxes, accounting fees, outside
auditor fees, the fees of the Paying Agent and the Transfer Agent and Registrar,
data processing costs, and other costs incurred in connection with administering
and servicing the Receivables. The amount of the Servicing Fee was determined in
light of the foregoing duties of the Servicer as well as with a view toward
providing the Servicer with a reasonable profit. The Servicing Fee, together
with the additional compensation consisting of investment earnings described
above, is comparable to fees that would be paid to parties unaffiliated with the
Bank. The Bank expects that the Receivables will provide the Trust with funds in
an amount sufficient to pay the Servicing Fee to the Servicer and interest each
month at the Pass-Through Rate on the Pool Balance to the Certificateholders.
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THE RESERVE ACCOUNT
The Reserve Account will be created with an initial deposit of cash from
the proceeds of the sale of the Certificates having a value of at least the
Reserve Account Initial Deposit. In addition, on each Distribution Date, any
amounts on deposit in the Certificate Account with respect to the preceding
Collection Period after payments to the Certificateholders and the Servicer have
been made will be deposited into the Reserve Account until the amount on deposit
in the Reserve Account is equal to the Specified Reserve Account Balance.
The Reserve Account will be maintained at a Qualified Trust Company and
shall be established and maintained in the name of, and under the control of,
the Collateral Agent. Funds on deposit in the Reserve Account will be invested
in certain permitted investments. The Reserve Account and any amounts therein
will not be property of the Trust, but will be pledged to the Collateral Agent,
for the benefit of Certificateholders.
On each Distribution Date, the amount available in the Reserve Account (the
'Available Reserve Amount') will equal the lesser of (i) the amount on deposit
in the Reserve Account (exclusive of investment earnings) and (ii) the Specified
Reserve Account Balance. On each Deposit Date, the Collateral Agent will
withdraw funds from the Reserve Account to make available to Certificateholders
the excess, if any, of (x) the sum of the amounts required to be distributed to
Certificateholders, any accrued and unpaid Servicing Fees payable to the
Servicer on such Distribution Date and any amounts required to reimburse any
Outstanding Advances (excluding Advances made as a result of prepayments by
Obligors) over (y) the amounts to be deposited in the Certificate Account with
respect to the preceding Collection Period (exclusive of investment earnings).
Such deficiencies in the Certificate Account may result from, among other
things, Receivables becoming Defaulted Receivables or the failure by the
Servicer to make any remittance required to be made under the Agreement. The
aggregate amount to be withdrawn from the Reserve Account on any Distribution
Date will not exceed the Available Reserve Amount with respect to the related
Distribution Date. The Collateral Agent will deposit the proceeds of such
withdrawal from the Reserve Account into the Class A Distribution Account or the
Class B Distribution Account or pay such proceeds to the Servicer, as
applicable, on the Distribution Date with respect to which such withdrawal was
made.
The Specified Reserve Account Balance on any Distribution Date will equal
the greater of (i) 2% of the Pool Balance as of the last day of the preceding
Collection Period and (ii) 1% of the initial Pool Balance (such amount not to
exceed the outstanding Pool Balance as of the last day of the preceding
Collection Period). The Specified Reserve Account Balance will be calculated
using a percentage of 4%, instead of 2%, for any Distribution Date on which the
Average Net Loss Ratio exceeds 1.25% or the Average Delinquency Ratio exceeds
1.25%. The Specified Reserve Account Balance may be reduced to a lesser amount
as determined by the Seller, provided that each Rating Agency shall have
confirmed in writing to the Trustee that such action will not result in a
withdrawal or reduction in its rating of the Certificates (the 'Rating Agency
Condition').
'Average Delinquency Ratio' means, as of any Distribution Date, the average
of the Delinquency Ratios for the preceding three Collection Periods.
'Average Net Loss Ratio' means, as of any Distribution Date, the average of
the Net Loss Ratios for the preceding three Collection Periods.
'Delinquency Ratio' means, for any Collection Period, the ratio, expressed
as a percentage, of (i) the principal amount of all outstanding Receivables
(other than Purchased Receivables and Defaulted Receivables) which are 60 or
more days delinquent as of the end of such Collection Period, determined in
accordance with the Servicer's customary practices, or Receivables as to which
the related Financed Vehicle has been repossessed but not sold, divided by (ii)
the Pool Balance as of the last day of such Collection Period.
'Liquidation Proceeds' means with respect to any Receivable (i) insurance
proceeds received by the Servicer and (ii) the monies collected by the Servicer
(from whatever source, including but not limited to proceeds of a Financed
Vehicle sold after repossession), on a Defaulted Receivable net of any payments
required by law to be remitted to the Obligor.
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'Net Loss Ratio' means, for any Collection Period, an amount, expressed as
an annualized percentage, equal to (i) Realized Losses minus Recoveries for such
Collection Period, divided by (ii) the average of the Pool Balances on the first
day of such Collection Period and the last day of such Collection Period.
'Recoveries' mean, with respect to any Collection Period, all monies
received by the Servicer with respect to any Defaulted Receivable during any
Collection Period following the Collection Period in which such Receivable
became a Defaulted Receivable, net of any fees, costs and expenses incurred by
the Servicer in connection with the collection of such Receivable and any
payments required by law to be remitted to the Obligor.
The Specified Reserve Account Balance may be reduced to a lesser amount as
determined by the Seller, subject to satisfaction of the Rating Agency
Condition. Amounts on deposit in the Reserve Account will be released to the
Seller on each Distribution Date to the extent that the amount on deposit in the
Reserve Account would exceed the Specified Reserve Account Balance. The
Collateral Agent will cause all investment earnings attributable to the Reserve
Account to be distributed on each Distribution Date to the Seller. Upon any
distribution to the Seller of amounts from the Reserve Account, the
Certificateholders will not have any rights in, or claims to, such amounts.
In the event that the funds in the Reserve Account are reduced to zero, the
Certificateholders will bear directly the credit and other risks associated with
ownership of the Receivables. In such a case, the amount available for
distribution may be less than that described below, and the Certificateholders
may experience delays or suffer losses as a result of, among other things,
defaults or delinquencies by the Obligors or previous extensions made by the
Servicer.
DISTRIBUTIONS ON CERTIFICATES
Deposits to Certificate Account. On or before the 15th day of each month
(or, if such 15th day is not a Business Day, the preceding Business Day), the
Servicer will inform the Trustee and the Paying Agent of the following amounts
with respect to the preceding Collection Period: (i) the amount of aggregate
collections on the Receivables; (ii) the aggregate amount of Advances to be
remitted by the Servicer; (iii) the aggregate Repurchase Amount of Receivables
to be repurchased by the Seller or purchased by the Servicer; (iv) the aggregate
amount to be withdrawn from the Reserve Account; (v) the aggregate amount to be
distributed as principal and interest on the Certificates; and (vi) the
Servicing Fee.
On or before each Deposit Date (a) the Servicer will cause all Collections
and Liquidation Proceeds and Recoveries to be deposited into the Certificate
Account and will deposit into the Certificate Account all Repurchase Amounts of
Receivables to be purchased by the Servicer on such Deposit Date, (b) the Seller
will deposit into the Certificate Account all Repurchase Amounts of Receivables
to be repurchased by the Seller on such Deposit Date and (c) the Servicer will
deposit all Advances for the related Distribution Date into the Certificate
Account.
'Available Interest' means, with respect to any Distribution Date, the
excess of (a) the sum of (i) Interest Collections for such Distribution Date,
(ii) all Advances made by the Servicer with respect to such Distribution Date
and (iii) beginning with the Collection Period for which the Servicer shall not
have made an Advance with respect to a Receivable other than because such
Receivable was a Defaulted Receivable, investment earnings on amounts on deposit
in the Certificate Account as of the last day of the related Collection Period,
over (b) the amount of Outstanding Advances to be reimbursed on or with respect
to such Distribution Date.
'Available Principal' means, with respect to any Distribution Date, the sum
of the following amounts with respect to the preceding Collection Period: (i)
that portion of all Collections on the Receivables allocable to principal in
accordance with the terms of the Receivables and the Servicer's customary
servicing procedures; (ii) to the extent attributable to principal, the
Repurchase Amount received with respect to each Receivable repurchased by the
Seller or purchased by the Servicer under an obligation which arose during the
related Collection Period; and (iii) all Liquidation Proceeds, to the extent
allocable to principal, received during such Collection Period. 'Available
Principal' on any Distribution Date shall exclude all payments and proceeds of
any Receivables the Repurchase Amount of which has been distributed on a prior
Distribution Date.
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'Collections' mean, with respect to any Distribution Date, all collections
on the Receivables.
'Interest Collections' mean, with respect to any Distribution Date, the sum
of the following amounts with respect to the preceding Collection Period: (i)
that portion of all Collections on the Receivables allocable to interest in
accordance with the terms of the Receivables and the Servicer's customary
servicing procedures; (ii) all Liquidation Proceeds, to the extent allocable to
interest, received during such Collection Period; (iii) all Recoveries on
Receivables which became Defaulted Receivables received during any Collection
Period following the Collection Period in which such Receivable became a
Defaulted Receivable; and (iv) to the extent attributable to accrued interest,
the Repurchase Amount with respect to each Receivable repurchased by the Seller
or purchased by the Servicer under an obligation which arose during such
Collection Period. 'Interest Collections' for any Distribution Date shall
exclude all payments and proceeds of any Receivables the Repurchase Amount of
which has been distributed on a prior Distribution Date.
'Purchased Receivable' means, at any time, a simple interest motor vehicle
installment loan included in the Schedule of Receivables as to which payment of
the Repurchase Amount has previously been made by the Seller or the Servicer
pursuant to the Agreement.
Deposits to the Distribution Accounts. On each Distribution Date, after
making reimbursements of Outstanding Advances to the Servicer from Available
Interest and/or the Available Reserve Amount to the extent then reimbursable
pursuant to the Agreement, the Trustee will make the following deposits and
distributions, to the extent of Available Interest and any Available Reserve
Amount remaining after such reimbursements (and, in the case of shortfalls
occurring under clause (ii) below in the Class A Interest Distribution, the
Class B Percentage of Available Principal to the extent of such shortfalls), in
the following priority:
(i) to the Servicer, first from Available Interest, and then, if
necessary, from the Available Reserve Amount, any unpaid Servicing Fee for
the related Collection Period and all unpaid Servicing Fees from prior
Collection Periods;
(ii) to the Class A Distribution Account, first from Available
Interest, then, if necessary, from the Available Reserve Amount, and
finally, if necessary, from the Class B Percentage of Available Principal,
the Class A Interest Distribution for such Distribution Date; and
(iii) to the Class B Distribution Account, first from Available
Interest and then, if necessary, from the Available Reserve Amount, the
Class B Interest Distribution for such Distribution Date.
On each Distribution Date, the Trustee will make the following deposits and
distributions, to the extent of the portion of Available Principal, Available
Interest and the Available Reserve Amount (to be applied in that order of
priority) remaining after the application of clauses (i), (ii) and (iii) above,
in the following priority:
(iv) to the Class A Distribution Account, the Class A Principal
Distribution for such Distribution Date;
(v) to the Class B Distribution Account, the Class B Principal
Distribution for such Distribution Date;
(vi) to the Reserve Account, any amounts remaining, until the amount
on deposit in the Reserve Account equals the Specified Reserve Account
Balance; and
(vii) to the Seller, any amounts remaining.
On each Distribution Date, all amounts on deposit in the Class A
Distribution Account will be distributed to the Class A Certificateholders and
all amounts on deposit in the Class B Distribution Account will be distributed
to the Class B Certificateholders by the Trustee.
'Class A Certificate Balance', at any time, equals the Original Class A
Certificate Balance, as reduced by all principal amounts distributed to Class A
Certificateholders prior to such time.
'Class A Interest Carryover Shortfall' means, (i) with respect to the
initial Distribution Date, zero, and (ii) with respect to any other Distribution
Date, the excess of Class A Monthly Interest for the preceding Distribution Date
and any outstanding Class A Interest Carryover Shortfall on such preceding
Distribution Date, over the amount in respect of interest that was actually
deposited in the
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Class A Distribution Account on such preceding Distribution Date, plus 30 days
of interest on such excess, to the extent permitted by law, at the Class A
Pass-Through Rate.
'Class A Interest Distribution' means, with respect to any Distribution
Date, the sum of Class A Monthly Interest for such Distribution Date and the
Class A Interest Carryover Shortfall for such Distribution Date.
'Class A Monthly Interest' means, with respect to any Distribution Date,
one-twelfth of the Class A Pass-Through Rate multiplied by the Class A
Certificate Balance as of the preceding Distribution Date (after giving effect
to all payments of principal made on such Distribution Date) or, in the case of
the first Distribution Date, as of the Closing Date.
'Class A Monthly Principal' means, with respect to any Distribution Date,
the Class A Percentage of Available Principal for such Distribution Date plus
the Class A Percentage of Realized Losses with respect to the related Collection
Period.
'Class A Percentage' means 97%.
'Class A Principal Carryover Shortfall' means, (i) with respect to the
initial Distribution Date, zero, and (ii) with respect to any other Distribution
Date, the excess of Class A Monthly Principal for such Distribution Date and any
outstanding Class A Principal Carryover Shortfall from the preceding
Distribution Date over the amount in respect of principal that is actually
deposited in the Class A Distribution Account on such Distribution Date.
'Class A Principal Distribution' means, with respect to any Distribution
Date, the sum of Class A Monthly Principal for such Distribution Date and, in
the case of any Distribution Date other than the initial Distribution Date, the
Class A Principal Carryover Shortfall as of the preceding Distribution Date. In
addition, on the Final Scheduled Distribution Date, the Class A Principal
Distribution shall include any additional amount required to reduce the
outstanding principal balance of the Class A Certificates to zero.
'Class B Certificate Balance', at any time, equals the Original Class B
Certificate Balance, as reduced by all principal amounts distributed to Class B
Certificateholders prior to such time.
'Class B Interest Carryover Shortfall' means, (i) with respect to the
initial Distribution Date, zero, and (ii) with respect to any other Distribution
Date, the excess of Class B Monthly Interest for the preceding Distribution Date
and any outstanding Class B Interest Carryover Shortfall on such preceding
Distribution Date, over the amount in respect of interest that was actually
deposited in the Class B Distribution Account on such preceding Distribution
Date, plus 30 days of interest on such excess, to the extent permitted by law,
at the Class B Pass-Through Rate.
'Class B Interest Distribution' means, with respect to any Distribution
Date, the sum of Class B Monthly Interest for such Distribution Date and the
Class B Interest Carryover Shortfall for such Distribution Date.
'Class B Monthly Interest' means, with respect to any Distribution Date,
one-twelfth of the Class B Pass-Through Rate multiplied by the Class B
Certificate Balance as of the preceding Distribution Date (after giving effect
to all payments of principal made on such Distribution Date) or, in the case of
the first Distribution Date, as of the Closing Date.
'Class B Monthly Principal' means, with respect to any Distribution Date,
the Class B Percentage of Available Principal for such Distribution Date plus
the Class B Percentage of Realized Losses with respect to the related Collection
Period.
'Class B Percentage' means 3%.
'Class B Principal Carryover Shortfall' means, (i) with respect to the
initial Distribution Date, zero and (ii) with respect to any other Distribution
Date, the excess of Class B Monthly Principal for such Distribution Date and any
outstanding Class B Principal Carryover Shortfall from the preceding
Distribution Date over the amount in respect of principal that is actually
deposited in the Class B Distribution Account on such Distribution Date.
'Class B Principal Distribution' means, with respect to any Distribution
Date, the sum of Class B Monthly Principal for such Distribution Date and, in
the case of any Distribution Date other than the
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initial Distribution Date, the Class B Principal Carryover Shortfall as of the
preceding Distribution Date. In addition, on the Final Scheduled Distribution
Date, the Class B Principal Distribution will include any additional amount
required to reduce the outstanding principal balance of the Class B Certificates
to zero.
'Realized Losses' mean, for any Collection Period and for each Receivable
that became a Defaulted Receivable during such Collection Period, the excess of
the aggregate principal balance of such Receivable over Liquidation Proceeds
received with respect to such Receivable during such Collection Period, to the
extent allocable to principal.
As an administrative convenience, the Servicer will be permitted under
certain circumstances to make deposits of Advances and Repurchase Amounts for,
or with respect to, a Collection Period net of distributions to be made to the
Servicer with respect to such Collection Period. The Servicer, however, will
account to the Trustee and to the Certificateholders as if all such deposits and
distributions were made on an aggregate basis for each type of payment or
deposit.
STATEMENTS TO CERTIFICATEHOLDERS
On each Distribution Date, the Paying Agent will include with each
distribution to each Certificateholder a statement, setting forth the following
information for the related Collection Period:
(i) the amount of the distribution allocable to principal on the
Class A Certificates and the Class B Certificates;
(ii) the amount of the distribution allocable to interest on the
Class A Certificates and the Class B Certificates;
(iii) the amount of the Servicing Fee paid to the Servicer with
respect to the related Collection Period;
(iv) the Class A Certificate Balance, the Class A Pool Factor, the
Class B Certificate Balance and the Class B Pool Factor as of such
Distribution Date, after giving effect to payments allocated to principal
reported under clause (i) above;
(v) the Pool Balance as of the close of business on the last day of
the related Collection Period;
(vi) the amount of the aggregate Realized Losses, if any, for the
related Collection Period;
(vii) the aggregate Repurchase Amount of Receivables repurchased by
the Seller or purchased by the Servicer;
(viii) the balance of the Reserve Account on such Distribution Date,
after giving effect to changes therein on such Distribution Date; and
(ix) the Specified Reserve Account Balance as of the close of
business on such Distribution Date.
Each amount set forth pursuant to subclauses (i), (ii) and (iii) above will
be expressed in the aggregate and as a dollar amount per $1,000 of the original
principal balance of a Certificate.
The statements for each Collection Period will be delivered to DTC for
further distribution to beneficial owners of the Certificates in accordance with
DTC procedures. See 'The Certificates -- General' and ' -- Book-Entry
Registration'. Copies of such statements may be obtained by Certificate Owners
by a request in writing addressed to the Trustee at its Corporate Trust Office.
See 'The Certificates -- The Trustee'.
Within the prescribed period of time for tax reporting purposes after the
end of each calendar year during the term of the Agreement, the Paying Agent
will furnish to each person who at any time during such calendar year was a
Certificateholder, a statement containing the sum of the monthly amounts
described in (i) through (iii) above for the purposes of such
Certificateholder's preparation of federal income tax returns. See 'Certain
Federal Income Tax Consequences'.
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EVIDENCE AS TO COMPLIANCE
The Agreement will provide that a firm of independent certified public
accountants will furnish to the Trustee on or before March 31 of each year,
beginning March 31, 1998, a statement as to compliance by the Servicer during
the twelve months (or shorter period in the case of the first such report) ended
the preceding December 31, with certain standards relating to the servicing of
the Receivables.
The Agreement will also provide for delivery to the Trustee, on or before
March 31 of each year, commencing March 31, 1998, of a certificate signed by an
officer of the Servicer stating that the Servicer has fulfilled its obligations
in all material respects under the Agreement throughout the twelve months (or
shorter period in the case of the first such certificate) ended the preceding
December 31 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 a
Certificateholder by a request in writing addressed to the Trustee.
CERTAIN MATTERS REGARDING THE SERVICER
The Agreement will provide that the Servicer may not resign from its
obligations and duties as Servicer thereunder, except (i) upon determination
that the Servicer's performance of such duties is no longer permissible under
applicable law or (ii) in the event of the appointment of a successor Servicer,
upon satisfaction of the Rating Agency Condition. Such resignation will not
become effective until the Trustee or a successor Servicer has assumed the
Servicer's servicing obligations and duties under the Agreement.
The Agreement will also provide that neither the Seller nor the Servicer
may transfer or assign all, or a portion of, its rights, obligations and duties
under the Agreement, unless such transfer or assignment (i) (A) will not result
in a reduction or withdrawal by each of Standard & Poor's or Moody's of the
rating then assigned to the Certificates and (B) the Trustee has consented to
such transfer or assignment or (ii) the Trustee and holders of Certificates
evidencing not less than 51% of the Pool Balance consent thereto. Any transfer
or assignment with respect to the Servicer of all of its rights, obligations and
duties will not become effective until a successor Servicer has assumed the
Servicer's rights, obligations and duties under the Agreement.
The Agreement will also provide that so long as the Bank is the Servicer,
in the ordinary course of its business, the Servicer will have the right to
delegate any of its duties under the Agreement to a third party. Any
compensation payable to such third party will be paid by the Servicer from its
own funds, and none of the Trust, the Trustee or the Certificateholders will be
liable for such compensation. Notwithstanding any delegation of duties by the
Servicer, the Servicer will not be relieved of its liability and responsibility
with respect to such duties.
The Agreement will further provide that neither the Servicer nor any of its
directors, officers, employees, and agents shall be under any liability to the
Trust, the Trustee or the Certificateholders for taking any action or for
refraining from taking any action pursuant to the Agreement, or for errors in
judgment; provided, however, that neither the Servicer nor any such person will
be protected against any liability that would otherwise be imposed by reason of
willful misfeasance, bad faith, or negligence in the performance of duties or by
reason of reckless disregard of obligations and duties thereunder, except that
employees of either the Servicer or its affiliates will be protected against any
liability that would otherwise be imposed by reason of negligence. The Agreement
will further provide that the Servicer, and its directors, officers, employees
and agents are entitled to indemnification by the Trust for, and will be held
harmless against, any loss, liability or expense incurred in connection with any
legal action relating to their performance of servicing duties under the
Agreement, other than any loss, liability, or expense incurred by reason of the
Servicer's willful misfeasance, bad faith, or negligence in the performance of
duties or by reason of the Servicer's reckless disregard of obligations and
duties thereunder; provided, however, that such indemnification will be paid on
a Distribution Date only after all payments required to be made to
Certificateholders and the Servicer have been made, certain payments required to
be made to the Trustee have been made and deposits of any amount required to be
deposited into the Reserve Account to maintain the amount on deposit therein at
the Required Reserve Account Amount have been made. In addition, the Agreement
will provide that the Servicer is
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under no obligation to appear in, prosecute, or defend any legal action that is
not incidental to the Servicer's servicing responsibilities under the 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 to the Agreement and the rights and duties of
the parties thereto and the interests of the Certificateholders thereunder. In
such event, the legal expenses and costs of such action and 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 the Certificate
Account as such expenses are incurred; provided, however, that such
reimbursement will be paid on a Distribution Date only after all payments
required to be made to Certificateholders and the Servicer have been made,
certain payments required to be made to the Trustee have been made and deposits
of any amount required to be deposited into the Reserve Account to maintain the
amount on deposit therein at the Required Reserve Account Amount have been made.
EVENTS OF SERVICING TERMINATION
'Events of Servicing Termination' under the Agreement will consist of (i)
any failure by the Servicer to deliver to the Trustee the Servicer's certificate
for the related Collection Period or any failure by the Servicer (or, so long as
the Seller is the Servicer, the Seller) to deliver to the Trustee for
distribution to the Certificateholders any proceeds or payments required to be
delivered under the terms of the Certificates or the Agreement (or, in the case
of a payment or deposit to be made not later than the Deposit Date, the failure
to make such payment or deposit on such Deposit Date), which failure continues
unremedied for five Business Days after discovery by the Servicer (or, so long
as the Seller is the Servicer, the Seller) or written notice to the Servicer
(or, so long as the Seller is the Servicer, the Seller) by the Trustee or to the
Trustee and the Servicer (or, so long as the Seller is the Servicer, the Seller)
by holders of Certificates evidencing not less than 25% of the Pool Balance;
(ii) any failure by the Servicer (or, so long as the Seller is the Servicer, the
Seller) duly to observe or perform in any material respect any other covenant or
agreement of the Servicer (or, so long as the Seller is the Servicer, the
Seller) set forth in the Certificates or in the Agreement, which failure
materially and adversely affects the rights of the Trust or the
Certificateholders (which determination shall be made without regard to whether
funds on deposit in the Reserve Account are available to the Certificateholders)
and which continues unremedied for 60 days after the date of written notice of
such failure to the Servicer (or, so long as the Seller is the Servicer, the
Seller) by the Trustee or to the Trustee and the Servicer (or, so long as the
Seller is the Servicer, the Seller) by holders of Certificates evidencing not
less than 25% of the Pool Balance; (iii) certain events of insolvency,
readjustment of debt, marshaling of assets and liabilities, or similar
proceedings and certain actions by the Servicer indicating its insolvency,
reorganization pursuant to bankruptcy proceedings or inability to pay its
obligations; (iv) any assignment or delegation by the Servicer of its duties or
rights under the Agreement, except as specifically permitted under the
Agreement, or any attempt to make such an assignment or delegation; and (v)
failure by the Servicer (other than the Bank) to be a servicer that complies
with certain criteria set forth in the Agreement. The holders of Certificates
evidencing not less than 51% of the Pool Balance may waive certain defaults by
the Servicer in the performance of its obligations.
RIGHTS UPON AN EVENT OF SERVICING TERMINATION
As long as an Event of Servicing Termination under the Agreement remains
unremedied, the Trustee or holders of Certificates evidencing not less than 25%
of the Pool Balance, by notice given in writing to the Servicer (and to the
Trustee if given by Certificateholders), may terminate all the rights and
obligations of the Servicer under the Agreement, whereupon all authority and
power of the Servicer under the Agreement shall pass to and be vested in the
Trustee, the Trustee will succeed to all the responsibilities, duties and
liabilities of the Servicer under the Agreement and will be entitled to the
compensation otherwise payable to the Servicer. In the event that the Trustee is
unwilling or unable so to act, it may appoint, or petition a court of competent
jurisdiction for the appointment of, a successor Servicer to act as successor to
the outgoing Servicer under the Agreement. The Trustee shall not be relieved of
its duties as successor Servicer until a newly appointed successor Servicer
shall have assumed
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the responsibilities and obligations of the Servicer under the Agreement. The
Trustee may make such arrangements for compensation to be paid to the successor
Servicer, which in no event may be greater than the Servicing Fee (plus the
investment earnings on amounts on deposit and to be deposited in the Certificate
Account) paid to the Servicer under the Agreement.
AMENDMENT
The Agreement may be amended by the Seller, the Servicer and the Trustee,
without prior notice to or the consent of the Certificateholders, to cure any
ambiguity, correct or supplement any provision therein which may be inconsistent
with any other provision therein, or make any other provisions with respect to
matters or questions arising under such Agreement which are not inconsistent
with the provisions of the Agreement; provided that such action will not, on the
basis of an officer's certificate and/or in the opinion of counsel (which may be
internal counsel to the Seller or the Servicer) reasonably satisfactory to the
Trustee, materially and adversely affect the interests of the Trust or the
Certificateholders. The Agreement may also be amended by the Seller, the
Servicer and the Trustee with the consent of the holders of Certificates
evidencing not less than 51% of the Pool Balance for the purpose of adding any
provision to or changing in any manner or eliminating any of the provisions of
the Agreement or of modifying in any manner the rights of Certificateholders;
provided, however, that no such amendment, except with the consent of the
holders of all Certificates, may (i) increase or reduce in any manner the amount
of, or accelerate or delay the timing of, collections of payments on Receivables
or distributions that are required to be made on any Certificate, (ii) reduce
the aforesaid percentage of the Pool Balance, the Certificateholders of which
are required to consent to any such amendment, or (iii) reduce the shortfalls
for which the Trustee may withdraw funds from the Reserve Account or change the
formula for determining the Specified Reserve Account Balance.
LIST OF CERTIFICATEHOLDERS
At such time as Definitive Certificates have been issued, the Trustee, upon
written request by three or more Certificateholders or by holders of
Certificates evidencing not less than 25% of the Pool Balance, will afford or
cause the Transfer Agent and Registrar to afford such Certificateholders access
during business hours to the current list of Certificateholders for purposes of
communicating with other Certificateholders with respect to their rights under
the Agreement (provided such Certificateholders (i) state that they wish to
communicate with other Certificateholders with respect to their rights under the
Agreement or under the Certificates and (ii) provide the Trustee with a copy of
the proposed communication). Definitive Certificates will be issued only in the
circumstances described above in ' -- Definitive Certificates'.
The Agreement will not provide for the holding of any annual or other
meeting of Certificateholders.
TERMINATION
The obligations of the Seller, the Servicer and the Trustee pursuant to the
Agreement will terminate upon the earlier of (i) the Distribution Date next
succeeding the month which is six months after the maturity or other liquidation
of the last Receivable and the disposition of any amounts received upon
liquidation of any property remaining in the Trust and (ii) payment to
Certificateholders of all amounts required to be paid to them pursuant to the
Agreement.
In order to avoid excessive administrative expense, the Servicer will be
permitted, at its option, to purchase from the Trust, as of the last Business
Day in any Collection Period in which the Pool Balance is 5% or less of the
initial Pool Balance, all remaining Receivables in the Trust at a price equal to
the sum of the aggregate of the Repurchase Amounts thereof as of such date.
Exercise of such right will effect early retirement of the Certificates.
The Trustee will give written notice of termination to each
Certificateholder of record, which notice will specify the Distribution Date
upon which Certificateholders may surrender their Certificates to the Trustee or
the Transfer Agent and Registrar, as the case may be, for final payment. The
final distribution to any Certificateholder will be made only upon surrender and
cancellation of such holder's
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Certificate (whether a Definitive Certificate or the Certificates registered in
the name of Cede representing the Certificates) at the office or agency of the
Trustee or the Transfer Agent and Registrar, as the case may be, specified in
the notice of termination. Any funds remaining in the Trust, after the Trustee
has taken certain measures to locate a Certificateholder and such measures have
failed, will be distributed to the Seller or as otherwise provided in the
Agreement.
DUTIES OF THE TRUSTEE
The Trustee makes no representations as to the validity or sufficiency of
the Agreement, the Certificates (other than the execution and authentication of
the Certificates), or the Receivables or any related documents, and is not
accountable for the use or application by the Seller or the Servicer of any
funds paid to the Seller or the Servicer in respect of the Certificates or the
Receivables, or any monies prior to the time such monies are deposited into the
Certificate Account. The Trustee has not independently verified the Receivables.
If no Event of Servicing Termination has occurred and is continuing, the Trustee
is required to perform only those duties specifically required of it under the
Agreement. Generally, those duties are limited to the receipt of the various
certificates, reports, or other instruments required to be furnished to the
Trustee under the Agreement, in which case it is only required to examine them
to determine whether they conform to the requirements of the Agreement.
The Trustee is under no obligation to exercise any of the rights or powers
vested in it by the Agreement or to make any investigation of matters arising
thereunder or to institute, conduct, or defend any litigation thereunder or in
relation thereto at the request, order, or direction of any of the
Certificateholders, unless such Certificateholders have offered to the Trustee
reasonable security or indemnity against the costs, expenses, and liabilities
which may be incurred therein or thereby, prior to the occurrence of an Event of
Servicing Termination. No Certificateholder will have any right under the
Agreement to institute any proceeding with respect to the Agreement, unless such
holder previously has given to the Trustee written notice of default and unless,
with respect to the Class A Certificates, the holders of Class A Certificates
evidencing not less than a majority of the aggregate outstanding principal
balance of the Class A Certificates or with respect to the Class B Certificates,
the holders of Class B Certificates evidencing not less than a majority of the
aggregate outstanding principal balance of the Class B Certificates, have made
written request upon the Trustee to institute such proceeding in its own name as
Trustee thereunder and have offered to the Trustee reasonable indemnity and the
Trustee for 30 days has neglected or refused to institute any such proceedings.
THE TRUSTEE
The Chase Manhattan Bank is the Trustee under the Agreement. The Trustee,
in its individual capacity or otherwise, and any of its affiliates may hold
Certificates in their own names or as pledgee. In addition, for the purpose of
meeting the legal requirements of certain jurisdictions, the Servicer and the
Trustee, acting jointly (or in some instances, the Trustee, acting alone), shall
have the power to appoint co-trustees or separate trustees of all or any part of
the Trust. In the event of such appointment, all rights, powers, duties and
obligations conferred or imposed upon the Trustee by the Agreement shall be
conferred or imposed upon the Trustee and such separate trustee or co-trustee
jointly, or, in any jurisdiction in which the Trustee shall be incompetent or
unqualified to perform certain acts, singly upon such separate trustee or
co-trustee who shall exercise and perform such rights, powers, duties and
obligations solely at the direction of the Trustee.
The Trustee may resign at any time by giving written notice thereof to the
Servicer, in which event the Trustee will be obligated promptly to appoint a
successor trustee. The Trustee will be obligated to resign if the Trustee ceases
to be eligible to continue as such under the Agreement, becomes legally unable
to act, or becomes insolvent. In such circumstances, the Trustee will be
obligated promptly to appoint a successor trustee. Any resignation or removal of
the Trustee and appointment of a successor trustee will not become effective
until acceptance of the appointment by the successor trustee.
The Agreement will provide that the Servicer will pay the Trustee's fees.
The Agreement will further provide that the Trustee will be entitled to
indemnification by the Servicer for, and will be held harmless against, any
loss, liability, or expense incurred by the Trustee not resulting from the
Trustee's
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own willful misfeasance, bad faith, or negligence (other than by reason of a
breach of any of its representations or warranties set forth in the Agreement)
except in the event the Servicer fails to indemnify the Trustee, in which case
the Trustee would be entitled to be indemnified by the Trust; provided, however,
that any such indemnification will be paid on a Distribution Date only after all
amounts required to be paid to the Certificateholders have been paid and certain
other distributions have been made and, with respect to a successor Servicer, if
any, after the Servicing Fee has been paid.
The Trustee's Corporate Trust Office is located at 450 West 33rd Street,
15th Floor, New York, NY 10001, telephone: (212) 746-8600. The Seller, the
Servicer and their respective affiliates may have normal banking relationships
with the Trustee and its affiliates.
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES
GENERAL
The Receivables are 'chattel paper' as defined in the Uniform Commercial
Code in effect in the States of Texas and New York (the 'UCC'). Pursuant to the
UCC, the sale of chattel paper is treated in a manner similar to perfection of a
security interest in chattel paper. In order to protect the Trust's ownership
interest in the Receivables, the Bank will file UCC-1 financing statements with
the appropriate governmental authorities in the State of Texas to give notice of
the Trust's ownership of the Receivables and their proceeds. Under the
Agreement, the Bank will be obligated to maintain the perfection of the Trust's
ownership interest in the Receivables. It should be noted, however, that a
purchaser of chattel paper who gives new value and takes possession of it in the
ordinary course of such purchaser's business has priority over a security
interest in the chattel paper which is perfected by filing UCC-1 financing
statements, and not by possession by the original secured party, if such
purchaser acts in good faith without knowledge that the specific chattel paper
is subject to a security interest. Any such purchaser would not be deemed to
have such knowledge by virtue of the UCC filings and would not learn of the sale
of the Receivables from a review of the Receivables since they would not be
marked to show such sale, although the Bank's master computer records will
evidence such sale.
SECURITY INTERESTS IN THE FINANCED VEHICLES
The Receivables consist of motor vehicle installment loans made pursuant to
contracts with Obligors for the purchase of automobiles and light-duty trucks
and also constitute personal property security agreements that include grants of
security interests in the Financed Vehicles under the UCC in the applicable
jurisdiction. Perfection of security interests in the Financed Vehicles
generally is governed by the motor vehicle registration laws of the state in
which the Financed Vehicle is located. In all states in which the Receivables
have been originated, a security interest in a vehicle is perfected by notation
of the secured party's lien on the vehicle's certificate of title or actual
possession by the secured party of such certificate of title, depending upon
applicable state law. The practice of the Bank is to effect such notation or to
obtain possession of the certificate of title, as appropriate under the laws of
the state in which a vehicle securing a motor vehicle installment loan
originated by the Bank is registered. The Receivables prohibit the sale or
transfer of the Financed Vehicle without the Bank's consent.
The Bank will assign its security interest in the individual Financed
Vehicles to the Trust. However, because of the administrative burden and expense
and since the Bank remains as Servicer of the Receivables, neither the Bank nor
the Trustee will amend the certificates of title to identify the Trust as the
new secured party and, accordingly, the Bank will continue to be named as the
secured party on the certificates of title relating to the Financed Vehicles. In
most states, such assignment is an effective conveyance of such security
interest without amendment of any lien noted on the related certificates of
title and the new secured party succeeds to the Bank's rights as the secured
party as against creditors of the Obligor. In certain states, in the absence of
such endorsement and delivery, the Trustee may not have a perfected security
interest in the Financed Vehicle. In such event or in the event that the Bank
did not have a perfected first priority security interest in the Financed
Vehicle, the only recourse of the Trust vis-a-vis third parties would be against
an Obligor on an unsecured basis or against the Bank pursuant to the Bank's
repurchase obligation. See 'Repurchase Obligation'.
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In the absence of fraud or forgery by a vehicle owner or administrative
error by state recording officials, the notation of the lien of the Bank on the
certificate of title will be sufficient to protect the Trust against the rights
of subsequent purchasers of a Financed Vehicle or subsequent lenders who take a
security interest in the Financed Vehicle. If there are any Financed Vehicles as
to which the Bank has failed to perfect the security interest assigned to the
Trust (i) such security interest would be subordinate to, among others, holders
of perfected security interests and (ii) subsequent purchasers of such Financed
Vehicles would take possession free and clear of such security interest. There
also exists a risk in not identifying the Trust as the new secured party on the
certificate of title that, through fraud or negligence, the security interest of
the Trust could be released.
In the event that the owner of a Financed Vehicle moves to a state other
than the state in which such Financed Vehicle initially is registered, under the
laws of most states the perfected security interest in the Financed Vehicle
would continue for four months after such relocation and thereafter until the
owner re-registers the Financed Vehicle in such state. A majority of states
generally require surrender of a certificate of title to re-register a vehicle.
Accordingly, the Bank must surrender possession if it holds the certificate of
title to such Financed Vehicle or, in the case of Financed Vehicles originally
registered in a state which provides for notation of lien but not possession of
the certificate of title by the holder of the security interest in the related
motor vehicle, the Bank would receive notice of surrender if the security
interest in the Financed Vehicle is noted on the certificate of title.
Accordingly, the Bank would have the opportunity to re-perfect its security
interest in the Financed Vehicle in the state of relocation. In states which do
not require a certificate of title for registration of a motor vehicle,
re-registration could defeat perfection. In the ordinary course of servicing its
portfolio of motor vehicle installment loans, the Bank takes steps to effect
such re-perfection upon receipt of notice of re-registration or information from
the Obligor as to relocation. Similarly, when an Obligor under a Receivable
sells a Financed Vehicle, the Bank must surrender possession of the certificate
of title or will receive notice as a result of its lien noted thereon and
accordingly will have an opportunity to require satisfaction of the related
Receivable before release of the lien. Under the Agreement, the Servicer is
obligated to take such steps, at the Servicer's expense, as are necessary to
maintain perfection of security interests in the Financed Vehicles.
Under the laws of many states, certain possessory liens for repairs
performed on a motor vehicle and storage, as well as certain rights arising from
the use of a motor vehicle in connection with illegal activities, may take
priority even over a perfected security interest. Certain federal tax liens may
have priority over the lien of a secured party. The Bank will represent in the
Agreement that it has no knowledge of any such liens with respect to any
Financed Vehicle. However, such liens could arise at any time during the term of
a Receivable. No notice will be given to the Trustee in the event such a lien
arises.
ENFORCEMENT OF SECURITY INTERESTS IN VEHICLES
The Servicer on behalf of the Trust may take action to enforce its security
interest by repossession and resale of the Financed Vehicles securing the
Receivables. The actual repossession may be contracted out to third party
contractors. Under the UCC and laws applicable in most states, a creditor can
repossess a motor vehicle securing a loan by voluntary surrender, 'self-help'
repossession that is 'peaceful' (i.e., without breach of the peace) or, in the
absence of voluntary surrender and the ability to repossess without breach of
the peace, by judicial process. The UCC and consumer protection laws in most
states place restrictions on repossession sales, including requiring prior
notice to the debtor and commercial reasonableness in effecting such a sale. In
the event of such repossession and resale of a Financed Vehicle, the Trust would
be entitled to be paid out of the sale proceeds before such proceeds could be
applied to the payment of the claims of unsecured creditors or the holders of
subsequently perfected security interests or, thereafter, to the defaulting
Obligor.
Under the UCC and laws applicable in most states, a creditor is entitled to
obtain a deficiency judgment from a debtor for any deficiency on repossession
and resale of the motor vehicle securing such debtor's loan. However, some
states impose prohibitions or limitations on deficiency judgments. Moreover, a
defaulting Obligor may not have sufficient assets to make the pursuit of a
deficiency judgment worthwhile.
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Certain other statutory provisions, including federal and state bankruptcy
and insolvency laws, and general equitable principles may limit or delay the
ability of a lender to repossess and resell collateral or enforce a deficiency
judgment.
OTHER MATTERS
Numerous federal and state consumer protection laws may impose requirements
applicable to the origination and lending pursuant to the contracts, including
the Truth-in-Lending Act, the Fair Credit Reporting Act, the Equal Credit
Opportunity Act, the Magnuson-Moss Warranty Act, and the Federal Trade
Commission Act.
The so-called 'Holder-in-Due-Course' Rule of the Federal Trade Commission
(the 'FTC Rule'), other state statutes or the common law in certain states have
the effect of subjecting a seller (and certain related lenders and their
assignees) in a consumer credit transaction and any assignee of the seller
(which would include the Trust) to all claims and defenses which an obligor in
the transaction could assert against the seller of the goods. Liability of a
subsequent holder under the FTC Rule is limited to the amounts paid by the
Obligor under the contract, and a subsequent holder of the contract may also be
unable to collect any balance remaining due thereunder from such obligor. The
Uniform Consumer Credit Code applicable in certain states contains provisions
which generally duplicate this rule.
The Agreement will set forth criteria that must be satisfied by each
Receivable, and such criteria will provide, among other things, 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 and such claim materially and adversely affects the Trust's interest in a
Receivable, such violation would result in the failure to satisfy a criterion in
the Agreement and would create an obligation of the Bank to repurchase the
Receivable unless such failed criterion is cured.
REPURCHASE OBLIGATION
Under the Agreement, each Receivable must satisfy certain criteria, and
such criteria relate to, among other things, the validity, subsistence,
perfection, and priority of the security interest in each Financed Vehicle.
Accordingly, if any defect exists in the perfection of the security interest in
any Financed Vehicle and such defect materially and adversely affects the
Trust's interest in a Receivable, such defect would result in the failure to
satisfy a criterion in the Agreement and would create an obligation of the Bank
to repurchase such Receivable unless such failed criterion is cured.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the material United States federal income tax
consequences of the purchase, ownership, and disposition of Certificates. This
summary is based upon laws, regulations, rulings, and decisions currently in
effect, all of which are subject to change. The discussion does not deal with
all federal tax consequences applicable to all categories of investors, some of
which may be subject to special rules. Consequences to individual investors of
investment in the Certificates will vary according to circumstances. In
addition, this summary is generally limited to investors who will hold the
Certificates as 'capital assets' (generally, property held for investment)
within the meaning of Section 1221 of the Internal Revenue Code of 1986, as
amended (the 'Code'). 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.
INVESTORS ARE URGED TO CONSULT WITH THEIR OWN TAX ADVISERS TO DETERMINE THE
FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX CONSEQUENCES TO THEM OF THEIR
PURCHASE, OWNERSHIP AND DISPOSITION OF THE CERTIFICATES.
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TAX STATUS OF THE TRUST; SCOPE OF TAX OPINION
In the opinion of Jones, Day, Reavis & Pogue, special tax counsel to the
Seller ('Special Tax Counsel'), the Trust will not be classified as an
association taxable as a corporation for federal income tax purposes, but will
be classified as a grantor trust, and each Certificate Owner will be subject to
federal income taxation as if it owned directly its interest in each asset owned
by the Trust for federal income tax purposes and paid directly its share of
reasonable expenses paid by the Trust. In addition, Special Tax Counsel has
prepared or reviewed the statements in this Prospectus under the headings
'Prospectus Summary -- Tax Status' and 'Certain Federal Income Tax
Consequences,' and is of the opinion that such statements to the extent that
they reflect conclusions of law are correct in all material respects. Such
statements are intended as an explanatory discussion of the possible effects of
the classification of the Trust as a grantor trust for federal income tax
purposes on investors generally and of related tax matters affecting investors
generally, but do not purport to furnish information in the level of detail or
with the attention to an investor's specific tax circumstances that would be
provided by an investor's own tax adviser. Accordingly, each investor is advised
to consult its own tax advisers with regard to the tax consequences to it of
investing in the Certificates.
TREATMENT OF CERTIFICATE OWNERS' INTEREST IN TRUST ASSETS
Each Certificate Owner could be considered to own either (i) an undivided
interest in a single debt obligation having a principal amount equal to the
total stated principal amount of the Receivables or (ii) an interest in each of
the Receivables and any other assets of the Trust. The Agreement will express
the intent of the Seller to sell, and the Certificateholders to purchase, the
Receivables (other than the Retained Yield) and the Seller, the
Certificateholders, and each Certificate Owner, by accepting a beneficial
interest in a Certificate, will agree to treat the Certificates as ownership
interests in the Receivables, and reports to Certificateholders will be prepared
on that basis.
Treatment as Debt Obligation. If a Certificate Owner were considered to own
an undivided interest in a debt obligation of the Seller, rather than reporting
its share of the interest accrued on each Receivable it would, in general, be
required to include in income a pro rata share of interest accrued or received
on such debt obligation in accordance with its usual method of accounting.
The Certificates would be subject to the original issue discount ('OID')
rules, generally in the manner discussed below with respect to Stripped
Receivables (as defined below). Thus, while the manner in which a
Certificateholder would calculate OID is unclear in some respects, each
Certificateholder would report as OID the difference between its proportionate
interest in the stated redemption price of such debt obligation and the issue
price of the Certificate. However, in determining whether such OID is de
minimis, the weighted average life of the Certificates would be determined using
a reasonable assumption regarding anticipated prepayments (a 'Prepayment
Assumption'). Original issue discount includible in income for any accrual
period (generally, the period between payment dates) would generally be
calculated using a Prepayment Assumption and an anticipated yield established as
of the date of initial sale of the Certificates, and would increase or decrease
to reflect prepayments at a faster or slower rate than anticipated. Purchasers
of the Certificates would also be subject to the market discount provisions of
the Code to the extent that they purchase such Certificates at a discount from
the initial issue price (as adjusted to reflect prior accruals of original issue
discount).
Income on Receivables. The remainder of the discussion herein assumes that
a Certificate Owner will be treated as owning an interest in each Receivable
(and the proceeds thereof).
For federal income tax purposes, the Seller will be treated as having
retained a fixed portion of the interest due on each Receivable (each, a
'Stripped Receivable') equal to the difference between (x) the Contract Rate of
the Receivable and (y) the sum of the weighted average of the Class A
Pass-Through Rate and the Class B Pass-Through Rate and the Servicing Fee Rate
(such difference referred to as the 'Retained Yield'). The Retained Yield will
be treated as 'stripped coupons' within the meaning of Section 1286 of the Code.
Accordingly, each Certificate Owner will be treated as owning its pro rata
percentage interest in the principal of, and interest payable on, each
Receivable (minus the portion of the interest payable on such Receivable that is
treated as Retained Yield on the Stripped Receivables)
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and such interest in each Receivable will be treated as a 'stripped bond' within
the meaning of Section 1286 of the Code.
Each Certificate Owner would be required to report on its federal income
tax return its share of the gross income of the Trust, including interest and
certain other charges accrued on the Receivables and any gain upon collection or
disposition of the Receivables (but not including any portion of the Retained
Yield). Such gross income attributable to interest on the Receivables would
exceed the applicable Pass-Through Rate by an amount equal to the Certificate
Owner's share of the reasonable expenses of the Trust for the period during
which it owns a Certificate. The Certificate Owner would be entitled to deduct
its share of the reasonable expenses of the Trust to the extent described below.
Any amounts received by a Certificate Owner from the Reserve Account or by a
Class A Certificate Owner on account of the subordination of the Class B
Certificates will be treated for federal income tax purposes as having the same
characteristics as the payments they replace.
A Certificate Owner would generally report its share of the income of the
Trust, including interest and certain other charges accrued on the Receivables
(but see discussion below in ' -- Discount and Premium'), and investment
earnings on funds held pending distribution, under its usual method of
accounting. Accordingly, interest, excluding OID or market discount, would be
includible in a Certificate Owner's gross income when it accrues on the
Receivables, or, in the case of Certificate Owners who are cash basis taxpayers,
when received by the Servicer on behalf of Certificate Owners. Because (i)
interest accrues on the Receivables over differing monthly periods and is paid
in arrears and (ii) interest collected on a receivable generally is paid to
Certificateholders in the following month, the amount of interest accruing to a
Certificate Owner that is an accrual basis taxpayer or deemed to have been
received by a Certificate Owner that is a cash basis taxpayer during any
calendar month will not equal the interest distributed in that month. Thus, both
cash basis and accrual basis taxpayers may be required to recognize some income
in advance of the receipt of the related cash distribution. For administrative
convenience, the amount of accrued and collected interest will be estimated
rather than being calculated precisely for each Receivable.
If the Class B Pass-Through Rate exceeds the Class A Pass-Through Rate, the
amounts received by the Class A Certificate Owners (calculated at the Class A
Pass-Through Rate) and the amounts received by the Class B Certificate Owners
(calculated at the Class B Pass-Through Rate) will be disproportionate to the
face amounts of their Certificates. The proper treatment of the amount of the
difference, if any, in the amounts received is unclear. The Agreement will
express the intent of the Seller that the Class B Certificate Owners be treated
as having acquired a 'stripped coupon' integrated for federal income tax
purposes with the Class B Certificate Owners' interest in the stripped
Receivables and reports to Certificate Owners will be prepared on that basis. It
is possible, however, that the Internal Revenue Service could recharacterize a
portion of the Class B Pass-Through Rate as constituting income other than
interest (e.g., compensation for the Class B Certificate Owners' assumption of a
limited guaranty by the Seller of the Class A Certificate Owners' receipt of
principal and interest), in which case the federal income tax consequences to
the Class B Certificate Owners, and possibly individual Class A Certificate
Owners, could be adversely affected. For example, a Class A Certificateholder
might be deemed to have received additional interest income and as having paid
a portion thereof as a guaranty fee (which may be subject to limitations on
deduction) to the Class B Certificateholders.
For administrative convenience, the Servicer intends to report the total
amount of income with respect to the Certificates on an aggregate basis at the
applicable Pass-Through Rate (as though all of the Receivables were a single
obligation), rather than on an asset-by-asset basis. The amount and, in some
instances, character, of the income reported to a Certificate Owner may differ
under this method for a particular period from that which would be reported if
income were reported on a precise asset-by-asset basis. Accordingly, the IRS
could require that a Certificate Owner calculate its income either (i) on an
asset-by-asset basis, accounting separately for each Receivable or (ii)
aggregating all Stripped Receivables under the aggregation rule described below.
See ' -- Original Issue Discount on Stripped Receivables.' In computing its
income on an asset-by-asset basis, a Certificate Owner would allocate its tax
basis among the Receivables, in proportion to their fair market values.
The remainder of the disclosure generally describes the Code provisions
governing reporting of income on the Receivables on a separate asset basis.
40
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<PAGE>
TREATMENT OF CERTIFICATE OWNERS' SHARE OF TRUST EXPENSES
A Certificate Owner will be entitled to deduct, consistent with its method
of accounting, its pro rata share of reasonable servicing fees and other fees
paid or incurred by the Trust as provided in Section 162 or 212 of the Code. The
Trustee intends to take the position that the Servicing Fee constitutes
reasonable compensation for services, although there is no authority on this
point in the context of receivables such as the Receivables. If a Certificate
Owner is an individual, estate or trust, the deduction for such holder's share
of such fees will be allowed only to the extent that all of such holder's
miscellaneous itemized deductions, including such holder's share of such fees,
exceed 2% of such holder's adjusted gross income. In addition, in the case of
Certificate Owners who are individuals, certain otherwise allowable itemized
deductions will be reduced, but not by more than 80%, by an amount equal to 3%
of such holder's adjusted gross income in excess of a statutorily defined
threshold $121,600 in the case of a married couple filing jointly for the
taxable year beginning in 1997. While not a Trust expense, the same limitations
would apply to individual Class A Certificate Owners' deduction of any
compensation deemed to have been paid by them for a limited guarantee provided
by the Class B Certificate Owners. Because the Servicer will not report
to Certificate Owners the amount of income or deductions attributable to
interest earned on collections, such a holder may effectively underreport
its net taxable income.
DISCOUNT AND PREMIUM
In determining whether a Certificate Owner has purchased its interest in
the Receivables (or any Receivable) at a discount and whether such Receivables
(or any Receivable) have OID, a portion of the purchase price of a Certificate
should be allocated to the Certificate Owner's undivided interest in accrued but
unpaid interest and amounts collected at the time of purchase but not
distributed. As a result, the portion of the purchase price allocable to a
Certificate Owner's undivided interest in the Receivables (or any Receivable)
(the 'Purchase Price') will be decreased and the potential OID on the
Receivables (or any Receivable) could be increased.
ORIGINAL ISSUE DISCOUNT ON STRIPPED RECEIVABLES
Because the Stripped Receivables represent stripped bonds, they will be
subject to the original issue discount rules of the Code. Accordingly, the tax
treatment of a Certificate Owner will depend in part upon whether the amount of
OID on a Stripped Receivable is less than a statutorily defined de minimis
amount.
In general, under Treasury regulations ('Treasury Regulations') issued
under Section 1286 of the Code (the 'Section 1286 Regulations'), the amount of
OID on a receivable treated as a 'stripped bond' will be de minimis if it is
less than 1/4 of one percent for each full year of weighted average life
remaining after the purchase date until the maturity of the Receivable, although
it is not clear whether expected prepayments are taken into account. Under the
Section 1286 Regulations, it appears that the portion of the interest on each
Receivable payable to the Certificate Owners may be treated as 'qualified stated
interest.' As a result, the amount of OID on a Stripped Receivable will equal
the amount by which the Purchase Price of a Stripped Receivable is less than the
portion of the remaining principal balance of the Receivable allocable to the
interest acquired.
If the amount of OID is de minimis under the rule set forth above, a
Stripped Receivable would not be treated as having OID. The actual amount of
discount on a Stripped Receivable would be includible in income as principal
payments are received on the Receivable, in the proportion that each principal
payment bears to the total principal amount of the Receivable.
If the OID on a Receivable is not treated as being de minimis, in addition
to the amounts described above, a Certificate Owner will be required to include
in income any OID as it accrues on a daily basis, regardless of when cash
payments are received, using a method reflecting a constant yield on the
Receivable (or Receivables). It is possible that the IRS could require use of a
Prepayment Assumption in computing the yield of a Receivable. Accrued OID would
increase a Certificate Owner's tax basis in the Certificate (and the applicable
Receivables). Distributions of principal and other items attributable to accrued
OID (other than payments of interest on the Receivables at the sum of the
applicable
41
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<PAGE>
Pass-Through Rate and the Servicing Fee Rate) would reduce a Certificate Owner's
tax basis. If a Receivable is deemed to be acquired by a Certificate Owner at a
significant discount, such treatment could accelerate the accrual of income by a
Certificate Owner.
The Trustee intends to account for OID, if any, reportable by holders of
Certificates by reference to the price paid for a Certificate by an initial
purchaser, although the amount of OID will differ for subsequent purchasers.
Such subsequent purchasers should consult their tax advisors regarding the
proper calculation of OID on the interest in Receivables represented by a
Certificate.
In addition, for administrative convenience, the Trustee intends to
calculate OID, if any, on all of the Receivables on an aggregate basis and
without the use of a Prepayment Assumption. Treasury Regulations issued under
the OID provisions of the Code (the 'OID Regulations') suggest, although the
matter is not entirely clear, that all payments on the Stripped Receivables
allocable to the Certificates may be aggregated in determining whether the
Stripped Receivables will be treated as having OID. It is not clear whether use
of a Prepayment Assumption is required in computing OID. If the Service were to
require that OID be computed on a Receivable-by-Receivable basis, or that a
Prepayment Assumption be used, the character and timing of a Certificate Owner's
income could be adversely affected. Because under the stripped bond rules, each
sale of a Certificate results in a recalculation of OID, a Certificate Owner
technically will not be subject to the market discount provisions of the Code
with respect to Stripped Receivables.
PURCHASES AT PREMIUM
In the event that a Receivable is treated as purchased at a premium (i.e.,
its Purchase Price exceeds the portion of the remaining principal balance of
such Receivable allocable to the Certificate Owner), such premium will be
amortizable by the Certificate Owner as an offset to interest income (with a
corresponding reduction in the Certificate Owner's basis) under a constant yield
method over the term of the Receivable if an election under Section 171 of the
Code is made with respect to the interests in the Receivables represented by the
Certificates or was previously in effect with respect to such taxpayer. Any such
election will also apply to all debt instruments held by the Certificate Owner
during the year in which the election is made and all debt instruments acquired
thereafter.
EFFECT OF SUBORDINATION
If the Class B Certificate Owners received distributions of less than their
share of the Trust's receipts of principal or interest (the 'Shortfall Amount')
because of the subordination of the Class B Certificates, holders of Class B
Certificates would probably be treated for federal income tax purposes as if
they had (1) received as distributions their full share of such receipts, (2)
paid over to the Class A Certificate Owners an amount equal to such Shortfall
Amount and (3) retained the right to reimbursement of such amounts to the extent
of future collections otherwise available for deposit in the Reserve Fund. There
is, however, no authority addressing this point and the Internal Revenue Service
could assert that a different treatment could apply.
Under this analysis, (1) Class B Certificate Owners would be required to
recognize as current income any interest or OID income of the Trust that was a
component of the Shortfall Amount, even though such amount was in fact paid to
the Class A Certificate Owners, (2) a loss would only be allowed to the Class B
Certificate Owners when their right to receive reimbursement of such Shortfall
Amount became worthless (i.e., when it becomes clear that amount will not be
available from any source to reimburse such loss and then as such loss may be
limited by Sections 67 and 68 of the Code) and (3) reimbursement of such
Shortfall Amount prior to such a claim of worthlessness would not be taxable
income to Class B Certificate Owners because such amount was previously included
in income. Those results should not significantly affect the inclusion of income
for Class B Certificate Owners on the accrual method of accounting, but could
accelerate inclusion of income to Class B Certificate Owners on the cash method
of accounting by, in effect, placing them on the accrual method. Moreover, the
character and timing of loss deductions is unclear.
42
<PAGE>
<PAGE>
SALE OF A CERTIFICATE
If a Certificate is sold, gain or loss will be recognized equal to the
difference between the amount realized on the sale and the Certificate Owner's
adjusted basis in the Receivables and any other assets held by the Trust. A
Certificate Owner's adjusted basis will equal the Certificate Owner's cost for
the Certificate, increased by any discount previously included in income, and
decreased by any deduction previously allowed for accrued premium and by the
amount of principal payments previously received on the Receivables. Any gain or
loss not attributable to accrued interest will be capital gain or loss if the
Certificate was held as a capital asset.
FOREIGN CERTIFICATE OWNERS
Interest attributable to Receivables which is payable to a foreign
Certificate Owner will generally not be subject to the normal 30% withholding
tax imposed with respect to such payments, provided that such Certificate Owner
is not engaged in a trade or business in the United States and that such
Certificate Owner fulfills certain certification requirements (however, the
withholding tax may apply to any portion of the interest received by the Class B
Certificate Owners that is recharacterized as compensation for a guarantee).
Under such certification requirements, the Certificate Owner must certify, under
penalties of perjury, that it is not a 'United States person' and it is the
beneficial owner of the Certificates, and must provide its name and address. For
this purpose, 'United States person' means a citizen or resident of the United
States, a corporation, partnership, or other entity created or organized in or
under the laws of the United States or any political subdivision thereof, or a
trust (if a court within the United States is able to exercise primary
supervision over its administration and one or more United States fiduciaries
have the authority to control all of its substantial decisions) or an estate,
the income of which is includible in gross income for United States Federal
income tax purposes, regardless of its source. Final Treasury Regulations have
been issued, generally with a January 1, 1999 effective date, that will affect
the certification requirements with respect to payments to foreign certificate
holders.
BACKUP WITHHOLDING
Payments made on the Certificates and proceeds from the sale of
Certificates will not be subject to a 'back-up' withholding tax of 31% unless,
in general, the Certificate Owner fails to comply with certain reporting
procedures and is not an exempt recipient under applicable provisions of the
Code.
ERISA CONSIDERATIONS
The Employee Retirement Income Security Act of 1974, as amended ('ERISA'),
and the Code impose certain requirements on employee benefit plans and certain
other retirement plans and arrangements, including individual retirement
accounts and annuities, Keogh plans and collective investment funds and separate
accounts in which such plans, accounts or arrangements are invested that are
subject to ERISA and the Code (all of which are hereinafter referred to as a
'Plan') and on persons who are fiduciaries with respect to such Plans. 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), an insurance
company's general account may be deemed to include assets of the Plans investing
in the general account (e.g., through the purchase of an annuity contract), and
the insurance company might be treated as a fiduciary with respect to such plans
by virtue of such investment. In accordance with ERISA's general fiduciary
standards, before investing in a Certificate, a Plan fiduciary should determine
whether such an investment is permitted under the governing Plan instruments and
is appropriate for the Plan in view of its overall investment policy and the
composition and diversification of its portfolio. Other provisions of ERISA and
the Code prohibit certain transactions involving the assets of a Plan and
persons who have certain specified relationships to the Plan ('parties in
interest' within the meaning of ERISA or 'disqualified persons' within the
meaning of the Code). Thus, a Plan fiduciary considering an investment in
Certificates should also consider whether such an investment might constitute or
give rise to a prohibited transaction under ERISA or the Code.
43
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<PAGE>
An investment in Certificates by a Plan might result in the assets of the
Trust being deemed to constitute Plan assets, which in turn might mean that
certain aspects of such investment, including the operation of the Trust, might
be prohibited transactions under ERISA and the Code. There may also be an
improper delegation of the responsibility to manage Plan assets if Plans that
purchase the Certificates are deemed to own an interest in the underlying assets
of the Trust. Neither ERISA nor the Code defines the term 'plan assets'. Under
Section 2510.3-101 of the United States Department of Labor ('DOL') regulations
(the 'Regulation'), a Plan's assets may include an interest in the underlying
assets of an entity (such as a trust) for certain purposes, including the
prohibited transaction provisions of ERISA and the Code, if the Plan acquires an
'equity interest' in such entity.
EXEMPTION FOR CLASS A CERTIFICATES
The DOL has issued an individual exemption, Prohibited Transaction
Exemption ('PTE') 90-29, to Merrill Lynch, Pierce, Fenner & Smith Incorporated
(the 'Exemption'). The Exemption generally exempts from the application of the
prohibited transaction provisions of Section 406 of ERISA and the excise taxes
imposed on such prohibited transactions pursuant to Sections 4975(a) and (b) of
the Code and Section 502(i) of ERISA certain transactions relating to the
initial purchase, holding and subsequent resale by Plans of certificates in
pass-through trusts that consist of certain receivables, loans and other
obligations that meet the conditions and requirements set forth in the
Exemption. The receivables covered by the Exemption include fixed rate simple
interest retail motor vehicle installment sales contracts and retail motor
vehicle installment loans such as the Receivables. In addition, the Exemption
provides that the trust's assets may include (i) yield supplement agreements or
similar yield maintenance arrangements, provided such arrangements do not
involve swap agreements or certain other principal contracts and (ii) certain
pre-funding arrangements. The Exemption will apply to the acquisition, holding
and resale of the Class A Certificates by a Plan from the Underwriters, provided
that specified conditions (certain of which are described below) are met. The
Seller believes that the Exemption will apply to the acquisition and holding of
the Class A Certificates by a Plan and that all conditions of the Exemption
other than those within the control of the investors have been or will be met.
The Exemption sets forth six general conditions that must be satisfied for
a transaction involving the acquisition of the Class A Certificates by a Plan to
be eligible for the exemptive relief thereunder:
(1) the acquisition of the Class A Certificates by a Plan is on terms
(including the price for the Class A Certificates) that are at least as
favorable to the Plan as they would be in an arm's-length transaction with
an unrelated party;
(2) the rights and interests evidenced by the Class A Certificates
acquired by a Plan are not subordinated to the rights and interests
evidenced by other certificates of the Trust;
(3) the Class A Certificates acquired by the Plan have received a
rating at the time of such acquisition that is in one of the three highest
generic rating categories of Standard & Poor's, Moody's, Duff & Phelps,
Inc. or Fitch Investors Service, L.P.;
(4) the Trustee is not an affiliate of any other member of the
'Restricted Group,' which consists of the Underwriters, the Seller, the
Servicer, the Trustee and any Obligor with respect to the Receivables
included in the Trust constituting more than 5% of the aggregate
unamortized principal balance of the assets of the Trust as of the date of
initial issuance of the Class A Certificates, and any affiliate of such
parties;
(5) the sum of all payments made to and retained by the Underwriters
in connection with the distribution or placement of the Class A
Certificates represents not more than reasonable compensation for
underwriting or placing the Class A Certificates. The sum of all payments
made to and retained by the Seller pursuant to the sale of the Receivables
to the Trust represents not more than the fair market value of such
Receivables. The sum of all payments made to and retained by the Servicer
represents not more than reasonable compensation for the Servicer's
services under the Agreement and reimbursement of the Servicer's reasonable
expenses in connection therewith; and
44
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<PAGE>
(6) the Plan investing in the Class A Certificates must be an
'accredited investor' as defined in Rule 501(a)(1) of Regulation D of the
Commission under the Securities Act.
Because the rights and interests evidenced by the Class A Certificates
acquired by a Plan are not subordinated to the rights and interests evidenced by
other certificates of the Trust, the second general condition set forth above is
satisfied. It is a condition of the issuance of the Class A Certificates that
they be rated in the highest rating category by a Rating Agency. A fiduciary of
a Plan contemplating purchasing a Class A Certificate must make its own
determination that at the time of such acquisition, the Class A Certificates
continue to satisfy the third general condition set forth above. The Seller and
the Servicer expect that the fourth general condition set forth above will be
satisfied with respect to the Class A Certificates. A fiduciary of a Plan
contemplating purchasing a Class A Certificate must make its own determination
that the first, fifth and sixth general conditions set forth above will be
satisfied with respect to the Class A Certificates.
In addition, the Trust must satisfy the following requirements:
(a) the corpus of the Trust must consist solely of assets of the type
which have been included in other investment pools,
(b) certificates in such other investment pools must have been rated
in one of the three highest generic rating categories of Standard & Poor's,
Moody's, Duff & Phelps, Inc. or Fitch Investors Service, L.P. for at least
one year prior to the Plan's acquisition of Class A Certificates, and
(c) certificates evidencing interests in such other investments pools
must have been purchased by investors other than Plans for at least one
year prior to any Plan's acquisition of Class A Certificates.
If the general conditions of the Exemption are satisfied, the Exemption may
provide relief from the restrictions imposed by Sections 406(a) and 407(a) of
ERISA as well as the excise taxes imposed by Sections 4975(a) and (b) of the
Code by reason of Sections 4975(c)(1)(A) through (D) of the Code, in connection
with the direct or indirect sale, exchange, transfer or holding of the Class A
Certificates by a Plan. However, no exemption is provided from the restrictions
of Sections 406(a)(1)(E), 406(a)(2) and 407 of ERISA for the acquisition or
holding of a Class A Certificate on behalf of an 'Excluded Plan' by any person
who has discretionary authority or renders investment advice with respect to the
assets of such Excluded Plan. For purposes of the Class A Certificates, an
'Excluded Plan' is a Plan sponsored by any member of the Restricted Group.
If certain specific conditions of the Exemption are also satisfied, the
Exemption may provide relief from the restrictions imposed by Sections 406(b)(1)
and (b)(2) and 407(a) of ERISA and the taxes imposed by Sections 4975(a) and (b)
of the Code by reason of Section 4975(c)(1)(E) of the Code in connection with
the direct or indirect sale, exchange, transfer or holding of Class A
Certificates in the initial issuance of Class A Certificates between the Seller
or Underwriters and a Plan other than an Excluded Plan when the person who has
discretionary authority or renders investment advice with respect to the
investment of Plan assets in the Class A Certificates is (a) an Obligor with
respect to 5% or less of the fair market value of the Receivables or (b) an
affiliate of such person.
The Exemption also applies to transactions in connection with the
servicing, management and operation of the Trust, provided that, in addition to
the general requirements described above, (a) such transactions are carried out
in accordance with the terms of a binding pooling and servicing agreement and
(b) the pooling and servicing agreement is provided to, or described in all
material respects in the prospectus provided to, investing Plans before their
purchase of Class A Certificates issued by the Trust. The Agreement is a pooling
and servicing agreement as defined in the Exemption. All transactions relating
to the servicing, management and operation of the Trust will be carried out in
accordance with the Agreement. See 'The Certificates.'
The Exemption also may provide relief from the restrictions imposed by
Sections 406(a) and 407(a) of ERISA and the taxes imposed by Sections
4975(c)(1)(A) through (D) of the Code if such restrictions are deemed to
otherwise apply merely because a person is deemed to be a party in interest or a
disqualified person with respect to an investing Plan by virtue of providing
services to a Plan (or by virtue of having certain specified relationships to
such a person) solely as a result of such Plan's ownership of Class A
Certificates.
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Any Plan fiduciary considering whether to purchase a Class A Certificate on
behalf of a Plan should consult with experienced legal counsel regarding the
applicability of the Exemption and other applicable issues and whether the Class
A Certificates are an appropriate investment for a Plan under ERISA and the
Code.
EXEMPTION FOR CLASS B CERTIFICATES
Because the Class B Certificates are subordinate interests, the Exemption
will not apply to exempt the purchase and subsequent holding of the Class B
Certificates by or on behalf of a Plan from the prohibited transaction
provisions of ERISA and the Code. However, certain other administrative
exemptions may be available with respect to the purchase and subsequent holding
of the Class B Certificates by or on behalf of a Plan. These exemptions include
PTE 95-60, which applies to certain transactions involving insurance company
general accounts, PTE 90-1, which applies to certain transactions involving
insurance company pooled separate accounts, PTE 91-38, which applies to certain
transactions involving bank collective investment funds, and PTE 84-14, which
applies to certain transactions entered into on behalf of a Plan by qualified
professional asset managers.
PTE 95-60 in particular, among other things, provides an exemption for
transactions in connection with the servicing, management, and operation of a
trust in which an insurance company general account has an interest as a result
of its acquisition of certificates issued by the trust. PTE 95-60 would apply to
the acquisition of the Class B Certificates issued by the Trust provided that
certain conditions are met, including the requirement that the Trust is
described in and otherwise meets the requirements of an 'underwriter exemption,'
such as PTE 93-31, other than the requirements relating to the nonsubordination
and rating of the Class B Certificates. Accordingly, an insurance company may
acquire the Class B Certificates on behalf of its general account if the
conditions of PTE 95-60 are otherwise satisfied.
Any Plan fiduciary considering the purchase of a Class B Certificate on
behalf of a Plan should consult with experienced legal counsel regarding the
applicability of any such exemption from the prohibited transaction rules, other
relevant issues, and whether the Class B Certificates would be an appropriate
investment for the Plan under ERISA and the Code.
Each investor purchasing the Class B Certificates by or on behalf of a Plan
will be deemed to have represented that an exemption from the prohibited
transaction rules applies such that the acquisition and subsequent holding of
the Class B Certificates by or on behalf of such Plan will not constitute a
non-exempt prohibited transaction in violation of Section 406 of ERISA or
Section 4975 of the Code by reason of the application of one or more statutory
or administrative exemptions from the prohibited transaction rules.
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UNDERWRITING
Subject to the terms and conditions set forth in the underwriting agreement
(the 'Underwriting Agreement'), the Seller has agreed to sell to each of the
underwriters named below (the 'Underwriters') and each of the Underwriters has
severally agreed to purchase the principal amount of Certificates set forth
opposite its name below:
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT OF
CLASS A
UNDERWRITER CERTIFICATES
- ------------------------------------------------------------------------------------------ ----------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith $
Incorporated................................................................
Citicorp Securities, Inc..................................................................
J.P. Morgan & Co..........................................................................
UBS Securities LLC........................................................................
----------
----------
<CAPTION>
PRINCIPAL
AMOUNT OF
CLASS B
UNDERWRITER CERTIFICATES
- ------------------------------------------------------------------------------------------ ----------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith $
Incorporated................................................................
----------
----------
</TABLE>
The Seller has been advised by the Underwriters that they propose initially
to offer the Class A Certificates to the public at the price set forth on the
cover page of this Prospectus, and to certain dealers at such price less a
concession not in excess of . % of the principal amount of the Class A
Certificates. The Underwriters may allow and such dealers may reallow to other
dealers a discount not in excess of . % of such principal amount. After the
initial public offering, such public offering price, concession and reallowance
may be changed.
The Seller has been advised by the Underwriter that it proposes initially
to offer the Class B Certificates to the public at the price set forth on the
cover page of this Prospectus, and to certain dealers at such price less a
concession not in excess of . % of the principal amount of the Class B
Certificates. The Underwriter may allow and such dealers may reallow to other
dealers a discount not in excess of . % of such principal amount. After the
initial public offering, such public offering price, concession and reallowance
may be changed.
The Underwriters have advised the Seller that, pursuant to Regulation M
under the Securities Act, certain persons participating in this offering may
engage in transactions, including stabilizing bids and syndicate covering
transactions, which may have the effect of stabilizing or maintaining the market
price of any class of Certificates at levels above those that might otherwise
prevail in the open market. A 'stabilizing bid' is a bid for or the purchase of
any Certificates on behalf of the Underwriters for the purpose of fixing or
maintaining the price of such Certificates. A 'syndicate covering transaction'
is the bid for or the purchase of Certificates on behalf of the Underwriters to
reduce a short position incurred by the Underwriters in connection with this
offering.
Stabilizing bids and syndicate covering transactions may have the effect of
causing the price of the Certificates of any class to be higher than it might be
in the absence thereof. Neither the Seller nor the Underwriters makes any
representation or prediction as to the direction or magnitude of any such effect
on the prices for the Certificates. Neither the Seller nor the Underwriters
makes any representation that the Underwriters will engage in any such
transactions or that, once commenced, any such transactions will not be
discontinued without notice.
The Seller has agreed to indemnify the Underwriters against certain
liabilities, including civil liabilities under the Securities Act, or to
contribute to payments which the Underwriters may be required to make in respect
thereof.
VALIDITY OF THE CERTIFICATES
The validity of the Certificates will be passed upon for the Seller by
Jones, Day, Reavis & Pogue, and certain other legal matters will be passed upon
for the Seller by Michael J. Broker, Esq., Vice-President and Banking Counsel
for the Bank and for the Underwriters by Skadden, Arps, Slate, Meagher & Flom
LLP. Certain federal income tax and other matters will be passed upon for the
Seller by Jones, Day, Reavis & Pogue.
47
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GLOSSARY OF TERMS
<TABLE>
<CAPTION>
TERMS PAGE
- ------------------------------------------------------------------------------------------------------ ---------
<S> <C>
Accounts.............................................................................................. 24
Advance............................................................................................... 5
Agreement............................................................................................. 1, 3
Applicant............................................................................................. 11
Available Interest.................................................................................... 28
Available Principal................................................................................... 28
Available Reserve Amount.............................................................................. 27
Average Delinquency Ratio............................................................................. 27
Average Net Loss Ratio................................................................................ 27
Bank.................................................................................................. 3
Business Day.......................................................................................... 4
Cede.................................................................................................. 3, 21
Certificate Account................................................................................... 24
Certificateholders.................................................................................... 2, 4
Certificate Owner..................................................................................... 3, 21
Certificates.......................................................................................... 1, 3
Class A Distribution Account.......................................................................... 24
Class A Certificate Balance........................................................................... 29
Class A Certificateholders............................................................................ 4
Class A Certificates.................................................................................. 1, 3
Class A Interest Carryover Shortfall.................................................................. 29
Class A Interest Distribution......................................................................... 30
Class A Monthly Interest.............................................................................. 30
Class A Monthly Principal............................................................................. 30
Class A Pass-Through Rate............................................................................. 4
Class A Percentage.................................................................................... 30
Class A Pool Factor................................................................................... 19
Class A Principal Carryover Shortfall................................................................. 30
Class A Principal Distribution........................................................................ 30
Class B Distribution Account.......................................................................... 24
Class B Certificate Balance........................................................................... 30
Class B Certificateholders............................................................................ 4
Class B Certificates.................................................................................. 1, 3
Class B Interest Carryover Shortfall.................................................................. 30
Class B Interest Distribution......................................................................... 30
Class B Monthly Interest.............................................................................. 30
Class B Monthly Principal............................................................................. 30
Class B Pass-Through Rate............................................................................. 4
Class B Percentage.................................................................................... 30
Class B Pool Factor................................................................................... 19
Class B Principal Carryover Shortfall................................................................. 30
Class B Principal Distribution........................................................................ 30
Closing Date.......................................................................................... 19
Code.................................................................................................. 38
Collateral Agent...................................................................................... 1
Collection Period..................................................................................... 4
Collections........................................................................................... 28
Commission............................................................................................ 2
Contract Rate......................................................................................... 16
Cutoff Date........................................................................................... 1, 3
Defaulted Receivable.................................................................................. 25
Definitive Certificates............................................................................... 22
</TABLE>
48
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
TERMS PAGE
- ------------------------------------------------------------------------------------------------------ ---------
<S> <C>
Delinquency Ratio..................................................................................... 27
Deposit Date.......................................................................................... 5
Depository............................................................................................ 21
disqualified persons.................................................................................. 43
Distribution Date..................................................................................... 1
DOL................................................................................................... 43
DTC................................................................................................... 1, 3, 21
Due Date.............................................................................................. 16
ERISA................................................................................................. 6, 43
Events of Servicing Termination....................................................................... 33
Excluded Plan......................................................................................... 45
Exemption............................................................................................. 43
FDIC.................................................................................................. 1
Final Scheduled Distribution Date..................................................................... 1
Financed Vehicles..................................................................................... 3, 15
Force Placed Insurance................................................................................ 13
FTC Rule.............................................................................................. 38
Holders............................................................................................... 22
Indirect Participants................................................................................. 22
Interest Collections.................................................................................. 28, 29
Liquidation Proceeds.................................................................................. 27
Moody's............................................................................................... 25
Motor Vehicle Loans................................................................................... 11
Net Loss Ratio........................................................................................ 27
Obligors.............................................................................................. 8
Original Certificate Balance.......................................................................... 3
Original Class A Certificate Balance.................................................................. 3
Original Class B Certificate Balance.................................................................. 3
Original Pool Balance................................................................................. 3
Outstanding Advances.................................................................................. 6
Participants.......................................................................................... 21
parties in interest................................................................................... 43
Pass-Through Rate..................................................................................... 4
Paying Agent.......................................................................................... 24
Plan.................................................................................................. 43
Pool Balance.......................................................................................... 3
PTE................................................................................................... 43
Purchase Price........................................................................................ 41
Purchased Receivable.................................................................................. 29
Qualified Institution................................................................................. 24
Qualified Trust Company............................................................................... 24
Rating Agency......................................................................................... 27
Rating Agency Condition............................................................................... 6
Realized Losses....................................................................................... 31
Receivables........................................................................................... 1, 3, 15
Receivables Pool...................................................................................... 15
Record Date........................................................................................... 4
Recoveries............................................................................................ 28
Regulation............................................................................................ 43
Repurchase Amount..................................................................................... 24
Reserve Account....................................................................................... 5
Reserve Account Initial Deposit....................................................................... 5
Restricted Group...................................................................................... 44
</TABLE>
49
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
TERMS PAGE
- ------------------------------------------------------------------------------------------------------ ---------
<S> <C>
Seller................................................................................................ 1, 3
Servicer.............................................................................................. 1, 3
Servicing Fee......................................................................................... 5
Servicing Fee Rate.................................................................................... 5, 26
Shortfall Amount...................................................................................... 10
Specified Reserve Account Balance..................................................................... 6
Standard & Poor's..................................................................................... 25
Transfer Agent and Registrar.......................................................................... 23
Trust................................................................................................. 1, 3
Trustee............................................................................................... 1, 3
UCC................................................................................................... 36
Underwriters.......................................................................................... 46
Underwriting Agreement................................................................................ 46
United States person.................................................................................. 43
USAA.................................................................................................. 12, 20
</TABLE>
50
<PAGE>
<PAGE>
__________________________________ __________________________________
NO DEALER, SALESPERSON, OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS IN CONNECTION WITH THE OFFER MADE
BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY USAA FEDERAL SAVINGS BANK
OR THE UNDERWRITERS. 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 USAA FEDERAL SAVINGS BANK OR THE RECEIVABLES SINCE
THE DATE HEREOF. 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>
Reports to Certificateholders.................. 2
Available Information.......................... 2
Incorporation of Certain Documents by
Reference.................................... 2
Prospectus Summary............................. 3
Risk Factors................................... 8
The Bank's Portfolio of Motor Vehicle Loans.... 11
The Trust...................................... 15
The Receivables Pool........................... 16
Yield Considerations........................... 19
Pool Factors................................... 19
Use of Proceeds................................ 20
USAA Federal Savings Bank...................... 20
United Services Automobile Association......... 20
The Certificates............................... 21
Certain Legal Aspects of the Receivables....... 36
Certain Federal Income Tax Consequences........ 38
ERISA Considerations........................... 43
Underwriting................................... 46
Validity of the Certificates................... 47
Glossary of Terms.............................. 48
</TABLE>
------------------------
UNTIL , 1998 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS) ALL
DEALERS EFFECTING TRANSACTIONS IN THE CERTIFICATES, 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 AN UNDERWRITER AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
USAA AUTO LOAN
GRANTOR TRUST 1997-1
$679,200,000 %
AUTOMOBILE LOAN
PASS-THROUGH CERTIFICATES, CLASS A
$21,005,448.34 %
AUTOMOBILE LOAN
PASS-THROUGH CERTIFICATES, CLASS B
[LOGO]
USAA FEDERAL SAVINGS BANK
SELLER AND SERVICER
------------------------
PROSPECTUS
------------------------
Underwriters of the Class A Certificates
MERRILL LYNCH & CO.
CITICORP SECURITIES, INC.
J.P. MORGAN & CO.
UBS SECURITIES
Underwriter of the Class B Certificates
MERRILL LYNCH & CO.
, 1997
__________________________________ __________________________________
<PAGE>
<PAGE>
PART II.
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Expenses in connection with the offering of the Certificates being
registered herein are estimated as follows:
<TABLE>
<S> <C>
Registration Fee............................................................... $212,183.47*
Legal Fees and Expenses........................................................ 70,000.00
Accounting Fees and Expenses................................................... 22,000.00
Blue Sky Fees and Expenses..................................................... 10,000.00
Rating Agency Fees............................................................. 191,701.00
Trustee's Fees and Expenses.................................................... 9,000.00
Printing....................................................................... 40,000.00
Miscellaneous.................................................................. 20,000.00
-----------
Total..................................................................... $574,884.47
-----------
-----------
</TABLE>
- ------------
* $303.03 has been previously paid.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Reference is made to the following document filed as an exhibit to this
Registration Statement which document is incorporated herein by reference:
Article VI of the By-Laws of USAA Federal Savings Bank (Exhibit 3.2
hereto).
Reference is also made to 12 C.F.R. SS545.121.
For the undertaking with respect to indemnification, see Item 17
herein.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a)
<TABLE>
<CAPTION>
EXHIBITS DESCRIPTION
- -------- -------------------------------------------------------------------------------------------------------------
<C> <S>
1.1 -- Form of Underwriting Agreement.
3.1 -- Charter of the Registrant.*
3.2 -- By-laws of the Registrant.*
4.1 -- Form of Pooling and Servicing Agreement between the Registrant and the Trustee.
5.1 -- Opinion of Jones, Day, Reavis & Pogue with respect to legality.
8.1 -- Opinion of Jones, Day, Reavis & Pogue with respect to tax matters.
23.1 -- Consent of Jones, Day, Reavis & Pogue (included as part of Exhibit 5.1).
23.2 -- Consent of Jones, Day, Reavis & Pogue (included as part of Exhibit 8.1).
24.1 -- Power of Attorney (included as part of signature page).*
</TABLE>
- ------------
* Previously Filed.
(b) Financial Statements:
Not applicable.
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(a) To provide to the Underwriters at the closing specified in the
Underwriting Agreement certificates in such denominations and registered in
such names as required by the Underwriters to permit prompt delivery to
each purchaser.
II-1
<PAGE>
<PAGE>
(b) That, insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended (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, such 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) That, 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 the form
of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Act shall be deemed to be part of the registration
statement as of the time it was declared effective.
(d) That, for the purpose of determining any liability under the Act,
each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at the time shall be
deemed to be the initial bona fide offering thereof.
(e) That the undersigned Registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act of 1933,
each filing of the registrant's annual report pursuant to Section 13(a) or
15(d) of the Securities Exchange Act of 1934 (and, where applicable, each
filing of an employee benefit plan's annual report pursuant to Section
15(d) of the Securities Exchange Act of 1934) that is incorporated by
reference in the registration statement shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
II-2
<PAGE>
<PAGE>
SIGNATURES
The Registrant. Pursuant to the requirements of the Securities Act of 1933,
the Registrant has duly caused this Amendment to the Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of San Antonio, State of Texas on this 24th day of October, 1997.
USAA FEDERAL SAVINGS BANK
By /S/ *
..................................
MARK H. WRIGHT
PRESIDENT AND CHIEF EXECUTIVE
OFFICER
(PRINCIPAL EXECUTIVE OFFICER)
By /S/ *
..................................
SUSAN K. EVERS
SENIOR VICE PRESIDENT FINANCE
(PRINCIPAL FINANCIAL OFFICER AND
PRINCIPAL ACCOUNTING OFFICER)
Pursuant to the requirements of the Securities Act of 1933, the
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
- ------------------------------------------ ----------------------------------------------- -----------------
<C> <S> <C>
/s/ * Chairman October 24, 1997
.........................................
(ROBERT G. DAVIS)
/s/ * Director October 24, 1997
.........................................
(CHARLES E. BISHOP)
/s/ * Director October 24, 1997
.........................................
(ARTHUR R. EMERSON)
/s/ * Director October 24, 1997
.........................................
(KENNETH R. FLEENOR)
/s/ * Director October 24, 1997
.........................................
(RICHARD W. HAGAUER)
/s/ * Director October 24, 1997
.........................................
(CARLOS R. MONTEMAYOR)
/s/ * Director October 24, 1997
.........................................
(JAMES E. OLSSON)
Director October 24, 1997
.........................................
(JANE B. PHIPPS)
</TABLE>
II-3
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
- ------------------------------------------ ----------------------------------------------- -----------------
<C> <S> <C>
Director October 24, 1997
.........................................
(DAVID M. ROBINSON)
/s/ * Director October 24, 1997
.........................................
(JOSUE ROBLES, JR.)
/s/ * Director October 24, 1997
.........................................
(MARK H. WRIGHT)
* /s/ MICHAEL J. BROKER, ESQ.
........................................
MICHAEL J. BROKER,
ATTORNEY-IN-FACT
</TABLE>
II-4
STATEMENT OF DIFFERENCE
-----------------------
The registered trademark symbol shall be expressed as ............. 'r'
<PAGE>
<PAGE>
USAA Auto Loan Grantor Trust 1997-1
__% Automobile Loan Pass-Through Certificates, Class A
__% Automobile Loan Pass-Through Certificates, Class B
USAA FEDERAL SAVINGS BANK
Seller and Servicer
UNDERWRITING AGREEMENT
_______ __, 1997
Merrill Lynch, Pierce, Fenner & Smith
Incorporated as Representative of the
Underwriters set forth herein
World Financial Center
North Tower, 15th Floor
New York, New York l0281-1315
Ladies and Gentlemen:
1. Introductory. USAA Federal Savings Bank (the "Bank") proposes
to cause USAA Auto Loan Grantor Trust 1997-1 (the "Trust") to sell to Merrill
Lynch, Pierce, Fenner & Smith Incorporated, [ ] and [ ] (individually, an
"Underwriter" and collectively, the "Underwriters") __% Automobile Loan
Pass-Through Certificates, Class A (the "Class A Certificates") and the __%
Automobile Loan Pass-Through Certificates, Class B (the "Class B Certificates"
and, together with the Class A Certificates, the "Certificates"). The
Certificates will be issued pursuant to a Pooling and Servicing Agreement
between the Bank, as Seller and Servicer, and The Chase Manhattan Bank, as
Trustee (the "Trustee"), dated as of _______ __, 1997 (the "Pooling and
Servicing Agreement"). Each Certificate will represent a fractional undivided
interest in the Trust. The assets of the Trust will include, among other things,
a pool of simple interest motor vehicle installment loans (the "Receivables")
secured by new and used automobiles and light-duty trucks (the "Financed
Vehicles") and certain monies due or to become due thereunder on or after the
Cutoff Date (as hereinafter defined), such Receivables to be sold to the Trust
and serviced
<PAGE>
<PAGE>
by the Bank. The Class A Certificates will be issued in an aggregate principal
amount of $[ ] and the Class B Certificates will be issued in an aggregate
principal amount of $[ ], which, together with the aggregate principal amount of
the Class A Certificates issued, is equal to the Original Pool Balance of the
Receivables as of the opening of business on _______ __, 1997 (the "Cutoff
Date"). Capitalized terms used herein and not otherwise herein defined shall
have the meanings ascribed to such terms in the Pooling and Servicing Agreement.
The Bank hereby agrees with the Underwriters, as follows:
2. Representations and Warranties of the Bank. The
Bank represents and warrants to, and agrees with the Underwriters that:
(i) A registration statement on Form S-3
(No. 333- ), including a prospectus and such amendments thereto
as may have been required on the date hereof, relating to the
Certificates, has been filed with the Securities and Exchange Commission
(the "Commission"). The conditions to the use of a registration
statement on Form S-3 under the Securities Act of 1933, as amended
(the "Act"), as set forth in the General Instructions to Form S-3, have
been, or will prior to the effective date of the Registration Statement
be, satisfied in all material respects with respect to the Bank and the
Registration Statement.
(ii) The Bank will next file with the Commission
either, (A) prior to the effectiveness of such registration statement, a
further amendment thereto (including the form of final prospectus) or
(B) after effectiveness of such registration statement, a final
prospectus in accordance with Rules 430A and 424(b) (each, as
hereinafter defined). In the case of clause (B), the Bank has included
in such registration statement, as amended at the Effective Date (as
hereinafter defined), all information (other than Rule 430A Information
(as hereinafter defined)) required by the Act and the rules and
regulations thereunder (the "Rules and Regulations") to be included in
the prospectus with respect to the Certificates and the offering there-
2
<PAGE>
<PAGE>
of. As filed, such amendment and form of final prospectus, or such final
prospectus, shall include all Rule 430A Information and, except to the
extent Underwriter shall agree in writing to a modification, shall be in
all substantive respects in the form furnished to the Underwriters prior
to the Execution Time (as hereinafter defined) or, to the extent not
completed at the Execution Time, shall contain only such specific
additional information and other changes (beyond that contained in the
latest Preliminary Prospectus (as hereinafter defined) which has
previously been furnished to the Underwriters) as the Bank has advised
the Underwriters, prior to the Execution Time, will be included or made
therein.
The terms which follow, when used in this Agreement, shall have the
meanings indicated. The term "Effective Date" shall mean each date that
the Registration Statement and any post-effective amendment or
amendments thereto became or become effective under the Act. "Execution
Time" shall mean the date and time that this Agreement is executed and
delivered by the parties hereto. "Preliminary Prospectus" shall mean any
preliminary prospectus referred to in the preceding paragraph and any
preliminary prospectus included in the Registration Statement which, as
of the Effective Date, omits Rule 430A Information. "Prospectus" shall
mean the prospectus relating to the Certificates that is first filed
with the Commission pursuant to Rule 424(b) and any prospectus
subsequently filed pursuant to Rule 424 or, if no filing pursuant to
Rule 424(b) is required, shall mean the form of final prospectus
included in the Registration Statement at the Effective Date.
"Registration Statement" shall mean the registration statement referred
to in the preceding paragraph and any registration statement required to
be filed under the Act or the Rules and Regulations, including
incorporated documents, exhibits and financial statements, in the form
in which it has, or shall, become effective and, in the event that any
post effective amendment thereto becomes effective prior to the Closing
Date (as hereinafter defined), shall also mean such registration
statement as so amended. Such term shall include Rule 430A Information
deemed to be included therein at the Effective Date as
3
<PAGE>
<PAGE>
provided by Rule 430A. "Rule 424" and "Rule 430A" refer to such rules
and regulations under the Act. "Rule 430A Information" means information
with respect to the Certificates and the offering thereof permitted to
be omitted from the Registration Statement when it becomes effective
pursuant to Rule 430A.
(iii) On the Effective Date, the Registration
Statement did, or will, comply in all material respects with the
applicable requirements of the Act and the Rules and Regulations; on the
Effective Date and when the Prospectus is first filed (if required) in
accordance with Rule 424(b) and on the Closing Date, the Prospectus (and
any supplements thereto) will comply in all material respects with the
applicable requirements of the Act and the Rules and Regulations; on the
Effective Date, the Registration Statement did not, or will not, contain
any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the
statements therein not misleading; and, on the Effective Date, the
Prospectus, if not filed pursuant to Rule 424(b), did not, or will not,
and on the date of any filing pursuant to Rule 424(b) and on the Closing
Date, the Prospectus (together with any supplement thereto) will not,
include any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading;
provided, however, that the Bank makes no representations or warranties
as to the information contained in, or omitted from, the Registration
Statement or the Prospectus (or any supplements thereto) in reliance
upon, and in conformity with, information furnished in writing to the
Bank on the Underwriters' behalf specifically for use in connection with
the preparation of the Registration Statement or the Prospectus (or any
supplements thereto).
(iv) As of the Closing Date, the representations
and warranties of the Bank, as Seller and Servicer, in the Pooling and
Servicing Agreement will be true and correct, and each Receivable
4
<PAGE>
<PAGE>
will satisfy the conditions set forth in Section 12.1(b) thereof.
(v) No consent, approval, authorization or order
of, or filing with, any court or governmental agency or body is required
to be obtained or made by the Bank for the consummation of the
transactions contemplated by this Agreement, 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 Trust's interest in the Receivables.
(vi) The Bank is not in violation of its By-Laws or
in default in the performance or observance of any obligation,
agreement, covenant or condition contained in any agreement or
instrument to which it is a party or by which it or its properties are
bound which would have a material adverse effect on the transactions
contemplated herein or in the Pooling and Servicing Agreement. The
execution, delivery and performance of this Agreement and the Pooling
and Servicing Agreement, and the issuance and sale of the Certificates
and compliance with the terms and provisions thereof will not result in
a breach or violation of any of the terms and provisions of, or
constitute a default under, any statute, rule, regulation or order of
any governmental agency or body or any court having jurisdiction over
the Bank or any of its properties or any agreement or instrument to
which the Bank is a party or by which the Bank is bound or to which any
of the properties of the Bank is subject, or By-Laws of the Bank and the
Bank has full power and authority to authorize, cause the Trust to
issue, and sell the Certificates as contemplated by this Agreement, to
enter into this Agreement and the Pooling and Servicing Agreement and to
consummate the transactions contemplated herein and therein.
(vii) This Agreement has been duly authorized,
executed and delivered by the Bank.
3. Purchase, Sale, Payment and Delivery of Certifi- cates. On the
basis of the representations, warranties and agreements herein contained, but
subject to the terms and conditions herein set forth, the Bank agrees to sell to
the
5
<PAGE>
<PAGE>
Underwriters, and the Underwriters agree severally, and not jointly, to purchase
from the Bank the number and type of Class A Certificates and Class B
Certificates set forth in Schedule A opposite the name of each such Underwriter.
The Class A Certificates are to be purchased at a purchase price of ______% of
the aggregate principal amount thereof plus accrued interest, if any, from
_______ __, 1997 and the Class B Certificates ar to be purchased at a purchase
price of ___% of the aggregate principal amount thereof plus accrued interest,
if any, from _______ __, 1997.
The Bank will deliver the Certificates to the Underwriters
against payment of the purchase price in immediately available funds drawn to
the order of the Bank at the offices of Skadden, Arps, Slate, Meagher & Flom LLP
in New York, New York 10022 at 10:00 a.m., New York City time on _______ __,
1997 or at such other time not later than seven full business days thereafter as
the Underwriters and the Bank determine, such time being herein referred to as
the "Closing Date". The Certificates so to be delivered shall be represented by
definitive certificates registered in the name of Cede & Co., as nominee for The
Depository Trust Company and definitive certificate(s) registered in the name(s)
provided by the Underwriters, each in such numbers as the Underwriters shall
request. The Bank shall make such definitive certificates representing the
Certificates available for inspection by the Underwriters at the office at which
the Certificates are to be delivered no later than _______ __, New York City
time, on the business day prior to the Closing Date.
4. Offering by the Underwriters. It is understood that, after the
Registration Statement becomes effective, the Underwriters propose to offer the
Certificates for sale to the public (which may include selected brokers and
dealers) as set forth in the Prospectus.
5. Certain Agreements of the Bank. The Bank agrees with the
Underwriters that:
(i) The Bank will use its best efforts to cause
the Registration Statement, and any amendment thereto, if not effective
at the Execution Time, to become effective. If the Registration
Statement has become or becomes effective pursuant to Rule 430A, or
filing of the Prospectus is otherwise required under Rule 424(b), the
Bank will file the prospectus, properly completed, pursuant to Rule
6
<PAGE>
<PAGE>
424(b) within the time period prescribed and will provide evidence
satisfactory to the Underwriters of such timely filing. The Bank will
advise the Underwriters promptly of any proposal to amend or supplement
the Registration Statement or the Prospectus, and will not effect any
such amendment or supplementation to which the Underwriters shall
reasonably object. The Bank will also advise you promptly of the
effectiveness of any amendment or supplementation of the Registration
Statement or Prospectus, of any request by the Commission for any
amendment or supplementation of the Registration Statement or the
Prospectus or for any additional information, of the receipt by the Bank
of any notification with respect to the suspension of qualification of
the Certificates for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose and of the institution by
the Commission of any stop order proceeding 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.
(ii) If, at any time when a prospectus relating to
the Certificates is required to be delivered under the Act, 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 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 Bank promptly will prepare and
file with the Commission (subject to the Underwriters' prior review
pursuant to paragraph (i) of this Section 5) an amendment or supplement
which will correct such statement or omission or an amendment or
supplement which will effect such compliance.
(iii) As soon as practicable, the Bank will cause
the Trust to make generally available to the Certificateholders of the
Trust an earning statement or statements of the Trust covering a period
of at least 12 months beginning after the Effective Date of the
Registration Statement which will satisfy the provisions of Section
11(a) of the
7
<PAGE>
<PAGE>
Act and Rule 158 of the Commission promulgated thereunder.
(iv) The Bank will furnish to the Underwriters
copies of the Registration Statement, each related preliminary
prospectus, the Prospectus and all amendments and supplements to such
documents, in each case as soon as available and in such quantities as
the Underwriters may reasonably request.
(v) The Bank will cooperate with any Underwriter in
arranging for the qualification of the Certificates for sale and the
determination of their eligibility for investment under the laws of such
jurisdictions as such Underwriter designates and will continue such
qualifications in effect so long as required for the distribution of the
Certificates; provided, however, that the Bank shall not be obligated to
qualify to do business in any jurisdiction in which it is not currently
so qualified or to take any action which would subject it to general or
unlimited service of process in any jurisdiction where it is not now so
subject.
(vi) For a period from the date of this Agreement
until the retirement of the Certificates, the Bank, as Servicer, will
furnish to you copies of each certificate and the annual statements of
compliance delivered to the Trustee pursuant to Article XIII of the
Pooling and Servicing Agreement and the annual independent public
accountant's reports furnished to the Trustee pursuant to Article XIII
of the Pooling and Servicing Agreement, as soon as practicable after
such statements and reports are furnished to the Trustee.
(vii) So long as any of the Certificates are
outstanding, the Bank will furnish to you as soon as practicable, (A)
all documents distributed, or caused to be distributed, by the Bank to
the Certificateholders, (B) all documents filed, or caused to be filed,
by the Bank with the Commission pursuant to the Securities Act of 1933,
as amended, any order of the Commission thereunder or pursuant to a
"no-action" letter from the staff of the Commission and (C) from time to
time, such other infor-
8
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<PAGE>
mation in the possession of the Bank concerning the Trust and any other
information concerning the Bank filed with any governmental or
regulatory authority which is otherwise publicly available as you may
reasonably request.
(viii) On or before the Closing Date, the Bank
shall cause its computer records relating to the Receivables to be
marked to show the Trust's absolute ownership of the Receivables, and
from and after the Closing Date the Bank shall not, as Seller or
Servicer, take any action inconsistent with the Trust's ownership of
such Receivables, other than as permitted by the Pooling and Servicing
Agreement.
(ix) To the extent, if any, that the
ratings provided with respect to the Class A Certificates and the Class
B Certificates by Moody's Investors Service, Inc. and Standard & Poor's
Corporation are conditional upon the furnishing of documents or the
taking of any other action by the Bank agreed upon on or prior to the
Closing Date, the Bank shall furnish such documents and take any such
action.
6. Payment of Expenses. The Bank will pay all expenses incident
to the performance of its obligations under this Agreement, including (i) the
printing and filing of the Registration Statement as originally filed and of
each amendment thereto, (ii) the Trustee's acceptance fee and the fees and
disbursements of the counsel to the Trustee, (iii) the fees and disbursements of
the accountants, (iv) the fees of the rating agencies and (v) blue sky expenses;
provided, however, that the Underwriters may reimburse the Bank for certain
expenses incurred by the Bank as agreed to by the Underwriters and the Bank.
7. Conditions to the Obligations of the Underwriters. The
obligation of the Underwriters to purchase and pay for the Certificates will be
subject to the accuracy of the representations and warranties on the part of the
Bank herein, to the accuracy of the statements of officers of the Bank made
pursuant to the provisions hereof, to the performance by the Bank of its
obligations hereunder and to the following additional conditions precedent:
9
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<PAGE>
(i) On or prior to the date of this Agreement, the
Underwriters shall have received a letter, dated the date of this
Agreement, of KPMG Peat Marwick and substantially in the form heretofore
agreed and otherwise in form and substance agreed to by the
Underwriters.
(ii) If the Registration Statement has not become
effective prior to the date of this Agreement, unless the Underwriters
agree in writing to a later time, the Registration Statement shall have
become effective not later than (A) 6:00 p.m., New York City time, on
the date of determination of the public offering price, if such
determination occurred at or prior to 12:00 noon, New York City time, on
such date or (B) 3:00 p.m. on the business day following the day on
which the public offering price was determined, if such determination
occurred after 12:00 noon, New York City time, on such date; if filing
of the Prospectus, or any supplement thereto, is required pursuant to
Rule 424(b), the Prospectus shall be filed in the manner and within the
time period required by Rule 424(b); and 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
threatened.
(iii) Subsequent to the execution and delivery of
this Agreement, there shall have not occurred (a) any change, or any
development involving a prospective change, in or affecting particularly
the business or properties of the Bank [or USAA Capital Corporation]
which, in the reasonable judgment of the Underwriters materially impairs
the investment quality of either Class of Certificates; (b) any
suspension or material limitation of trading in securities generally on
the New York Stock Exchange, or any setting of minimum prices for
trading on such exchange, or any suspension of trading of any securities
of the Bank or of [USAA Capital Corporation] on any exchange or in the
over-the-counter market by such exchange or over-the-counter market or
by the Commission; (c) any banking moratorium declared by Federal, New
York or Texas authorities; or (d) any outbreak or material escalation of
major hostilities or any other substantial national or
10
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<PAGE>
international calamity or emergency if, in the reasonable judgment of
the Underwriters, the effect of any such outbreak, escalation, calamity
or emergency on the United States financial markets makes it
impracticable or inadvisable to proceed with completion of the sale of,
and any payment for, the Certificates.
(iv) You shall have received an opinion, dated the Closing
Date, of Michael J. Broker, Vice President and Banking Counsel of the
Bank, substantially to the effect that:
(a) The Bank (1) has been duly chartered and is
validly existing as a federal savings association under the laws of the
United States, (2) has the power and authority to own its properties and
conduct its business as described in the Prospectus and (3) had at all
relevant times, and now has, the power, authority and legal right to
acquire, own, sell and service the Receivables;
(b) The Bank has the power and authority to execute
and deliver this Agreement and the Pooling and Servicing Agreement and
to consummate the transactions contemplated herein and therein;
(c) No consent, approval, authorization or order
of, or filing with, any Texas or federal governmental agency or body or
any court is required by the Bank to perform the transactions
contemplated by this Agreement or the Pooling and Servicing Agreement
except for (1) filing of a Uniform Commercial Code financing statement
in the State of Texas with respect to the transfer of the Receivables to
the Trust pursuant to the Pooling and Servicing Agreement and (2) such
consents, approvals, authorizations, orders or filings as may be
required under the federal and state securities laws;
(d) None of the execution, delivery and
performance by the Bank of this Agreement or the Pooling and Servicing
Agree-
11
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<PAGE>
ment, the transfer of the Receivables to the Trust, the assignment of
the security interests of the Bank in the Financed Vehicles, the
issuance and sale of the Certificates or the consummation of any other
of the transactions contemplated herein or in the Pooling and Servicing
Agreement, will conflict with, result in a breach, violation or
acceleration of any of the terms of, or constitute a default under, the
By-Laws or the Charter of the Bank, as amended, or, to the best of such
counsel's knowledge, any rule, order, statute or regulation known to
such counsel to be currently applicable to the Bank of any court,
regulatory body, administrative agency or governmental body having
jurisdiction over the Bank or the terms of any material indenture or
other material agreement or instrument known to such counsel to which
the Bank is a party or by which it or its properties are bound;
(e) To the best knowledge of such counsel, after
due inquiry, there are no actions, proceedings or investigations pending
or threatened before any court, administrative agency or other tribunal
(1) asserting the invalidity of this Agreement, or the Pooling and
Servicing Agreement, or either Class of the Certificates, (2) seeking to
prevent the issuance of the Certificates or the consummation of any of
the transactions contemplated by this Agreement, the Pooling and
Servicing Agreement, or (3) seeking adversely to affect the federal
income tax attributes of either Class of Certificates as described in
the Prospectus under the headings "Prospectus Summary -- Tax Status" and
"Certain Federal Income Tax Consequences";
(f) The Pooling and Servicing Agreement, has been
duly authorized, executed and delivered by the Bank;
(g) This Agreement has been duly authorized,
executed and delivered by the Bank; and
12
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<PAGE>
(h) The statements in the Prospectus under the
caption "Certain Legal Aspects of the Receivables," to the extent they
constitute matters of law or legal conclusions, are correct in all
material respects.
In rendering such opinion, such counsel may rely (A) as to
matters involving the application of laws of any jurisdiction other than
the State of Texas and the United States, to the extent deemed proper
and stated in such opinion, upon the opinion of other qualified counsel
of good standing, and (B) as to matters of fact, to the extent deemed
proper and as stated therein, on certificates of responsible officers of
the Trust, the Bank and public officials. References to the Prospectus
in this paragraph (iv) include any supplements thereto.
(v) You shall have received an opinion, dated the
Closing Date of Jones, Day, Reavis & Pogue, special counsel to the Bank,
substantially to the effect that:
(a) The Certificates have been duly and
validly authorized and, when executed, authenticated and issued
in accordance with the terms of the Pooling and Servicing
Agreement, and delivered to and paid for by the Underwriters
pursuant to this Agreement, will be duly and validly issued and
outstanding and will be entitled to the benefits of the Pooling
and Servicing Agreement;
(b) Assuming the authorization,
execution and delivery thereof by the Trustee with respect to
the Pooling and Servicing Agreement, such agreement constitutes
the legal, valid and binding agreement of the Bank, enforceable
against the Bank in accordance with its terms, subject, as to
enforcement, to (1) the effect of bankruptcy, insolvency,
reorganization, moratorium, conservatorship, receivership or
other similar laws of general application relating to or
affecting creditors' rights generally or the rights of creditors
of federal savings associations; (2) the application of general
principles of equity (regard-
13
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<PAGE>
less of whether such enforceability is considered in a
proceeding in equity or at law); (3) the unenforceability under
certain circumstances of provisions indemnifying a party against
liability where such indemnification is contrary to public
policy; (4) the effect of judicial decisions which have held
that certain covenants and provisions of agreements are
unenforceable where (A) the breach of such covenants or
provisions imposes restrictions or burdens where it cannot be
demonstrated that such breach is a material breach of a material
covenant or provision or (B) the creditor's enforcement of such
covenants or provisions under the circumstances would violate
the creditor's implied covenant of good faith and fair dealing;
and (5) the unenforceability of provisions in the Pooling and
Servicing Agreement to the effect that failure to exercise or
delay in exercising rights or remedies will not operate as a
waiver of any such rights or remedies, or to the effect that
provisions therein may only be waived in writing to the extent
that an oral agreement modifying such provisions has been
entered into;
(c) The Registration Statement became
effective under the Act as of the date and time specified in
such opinion; after due inquiry, to the best of such counsel's
knowledge, no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for
that purpose have been instituted or are pending or contemplated
under the Act; the Registration Statement, and each amendment
thereof or supplement thereto as of its Effective Date and the
Prospectus as of its date of issuance complied as to form in all
material respects with the requirements of the Act and the Rules
and Regulations; and such counsel has no reason to believe that
either the Registration Statement or the Prospectus or any such
amendment thereof or supplement thereto as of its Effective Date
or date of issuance, as the case may be, contained any untrue
statement of a material fact or omitted to state any material
fact required to be stated
14
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<PAGE>
therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading; it
being understood that such counsel need express no opinion as to
the financial statements or other financial data contained in
the Registration Statement or the Prospectus;
(d) The Class A Certificates, Class B
Certificates, the Pooling and Servicing Agreement and this
Agreement, conform in all material respects to the descriptions
thereof set forth in the Registration Statement and the
Prospectus;
(e) The Pooling and Servicing Agreement
is not required to be qualified under the Trust Indenture Act of
1939, as amended; and
(f) The Trust is not now, and
immediately following the sale of the Certificates pursuant to
this Agreement will not be, required to be registered under the
Investment Company Act of 1940, as amended.
In addition, such counsel shall opine as to certain
matters relating to the acquisition by the Bank of a perfected first
priority security interest in the vehicles financed by motor vehicle
installment loans made by the Bank and that the Receivables constitute
"chattel paper" (as defined in Section 9.105(a)(2) of the Uniform
Commercial Code of the State of Texas).
In rendering such opinion, such counsel may rely (A) as to
matters involving the application of laws of any jurisdiction other than
the State of Texas and the United States, to the extent deemed proper
and stated in such opinion, upon the opinion of other qualified counsel
of good standing, and (B) as to matters of fact, to the extent deemed
proper and as stated therein, on certificates of responsible officers of
the Trust, the Bank and public officials. References to the Prospectus
in this paragraph (v) include any supplements thereto.
15
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<PAGE>
(vi) You shall have received an opinion or opinions
of Jones, Day, Reavis & Pogue, special counsel to the Bank, dated the
Closing Date and satisfactory in form and substance to you, with respect
to certain matters relating to the transfer of the Receivables to the
Trust, with respect to the perfection of the Trust's interests in the
Receivables and with respect to certain other matters.
(vii) You shall have received from Skadden, Arps,
Slate, Meagher & Flom LLP, counsel to the Underwriters, such opinion or
opinions, dated the Closing Date and satisfactory in form and substance
to you, with respect to the validity of the Certificates, the
Registration Statement, the Prospectus and other related matters as the
Underwriters may require, and the Bank shall have furnished to such
counsel such documents as they reasonably request for the purpose of
enabling them to pass upon such matters.
(viii) You shall have received an opinion of Jones,
Day, Reavis & Pogue, special tax counsel to the Bank, dated the Closing
Date and satisfactory in form and substance to you substantially to the
effect that:
(a) the Trust created by the Pooling and
Servicing Agreement will not be classified as an association
taxable as a corporation for federal income tax purposes and,
instead, under subpart E, part I of subchapter J of the Internal
Revenue Code of 1986, as amended, the Trust will be treated as a
grantor trust, and subject to possible recharacterization of
certain amounts paid by the Trust to the Seller or the Servicer,
the holders of the Class A Certificates or the Class B
Certificates will be treated as owning an undivided pro-rata
interest in the income and corpus attributable to the Trust;
(b) The statements in the Reg- istration
Statement and Prospectus under the headings "Prospectus Summary
-- Tax Status" and "Certain Federal Income Tax Consequences" to
the extent that they constitute matters of law
16
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<PAGE>
or legal conclusions with respect thereto, have been prepared or
reviewed by such counsel and are correct in all material
respects; and
(c) For Texas franchise tax purposes,
the Trust created by the Pooling and Servicing Agreement will
not be subject to Texas franchise taxes.
(ix) You shall have received an opinion of counsel
to the Trustee, dated the Closing Date and satisfactory in form and
substance to you, substantially to the effect that:
(a) the Trustee has been duly
incorporated and is validly existing as a banking organization
organized under the laws of the state of New York;
(b) The Trustee has full corporate
trust power and authority to enter into and perform its
obligations under the Pooling and Servicing Agreement;
(c) The Pooling and Servicing Agreement
has been duly authorized, executed and delivered by the Trustee
and constitutes a valid and legally binding agreement of the
Trustee, enforceable against the Trustee in accordance with its
terms, subject, as to enforcement of remedies, (a) to applicable
bankruptcy, insolvency, reorganization, and other similar laws
affecting the rights of creditors generally, and (b) to general
principles of equity (regardless of whether such enforceability
is considered in a proceeding in equity or at law);
(d) The Trustee has duly exe- cuted and
authenticated the Certificates issued on the date hereof on
behalf of the Trust;
(e) No consent, approval or
authorization of, or registration, declaration or filing with,
or giving of notice to or the taking of any other act with
respect to any court or governmental authority, agency or body
17
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of the United States of America or of any state governing the
trust powers of the Trustee is required under any existing laws
or regulation for the consummation on the part of the Trustee of
any of the transactions contemplated in the Pooling and
Servicing Agreement, except such as have been obtained; and
(f) The execution and delivery of the
Pooling and Servicing Agreement and the performance by the
Trustee of the terms thereof do not conflict with or result in a
violation of (1) any laws or regulations of the United States of
America or of any state governing the trust powers of the
Trustee, (2) the Articles of Incorporation or By-Laws of the
Trustee or (3) any material agreement, instrument, order, writ,
judgment or decree known to such counsel to which the Trustee is
a party or is subject.
In rendering such opinions, counsel to the Trustee may rely on
the opinion of the office of the general counsel to the Trustee.
(x) The Underwriters shall have received a letter,
dated the Closing Date, of KPMG Peat Marwick which meets the
requirements of the subsection (i) of this Section 7, except that the
specified date referred to in such subsection will be a date not more
than five days prior to the Closing Date for the purposes of this
subsection.
(xi) The Underwriters shall have re- ceived
evidence satisfactory to them that the Class A Certificates have been
rated in the highest rating category by each of Moody's Investors
Service, Inc. and by Standard & Poor's Corporation and that the Class B
Certificates have been rated in one of the four highest rating
categories by each of the foregoing rating agencies.
(xii) You shall have received a cer- tificate,
dated the Closing Date, of a Vice President or more senior officer of
the Bank in which such officer shall state that, to the best of his or
her knowledge after reasonable investigation, the representations and
warranties of the Bank in this
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Agreement are true and correct in all material respects on and as of the
Closing Date, that the Bank has complied with all agreements and
satisfied all conditions on its part to be performed or satisfied
hereunder at or prior to the Closing Date, that the representations and
warranties of the Bank, as Seller and as Servicer, in the Pooling and
Servicing Agreement and the conditions set forth in Section 12.1(b) of
the Pooling and Servicing Agreement, are true and correct as of the
dates specified in the Pooling and Servicing Agreement, that no stop
order suspending the effectiveness of the Registration Statement has
been issued and no proceedings for that purpose have been instituted or
are threatened by the Commission and that, subsequent to the date of the
Prospectus, there has been no material adverse change in the financial
position or results of operation of the Bank's motor vehicle installment
loan business except as set forth in or contemplated by the Prospectus
or as described in such certificate.
The Bank will furnish or cause to be furnished to the Underwriters such
number of conformed copies of such opinions, certificates, letters and documents
as the Underwriters reasonably request.
8. Indemnification.
(i) The Bank will indemnify and hold harmless each
Underwriter and each person, if any, who controls such Underwriter with
the meaning of Section 15 of the Act against any losses, claims, damages
or liabilities to which the 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 preliminary prospectus, the
Prospectus, or any amendment or supplement thereto, 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 the Underwriter
for any legal or other expenses reasonably incurred by the
19
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Underwriter in connection with investigating or defending any such
action or claim; provided, however, that the Bank shall not be liable in
any such case to the extent that any such loss, claim, damage or
liability arises out of, or is based upon, an untrue statement or
alleged untrue statement or omission or alleged omission made in the
Registration Statement, the preliminary prospectus or the Prospectus or
any such amendment or supplement in reliance upon and in conformity with
written information furnished to the Bank by the Underwriter expressly
for use therein.
(ii) Each Underwriter agrees severally to indemnify
and hold harmless the Bank, its directors, each of its officers or
agents who signed the Registration Statement, and each person, if any,
who controls the Bank within the meaning of Section 15 of the Act
against any and all loss, liability, claim, damage and expense described
in the indemnity contained in subsection (i) of this Section 8, as
incurred, but only with respect to untrue statements or omissions, or
alleged untrue statements or omissions, made in the Registration
Statement (or any amendment thereto) or any preliminary prospectus or
the Prospectus (or any amendment or supplement thereto) in reliance upon
and in conformity with written information furnished to the Bank by each
Underwriter expressly for use in the Registration Statement (or any
amendment thereto) or such preliminary prospectus or the Prospectus (or
any amendment or supplement thereto).
(iii) Each indemnified party shall give prompt
notice to the indemnifying party of any action commenced against the
indemnified party in respect of which indemnity may be sought hereunder,
but failure to so notify an indemnifying party shall not relieve such
indemnifying party from any liability which it may have hereunder or
otherwise than on account of this indemnity agreement. In case any such
action shall be brought against an indemnified party and it shall have
notified the indemnifying party of the commencement thereof, the
indemnifying party shall be entitled to participate therein and, to the
extent that it shall wish, to assume the defense thereof, with counsel,
satisfactory to such
20
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indemnified party (who shall not, except with the consent of the
indemnified party, be counsel to the indemnifying party with respect to
such action), and it being understood that the indemnifying party shall
not, in connection with any one such action or separate but
substantially similar or related actions in the same jurisdiction
arising out of the same general allegations or circumstances, be liable
for the reasonable fees and expenses of more than one separate firm of
attorneys, and, after notice from the indemnifying party to the
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be liable to the indemnified party under
subsections (i) or (ii) of this Section 8 for any legal expenses of
other counsel or any other expenses, in each case subsequently incurred
by the indemnified party, in connection with the defense thereof other
than reasonable costs of investigation.
9. Contribution. In order to provide for just and equitable
contribution in circumstances in which the indemnity agreement provided for in
Section 8 is for any reason held to be unavailable other than in accordance with
its terms, then each indemnifying party shall contribute to the amount paid or
payable by such indemnifying party as a result of the losses, claims, damages or
liabilities referred to in 8(i) and 8(ii) above (i) in such proportion as is
appropriate to reflect the relative benefits received by the Bank on the one
hand and the respective Underwriter on the other from the offering of the
Certificates or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) above but also the relative
fault of the Bank on the one hand and of the respective Underwriter 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 Bank on the one hand and
the respective Underwriter 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 Bank bear to the total underwriting discounts and
commissions received by such Underwriter. 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 informa-
21
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tion supplied by the Bank or by any Underwriter and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such untrue statement or omission. The amount paid by an indemnified party as a
result of the losses, claims, damages or liabilities referred to in the first
sentence of this Section 9 shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any action or claim which is the subject of this
Section 9. Notwithstanding the provisions of this Section 9, each Underwriter
shall not be required to contribute any amount in excess of the underwriting
discount or commission applicable to the Certificates purchased by it hereunder.
The Bank and the Underwriters agree that it would not be just and equitable if
contribution pursuant to this Section 9 were determined by pro rata allocation
(even if the Underwriters were treated as one entity for such purpose) or by any
other method of allocation which does not take account of the equitable
considerations referred to above in this Section 9. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
10. Termination. The Underwriters may terminate this Agreement
immediately upon notice to the Bank, if at any time, prior to the Closing Date
relating thereto, there has occurred: (a) any change, or any development
involving a prospective change, in or affecting particularly the business or
properties of the Bank or [USAA Capital Corporation] which, in the reasonable
judgment of the Underwriters, materially impairs the investment quality of the
Class A Certificates or the Class B Certificates; (b) any suspension or material
limitation of trading in securities generally on the New York Stock Exchange, or
any setting of minimum prices for trading on such exchange, or any suspension of
trading of any securities of the Bank or of [USAA Capital Corporation] on any
exchange or in the over-the-counter market by such exchange or over-the-counter
market or by the Commission; (c) any banking moratorium declared by Federal, New
York or Texas authorities; or (d) any outbreak or material escalation of major
hostilities or any other substantial national or international calamity or
emergency if, in the reasonable judgment of the Underwriters, the effect of any
such outbreak, escalation, calamity or emergency on the United States financial
markets makes it impracticable or inadvisable to proceed with completion of the
sale of and any payment for the Certificates.
22
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11. Survival of Certain Representations and Obligations. The
respective indemnities, agreements, representations, warranties and other
statements of the Bank or its officers and of the Underwriters set forth in or
made pursuant to this Agreement will remain in full force and effect, regardless
of any investigation, or statement as to the results thereof, made by or on
behalf of the Underwriters, the Bank or any of their respective representatives,
officers or directors or any controlling person, and will survive delivery of
and payment for the Certificates. If for any reason the purchase of the
Certificates by the Underwriters is not consummated, the Bank shall remain
responsible for the expenses to be paid or reimbursed by it pursuant to Section
6 and the respective obligations of the Bank and the Underwriters pursuant to
Sections 6, 8 and 9 shall remain in effect. If the purchase of the Certificates
by the Underwriters is not consummated for any reason other than solely because
of the occurrence of any event specified in clauses (b), (c) or (d) of Section
7(iii), the Bank will reimburse the Underwriters for all out-of-pocket expenses
(including fees and disbursements of counsel) reasonably incurred by it in
connection with the offering of the Certificates.
12. Notices. All communications hereunder will be in writing and,
if sent to the Underwriters, will be mailed, delivered or telegraphed and
confirmed to the Underwriters at Merrill Lynch & Co., World Financial Center,
Attention: Managing Director, Asset-Backed Securities Department, or to such
other address as the Underwriters may designate in writing to the Bank, or if
sent to the Bank, will be mailed, delivered or telegraphed and confirmed to the
Bank at USAA Federal Savings Bank, 10750 McDermott Freeway, San Antonio, Texas
78288, Attention: Michael J. Broker.
13. Successors. This Agreement will inure to the benefit of, and
be binding upon, the parties hereto and their respective successors. Nothing
expressed or mentioned in this Agreement is intended or shall be construed to
give any person, firm or corporation, other than the parties hereto and their
respective successors and the controlling persons and officers and directors
referred to in Sections 8 and 9 and their heirs and legal representatives, any
legal or equitable right, remedy or claim under or in respect of this Agreement
or any provision herein contained. This Agreement and all conditions and
provisions hereof are intended to be for the sole and exclusive benefit of the
parties hereto and their respective successors, and said controlling persons and
offi-
23
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cers and directors and their heirs and legal representatives, and for the
benefit of no other person, firm or corporation. No purchaser of Certificates
from the Underwriters shall be deemed to be a successor by reason merely of such
purchase.
14. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all such
counterparts shall together constitute one and the same Agreement.
15. APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
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If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return to us the enclosed duplicate thereof,
whereupon it will become a binding agreement among the undersigned in accordance
with its terms.
Very truly yours,
USAA FEDERAL SAVINGS BANK
By: _____________________________
Name:
Title:
The foregoing Underwriting Agreement
is hereby confirmed and accepted as
of the date first above written.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
For itself and as Representative
of the Underwriters named
in Schedule A hereto.
By: __________________________________
Name:
Title:
<PAGE>
<PAGE>
SCHEDULE A
Aggregate Principal
Amount of the
Class A Certificates
--------------------
Underwriters
- ------------
Merrill Lynch, Pierce, Fenner & Smith $
Incorporated
[ ] $
[ ] $
Aggregate Principal
Amount of the
Class B Certificates
--------------------
Underwriter
- -----------
Merrill Lynch, Pierce, Fenner & Smith $
Incorporated
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USAA FEDERAL SAVINGS BANK
Seller and Servicer
and
[ ]
Trustee
on behalf of the Certificateholders
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POOLING AND SERVICING AGREEMENT
Dated as of _______ __, 1997
-----------------------------------------------
$
USAA Auto Loan Grantor Trust 1997-1
__% Automobile Loan Pass-Through Certificates, Class A
__% Automobile Loan Pass-Through Certificates, Class B
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TABLE OF CONTENTS
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Section Page
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ARTICLE I
Section 1.1 Creation of Trust......................................... 1
ARTICLE II
Section 2.1 Conveyance of Receivables................................. 2
ARTICLE III
ARTICLE IV
Section 4.1 Acceptance by Trustee..................................... 5
ARTICLE V
Section 5.1 Incorporation of Standard Terms and
Conditions of Agreement................................... 6
ARTICLE VI
Section 6.1 Special Definitions and Terms............................. 7
ARTICLE VII
Section 7.1 Additional Representations and Warranties of Seller....... 8
ARTICLES VIII-X.........................11
ARTICLE XI
Definitions
Section 11.1 Definitions..............................................15
Section 11.2 Usage of Terms. .........................................34
Section 11.3 Simple Interest Method; Allocations......................34
Section 11.4 References...............................................34
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Section 11.5 Section References..................................... 35
Section 11.6 Separate Agreements.................................... 35
ARTICLE XII
The Receivables......................... 36
Section 12.1 Representations and Warranties of
Seller; Conditions Relating to Receivables............. 36
Section 12.2 Repurchase Upon Breach or Failure
of a Condition......................................... 40
Section 12.3 Custody of Receivable Files............................ 41
Section 12.4 Duties of Servicer as Custodian........................ 42
Section 12.5 Instructions; Authority to Act......................... 43
Section 12.6 Custodian's Indemnification............................ 43
Section 12.7 Effective Period and Termination....................... 44
ARTICLE XIII
Administration and Servicing of Receivables
Section 13.1 Duties of Servicer..................................... 45
Section 13.2 Collection of Receivable Payments...................... 45
Section 13.3 Realization Upon Receivables........................... 46
Section 13.4 [Reserved]............................................. 47
Section 13.5 Maintenance of Security Interests
in Financed Vehicles................................... 47
Section 13.6 Covenants of Servicer.................................. 48
Section 13.7 Purchase of Receivables Upon
Breach................................................. 49
Section 13.8 Servicing Fee.......................................... 49
Section 13.9 Servicer's Certificate................................. 50
Section 13.10 Annual Statement as to Compliance...................... 51
Section 13.11 Annual Audit Report.................................... 51
Section 13.12 Access to Certain Documentation and
Information Regarding Receivables...................... 52
Section 13.13 Reports to Certificateholders and
the Rating Agencies.................................... 52
Section 13.14 Insurance.............................................. 52
ARTICLE XIV
Section 14.1 Accounts............................................... 55
Section 14.2 Collections............................................ 56
Section 14.3 Advances............................................... 57
Section 14.4 Additional Deposits.................................... 60
Section 14.5 Distributions.......................................... 60
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Section 14.6 Reserve Account........................................ 60
Section 14.7 Net Deposits........................................... 63
Section 14.8 Statements to Certificateholders....................... 63
ARTICLE XV
[reserved].............................66
ARTICLE XVI
Section 16.1 The Certificates....................................... 67
Section 16.2 Execution, Authentication and
Delivery of Certificates............................... 67
Section 16.3 Registration of Transfer and Exchange of Certificates.. 68
Section 16.4 Mutilated, Destroyed, Lost, or
Stolen Certificates.................................... 69
Section 16.5 Persons Deemed Owners.................................. 70
Section 16.6 Access to List of Certificateholders'
Names and Addresses.................................... 70
Section 16.7 Maintenance of Office or Agency........................ 71
Section 16.8 Book-Entry Certificates................................ 71
Section 16.9 Notices to Clearing Agency............................. 73
Section 16.10 Definitive Certificates................................ 73
Section 16.11 Appointment of Paying Agent............................ 74
Section 16.12 Authenticating Agent................................... 75
Section 16.13 Actions of Certificateholders.......................... 77
ARTICLE XVII
The Seller
Section 17.1 Representations of Seller.............................. 79
Section 17.2 Liability of Seller; Indemnities....................... 81
Section 17.3 Merger or Consolidation of Seller...................... 81
Section 17.4 Limitation on Liability of Seller and Others........... 82
Section 17.5 Seller May Own Certificates............................ 82
ARTICLE XVIII
The Servicer
Section 18.1 Representations of Servicer............................ 83
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Section 18.2 Liability of Servicer; Indemnities..................... 85
Section 18.3 Merger or Consolidation of Servicer.................... 86
Section 18.4 Limitation on Liability of
Servicer and Others.................................... 87
Section 18.5 Servicer Not To Resign................................. 89
Section 18.6 Delegation of Duties................................... 89
ARTICLE XIX
Events of Servicing Termination
Section 19.1 Events of Servicing Termination........................ 90
Section 19.2 Trustee to Act; Appointment of
Successor.............................................. 92
Section 19.3 Notification to Certificateholders..................... 93
Section 19.4 Waiver of Past Defaults................................ 93
ARTICLE XX
The Trustee
Section 20.1 No Power to Engage in Business or
to Vary Investments.................................... 95
Section 20.2 Duties of Trustee...................................... 95
Section 20.3 Trustee's Assignment of Repurchased
Receivables and Trustee's Certificate.................. 98
Section 20.4 Certain Matters Affecting the Trustee.................. 98
Section 20.5 Trustee Not Liable for Certificates
or Receivables.........................................101
Section 20.6 Trustee May Own Certificates...........................102
Section 20.7 Trustee's Fees and Expenses............................102
Section 20.8 Indemnity of Trustee...................................103
Section 20.9 Eligibility Requirements for Trustee...................104
Section 20.10 Resignation or Removal of Trustee......................104
Section 20.11 Successor Trustee......................................105
Section 20.12 Merger or Consolidation of Trustee.....................106
Section 20.13 Appointment of Co-Trustee
or Separate Trustee....................................106
Section 20.14 Representations and Warranties of Trustee..............108
Section 20.15 Tax Returns............................................110
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Section 20.16 Trustee May Enforce Claims Without Possession
of Certificates........................................110
Section 20.17 Suits for Enforcement..................................110
Section 20.18 Maintenance of Office or Agency........................110
ARTICLE XXI
Termination
Section 21.1 Termination of the Trust...............................111
Section 21.2 Optional Purchase of All
Receivables............................................112
ARTICLE XXII
Miscellaneous Provisions
Section 22.1 Amendment..............................................114
Section 22.2 Protection of Title to Trust...........................115
Section 22.3 Limitation on Rights of Certificateholders.............118
Section 22.4 Governing Law..........................................119
Section 22.5 Notices................................................119
Section 22.6 Severability of Provisions.............................120
Section 22.7 Assignment.............................................120
Section 22.8 Certificates Nonassessable
and Fully Paid.........................................121
Section 22.9 Third-Party Beneficiaries..............................121
Schedule A -- Schedule of Receivables
Schedule B -- Locations of Receivable Files
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This Pooling and Servicing Agreement, dated as of _______ __,
1997, is made with respect to the formation of the USAA Auto Loan Grantor Trust
1997-1 (the "Trust"), between USAA Federal Savings Bank, a federally chartered
savings association (the "Seller" and the "Servicer" in its respective
capacities as such), and [ ], as trustee (the "Trustee").
WITNESSETH THAT: In consideration of the premises and of the
mutual agreements herein contained, the parties hereto agree as follows:
ARTICLE I
Section 1.1 Creation of Trust. Upon the execution of this
Agreement by the parties hereto, there is hereby created the USAA Auto Loan
Grantor Trust 1997-1.
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ARTICLE II
Section 2.1 Conveyance of Receivables. In consideration of the
Trustee's delivery to, or upon the order of, the Seller of authenticated
Certificates, in authorized denominations, in an aggregate amount equal to the
Original Pool Balance, the Seller does hereby sell, transfer, assign, and
otherwise convey to the Trustee on behalf of the Trust, without recourse
(subject to the Seller's obligations herein):
(i) all right, title, and interest of the Seller in and to the
Receivables listed in Schedule A hereto, all proceeds thereof and all
monies paid thereon on and after the Cutoff Date (including proceeds of
the repurchase of Receivables by the Seller pursuant to Section 12.2 or
the purchase of Receivables by the Servicer pursuant to Section 13.7 or
21.2), together with the interest of the Seller in the security
interests in the Financed Vehicles granted by the Obligors pursuant to
the Receivables;
(ii) all right, title and interest of the Seller in any
Liquidation Proceeds and in any proceeds of any extended warranties,
comprehensive and collision, credit life, or credit disability policies
relating to the Financed Vehicles or the Obligors; and
(iii) all proceeds of the foregoing items (i) and (ii).
In connection with such sale, the Seller agrees to record and
file, at its own expense, financing statements (and continuation statements with
respect to such financing statements when applicable) with respect to the
Receivables for the sale of accounts and chattel paper meeting the requirements
of applicable state law in such manner and in such jurisdictions as are
necessary to perfect the sale and assignment of the Receivables to the Trust.
It is the intention of the Seller and the Trustee that the
assignment and transfer herein contemplated constitute a sale of the
Receivables, conveying good title thereto free and clear of any liens and
encumbrances, from the Seller to the Trust and that the Re-
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ceivables not be part of the Seller's estate in the event of an insolvency. In
the event that such conveyance is deemed to be a pledge to secure a loan, the
Seller hereby grants to the Trustee on behalf of the Trust for the benefit of
the Certificateholders a first priority perfected security interest in all of
the Seller's right, title and interest in the items of property listed in
clauses (i) and (ii) above, and all proceeds of the foregoing to secure the loan
deemed to be made in connection with such pledge and, in such event, this
Agreement shall constitute a security agreement under applicable law.
ARTICLE III
[Reserved]
ARTICLE IV
Section 4.1 Acceptance by Trustee. The Trustee does hereby accept
all consideration conveyed by the Seller pursuant to Section 2.1 and declares
that the Trustee shall hold such consideration upon the trusts herein set forth
for the benefit of the Certificateholders, subject to the terms and provisions
of this Agreement.
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ARTICLE V
Section 5.1 Incorporation of Standard Terms and Conditions of
Agreement. This Pooling and Servicing Agreement does hereby incorporate herein
by reference the Standard Terms and Conditions of Agreement for the USAA Auto
Loan Grantor Trust 1997-1 effective ________ __, 1997 (the "Standard Terms and
Conditions of Agreement") attached hereto as Annex I. The terms and conditions
of Articles I through X of this Pooling and Servicing Agreement, to the extent
they are inconsistent with the Standard Terms and Conditions of Agreement, shall
control.
ARTICLE VI
Section 6.1 Special Definitions and Terms. Whenever used in the
Standard Terms and Conditions of Agreement and in this Pooling and Servicing
Agreement, the following words and phrases shall have the following meanings:
The "Class A Pass-Through Rate" shall be __% per annum,
calculated on the basis of a year of twelve 30-day months.
"Class A Percentage" means __%.
The "Class B Pass-Through Rate" shall be __% per annum,
calculated on the basis of a year of twelve 30-day months.
"Class B Percentage" means _%.
"Closing Date" shall mean _____ __, 1997.
The "Corporate Trust Office" at the date hereof is located at
________________.
The "Cutoff Date" shall be the opening of business on _____ __,
1997.
The first "Distribution Date" shall be _____ __, 1997.
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The "Final Distribution Date" shall be ________ __ ____ or, if
such day is not a Business Day, the next succeeding Business Day.
The "Optional Purchase Percentage" shall be 5%.
The "Original Pool Balance" shall be $_______.
The "Reserve Account Initial Amount" shall be $___________.
The "Required Deposit Rating" shall be a short-term certificate
of deposit rating from Moody's of P-1 and from Standard & Poor's of A-1+ and a
long-term unsecured debt rating of not less than "AA" by Standard & Poor's and
"Aa2" by Moody's.
"Servicing Fee Rate" shall mean 1.00% per annum.
"Specified Reserve Account Balance" means, with respect to any
Distribution Date, __% of the Pool Balance as of the last day of the preceding
Collection Period, but in any event not less than the lesser of (i) $________
and (ii) the sum of such Pool Balance plus an amount sufficient to pay interest
on such Pool Balance at a rate equal to the sum of the weighted average of the
Class A Pass-Through Rate and the Class B Pass-Through Rate and the Servicing
Fee Rate through the Final Scheduled Distribution Date; provided, however, that
the Specified Reserve Account Balance will be calculated using a percentage of
__% for any Distribution Date (beginning with the _______ 199_ Distribution
Date) on which the Average Net Loss Ratio exceeds __% or the Average Delinquency
Ratio exceeds ___%. The Specified Reserve Account Balance may be reduced to a
lesser amount as determined by the Seller; provided, however, that the Rating
Agency Condition is satisfied.
ARTICLE VII
Section 7.1 Additional Representations and Warranties of Seller.
The Seller does hereby make the following representations and warranties to the
Trustee and the Certificateholders and the Trustee shall rely on
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such representations and warranties in accepting the Receivables in trust and
authenticating the Certificates:
(i) Receivables. Each Receivable represents a motor
vehicle installment loan made to Obligors located in a State of
the United States or the District of Columbia;
(ii) Security. Each Receivable is secured by a new or
used automobile or light-duty truck;
(iii) Maturity of Receivables. Each Receivable has a
remaining maturity, as of the Cutoff Date, of not less than 6
months nor greater than 66 months and, (i) with respect to
Receivables secured by new Financed Vehicles, an original
maturity of at least 12 months and not more than 72 months and
(ii) with respect to Receivables secured by used Financed
Vehicles, an original maturity of at least 12 months and not
more than 60 months;
(iv) Annual Percentage Rate. Each Receivable is a
fully-amortizing fixed rate simple interest contract that
provides for level scheduled monthly payments (except for the
last payment, which may be minimally different from the level
payments) over its respective remaining term, and has an Annual
Percentage Rate that equals or exceeds ___%, is not secured by
any interest in real estate, and has not been identified on the
computer files of the Seller as relating to Obligors who have
requested a reduction in the periodic finance charges, as of the
Cutoff Date, by application of the Soldiers' and Sailors' Civil
Relief Act of 1940, as amended;
(v) No Repossessions. Each Receivable is secured by a
Financed Vehicle that, as of the Cutoff Date, has not been
repossessed without reinstatement of such Receivable;
(vi) Obligor Not Subject to Bankruptcy Proceedings. Each
Receivable has been entered into by an Obligor who has not been
identified on the computer files of the Seller as being a debtor
in any bankruptcy proceeding as of the Cutoff Date;
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(vii) No Overdue Payments. No Receivable has any
payment that is more than [30] days past due as of the Cutoff
Date;
(viii) Remaining Principal Balance. Each Receivable had
a remaining principal balance, as of the Cutoff Date, of at
least $500; and
(ix) Receivable Files. The Receivable Files shall be
kept at one or more of the locations specified in Schedule B
hereto.
ARTICLEs VIII THROUGH X
[RESERVED]
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IN WITNESS WHEREOF, the parties have caused this Pooling and
Servicing Agreement to be duly executed by their respective officers as of the
day and year first above written.
USAA FEDERAL SAVINGS BANK
as Seller and Servicer
By __________________________________
Name:
Title:
[ ] as Trustee
By __________________________________
Name:
Title:
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Schedule A
Schedule A shall be deemed to be the computer data disk
or printout relating to the Receivables delivered by the
Seller to the Trustee on the Closing Date.
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Schedule B
Location of Receivable Files
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USAA AUTO LOAN GRANTOR
TRUST 1997-1 STANDARD TERMS
AND CONDITIONS OF AGREEMENT
EFFECTIVE ___________ ___, 1997
for the USAA Auto Loan
Grantor Trust 1997-1 formed on or
subsequent to the date specified above
INTRODUCTION
These Standard Terms and Conditions of Agreement shall be
applicable to the USAA Auto Loan Grantor Trust 1997-1 formed on or after the
effective date hereof, with respect to which a Pooling and Servicing Agreement
relating to such trust and incorporating by reference these Standard Terms and
Conditions of Agreement shall have been executed.
ARTICLE XI
Definitions
Section 11.1 Definitions. Whenever used in the Agreement, the
following words and phrases, unless the context otherwise requires, shall have
the following meanings:
"Account Property" means the Reserve Account and all amounts,
Financial Assets and other investments held from time to time in the Reserve
Account and all proceeds of the foregoing.
"Advance" as of a Record Date means any payment made by the
Servicer pursuant to Section 14.3.
"Agreement" means a Pooling and Servicing Agreement executed by
the parties as of the related Cutoff Date, into which this Standard Terms and
Conditions of Agreement shall be incorporated by reference, and all amendments
and supplements thereto.
"Amount Financed" in respect of a Receivable means the amount
advanced under the Receivable toward the purchase price of the Financed Vehicle
and related costs.
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"Annual Percentage Rate" or "APR" of a Receivable means the
annual rate of interest stated in the Receivable.
"Authenticating Agent" shall have the meaning specified in
Section 16.13.
"Authorized Officer" means any officer in the Corporate Trust
Department of the Trustee with direct responsibility for the administration of
the Agreement.
"Available Interest" means, with respect to any Distribution
Date, the excess of (a) the sum of (i) Interest Collections for such
Distribution Date and (ii) all Advances made by the Servicer with respect to
such Distribution Date pursuant to Section 14.3(a), over (b) the amount of
Outstanding Advances to be reimbursed on or with respect to such Distribution
Date pursuant to Section 14.3(a).
"Available Principal" means, with respect to any Distribution
Date, the sum of the following amounts with respect to the preceding Collection
Period: (i) that portion of all Collections on the Receivables received during
such Collection Period and allocable to principal in accordance with the terms
of the Receivables and the Servicer's customary servicing procedures, (ii) to
the extent attributable to principal, the Purchase Amount received with respect
to each Receivable repurchased by the Seller or purchased by the Servicer under
an obligation which arose during the related Collection Period and (iii)
Liquidation Proceeds, to the extent allocable to principal, received during such
Collection Period. Available Principal on any Distribution Date shall exclude
all payments and proceeds of any Receivables the Purchase Amount of which has
been distributed on a prior Distribution Date.
"Available Reserve Amount" shall mean, as of any Distribution
Date, the lesser of (i) the amount on deposit in the Reserve Account (exclusive
of earnings and income from the investment of funds therein) as of such date and
(ii) the Specified Reserve Account Balance as of such date.
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"Average Delinquency Ratio" means, as of any Distribution Date,
the average of the Delinquency Ratios for the preceding three Collection
Periods.
"Average Net Loss Ratio" means, as of any Distribution Date, the
average of the Net Loss Ratios for the preceding three Collection Periods.
"Book-Entry Certificates" means beneficial interests in the
Certificates described in Section 16.8, the ownership and transfers of which
shall be made through book entries by a Clearing Agency as described in Section
16.8.
"Business Day" means a day, other than a Saturday or a Sunday, on
which the Trustee and banks located in New York, New York are open for the
purpose of conducting a commercial banking business.
"Certificate" means any Class A Certificate or Class B
Certificate.
"Certificate Account" means the account established and
maintained pursuant to Section 14.1.
"Certificateholder" or "Holder" means the Person in whose name a
Certificate is registered in the Certificate Register, except that, solely for
the purpose of giving any consent, request, waiver or demand pursuant to the
Agreement, the interest evidenced by any Certificate registered in the name of
the Seller, the Servicer or any Person controlling, controlled by, or under
common control with the Seller or the Servicer shall not be taken into account
in determining whether the requisite percentage necessary to effect any such
consent, request or waiver shall have been obtained; provided, however, that in
determining whether the Trustee shall be protected in relying upon any such
consent, request, waiver or demand, only Certificates that an Authorized Officer
of the Trustee knows to be so owned shall be so disregarded.
"Certificate Owner" means, with respect to a Book-Entry
Certificate, the Person who is the owner of such Book-Entry Certificate, as
reflected on the books of the Clearing Agency, or on the books of a direct or
indirect Clearing Agency Participant.
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"Certificate Register" means the register maintained pursuant to
Section 16.3.
"Class A Certificate" means a certificate executed by the Trustee
on behalf of the Trust and authenticated by the Trustee, substantially in the
form of Exhibit A hereto.
"Class A Certificateholder" or "Class A Holder" means the Person
in whose name a Class A Certificate shall be registered in the Certificate
Register, except that, solely for the purpose of giving any consent, request or
waiver pursuant to this Agreement, the interest evidenced by any Class A
Certificate registered in the name of the Seller, the Servicer or any Person
actually known to an Authorized Officer of the Trustee to be an Affiliate of the
Seller or the Servicer shall not be taken into account in determining whether
the requisite percentage necessary to effect any such consent, request or waiver
shall have been obtained.
"Class A Certificate Balance" means, at any time, the Original
Class A Certificate Balance, as reduced by all principal amounts distributed to
Class A Certificateholders prior to such time.
"Class A Certificate Owner" means, with respect to a Book-Entry
Certificate representing a beneficial interest in the Class A Certificates, the
Person who is the owner of such Book-Entry Certificate, as reflected on the
books of the Clearing Agency, or on the books of a Person maintaining an account
with such Clearing Agency (directly or as an indirect participant in accordance
with the rules, regulations and procedures of such Clearing Agency).
"Class A Distribution Account" means the account established and
maintained as such pursuant to Section 14.1.
"Class A Interest Carryover Shortfall" means, (i) with respect to
the initial Distribution Date, zero and (ii) with respect to any other
Distribution Date, the excess of Class A Monthly Interest for the preceding
Distribution Date, and any outstanding Class A Interest Carryover Shortfall on
such preceding Distribution Date, over the amount in respect of interest that is
actually
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deposited in the Class A Distribution Account on such preceding Distribution
Date, plus 30 days of interest on such excess, to the extent permitted by law,
at the Class A Pass-Through Rate.
"Class A Interest Distribution" means, with respect to any
Distribution Date, the sum of Class A Monthly Interest for such Distribution
Date and the Class A Interest Carryover Shortfall for such Distribution Date.
"Class A Monthly Interest" means, with respect to any
Distribution Date, one-twelfth of the Class A Pass-Through Rate multiplied by
the Class A Certificate Balance as of the preceding Distribution Date (after
giving effect to all payments of principal made on such Distribution Date) or,
in the case of the first Distribution Date, as of the Closing Date.
"Class A Monthly Principal" means, with respect to any
Distribution Date, the Class A Percentage of Available Principal for such
Distribution Date plus the Class A Percentage of Realized Losses with respect to
the related Collection Period.
"Class A Pool Factor" means, with respect to any Distribution
Date, the Class A Certificate Balance as of such Distribution Date (after giving
effect to all payments of principal to be made on such Distribution Date)
divided by the Original Class A Certificate Balance, expressed as a seven-digit
decimal.
"Class A Principal Carryover Shortfall" means, (i) with respect
to the initial Distribution Date, zero and (ii) with respect to any other
Distribution Date, the excess of Class A Monthly Principal for such Distribution
Date and any outstanding Class A Principal Carryover Shortfall from the
preceding Distribution Date over the amount in respect of principal that is
actually deposited in the Class A Distribution Account on such Distribution
Date.
"Class A Principal Distribution" means, (i) with respect to the
initial Distribution Date, the Class A Monthly Principal for such Distribution
Date and (ii) with respect to any other Distribution Date, the sum of Class A
Monthly Principal for such Distribution Date and
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the Class A Principal Carryover Shortfall as of the preceding Distribution Date.
In addition, on the Final Scheduled Distribution Date, the Class A Principal
Distribution shall include any additional amount required to reduce the
outstanding principal balance of the Class A Certificates to zero.
"Class B Certificate" means a certificate executed by the Trustee
on behalf of the Trust and authenticated by the Trustee, substantially in the
form of Exhibit B hereto.
"Class B Certificateholder" or "Class B Holder" means the Person
in whose name a Class B Certificate shall be registered in the Certificate
Register, except that, solely for the purpose of giving any consent, request or
waiver pursuant to this Agreement, the interest evidenced by any Class B
Certificate registered in the name of the Seller, the Servicer or any Person
actually known to an Authorized Officer of the Trustee to be an Affiliate of the
Seller or the Servicer shall not be taken into account in determining whether
the requisite percentage necessary to effect any such consent, request or waiver
shall have been obtained.
"Class B Certificate Balance", at any time, equals the Original
Class B Certificate Balance, as reduced by all principal amounts distributed to
Class B Certificateholders prior to such time.
"Class B Certificate Owner" means, with respect to a Book-Entry
Certificate representing a beneficial interest in the Class B Certificates, the
Person who is the owner of such Book-Entry Certificate, as reflected on the
books of the Clearing Agency, or on the books of a Person maintaining an account
with such Clearing Agency (directly or as an indirect participant in accordance
with the rules, regulations and procedures of such Clearing Agency).
"Class B Distribution Account" means the account established and
maintained as such pursuant to Section 14.1.
"Class B Interest Carryover Shortfall" means, (i) with respect to
the initial Distribution Date, zero and (ii) with respect to any other
Distribution Date, the
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excess of Class B Monthly Interest for the preceding Distribution Date, and any
outstanding Class B Interest Carryover Shortfall on such preceding Distribution
Date, over the amount in respect of interest that is actually deposited in the
Class B Distribution Account on such preceding Distribution Date, plus 30 days
of interest on such excess, to the extent permitted by law, at the Class B
Pass-Through Rate.
"Class B Interest Distribution" means, with respect to any
Distribution Date, the sum of Class B Monthly Interest for such Distribution
Date and the Class B Interest Carryover Shortfall for such Distribution Date.
"Class B Monthly Interest" means, with respect to any
Distribution Date, one-twelfth of the Class B Pass-Through Rate multiplied by
the Class B Certificate Balance as of the preceding Distribution Date (after
giving effect to all payments of principal made on such Distribution Date) or,
in the case of the first Distribution Date, as of the Closing Date.
"Class B Monthly Principal" means, with respect to any
Distribution Date, the Class B Percentage of Available Principal for such
Distribution Date plus the Class B Percentage of Realized Losses with respect to
the related Collection Period.
"Class B Pool Factor" means, with respect to any Distribution
Date, the Class B Principal Balance as of such Distribution Date (after giving
effect to all payments of principal to be made on such Distribution Date)
divided by the Original Class B Certificate Balance, expressed as a seven-digit
decimal.
"Class B Principal Carryover Shortfall" means, (i) with respect
to the initial Distribution Date, zero and (ii) with respect to any other
Distribution Date, the excess of Class B Monthly Principal for such Distribution
Date and any outstanding Class B Principal Carryover Shortfall from the
preceding Distribution Date over the amount in respect of principal that is
actually deposited in the Class B Distribution Account on such Distribution
Date.
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"Class B Principal Distribution" means, (i) with respect to the
initial Distribution Date, the Class B Monthly Principal for such Distribution
Date and (ii) with respect to any other Distribution Date, the sum of Class B
Monthly Principal for such Distribution Date and the Class B Principal Carryover
Shortfall as of the preceding Distribution Date. In addition, on the Final
Scheduled Distribution Date, the Class B Principal Distribution shall include
any additional amount required to reduce the outstanding principal balance of
the Class B Certificates to zero.
"Clearing Agency" means an organization registered as a "clearing
agency" pursuant to Section 17A of the Securities Exchange Act of 1934, as
amended. The initial Clearing Agency shall be The Depository Trust Company.
"Clearing Agency Participant" means a broker, dealer, bank, other
financial institution or other Person for whom from time to time a Clearing
Agency effects book-entry transfers of securities deposited with the Clearing
Agency.
"Closing Date" means the date set forth as such in the Agreement.
"Code" means the Internal Revenue Code of 1986, as amended.
"Collateral Agent" means _________________, a banking
corporation, in its capacity as collateral agent for the benefit of the
Certificateholders with respect to the Reserve Account.
"Collection Period" means, during the term of this Agreement, the
calendar month preceding each Distribution Date. With respect to any
Determination Date, Deposit Date or Distribution Date, the "related Collection
Period" shall mean the Collection Period preceding the month in which such
Determination Date, Deposit Date or Distribution Date occurs.
"Collections" mean all collections on the Receivables.
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"Contract Rate" means, with respect to a Receivable, the rate per
annum of interest charged to the Obligor on the outstanding Principal Balance of
such Receivable in accordance with the terms thereof.
"Corporate Trust Office" means the office of the Trustee at which
its corporate trust business shall be principally administered, which office
shall be the office specified as such in the Agreement, or such office at some
other address as the Trustee may designate from time to time by notice to the
Certificateholders, the Seller, the Servicer, the Paying Agent and the Transfer
Agent and Certificate Registrar.
"Cutoff Date" means the date specified as such in the Agreement.
"Cutoff Date Principal Balance" means, with respect to any
Receivable, the initial Principal Balance of such Receivable minus the sum of
the portion of all payments received under such Receivable from or on behalf of
the related Obligor on or prior to the close of business of the Servicer on the
Cutoff Date and allocable to principal in accordance with the terms of the
Receivable and the Servicer's customary servicing practices.
"Defaulted Receivable" means a Receivable (other than a
Repurchased Receivable) as to which (i) more than 10% of a scheduled payment is
120 or more days delinquent as of the last day of the applicable Collection
Period or (ii) the Servicer has determined based on its usual collection
practices and procedures, during any Collection Period, that eventual payment in
full of the Amount Financed is unlikely.
"Definitive Certificates" shall have the meaning specified in
Section 16.8.
"Delinquency Ratio" means, for any Collection Period, the ratio,
expressed as a percentage, of (i) the principal amount of all outstanding
Receivables (other than Purchased Receivables and Defaulted Receivables) which
are sixty (60) or more days delinquent as of the end of such Collection Period,
determined in accordance with the Servicer's customary practices, divided by
(ii) the Pool Balance as of the last day of such Collection Period.
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"Deposit Date" shall mean the Business Day immediately preceding
each Distribution Date.
"Depository Agreement" shall mean the agreement among the Seller,
the Trustee and the initial Clearing Agency, in the form attached hereto as
Exhibit F.
"Determination Date" means the 10th calendar day of the month
(or, if such 10th calendar day is not a Business Day, the Business Day preceding
such 10th calendar day) immediately succeeding the related Collection Period.
"Distribution Date" means, for each Collection Period, the 15th
day of the following month, or if the 15th day is not a Business Day, the next
following Business Day, commencing with the first Distribution Date specified in
the Agreement.
"Entitlement Order" has the meaning specified in Section
8-102(a)(8) of the UCC.
"Event of Servicing Termination" means an event specified in
Section 19.1.
"Excess Funds" shall have the meaning specified in Section
14.5(d).
"FDIC" means the Federal Deposit Insurance Corporation or any
successor thereto.
"FHLMC" means the Federal Home Loan Mortgage Corporation or any
successor thereto.
"Final Distribution Date" means the date specified as such in
the Agreement.
"Financed Vehicle" with respect to a Receivable means the new or
used automobile or light-duty truck, together with all accessions thereto,
securing an Obligor's indebtedness under such Receivable.
"Financial Asset" has the meaning specified in Section
8-102(a)(14) of the UCC.
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"FNMA" means the Federal National Mortgage Association or any
successor thereto.
"Force Placed Insurance" shall have the meaning specified in
Section 13.14.
"Interest Collections" mean, with respect to any Distribution
Date, the sum of the following amounts for the preceding Collection Period: (i)
that portion of the Collections on the Receivables received during such
Collection Period that is allocable to interest in accordance with the terms of
the Receivables and the Servicer's customary servicing procedures, (ii)
Liquidation Proceeds, to the extent allocable to interest, received during such
Collection Period, (iii) all Recoveries and (iv) to the extent attributable to
interest, the Purchase Amount received with respect to each Receivable
repurchased by the Seller or purchased by the Servicer under an obligation which
arose during the related Collection Period. "Interest Collections" for any
Distribution Date shall exclude all payments and proceeds of any Receivables the
Purchase Amount of which has been distributed on a prior Distribution Date.
"Lien" means a security interest, lien, charge, pledge or
encumbrance of any kind other than tax liens, mechanics' liens or any other
liens that attach to a Receivable by operation of law.
"Liquidation Proceeds" means (i) insurance proceeds received by
the Servicer and (ii) the monies collected by the Servicer (from whatever
source, including but not limited to proceeds of a Financed Vehicle which is
sold after repossession) during a Collection Period on a Defaulted Receivable
net of any payments required by law to be remitted to the Obligor.
"Moody's" means Moody's Investors Service, Inc.
"Net Loss Ratio" means, for any Collection Period, an amount,
expressed as an annualized percentage, equal to (i) the Realized Losses minus
Recoveries for such Collection Period, divided by (ii) the average of the Pool
Balances on the first day of such Collection Period and the last day of such
Collection Period.
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"Obligor" on a Receivable means the purchaser or the
co-purchasers of the Financed Vehicle purchased in part or in whole by the
execution and delivery of such Receivable or any other Person who owes or may be
liable for payments under such Receivable.
"Officer's Certificate" means a certificate signed by the
chairman of the board, the president, the treasurer, the controller, any
executive or senior vice president or any vice president of the Seller or
Servicer, as appropriate.
"Opinion of Counsel" means a written opinion of counsel (who may
be counsel to the Seller or the Servicer) acceptable in form and substance to
the Trustee.
"Optional Purchase Percentage" means the percentage specified as
such in the Agreement.
"Original Pool Balance" means the Pool Balance as of the Cutoff
Date, as specified in the Agreement.
"Outstanding Advances" means, as of any date, the aggregate of
all Advances made by the Servicer with respect to prior Distribution Dates which
have not been reimbursed pursuant to Section 14.3.
"Outstanding Receivable" means, as of the time of reference
thereto, a Receivable that (i) has not been fully paid, (ii) has not become a
Defaulted Receivable, and (iii) has not become a Repurchased Receivable.
"Paying Agent" shall have the meaning specified in Section 16.12
and shall initially be _____________.
"Payment Deficiencies" shall have the meaning specified in
Section 15.1.
"Permitted Investments" means, at any time, any one or more of
the following obligations and securities:
(i) obligations of the United States of America or any
agency thereof, provided such obligations are backed by the full
faith and credit of the United States of America;
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(ii) general obligations of or obligations guaranteed as
to the timely payment of interest and principal by any state of
the United States of America or the District of Columbia then
rated A-1+ or AAA by Standard & Poor's and P-1 or Aaa by Moody's
or such lower ratings (as approved in writing by the Rating
Agencies) as will not result in the qualification, downgrading
or withdrawal of the ratings then assigned to the Certificates
by the Rating Agencies;
(iii) commercial paper which is then rated P-1 by
Moody's and A-1+ by Standard & Poor's, or such lower rating
categories (as approved in writing by the Rating Agencies) as
will not result in the qualification, downgrading or withdrawal
of the ratings then assigned to the Certificates by the Rating
Agencies;
(iv) certificates of deposit, demand or time deposits,
federal funds or banker's acceptances issued by any depository
institution or trust company (including the Trustee acting in
its commercial banking capacity) incorporated under the laws of
the United States or of any state thereof or incorporated under
the laws of a foreign jurisdiction with a branch or agency
located in the United States of America and subject to
supervision and examination by federal or state banking
authorities, provided that the short term unsecured deposit
obligations of such depository institution or trust company is
then rated P-1 by Moody's and A-1+ by Standard & Poor's or such
lower rating categories (as approved in writing by the Rating
Agencies) as will not result in the qualification, downgrading
or withdrawal of the ratings then assigned to the Certificates
by the Rating Agencies;
(v) demand or time deposits of, or certificates of
deposit issued by, any bank, trust company, savings bank or
other savings institution provided that such deposits or
certificates of deposit are fully insured by the FDIC;
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(vi) guaranteed reinvestment agreements issued by any
bank, insurance company or other corporation (A) the short term
unsecured debt or deposits of which are rated P-1 by Moody's and
A-1+ by Standard & Poor's or the long-term unsecured debt of
which are rated at least Aaa by Moody's and AAA by Standard &
Poor's or (B) are otherwise approved in writing by the Rating
Agencies as investments which will not result in the
qualification, downgrading or withdrawal of the ratings then
assigned to the Certificates by the Rating Agencies;
(vii) repurchase obligations with respect to any
security described in clauses (i), (ii) or (ix) herein or any
other security issued or guaranteed by the FHLMC, FNMA or any
other agency or instrumentality of the United States of America
which is backed by the full faith and credit of the United
States of America, in either case entered into with a federal
agency or a depository institution or trust company (acting as
principal) described in (iv) above or a corporation (acting as
principal) described in (vi) above;
(viii) investments in money market funds, which funds
(A) are not subject to any sales, load or other similar charge;
(B) are rated at least AAAm or AAAm-G by Standard & Poor's and
Aaa by Moody's and (C) are invested solely in obligations
described in clauses (i) through (vii) above.
(ix) interests in any open-end or closed-end management
type investment company or investment trust (a) registered under
the Investment Company Act of 1940, as from time to time
amended, the portfolio of which is limited to obligations of the
United States or obligations guaranteed by the United States and
to agreements to repurchase such obligations, which agreements,
with respect to principal and interest, are at least 100%
collateralized by such obligations marked to market on a daily
basis and pursuant to which the investment com-
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pany or investment trust is required to take delivery of such
obligations either directly or through an independent custodian
designated in accordance with the Investment Company Act of
1940, as from time to time amended and (b) acceptable to the
Rating Agencies (as approved in writing by the Rating Agencies)
as collateral for securities having ratings equivalent to the
ratings of the Certificates on the Closing Date; and
(x) such other investments where either (A) the
short-term unsecured debt or deposits of the obligor on such
investments are rated A-1+ by Standard & Poor's and P-1 by
Moody's or (B) such investments are acceptable to the Rating
Agencies (as approved in writing by each of them) and will not
result in the qualification, downgrading or withdrawal of the
ratings then assigned to the Certificates by the Rating
Agencies.
"Person" means a legal person, including any individual,
corporation, estate, partnership, joint venture, association, joint stock
company, trust, unincorporated organization, or government or any agency or
political subdivision thereof, or any other entity of whatever nature.
"Pool Balance" as of any date of determination means the
aggregate Principal Balance of the Outstanding Receivables.
"Pool Factor" as of the last day of any Collection Period means
the Pool Balance divided by the Original Pool Balance, expressed as a
seven-digit decimal.
"Principal Balance" of a Receivable, as of the last day of the
preceding Collection Period, means the Amount Financed minus that portion of all
payments received on or prior to such date allocable to principal.
"Purchased Receivable" means, on any date of determination, a
Receivable as to which payment of the Purchase Amount has been made by the
Seller or the Servicer pursuant to the Agreement.
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"Qualified Institution" means a depository institution organized
under the laws of the United States of America or any one of the states thereof
or incorporated under the laws of a foreign jurisdiction with a branch or agency
located in the United States of America or one of the States thereof and subject
to supervision and examination by federal or state banking authorities which at
all times has the Required Deposit Rating and, in the case of any such
institution organized under the laws of the United States of America, whose
deposits are insured by the FDIC.
"Qualified Trust Institution" means an institution organized
under the laws of the United States of America or any one of the states thereof
or incorporated under the laws of a foreign jurisdiction with a branch or agency
located in the United States of America or one of the States thereof and subject
to supervision and examination by federal or state banking authorities which at
all times (i) is authorized under such laws to act as a trustee or in any other
fiduciary capacity, (ii) has not less than one billion dollars in assets under
fiduciary management, (iii) has a minimum net worth of at least $50,000,000 and
(iv) has a long term deposits rating of not less than "BBB-" and "Baa3" from
Standard & Poor's and Moody's, respectively.
"Rating Agencies" means Standard & Poor's and Moody's.
"Rating Agency Condition" means, with respect to any action,
written confirmation by each Rating Agency that such action will not result in a
withdrawal or reduction of its rating of the Class A Certificates or the Class B
Certificates.
"Realized Losses" mean, for any Collection Period and for each
Receivable that became a Defaulted Receivable during such Collection Period, the
excess of (i) the aggregate Principal Balance of such Receivable over (ii)
Liquidation Proceeds received with respect to such Receivable during such
Collection Period, to the extent allocable to principal.
"Receivable" means a motor vehicle installment loan contract and
all proceeds thereof and payments thereunder (other than interest accrued and
unpaid as of
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the Cutoff Date), which Receivable shall appear on Schedule A to the
Agreement.
"Receivable Files" means the documents specified in Section
12.3.
"Receivables Pool" means the pool of Receivables included in
the Trust.
"Record Date" means, with respect to any Distribution Date, the
Business Day prior to such Distribution Date unless Definitive Certificates are
issued, in which case Record Date shall mean the last day of the immediately
preceding calendar month.
"Recoveries" mean, with respect to any Collection Period, all
monies received by the Servicer with respect to any Defaulted Receivable during
any Collection Period following the Collection Period in which such Receivable
became a Defaulted Receivable, net of the sum of (i) any fees, costs or expenses
incurred by the Servicer in connection with the collection of such Receivable
and the disposition of the Financed Vehicle as permitted by Section 13.3 (to the
extent not previously reimbursed) and (ii) any payments required by law to be
remitted to the Obligor, but, in any event, not less than zero.
"Repurchase Amount" with respect to a Repurchased Receivable or
any Receivable purchased by the Servicer pursuant to Section 21.2 means the sum,
as of the last day of the preceding Collection Period on which such Receivable
becomes such, of the Principal Balance thereof plus the accrued interest thereon
at the weighted average of the Class A Pass-Through Rate and the Class B
Pass-Through Rate.
"Repurchase Date" shall have the meaning set forth in Section
12.2.
"Repurchased Receivable" means as of the last day of any
Collection Period a Receivable repurchased as of such date by the Seller
pursuant to Section 12.2 or purchased as of such date by the Servicer pursuant
to Section 13.7.
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"Required Deposit Rating" means the ratings specified as such in
the Agreement.
"Reserve Account" shall mean the Reserve Account established and
maintained as such pursuant to Section 14.4.
"Securities Act" means the Securities Act of 1933, as amended.
"Security Entitlement" has the meaning specified in Section
8-102(a)(17) of the UCC.
"Seller" means USAA Federal Savings Bank in its capacity as the
seller of the Receivables under the Agreement, and each successor to USAA
Federal Savings Bank (in the same capacity) pursuant to Section 17.3.
"Servicer" means USAA Federal Savings Bank in its capacity as the
servicer of the Receivables under the Agreement, each successor to USAA Federal
Savings Bank (in the same capacity) pursuant to Section 18.3, and each successor
Servicer pursuant to Section 19.2.
"Servicer's Certificate" means a certificate, substantially in
the form of Exhibit D attached hereto, completed and executed by the Servicer by
its chairman of the board, the president, treasurer, controller or any executive
vice president, senior vice president or vice president pursuant to Section
13.9.
"Servicing Fee" means with respect to a Collection Period the fee
payable to the Servicer for services rendered during the Collection Period
ending on the last day of such Collection Period, determined pursuant to Section
13.8.
"Servicing Fee Rate" means the rate specified as such in the
Agreement.
"Standard & Poor's" means Standard & Poor's Ratings Services, a
division of McGraw-Hill Companies Inc.
"Total Collections" means with respect to any Collection Period
all amounts deposited in the Certifi-
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cate Account relating to such Collection Period pursuant to Sections 14.2, 14.3
and 14.4.
"Transfer Agent and Certificate Registrar" shall have the meaning
specified in Section 16.3 and shall initially be _____________.
"Trust" means the trust created by the Agreement, the estate of
which shall consist of the property transferred thereto pursuant to the
Agreement; funds deposited in the Certificate Account, the Class A Distribution
Account and the Class B Distribution Account and such amounts as from time to
time may be held therein (including the Account Property related thereto) and
proceeds thereof; and the rights of the Trust to receive payments from the
Reserve Account in accordance with this Agreement (but not the Reserve Account
itself).
"Trustee" means the Person executing the Agreement as Trustee,
its successor in interest pursuant to Section 20.12, and any successor Trustee
pursuant to Section 20.11.
"Trustee's Certificate" means a certificate completed and
executed by an Authorized Officer pursuant to Section 20.3 and substantially in
the form attached hereto as Exhibit C-1 or C-2.
"UCC" means the Uniform Commercial Code as in effect in the
respective jurisdiction.
Section 11.2 Usage of Terms. With respect to all terms in the
Agreement, the singular includes the plural and the plural the singular; words
importing any gender include the other gender; references to "writing" include
printing, typing, lithography, and other means of reproducing words in a visible
form; references to agreements and other contractual instruments include all
subsequent amendments thereto or changes therein effected in accordance with
their respective terms and not prohibited by the Agreement; references to
Persons include their permitted successors and assigns; and the term "including"
means "including without limitation."
Section 11.3 Simple Interest Method; Allocations. All
allocations of payments to principal and interest and determinations of periodic
charges and the
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like on the Receivables shall be based on a year with the actual number of days
in such year and twelve months with the actual number of days in each such
month. Each payment on a Receivable shall be applied first to the amount of
interest accrued on such Receivable to the date of receipt, then to reduce the
scheduled principal amount outstanding on the Receivable to the extent of the
remaining scheduled payment and then to any outstanding fees under the terms of
the Receivable. Amounts paid by the Seller or the Servicer in respect of
Repurchased Receivables shall be allocated first to any interest accrued on the
related Receivable and then to the Principal Balance of the related Receivable.
Section 11.4 References. All references to the Record Date prior
to the first Record Date in the life of the Trust shall be deemed to be
references to the Cutoff Date. All references to "as of a Record Date" shall
refer to the close of business on such Record Date. All references to the Pool
Balance "as of the first day of a Collection Period" shall refer to the Pool
Balance as of the last day of the preceding Collection Period.
Section 11.5 Section References. All section references shall be
to Sections in these Standard Terms and Conditions of Agreement unless otherwise
specified.
Section 11.6 Separate Agreements. Each Agreement which shall
incorporate by reference these Standard Terms and Conditions of Agreement shall
be separate and distinct from each other such Agreement, no provision of any
such Agreement shall be applicable to any other such Agreement, and all
references to "the Agreement" and to provisions thereof shall be references to a
particular Agreement which incorporates these Standard Terms and Conditions of
Agreement.
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ARTICLE XII
The Receivables
Section 12.1 Representations and Warranties of Seller; Conditions
Relating to Receivables.
(a) The Seller makes the following representations and
warranties as to the Receivables on which the Trustee shall rely in
accepting the Receivables in trust and authenticating the Certificates.
Such representations and warranties shall speak as of the Cutoff Date
unless otherwise specified, but shall survive the sale, transfer, and
assignment of the Receivables to the Trustee.
(i) Schedule of Receivables. The information set forth
in Schedule A to the Agreement with respect to each Receivable
is true and correct in all material respects, and no selection
procedures adverse to the Certificateholders have been used in
selecting the Receivables from all receivables owned by the
Seller which meet the selection criteria specified herein and in
the Agreement.
(ii) No Sale or Transfer. No Receivable has been sold,
transferred, assigned or pledged by the Seller to any Person
other than the Trustee.
(iii) Good Title. Immediately prior to the transfer and
assignment of the Receivables to the Trustee on behalf of the
Trust herein contemplated, the Seller has good and marketable
title to each Receivable free and clear of all Liens,
encumbrances, security interests and rights of others; and,
immediately upon the transfer thereof, the Trustee, for the
benefit of the Certificateholders, has either (i) good and
marketable title to each Receivable, free and clear of all
Liens, encumbrances, security interests, and rights of others,
and the transfer has been perfected under applicable law or (ii)
a first priority perfected security interest in each Receivable.
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(b) Each Receivable satisfies the following conditions as of
the Cutoff Date unless otherwise specified, but such conditions shall
survive the sale, transfer and assignment of the Receivables to the
Trustee.
(i) Characteristics of Receivables. Each Receivable (a)
has been originated for the retail financing of a Financed
Vehicle by an Obligor located in one of the States of the United
States or the District of Columbia; (b) contains customary and
enforceable provisions such that the rights and remedies of the
holder thereof are adequate for realization against the
collateral of the benefits of the security; and (c) provides for
fully amortizing level scheduled monthly payments (provided that
the payment in the last month in the life of the Receivable may
be different from the level scheduled payment) and for accrual
of interest at a fixed rate according to the simple interest
method.
(ii) Compliance with Law. Each Receivable and each sale
of the related Financed Vehicle complied at the time it was
originated or made, and complies on and after the Cutoff Date,
in all material respects with all requirements of applicable
federal, state, and local laws, and regulations thereunder,
including usury laws, the Federal Truth-in Lending Act, the
Equal Credit Opportunity Act, the Fair Credit Reporting Act, the
Federal Trade Commission Act, the Magnuson-Moss Warranty Act,
Federal Reserve Board Regulations B and Z, state adaptations of
the National Consumer Act and of the Uniform Consumer Credit
Code, and any other consumer credit, equal opportunity, and
disclosure laws applicable to such Receivable and sale.
(iii) Binding Obligation. Each Receivable constitutes
the legal, valid, and binding payment obligation in writing of
the Obligor, enforceable by the holder thereof in all material
respects in accordance with its
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terms, subject, as to enforcement, to applicable bankruptcy,
insolvency, reorganization, liquidation and other similar laws
and equitable principles relating to or affecting the
enforcement of creditors' rights.
(iv) No Government Obligor. No Receivable is due from
the United States of America or any state or from any agency,
department, instrumentality or political subdivision of the
United States of America or any state or local municipality and
no Receivable is due from a business except to the extent that
such receivable has a personal guaranty.
(v) Security Interest in Financed Vehicle. Immediately
prior to the sale and assignment thereof to the Trust as herein
contemplated, each Receivable was secured by a validly perfected
first priority security interest in the Financed Vehicle in
favor of the Seller as secured party or all necessary and
appropriate action with respect to such Receivable had been
taken to perfect a first priority security interest in the
related Financed Vehicle in favor of the Seller as secured
party, which security interest is assignable and has been so
assigned by the Seller to the Trust.
(vi) Receivables in Force. No Receivable has been
satisfied, subordinated, or rescinded, nor has any Financed
Vehicle been released from the Lien granted by the related
Receivable in whole or in part.
(vii) No Waiver. No provision of a Receivable has been
waived in such a manner that such Receivable fails either to
meet all of the representations and warranties made by the
Seller herein with respect thereto or to meet all of the
conditions with respect thereto pursuant to this subsection
12.1(b).
(viii) No Amendments. No Receivable has been amended
except pursuant to either instruments included in the Receivable
Files or instruments to be included in the Receivable
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Files pursuant to Section 13.2 and no such amendment has caused
such Receivable either to fail to meet all of the
representations and warranties made by the Seller herein with
respect thereto or to fail to meet all of the conditions with
respect thereto pursuant to this subsection 12.1(b).
(ix) No Defenses. As of the Cutoff Date, there are no
rights of rescission, setoff, counterclaim, or defense, and the
Seller has no knowledge of the same being asserted or
threatened, with respect to any Receivable.
(x) No Liens. As of the Cutoff Date, the Seller has no
knowledge of any Liens or claims that have been filed, including
Liens for work, labor, materials or unpaid taxes relating to a
Financed Vehicle, that would be Liens prior to, or equal or
coordinate with, the Lien granted by the Receivable.
(xi) No Default. Except for payment defaults continuing
for a period of not more than [30] days as of the Cutoff Date,
the Seller has no knowledge that a default, breach, violation,
or event permitting acceleration under the terms of any
Receivable exists; the Seller has no knowledge that a continuing
condition that with notice or lapse of time would constitute a
default, breach, violation, or event permitting acceleration
under the terms of any Receivable exists; and the Seller has not
waived any of the foregoing.
(xii) Insurance. Each Receivable requires that the
Obligor thereunder obtain comprehensive and collision insurance
covering the Financed Vehicle.
(xiii) Lawful Assignment. No Receivable has been
originated in, or is subject to the laws of, any jurisdiction
under which the sale, transfer, and assignment of such
Receivable under the Agreement or pursuant to transfers of the
Certificates is unlawful, void or voidable.
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(xiv) All Filings Made. No filings (other than UCC
filings which have been made) or other actions are necessary in
any jurisdiction to give the Trustee a first perfected security
interest in the Receivables.
(xv) One Original. With respect to any Receivable for
which an original executed copy exists, there is no more than
one original executed copy of such Receivable which, immediately
prior to the delivery thereof to the Servicer, as custodian for
the Trustee, was in the possession of the Seller.
(xvi) Agreement. The additional representations and
warranties in Section 7.1 of the Agreement are true and correct.
Section 12.2 Repurchase Upon Breach or Failure of a Condition.
The Seller, the Servicer, or the Trustee, as the case may be, shall inform the
other parties promptly, in writing, upon the discovery by the Seller, the
Servicer or an Authorized Officer of the Trustee of either any breach of the
Seller's representations and warranties set forth in subsection 12.1(a) or the
failure of any Receivable to satisfy any of the conditions set forth in
subsection 12.1(b). Unless the breach or failed condition shall have been cured
by the last day of the Collection Period following the Collection Period during
which such discovery occurred (or, at the Seller's option, the last day of the
Collection Period during which such discovery occurred)(such date, the
"Repurchase Date"), the Seller shall repurchase any Receivable the Trust's
interest in which was materially and adversely affected by the breach or failed
condition, as determined by the Servicer and reported in an Officer's
Certificate, as of the Repurchase Date. In consideration of the repurchase of a
Receivable, the Seller shall remit the Repurchase Amount of such Receivable as
of the Repurchase Date (less any Liquidation Proceeds deposited, or to be
deposited, by the Servicer in the Certificate Account with respect to such
Receivable pursuant to Section 13.3) in the manner specified in Section 14.4. In
the event that, as of the Cutoff Date, any Receivable shall have an APR which is
lower than the sum of (i) the weighted average of the Class A Pass-through Rate
and the Class B Pass-through Rate and (ii) the Servicing Fee Rate, the
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Seller shall repurchase such Receivable on the terms and in the manner specified
above, provided, however, that notwithstanding anything to the contrary
contained herein, the Seller shall repurchase such Receivable as of the last day
of the Collection Period during which the discovery thereof by the Seller or the
Servicer occurred or the notice thereof from the Trustee was received by the
Seller. The sole remedy of the Trust, the Trustee or the Certificateholders with
respect either to a breach of the Seller's representations and warranties set
forth in subsection 12.1(a) or to a failure of any of the conditions set forth
in subsection 12.1(b) shall be to require the Seller to repurchase Receivables
pursuant to this Section 12.2. The obligation of the Seller to repurchase under
this Section 12.2 shall not be solely dependent upon the actual knowledge of the
Seller of any breached representation or warranty. The Trustee shall have no
duty to conduct any affirmative investigation as to the occurrence of any
condition requiring the repurchase of any Receivable pursuant to this Section
12.2 or the eligibility of any Receivable for purposes of the Agreement.
Section 12.3 Custody of Receivable Files. To assure uniform
quality in servicing the Receivables and to reduce administrative costs, the
Trustee, upon the execution and delivery of the Agreement, agrees to have the
Servicer act as custodian of the following documents or instruments which are
hereby constructively delivered to the Trustee with respect to each Receivable:
(i) The original executed Receivable or, if no such
original exists, a copy of the original executed Receivable;
(ii) To the extent that a credit application with
respect to an Obligor exists, the original executed copy of such
credit application or, if no such original exists, a copy of
such original executed copy, fully executed by the Obligor;
(iii) The notice of recorded Lien or such documents that
the Servicer or the Seller shall keep on file, in accordance
with its customary procedures, evidencing the first
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priority perfected security interest of the Seller in the
Financed Vehicle; and
(iv) Any and all other documents that the Seller or
Servicer, as the case may be, shall keep on file, in accordance
with its customary procedures, relating to a Receivable, an
Obligor (to the extent relating to a Receivable), or a Financed
Vehicle.
The Servicer hereby agrees to act as custodian of the Receivable
Files, as agent for the Trustee, hereunder. The Servicer acknowledges that it
holds the documents and instruments relating to the Receivables for the benefit
of the Trustee and the Certificateholders. The Trustee shall have no
responsibility to monitor the Servicer's performance as custodian and shall have
no liability in connection with the Servicer's performance of such duties
hereunder.
Section 12.4 Duties of Servicer as Custodian.
(a) Safekeeping. The Servicer, in its capacity as custodian,
shall hold the Receivable Files on behalf of the Trustee for the use and
benefit of all present and future Certificateholders, and maintain such
accurate and complete accounts, records, and computer systems pertaining
to the Receivables as shall enable the Trustee to comply with its
obligations pursuant to these Standard Terms and Conditions of
Agreement. In performing its duties as custodian, the Servicer shall act
with reasonable care, using that degree of skill and attention that the
Servicer exercises with respect to the receivable files of comparable
new or used automobile and light-duty truck receivables that the
Servicer services for itself or others. The Servicer shall conduct, or
cause to be conducted, periodic audits of the files of all receivables
owned or serviced by the Servicer which shall include the Receivable
Files held by it under the Agreement and the related accounts, records,
and computer systems, in such a manner as shall enable the Trustee to
identify all Receivable Files and such related accounts, records and
computer systems and to verify, if the Trustee so elects, the accuracy
of the Servicer's record-keeping. The Servicer shall promptly report to
the Trustee any failure on its part to hold the Receivable Files and
maintain its accounts, records, and computer
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systems as herein provided, and promptly take appropriate action to remedy any
such failure.
(b) Maintenance of and Access to Records. The Servicer shall
maintain each Receivable File at one of its offices specified in
Schedule B to the Agreement, or at such other office as shall be
specified to the Trustee by 30 days' prior written notice. The Servicer
shall make available to the Trustee or its duly authorized
representatives, attorneys, or auditors the Receivable Files and the
related accounts, records, and computer systems maintained by the
Servicer at such times during normal operating hours as the Trustee
shall reasonably instruct which does not unreasonably interfere with the
Servicer's normal operations.
(c) Release of Documents. Upon instruction from the Trustee,
the Servicer shall release any document in the Receivable Files to the
Trustee, the Trustee's agent, or the Trustee's designee, as the case may
be, at such place or places as the Trustee may reasonably designate as
soon as reasonably practicable to the extent it does not unreasonably
interfere with the Servicer's normal operations. The Servicer shall not
be responsible for any loss occasioned by the failure of the Trustee,
its agent or its designee to return any document or any delay in doing
so.
Section 12.5 Instructions; Authority to Act. The Servicer shall
be deemed to have received proper instructions with respect to the Receivable
Files upon its receipt of written instructions signed by an Authorized Officer.
A certified copy of a by-law or of a resolution of the Board of Directors of the
Trustee shall constitute conclusive evidence of the authority of any such
Authorized Officer to act and shall be considered in full force and effect until
receipt by the Servicer of written notice to the contrary given by the Trustee.
Section 12.6 Custodian's Indemnification. The Servicer, as
custodian, shall indemnify the Trustee, its officers, directors, employees and
agents for any and all liabilities, obligations, losses, damages, payments,
costs, or expenses of any kind whatsoever that may be imposed on, incurred, or
asserted against the Trustee, its officers, directors, employees or agents as
the result of any improper act or omission in any way relat-
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ing to the maintenance and custody by the Servicer, as custodian, of the
Receivable Files; provided, however, that the Servicer shall not be liable for
any portion of any such amount resulting from the willful misfeasance, bad
faith, or negligence of the Trustee or any loss occasioned by the failure of the
Trustee, its agent or designee to return any document to the Servicer or any
delay in doing so.
Section 12.7 Effective Period and Termination. The Servicer's
appointment as custodian shall become effective as of the Cutoff Date and shall
continue in full force and effect until terminated pursuant to this Section 12.7
or until the Agreement shall be terminated. If the Servicer shall resign as
Servicer under Section 18.5 or if all of the rights and obligations of the
Servicer shall have been terminated under Section 19.1, the appointment of the
Servicer as custodian may be terminated by the Trustee or by the Holders of
Certificates evidencing not less than 25% of the Pool Balance, in the same
manner as the Trustee or such Holders may terminate the rights and obligations
of the Servicer under Section 19.1. As soon as practicable after any termination
of such appointment, the Servicer shall, at its expense, deliver the Receivable
Files to the Trustee or the Trustee's agent at such place or places as the
Trustee may reasonably designate. Notwithstanding the termination of the
Servicer as custodian, the Trustee agrees that upon any such termination, the
Trustee shall provide, or cause its agent to provide, access to the Receivables
Files to the Servicer for the purpose of carrying out its duties and
responsibilities with respect to the servicing of the Receivables hereunder.
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ARTICLE XIII
Administration and Servicing of Receivables
Section 13.1 Duties of Servicer. The Servicer shall manage,
service, administer and make collections on the Receivables (other than
Repurchased Receivables) with reasonable care, using that degree of skill and
attention that the Servicer exercises with respect to comparable new or used
automobile and light-duty truck receivables that it services for itself. The
Servicer's duties shall include collection and posting of all payments,
responding to inquiries by Obligors or by federal, state, or local governmental
authorities with respect to the Receivables, investigating delinquencies,
reporting tax information to Obligors in accordance with its customary
practices, accounting for collections, furnishing monthly and annual statements
to the Trustee with respect to distributions, and, if it elects to do so, making
Advances pursuant to Section 14.3. The Servicer shall follow its customary
standards, policies, and procedures in performing its duties as Servicer.
Without limiting the generality of the foregoing, the Servicer shall be
authorized and empowered by the Trustee to execute and deliver, on behalf of
itself, the Trust, the Trustee, the Certificateholders, or any of them, any and
all instruments of satisfaction or cancellation, or of partial or full release
or discharge, and all other comparable instruments, without recourse to the
Trustee, with respect to the Receivables or with respect to the Financed
Vehicles. If the Servicer shall commence a legal proceeding to enforce a
Receivable or a Defaulted Receivable, the Trustee shall thereupon be deemed to
have automatically assigned such Receivable and the related property conveyed to
the Trust pursuant to Section 2.1 with respect to such Receivable to the
Servicer, solely for the purpose of collection. The Trustee shall furnish the
Servicer with such documents as have been prepared by the Servicer for execution
by the Trustee and as are necessary or appropriate to enable the Servicer to
carry out its servicing and administrative duties hereunder.
Section 13.2 Collection of Receivable Payments. The Servicer
shall make reasonable efforts to collect all payments called for under the terms
and provisions of the Receivables and of the Agreement as and when the same
shall become due, and shall follow such
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collection procedures as it follows with respect to comparable new or used
automobile and light-duty truck receivables that it services for itself or
others and that is consistent with prudent industry standards. The Servicer
shall not change the amount of or reschedule the due date of any scheduled
payment to a date more than 30 days from the original due date of such scheduled
payment, change the annual percentage rate of, or extend any Receivable or
change any material term of a Receivable, except as provided by the terms of the
Receivable or of the Agreement or as required by law or court order, provided,
however, that the Servicer may extend any Receivable that is in default or with
respect to which default is reasonably foreseeable and that would be acceptable
to the Servicer with respect to comparable new or used automobile and light-duty
truck receivables that it services for itself, if (a) the amount on deposit in
the Reserve Account is greater than zero at the time of the extension, (b) the
total credit-related extensions granted on the Receivable will not exceed four
months in the aggregate, (c) the total number of credit-related extensions
granted on the Receivable will not exceed two, (d) the maturity of such
Receivable would not be extended beyond the Collection Period immediately
preceding the Final Distribution Date and (e) the rescheduling or extension
would not modify the terms of such Receivable in such a manner as to constitute
a cancellation of such Receivable and the creation of a new receivable. If, as a
result of inadvertently rescheduling or extending of payments, such rescheduling
or extension breaches any of the terms of the proviso to the preceding sentence,
then the Servicer shall be obligated to purchase such Receivable pursuant to
Section 13.7. For the purpose of such purchases pursuant to Section 13.7, notice
shall be deemed to have been received by the Servicer at such time as shall make
purchase mandatory as of the last day of the Collection Period during which the
discovery of such breach occurred.
Section 13.3 Realization Upon Receivables. On behalf of the
Trust, the Servicer shall use reasonable efforts, consistent with its customary
servicing procedures, to repossess or otherwise take possession of the
Financed Vehicle securing any Receivable which the Servicer shall have
determined to be a Defaulted Receivable or otherwise (and shall specify any
such Defaulted Receivable to the Trustee no later than the Determination
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Date following the Collection Period in which the Servicer shall have made such
determination). The Servicer shall follow such customary and usual practices and
procedures as it shall deem necessary or advisable in its servicing of new or
used automobile and light-duty truck receivables, which may include selling the
Financed Vehicle at public or private sale. The Servicer shall be entitled to
recover from proceeds all reasonable expenses incurred by it in the course of
converting the Financed Vehicle into cash proceeds. The Liquidation Proceeds
(net of such expenses) realized in connection with any such action with respect
to a Receivable shall be deposited by the Servicer in the Certificate Account in
the manner specified in Section 14.2 and shall be applied to reduce (or to
satisfy, as the case may be) the Repurchase Amount of the Receivable, if such
Receivable is to be repurchased by the Seller pursuant to Section 12.2, or is to
be purchased by the Servicer pursuant to Section 13.7. The foregoing shall be
subject to the provision that, in any case in which the Financed Vehicle shall
have suffered damage, the Servicer shall not expend funds in connection with the
repair or the repossession of such Financed Vehicle unless it shall determine in
its sole discretion that such repair and/or repossession will increase the
Liquidation Proceeds of the related Receivable by an amount equal to or greater
than the amount of such expenses.
Section 13.4 [Reserved]
Section 13.5 Maintenance of Security Interests in Financed
Vehicles. The Servicer, in accordance with its customary servicing procedures,
shall take such steps as are necessary to maintain (i) perfection of the
security interest created in any Financed Vehicle which secures a Receivable and
(ii) perfection of the Trust's interest in the Receivables including, without
limitation, the filing of financing statements and continuation statements. On
behalf of the Trust, the Servicer hereby agrees to take such steps as are
necessary to re-perfect such security interest in the event of the relocation of
a Financed Vehicle or for any other reason, in either case, when the Servicer
has knowledge of the need for such re-perfection. In the event that the
assignment of a Receivable to the Trust is insufficient, without a notation on
the related Financed Vehicle's certificate of title, or without fulfilling any
additional administra-
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tive requirements under the laws of the state in which the Financed Vehicle is
located, to grant to the Trust a perfected security interest in the related
Financed Vehicle, the Servicer hereby agrees that the Servicer's listing as the
secured party on the certificate of title is deemed to be in its capacity as
agent of the Trust and further agrees to hold such certificate of title as the
Trustee's agent and custodian; provided that the Servicer shall not, nor shall
the Trustee or Certificateholders have the right to require that the Servicer,
make any such notation on the related Financed Vehicles' certificate of title or
fulfill any such additional administrative requirement of the laws of the state
in which a Financed Vehicle is located.
Section 13.6 Covenants of Servicer. The Servicer hereby makes the
following covenants on which the Trustee shall rely in accepting the Receivables
in trust and authenticating the Certificates:
(i) Security Interest to Remain in Force. The Financed
Vehicle securing each Receivable shall not be released from the
security interest granted by the Receivable in whole or in
part except as contemplated herein;
(ii) No Impairment. The Servicer shall not impair the
rights of the Trust in the Receivables; and
(iii) Extensions, Defaulted Receivables. The Servicer
shall not increase the number of payments under a Receivable,
nor increase the Amount Financed under a Receivable, nor extend
or forgive payments on a Receivable, except as provided in
Section 13.2. In the event that at the end of the scheduled term
of any Receivable, the outstanding principal amount thereof is
such that the final payment to be made by the related Obligor is
larger than the regularly scheduled payment of principal and
interest made by such Obligor, the Servicer may permit such
Obligor to pay such remaining principal amount in more than one
payment of principal and interest, provided that the last such
payment shall be due on or
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prior to the Collection Period immediately preceding the Final
Distribution Date.
Section 13.7 Purchase of Receivables Upon Breach. The Servicer or
the Trustee, as the case may be, shall inform the other party promptly, in
writing, upon the discovery by the Servicer or an Authorized Officer of the
Trustee, as the case may be, of any breach by the Servicer of its covenants
under Section 13.6. Except as otherwise specified in Section 13.2, unless the
breach shall have been cured by the last day of the Collection Period following
the Collection Period during which such breach was discovered (or, at the
Servicer's election, the last day of the Collection Period during which such
breach was discovered), the Servicer shall purchase any Receivable materially
and adversely affected by such breach, as determined by the Servicer and
reported in an Officer's Certificate as of such date. For this purpose, any
breach of the covenant set forth in Section 13.6(iii) shall be deemed to
materially and adversely affect the interest of the Trust in a Receivable. In
consideration of the purchase of such Receivable, the Servicer shall remit the
Repurchase Amount (less any Liquidation Proceeds deposited, or to be deposited,
by the Servicer in the Certificate Account with respect to such Receivable
pursuant to Section 13.3) in the manner specified in Section 14.4. The sole
remedy of the Trust, the Trustee, or the Certificateholders against the Servicer
with respect to a breach pursuant to Section 13.6 shall be to require the
Servicer to purchase Receivables pursuant to this Section 13.7. The Trustee
shall have no duty to conduct any affirmative investigation as to the occurrence
of any condition requiring the repurchase of any Receivable pursuant to this
Section 13.7 or the eligibility of any Receivable for purposes of the Agreement.
Section 13.8 Servicing Fee. The Servicing Fee for a Collection
Period shall equal the product of one-twelfth of the Servicing Fee Rate and the
Pool Balance as of the first day of such Collection Period. In addition, the
Servicer shall be entitled to receive as additional servicing compensation
investment earnings on amounts on deposit in the Certificate Account or earned
on collections pending deposit in the Certificate Account; provided, however,
that, beginning with the Collection Period for which the Trustee is notified in
writing that the
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Servicer has failed to deposit an Advance with respect to a Receivable other
than because such Receivable has been designated a Defaulted Receivable and
continuing until the Final Distribution Date, such investment earnings shall not
be paid to the Servicer, but shall be treated as Available Interest. The
Servicer shall be required to pay from its own account all expenses incurred by
it in connection with its activities hereunder (including fees and disbursements
of the Trustee, Trustee's counsel, the Paying Agent, the Transfer Agent and
Certificate Registrar and independent accountants, taxes imposed on the
Servicer, and expenses incurred in connection with distributions and reports to
Certificateholders) except expenses in connection with realizing upon a
Receivable under Section 13.3 which may be paid from Liquidation Proceeds from
such Receivable.
Section 13.9 Servicer's Certificate. On or before each
Determination Date, the Servicer shall deliver to the Trustee, the Paying Agent,
the Rating Agencies, a Servicer's Certificate substantially in the form of
Exhibit D hereto, for the Collection Period preceding such Determination Date,
containing all information necessary to make the distributions pursuant to
Section 14.5, all information necessary for the Paying Agent to send statements
to Certificateholders pursuant to Section 14.7 The Servicer shall deliver to the
Rating Agencies any information, to the extent it is available to the Servicer,
that the Rating Agencies reasonably request in order to monitor the Trust. The
Servicer shall also specify each Receivable which the Seller or the Servicer is
required to repurchase or purchase, as the case may be, as of the last day of
the preceding Collection Period, each Receivable which the Servicer shall have
determined to be a Defaulted Receivable during the preceding Collection Period,
and each Receivable for which the Servicer has failed to deposit an Advance
pursuant to Section 14.3 other than because such Receivable has been designated
a Defaulted Receivable. Subsequent to the Closing Date, the form of Servicer's
Certificate may be revised or modified to cure any ambiguities or
inconsistencies with the Agreement; provided, however, that no material
information shall be deleted from the form of Servicer's Certificate. In the
event that the form of Servicer's Certificate is revised or modified in
accordance with the preceding sentence, a form thereof, as so
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revised or modified, shall be provided to the Trustee and each Rating Agency.
Section 13.10 Annual Statement as to Compliance. (a) The Servicer
shall deliver to the Trustee and the Rating Agencies, and on or before March 31
of each year commencing March 31, 1998, a certificate signed by the chairman of
the board, president, the treasurer, the controller, any executive or senior
vice president or any vice president of the Servicer, stating that (a) a review
of the activities of the Servicer during the year ended the preceding December
31 (or shorter period in the case of the first such certificate) and of its
performance under the Agreement has been made under such officer's supervision
and (b) to the best of such officer's knowledge, based on such review, the
Servicer has fulfilled all its obligations in all material respects under the
Agreement throughout such year, or, if there has been a default in the
fulfillment of any such obligation, specifying each such default known to such
officer and the nature and status thereof.
(b) The Servicer shall deliver to the Trustee, and each Rating
Agency promptly after having obtained knowledge thereof, but in no event later
than five Business Days thereafter, an Officer's Certificate specifying any
event which with the giving of notice or lapse of time, or both, would become an
Event of Servicing Termination under Section 19.1. The Seller shall deliver to
the Trustee, promptly after having obtained knowledge thereof, but in no event
later than five Business Days thereafter, an Officer's Certificate specifying
any event which with the giving of notice or lapse of time, or both, would
become an Event of Servicing Termination under Section 19.1.
Section 13.11 Annual Audit Report. The Servicer shall cause a
firm of independent public accountants (which may provide other services to the
Servicer or the Seller) to prepare a report addressed to the Board of Directors
of the Servicer, for the information and use of the Trustee, and the Rating
Agencies on or before March 31 of each year, beginning March 31, 1998, to the
effect that such firm has examined the automobile and light-duty truck
receivable servicing functions of the Servicer, including the Servicer's
procedures and records relating to servicing of the Receivables under this
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Agreement and that, on the basis of such examination, such firm is of the
opinion such servicing has been conducted in compliance with this Agreement
except for (a) such exceptions as such firm believes to be immaterial and (b)
such other exceptions as shall be set forth in such firm's report. In addition,
such report shall state that such firm has compared the mathematical
calculations of each amount set forth in the monthly certificates forwarded by
the Servicer pursuant to Section 13.9 during the period covered by such report
(which shall be the preceding calendar year) with the Servicer's computer
reports which were the source of such amounts and that on the basis of such
comparison, such firm is of the opinion that such amounts are in agreement,
except for such exceptions as such firm believes to be immaterial and such other
exceptions as shall be set forth in such statement. In addition, such report
shall set forth the procedures performed in conjunction with the examination and
shall contain an opinion of such firm as to the accuracy of the amounts set
forth in the certificates delivered pursuant to Section 13.9 in such period.
The report of the independent certified public accountants shall
also indicate that such accounting firm is independent of the Servicer within
the meaning of the Code of Professional Ethics of the American Institute of
Certified Public Accountants.
Section 13.12 Access to Certain Documentation and Information
Regarding Receivables. The Servicer shall provide to the Certificateholders
access to the Receivable Files in such cases where the Certificateholders shall
be required by applicable statutes or regulations to have access to such
documentation. Nothing in this Section 13.12 shall affect the obligation of the
Servicer to observe any applicable law prohibiting disclosure of information
regarding the Obligors, and the failure of the Servicer to provide access to
information as a result of such obligation shall not constitute a breach of this
Section 13.12.
Section 13.13 Reports to Certificateholders and the Rating
Agencies. (a) The Trustee shall provide to any Certificateholder who so requests
in writing (addressed to the Corporate Trust Office) a copy of any Servicer's
Certificate described in Section 13.9, the annual audit statement described in
Section 13.10, or the
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annual audit report described in Section 13.11. The Trustee may require the
Certificateholder to pay a reasonable sum to cover the cost of the Trustee's
complying with such request.
(b) The Trustee shall forward to the Rating Agencies the
statement to Certificateholders described in Section 14.7 and any other reports
it may receive pursuant to this Agreement to (i) Standard & Poor's Corporation,
Asset-Backed Surveillance Group, 26 Broadway, Fifteenth Floor, New York, New
York 10004, and (ii) Moody's Investors Service, Inc., ABS Monitoring Dept., 99
Church Street, 4th Floor, New York, New York 10007.
Section 13.14 Insurance. The Servicer, in accordance with its
customary servicing procedures and underwriting standards, shall require that
each Obligor shall have obtained and shall maintain comprehensive and collision
insurance covering the Financed Vehicle as of the execution of the Receivable.
The Servicer shall enforce its rights under the Receivables to require the
Obligors to maintain comprehensive and collision insurance, in accordance with
the Servicer's customary practices and procedures with respect to comparable new
or used automobile and light-duty truck receivables that it services for itself
or others.
ARTICLE XIV
Distributions; Statements to
Certificateholders
Section 14.1 Accounts. (a) The Servicer shall establish the (i)
Certificate Account in the name of the Trustee for the benefit of the
Certificateholders, (ii) the Class A Distribution Account in the name of the
Trustee for the benefit of the Class A Certificateholders and (iii) the Class B
Distribution Account in the name of the Trustee for the benefit of the Class B
Certificateholders. Each such account shall be either:
(x) a segregated identifiable trust account established in
the trust department of a Qualified Trust Institution; or
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(y) a separately identifiable deposit account established in the
deposit taking department of a Qualified Institution, which may be the Seller so
long as the Seller is a Qualified Institution.
The Certificate Account shall satisfy the requirements of clause
(x) above. The Seller hereby grants to the Collateral Agent for the benefit of
the Class A Certificateholders a security interest in the Class A Distribution
Account, likewise, the Seller hereby grants to the Collateral Agent for the
benefit of the Class B Certificateholders a security interest in the Class B
Distribution Account. Should any depositary of the Certificate Account, the
Class A Distribution Account or the Class B Distribution Account cease to be
either a Qualified Institution or a Qualified Trust Institution, then the
Servicer shall, with the Seller's assistance as necessary, cause such account to
be moved to a Qualified Institution or a Qualified Trust Institution, unless the
Servicer provides the Trustee with a letter from the Rating Agencies to the
effect that the current ratings assigned to the Certificates by the Rating
Agencies will not be adversely affected by such depositary's ceasing to be a
Qualified Institution or a Qualified Trust Institution, as the case may be.
All amounts held in the Certificate Account shall be invested by
the bank or trust company then maintaining the account at the written direction
of the Servicer in Permitted Investments that mature on a date proximate to but
not later than the Deposit Date next succeeding the date of investment;
provided, that if the Certificate Account is maintained with the Trustee, such
Permitted Investments may mature on the Distribution Date next succeeding the
date of investment, if the Trustee is the obligor on such investments (including
repurchase agreements on which the Trustee in its commercial capacity is liable
as principal).
(b) The Seller shall establish the Reserve Account in the name of
the Collateral Agent for the benefit of the Certificateholders. The Reserve
Account shall be under the sole dominion and control of the Collateral Agent.
The Reserve Account shall be a segregated identifiable trust account established
in the trust department of a Qualified Trust Institution.
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Should any depositary of the Reserve Account cease to be either
a Qualified Institution or a Qualified Trust Institution, then the Collateral
Agent shall, with the Seller's assistance as necessary, cause such account to be
moved to a Qualified Institution or a Qualified Trust Institution, unless the
Seller provides the Trustee with a letter from the Rating Agencies to the effect
that the current ratings assigned to the Certificates by the Rating Agencies
will not be adversely affected by such depositary's ceasing to be a Qualified
Institution or a Qualified Trust Institution, as the case may be. The Reserve
Account shall not be property of the Trust.
Funds on deposit in the Reserve Account shall be invested by the
Collateral Agent in Permitted Investments selected by the Servicer; provided,
however, it is understood and agreed that the Collateral Agent shall not be
liable for any loss or charge arising from such investment in Permitted
Investments. All such Permitted Investments shall be held by the Collateral
Agent for the benefit of the Certificateholders in the manner specified in
subsection (c) below; provided, however, that on each Distribution Date all
interest and other investment income (net of losses and investment expenses) on
funds on deposit therein shall be withdrawn from the Reserve Account at the
direction of the Servicer and paid to the Seller. Funds on deposit in the
Reserve Account shall be invested in Permitted Investments that will mature so
that all funds (including both principal and interest) will be available at the
opening of business on the next following Deposit Date; provided, however, that
subject to satisfaction of the Rating Agency Condition and notice thereof to the
Trustee and the Collateral Agent, all or a portion of such funds on deposit in
the Reserve Account may be invested in Permitted Investments that mature later
than such next following Deposit Date.
(c) Each Permitted Investment made with funds from the Reserve
Account shall be delivered to the Collateral Agent by causing the financial
institution then maintaining the Reserve Account (such institution being
referred to as the "Reserve Account Securities Intermediary") to create a
Security Entitlement in the Reserve Account in favor of the Trustee with respect
to such Permitted Investment by indicating by book-entry that such Permitted
Investment has been credited to the Reserve Account. The Servicer shall only
invest in Eligi-
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ble Investments which the Reserve Account Securities Intermediary agrees to
credit to the applicable Account.
(d) The Servicer shall have the power, revocable by the
Collateral Agent, to instruct the Collateral Agent to make withdrawals and
payments from the Reserve Account for the purpose of permitting the Servicer to
carry out its duties hereunder.
(e) Each of the Seller (and any successor to the Seller in
accordance with Section 17.3) and the Servicer agree to take or cause to be
taken such further actions, to execute, deliver and file or cause to be
executed, delivered and filed such further documents and instruments (including,
without limitation, any financing statements under the UCC or this Agreement) as
may be determined to be necessary, in order to perfect the interests created by
this Section 14.4 and otherwise effectuate the purposes, terms and conditions of
this Section 14.4.
(f) Notwithstanding anything else contained herein, the Reserve
Account shall only be established at Qualified Trust Institution which agrees
that it will (i) comply with Entitlement Orders (i.e. orders directing the
transfer or redemption of any financial assets credited to the Reserve Account)
relating to the Reserve Account issued by the Collateral Agent without further
consent by the Seller; (ii) credit all Permitted Investments to the Reserve
Account; (iii) treat each item of property credited to the Reserve Account as a
Financial Asset; (iv) not enter into, any agreement with any other person
relating to the Reserve Account pursuant to which agreement it has agreed to
comply with entitlement orders made by such person; (v) not accept for credit to
the Reserve Account any Permitted Investment which is registered in the name of,
or payable to the order of, or specially indorsed to, any person other than such
Qualified Trust Institution unless it has been indorsed to such Qualified Trust
Institution or is indorsed in blank and (vi) such Qualified Trust Institution
has agreed that it will waive any right of set-off unrelated to its fees for
such Account.
Section 14.2 Collections. The Servicer shall remit daily within
two Business Days of receipt to the Certificate Account all payments by or on
behalf of the
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Obligors on the Receivables and all Liquidation Proceeds (net of expenses), both
as collected during the Collection Period. Notwithstanding the provisions of the
first sentence of this Section 14.2, the Servicer, so long as the Servicer is
USAA Federal Savings Bank, shall be permitted to make deposits on a monthly
instead of a daily basis if either (a) the Servicer obtains a short-term
certificate of deposit rating of the Servicer from Standard & Poor's and Moody's
of A-1 and P-1, respectively, or (b) the Servicer provides the Trustee with (1)
a letter from the Rating Agencies to the effect that the current ratings
assigned to the Certificates by the Rating Agencies will not be adversely
affected by the remittance of Collections on a monthly, rather than a daily,
basis. Any such collections remitted to the Certificate Account on a monthly
basis shall be in immediately available funds and shall be remitted no later
than 11:00 a.m., New York City time on or before the Deposit Date. For purposes
of this Section 14.2 the phrase "payments made on behalf of the Obligors" shall
mean payments made by Persons other than the Seller or the Servicer.
Section 14.3 Advances.
(a) As of each Deposit Date, the Servicer may, in its sole
discretion, make a payment with respect to each Receivable (other than a
Defaulted Receivable) equal to the excess, if any, of (x) the product of the
Principal Balance of such Receivable as of the first day of the related
Collection Period and one-twelfth of the Annual Percentage Rate of interest on
such Receivable (calculated on the basis of a 360-day year of twelve 30-day
months), over (y) the interest actually received by the Servicer with respect to
such Receivable from the Obligor or from payment of the Repurchase Amount during
or with respect to such Collection Period. The Servicer shall deposit all such
Advances into the Certificate Account in immediately available funds no later
than, 11:00 a.m. New York City time, on the Deposit Date. The Servicer may elect
not to make any Advance with respect to a Receivable to the extent that the
Servicer, in its sole discretion, shall determine that such Advance is not
recoverable from subsequent payments on such Receivable or from withdrawals from
the Reserve Account. To the extent that the amount set forth in clause (y) above
with respect to a Receivable is greater than the amount set
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forth in clause (x) above with respect thereto, such excess amount shall be
distributed to the Servicer pursuant to Section 14.5(b); provided, however, that
the Servicer shall not be entitled to reimbursement for an Advance resulting
from a payment being made by or on behalf of the Obligor prior to the Due Date
under the Receivable (a "Simple Interest Advance"). In addition, in the event
that a Receivable becomes a Defaulted Receivable, Outstanding Advances up to the
amount of accrued and unpaid interest thereon shall be reimbursed to the extent
of Interest Collections with respect to such Receivable and, if such amounts are
insufficient, from amounts on deposit in the Reserve Account. The Servicer shall
not be required to make an Advance (other than a Simple Interest Advance) to the
extent that the Servicer, in its sole discretion, determines that such Advance
would not subsequently be recovered (whether from Interest Collections on such
Receivables (including Liquidation Proceeds) or the Reserve Account). The
Servicer shall not make any advance with respect to principal of Receivables.
Notwithstanding anything else herein, the Servicer shall be reimbursed only from
accrued interest due from the Obligor under the Receivable.
(b) The Servicer shall deposit in the Certificate Account
the aggregate Advances on the Receivables pursuant to Section 14.3(a). To the
extent that the Servicer fails to make an Advance pursuant to Section 14.3(a) on
the date required, the Servicer shall so notify the Trustee in writing
specifying the amount of the Advance and the Receivable to which such Advance
relates, and the Trustee shall withdraw such amount (or, if determinable, such
portion of such amount as does not represent advances for delinquent interest)
from the Reserve Account and deposit such amount in the Certificate Account.
Section 14.4 Additional Deposits. The Servicer, or the Seller, as
the case may be, shall deposit into the Certificate Account the aggregate
Repurchase Amount pursuant to Sections 12.2, 13.7 and 21.2, as applicable. All
remittances shall be made to the Certificate Account, in immediately available
funds, no later than 11:00 a.m., on the Deposit Date.
SECTION 14.5 Distributions.
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(a) On or before each Determination Date, the Servicer
shall calculate all amounts to be deposited in the Class A Distribution Account
and the Class B Distribution Account, which calculations shall be set forth in
the Servicer's Certificate delivered to the Trustee on or before such
Determination Date.
(b) On each Distribution Date, after making the
reimbursements to the Servicer of Outstanding Advances pursuant to Section 14.3,
the Trustee shall make the following deposits and distributions from the
Certificate Account and the Reserve Account, if necessary, based solely on the
information contained in the Servicer's Certificate, to the extent of amounts
available from the indicated sources, in the following priority:
(i) to the Servicer, first from Available Interest, and
then, if necessary, from the Available Reserve Amount, any
unpaid Servicing Fee owing to such Servicer for the related
Collection Period and all unpaid Servicing Fees from prior
Collection Periods;
(ii) to the Class A Distribution Account, first from
Available Interest, then, if necessary, from the Available
Reserve Amount, and finally, if necessary, from the Class B
Percentage of Available Principal, the Class A Interest
Distribution for such Distribution Date; and
(iii) to the Class B Distribution Account, first from
Available Interest, and then, if necessary, from the Available
Reserve Amount, the Class B Interest Distribution for such
Distribution Date based solely on the information contained in
the Servicer's Certificate.
On each Distribution Date, the Trustee shall make the following deposits and
distributions (based on the information contained in the Servicer's
Certificate), to the extent of the portion of Available Principal, Available
Interest and the Available Reserve Amount (to be applied in that order of
priority) remaining after the
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application of clauses (i), (ii) and (iii) above, in the following priority:
(iv) to the Class A Distribution Account, the Class A
Principal Distribution for such Distribution Date;
(v) to the Class B Distribution Account, the Class B
Principal Distribution for such Distribution Date;
(vi) to the Collateral Agent for deposit in the Reserve
Account, any amounts remaining, until the amount on deposit in
the Reserve Account equals the Specified Reserve Account
Balance; and
(vii) to the Seller, any amount remaining.
(c) On each Distribution Date, all amounts on deposit in
the Class A Distribution Account will be distributed to the Class A
Certificateholders by the Trustee and all amounts on deposit in the Class B
Distribution Account will be distributed to the Class B Certificateholders by
the Trustee. Except as provided in Section 21.1, payments under this paragraph
shall be made to the Certificateholders by check mailed by the Trustee to each
Holder's respective address of record (or, in the case of Certificates
registered in the name of a Clearing Agency, or its nominee, by wire transfer of
immediately available funds). To the extent that the Trustee is required to wire
funds to the Certificateholders from the Class A Distribution Account or the
Class B Distribution Account, as applicable, it shall request the bank
maintaining the Class A Distribution Account or the Class B Distribution
Account, as applicable, to make a wire transfer of the amount to be distributed
and the bank maintaining the Class A Distribution Account or the Class B
Distribution Account, as applicable, shall promptly deliver to the Trustee a
confirmation of such wire transfer. To the extent that the Trustee is required
to make payments to Certificateholders by check hereunder, it shall request the
bank maintaining the Class A Distribution Account or the Class B Distribution
Account, as applicable, to provide it with a supply of checks to make such
payments. The bank shall, if a request is made by
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the Trustee for a wire transfer by 9:00 A.M. (New York time) on any Distribution
Date, wire such funds in accordance with such instructions by 10:00 A.M. (New
York time) on such Distribution Date, and it will otherwise act in compliance
with the provisions of this paragraph and the other provisions of this Agreement
applicable to it as the bank maintaining the Class A Distribution Account or the
Class B Distribution Account, as applicable. The Servicer shall take all
necessary action (including requiring an agreement to such effect) to ensure
that any bank maintaining the Class A Distribution Account or the Class B
Distribution Account, as applicable, agrees to comply, and complies, with the
provisions of this paragraph and the other provisions of this Agreement
applicable to it as the bank maintaining the Class A Distribution Account or the
Class B Distribution Account, as applicable.
SECTION 14.6 Reserve Account. On the Closing Date, the Seller
shall deposit the Reserve Account Initial Deposit into the Reserve Account. The
Seller hereby grants to the Collateral Agent for the benefit of the
Certificateholders a security interest in and to the Reserve Account and any and
all Financial Assets or other property credited thereto from time to time,
including, but not limited to, Permitted Investments, to secure payment of the
Certificates according to their terms. Amounts held from time to time in the
Reserve Account will continue to be held by the Collateral Agent for the benefit
of Class A Certificateholders and the Class B Certificateholders, but the
Reserve Account shall not be an asset of the Trust. By acceptance of their
Certificates or interest therein, Certificateholders and Certificate Owners
shall be deemed to have appointed _________ as Collateral Agent. __________
hereby accepts such appointment as Collateral Agent.
Section 14.7 Net Deposits. USAA Federal Savings Bank (in whatever
capacity) may make the remittances pursuant to Section 14.2 and Section 14.4
above, net of amounts to be retained by it or distributed to it (also in
whatever capacity) pursuant to Section 14.5, if (a) it shall be the Servicer and
(b) it is entitled, pursuant to Section 14.2, to make deposits on a monthly
basis, rather than a daily basis. The Servicer may remit amounts to the
Certificate Account net of investment earnings accrued on such amounts pending
deposit into the
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Certificate Account, whether or not the Servicer is then entitled to make
deposits on a monthly basis. Nonetheless, the Servicer shall account for all of
the above described amounts as if such amounts were deposited and distributed
separately.
Section 14.8 Statements to Certificateholders. On each
Distribution Date, the Servicer shall prepare and furnish to the Trustee and the
Paying Agent, and the Paying Agent shall include with the distribution to each
Certificateholder, a statement substantially in the form of Exhibit E, based on
information in the certificate furnished pursuant to Section 13.9, setting forth
for the related Collection Period the following information
(i) the amount of the distribution allocable to
principal on the Class A Certificates and the Class B
Certificates;
(ii) the amount of the distribution allocable to
interest on the Class A Certificates and the Class B
Certificates;
(iii) the amount of the Servicing Fee paid to the
Servicer with respect to the related Collection Period;
(iv) the Class A Certificate Balance, the Class A Pool
Factor, the Class B Certificate Balance and the Class B Pool
Factor as of such Distribution Date, after giving effect to
payments allocated to principal reported pursuant to clause (i)
above;
(v) the Pool Balance as of the close of business of the
Servicer on the last day of the preceding Collection Period;
(vi) the amount of the aggregate Realized Losses, if
any, for such Collection Period;
(vii) the aggregate Purchase Amount of Receivables
repurchased by the Seller or purchased by the Servicer;
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(viii) the balance of the Reserve Account on such
Distribution Date, after giving effect to changes therein on
such Distribution Date; and
(ix) the Specified Reserve Account Balance as of the
close of business on such Distribution Date.
Each amount set forth pursuant to clauses (i), (ii) and (iv) above shall be
expressed in the aggregate and as a dollar amount per $1,000 of original
denomination of a Certificate.
Within a reasonable period of time after the end of each calendar
year, but not later than the latest date permitted by law, the Servicer shall
prepare and furnish to the Trustee and the Paying Agent, and the Paying Agent
shall furnish to each Person who at any time during such calendar year shall
have been a Certificateholder, a statement containing the sum of the amounts
determined in clauses (i) and (ii) for such calendar year, for the purposes of
such Certificateholder's preparation of federal income tax returns.
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ARTICLE XV
[reserved]
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ARTICLE XVI
The Certificates
Section 16.1 The Certificates. Unless otherwise specified in the
Agreement, the Certificates shall be issued in denominations of $1,000 and
integral multiples thereof; provided, however, that one Class A Certificate and
one Class B Certificate may be issued in a denomination that includes any
residual portion of the Original Class A Certificate Balance and the Original
Class B Balance. The Certificates shall be executed on behalf of the Trust by
manual or facsimile signature of an Authorized Officer or other authorized
signatory of the Trustee. Certificates bearing the manual or facsimile
signatures of individuals who were, at the time when such signatures shall have
been affixed, authorized to sign on behalf of the Trust, shall be valid and
binding obligations of the Trust, notwithstanding that such individuals shall
have ceased to be so authorized prior to the execution, authentication and
delivery of such Certificates or did not hold such offices or positions at the
date of such Certificates. No Certificate shall entitle the Holder to any
benefit under the Agreement, or shall be valid for any purpose, unless there
shall appear on such Certificate an authentication substantially in the form set
forth in Exhibit A and Exhibit B hereto executed by the Trustee by manual or
facsimile signature; such authentication shall constitute conclusive evidence
that such Certificate has been duly authenticated and delivered hereunder. All
Certificates shall be dated the date of their authentication.
Section 16.2 Execution, Authentication and Delivery of
Certificates. In exchange for the Receivables and the other assets of the Trust,
simultaneously with the sale, assignment and transfer to the Trustee of the
Receivables, the constructive delivery to the Trustee of the Receivable Files
and the delivery to the Trustee of the other components of the Trust, the
Trustee shall deliver to, or upon the order of, the Seller, Certificates duly
executed by the Trustee, on behalf of the Trust, and authenticated by the
Trustee in authorized denominations equaling in the aggregate the Original Pool
Balance, and evidencing the entire ownership of the Trust.
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Section 16.3 Registration of Transfer and Exchange of
Certificates.
(a) The Trustee shall cause to be kept at the office or
agency to be maintained by a transfer agent and certificate registrar (the
"Transfer Agent and Certificate Registrar"), in accordance with the provisions
of Section 16.7, a register (the "Certificate Register") in which, subject to
such reasonable regulations as it may prescribe, the Transfer Agent and
Certificate Registrar shall provide for the registration of Certificates and of
transfers and exchanges of Certificates as herein provided. The Certificate
Register shall list the names of the Certificateholders and their respective
ownership interests in the Trust, and shall be treated as definitive and binding
for all purposes hereunder. Only those persons registered as Certificateholders
in the Certificate Register shall be recognized as having any interest in the
Trust or Trust estate or as possessing the rights of a Certificateholder
hereunder. A transfer of ownership of a Certificate shall be effectuated only by
an appropriate entry in the Certificate Register. [ ] is
hereby initially appointed Transfer Agent and Certificate Registrar for the
purpose of registering Certificates and transfers and exchanges of Certificates
as herein provided. In the event that, subsequent to the date of issuance of the
Certificates, the Trustee is unable to act as Transfer Agent and Certificate
Registrar, the Trustee shall, with the consent of the Seller, appoint another
bank or trust company, having an office or agency located in New York City and
which agrees to act in accordance with the provisions of the Agreement
applicable to it, to act, as successor Transfer Agent and Certificate Registrar
under the Agreement.
[ ] shall be permitted to resign as
Transfer Agent and Certificate Registrar upon 30 days' written notice to the
Seller and the Servicer; provided, however, that such resignation shall not be
effective and [ ] shall continue to perform its duties as
Transfer Agent and Certificate Registrar until the Trustee has appointed a
successor Transfer Agent and Certificate Registrar with the consent of the
Seller.
Upon surrender for registration of transfer of any Class A
Certificate or Class B Certificate at the
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office or agency of the Transfer Agent and Certificate Registrar maintained
pursuant to Section 16.7, the Transfer Agent and Certificate Registrar shall
make an appropriate entry in the Certificate Register to reflect such transfer,
and the Trustee shall execute, authenticate and (if the Transfer Agent and
Certificate Registrar is different than the Trustee, then the Transfer Agent and
Certificate Registrar shall) deliver, in the name of the designated transferee
or transferees, one or more new Certificates in authorized denominations of a
like aggregate amount. At the option of a Certificateholder, Class A
Certificates or Class B Certificates may be exchanged for other Class A
Certificates or Class B Certificates, as the case may be, in authorized
denominations of a like aggregate amount at such office or agency.
Whenever any Class A Certificate or Class B Certificate is
surrendered for exchange, the Trustee shall execute, authenticate and (if the
Transfer Agent and Certificate Registrar is different than the Trustee, then the
Transfer Agent and Certificate Registrar shall) deliver the Certificates which
the Certificateholder making the exchange is entitled to receive. Every
Certificate presented or surrendered for registration of transfer or exchange
shall be accompanied by a written instrument of transfer in form satisfactory to
the Trustee and the Transfer Agent and Certificate Registrar duly executed by
the Holder, which signature on such assignment must be guaranteed by a member of
the New York Stock Exchange or a commercial bank or trust company.
Each Certificate surrendered for registration of transfer or
exchange shall be cancelled by the Transfer Agent and Certificate Registrar or
retained in accordance with its standard retention policy and disposed of or
retained in a manner satisfactory to the Trustee and the Seller.
No service charge shall be made for any registration of transfer
or exchange of Certificates, but the Transfer Agent and Certificate Registrar
may require payment of a sum sufficient to cover any tax or governmental charge
that may be imposed in connection with any transfer or exchange of Certificates.
Section 16.4 Mutilated, Destroyed, Lost, or Stolen Certificates.
If (a) any mutilated Class A Cer-
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tificate or Class B Certificate shall be surrendered to the Transfer Agent and
Certificate Registrar, or if the Transfer Agent and Certificate Registrar shall
receive evidence to its satisfaction of the destruction, loss, or theft of any
Class A Certificate or Class B Certificate and (b) there shall be delivered to
the Trustee and the Transfer Agent and Certificate Registrar such security or
indemnity as may be required to save each of them harmless, then, in the absence
of notice to the Trustee that such, Class A Certificate or Class B Certificate
shall have been acquired by a bona fide purchaser, the Trustee on behalf of the
Trust shall execute, authenticate and (if the Transfer Agent and Certificate
Registrar is different from the Trustee, then Transfer Agent and Certificate
Registrar shall) deliver, in exchange for or in lieu of any such mutilated,
destroyed, lost or stolen Class A Certificate or Class B Certificate, a new
Class A Certificate or Class B Certificate of like tenor and denomination but
bearing a number not contemporaneously outstanding. In connection with the
issuance of any new Class A Certificate or Class B Certificate under this
Section 16.4, the Trustee or the Transfer Agent and Certificate Registrar, as
the case may be, may require the payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in connection therewith. Any
Replacement Class A Certificate or Class B Certificate issued pursuant to this
Section 16.4 shall constitute conclusive evidence of ownership in the Trust, as
if originally issued, whether or not a lost, stolen, or destroyed Certificate
shall be found at any time.
Section 16.5 Persons Deemed Owners. Prior to due presentation of
a Certificate for registration of transfer, the Trustee, the Paying Agent, the
Transfer Agent and Certificate Registrar or any agent of any of them may treat
the Person in whose name any Certificate shall be registered as the owner of
such Certificate for the purpose of receiving distributions pursuant to Section
14.5(b) and for all other purposes whatsoever, and none of the Trustee, the
Paying Agent, the Transfer Agent and Certificate Registrar or any agent of any
of them shall be bound by any notice to the contrary.
Section 16.6 Access to List of Certificateholders' Names and
Addresses. The Transfer Agent and Certificate Registrar shall furnish to the
Servicer or the Paying Agent (or to the Trustee if the Trustee is not
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the Transfer Agent and Certificate Registrar), within 15 days after receipt by
the Transfer Agent and Certificate Registrar of a request therefor from the
Servicer, the Trustee or the Paying Agent in writing, a list of the names and
addresses of the Certificateholders as of the most recent Record Date, in such
form as the Servicer, the Trustee or the Paying Agent may reasonably require.
If, at such time, if any, as Definitive Certificates have been issued, three or
more Certificateholders, or one or more Holders of Certificates aggregating not
less than 25% of the Pool Balance apply in writing to the Transfer Agent and
Certificate Registrar (or the Trustee if the Trustee is acting as the Transfer
Agent and Certificate Registrar), and such application states that the
applicants desire to communicate with other Certificateholders with respect to
their rights under the Agreement or under the Certificates, and such application
is accompanied by a copy of the communication that such applicants propose to
transmit, then the Transfer Agent and Certificate Registrar shall, within five
Business Days after the receipt of such application, afford such applicants
access during normal business hours to the current list of Certificateholders.
Each Certificateholder, by receiving and holding a Certificate, shall be deemed
to have agreed not to hold any of the Servicer, the Trustee, the Transfer Agent
and Certificate Registrar or any of their respective agents accountable by
reason of the disclosure of its name and address, regardless of the source from
which such information was derived.
Section 16.7 Maintenance of Office or Agency. The Transfer Agent
and Certificate Registrar shall maintain in New York, New York an office or
offices or agency or agencies where Certificates may be surrendered for
registration of transfer or exchange. The Transfer Agent and Certificate
Registrar initially designates its agency located at 80 Broad Street, 4th Floor,
New York, New York 10004 as its office for such purposes. The Transfer Agent and
Certificate Registrar shall give prompt written notice to the Trustee, the
Servicer and to Certificateholders of any change in the location of such office
or agency.
Section 16.8 Book-Entry Certificates. Upon original issuance, the
Class A Certificates and the Class B Certificates, other than the Class A
Certificate and the Class B Certificate representing the residual amount
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of the Original Class A Certificate Balance and the Original Class B Certificate
Balance, respectively, which shall be issued upon the written order of the
Seller, shall be issued in the form of one or more typewritten Certificates
representing the Book-Entry Certificates, to be delivered to the initial
Clearing Agency, by, or on behalf of, the Seller. The Certificates shall
initially be registered on the Certificate Register in the name of CEDE & Co.,
the nominee of the initial Clearing Agency, and no Certificate Owner will
receive a definitive certificate representing such Certificate Owner's interest
in the Class A Certificates or the Class B Certificates, as the case may be,
except as provided in Section 16.10. Unless and until definitive, fully
registered Certificates ("Definitive Certificates") have been issued to Class A
Certificateholders or the Class B Certificateholders pursuant to Section 16.10:
(i) the provisions of this Section 16.8 shall be in full
force and effect;
(ii) the Seller, the Servicer, the Paying Agent, the
Transfer Agent and Certificate Registrar and the Trustee may
deal with the Clearing Agency and the Clearing Agency
Participants for all purposes (including the making of
distributions in respect of the Certificates and the taking of
actions by the Certificateholders) as the authorized
representatives of the Certificate Owners;
(iii) to the extent that the provisions of this Section
16.8 conflict with any other provisions of the Agreement, the
provisions of this Section 16.8 shall control;
(iv) the rights of Certificate Owners shall be exercised
only through the Clearing Agency (or to the extent Certificate
Owners are not Clearing Agency Participants through the Clearing
Agency Participants through which such Certificate Owners own
Book-Entry Certificates) and shall be limited to those
established by law and agreements between such Certificate
Owners and the Clearing Agency and/or the Clearing Agency
Participants and all references in the Agreement to actions by
Certifi-
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cateholders shall refer to actions taken by the Clearing Agency
upon instructions from the Clearing Agency Participants, and all
references in the Agreement to distributions, notices, reports
and statements to Certificateholders shall refer to
distributions, notices, reports and statements to the Clearing
Agency or its nominee, as registered holder of the Certificates,
as the case may be, for distribution to Certificate Owners in
accordance with the procedures of the Clearing Agency; and
(v) pursuant to the Depository Agreement, the initial
Clearing Agency will make book-entry transfers among the
Clearing Agency Participants and receive and transmit
distributions of principal and interest on the Certificates to
the Clearing Agency Participants, for distribution by such
Clearing Agency Participants to the Certificate Owners or their
nominees.
Section 16.9 Notices to Clearing Agency. Whenever notice or other
communication to the Certificateholders is required under the Agreement, unless
and until Definitive Certificates shall have been issued to Certificate Owners
pursuant to Section 16.10, the Trustee and the Paying Agent shall give all such
notices and communications specified herein to be given by it to
Certificateholders to the Clearing Agency.
Section 16.10 Definitive Certificates. If (i) (A) the Servicer
advises the Trustee in writing that the Clearing Agency is no longer willing or
able to discharge properly its responsibilities under the Depository Agreement
and (B) the Trustee or the Servicer is unable to locate a qualified successor,
(ii) the Servicer, at its option, advises the Trustee in writing that it elects
to terminate the book-entry system through the Clearing Agency or (iii) after
the occurrence of an Event of Servicing Termination, Certificate Owners
representing in the aggregate not less than 50% of the Pool Balance advise the
Trustee and the Clearing Agency through the Clearing Agency Participants in
writing, and the Clearing Agency shall so notify the Trustee, that the
continuation of a book-entry system through the Clearing Agency, is no longer in
the best interests of the Certificate Owners,
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the Trustee shall notify the Clearing Agency of the occurrence of any such event
and of the availability of Definitive Certificates to Certificate Owners
requesting the same. Upon surrender to the Trustee by the Clearing Agency of
Certificates registered in the name of the nominee of the Clearing Agency,
accompanied by re-registration instructions from the Clearing Agency for
registration, the Trustee shall execute, on behalf of the Trust, authenticate
and deliver Definitive Certificates in accordance with such instructions. The
Servicer shall arrange for, and will bear all costs of, the printing and
issuance of such Definitive Certificates. None of the Seller, the Servicer, the
Transfer Agent and Certificate Registrar or the Trustee shall be liable for any
delay in delivery of such instructions and may conclusively rely on, and shall
be protected in relying on such instructions. Upon the issuance of Definitive
Certificates, all references herein to obligations imposed upon or to be
performed by the Clearing Agency shall be deemed to be imposed upon and
performed by the Transfer Agent and Certificate Registrar, to the extent
applicable with respect to such Definitive Certificates and the Trustee, the
Paying Agent and the Transfer Agent and Certificate Registrar shall recognize
the Holders of the Definitive Certificates as Certificateholders hereunder.
Section 16.11 Appointment of Paying Agent.
(a) The Paying Agent shall have the revocable power to
withdraw funds from the Certificate Account and make distributions to the
Certificateholders pursuant to Section 14.5 hereof. The Trustee may revoke such
power and remove the Paying Agent, if the Trustee determines in its sole
discretion that the Paying Agent shall have failed to perform its obligations
under the Agreement in any material respect or for other good cause. The Paying
Agent shall initially be _________. _____________ shall be permitted to resign
as Paying Agent upon 30 days' written notice to the Servicer, the Trustee and
the Collateral Agent. In the event that ____________ shall no longer be the
Paying Agent, the Trustee shall appoint a successor to act as Paying Agent,
which shall be a bank or trust company. If at any time the Trustee shall be
acting as the Paying Agent, the provisions of Sections 20.2, 20.4 and 20.5 shall
apply to the Trustee in its role as Paying Agent.
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(b) The Trustee shall cause the Paying Agent (if other
than itself) to execute and deliver to the Trustee an instrument in which such
Paying Agent shall agree with the Trustee that such Paying Agent will hold all
sums, if any, held by it for payment to the Certificateholders in trust for the
benefit of the Certificateholders or other party entitled thereto until such
sums shall be paid to such Certificateholders or other party entitled thereto
and shall agree, and if the Trustee is the Paying Agent it hereby agrees, that
it shall comply with all requirements of the Code regarding the withholding by
the Trustee of payments in respect of federal income taxes due from Class A
Certificate Owners or Class B Certificateholders.
(c) _____________ in its capacity as initial Paying
Agent hereunder agrees that it (i) will hold all sums held by it hereunder for
payment to the Certificateholders in trust for the benefit of the
Certificateholders or other parties entitled thereto until such sums shall be
paid to such Certificateholders or other party entitled thereto and (ii) shall
comply with all requirements of the Code regarding the withholding by the
Trustee of payments in respect of federal income taxes due from Certificate
Owners.
Section 16.12 Authenticating Agent.
(a) The Trustee may appoint one or more authenticating
agents with respect to the Certificates which shall be authorized to act on
behalf of the Trustee in authenticating the Certificates in connection with the
issuance, delivery, registration of transfer, exchange or repayment of the
Certificates. Whenever reference is made in this Agreement to the authentication
of Certificates by the Trustee or the Trustee's certificate of authentication,
such reference shall be deemed to include authentication on behalf of the
Trustee by an authenticating agent and a certificate of authentication executed
on behalf of the Trustee by an authenticating agent. Any authenticating agent
appointed by the Trustee shall require the consent of the Seller, which consent
may not be unreasonably withheld.
(b) Any institution succeeding to the corporate agency
business of an authenticating agent shall continue to be an authenticating agent
without the
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execution or filing of any paper or any further act on the part of the Trustee
or such authenticating agent.
(c) An authenticating agent may at any time resign by
giving written notice of resignation to the Trustee and the Seller. The Trustee
may at any time terminate the agency of an authenticating agent by giving notice
of termination to such authenticating agent and to the Seller. Upon receiving
such a notice of resignation or upon such a termination, or in case at any time
an authenticating agent shall cease to be acceptable to the Trustee or the
Seller, the Trustee promptly may appoint a successor authenticating agent with
the consent of the Seller. Any successor authenticating agent upon acceptance of
its appointment hereunder shall become vested with all the rights, powers and
duties of its predecessor hereunder, with like effect as if originally named as
an authenticating agent. Any successor authenticating agent appointed by the
Trustee shall require the consent of the Seller, which consent may not be
unreasonably withheld.
(d) The Servicer shall pay the Authenticating Agent
from time to time reasonable compensation for its services under this Section
16.13.
(e) The provisions of Sections 20.2, 20.4 and 20.5
shall be applicable to any authenticating agent.
(f) Pursuant to an appointment made under this Section
16.13, the Certificates may have endorsed thereon, in lieu of the Trustee's
certificate of authentication, an alternate certificate of authentication in
substantially the following form:
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This is one of the certificates referred to in the within
mentioned Agreement.
[NAME OF TRUSTEE]
as Trustee
By:______________________
Authorized Signatory
or
_________________________
as Authenticating Agent
for the Trustee,
By:______________________
Authorized Signatory
Section 16.13 Actions of Certificateholders.
(a) Any request, demand, authorization, direction,
notice, consent, waiver or other action provided by the Agreement to be given or
taken by Certificateholders may be embodied in and evidenced by one or more
instruments of substantially similar tenor signed by such Certificateholders in
person or by an agent duly appointed in writing; and except as herein otherwise
expressly provided, such action shall become effective when such instrument or
instruments are delivered to the Trustee and, when required, to the Seller or
the Servicer. Proof of execution of any such instrument or of a writing
appointing any such agent shall be sufficient for any purpose of the Agreement
and conclusive in favor of the Trustee, the Seller and the Servicer, if made in
the manner provided in this Section 16.14.
(b) The fact and date of the execution by any
Certificateholder of any such instrument or writing may be proved in any
reasonable manner which the Trustee deems sufficient.
(c) Any request, demand, authorization, direction,
notice, consent, waiver or other act by a Certificateholder shall bind every
Holder of every Certificate issued upon the registration of transfer thereof or
in exchange therefor or in lieu thereof, in respect of
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anything done, or omitted to be done, by the Trustee, the Seller or the Servicer
in reliance thereon, whether or not notation of such action is made upon such
Certificate.
(d) The Trustee may require such additional proof of
any matter referred to in this Section 16.14 as it shall deem necessary.
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ARTICLE XVII
The Seller
Section 17.1 Representations of Seller. The Seller makes the
following representations on which the Trustee shall rely in accepting the
Receivables in trust and authenticating the Certificates. The representations
shall speak as of the execution and delivery of the Agreement, and shall survive
the sale of the Receivables to the Trustee.
(i) Organization and Good Standing. The Seller has been
duly organized and is validly existing as a federally chartered savings
association in good standing under the laws of the United States of
America, with power and authority to own its properties and to conduct
its business as such properties are currently owned and such business is
presently conducted, and had at all relevant times, and has, power,
authority, and legal right to acquire and own the Receivables.
(ii) Power and Authority. The Seller has the power and
authority to execute and deliver the Agreement and to carry out its
terms; the Seller has full power and authority to sell and assign the
property to be sold and assigned to the Trustee as part of the Trust and
has duly authorized such sale and assignment to the Trustee by all
necessary corporate action; and the execution, delivery, and performance
of the Agreement has been duly authorized by the Seller by all necessary
corporate action.
(iii) Valid Sale; Binding Obligations. The Agreement
effects a valid sale, transfer, and assignment of the Receivables,
enforceable against creditors of and purchasers from the Seller and
constitutes a legal, valid, and binding obligation of the Seller
enforceable in accordance with its terms, except as enforceability may
be limited by bankruptcy, insolvency, reorganization, or other similar
laws affecting the enforcement of creditors' rights in
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general and by general principles of equity, regardless of whether such
enforceability is considered in a proceeding in equity or at law.
(iv) No Violation. The consummation of the transactions
contemplated by the Agreement and the fulfillment of the terms hereof do
not (a) conflict with, result in any breach of any of the terms and
provisions of, or constitute (with or without notice or lapse of time) a
default under, the charter or bylaws of the Seller, or conflict with or
breach any of the material terms or provisions of, or constitute (with
or without notice or lapse of time) a default under, any indenture,
agreement, or other instrument to which the Seller is a party or by
which it is bound, (b) result in the creation or imposition of any lien
upon any of its properties pursuant to the terms of any such indenture,
agreement, or other instrument, or (c) violate any law or, to the best
of the Seller's knowledge, any order, rule, or regulation applicable to
the Seller of any court or of any federal or state regulatory body,
administrative agency, or other governmental instrumentality having
jurisdiction over the Seller or its properties.
(v) No Proceedings. There are no proceedings or
investigations pending, or, to the best of the Seller's knowledge,
threatened, before any court, regulatory body, administrative agency, or
other governmental instrumentality having jurisdiction over the Seller
or its properties (a) asserting the invalidity of the Agreement or the
Certificates, (b) seeking to prevent the issuance of the Certificates or
the consummation of any of the transactions contemplated by the
Agreement, (c) seeking any determination or ruling that might materially
and adversely affect the performance by the Seller of its obligations
under, or the validity or enforceability of, the Agreement or the
Certificates or (d) relating to the Seller and which might adversely
affect the federal income tax attributes of the Certificates.
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Section 17.2 Liability of Seller; Indemnities. The Seller shall
be liable in accordance herewith only to the extent of the obligations
specifically undertaken by the Seller in such capacity under the Agreement and
shall have no other obligations or liabilities hereunder.
The Seller shall indemnify, defend and hold harmless the Trustee
and the Trust from and against any taxes that may at any time be asserted
against the Trustee or the Trust with respect to, and as of the date of, the
sale of the Receivables to the Trust or the issuance and original sale of the
Certificates, including any sales, gross receipts, general corporation, tangible
or intangible personal property, privilege, or license taxes (but not, in the
case of the Trust, including any taxes asserted with respect to ownership of the
Receivables or federal or other income taxes, including franchise taxes measured
by net income), arising out of the transactions contemplated by the Agreement,
and costs and expenses in defending against the same.
The Seller shall indemnify, defend, and hold harmless the
Trustee, its officers, directors, employees and agents or the Trust from and
against any loss, liability or expense incurred by reason of (i) the Seller's
willful misfeasance, bad faith, or negligence in the performance of its duties
hereunder, or by reason of reckless disregard of the obligations and duties
hereunder and (ii) the Seller's violation of federal or state securities laws in
connection with the registration of the sale of the Certificates.
Indemnification under this Section 17.2 shall survive the
termination of this Agreement and the resignation or removal of the Trustee and
shall include reasonable fees and expenses of counsel and expenses of
litigation. If the Seller shall have made any indemnity payments to the Trust or
the Trustee pursuant to this Section 17.2 and the Trust or the Trustee
thereafter shall collect any of such amounts from others, the Trust shall repay
such amounts to the Seller, without interest.
Section 17.3 Merger or Consolidation of Seller. Any corporation
or other entity (i) into which the Seller may be merged or consolidated, (ii)
which may result from any merger, conversion, or consolidation to which the
Seller shall be a party, or (iii) which may succeed to all
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or substantially all of the business of the Seller, which corporation or other
entity executes an agreement of assumption to perform every obligation of the
Seller under the Agreement, shall be the successor to the Seller hereunder
without the execution or filing of any document or any further act by any of the
parties to the Agreement. The Seller shall give prompt written notice of any
merger or consolidation to the Trustee, the Servicer and the Rating Agencies.
Section 17.4 Limitation on Liability of Seller and Others. The
Seller and any director, officer, employee or agent of the Seller may rely in
good faith on the advice of counsel or on any document of any kind, prima facie
properly executed and submitted by any Person respecting any matters arising
hereunder. The Seller shall not be under any obligation under this Agreement to
appear in, prosecute, or defend any legal action that shall be unrelated to its
obligations under the Agreement, and that in its opinion may involve it in any
expense or liability.
Section 17.5 Seller May Own Certificates. The Seller and any
Person controlling, controlled by, or under common control with the Seller may
in its individual or any other capacity become the owner or pledgee of
Certificates with the same rights as it would have if it were not the Seller or
an affiliate thereof, except as otherwise provided in the definition of
"Certificateholder", "Class A Certificateholder" and "Class B Certificateholder"
specified in Section 11.1. Certificates so owned by or pledged to the Seller or
such controlling or commonly controlled Person shall have an equal and
proportionate benefit under the provisions of the Agreement, without preference,
priority, or distinction as among all of the Certificates.
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ARTICLE XVIII
The Servicer
Section 18.1 Representations of Servicer. The Servicer makes the
following representations on which the Trustee shall rely in accepting the
Receivables in trust and authenticating the Certificates. The representations
shall speak as of the execution and delivery of the Agreement, and shall survive
the sale of the Receivables to the Trustee.
(i) Organization and Good Standing. The Servicer has been
duly organized and is validly existing as a federally chartered savings
association or corporation and is in good standing under the laws of the
United States of America or its state of incorporation, with power and
authority to own its properties and to conduct its business as such
properties are currently owned and such business is presently conducted,
and had at all relevant times, and has, power, authority, and legal
right to acquire, own, sell, and service the Receivables and to hold the
Receivable Files as custodian on behalf of the Trustee.
(ii) Power and Authority. The Servicer has the power and
authority to execute and deliver the Agreement and to carry out its
terms; and the execution, delivery, and performance of the Agreement has
been duly authorized by the Servicer by all necessary corporate action.
(iii) Binding Obligations. The Agreement constitutes a
legal, valid, and binding obligation of the Servicer enforceable in
accordance with its terms subject, as to enforcement, to applicable
bankruptcy, insolvency, reorganization, liquidation or other similar
laws and equitable principles relating to or affecting the enforcement
of creditors' rights in general and by general principles of equity
regardless of whether such enforceability is considered in a proceeding
in equity or law.
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(iv) No Violation. The consummation of the transactions
contemplated by the Agreement and the fulfillment of the terms hereof do
not conflict with, result in any breach of any of the terms and
provisions of, nor constitute (a) (with or without notice or lapse of
time) a default under, the articles of association or bylaws of the
Servicer, or conflict with or breach any of the material terms or
provisions of, or constitute (with or without notice or lapse of time) a
default under, any indenture, agreement, or other instrument to which
the Servicer is a party or by which it shall be bound, (b) result in the
creation or imposition of any lien upon any of its properties pursuant
to the terms of any such indenture, agreement, or other instrument or
(c) violate any law or, to the best of the Servicer's knowledge, any
order, rule, or regulation applicable to the Servicer of any court or of
any federal or state regulatory body, administrative agency, or other
governmental instrumentality having jurisdiction over the Servicer or
its properties.
(v) No Proceedings. There are no proceedings or
investigations pending, or to the best of the Servicer's knowledge,
threatened, before any court, regulatory body, administrative agency, or
other governmental instrumentality having jurisdiction over the Servicer
or its properties (a) asserting the invalidity of the Agreement or the
Certificates, (b) seeking to prevent the issuance of the Certificates or
the consummation of any of the transactions contemplated by the
Agreement, (c) seeking any determination or ruling that might materially
and adversely affect the performance by the Servicer of its obligations
under, or the validity or enforceability of, the Agreement or the
Certificates, or (d) relating to the Servicer and which might adversely
affect the federal income tax attributes of the Certificates.
(vi) Fidelity Bond. The Servicer maintains a fidelity bond
in such form and amount as is customary for banks acting as cus-
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todian of funds and documents in respect of retail automotive
installment sales contracts.
Section 18.2 Liability of Servicer; Indemnities. The Servicer
shall be liable in accordance herewith only to the extent of the obligations
specifically undertaken by the Servicer under the Agreement and shall have no
other obligations or liabilities hereunder.
(i) The Servicer shall defend, indemnify, and hold
harmless the Trustee, its officers, directors, employees and agents, the
Trust and the Certificateholders from and against any and all costs,
expenses, losses, damages, claims, and liabilities, arising out of or
resulting from the use, ownership, or operation by the Servicer or any
affiliate thereof of a Financed Vehicle.
(ii) The Servicer shall indemnify, defend, and hold
harmless the Trustee, its officers, directors, employees and agents from
and against any taxes that may at any time be asserted against the
Trustee or the Trust with respect to the transactions contemplated in
the Agreement, including, without limitation, any sales, gross receipts,
general corporation, tangible or intangible personal property,
privilege, or license taxes (but not including any taxes asserted with
respect to, and as of the date of, the sale of the Receivables to the
Trust or the issuance and original sale of the Class A Certificates and
the Class B Certificates, or asserted with respect to ownership of the
Receivables or federal or other income taxes, including franchise taxes
measured by net income) arising out of distributions on the Certificates
and costs and expenses in defending against the same.
(iii) The Servicer shall indemnify, defend, and hold
harmless the Trustee, its officers, directors, employees and agents and
the Trust and the Certificateholders from and against any and all costs,
expenses, losses, claims, damages, and liabilities to the extent that
such cost, expense, loss, claim, damage, or
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liability arose out of, or was imposed upon the Trustee and the Trust or
the Certificateholders through the willful misfeasance, negligence, or
bad faith of the Servicer in the performance of its duties under the
Agreement or by reason of reckless disregard of its obligations and
duties under the Agreement.
(iv) The Servicer shall indemnify, defend, and hold
harmless the Trustee, its officers, directors, employees and agents,
from and against all costs, expenses, losses, claims, damages, and
liabilities arising out of or incurred in connection with the acceptance
or performance of the trusts and duties herein contained, except to the
extent that such costs, expenses, losses, claims, damage or liabilities:
(1) shall be due to the willful misfeasance, bad faith or negligence of
the Trustee; (2) shall arise from the Trustee's breach of any of its
representations or warranties set forth in Section 20.14; or (3) shall
be one as to which the Seller is required to indemnify the Trustee.
Indemnification under this Section 18.2 shall include reasonable
fees and expenses of counsel and expenses of litigation. If the Servicer shall
have made any indemnity payments pursuant to this Section 18.2 and the recipient
thereafter collects any of such amounts from others, the recipient shall
promptly repay such amounts to the Servicer, without interest. The
indemnification obligations of the Servicer set forth in this Section 18.2 shall
survive the termination of this Agreement, the termination of the Servicer with
respect to any act or failure to act which occurs prior to such Servicer's
termination and the resignation or removal of the Trustee.
Section 18.3 Merger or Consolidation of Servicer. Any corporation
or other entity (i) into which the Servicer may be merged or consolidated, (ii)
which may result from any merger, conversion, or consolidation to which the
Servicer shall be a party, or (iii) which may succeed to all or substantially
all of the business of the Servicer, which corporation or other entity executes
an agreement of assumption to perform every obligation of the Servicer
hereunder, shall be the successor to the Servicer under the Agreement without
the execution or filing of any
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document or any further act on the part of any of the parties to the Agreement.
The Servicer shall promptly inform the Trustee, the Seller and the Rating
Agencies in writing of any such merger or consolidation.
Section 18.4 Limitation on Liability of Servicer and Others.
(a) Neither the Servicer nor any of the directors or
officers or employees or agents of the Servicer shall be under any liability to
the Trust, the Trustee, or the Certificateholders, except as provided under the
Agreement, for any action taken or for refraining from the taking of any action
pursuant to the Agreement or for errors in judgment; provided, however, that
this provision shall not protect the Servicer or any such Person against any
liability that would otherwise be imposed by reason of willful misfeasance,
negligence, or bad faith in the performance of duties or by reason of reckless
disregard of obligations and duties under the Agreement. The Servicer and any
director or officer or employee or agent of the Servicer may rely in good faith
on the advice of counsel or on any document of any kind prima facie properly
executed and submitted by any Person respecting any matters arising under the
Agreement.
(b) The Servicer and any director or officer or
employee or agent of the Servicer shall be indemnified by the Trust and held
harmless against any loss, liability, or expense including reasonable attorneys'
fees and expenses incurred in connection with any legal action relating to the
performance of the Servicer's duties under the Agreement, other than (i) any
loss or liability otherwise reimbursable pursuant to the Agreement; (ii) any
loss, liability, or expense incurred solely by reason of the Servicer's willful
misfeasance, negligence, or bad faith in the performance of its duties hereunder
or by reason of reckless disregard of its obligations and duties under the
Agreement; (iii) any loss, liability, or expense for which the Trust is to be
indemnified by the Servicer under the Agreement, and (iv) any loss, liability,
or expense incurred by the Person to be indemnified for which loss, liability,
or expense, such Person shall be indemnified by the Trust. Any amounts due the
Servicer pursuant to this subsection shall be payable on a Distribution Date
from the Total Collections on deposit in the Certificate Account only after all
payments
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required to be made on such date to the Certificateholders and the Servicer have
been made, payments of amounts, if any, due the Trustee from the Trust pursuant
to Section 20.8 have been made, and deposits of any amount required to be
deposited into the Reserve Account pursuant to Section 14.5(b)(vi) to maintain
the amount on deposit therein (exclusive of investment income and earnings on
amounts on deposit therein) at the Specified Reserve Account Balance on such
date have been made.
(c) Except as provided in the Agreement, the Servicer
shall not be under any obligation to appear in, prosecute, or defend any legal
action that shall not be incidental to its obligations under the Agreement, and
that in its opinion may involve it in any expense or liability; provided,
however, that the Servicer may undertake any reasonable action that it may deem
necessary or desirable in respect of the Agreement and the rights and duties of
the parties to the Agreement and the interests of the Certificateholders under
the Agreement. In such event, the legal expenses and costs of such action and
any liability resulting therefrom shall be expenses, costs, and liabilities of
the Trust, and the Servicer shall be entitled to be reimbursed therefor. Any
amounts due the Servicer pursuant to this subsection shall be payable on a
Distribution Date from the Total Collections on deposit in the Certificate
Account only after all payments required to be made on such date to the
Certificateholders and the Servicer have been made, payments of amounts, if any,
due the Trustee from the Trust pursuant to Section 20.8 have been made and
deposits of any amount required to be deposited into the Reserve Account
pursuant to Section 14.5(b)(vi) to maintain the amount on deposit therein
(exclusive of investment income and earnings on amounts on deposit therein) at
the Specified Reserve Account Balance on such date have been made.
The Person to be indemnified shall provide the Trustee with a
certificate and accompanying Opinion of Counsel requesting indemnification and
setting forth the basis for such request.
Section 18.5 Servicer Not To Resign. The Servicer shall not
resign from its obligations and duties under the Agreement except (i) upon
determination that the performance of its duties shall no longer be permissible
under applicable law or (ii) in the event of the appoint-
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ment of a successor Servicer pursuant to Section 19.2, upon satisfaction of the
Rating Agency Condition. Notice of any such determination permitting the
resignation of USAA Federal Savings Bank shall be communicated to the Trustee,
and the Rating Agencies at the earliest practicable time (and, if such
communication is not in writing, shall be confirmed in writing at the earliest
practicable time) and any such determination permitting the resignation of the
Servicer shall be evidenced by an Opinion of Counsel to such effect delivered to
the Trustee concurrently with such notice. No such resignation shall become
effective until the Trustee (which shall not be obligated to act as successor
Servicer if the Servicer has resigned for a reason other than the performance of
its duties are no longer permissible under applicable law) or a successor
Servicer shall have assumed the responsibilities and obligations of the Servicer
in accordance with Section 19.2.
Section 18.6 Delegation of Duties. So long as USAA Federal
Savings Bank or the Trustee acts as Servicer, the Servicer shall have the right,
in the ordinary course of its business, to delegate any of its duties under this
Agreement to any Person. Any compensation payable to such Person shall be paid
by the Servicer from its own funds and none of the Trust, the Trustee or the
Certificateholders shall have any liability to such Person with respect thereto.
Notwithstanding any delegation of duties by the Servicer pursuant to this
Section 18.6, the Servicer shall not be relieved of its liability and
responsibility with respect to such duties, and any such delegation shall not
constitute a resignation within the meaning of Section 18.5 hereof. Any
agreement that may be entered into by the Servicer and a Person that provides
for any delegation of the Servicer's duties hereunder shall be deemed to be
between the Servicer and such Person alone, and the Trustee and
Certificateholders shall not be deemed parties thereto and shall have no claims,
rights, obligations, duties or liabilities with respect thereto.
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ARTICLE XIX
Events of Servicing Termination
Section 19.1 Events of Servicing Termination. If any one of the
following events ("Events of Servicing Termination") shall occur and be
continuing:
(i) Any failure by the Servicer to deliver to the Trustee
the Servicer's Certificate for the related Collection Period, or any
failure by the Servicer (or so long as the Seller is the Servicer, the
Seller) to deliver to the Trustee, for distribution to
Certificateholders, any proceeds or payment required to be so delivered
under the terms of the Certificates and the Agreement (or, in the case
of a payment or deposit to be made not later than any Deposit Date, the
failure to make such payment or deposit on the related Distribution
Date), in each case that continues unremedied for a period of five
Business Days after (A) discovery by an officer of the Servicer (or so
long as the Seller is the Servicer, the Seller) or (B) written notice
(1) to the Servicer by the Trustee or (2) to the Trustee and the
Servicer (or so long as the Seller is the Servicer, the Seller) by the
Holders of Certificates evidencing not less than 25% of the Pool
Balance; or
(ii) Failure on the part of the Servicer (or so long as
the Seller is the Servicer, the Seller) duly to observe or to perform in
any material respect any other covenants or agreements of the Servicer
(or so long as the Seller is the Servicer, the Seller) set forth in the
Certificates or in the Agreement, which failure shall (a) materially and
adversely affect the rights of the Trust or the Certificateholders
(which determination shall be made without regard to whether funds on
deposit in the Reserve Account are available to the Certificateholders)
and (b) continues unremedied for a period of 60 days after the date on
which written notice of such failure, requiring the same to be remedied,
shall have been given (1) to the Servicer (or so long as the Seller is
the
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Servicer, the Seller) by the Trustee or (2) to the Trustee and the
Servicer (or so long as the Seller is the Servicer, the Seller) by the
Holders of Certificates evidencing not less than 25% of the Pool
Balance; provided, however, that a failure on the part of the Servicer,
other than USAA Federal Savings Bank for so long as it is the Servicer,
to observe and comply with the provisions of Section 18.6 or to meet the
eligibility criteria set forth in Section 19.2 shall constitute an Event
of Servicing Termination without regard to (a) and (b) above; or
(iii) The entry of a decree or order by a court or agency
or supervisory authority having jurisdiction in the premises for the
appointment of a conservator, receiver, or liquidator for the Servicer
in any insolvency, readjustment of debt, marshalling of assets and
liabilities, or similar proceedings, or for the winding up or
liquidation of their respective affairs, and the continuance of any such
decree or order unstayed and in effect for a period of 60 consecutive
days; or
(iv) The consent by the Servicer to the appointment of a
conservator or receiver or liquidator in any insolvency, readjustment of
debt, marshalling of assets and liabilities, or similar proceedings of
or relating to the Servicer or of or relating to substantially all of
their property; or the Servicer shall admit in writing its inability to
pay its debts generally as they become due, file a petition to take
advantage of any applicable insolvency or reorganization statute, make
an assignment for the benefit of its creditors, or voluntarily suspend
payment of its obligations;
then, and in each and every case and so long as an Event of Servicing
Termination shall not have been remedied, either the Trustee, or the Holders of
Certificates evidencing not less than 25% of the Pool Balance, by notice given
in writing to the Servicer (and to the Trustee if given by the
Certificateholders) may terminate all of the rights and obligations of the
Servicer under the Agreement. On or after the receipt by the Servicer of such
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written notice, all authority and power of the Servicer under the Agreement,
whether with respect to the Certificates or the Receivables or otherwise, shall
pass to and be vested in the Trustee pursuant to this Section 19.1; and, without
limitation, the Trustee shall be hereby authorized and empowered to execute and
deliver, on behalf of the predecessor Servicer, as attorney-in-fact or
otherwise, any and all documents and other instruments, and to do or accomplish
all other acts or things necessary or appropriate to effect the purposes of such
notice of termination, whether to complete the transfer and endorsement of the
Receivable Files, or otherwise. The predecessor Servicer shall cooperate with
the successor Servicer and the Trustee in effecting the termination of the
responsibilities and rights of the predecessor Servicer under the Agreement,
including the transfer to the successor Servicer for administration by it of all
cash amounts that shall at the time be held by the predecessor Servicer for
deposit, shall have been deposited by the Servicer in the Certificate Account,
or shall thereafter be received with respect to a Receivable. All reasonable
costs and expenses (including attorneys' fees and disbursements) incurred in
connection with transferring the Receivable Files to the successor Servicer and
amending the Agreement to reflect such succession as Servicer pursuant to this
Section 19.1 shall be paid by the predecessor Servicer upon presentation of
reasonable documentation of such costs and expenses. The Trustee shall give
written notice of any termination of the Servicer to the Certificateholders and
the Rating Agencies.
Section 19.2 Trustee to Act; Appointment of Successor. Upon the
Servicer's receipt of notice of termination pursuant to Section 19.1 the Trustee
shall, and upon the Servicer's resignation pursuant to Section 18.5 the Trustee
may, be the successor in all respects to the Servicer in its capacity as
Servicer under the Agreement, and, in such case, shall be subject to all the
responsibilities, duties and liabilities arising thereafter relating thereto
placed on the Servicer by the terms and provisions of the Agreement. As
compensation therefor, the Trustee shall be entitled to such compensation
(whether payable out of the Certificate Account or otherwise) as the Servicer
would have been entitled to under the Agreement if no such notice of termination
or resignation had been given. Notwithstanding the above, the Trustee may, if it
shall be unwilling so to act, or shall, if it shall
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be legally unable so to act, appoint, or petition a court of competent
jurisdiction to appoint, any established financial institution, having a net
worth of not less than $100,000,000 as of the last day of the most recent fiscal
quarter for such institution and whose regular business shall include the
servicing of automobile receivables, as successor Servicer under the Agreement;
provided, that the appointment of any such successor Servicer will not result in
the withdrawal or reduction of the outstanding ratings assigned to the
Certificates by the Rating Agencies. In connection with such appointment, the
Trustee may make such arrangements for the compensation of such successor
Servicer out of payments on Receivables as it and such successor Servicer shall
agree; provided, however, that no such compensation shall be in excess of that
permitted the Servicer under the Agreement. The Trustee and such successor
Servicer shall take such action, consistent with the Agreement, as shall be
necessary to effectuate any such succession. Unless the Trustee shall be
prohibited by law from so acting, the Trustee shall not be relieved of its
duties as successor Servicer under this Section 19.2 until the newly appointed
successor Servicer shall have assumed the responsibilities and obligations of
the Servicer under the Agreement.
Section 19.3 Notification to Certificateholders. Upon delivery of
written notice by the Trustee to the Servicer or receipt by the Trustee of
written notice from Holders of Certificates evidencing not less than 25% of the
Pool Balance of an Event of Servicing Termination or upon any Servicer
termination, or appointment of a successor Servicer pursuant to this Article
XIX, the Trustee shall give prompt written notice thereof to Certificateholders
at their respective addresses of record, to the Seller and to the Rating
Agencies.
Section 19.4 Waiver of Past Defaults. The Holders of Certificates
evidencing not less than 51% of the Pool Balance, may, on behalf of all Holders
of Certificates, waive any default by the Servicer in the performance of its
obligations hereunder and its consequences, except a default in the failure to
make any required deposits to or payments from the Certificate Account in
accordance with this Agreement. Upon any such waiver of a past default, such
default shall cease to exist, and any Event of Servicing Termination arising
therefrom shall be deemed to have been remedied for every purpose of this
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Agreement. No such waiver shall extend to any subsequent or other default or
impair any right consequent thereon except to the extent expressly so waived.
The Servicer shall give prompt written notice of any waiver to the Rating
Agencies.
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ARTICLE XX
The Trustee
Section 20.1 No Power to Engage in Business or to Vary
Investments. Notwithstanding any provision or agreement to the contrary in this
Agreement or in any other agreement, the Trustee, acting on behalf of the Trust
(but not individually), shall not have any power to engage in any business,
commercial or other activity for profit, and the Trustee and the Servicer shall
not have any power to vary the Trust estate, whether consisting of a Receivable,
a Permitted Investment or any other amount (other than cash payments received
with respect to Receivables) in any account maintained for the benefit of the
Trust or the Certificateholders or Certificate Owners, by disposition of said
property, investment or amount and the reinvestment of the proceeds realized or
by any other action calculated to take advantage of any variation or change in
the market or in market conditions, for the purpose of improving the investment
or return of the Certificateholders or Certificate Owners.
Section 20.2 Duties of Trustee. The Trustee, both prior to and
after the occurrence of an Event of Servicing Termination, shall undertake to
perform such duties and only such duties as are specifically set forth in the
Agreement. If an Event of Servicing Termination known to the Trustee shall have
occurred and shall not have been cured, the Trustee shall exercise such of the
rights and powers vested in it by the Agreement, and shall use the same degree
of care and skill in their exercise, as a prudent person would exercise or use
under the circumstances in the conduct of his or her own affairs; provided,
however, that if the Trustee shall assume the duties of the Servicer pursuant to
Section 19.2, the Trustee in performing such duties shall use the degree of
skill and attention customarily exercised by a servicer with respect to
automobile and light-duty truck receivables that it services for itself.
The Trustee, upon receipt of any resolutions, certificates,
statements, opinions, reports, documents, orders, or other instruments furnished
to the Trustee that shall be specifically required to be furnished pursuant to
any provision of the Agreement, shall examine them to determine whether they
conform to the requirements of the
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Agreement; provided, however, that the Trustee shall not be responsible for the
accuracy or content of any such resolution, certificate, statement, opinion,
report, document, order or other instrument furnished by the Servicer to the
Trustee pursuant to this Agreement.
No provision of the Agreement shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act, or its own bad faith or willful misfeasance; provided, however, that:
(i) Prior to the occurrence of an Event of Servicing
Termination, and after the curing of all such Events of Servicing
Termination that may have occurred, the duties and obligations of the
Trustee shall be determined solely by the express provisions of the
Agreement, the Trustee shall not be liable except for the performance of
such duties and obligations as shall be specifically set forth in the
Agreement, no implied covenants or obligations shall be read into the
Agreement against the Trustee, the permissible right of the Trustee to
do things enumerated in the Agreement shall not be construed as a duty
and, in the absence of bad faith on the part of the Trustee, or manifest
error, the Trustee may conclusively rely upon any certificates or
opinions furnished to the Trustee and conforming to the requirements of
the Agreement as to the truth of the statements made and the correctness
of the opinions expressed therein;
(ii) The Trustee shall not be personally liable for an
error of judgment made in good faith by an Authorized Officer of the
Trustee, unless it shall be proved that the Trustee shall have been
negligent in ascertaining the pertinent facts; and
(iii) The Trustee shall not be personally liable with
respect to any action taken, suffered, or omitted to be taken in good
faith in accordance with the Agreement or at the direction of the
Holders of Certificates evidencing not less than 25% of the Pool Balance
relating to the time, method, and place of conducting
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any proceeding or any remedy available to the Trustee, or exercising any
trust or power conferred upon the Trustee, under the Agreement.
The Trustee shall not be required to expend or risk its own funds
or otherwise incur financial liability in the performance of any of its duties
hereunder, or in the exercise of any of its rights or powers, if there shall be
reasonable ground for believing that the repayment of such funds or adequate
indemnity against such risk or liability shall not be reasonably assured to it,
and none of the provisions contained in the Agreement shall in any event require
the Trustee to perform, or be responsible for the manner of performance of, any
of the obligations of the Servicer (including its obligations as custodian)
under the Agreement except during such time, if any, as the Trustee shall be the
successor to, and be vested with the rights, duties, powers and privileges of,
the Servicer in accordance with the terms of the Agreement.
The Trustee shall not be charged with knowledge of an Event of
Servicing Termination until such time as an Authorized Officer shall have actual
knowledge or have received written notice thereof.
Except for actions expressly authorized by the Agreement or,
based upon an Opinion of Counsel, in the best interests of Certificateholders,
the Trustee shall take no action reasonably likely to impair the security
interests created or existing under any Receivable or to impair the value of any
Receivable.
All information obtained by the Trustee regarding the Obligors
and the Receivables, whether upon the exercise of its rights under the Agreement
or otherwise, shall be maintained by the Trustee in confidence and shall not be
disclosed to any other Person, other than internal counsel, unless such
disclosure is pursuant to the terms of the Agreement or required by any
applicable law or regulation.
In the event that the Paying Agent or the Transfer Agent and
Certificate Registrar shall fail to perform any obligation, duty or agreement in
the manner or on the day required to be performed by the Paying Agent or the
Transfer Agent and Certificate Registrar, as the case may be, under the
Agreement, the Trustee shall be obligated
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promptly upon an Authorized Officer obtaining knowledge thereof to perform such
obligation, duty or agreement in the manner so required to the extent the
information necessary to such performance is reasonably available to the Trustee
after the Trustee has made a reasonable effort to obtain such information. The
Trustee shall not be liable for the acts or omissions of any Paying Agent, any
Authenticating Agent or the Transfer Agent and Certificate Registrar appointed
hereunder with due care by the Trustee hereunder.
Section 20.3 Trustee's Assignment of Repurchased Receivables and
Trustee's Certificate. With respect to any Receivable repurchased by the Seller
pursuant to Section 12.2 or purchased by the Servicer pursuant to Section 13.7
or 21.2, the Trustee shall (i) assign, without recourse, representation, or
warranty, to the Seller or the Servicer, as the case may be, all the Trust's
right, title, and interest in and to such Receivable and the other property
conveyed to the Trust pursuant to Section 2.1 with respect to such Receivable,
and all security and documents relating thereto, such assignment being an
assignment outright and not for security and (ii) as soon as practicable after a
Receivable shall have been assigned to the Seller or the Servicer, as the case
may be, execute a Trustee's Certificate, including the date of execution of such
Trustee's Certificate and the date of the Agreement, and accompanied by a copy
of the Servicer's Certificate specified for the related Collection Period. If,
in any enforcement suit or legal proceeding, it shall be held that the Servicer
may not enforce a Receivable on the ground that it shall not be a real party in
interest or a holder entitled to enforce the Receivable, the Trustee shall, at
the Servicer's expense, take such steps as the Trustee or the Servicer deems
necessary to enforce the Receivable, including bringing suit in the Trustee's
name or the names of the Trust or the Certificateholders; provided, that nothing
in this Section 20.3 shall require the Trustee to qualify to do business in a
state in which it is not so qualified on the date of this Agreement.
Section 20.4 Certain Matters Affecting the Trustee. Except as
otherwise provided in Section 20.2:
(i) The Trustee may request, and may rely and shall be
protected in acting or re-
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fraining from acting upon, any resolution, certificate of auditors or
any other certificate, statement, instrument, opinion, report, notice,
request, consent, order, appraisal, bond, or other paper or document
(including the annual auditor's report and the letter of independent
certified public accountants described in Section 13.11, the Servicer's
Certificate described in Section 13.9, and the annual compliance
statement described in Section 13.10) believed by it to be genuine and
to have been signed or presented by the proper party or parties.
(ii) The Trustee may consult with counsel and any advice
or Opinion of Counsel shall be full and complete authorization and
protection in respect of any action taken or suffered or omitted by it
under the Agreement in good faith and in accordance with such advice or
Opinion of Counsel, which counsel has been selected by the Trustee with
due care. A copy of any such Opinion of Counsel shall be provided to the
Seller and the Servicer.
(iii) The Trustee shall be under no obligation to exercise
any of the rights or powers vested in it by the Agreement, or to
institute, conduct or defend any litigation under the Agreement or in
relation to the Agreement, at the request, order or direction of any of
the Certificateholders pursuant to the provisions of the Agreement,
unless such Certificateholders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses, and
liabilities that may be incurred therein or thereby; provided, however,
that the Trustee shall have the right to decline to follow any such
request, order or direction if the Trustee, in accordance with an
Opinion of Counsel determines that the action or proceeding may not
lawfully be taken or if the Trustee in good faith determines that the
action or proceeding so directed would involve it in personal liability
or be unjustly prejudicial to the non-assenting Certificateholders;
nothing contained in the Agreement, however, shall relieve the Trustee
of the obligations, upon the occurrence of an
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Event of Servicing Termination (that shall not have been cured), to
exercise such of the rights and powers vested in it by the Agreement,
and to use the same degree of care and skill in their exercise as a
prudent person would exercise or use under the circumstances in the
conduct of his or her own affairs.
(iv) The Trustee shall not be personally liable for any
action taken, suffered or omitted by it in good faith and believed by it
to be authorized or within the discretion or rights or powers conferred
upon it by the Agreement.
(v) Prior to the occurrence of an Event of Servicing
Termination and after the curing of all Events of Servicing Termination
that may have occurred, the Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice, request,
consent, order, approval, bond, or other paper or document, unless
requested in writing to do so by Holders of Certificates evidencing not
less than 25% of the Pool Balance; provided, however, that if the
payment within a reasonable time to the Trustee of the costs, expenses,
or liabilities likely to be incurred by it in the making of such
investigation shall be, in the opinion of the Trustee, not reasonably
assured to the Trustee by the security afforded to it by the terms of
the Agreement, the Trustee may require reasonable indemnity against such
cost, expense, or liability or payment of such expenses as a condition
precedent to so proceeding. The reasonable expense of every such
examination shall be paid by the Servicer or, if paid by the Trustee,
shall be reimbursed by the Servicer upon demand. Nothing in this clause
(v) shall affect the obligation of the Servicer to observe any
applicable law prohibiting disclosure of information regarding the
Obligors.
(vi) The Trustee may execute any of the trusts or powers
hereunder or perform any
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duties under the Agreement either directly or by or through agents or
attorneys or a custodian, which agents or attorneys shall have any or
all of the rights, powers, duties and obligations of the Trustee
conferred on them by such appointment.
Section 20.5 Trustee Not Liable for Certificates or Receivables.
The recitals contained in the Agreement and in the Certificates shall be taken
as the statements of the Seller or the Servicer, as the case may be, and the
Trustee assumes no responsibility for the correctness thereof. The Trustee shall
make no representations as to the validity or sufficiency of the Agreement or of
the Certificates (other than execution by the Trustee on behalf of the Trust of,
or the authentication on, the Certificates), or of any Receivable or related
document. The Trustee shall have no obligation to perform any of the duties of
the Seller or Servicer unless explicitly set forth in the Agreement. The Trustee
shall at no time have any responsibility or liability for or with respect to the
legality, validity, and enforceability of any security interest in any Financed
Vehicle or any Receivable, or the perfection and priority of such a security
interest or the maintenance of any such perfection and priority; the filing of
any financing or continuation statement in any public office; the preparation or
filing of any report or statement with the Securities and Exchange Commission;
the efficacy of the Trust or its ability to generate the payments to be
distributed to Certificateholders under the Agreement; the existence, condition,
location, and ownership of any Financed Vehicle; the existence and
enforceability of any comprehensive and collision insurance or credit life or
credit disability insurance or Force Placed Insurance; the existence and
contents of any Receivable or any computer or other record thereof; the validity
of the assignment of any Receivable to the Trust or of any intervening
assignment; the completeness of any Receivable; any claim or default asserted
against a Receivable; the performance or enforcement of any Receivable; the
compliance by the Seller or the Servicer with any warranty or representation
made under the Agreement or in any related document and the accuracy of any such
warranty or representation (except after the Trustee's receipt of notice or
other discovery of any noncompliance therewith or any breach thereof or as
otherwise provided herein); the satisfaction of any condition
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relating to the Receivables; any investment of funds by the Servicer or any loss
resulting therefrom (it being understood that the Trustee shall remain
responsible for any Trust property that it may hold); the acts or omissions of
the Seller, Servicer (including in its capacity as custodian hereunder), or any
Obligor; any action of the Servicer taken in the name of the Trustee; or any
action by the Trustee taken at the instruction of the Servicer; provided,
however, that the foregoing shall not relieve the Trustee of its obligation to
perform its duties under the Agreement. Except with respect to a claim based on
the failure of the Trustee to perform its duties under the Agreement or based on
the Trustee's willful misconduct, negligence, or bad faith, or based on the
Trustee's breach of a representation and warranty specified in Section 20.14, no
recourse shall be had for any claim or defense based on any provision of the
Agreement, the Certificates, or any Receivable or assignment thereof against the
Trustee in its individual capacity. The Trustee shall not have any personal
obligation, liability, or duty whatsoever to any Certificateholder or any other
Person with respect to any such claim or defense, and any such claim or defense
shall be asserted solely against the Trust or any indemnitor who shall furnish
indemnity as provided in the Agreement. The Trustee shall not be accountable for
the use or application by the Seller of any of the Certificates or of the
proceeds of such Certificates, or for the use or application of any funds paid
to the Servicer in respect of the Receivables.
Section 20.6 Trustee May Own Certificates. The Trustee in its
individual or any other capacity may become the owner or pledgee of Certificates
and may deal with the Seller and the Servicer in banking transactions with the
same rights as it would have if it were not Trustee.
Section 20.7 Trustee's Fees and Expenses. By execution and
delivery of the Agreement, the Servicer shall covenant and agree to pay to the
Trustee, and the Trustee shall be entitled to, reasonable compensation (which
shall not be limited by any provision of law in regard to the compensation of a
trustee of an express trust) for all services rendered by it in the execution of
the trusts created by the Agreement and in the exercise and performance of any
of the powers and duties under the Agreement of the Trustee, and the Servicer
shall pay or reimburse the Trustee upon its request for all reasonable
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expenses, disbursements, and advances (including the reasonable compensation and
the expenses and disbursements of its counsel and of all persons not regularly
in its employ) incurred or made by the Trustee under the Agreement (including
expenses, disbursements, and advances incurred in defense of any action brought
against it in connection with the Agreement) except any such expense,
disbursement, or advance as may arise from its negligence, willful misfeasance,
or bad faith or that is the responsibility of Certificateholders under the
Agreement. The Servicer's obligation to pay such compensation and expenses shall
survive the termination of such Servicer to the extent that such obligation is a
result of services rendered prior to such Servicer's termination. Additionally,
the Servicer, pursuant to Section 20.8, shall indemnify the Trustee with respect
to certain matters, and Certificateholders, pursuant to Section 22.3, shall upon
the circumstances therein set forth, indemnify the Trustee under certain
circumstances. The provisions of this Section 20.7 shall survive the termination
of this Agreement and the resignation or removal of the Trustee.
Section 20.8 Indemnity of Trustee. The Trustee and its officers,
directors, agents and employees shall be indemnified by the Servicer and held
harmless against any loss, liability, or expense (including reasonable
attorneys' fees and expenses and expenses of litigation) arising out of or
incurred in connection with the acceptance or performance of the trusts and
duties contained in the Agreement to the extent that (i) such loss, liability,
or expense shall not have been incurred by reason of the Trustee's willful
misfeasance, bad faith, or negligence, and (ii) such loss, liability, or expense
shall not have been incurred by reason of the Trustee's breach of its
representations and warranties pursuant to Section 20.14; provided, however,
that the obligations of the Servicer in this Section 20.8 shall survive such
Servicer's termination with respect to the performance of such Servicer prior to
such Servicer's termination and provided, further, that if the Servicer fails to
indemnify the Trustee and its officers, directors, agents and employees pursuant
to this Section 20.8, then such indemnity shall be provided by the Trust, but
any amounts so payable to the Trustee by the Trust pursuant to this Section 20.8
shall be payable on a Distribution Date only after all payments required to be
made on such date to the Certificateholders have been made, and, with respect to
a successor Servicer,
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if any, the Servicing Fee has been paid. The provisions of this Section 20.8
shall survive the termination of this Agreement and the resignation or removal
of the Trustee.
Section 20.9 Eligibility Requirements for Trustee. The Trustee
under the Agreement shall at all times be a state banking corporation or
national banking association organized and doing business under the laws of such
state or the United States of America; authorized under such laws to exercise
corporate trust powers; and having a combined capital and surplus of at least
$100,000,000 as of the last day of the most recent fiscal quarter for such
institution and subject to supervision or examination by federal or state
authorities. If such state banking corporation or national banking association
shall publish reports of condition at least annually, pursuant to law or to the
requirements of the aforesaid supervising or examining authority, then for the
purpose of this Section 20.9, the combined capital and surplus of such
corporation shall be deemed to be its combined capital and surplus as set forth
in its most recent report of condition so published. The Trustee shall at all
times be rated not lower than BBB- and Baa3 by Moody's or such other ratings as
are acceptable to the Rating Agencies. In case at any time the Trustee shall
cease to be eligible in accordance with the provisions of this Section 20.9, the
Trustee shall resign immediately in the manner and with the effect specified in
Section 20.10.
Section 20.10 Resignation or Removal of Trustee. The Trustee may
at any time resign and be discharged from the trust hereby created by giving
written notice thereof to the Servicer. Upon giving such notice of resignation,
the Trustee shall promptly appoint a successor Trustee by written instrument
which instrument shall be delivered to the successor Trustee. If no successor
Trustee shall have been so appointed and have accepted appointment within 30
days after the giving of such notice of resignation, the resigning Trustee may
petition any court of competent jurisdiction for the appointment of a successor
Trustee. The Servicer shall provide notice to the Rating Agencies of any
resignation of the Trustee.
If at any time the Trustee shall cease to be eligible in
accordance with the provisions of Section 20.9 or shall be legally unable to
act, or shall be adjudged a bankrupt or insolvent, or a receiver of the Trustee
or of
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its property shall be appointed, or any public officer shall take charge or
control of the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation, or liquidation, then the Trustee shall promptly
resign. The Trustee shall promptly appoint a successor Trustee by written
instrument which instrument shall be delivered to the successor Trustee. If the
Trustee fails to resign, the Certificateholders shall remove the Trustee and
appoint a successor Trustee by written instrument in duplicate, one copy of
which instrument shall be delivered to the Trustee so removed and one copy to
the successor Trustee.
Any resignation or removal of the Trustee and appointment of a
successor Trustee pursuant to any of the provisions of this Section 20.10 shall
not become effective until acceptance of appointment by the successor Trustee
pursuant to Section 20.11.
Section 20.11 Successor Trustee. Any successor Trustee appointed
pursuant to Section 20.10 shall execute, acknowledge, and deliver to the
Servicer and to its predecessor Trustee an instrument accepting such appointment
under the Agreement, and thereupon the resignation or removal of the predecessor
Trustee shall become effective and such successor Trustee, without any further
act, deed or conveyance, shall become fully vested with all the rights, powers,
duties, and obligations of its predecessor under the Agreement with like effect
as if originally named as Trustee. The predecessor Trustee shall deliver to the
successor Trustee all documents and statements held by it under the Agreement,
and the Servicer and the predecessor Trustee shall execute and deliver such
instruments and do such other things as may reasonably be required for fully and
certainly vesting and confirming in the successor Trustee all such rights,
powers, duties, and obligations.
No successor Trustee shall accept appointment as provided in this
Section 20.11 unless at the time of such acceptance such successor Trustee shall
be eligible pursuant to Section 20.9.
Upon acceptance of appointment by a successor Trustee pursuant to
this Section 20.11, the Servicer shall mail notice of the successor of such
Trustee under the Agreement to all Certificateholders at their respective
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addresses of record, and to the Rating Agencies. If the Servicer shall fail to
mail such notice within 10 days after acceptance of appointment by successor
Trustee, the successor Trustee shall cause such notice to be mailed at the
expense of the Servicer.
Section 20.12 Merger or Consolidation of Trustee. Any corporation
or other entity (i) into which the Trustee may be merged or consolidated, (ii)
which may result from any merger, conversion, or consolidation to which the
Trustee shall be a party, or (iii) which may succeed to all or substantially all
of the corporate trust business of the Trustee, which corporation or other
entity executes an agreement of assumption to perform every obligation of the
Trustee under the Agreement, shall be the successor of the Trustee hereunder,
provided such corporation or other entity shall be eligible pursuant to Section
20.9, without the execution or filing of any instrument or any further act on
the part of any of the parties hereto. The Trustee shall provide prompt written
notice of any merger or consolidation to the Seller, the Servicer and the Rating
Agencies.
Section 20.13 Appointment of Co-Trustee or Separate Trustee.
Notwithstanding any other provisions of the Agreement, at any time, for the
purpose of meeting any legal requirements of any jurisdiction in which any part
of the Trust or any Financed Vehicle may at the time be located, the Servicer
and the Trustee acting jointly shall have the power and shall execute and
deliver all instruments to appoint one or more Persons approved by the Trustee
to act as co-trustee, jointly with the Trustee, or separate trustee or separate
trustees, of all or any part of the Trust, and to vest in such Person, in such
capacity and for the benefit of the Certificateholders, such title to the Trust,
or any part thereof, and, subject to the other provisions of this Section 20.13,
such powers, duties, obligations, rights, and trusts as the Servicer and the
Trustee may consider necessary or desirable. The Servicer will pay all
reasonable fees and expenses of any co-trustee or separate trustee or separate
trustees. The appointment of any separate trustee or co-trustee shall not
absolve the Trustee of its obligations under this Agreement. If the Servicer
shall not have joined in such appointment within 15 days after the receipt by it
of a request so to do, or in the case an Event of Servicing Termination shall
have occurred and be continuing, the
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Trustee alone shall have the power to make such appointment. No co-trustee or
separate trustee or separate trustees under the Agreement shall be required to
meet the terms of eligibility as a successor trustee pursuant to Section 20.9
and no notice to Certificateholders of the appointment of any co-trustee or
separate trustee or separate trustees shall be required pursuant to Section
20.11.
Each separate trustee and co-trustee shall, to the extent
permitted by law, be appointed and act subject to the following provisions and
conditions:
(i) All rights, powers, duties, and obligations conferred
or imposed upon the Trustee shall be conferred upon and exercised or
performed by the Trustee and such separate trustee or co-trustee jointly
(it being understood that such separate trustee or co-trustee is not
authorized to act separately without the Trustee joining in such act),
except to the extent that under any law of any jurisdiction in which any
particular act or acts are to be performed (whether as Trustee under the
Agreement or as successor to the Servicer under the Agreement), the
Trustee shall be incompetent or unqualified to perform such act or acts,
in which event such rights, powers, duties, and obligations (including
the holding of title to the Trust or any portion thereof in any such
jurisdiction) shall be exercised and performed singly by such separate
trustee or co-trustee, but solely at the direction of the Trustee.
(ii) No trustee under the Agreement shall be personally
liable by reason of any act or omission of any other trustee under the
Agreement.
(iii) The Trustee may at any time accept the resignation
of or remove any separate trustee or co-trustee.
Any notice, request or other writing given to the Trustee shall
be deemed to have been given to each of the then separate trustees and
co-trustees, as effectively as if given to each of them. Every instrument
appointing
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any separate trustee or co-trustee shall refer to the Agreement and the
conditions of this Article XX. Each separate trustee and co-trustee, upon its
acceptance of the trusts conferred, shall be vested with the estates or
properties specified in its instrument of appointment, either jointly with the
Trustee or separately, as may be provided therein, subject to all the provisions
of the Agreement, specifically including every provision of the Agreement
relating to the conduct of, affecting the liability of, or affording protection
to, the Trustee. Each such instrument shall be filed with the Trustee and a copy
thereof given to the Servicer.
Any separate trustee or co-trustee may at any time appoint the
Trustee, its agent or attorney-in-fact with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect of the
Agreement on its behalf and in its name. If any separate trustee or co-trustee
shall die, become incapable of acting, resign or be removed, all of its estates,
properties, rights, remedies and trusts shall vest in and be exercised by the
Trustee, to the extent permitted by law, without the appointment of a new or
successor Trustee.
Section 20.14 Representations and Warranties of Trustee. The
Trustee makes the following representations and warranties on which the Seller,
the Servicer, and the Certificateholders may rely:
(i) Organization and Good Standing. The Trustee is a
[national banking association duly organized, validly existing, and in
good standing under the laws of the United States].
(ii) Power and Authority. The Trustee has full power,
authority and legal right to execute, deliver, and perform the
Agreement, and has taken all necessary action to authorize the
execution, delivery, and performance by it of the Agreement.
(iii) No Violation. The execution and delivery of the
Agreement and the performance by the Trustee of its obligations under
the Agree- ment do not (a) violate any provision of any law governing
the trust powers of the Trustee or, to the best of the Trustee's
knowledge, any order,
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writ, judgment, or decree of any court, arbitrator, or governmental
authority applicable to the Trustee or any of its assets, (b) violate
any provision of the articles of association or by laws of the Trustee
or (c) conflict with, result in any breach of any of the terms or
provisions of, or constitute (with or without notice or lapse of time) a
default under, any indenture, agreement or other instrument to which the
Trustee is a party or by which it is bound to the extent such conflict,
breach or default would impair the Trustee's obligation or ability to
perform under this Agreement.
(iv) No Governmental Authorization Required. The
execution, delivery and performance by the Trustee of the Agreement do
not require the authorization, consent, or approval of, the giving of
notice to, the filing or registration with, or the taking of any other
action in respect of, any governmental authority or agency regulating
the corporate trust activities of the Trustee.
(v) Due Authorization, Execution and Delivery. The
Agreement has been duly authorized, executed and delivered by the
Trustee and shall constitute the legal, valid, and binding agreement of
the Trustee, enforceable in accordance with its terms except that (1)
such enforcement may be subject to bankruptcy, insolvency,
reorganization, moratorium or similar laws now or hereafter in effect
relating to creditors' rights generally, and (2) the remedy of specific
performance and injunctive and other forms of equitable relief may be
subject to certain equitable defenses and to the discretion of the court
before which any proceeding thereof may be brought.
Section 20.15 Tax Returns. The Servicer shall prepare or shall
cause to be prepared any tax returns required to be filed by the Trust and
furnish to Certificateholders any information required by the Code or the
regulations thereunder and shall remit such returns to the Trustee for signature
at least five days before such returns are due to be filed. The Trustee, upon
request,
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will furnish the Servicer with all such information known to the Trustee as may
be reasonably required in connection with the preparation of all tax returns of
the Trust, and shall, upon request, execute such returns.
Section 20.16 Trustee May Enforce Claims Without Possession of
Certificates. All rights of action and claims under the Agreement or the
Certificates may be prosecuted and enforced by the Trustee without the
possession of any of the Certificates or the production thereof in any
proceeding relating thereto, and any such proceeding instituted by the Trustee
shall be brought in its own name or in its capacity as Trustee. Any recovery of
judgment shall, after provision for the payment of the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel, be
for the ratable benefit of the Certificateholders in respect of which such
judgment has been recovered.
Section 20.17 Suits for Enforcement. In case an Event of
Servicing Termination or other default by the Servicer or the Seller hereunder
shall occur and be continuing, the Trustee, in its discretion, may proceed to
protect and enforce its rights and the rights of the Certificateholders under
the Agreement by a suit, action or proceeding in equity or at law or otherwise
whether for the specific performance of any covenant or agreement contained in
the Agreement or in aid of the execution of any power granted in the Agreement
or the enforcement of any other legal, equitable or other remedy, as the
Trustee, being advised by counsel, shall deem most effectual to protect and
enforce any of the rights of the Trustee or the Certificateholders.
Section 20.18 Maintenance of Office or Agency. The Trustee shall
maintain at its expense in _________, an office or offices or agency or agencies
where notices and demands to or upon the Trustee in respect of the Certificates
and this Agreement may be served. The Trustee initially designates the Corporate
Trust Office as its office for such purposes. The Trustee will give prompt
written notice to the Servicer, the Paying Agent, the Transfer Agent and
Certificate Registrar, and to Certificateholders of any change in the location
of such office or agency.
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ARTICLE XXI
Termination
Section 21.1 Termination of the Trust. The Trust, and the
respective obligations and responsibilities of the Seller, the Servicer and the
Trustee shall terminate with respect to the Certificateholders upon the first to
occur of (i) the Distribution Date next succeeding the month which is six months
after the maturity or other liquidation of the last Receivable and the
disposition of any amounts received upon liquidation of any property remaining
in the Trust and (ii) the payment to Certificateholders of all amounts required
to be paid to them pursuant to the Agreement; provided, however, that in no
event shall the Trust created by the Agreement continue beyond the expiration of
21 years from the death of the last survivor of the descendants of George
Herbert Walker Bush, the former President of the United States, living on the
date of the Agreement. The Servicer shall promptly (but in any event not later
than the first day of the month of the specified Distribution Date) notify the
Trustee, the Paying Agent, the Transfer Agent and Certificate Registrar, and the
Rating Agencies in writing of any prospective termination pursuant to this
Section 21.1.
Notice of any termination, specifying the Distribution Date upon
which the Certificateholders may surrender their Certificates to the Transfer
Agent and Certificate Registrar for payment of the final distribution and
cancellation, shall be given promptly by the Trustee by letter to
Certificateholders mailed not earlier than the 15th day and not later than the
25th day of the month next preceding the specified Distribution Date stating the
amount of any such final payment, and that the Record Date otherwise applicable
to such Distribution Date is not applicable, payments being made only upon
presentation and surrender of the Certificates at the office of the Transfer
Agent and Certificate Registrar therein specified. The Trustee shall give such
notice to the Transfer Agent and Certificate Registrar, the Paying Agent and the
Rating Agencies at the time such notice is given to Certificateholders. Upon
presentation and surrender of the Certificates, the Paying Agent shall cause to
be distributed to Certificateholders amounts distributable on such Distribution
Date pursuant to Section 14.5.
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In the event that all of the Certificateholders shall not
surrender their Certificates for cancellation within six months after the date
specified in the above-mentioned written notice, the Trustee shall give a second
written notice to the remaining Certificateholders upon receipt of the
appropriate records from the Transfer Agent and Certificate Registrar to
surrender their Certificates for cancellation and receive the final distribution
with respect thereto. If within one year after the second notice all the
Certificates shall not have been surrendered for cancellation, the Trustee may
take appropriate steps, or may appoint an agent to take appropriate steps, to
contact the remaining Certificateholders concerning surrender of their
Certificates, and the cost thereof shall be paid out of the funds and other
assets that shall remain subject to the Agreement.
All Certificates surrendered for payment of the final
distribution with respect to such Certificates and cancellation shall be
cancelled by the Transfer Agent and Certificate Registrar and shall be disposed
of in a manner satisfactory to the Trustee and the Seller.
Section 21.2 Optional Purchase of All Receivables. As of the
last Business Day in any Collection Period as of which the Pool Balance
(expressed as a percentage) of initial Pool Balance shall be equal to or less
than the Optional Purchase Percentage, the Servicer shall have the option to
purchase the corpus of the Trust. To exercise such option, the Servicer shall
notify the Trustee, the Paying Agent, and the Transfer Agent and Certificate
Registrar and in writing, no later than the fifth calendar day of the month in
which such purchase is to be effected of its intention to effect such purchase.
On the Deposit Date in such month, the Servicer shall pay the aggregate
Repurchase Amount for the Receivables (including Defaulted Receivables) and
shall succeed to all interests in and to the Trust property. The payment shall
be made in the manner specified in Section 14.4, and shall be distributed
pursuant to Section 14.5. The Trustee shall not permit the purchase of the
corpus of the Trust pursuant to this Section unless either (i) the Servicer's
long term unsecured debt is rated at the time of such purchase at least BBB and
Baa3 by the Rating Agencies or (ii) the Servicer provides to the Trustee an
Opinion of Counsel in form reasonably satisfactory to the Trustee and in form
and substance satisfactory to the Rating Agencies to the
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effect that such purchase will not constitute a fraudulent transfer of assets of
the Servicer under applicable state and federal law.
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ARTICLE XXII
Miscellaneous Provisions
Section 22.1 Amendment. The Agreement may be amended by the
Seller, the Servicer and the Trustee, without prior notice to or the consent of
any of the Certificateholders, (i) to cure any ambiguity, to correct or
supplement any provision in the Agreement which may be inconsistent with any
other provision herein or therein, to evidence a succession to the Servicer or
the Seller pursuant to the Agreement or to add any other provisions with respect
to matters or questions arising under the Agreement that shall not be
inconsistent with the provisions of the Agreement; provided, however, that such
action shall not, as evidenced by an Officer's Certificate and/or an Opinion of
Counsel delivered to the Trustee, adversely and materially affect the interests
of the Trust or any of the Certificateholders and provided, further, that the
Servicer shall deliver written notice of such changes to each Rating Agency
prior to the execution of any such amendment, or (ii) to effect a transfer or
assignment in compliance with Section 22.7(i) of the Agreement.
The Agreement may also be amended from time to time by the
Seller, the Servicer and the Trustee, with the consent of the Holders of
Certificates evidencing not less than 51% of the Pool Balance, for the purpose
of adding any provision to or changing in any manner or eliminating any of the
provisions of the Agreement, or of modifying in any manner the rights of the
Certificateholders (including effecting a transfer or assignment in compliance
with Section 22.7(ii) of the Agreement); provided, however, that no such
amendment, except with the consent of the Holders of all Certificates then
outstanding, shall (a) increase or reduce in any manner the amount of, or
accelerate or delay the timing of, collections of payments of Receivables, or
distributions that shall be required to be made on any Certificate, (b) reduce
the aforesaid percentage of the Pool Balance required to consent to any such
amendment or (c) reduce in any way the shortfalls for which the Trustee may draw
under the Reserve Account pursuant to Article XIV hereof or change the formula
for determining the Specified Reserve Account Balance.
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Promptly after the execution of any amendment or consent referred
to in this Section 22.1, the Trustee shall furnish a copy of such amendment or
consent to each Certificateholder and to the Rating Agencies.
It shall not be necessary for the consent of Certificateholders
pursuant to this Section 22.1 to approve the particular form of any proposed
amendment or consent, but it shall be sufficient if such consent shall approve
the substance thereof. The manner of obtaining such consents and of evidencing
the authorization of the execution thereof by Certificateholders shall be
subject to such reasonable requirements as the Trustee may prescribe.
Prior to the execution of any amendment to the Agreement, the
Trustee shall be entitled to receive and rely upon an Opinion of Counsel stating
that the execution of such amendment is authorized or permitted by the
Agreement. The Trustee shall not be obligated to enter into any such amendment
which affects the Trustee's own rights, duties or immunities under the
Agreement.
Prior to the execution of any amendment to this Agreement, other
than an amendment permitted pursuant to clause (i) of the first paragraph of
this Section 22.1, the Servicer shall have received written notice from each of
the Rating Agencies that the rating of the Certificates will not be reduced or
withdrawn as a result of such amendment.
Section 22.2 Protection of Title to Trust.
(a) The Servicer shall execute and file such financing
statements and cause to be executed and filed such continuation statements, all
in such manner and in such places as may be required by law fully to preserve,
maintain, and protect the interests of the Trustee under the Agreement in the
Receivables and in the proceeds thereof. The Servicer shall deliver (or cause to
be delivered) to the Trustee file-stamped copies of, or filing receipts for, any
document filed as provided above, as soon as available following such filing.
(b) Neither the Seller nor the Servicer shall change its
name, identity, or corporate structure in any manner that would, could, or might
make any financing
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statement or continuation statement filed by the Servicer in accordance with
paragraph (a) above seriously misleading within the meaning of ss. 9-402(7) of
the UCC, unless it shall have given the Trustee at least 30 days prior written
notice thereof.
(c) The Seller and the Servicer shall give the Trustee at
least 60 days prior written notice of any relocation of its principal executive
office if, as a result of such relocation, the applicable provisions of the UCC
would require the filing of any amendment of any previously filed financing or
continuation statement or of any new financing statement. The Servicer shall at
all times maintain each office from which it shall service Receivables, and its
principal executive office, within the United States of America.
(d) The Servicer shall maintain accounts and records as to
each Receivable accurately and in sufficient detail to permit (i) the reader
thereof to know at any time the status of such Receivable, including payments
and recoveries made and payments owing (and the nature of each) and (ii)
reconciliation between payments or recoveries on (or with respect to) each
Receivable and the amounts from time to time deposited in the Certificate
Account in respect of such Receivable.
(e) The Servicer shall maintain its computer systems so
that, from and after the time of sale under the Agreement of the Receivables to
the Trustee, the Servicer's master computer records (including archives) that
shall refer to a Receivable indicate clearly, by numerical code or otherwise,
that such Receivable is owned by the Trust. Indication of the Trust's ownership
of a Receivable shall be deleted from or modified on the Servicer's computer
systems when, and only when, the Receivable shall have been paid in full,
repurchased, purchased or assigned pursuant hereto.
(f) If at any time the Seller or the Servicer shall
propose to sell, grant a security interest in, or otherwise transfer any
interest in a new or used automobile or light-duty truck to any prospective
purchaser, creditor, or other transferee, the Seller or the Servicer, as the
case may be, shall give to such prospective purchaser, creditor, or other
transferee computer tapes, records, or print-outs (including any restored from
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archives) that, if they shall refer in any manner whatsoever to any Receivable,
shall indicate clearly that such Receivable has been sold and is owned by the
Trust.
(g) The Servicer shall permit the Trustee and its agents
upon reasonable notice at any time during normal business hours which does not
unreasonably interfere with the Servicer's normal operations to inspect, audit,
and make copies of and abstracts from the Servicer's records regarding the
Receivables.
(h) Upon request, the Servicer shall furnish to the
Trustee, within five Business Days of any request therefor, a list of all
Receivables by contract number and name of Obligor then held as part of the
Trust, together with a reconciliation of such list to the Schedule of
Receivables attached as Schedule A to the Agreement and to each of the Servicer
Certificates indicating removal of Receivables from the Trust.
(i) The Servicer shall deliver to the Trustee:
(1) upon the execution and delivery of the Agreement, an Opinion
of Counsel either (a) stating that, in the opinion of such counsel, all
financing statements and continuation statements have been executed and filed
that are necessary fully to preserve and protect the interest of the Trust in
the Receivables, and reciting the details of such filings or referring to prior
Opinions of Counsel in which such details are given, or (b) stating that, in the
opinion of such counsel, no such action shall be necessary to preserve and
protect such interest; and
(2) on March 31 of each year, commencing with March 31, 1995, an
Opinion of Counsel, dated as of such date, either (a) stating that, in the
opinion of such counsel, all financing statements and continuation statements
have been executed and filed that are necessary fully to preserve and protect
the interest of the Trustee in the Receivables, and reciting the details of such
filings or referring to prior Opinions of Counsel in which such details are
given, or (b) stating that, in the opinion of such counsel, no such action shall
be necessary to preserve and protect such interest.
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(j) The Servicer shall, to the extent required by applicable law,
cause the Certificates to be registered with the Securities and Exchange
Commission pursuant to Section 12(b) or Section 12(g) of the Securities Exchange
Act of 1934 within the time periods specified in such sections.
(k) For the purpose of facilitating the execution of the
Agreement and for other purposes, the Agreement may be executed simultaneously
in any number of counterparts, each of which counterparts shall be deemed to be
an original, and all of which counterparts shall constitute but one and the same
instrument.
Section 22.3 Limitation on Rights of Certificateholders. The
death or incapacity of any Certificateholder shall not operate to terminate the
Agreement or the Trust, nor entitle the Certificateholder's legal
representatives or heirs to claim an accounting or to take any action or
commence any proceeding in any court for a partition or winding up of the Trust,
nor otherwise affect the rights, obligations, and liabilities of the parties to
the Agreement or any of them.
No Certificateholder shall have any right to vote (except as
provided in Section 19.1, Section 19.4, Section 22.1 and this Section 22.3) or
in any manner otherwise control the operation and management of the Trust, or
the obligations of the parties to the Agreement, nor shall anything set forth in
the Agreement or contained in the terms of the Certificates, be construed so as
to constitute the Holders as partners or members of an association; nor shall
any Certificateholder be under any liability to any third person by reason of
any action taken pursuant to any provision of the Agreement.
No Certificateholder shall have any right by virtue or by
availing itself of any provision of the Agreement to institute any suit, action,
or proceeding in equity or at law upon or under or with respect to the
Agreement, unless such Holder previously shall have given to the Trustee a
written notice of default and of the continuance thereof, as hereinbefore
provided, and unless also the Holders of Certificates evidencing not less than
25% of the Pool Balance shall have made written request upon the Trustee to
institute such action, suit, or proceeding in its own name as Trustee under the
Agreement and
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shall have offered to the Trustee such reasonable indemnity as it may require
against the costs, expenses, and liabilities to be incurred therein or thereby,
and the Trustee, for 30 days after its receipt of such notice, request, and
offer of indemnity, shall have either neglected or refused to institute any such
action, suit or proceeding; no one or more Holders of Certificates shall have
any right in any manner whatever by virtue or by availing itself or themselves
of any provisions of the Agreement to affect, disturb, or prejudice the rights
of the Holders of any other of the Certificates, or to obtain or seek to obtain
priority over or preference to any other such Holder, or to enforce any right,
under the Agreement, except in the manner provided in the Agreement and for the
equal, ratable, and common benefit of all Certificateholders. For the protection
and enforcement of the provisions of this Section 22.3, each Certificateholder
and the Trustee shall be entitled to such relief as can be given either at law
or in equity.
Section 22.4 Governing Law. THE AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AND THE OBLIGATIONS, RIGHTS,
AND REMEDIES OF THE PARTIES UNDER THE AGREEMENT SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.
Section 22.5 Notices. All demands, notices, and communications
under the Agreement shall be in writing, personally delivered or mailed by
certified mail, return receipt requested, or sent by telecopy or other similar
form of rapid transmission and shall be deemed to have been duly given upon
receipt (a) in the case of the Seller, at USAA Federal Savings Bank, McDermott
Freeway, San Antonio, Texas 78288 Attention: Vice President and Banking Counsel,
Telecopy Number: (210) 498-7210, or at such other address as shall be designated
by the Seller in a written notice to the Trustee, (b) in the case of the
Servicer, at USAA Federal Savings Bank, McDermott Freeway, San Antonio, Texas
78288, Attention: Vice President and Banking Counsel, Telecopy Number: (210)
498-7210, or at such other address as shall be designated by the Servicer in a
written notice to the Trustee, and (c) in the case of the Trustee and the
Collateral Agent, at ________ ___________ Attention: __________, Telecopy
Number: (___) ___-____ or at such other address as shall be designated in a
written notice to the Trustee. Any notice required
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or permitted to be mailed to a Certificateholder shall be given by first class
mail, postage prepaid, at the address of record of such Holder. Any notice to a
Certificateholder so mailed within the time prescribed in the Agreement shall be
conclusively presumed to have been duly given, whether or not the
Certificateholder shall receive such notice.
Section 22.6 Severability of Provisions. If any one or more of
the covenants, agreements, provisions, or terms of the Agreement shall be for
any reason whatsoever held invalid, then such covenants, agreements, provisions,
or terms shall be deemed severable from the remaining covenants, agreements,
provisions, or terms of the Agreement and shall in no way affect the validity or
enforceability of the other provisions of the Agreement or of the Certificates
or the rights of the Holders thereof.
Section 22.7 Assignment. Notwithstanding anything to the contrary
contained herein, except as provided in Sections 17.3 and 18.3, neither the
Seller nor the Servicer may transfer or assign all, or a portion of, its rights,
obligations and duties under the Agreement unless such transfer or assignment
(i) (A) will not result in a reduction or withdrawal by Standard & Poor's or
Moody's of the rating then assigned to the Certificates and (B) the Trustee has
consented to such transfer or assignment, which consent shall not be
unreasonably withheld or (ii) the Trustee and Holders of Certificates evidencing
not less than 51% of the Pool Balance consent thereto. Any transfer or
assignment with respect to the Servicer of all of its rights, obligations and
duties will not become effective until a successor Service has assumed the
Servicer's rights, duties and obligations under the Agreement. In the event of a
transfer or assignment pursuant to clause (ii) above, the Rating Agencies shall
be provided with notice of such transfer or assignment.
Section 22.8 Certificates Nonassessable and Fully Paid. The
interests represented by the Certificates shall be nonassessable for any losses
or expenses of the Trust or for any reason whatsoever, and, upon authentication
thereof by the Trustee pursuant to Section 16.2, each Certificate shall be
deemed fully paid.
Section 22.9 Third-Party Beneficiaries. This Agreement will inure
to the benefit of and be binding upon
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the parties hereto, the Certificateholders and the Certificate Owners and their
respective successors and permitted assigns. Except as otherwise provided in
this Agreement, no other person will have any right or obligation hereunder.
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EXHIBIT A: FORM OF CLASS A SEE REVERSE FOR
CERTIFICATE CERTAIN DEFINITIONS
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION, TO ISSUER OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (AND ANY PAYMENT IS
MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY), ANY TRANSFER, PLEDGE, OR OTHER
USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS
THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
USAA AUTO LOAN GRANTOR TRUST 1997-1
__% AUTOMOBILE LOAN PASS-THROUGH CERTIFICATE, CLASS A
evidencing a fractional undivided interest in the Trust, as defined
below, the property of which includes a pool of simple interest motor
vehicle installment loans, secured by new and used automobiles and
light-duty trucks financed thereby and sold to the Trustee, as defined
below, on behalf of the Trust by USAA Federal Savings Bank.
(This Certificate does not represent an interest in or obligation of
USAA Federal Savings Bank or United Services Automobile Association or
any of their respective affiliates.)
NUMBER CUSIP __________
___________ $ ______________
THIS CERTIFIES THAT CEDE & CO. is the registered owner of a
nonassessable, fully paid, fractional undivided interest, in the amount set
forth above, in the USAA Auto
A-1
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Loan Grantor Trust 1997-1 (the "Trust") formed by USAA Federal Savings Bank, a
federally chartered savings association (the "Seller"). The Trust was created
pursuant to a Pooling and Servicing Agreement dated as of _______ __, 1997 (the
"Agreement") between the Seller, acting as Seller and Servicer, and
as trustee
(the trustee and any successor in interest under the Agreement, the "Trustee"),
a summary of certain of the pertinent provisions of which is set forth below.
This Certificate is one of the duly authorized Certificates designated as "__%
Automobile Loan Pass-Through Certificates, Class A" (herein called the "Class A
Certificates"). This Class A Certificate is issued under and is subject to the
terms, provisions, and conditions of the Agreement, to which Agreement the
Holder of this Class A Certificate by virtue of the acceptance hereof assents
and by which such Holder is bound. The property of the Trust includes a pool of
simple interest motor vehicle installment loans (the "Receivables") for the
purchase of new and used automobiles and light-duty trucks financed thereby, all
monies due thereunder on or after the Cutoff Date, security interests in the
vehicles securing the Receivables (the "Financed Vehicles"); such amounts as
from time to time may be held in the Class A Certificate Account established and
maintained by the Servicer in the name of the Trustee, benefits under the
Reserve Account (described below); an assignment of the rights of the Seller to
receive proceeds from any claims on comprehensive and collision, credit life and
credit disability insurance policies covering the Financed Vehicles or the
Obligors, as the case may be, to the extent that such insurance policies relate
to the Receivables; and the rights with respect to any Financed Vehicle that has
been repossessed by the Servicer, on behalf of the Trustee.
Under the Agreement, there will be distributed on the 15th day of each
month or, if such 15th day is not a Business Day, the next succeeding Business
Day (the "Distribution Date"), commencing on __________ __, 1997, to the Person
in whose name this Class A Certificate is registered at the close of business on
the Record Date, such Certificateholder's fractional undivided interest in all
amounts allocable to interest from any source with respect to each Receivable in
an amount equal to the Class A Pass Through Rate of __% per annum on or with
respect to the outstanding Pool Balance as of the first day of the pre-
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ceding Collection Period after giving effect to any amounts distributed with
respect to principal on the Distribution Date occurring in such Collection
Period (calculated on the basis of a 360-day year comprised of twelve 30-day
months), and the aggregate amount allocable to principal from any source, all as
more fully described in the Agreement.
Distributions on this Class A Certificate will be made by the Paying
Agent by check mailed to the Certificateholder of record in the Certificate
Register without the presentation or surrender of this Class A Certificate or
the making of any notation hereon, except that if directed by the Seller in the
case of Certificates registered in the name of a Clearing Agency distributions
will be made in the form of immediately available funds. Except as otherwise
provided in the Agreement and notwithstanding the above, the final distribution
on this Class A Certificate will be made after due notice by the Trustee of the
pendency of such distribution and only upon presentation and surrender of this
Class A Certificate at the office or agency maintained for that purpose by the
Transfer Agent and Certificate Registrar in New York, New York.
Reference is hereby made to the further provisions of this Class A
Certificate set forth on the reverse hereof, which further provisions shall for
all purposes have the same effect as if set forth at this place.
All capitalized terms used herein not otherwise defined shall have the
meaning assigned thereto in the Agreement.
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Unless the authentication hereon shall have been executed by an
authorized officer of the Trustee or an authenticating agent acting on behalf of
the Trustee, by manual signature, this Class A Certificate shall not entitle the
holder hereof to any benefit under the Agreement or be valid for any purpose.
IN WITNESS WHEREOF, the Trustee, on behalf of the Trust, and not in its
individual capacity, has caused this Class A Certificate to be duly executed.
USAA AUTO LOAN GRANTOR
TRUST 1997-1
[ ]
as Trustee
By:
-------------------------------
Authorized Signatory
This is one of the Class A Certificates referred
to in the within-mentioned Agreement.
[ ]
as Trustee
By:
-------------------------------
Authorized Signatory
or
,
---------------------------------
as Authenticating Agent
for the Trustee
By:
-------------------------------
Authorized Officer
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USAA AUTO LOAN GRANTOR TRUST 1997-1
% AUTOMOBILE LOAN PASS-THROUGH CERTIFICATES, CLASS A
The Class A Certificates do not represent an obligation of, or an
interest in, the Seller, the Servicer, the Trustee or any affiliate of any of
them. The Class A Certificates are limited in right of payment to certain
collections and recoveries in respect of the Receivables, all as more
specifically set forth in the Agreement. The Trust will have the benefit of a
Reserve Account. On the Business Day preceding each Distribution Date (the
"Deposit Date"), the Trustee, or the Servicer on behalf of the Trustee, shall
make a demand under the Reserve Account to the extent (1) the sum of (a) the
aggregate principal balance of, and accrued and unpaid interest on (such accrued
interest for the Collection Period in which such Receivable became a Defaulted
Receivable to be calculated at a rate equal to one-twelfth of the sum of the
Class A Pass-Through Rate and the Servicing Rate to the extent not otherwise
collected), Receivables that the Servicer has determined to be Defaulted
Receivables during the preceding Collection Period to the extent not covered by
certain amounts described in the Agreement, any accrued interest due and not
paid to Certificateholders on a previous Distribution Date and any Servicing Fee
due and not paid to the Servicer on a previous Distribution Date (b) any
Principal Carryover Shortfall to the extent not covered by certain amounts
described in the Agreement, and (c) any additional amount necessary to make
distributions to Certificateholders and pay the Servicing Fee to the Servicer on
such Distribution Date exceeds (2) the amount of Total Collections on deposit in
the Certificate Account with respect to the preceding Collection Period (net of
investment income and Excess Collections), but in no event in an amount greater
than the Available Reserve Amount with respect to such Distribution Date. A copy
of the Agreement may be examined during normal business hours at the Corporate
Trust Office of the Trustee, and at such other places, if any, designated by the
Trustee, by any Certificateholder upon request.
The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights of the Certificateholders
under the Agreement
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at any time by the Seller, the Servicer and the Trustee with the consent of the
Holders of Certificates evidencing not less than 51% of the Pool Balance. Any
such consent by the Holder of this Class A Certificate shall be conclusive and
binding on such Holder and on all future Holders of this Class A Certificate and
of any Certificate issued upon registration of transfer hereof or in exchange
herefor or in lieu hereof whether or not notation of such consent is made upon
this Class A Certificate. The Agreement also permits the amendment thereof, in
certain limited circumstances and with certain exceptions provided therein,
without prior notice to or the consent of the Holders of any of the Class A
Certificates.
As provided in the Agreement and subject to certain limitations therein
set forth, the transfer of this Class A Certificate is registrable in the
Certificate Register upon surrender of this Class A Certificate for registration
of transfer at the office or agency maintained by the Transfer Agent and
Certificate Registrar, in New York, New York, accompanied by a written
instrument of transfer in form satisfactory to the Trustee and the Transfer
Agent and Certificate Registrar duly executed by the Holder hereof, which
signature to such assignment has been guaranteed by a member of the New York
Stock Exchange or a commercial bank or trust company, and thereupon one or more
new Class A Certificates of authorized denominations evidencing the same
aggregate interest in the Trust will be issued to the designated transferee.
The Class A Certificates are issuable only as registered Certificates
without coupons in denominations of $1,000 and integral multiples thereof
(except for a single Certificate in a smaller minimum denomination representing
any residual portion of the Pool Balance on the Cutoff Date). As provided in the
Agreement and subject to certain limitations therein set forth, Class A
Certificates are exchangeable for new Class A Certificates of authorized
denominations evidencing the same aggregate denomination, as requested by the
Holder surrendering the same. No service charge will be made for any such
registration of transfer or exchange, but the Transfer Agent and Certificate
Registrar may require payment of a sum sufficient to cover any tax or
governmental charge payable in connection therewith.
A-6
<PAGE>
<PAGE>
In the event that the Holder of this Class A Certificate does not
surrender this Class A Certificate for cancellation within six months after the
date specified in the notice regarding the pendency of the final distribution
described on the face hereof, the Trustee shall give a second notice with
respect thereto. If within one year after such second notice this Class A
Certificate shall not have been surrendered for cancellation, the Trustee may
take appropriate steps to contact the Holder hereof. As provided in the
Agreement, any funds remaining in the Trust after exhaustion of such steps shall
be distributed to the Seller, such distribution to occur not later than three
years from the date of the final Distribution Date.
The Trustee, the Paying Agent and the Transfer Agent and Certificate
Registrar may treat the Person in whose name this Certificate is registered as
the owner hereof for all purposes, and none of the Trustee, the Paying Agent or
the Transfer Agent and Certificate Registrar shall be affected by any notice to
the contrary.
The obligations and responsibilities created by the Agreement and the
Trust created thereby with respect to the Certificateholders shall terminate
upon the payment to Certificateholders of all amounts required to be paid to
them pursuant to the Agreement on the Distribution Date next succeeding the
month which is six months after the maturity or liquidation of the last
Receivable and the disposition of all property held as part of the Trust. The
Servicer may, at its option, purchase the corpus of the Trust at a price
specified in the Agreement, and such purchase of the Receivables and other
property of the Trust will effect early retirement of the Class A Certificates;
however, such right of purchase is exercisable only as of the last day of a
month immediately preceding any Distribution Date as of which the Pool Balance
is equal to or less than 5% of the original Pool Balance.
A-7
<PAGE>
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers
unto
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER
OF ASSIGNEE
- --------------------------------------------------------------------------------
(Please print or typewrite name and address, including
postal zip code, of assignee)
- --------------------------------------------------------------------------------
the within Certificate, and all rights thereunder, hereby
irrevocably constituting and appointing
_______________________________________________________________________ Attorney
to transfer said Certificate on the books of the Transfer Agent and Certificate
Registrar, with full power of substitution in the premises.
Dated:
_________________________*
Signature Guaranteed:
_________________________*
* NOTICE: The signature to this assignment must correspond with the name as it
appears upon the face of the within Certificate in every particular, without
alteration, enlargement or any change whatever. Such signature must be
guaranteed by a member of the New York Stock Exchange or a commercial bank or
trust company.
A-8
<PAGE>
<PAGE>
EXHIBIT B: FORM OF CLASS B SEE REVERSE FOR
CERTIFICATE CERTAIN DEFINITIONS
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION, TO ISSUER OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (AND ANY PAYMENT IS
MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY), ANY TRANSFER, PLEDGE, OR OTHER
USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS
THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
USAA AUTO LOAN GRANTOR TRUST 1997-1
__% AUTOMOBILE LOAN PASS-THROUGH CERTIFICATE, CLASS B
evidencing a fractional undivided interest in the Trust, as defined
below, the property of which includes a pool of simple interest motor
vehicle installment loans, secured by new and used automobiles and
light-duty trucks financed thereby and sold to the Trustee, as defined
below, on behalf of the Trust by USAA Federal Savings Bank.
(This Certificate does not represent an interest in or obligation of
USAA Federal Savings Bank or United Services Automobile Association or
any of their respective affiliates.)
NUMBER CUSIP __________
___________ $ ______________
THIS CERTIFIES THAT CEDE & CO. is the registered owner of a
nonassessable, fully paid, fractional undivided interest, in the amount set
forth above, in the USAA Auto
B-1
<PAGE>
<PAGE>
Loan Grantor Trust 1997-1 (the "Trust") formed by USAA Federal Savings Bank, a
federally chartered savings association (the "Seller"). The Trust was created
pursuant to a Pooling and Servicing Agreement dated as of _______ __, 1997 (the
"Agreement") between the Seller, acting as Seller and Servicer, and
as trustee
(the trustee and any successor in interest under the Agreement, the "Trustee"),
a summary of certain of the pertinent provisions of which is set forth below.
This Certificate is one of the duly authorized Certificates designated as "__%
Automobile Loan Pass-Through Certificates, Class B" (herein called the "Class B
Certificates"). This Class B Certificate is issued under and is subject to the
terms, provisions, and conditions of the Agreement, to which Agreement the
Holder of this Class B Certificate by virtue of the acceptance hereof assents
and by which such Holder is bound. The property of the Trust includes a pool of
simple interest motor vehicle installment loans (the "Receivables") for the
purchase of new and used automobiles and light-duty trucks financed thereby, all
monies due thereunder on or after the Cutoff Date, security interests in the
vehicles securing the Receivables (the "Financed Vehicles"); such amounts as
from time to time may be held in the Class B Certificate Account established and
maintained by the Servicer in the name of the Trustee, benefits under the
Reserve Account (described below); an assignment of the rights of the Seller to
receive proceeds from any claims on comprehensive and collision, credit life and
credit disability insurance policies covering the Financed Vehicles or the
Obligors, as the case may be, to the extent that such insurance policies relate
to the Receivables; and the rights with respect to any Financed Vehicle that has
been repossessed by the Servicer, on behalf of the Trustee.
Under the Agreement, there will be distributed on the 15th day of each
month or, if such 15th day is not a Business Day, the next succeeding Business
Day (the "Distribution Date"), commencing on ________ __, 1997, to the Person in
whose name this Class B Certificate is registered at the close of business on
the Record Date, such Certificateholder's fractional undivided interest in all
amounts allocable to interest from any source with respect to each Receivable in
an amount equal to the Class B PassThrough Rate of __% per annum on or with
respect to the outstanding Pool Balance as of the first day of the pre-
B-2
<PAGE>
<PAGE>
ceding Collection Period after giving effect to any amounts distributed with
respect to principal on the Distribution Date occurring in such Collection
Period (calculated on the basis of a 360-day year comprised of twelve 30-day
months), and the aggregate amount allocable to principal from any source, all as
more fully described in the Agreement.
Distributions on this Class B Certificate will be made by the Paying
Agent by check mailed to the Certificate-holder of record in the Certificate
Register without the presentation or surrender of this Class B Certificate or
the making of any notation hereon, except that if directed by the Seller in the
case of Certificates registered in the name of a Clearing Agency distributions
will be made in the form of immediately available funds. Except as otherwise
provided in the Agreement and notwithstanding the above, the final distribution
on this Class B Certificate will be made after due notice by the Trustee of the
pendency of such distribution and only upon presentation and surrender of this
Class B Certificate at the office or agency maintained for that purpose by the
Transfer Agent and Certificate Registrar in New York, New York.
Reference is hereby made to the further provisions of this Class B
Certificate set forth on the reverse hereof, which further provisions shall for
all purposes have the same effect as if set forth at this place.
All capitalized terms used herein not otherwise defined shall have the
meaning assigned thereto in the Agreement.
B-3
<PAGE>
<PAGE>
Unless the authentication hereon shall have been executed by an
authorized officer of the Trustee or an authenticating agent acting on behalf of
the Trustee, by manual signature, this Class B Certificate shall not entitle the
holder hereof to any benefit under the Agreement or be valid for any purpose.
IN WITNESS WHEREOF, the Trustee, on behalf of the Trust, and not
in its individual capacity, has caused this Class B Certificate to be duly
executed.
USAA AUTO LOAN GRANTOR
TRUST 1997-1
[ ]
as Trustee
By:
-------------------------------
Authorized Signatory
This is one of the Class B Certificates referred
to in the within-mentioned Agreement.
[ ]
as Trustee
By:
-------------------------------
Authorized Signatory
or
,
---------------------------------
as Authenticating Agent
for the Trustee
By:
-------------------------------
Authorized Officer
B-4
<PAGE>
<PAGE>
USAA AUTO LOAN GRANTOR TRUST 1997-1
% AUTOMOBILE LOAN PASS-THROUGH CERTIFICATES, CLASS B
The Class B Certificates do not represent an obligation of, or an
interest in, the Seller, the Servicer, the Trustee or any affiliate of any of
them. The Class B Certificates are limited in right of payment to certain
collections and recoveries in respect of the Receivables, all as more
specifically set forth in the Agreement. The Trust will have the benefit of a
Reserve Account. On the Business Day preceding each Distribution Date (the
"Deposit Date"), the Trustee, or the Servicer on behalf of the Trustee, shall
make a demand under the Reserve Account to the extent (1) the sum of (a) the
aggregate principal balance of, and accrued and unpaid interest on (such accrued
interest for the Collection Period in which such Receivable became a Defaulted
Receivable to be calculated at a rate equal to one-twelfth of the sum of the
Class B Pass-Through Rate and the Servicing Rate to the extent not otherwise
collected), Receivables that the Servicer has determined to be Defaulted
Receivables during the preceding Collection Period to the extent not covered by
certain amounts described in the Agreement, any accrued interest due and not
paid to Certificateholders on a previous Distribution Date and any Servicing Fee
due and not paid to the Servicer on a previous Distribution Date (b) any
Principal Carryover Shortfall to the extent not covered by certain amounts
described in the Agreement, and (c) any additional amount necessary to make
distributions to Certificateholders and pay the Servicing Fee to the Servicer on
such Distribution Date exceeds (2) the amount of Total Collections on deposit in
the Certificate Account with respect to the preceding Collection Period (net of
investment income and Excess Collections), but in no event in an amount greater
than the Available Reserve Amount with respect to such Distribution Date. A copy
of the Agreement may be examined during normal business hours at the Corporate
Trust Office of the Trustee, and at such other places, if any, designated by the
Trustee, by any Certificateholder upon request.
The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights of the Certificateholders
under the Agreement
B-5
<PAGE>
<PAGE>
at any time by the Seller, the Servicer and the Trustee with the consent of the
Holders of Certificates evidencing not less than 51% of the Pool Balance. Any
such consent by the Holder of this Class B Certificate shall be conclusive and
binding on such Holder and on all future Holders of this Class B Certificate and
of any Certificate issued upon registration of transfer hereof or in exchange
herefor or in lieu hereof whether or not notation of such consent is made upon
this Class B Certificate. The Agreement also permits the amendment thereof, in
certain limited circumstances and with certain exceptions provided therein,
without prior notice to or the consent of the Holders of any of the Class B
Certificates.
As provided in the Agreement and subject to certain limitations therein
set forth, the transfer of this Class B Certificate is registrable in the
Certificate Register upon surrender of this Class B Certificate for registration
of transfer at the office or agency maintained by the Transfer Agent and
Certificate Registrar, in New York, New York, accompanied by a written
instrument of transfer in form satisfactory to the Trustee and the Transfer
Agent and Certificate Registrar duly executed by the Holder hereof, which
signature to such assignment has been guaranteed by a member of the New York
Stock Exchange or a commercial bank or trust company, and thereupon one or more
new Class B Certificates of authorized denominations evidencing the same
aggregate interest in the Trust will be issued to the designated transferee.
The Class B Certificates are issuable only as registered Certificates
without coupons in denominations of $1,000 and integral multiples thereof
(except for a single Certificate in a smaller minimum denomination representing
any residual portion of the Pool Balance on the Cutoff Date). As provided in the
Agreement and subject to certain limitations therein set forth, Class B
Certificates are exchangeable for new Class B Certificates of authorized
denominations evidencing the same aggregate denomination, as requested by the
Holder surrendering the same. No service charge will be made for any such
registration of transfer or exchange, but the Transfer Agent and Certificate
Registrar may require payment of a sum sufficient to cover any tax or
governmental charge payable in connection therewith.
B-6
<PAGE>
<PAGE>
In the event that the Holder of this Class B Certificate does not
surrender this Class B Certificate for cancellation within six months after the
date specified in the notice regarding the pendency of the final distribution
described on the face hereof, the Trustee shall give a second notice with
respect thereto. If within one year after such second notice this Class B
Certificate shall not have been surrendered for cancellation, the Trustee may
take appropriate steps to contact the Holder hereof. As provided in the
Agreement, any funds remaining in the Trust after exhaustion of such steps shall
be distributed to the Seller, such distribution to occur not later than three
years from the date of the final Distribution Date.
The Trustee, the Paying Agent and the Transfer Agent and Certificate
Registrar may treat the Person in whose name this Certificate is registered as
the owner hereof for all purposes, and none of the Trustee, the Paying Agent or
the Transfer Agent and Certificate Registrar shall be affected by any notice to
the contrary.
The obligations and responsibilities created by the Agreement and the
Trust created thereby with respect to the Certificateholders shall terminate
upon the payment to Certificateholders of all amounts required to be paid to
them pursuant to the Agreement on the Distribution Date next succeeding the
month which is six months after the maturity or liquidation of the last
Receivable and the disposition of all property held as part of the Trust. The
Servicer may, at its option, purchase the corpus of the Trust at a price
specified in the Agreement, and such purchase of the Receivables and other
property of the Trust will effect early retirement of the Class B Certificates;
however, such right of purchase is exercisable only as of the last day of a
month immediately preceding any Distribution Date as of which the Pool Balance
is equal to or less than 5% of the original Pool Balance.
B-7
<PAGE>
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers
unto
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER
OF ASSIGNEE
- --------------------------------------------------------------------------------
(Please print or typewrite name and address, including
postal zip code, of assignee)
- --------------------------------------------------------------------------------
the within Certificate, and all rights thereunder, hereby
irrevocably constituting and appointing
_______________________________________________________________________ Attorney
to transfer said Certificate on the books of the Transfer Agent and Certificate
Registrar, with full power of substitution in the premises.
Dated:
_________________________*
Signature Guaranteed:
_________________________*
* NOTICE: The signature to this assignment must correspond with the name as it
appears upon the face of the within Certificate in every particular, without
alteration, enlargement or any change whatever. Such signature must be
guaranteed by a member of the New York Stock Exchange or a commercial bank or
trust company.
B-8
<PAGE>
<PAGE>
EXHIBIT C-1
Trustee's Certificate
pursuant to Section 20.3
of the Pooling and Servicing
Agreement
(the "Trustee") of the USAA
Auto Loan Grantor Trust 1997-1 created pursuant to the Pooling and Servicing
Agreement (the "Pooling and Servicing Agreement"), dated as of , 1997,
between USAA Federal Savings Bank, as Seller (the "Seller") and Servicer, and
the Trustee, does hereby sell, transfer, assign, and otherwise convey to the
Seller, without recourse, representation, or warranty, all of the Trustee's
right, title, and interest in and to all of the Receivables (as defined in the
Pooling and Servicing Agreement) identified in the attached Servicer's
Certificate as "Repurchased Receivables," which are to be repurchased by the
Seller pursuant to Section 12.2 of the Pooling and Servicing Agreement and all
security and documents relating thereto.
IN WITNESS WHEREOF I have hereunto set my hand this ____ day of _____________ ,
19__ .
C-1
<PAGE>
<PAGE>
EXHIBIT C-2
Trustee's Certificate
pursuant to Section 20.3
of the Pooling and Servicing
Agreement
(the "Trustee") of the USAA
Federal Savings Grantor Trust 1997-1 created pursuant to the Pooling and
Servicing Agreement (the "Pooling and Servicing Agreement"), dated as of
_____________, 1997 between USAA Federal Savings Bank, as Seller and Servicer
(the "Servicer"), and the Trustee, does hereby sell, transfer, assign, and
otherwise convey to the Servicer, without recourse, representation, or warranty,
all of the Trustee's right, title, and interest in and to all of the Receivables
(as defined in the Pooling and Servicing Agreement) identified in the attached
Servicer's Certificate as "Repurchased Receivables," which are to be purchased
by the Servicer pursuant to Section 13.7 or 21.2 of the Pooling and Servicing
Agreement, and all security and documents relating thereto.
IN WITNESS WHEREOF I have hereunto set my hand this ___ day of _______,
19___.
C-2
<PAGE>
<PAGE>
EXHIBIT D
USAA Auto Loan Grantor Trust 1997-1
5% Automobile Loan Pass-Through Certificates
MONTHLY SERVICER CERTIFICATE REPORT
Collection Period # Beginning Date
Collection Period # End Date
Determination Date
Distribution Date
I. Available Amount in the Certificate Account
A. Credits
1. Payments from Obligors Applied to Collection
Period
a. Principal Payments (PSA 14.2) $
b. Interest Payments (PSA 14.2) $
c. Total (a+b) $
2. Repurchase Amount From Repurchased
Receivables
a. Principal Payments (PSA 14.4) $
b. Interest Payments (PSA 14.4) $
c. Total (a+b) $
3. Recovery of Defaulted Receivables
(PSA 14.2) $
4. Advance by Servicer (PSA 14.3) $
5. Investment Earnings on Certificate
Account (as of month end) $
6. Overpayment from Obligors $
7. Net Adjustments $
8. Total Credits (sum 1 thru 7) $
B. Debits
1. Overpayment From Obligors $
2. Total Debits $
C. Collections (A-B)(PSA 14.5) $
D. Cash Collateral Draw (XVIII.C)(PSA 14.4) $
E. Total Collections (C+D) $
II. Scheduled Monthly Disbursements
D-1
<PAGE>
<PAGE>
A. Reimbursement of Advance (PSA 14.5a) $
B. Principal and Interest to
Certificateholders
1. Monthly Interest (PSA 14.5b) $
2. Unpaid Interest (PSA 14.5b) $
3. Monthly Principal
a. Principal Payment (PSA 14.5b) $
b. From Repurchased Receivables
(PSA 14.5b) $
c. From Defaulted Receivables
(PSA 14.5b) $
d. Total (sum a thru c) $
4. Principal Carryover Shortfall (PSA
14.5b) $
5. Total (sum 1 thru 4) $
C. Servicing Fee to Servicer
1. Monthly Servicing Fee (PSA 14.5c) $
2. Overdue Monthly Servicing Fee (PSA
14.5c) $
3. Investment Earnings on Certificate
Account (PSA 13.8) $
4. Total (sum 1 thru 3) $
D. Total (sum A thru C) $
III. Average Certificate Principal
A. Beginning Balance $
B. Ending Balance (III.A-II.B.3-II.B.4) $
C. Average Balance ((A+B)/2) $
IV. Deposit to Cash Collateral Account
(PSA 14.5d.1) $
A. Excess Funds From Certificate Account
(I-II)(PSA 14.5) $
B. Reinvestment on CCA (USAA Portion-
Date prior to Dist. Date) $
C. Required Deposit to Cash Collateral Account
1. Required Cash Collateral Account for
Next Period (XIV.C) $
2. Available Cash Collateral Amount (V.A) $
3. Cash Collateral Account Draw (XVIII.C) $
4. Required Deposit Amount (max: 0 or
sum 1-2+3) $
D. Cash Collateral Account Deposit
(Min: A+B or C) $
V. Cash Collateral Account Surplus (LA 3.a.ii) $
A. Available Cash Collateral Amount $
B. Cash Collateral Account Deposit (IV.D) $
C. Cash Collateral Account Draw (XVIII.C) $
D-2
<PAGE>
<PAGE>
D. Required Cash Collateral Next Period $
E. Cash Collateral Account Surplus (max
0 or sum A+B-C-D) $
VI. Scheduled Disbursement to Cash Collateral
Depositor
A. Scheduled Interest
1. Interest on Deposit Rate Portion
$ (LA Def.) $
2. Interest on Base Rate Portion $
(LA Def.)/Reinv CCA - CS Portion) $
3. Unpaid interest $
4. Total (sum 1 thru 3) $
B. Fees and Expenses
1. Fees and Expenses $
2. Overdue Fees and Expenses $
3. Total (sum 1 thru 2) $
C. Total (A+B) $
VII. Memorandum Spread Account Unfunded Amount
(LA Def.)
A. Memorandum Spread Account Cap
1. Cash Collateral Account Balance $
2. Memorandum Spread Account Cap
Percentage $
a. Average Three Period Charge Off Rate %
b. Charge Off Rate Trigger %
c. Maximum Memorandum Spread Account
Percentage %
d. Minimum Memorandum Spread Account
Percentage %
e. Memorandum Spread Account Percentage
Applied (if > ) %
f. Original Pool Principal Balance $
g. Memorandum Spread Account Cap
Percentage %
h. Possible Amount (f*g) $
3. Memorandum Spread Account Cap
(Min: 1 or 2) $
B. Memorandum Spread Account Amount
1. Available Cash Collateral Amount $
2. Cash Collateral Account Deposit (IV.D) $
3. Cash Collateral Account Withdrawal
(XVIII.C) $
4. Principal Balance on Cash Collateral
Loan (IX.B.3) $
5. Memorandum Spread Account Amount (Max:
0 or 1+2-3-4) (LA D) $
C. Memorandum Spread Account Unfunded Amount
(Max: 0 or A-B) (LA Def.) $
D-3
<PAGE>
<PAGE>
VIII. Excess from Memorandum Spread Account
A. Memorandum Spread Account Cap (VII.A.3) $
B. Memorandum Spread Account Deposit
1. Memorandum Spread Account Unfunded
Amount (VII.C) $
2. Excess Funds from Certificate Account
(IV.A) $
3. Fees (VI.B.3) $
4. Reinvestment on CCA (USAA Portion-
Date prior to Dist. Date) $
5. Memorandum Spread Account Deposit
(min B.1 or B.2-B.3+B.4) $
6. Next Period Memorandum Spread Account
Amount $
C. Excess From Memorandum Spread Account $
IX. Disbursement of Available Cash Collateral
Payment Funds $
A. Available Cash Collateral Amount
B. Principal Payment to Cash Collateral
Loan
1. Memorandum Spread Account
Deposit (VIII.B.5) $
2. Cash Collateral Account Surplus (V.E) $
3. Principal Balance on Cash
Collateral Loan $
4. Principal Payment (Min: 1 + 2 or 3) $
C. Ending Balance on Cash Collateral Loan $
D. Excess Amount to Seller (VIII.C) $
X. Available $ Cash Collateral Amount for
Next Distribution Date
A. Available Cash Collateral Amount
1. Available Cash Collateral Amount $
2. Cash Collateral Account Deposit (IV.D) $
3. Cash Collateral Account Draw (XVIII.C) $
4. Cash Collateral Account Surplus (V.E) $
5. Available Cash Collateral Amount
for Next Period (1+2-3-4) $
XI. Delinquency and Default Information
A. Automobiles Delinquency Information
Delinquency
31-60 days $
61-90 days $
91-120 days $
Total $
Delinquency Units
31-60 days
61-90 days
91-120 days
D-4
<PAGE>
<PAGE>
Total
B. Principal Amount of Loans in Defaulted
Receivables $
C. Delinquency Percentage
1. Outstanding Principal Balance
for Delinquency >=60 days $
2. Portfolio Principal Ending Balance
for Collection Period $
3. Delinquency Percentage (1/2) %
XII. Portfolio Average Delinquency Rate
A. Delinquency Rate for Period #-2 %
B. Delinquency Rate for Period #-1 %
C. Delinquency Rate for Period # %
D. Average Delinquency Rate (Sum A thru C)/3) %
XIII. Portfolio Average Charge Off Rate
1. Principal Recoveries of Defaulted
Receivables $
2. Principal on Defaulted Receivables $
3. Average Pool Balance for Collection
Period $
4. Charge Off Rate (2-1)/3) %
A. Portfolio Charge Off Rate for
Period #-2 %
B. Portfolio Charge Off Rate for
Period #-1 %
C. Portfolio Charge Off Rate for
Period # %
D. Average Charge Off Rate (Sum A thru C)/3) %
XIV. Required Cash Collateral Amount for Next
Distribution Date (Def. PSA) $
A. Cash Collateral Floor Amount (Def. PSA)
1. Maximum Amount $
2. Possible Amount $
a. Pool Principal Balance at Beginning
of Collection Period $
b. Months Remaining to Legal Final
c. Cumulative Monthly Interest Through
Final Distribution
d. Cumulative Monthly Servicing Fee
Through Final Distribution $
e. Total (sum a thru c) $
3. Cash Collateral Floor Amount
(Min: 1 or 2) $
B. Possible Cash Collateral Amount
1. Cash Collateral Percentage
a. Average Three Period Delinquency
D-5
<PAGE>
<PAGE>
Percentage %
b. Delinquency Percentage Trigger %
c. Average Three Period Charge Off Rate %
d. Charge Off Rate Trigger %
e. Maximum Cash Collateral Percentage
Specified %
f. Minimum Cash Collateral Percentage
Specified %
g. Cash Collateral Percentage Applied
(if a < b or c < d then e[)] %
2. Pool Principal Ending Balance $
3. Possible Amount (2*g) $
C. Required Cash Collateral Amount for Next
Period (Max: A or B) (PSA Def.) $
XV. Excess Spread Amounts for Collection Period
(PSA Def.)
A. Interest Payments $
B. Advance by Servicer $
C. Reimbursement of Advance $
D. Monthly Interest $
E. Monthly Servicing Fee $
F. Excess Spread Amount (Lines A+B-C-D-E) $
XVI. Excess Collections for Collection Period
(PSA Def.) $
A. Excess Spread Amount $
B. Net Recovery of Defaulted Receivables
C. Excess Spread Amount to this Period's
Defaulted Receivables
1. Balance on Defaulted Receivables
a. Principal $
b. Interest $
c. Total (Lines a+b) $
2. Amount Applied to Default Balance
(Min: Lines (A+B) or C.1.c) $
D. Principal Carryover Shortfall $
E. Excess Collections (Max: 0 or Lines
A+B-C-D) $
XVII. Payment Deficiency Amount (PSA 15.1) $
A. Scheduled Monthly Disbursements $
B. Available Distribution Amount
1. Collections (I.C) $
C. Payment Deficiences Amount (Max: 0
or A-B) $
XVIII. Cash Collateral Account Draw
D-6
<PAGE>
<PAGE>
A. Available Cash Collateral Amount
for Collection Period $
B. Payment Deficiency Amount (XVII.C) $
C. Cash Collateral Account Draw (Min: A or B) $
D-7
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EXHIBIT E
FORM OF CERTIFICATEHOLDER REPORT
--------------------------------
USAA Auto Loan Grantor Trust 1997-1
5% Automobile Loan Pass-Through Certificates
On ___________, 19___ , interest earned and principal paid on the underlying
assets for the month of ____________, 19___ were paid to you in connection with
the above referenced issue. The following information is being provided pursuant
to Section 14.7 of the Pooling and Servicing Agreement, dated as of ___________,
1997. This payment per $1000 of original issuance of your holdings is allocated
as follows:
1) Principal _______
2) Interest _______
Total per each individual certificate _______
3) Fees and Compensation paid to Servicer _______
(a) Total _______
(b) Per individual certificate _______
4) The amount deposited into the Cash
Collateral Account _______
5) Aggregate Unreimbursed Advances
Previous Month _______
Change From Previous Month _______
This Month _______
6) (a) Pool Balance before this payment _______
(b) Pool Factor before this payment _______
7) (a) Available Cash Collateral Amount _______
(b) % of Pool Balance _______
8) Required Cash Collateral Amount _______
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ANNEX I
USAA FEDERAL SAVINGS BANK
Seller and Servicer
Standard Terms and Conditions of Agreement
Effective October __, 1997
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SCHEDULE A
----------
Schedule A shall be deemed to be the computer data disk or
printout relating to the Receivables delivered by the Seller to the Trustee on
the Closing Date.
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SCHEDULE B
----------
Location of Receivable Files
----------------------------
USAA Federal Savings Bank
10750 McDermott Freeway
San Antonio, TX 78288
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Exhibit 5.1
October 23, 1997
USAA Federal Savings Bank
10750 McDermott Freeway
San Antonio, Texas 78288
Re: USAA Auto Loan Grantor Trust 1997-1
-----------------------------------
Ladies and Gentlemen:
We have acted as special counsel to USAA Federal Savings Bank (the
"Bank") in connection with the registration statement on Form S-3, Registration
No. 333-37471 (the "Registration Statement"), filed by the Bank on behalf of
USAA Auto Loan Grantor Trust 1997-1 (the "Trust") with the Securities and
Exchange Commission under the Securities Act of 1933, as amended (the "Act"),
with respect to the issuance by the Trust of Automobile Loan Pass-Through
Certificates representing undivided interests in the Trust (the "Certificates").
The Certificates are to be issued pursuant to a Pooling and Servicing Agreement
relating to the Certificates (the "Pooling and Servicing Agreement") between the
Bank, as seller and servicer, and The Chase Manhatten Bank, a New York banking
corporation, as trustee (the "Trustee").
We have examined such documents, records and matters of law as we have
deemed necessary for purposes of this opinion. Based on the foregoing, we are of
the opinion that when the issuance, execution and delivery of the Certificates
have been duly authorized by all corporate action by the Bank and when the
Certificates have been duly executed and authenticated by the Trustee in
accordance with the terms of the Pooling and Servicing Agreement and issued and
delivered against payment therefor as contemplated by the Registration
Statement, the Certificates will be validly issued, fully paid and
nonassessable.
We hereby consent to the filing of this opinion as Exhibit 5.1 to the
Registration Statement and to the reference to us under the heading "Validity of
the Certificates" in the Prospectus constituting a part of the Registration
Statement. In giving such consent, we do not thereby admit that we are in the
category of persons whose consent is required under Section 7 of the Act.
Very truly yours,
JONES, DAY, REAVIS & POGUE
<PAGE>
<PAGE>
October 23, 1997
The Chase Manhattan Bank, in
its capacity as Trustee
431 West 33rd St., 15th Floor
New York, New York 10001
Re: USAA Auto Loan Grantor Trust 1997-1
Ladies and Gentlemen:
We have acted as special counsel to USAA Federal Savings Bank (the
"Bank") in connection with the issuance by the USAA Auto Loan Grantor Trust
1997-1 (the "Trust") of $679,200,000 of Class A Automobile Loan Pass-Through
Certificates and $21,005,448.34 of Class B Automobile Loan Pass-Through
Certificates (collectively, the "Certificates") pursuant to a Pooling and
Servicing Agreement (the "Pooling and Servicing Agreement") between the Bank
and The Chase Manhattan Bank as trustee, and the sale of the Certificates as
contemplated by the Registration Statement on Form S-3 (Registration
No. 333-37471) (as amended from time to time, the "Registration Statement").
We have examined such documents, records, and matters of law as we
have deemed necessary for purposes of the opinions that follow. The opinions are
subject to the following qualifications, assumptions, and limitations:
A. Our opinions are based on the relevant provisions of the Internal
Revenue Code of 1986, as amended, and administrative interpretations,
judicial decisions, and regulations in effect on the date of this letter.
These authorities are subject to either prospective or retroactive change
and we can provide no assurance as to the effect of any change on the
conclusions reached in our opinions. We further note that no federal
statutes, administrative interpretations, judicial decisions, or
regulations address the characterization for tax purposes of securities
with
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The Chase Manhattan Bank
October 23, 1997
Page 2
terms and provisions substantially the same as the Certificates and that
application of these authorities to the Certificates is a matter of
interpretation. Our opinions do not relate to or purport to cover the laws
or regulations of any jurisdiction other than the United States of America.
B. We note that judicial decisions and administrative rulings of the
Internal Revenue Service (the "Service") generally indicate that the
characterization of a transaction for tax purposes depends on the facts and
circumstances of each case. No ruling has been requested from the Service
concerning the Certificates. Opinions of counsel, moreover, are not binding
on the Service and the Service may assert positions contrary to those
stated in our opinion letter.
C. In rendering our opinions, we have relied upon statements,
representations, and certificates of officers and other representatives of
the Bank.
D. We have assumed that the Certificates are being issued in
accordance with the Pooling and Servicing Agreement and we have assumed
compliance by all parties with the Pooling and Servicing Agreement and all
other documents relating to the issuance and sale of the Certificates.
Based on our examination, and subject to the foregoing qualifications,
assumptions, and limitations, we are of the opinion that:
1. the Trust will be treated for federal income tax purposes as a
grantor trust and not as an association taxable as a corporation;
2. the owners of the Certificates will be treated as directly
owning their pro rata interest in each Trust asset and as directly
paying their pro rata share of the Trust's reasonable expenses; and
3. the statements set forth in the prospectus contained in the
Registration Statement under the headings "Prospectus Summary -- Tax
Status" and "Certain Federal Income Tax Consequences," to the extent
such statements address matters of law, are correct in all material
respects.
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The Chase Manhattan Bank
October 23, 1997
Page 3
Our opinions are limited to those opinions expressly stated in this
letter; no other opinions may be inferred. The opinions expressed in this letter
take into account laws, interpretations of laws, and facts known to us as of the
date of this letter. We undertake no responsibility to advise you of changes in
laws or interpretations of law or facts that come to our attention after that
time.
These opinions are rendered solely for your benefit and no other
person or entity is entitled to rely on them without our prior written consent.
Copies of this letter may not be furnished to any other person or entity or
referred to in any other document without our prior written consent.
Very truly yours,
JONES, DAY, REAVIS & POGUE
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