<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON , 1999
REGISTRATION NO. 333-81385
________________________________________________________________________________
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 1999-1
(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 CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
ORGANIZATION)
</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, MEAGHER &
2001 ROSS AVE., SUITE 2300 599 LEXINGTON AVENUE 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 PROPOSED
AMOUNT MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF TO BE OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PER UNIT(1) OFFERING PRICE FEE(2)
<S> <C> <C> <C> <C>
% Automobile Loan Pass-Through Certificates,
Class A....................................... $673,149,000 100% $673,149,000 $187,135
% Automobile Loan Pass-Through Certificates,
Class B....................................... $ 26,227,130 100% $ 26,227,130 $ 7,291
Total.................................... $699,376,130 $699,376,130 $194,426
</TABLE>
(1) Estimated solely for purposes of calculating the Registration Fee.
(2) $278 previously paid.
________________________________________________________________________________
<PAGE>
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED JULY 16, 1999
USAA AUTO LOAN GRANTOR TRUST 1999-1
Issuer
$699,376,130 FIXED RATE AUTOMOBILE LOAN PASS-THROUGH CERTIFICATES
[LOGO]
USAA FEDERAL SAVINGS BANK
Seller and Servicer
The certificates will be issued by the trust. The certificates represent
interests in the trust. The sources for payments on the certificates will be
collections received on a pool of auto loans held by the trust and the funds
held in a cash reserve account.
THE CERTIFICATES
USAA Auto Loan Grantor Trust 1999-1 will issue the following two classes of
certificates:
<TABLE>
<CAPTION>
CLASS A CERTIFICATES CLASS B CERTIFICATES
-------------------- --------------------
<S> <C> <C>
Initial Principal Amount.................... $673,149,000 $26,227,130
Interest Rate............................... % %
Final Scheduled Distribution Date........... February 15, 2006 February 15, 2006
Price to Public(1).......................... $ % N/A
Underwriting Discount....................... $ % N/A
Proceeds to Seller(2)....................... $ % N/A
First Distribution Date..................... August 16, 1999 August 16, 1999
</TABLE>
- ------------
(1) Plus accrued interest, if any, at the applicable interest rate from
July 15, 1999.
(2) Before deducting expenses payable by the seller, estimated to be $ .
Interest and principal on the certificates will be payable monthly, on the
15th or the first business day after the 15th, beginning August 16, 1999.
CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE 9 OF THIS PROSPECTUS.
The certificates represent interests in the trust only and do not represent
obligations of or interests in, and are not guaranteed by, USAA Federal Savings
Bank or any of its affiliates.
This prospectus may be used to offer and sell the certificates.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION (THE 'SEC') NOR ANY STATE
SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR
DETERMINED IF THIS PROSPECTUS IS ACCURATE AND COMPLETE. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
UNDERWRITERS OF THE CLASS A CERTIFICATES
J.P. MORGAN & CO.
CHASE SECURITIES INC.
CREDIT SUISSE FIRST BOSTON
SALOMON SMITH BARNEY
The date of this prospectus is , 1999.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
SUMMARY OF TERMS. 5
THE PARTIES............................................ 5
THE SECURITIES......................................... 5
RISK FACTORS................................................ 9
THE BANK'S PORTFOLIO OF MOTOR VEHICLE LOANS................. 13
Origination of Motor Vehicle Loans..................... 13
Underwriting of Motor Vehicle Loans.................... 13
Insurance.............................................. 15
Collection Procedures.................................. 15
Delinquency and Loan Loss and Recovery Information..... 16
DESCRIPTION OF THE TRUST.................................... 18
DESCRIPTION OF THE RECEIVABLES POOL......................... 18
Maturity and Prepayment Assumptions.................... 21
YIELD CONSIDERATIONS........................................ 22
POOL FACTORS................................................ 22
USE OF PROCEEDS............................................. 23
USAA FEDERAL SAVINGS BANK................................... 23
UNITED SERVICES AUTOMOBILE ASSOCIATION...................... 23
DESCRIPTION OF THE CERTIFICATES............................. 24
General................................................ 24
Book-Entry Registration................................ 24
DTC's Year 2000 Efforts................................ 27
Definitive Certificates................................ 28
Sale and Assignment of the Receivables................. 28
Description of the Trust's Accounts.................... 30
Collections on the Receivables......................... 30
Servicing Procedures................................... 31
Advances............................................... 32
Servicing Compensation................................. 32
The Reserve Account.................................... 33
The Yield Supplement Agreement......................... 34
Distributions on Certificates.......................... 35
Statements to Certificateholders....................... 38
Evidence as to Compliance.............................. 39
Certain Matters Regarding the Servicer................. 39
Events of Servicing Termination........................ 40
Rights Upon an Event of Servicing Termination.......... 41
Amendment.............................................. 41
List of Certificateholders............................. 42
Termination............................................ 42
Duties of the Trustee.................................. 43
The Trustee............................................ 43
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES.................... 45
General................................................ 45
Security Interests in the Financed Vehicles............ 45
Enforcement of Security Interests in Vehicles.......... 46
Other Matters.......................................... 47
Repurchase Obligation.................................. 47
</TABLE>
2
<PAGE>
<TABLE>
<S> <C>
CERTAIN FEDERAL INCOME TAX CONSEQUENCES..................... 47
Tax Status of the Trust; Scope of Tax Opinion.......... 47
Treatment of Certificate Owners' Interest in Trust
Assets................................................ 48
Treatment of Certificate Owners' Share of Trust
Expenses.............................................. 50
Discount and Premium................................... 50
Effect of Subordination................................ 52
Yield Supplement Amounts............................... 52
Sale of a Certificate.................................. 53
Foreign Certificate Owners............................. 53
Backup Withholding..................................... 54
Certain State Tax Consequences......................... 54
ERISA CONSIDERATIONS........................................ 54
Exemption for Class A Certificates..................... 54
Exemptions for Class B Certificates.................... 56
Special Considerations Applicable to Insurance Company
General Accounts...................................... 57
UNDERWRITING................................................ 58
VALIDITY OF THE CERTIFICATES................................ 58
GLOSSARY OF TERMS........................................... 59
ANNEX A..................................................... A-1
</TABLE>
3
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
Federal law requires the filing of information with the SEC, including
periodic reports and other information. You can read and copy these documents at
the public reference facility maintained by the SEC at Judiciary Plaza, 450
Fifth Street, NW, Room 1024, Washington, D.C. 20549. You can also copy and
inspect such reports, proxy statements and other information at the following
regional offices of the SEC:
<TABLE>
<S> <C>
New York Regional Office Chicago Regional Office
Seven World Trade Center Citicorp Center
Suite 1300 500 West Madison Street, Suite 1400
New York, NY 10048 Chicago, IL 60661
</TABLE>
Please call the SEC at 1-800-SEC-0330 for further information on public
reference rooms. SEC filings are also available to the public on the SEC's web
site at http://www.sec.gov.
This prospectus is part of a registration statement filed by the trust with
the SEC (Registration No. 333-81385).
You should rely only on the information provided in this prospectus. We
have not authorized anyone else to provide you with different information. You
should not assume that the information in this prospectus is accurate as of any
date other than the date on the cover page of this prospectus.
You can find a listing of the pages where capitalized terms used in this
prospectus are defined beginning on page 59 in this prospectus.
We include cross-references to sections where you can find additional
information. The table of contents on the back cover provides the location of
these sections.
In this prospectus, the terms 'we,' 'us' and 'our' refer to USAA Federal
Savings Bank.
4
<PAGE>
SUMMARY OF TERMS
This summary highlights selected information from this document and does not
contain all of the information that you need to consider in making your
investment decision. To understand all of the terms of the offering of the
certificates, we urge you to read carefully this entire prospectus.
This summary provides an overview of calculations, cash flows and other
information to aid your understanding and is qualified by the full description
of these calculations, cash flows and other information in this prospectus.
THE PARTIES
<TABLE>
<S> <C>
Issuer.................................... USAA Auto Loan Grantor Trust 1999-1
Seller of the Auto Loans and Servicer..... USAA Federal Savings Bank
Trustee................................... The Bank of New York, a banking corporation organized
under the laws of the State of New York
Seller's Address.......................... 10750 McDermott Freeway, San Antonio, Texas 78288
Seller's Telephone Number................. (210) 498-2265
</TABLE>
THE SECURITIES
The Terms of the Certificates:
<TABLE>
<CAPTION>
CLASS A CLASS B
CERTIFICATES CERTIFICATES
------------ ------------
<S> <C> <C>
Principal Amount:................................... $673,149,000 $26,227,130
Interest Rate per Annum:............................ % %
Interest Accrual Method:............................ 30/360 30/360
Distribution Date:.................................. monthly (15th) monthly (15th)
First Distribution Date:............................ August 16, 1999 August 16, 1999
Final Scheduled Distribution Date:.................. February 15, 2006 February 15, 2006
</TABLE>
5
<PAGE>
THE CERTIFICATES
The trust will issue the following certificates:
$673,149,000 Class A % Automobile Loan Pass-Through Certificates
$26,227,130 Class B % Automobile Loan Pass-Through Certificates
An affiliate of the seller will purchase the Class B Certificates in the
aggregate principal amount of $26,227,130.
RATINGS OF CERTIFICATES
The trust will not issue the certificates unless:
(1) the Class A Certificates are rated in the highest rating category, and
(2) the Class B Certificates are rated in at least the 'BBB' category or its
equivalent,
by at least one nationally recognized statistical rating agency. After the
certificates are issued, any ratings may be lowered or withdrawn by the
applicable rating agency.
CLOSING DATE
The deposit of the auto loans and the issuance of the certificates is expected
to take place on , 1999.
INTEREST PAYMENTS
The interest rates for the certificates are the fixed rates specified above and
on the cover page of this prospectus. Interest will be payable on all
certificates on each distribution date.
Interest on the Class A and Class B Certificates will be calculated on the basis
of a 360-day year consisting of 12 months of 30 days each.
On any distribution date, interest on the Class B Certificates will not be paid
until all accrued and unpaid interest on the Class A Certificates has been
paid in full.
PRINCIPAL PAYMENTS
The Class A Certificates and the Class B Certificates will be entitled to their
proportionate share of principal collections on the auto loans. However, the
trust will make principal payments to the Class A Certificates before making
principal payments to the Class B Certificates on each distribution date.
FINAL SCHEDULED DISTRIBUTION DATE
The outstanding principal amount, if any, of each class of certificates will be
payable in full on the following final scheduled distribution date:
<TABLE>
<CAPTION>
FINAL SCHEDULED
CERTIFICATES DISTRIBUTION DATE
- ------------ -----------------
<S> <C>
Class A.................. February 15, 2006
Class B.................. February 15, 2006
</TABLE>
REDEMPTION OF CERTIFICATES
The Class A Certificates and the Class B Certificates will be redeemed in whole
on any distribution date if the seller exercises its option to purchase the auto
loans and other trust property from the trust.
The seller may exercise its option to purchase when the aggregate principal
balance of the auto loans declines to 5% or less of the aggregate starting
principal balance.
BOOK-ENTRY FORM
The trust will initially issue the certificates in book-entry form. You will
hold your interest in the certificates through The Depository Trust Company,
Cedel Bank, societe anonyme, or the Euroclear System.
You will not be entitled to receive a definitive certificate representing your
interest except under limited circumstances. See 'Description of the
Certificates -- Book-Entry Registration' in this prospectus.
CREDIT ENHANCEMENT
SUBORDINATION OF CLASS B CERTIFICATES
Payments on the Class B Certificates are subordinated to those on the Class A
Certificates to the extent explained below. This provides additional credit
enhancement for the Class A Certificates.
No interest will be paid on the Class B Certificates on any distribution date
until all accrued and unpaid interest on the Class A Certificates has been
paid in full;
6
<PAGE>
No principal will be paid on the Class B Certificates on any distribution date
until all principal owed on the Class A Certificates has been paid in full; and
Amounts otherwise payable as principal on the Class B Certificates will be
available to make payments of interest and principal on the Class A
Certificates.
RESERVE ACCOUNT
Funds on deposit in the reserve account will be available on each distribution
date to cover shortfalls in distributions of interest and principal on the
certificates due to delinquencies and defaults on the auto loans. Amounts in the
reserve account will also be available to pay servicing fees.
The reserve account will be funded as follows:
On the closing date, the seller will make an initial deposit of $5,245,321 into
the reserve account.
On each distribution date, any collections on the auto loans remaining after
providing for all required payments to certificateholders, payment of the
total servicing fee and reimbursement of outstanding servicing advances will
be deposited in the reserve account up to the specified reserve account
balance.
The specified reserve account balance for any distribution date will equal the
greater of (a) 1.25% of the outstanding principal balance of the auto loans and
(b) 0.50% of the initial principal balance of the auto loans. The reserve
amount, however, will not exceed the amount of the outstanding principal
balance.
YIELD SUPPLEMENT AGREEMENT
If any auto loan has, as of the closing date, a contract rate below the sum of
(1) the weighted average of the interest rates on the Class A Certificates and
the Class B Certificates, and (2) the servicing rate, the seller, the servicer
and the trust will enter into a Yield Supplement Agreement. The Yield Supplement
Agreement will provide for payment by the seller of a yield supplement amount
which is equal to the difference between (1) interest that would be payable on
each auto loan if the rate on that auto loan were equal to the sum of the
weighted average of the interest rates on the certificates and the servicing
rate and (2) interest that is actually payable on each auto loan at its contract
rate.
TRUST PROPERTY
The primary assets of the trust will be the auto loans, which are a pool of
fixed rate simple interest motor vehicle installment contracts made by the
seller. The auto loans in the trust will be deposited by the seller in the
trust. The trust property will also include:
All monies due or received under the auto loans on or after the cutoff date of
July 1, 1999;
A security interest in the new and used automobiles and light-duty trucks
financed by the auto loans;
Any proceeds from claims on related insurance policies or from borrowers under
the auto loans;
Amounts on deposit in the trust accounts, including the right to receive
payments from the reserve account and pursuant to the Yield Supplement
Agreement; and
All rights of the trust against the seller under the Pooling and Servicing
Agreement.
THE AUTO LOANS
On the closing date, the trust will acquire auto loans with an aggregate
principal balance of $699,376,130.44 as of the cutoff date. As of the cutoff
date:
the weighted average contract rate of the auto loans is approximately 8.30%;
the weighted average remaining term of the auto loans, that is, the period
starting after the cutoff date and including each auto loan's scheduled
maturity date, is approximately 51.0 months; and
the weighted average original term of the auto loans is approximately
57.8 months.
The weighted averages listed above are averages that take into account the
differences in the principal amounts of the auto loans.
7
<PAGE>
CERTIFICATE ACCOUNT; PRIORITY OF DISTRIBUTIONS
Payments received on the auto loans will be deposited in the certificate account
until paid to the certificateholders. On each distribution date, funds on
deposit in the certificate account collected during the prior monthly collection
period will be applied in the priority indicated below:
reimbursement of outstanding advances;
the total servicing fee;
accrued and unpaid interest on the Class A Certificates;
accrued and unpaid interest on the Class B Certificates;
principal on the Class A Certificates;
principal on the Class B Certificates; and
the remaining balance, if any, to be deposited in the reserve account.
SERVICING COMPENSATION
The trust will pay the servicer a monthly fee on each distribution date. The
monthly servicing fee will equal one-twelfth of 1.00% of the outstanding
principal balance of the auto loans in the trust as of the end of the prior
month. In addition, the servicer will receive as additional compensation
investment earnings on trust property, unless the servicer fails to make certain
advances of funds to the trust. The servicer has the option, but is not
obligated, to make advances to the trust in the amount of interest due on an
auto loan but not yet received. See 'Description of the Certificates --
Advances' and ' -- Servicing Compensation' in this prospectus.
TAX STATUS
Jones, Day, Reavis & Pogue, special tax counsel to the trust, will deliver its
opinion that the trust will be classified for federal income tax purposes as a
grantor trust and not as an association taxable as a corporation. You must
report your respective allocable share of income earned on trust assets
excluding certain amounts retained by the seller. You may deduct your respective
allocable share of reasonable servicing fee and other fees, subject to
limitations applicable to individuals, estates, trusts and partnerships.
However, the tax code is complex, and we recommend that you and your tax
advisors review the information under the caption 'Certain Federal Income Tax
Consequences' in this prospectus.
ERISA CONSIDERATIONS
The Class A Certificates may be purchased by employee benefit or other
retirement plans if certain conditions are satisfied. The Class B Certificates
may be purchased and held by such plans only if exempt from certain prohibited
transaction rules. See 'ERISA Considerations' in this prospectus.
8
<PAGE>
RISK FACTORS
You should carefully consider, among other things, the following risk
factors before deciding to invest in the certificates offered by this
prospectus.
<TABLE>
<S> <C>
ABSENCE OF PUBLIC MARKET FOR YOUR The certificates will not be listed on any securities
CERTIFICATES COULD LIMIT YOUR ABILITY TO exchange and there is currently no public market for the
RESELL CERTIFICATES. certificates. The underwriters expect, but are not
obligated, to make a market in the Class A Certificates.
If no public market develops, as a certificateholder,
you may not be able to sell the certificates you
purchased prior to maturity. There is no assurance that
any such market will be created or, if created, will
continue. Transfers of the certificates can only be made
through DTC, and direct and indirect participating
organizations. You may not be able to pledge a
certificate as collateral to an entity or person that
does not participate in those transfer systems. In
addition, some investors may be unwilling to purchase
certificates for which there are no physical
certificates.
THE TRUST WILL NOT ENGAGE IN ANY OTHER The seller will establish the trust by selling and
ACTIVITY. assigning the auto loans to the trust in exchange for
the certificates. After formation, the trust will not
engage in any activity other than holding the auto loans
and distributing payments.
INTERESTS OF OTHER PERSONS IN THE AUTO In order to protect the trust's ownership of the auto
LOANS AND TRUST PROPERTY MAY TAKE PRIORITY loans, the seller will file UCC-1 financing statements
OVER THE TRUST'S SECURITY INTEREST. with the appropriate governmental authorities in the
State of Texas to give notice of the trust's ownership
of the auto loans and their proceeds. Therefore, the
trust's security interest will be perfected by the UCC
filings and not by possession of the auto loans. Under
the Pooling and Servicing Agreement, the seller will be
obligated to maintain the perfection of the trust's
ownership interest in the auto loans. However, a
purchaser of an auto loan who gives new value and takes
possession of the original document evidencing the auto
loan in the ordinary course of such purchaser's business
will have priority over the trust's security interest,
if such purchaser acts in good faith without knowledge
that the specific auto loan is subject to the trust's
security interest. While the seller's master computer
records will evidence the sale of the auto loans to the
trust, any purchaser would be deemed not to have
knowledge of the sale by virtue of the UCC filings or a
review of the auto loans since they would not be marked
to show the sale.
The seller will assign its security interest in the
individual financed vehicles to the trust. However,
because of the administrative burden and expense, and
since the seller will be the servicer of the auto loans,
neither the seller nor the trustee will amend the
certificates of title to identify the trust as the new
secured party. Accordingly, the seller will continue to
be named as the secured party in the certificates of
title relating to the financed vehicles. In some states,
in the absence of endorsement and delivery, the trustee
may not have a perfected security interest in the
financed vehicles. See 'Certain Legal Aspects of the
Receivables'.
</TABLE>
9
<PAGE>
<TABLE>
<S> <C>
YOU MAY BE REQUIRED TO REINVEST YOUR All of the auto loans may be prepaid at any time without
PRINCIPAL IN THE CERTIFICATES BECAUSE OF penalty. Prepayments may also result from liquidations
PREPAYMENTS WHICH MAY REDUCE YOUR YIELD. 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
an auto loan to meet certain criteria in the Pooling and
Servicing Agreement;
purchases by the servicer as a result of breach of
certain of its covenants with respect to the auto loans
made by it in the Pooling and Servicing Agreement; or
as a result of an exercise by the seller of its option
to purchase the auto loan.
The rate of prepayment and default of auto loans may be
influenced by a variety of economic and other factors.
For example, changes in economic conditions, interest
rates and natural disasters such as floods, hurricanes,
earthquakes and tornadoes may affect prepayments.
The seller does not maintain adequate records to provide
meaningful prepayment information with respect to the
auto loans. No prediction can be made as to the actual
prepayment rates which will be experienced on the auto
loans. You will bear all reinvestment risk resulting
from prepayments on the auto loans and the corresponding
acceleration of payments on the certificates.
GEOGRAPHIC CONCENTRATION OF AUTO LOANS MAY Adverse economic conditions or other factors
ADVERSELY AFFECT YOUR CERTIFICATES. particularly affecting any state or region where a high
concentration of auto loans is located could adversely
affect the certificates. As of June 30, 1999,
approximately 18.90%, 9.42%, 6.37% and 5.83% of the auto
loans, based on the principal balance and mailing
address of the borrowers, were located in Texas,
California, Florida and Virginia, respectively. The
seller is unable to determine and has no basis to
predict, with respect to any state or region, whether
any such conditions have occurred or may occur, or to
what extent such conditions may affect the auto loans or
the repayment of amounts due under your certificates.
The location of the auto loans by state, based upon
borrowers' addresses at the time the auto loans were
made, is set out in the table beginning on page 20 of
this prospectus.
LIMITED ASSETS OF THE TRUST COULD RESULT You may suffer a loss on your certificates if the assets
IN LOSSES ON YOUR CERTIFICATES. of the trust are insufficient to pay the principal
amount of the certificates in full. The only sources of
funds for payments on the certificates will be the
assets of the trust. The assets of the trust are limited
to the auto loans, payments made on the auto loans,
funds on deposit in the trust's accounts and the right
to payments from the reserve account and pursuant to the
Yield Supplement Agreement (if applicable). The
certificates represent interests solely in the trust and
neither the seller, the servicer, the trustee, the
collateral agent or any other person or entity will
insure or guarantee the certificates. Consequently,
certificateholders
</TABLE>
10
<PAGE>
<TABLE>
<S> <C>
will only be able to look to payments on the auto loans,
amounts on deposit in the trust's accounts and the right
to payments from the reserve account and pursuant to the
Yield Supplement Agreement (if applicable) for payment.
Amounts to be deposited in the reserve account are
limited in amount and will be reduced as the principal
balance of the auto loans declines.
Amounts on deposit in the reserve account will be
available on any distribution date first to cover
shortfalls in:
reimbursement of outstanding advances and payment of the
servicing fee to the servicer; then
interest distributions on the Class A Certificates; then
interest distributions on the Class B Certificates; then
principal distributions on the Class A Certificates; and
finally
principal distributions on the Class B Certificates.
If the reserve account is exhausted and not replenished,
the trust will depend solely on payments on the auto
loans to make distributions on the certificates.
Therefore, you will bear directly the credit and other
risks associated with ownership of the auto loans,
without any additional credit enhancement. There can be
no assurance that the future delinquency, loan loss or
repossession experience of the trust with respect to the
auto loans will be better or worse than the information
provided with respect to the seller's portfolio of motor
vehicle loans owned and serviced by the seller. See
'Description of the Certificates -- The Reserve Account'
and ' -- Distributions on Certificates'.
CLASS B CERTIFICATES WILL ABSORB CASH The Class B certificateholders will not receive any
SHORTFALLS BEFORE THE CLASS A interest distributions until the interest on the Class A
CERTIFICATES. Certificates has been paid in full on each distribution
date. The Class B certificateholders will not receive
any principal distributions until the interest and
principal then due on the Class A Certificates has been
paid in full on that distribution date. You must rely on
payments on the auto loans, funds on deposit in the
trust's accounts and the right to payments from the
reserve account for your payment. If funds in the
reserve account are exhausted, the trust will depend
solely on current payments on the auto loans to make
distributions on the certificates. Delinquent payments
on the auto loans may result in a shortfall in the
distributions on the Class B Certificates on any date
due to the priority of payments on the Class A
Certificates.
A CHANGE IN THE CERTIFICATES' RATINGS MAY It is a condition to the issuance of the certificates
ADVERSELY AFFECT THE MARKETABILITY OF YOUR that the Class A Certificates be rated in the highest
CERTIFICATES. rating category, and the Class B Certificates be rated
in at least the 'BBB' category or its equivalent 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
agency will not lower or withdraw its ratings, if
warranted. The seller cannot predict with certainty what
</TABLE>
11
<PAGE>
<TABLE>
<S> <C>
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 LACK OF PHYSICAL CERTIFICATES MAY The Class A Certificates and the Class B Certificates
ADVERSELY AFFECT YOUR RIGHTS AS A will each be represented in book-entry form through DTC,
CERTIFICATEHOLDER. Cedel and Euroclear. You will not be entitled to receive
a physical certificate representing your interest in the
trust except under limited circumstances. Therefore, you
will not be recognized as a certificateholder, and you
will not be permitted to exercise your rights as a
certificateholder except indirectly through DTC, Cedel
or Euroclear. See 'Description of the
Certificates -- Book-Entry Registration'.
POTENTIAL DELAYS IN PAYMENTS ON YOUR The servicer is in the process of addressing issues
CERTIFICATES DUE TO POTENTIAL COMPUTER arising from the year 2000 issue that could impact the
PROGRAM PROBLEMS BEGINNING IN THE YEAR timely payment of principal and interest on your
2000. certificates. The year 2000 issue results from the
custom of writing computer programs using two digits to
define a year. Computer programs that have
time-sensitive software may recognize a date using '00'
as the year 1900 rather than the year 2000. Any such
occurrence could result in major computer system failure
or miscalculations. Although the servicer reasonably
believes that its servicing system will be year 2000
compliant prior to the year 2000, it is presently
engaged in various procedures to determine if its
computer systems and software and those of its material
suppliers, customers and agents will be year 2000
compliant.
In the event that the servicer, or any of its suppliers,
customers or agents do not successfully and timely
achieve year 2000 compliance, the servicer's performance
of its obligations under the Pooling and Servicing
Agreement could be adversely affected. This could result
in delays in processing payments on the auto loans and
could cause a delay in payments to you.
</TABLE>
12
<PAGE>
THE BANK'S PORTFOLIO OF MOTOR VEHICLE LOANS
ORIGINATION OF MOTOR VEHICLE LOANS
USAA Federal Savings Bank (the 'BANK' which is also referred to in this
prospectus as the 'SELLER' or the 'SERVICER' when it is acting in those
capacities) has a portfolio of motor vehicle installment loans secured by new
and used automobiles and light-duty trucks (the '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:
(1) stability of the Applicant with specific regard to the Applicant's
occupation and length of employment;
(2) 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;
(3) a debt service to gross monthly income ratio test; and
(4) 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.
13
<PAGE>
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 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, although an existing
credit card account is not a prerequisite for preapproval. If the potential
customer has a credit card account, the Bank's credit card database must show
that the account:
(1) is current and has been active more than twelve months;
(2) has not been more than 30 days delinquent on more than two occasions in
the most recent 12 month period;
(3) has had no record of bankruptcy, closed account or collection problems;
and
(4) has no lost or stolen account or fraudulent activity record.
A potential customer without a credit card account is eligible for a
pre-approved Motor Vehicle Loan in the amount of $15,000 if the individual has
an existing Motor Vehicle Loan that:
(1) has not been more than 30 days delinquent;
(2) has a term greater than one year and has been outstanding for more than
one year;
(3) has no record of bankruptcy or collection problems on any Bank loan
products; and
(4) had an original principal balance in excess of $7,500.
All potential customer names are also screened against the database
maintained by the Bank's parent company, United Services Automobile Association
('USAA'). USAA's database must show that the potential customer:
(1) is an active, or is eligible to be a, USAA insurance policyholder; and
(2) is not identified in USAA's database as a customer who should not
receive advertising from USAA or its subsidiary companies.
A potential customer who is pre-approved using the credit card account
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 and the individual's credit score. Pre-approved potential
customers are offered Motor Vehicle Loans in amounts of $15,000 to $30,000. 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-approved program, generally has
not exceeded:
(1) for a new Financed Vehicle, the manufacturer's suggested retail price
plus taxes, and title and license fees on the Financed Vehicle or
14
<PAGE>
(2) 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 (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' and
'AAA' by Moody's and Standard & Poor's, respectively.
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 (the 'FORCE PLACED INSURANCE'). The Bank currently does
not obtain Force 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 on or about 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.
15
<PAGE>
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:
(1) 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;
(2) the extension will result in the Obligor's payments being brought
current;
(3) 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
(4) 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 'Description of the Certificates -- Servicing Procedures' for
certain additional conditions on credit-related extensions which must be
satisfied with respect to Receivables in the Trust.
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 originated and serviced
by the Bank. The portfolio of Motor Vehicle Loans originated 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 JUNE 30, AT DECEMBER 31,
---------------------- ------------------------------------------------------------------------
1999 1998 1997 1996
---------------------- ---------------------- ---------------------- ----------------------
DOLLARS NUMBER OF DOLLARS NUMBER OF DOLLARS NUMBER OF DOLLARS NUMBER OF
(IN 000S) LOANS (IN 000S) LOANS (IN 000S) LOANS (IN 000S) LOANS
--------- ----- --------- ----- --------- ----- --------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Outstandings............ $3,250,316 260,455 $2,802,144 234,281 $2,076,318 186,560 $1,687,922 159,812
Delinquencies over
30 days(2)(3)......... $ 11,676 1,215 $ 12,297 1,366 $ 7,028 871 $ 8,634 1,082
Delinquencies over
30 days(%)(4)......... 0.36% 0.47% 0.44% 0.58% 0.34% 0.47% 0.51% 0.68%
<CAPTION>
AT DECEMBER 31,
----------------------
1995
----------------------
DOLLARS NUMBER OF
(IN 000S) LOANS
--------- -----
<S> <C> <C>
Outstandings............ $1,454,843 145,246
Delinquencies over
30 days(2)(3)......... $ 580 2,338
Delinquencies over
30 days(%)(4)......... 0.34% 0.40%
</TABLE>
- ------------
(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 did not exceed 10% of outstandings as of
(footnotes continued on next page)
16
<PAGE>
(footnotes continued from previous page)
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.
LOAN LOSS EXPERIENCE(1)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30, YEAR ENDED DECEMBER 31,
-------------- -------------------------------------------------
1999(7) 1998 1997 1996 1995
------- ---- ---- ---- ----
(DOLLARS IN 000S)
<S> <C> <C> <C> <C> <C>
Number of Loans(2)................................. 260,455 234,281 186,560 159,812 145,246
Period Ending Outstandings......................... $3,250,316 $2,802,144 $2,076,318 $1,687,922 $1,454,843
Average Outstandings(3)............................ $3,009,524 $2,375,294 $1,867,280 $1,527,686 $1,298,116
Number of Gross Charge-Offs........................ 659 874 797 805 422
Gross Charge-Offs(4)............................... $7,178 $9,311 $6,157 $4,131 $2,244
Gross Charge-Offs as a % of Period End
Outstandings..................................... 0.44% 0.33% 0.30% 0.24% 0.15%
Gross Charge-Offs as a % of Average Outstandings... 0.48% 0.39% 0.33% 0.27% 0.17%
Recoveries(5)...................................... $3,279 $4,856 $2,158 $1,068 $683
Net Charge-Offs(6)................................. $3,899 $4,455 $3,999 $3,063 $1,561
Net Charge-Offs as a % of Period End
Outstandings..................................... 0.24% 0.16% 0.19% 0.18% 0.11%
Net Charge-Offs as a % of Average Outstandings..... 0.26% 0.19% 0.21% 0.20% 0.12%
</TABLE>
- ------------
(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
did not exceed 10% 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 an average of daily outstandings for the
loans owned by the Bank combined with an average of month-end outstandings
for sold loans for each period presented.
(4) Prior to July 1997, the amount charged off is the remaining principal
balance less proceeds from the 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. As of July 1997, amounts charged off represent the remaining
principal balance.
(5) Recoveries generally include amounts received with respect to loans
previously charged off, except for the 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.
(7) Data for 1999 reflects annualized numbers.
------------------------
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.
17
<PAGE>
DESCRIPTION OF THE TRUST
The Seller will establish the USAA Auto Loan Grantor Trust 1999-1 (the
'TRUST') by selling and assigning the Receivables to the Trust in exchange for
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' and, together with the Class A Certificates, 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'). The Trust
property will also include:
(1) all monies due under the Receivables on or after July 1, 1999 (the
'CUTOFF DATE');
(2) 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;
(3) security interests in the vehicles securing the Receivables (the
'FINANCED VEHICLES');
(4) the benefit of the right to payments from the reserve account (the
'RESERVE ACCOUNT') and pursuant to the Yield Supplement Agreement (if
applicable);
(5) 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
(6) the rights of the Trust against the Seller and the Servicer under the
Pooling and Servicing Agreement (the 'AGREEMENT').
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 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.
DESCRIPTION OF THE RECEIVABLES POOL
The Receivables represent Motor Vehicle Loans from the portfolio of the
Bank that:
(1) were made to Obligors located in a state of the United States or the
District of Columbia;
(2) are each secured by a new or used automobile or light-duty truck;
(3) have a remaining maturity, as of the Cutoff Date, of at least 6 months
and not more than 72 months;
(4) 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;
(5) are fully-amortizing, fixed rate simple interest contracts which
provide for level scheduled monthly payments (except for the last
payment, 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 7.50%, are not secured
by any
18
<PAGE>
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;
(6) are secured by Financed Vehicles that, as of the Cutoff Date, had not
been repossessed without reinstatement;
(7) 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;
(8) have no payment more than 30 days past due as of the Cutoff Date; and
(9) 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
holders of the Class A Certificates (the 'CLASS A CERTIFICATEHOLDERS') or the
holders of the Class B Certificates (the 'CLASS B CERTIFICATEHOLDERS' and,
together with the Class A Certificateholders, the 'CERTIFICATEHOLDERS').
Approximately 59.33% of the aggregate principal balance of the Receivables, as
of the Cutoff Date, were secured by new Financed Vehicles and approximately
40.67% 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 the
date of payment are paid first, and then the remaining payment is applied to the
unpaid amount financed. See 'Description of 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 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.
19
<PAGE>
COMPOSITION OF THE RECEIVABLES
<TABLE>
<S> <C>
Aggregate Principal Balance................................. $699,376,130.44
Number of Receivables....................................... 50,458
Average Principal Balance................................... $13,860.56
Average Original Amount Financed............................ $15,839.53
Original Amount Financed (Range)............................ $2,521.43 to $93,594.83
Weighted Average Contract Rate.............................. 8.305%
Contract Rate (Range)....................................... 7.5% to 14.2%
Weighted Average Original Term.............................. 57.80 months
Original Term (Range)....................................... 10 months to 72 months
Weighted Average Remaining Term............................. 51.01 months
Remaining Term (Range)...................................... 6 months to 72 months
</TABLE>
DISTRIBUTION BY CONTRACT RATE OF THE RECEIVABLES
<TABLE>
<CAPTION>
PERCENTAGE OF
PRINCIPAL AGGREGATE POOL
RATE LOANS BALANCE BALANCE(1)
---- ----- ------- ----------
<S> <C> <C> <C>
7.50% to 8.00%......................................... 25,537 $395,909,485 56.61%
8.01% to 9.00%......................................... 13,326 185,644,573 26.54
9.01% to 10.00%......................................... 4,305 52,328,455 7.48
10.01% to 11.00%......................................... 5,753 50,948,134 7.28
11.01% to 12.00%......................................... 1,107 10,545,660 1.51
12.01% to 13.00%......................................... 243 2,208,278 0.32
13.01% to 14.00%......................................... 186 1,782,846 0.25
14.01% to 15.00%......................................... 1 8,698 0.00
------ ------------ ------
Totals.............................................. 50,458 $699,376,130 100.00%
------ ------------ ------
------ ------------ ------
</TABLE>
- ------------
(1) May not add to 100.00% due to rounding.
GEOGRAPHIC DISTRIBUTION(1) OF THE RECEIVABLES
<TABLE>
<CAPTION>
PERCENTAGE OF
NUMBER OF PRINCIPAL AGGREGATE POOL
STATE RECEIVABLES BALANCE BALANCE(2)
- ----- ----------- ------- ----------
<S> <C> <C> <C>
Alabama............................................... 936 $ 13,099,463 1.87%
Alaska................................................ 329 4,797,294 0.69
Arizona............................................... 1,601 22,614,554 3.23
Arkansas.............................................. 458 6,110,030 0.87
California............................................ 4,567 65,873,088 9.42
Colorado.............................................. 1,408 19,703,122 2.82
Connecticut........................................... 604 7,957,025 1.14
Delaware.............................................. 178 2,360,466 0.34
District of Columbia.................................. 110 1,430,758 0.20
Florida............................................... 3,230 44,520,463 6.37
Georgia............................................... 2,417 34,169,373 4.89
Hawaii................................................ 508 7,139,335 1.02
Idaho................................................. 218 2,962,660 0.42
Illinois.............................................. 899 12,403,397 1.77
Indiana............................................... 371 5,139,737 0.73
Iowa.................................................. 146 1,965,046 0.28
Kansas................................................ 529 7,349,733 1.05
Kentucky.............................................. 522 7,230,904 1.03
Louisiana............................................. 773 10,803,424 1.54
Maine................................................. 166 2,007,855 0.29
Maryland.............................................. 1,499 20,607,353 2.95
Massachusetts......................................... 637 8,029,708 1.15
</TABLE>
(table continued on next page)
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(table continued from previous page)
<TABLE>
<CAPTION>
PERCENTAGE OF
NUMBER OF PRINCIPAL AGGREGATE POOL
STATE RECEIVABLES BALANCE BALANCE(2)
- ----- ----------- ------- ----------
<S> <C> <C> <C>
Michigan.............................................. 514 $ 6,885,056 0.98%
Minnesota............................................. 476 6,138,543 0.88
Mississippi........................................... 425 5,867,235 0.84
Missouri.............................................. 718 9,455,571 1.35
Montana............................................... 167 2,320,774 0.33
Nebraska.............................................. 235 3,183,481 0.46
Nevada................................................ 588 8,450,555 1.21
New Hampshire......................................... 302 3,709,569 0.53
New Jersey............................................ 1,048 14,143,533 2.02
New Mexico............................................ 649 8,972,159 1.28
New York.............................................. 1,360 19,217,117 2.75
North Carolina........................................ 2,176 29,518,717 4.22
North Dakota.......................................... 111 1,374,787 0.20
Ohio.................................................. 698 8,879,424 1.27
Oklahoma.............................................. 871 12,058,727 1.72
Oregon................................................ 533 6,914,037 0.99
Pennsylvania.......................................... 954 12,304,836 1.76
Rhode Island.......................................... 172 2,152,640 0.31
South Carolina........................................ 821 10,918,147 1.56
South Dakota.......................................... 90 1,198,269 0.17
Tennessee............................................. 925 12,975,065 1.86
Texas................................................. 9,234 132,148,541 18.90
Utah.................................................. 267 3,312,293 0.47
Vermont............................................... 105 1,261,998 0.18
Virginia.............................................. 2,989 40,791,639 5.83
Washington............................................ 1,366 19,451,469 2.78
West Virginia......................................... 156 2,094,819 0.30
Wisconsin............................................. 306 4,027,963 0.58
Wyoming............................................... 96 1,410,378 0.20
------ ------------ ------
Totals........................................... 50,458 $699,376,130 100.00%
------ ------------ ------
------ ------------ ------
</TABLE>
- ------------
(1) Based on the location of the Obligor at the time each Motor Vehicle Loan was
advanced.
(2) May not add to 100.00% due to rounding.
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 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 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
Seller 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
21
<PAGE>
prevailing market interest rates. If the prevailing market interest rates were
to fall significantly below the Contract Rates, the rate of prepayment and
refinancings would be expected to increase. Conversely, if prevailing market
interest rates were to increase significantly above the Contract Rates, 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 prepayment 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
Interest on the Certificates will be distributed on the 15th day of each
month (or if such day is a Saturday, a Sunday or not a business day in New York,
New York (a 'BUSINESS DAY'), the next succeeding Business Day), beginning
August 16, 1999 (each, a 'DISTRIBUTION DATE'). Interest will be % 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'). The Class A Pass-Through Rate and the Class B Pass-Through
Rate are both sometimes referred to as the applicable 'PASS-THROUGH RATE'.
Interest 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, to all Certificateholders of record as of the day
immediately preceding such Distribution Date (the 'RECORD 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 'Description of the Certificates --
Distributions on Certificates'.
In the event that any Receivable has a Contract Rate, as of the Cutoff
Date, below 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 Seller
will enter into the Yield Supplement Agreement with the Trust pursuant to which
the Seller will be obligated to pay to the Trust the difference between the
interest accrued with respect to each Receivable with a Contract Rate below the
sum of (i) and (ii) above and the interest which would accrue on such Receivable
at a rate at least equal to the sum of (i) and (ii). See 'Description of the
Certificates -- The Yield Supplement Agreement'. 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 the Class B Certificates.
A Class A Certificateholder's portion of the aggregate outstanding
principal balance of the Class A Certificates is the product of (a) the original
denomination of the holder's Class A Certificate and (b) 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 (a) the original principal
amount of the Certificate Owner's interest in the Class A Certificates and
(b) the Class A Pool
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<PAGE>
Factor. A Class B Certificateholder's portion of the aggregate outstanding
principal balance of the Class B Certificates is the product of (a) the original
denomination of the holder's Class B Certificate and (b) 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 (a) the original principal
amount of the Certificate Owner's interest in the Class B Certificates and
(b) 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 'Description of 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 'Description of 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 the 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 Federal
Deposit Insurance Corporation. The Bank is an indirect wholly-owned subsidiary
of 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, 1998, the
total assets and total common and preferred stockholders' equity of the Bank
were $7.184 billion and $674 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. As of
December 31, 1998, USAA and its various property and casualty insurance
subsidiaries had approximately 3.0 million policyholders. In addition,
approximately 326,000 customers of USAA's financial services subsidiaries are
eligible to become insured by the USAA group of property and casualty insurance
companies.
USAA and its various property and casualty insurance subsidiaries provide
personal lines insurance, which includes automobile, homeowners, and renters
insurance, to their policyholders. In addition, through its various wholly-owned
subsidiaries and affiliates, USAA offers personal financial service products,
including life insurance, mutual funds, banking services and financial planning
services. USAA is the sixth largest private passenger automobile and the sixth
largest homeowners insurer in the United States, based on 1998 direct written
premiums. USAA markets its products and services principally through a direct
mail and telecommunication program. USAA's insurance financial strength has been
rated 'Aaa' and 'AAA' by Moody's and Standard & Poor's, respectively. USAA is
headquartered in San Antonio, Texas and employs approximately 20,000 people.
23
<PAGE>
DESCRIPTION OF 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
The Class A Certificates will be issued in an initial principal amount
equal to $673,149,000 (the 'ORIGINAL CLASS A CERTIFICATE BALANCE'), and the
Class B Certificates will be issued in an initial principal amount equal to
$26,227,130 (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 96.25% 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 3.75% of the Original Pool Balance.
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 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 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 (including any Yield
Supplement Amounts) or available in the Reserve Account to make such
distributions. See ' -- Distributions on Certificates', ' -- The Reserve
Account' and ' -- The Yield Supplement Agreement'. 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.
BOOK-ENTRY REGISTRATION
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'),
except as provided below. The Seller has been informed by DTC that DTC's nominee
will be Cede & Co. ('CEDE'). Certificateholders of any class of Certificates may
hold their Certificates through DTC (in the United States) or Cedel Bank,
societe anonyme ('CEDEL') or the Euroclear System operated by Morgan Guaranty
Trust Company of New York, Brussels, Belgium office (the 'EUROCLEAR OPERATOR' or
'EUROCLEAR') (in Europe) if they are participants of such systems, or indirectly
through organizations that are participants in such systems. 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 participating organizations ('DIRECT PARTICIPANTS'), and all references
herein to distributions,
24
<PAGE>
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
August 16, 1999. Each Collection Period will be one calendar month, or in the
case of the initial Collection Period, the period from the Cutoff Date to July
31, 1999.
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 under the provisions of Section 17A of the Exchange
Act. DTC was created to hold securities for its Direct Participants and
facilitate the clearance and settlement of securities transactions between
Direct Participants through electronic book-entry changes in accounts of its
Direct Participants, thereby eliminating the need for physical movement of
certificates. Direct 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 Direct
Participant, either directly or indirectly (the 'INDIRECT PARTICIPANTS' and,
together with the Direct Participants, the 'DTC PARTICIPANTS').
Certificate Owners that are not Direct Participants or Indirect
Participants but desire to purchase, sell or otherwise transfer ownership of, or
other interests in, Certificates may do so only through Direct Participants and
Indirect Participants. In addition, Certificate Owners will receive all
distributions of principal and interest from the Trustee through DTC and its
Direct 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 Direct 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 Direct Participants.
Under the rules, regulations and procedures creating and affecting DTC and
its operations, DTC is required to make book-entry transfers among Direct
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. DTC 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 Direct 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 Direct 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 Direct 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 Direct Participants whose holdings include such undivided
interests.
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<PAGE>
Cedel and Euroclear will hold omnibus positions on behalf of the Cedel
Participants and the Euroclear Participants, respectively, through customers'
securities accounts in Cedel's and Euroclear's names on the books of their
respective depositaries (each, a 'DEPOSITARY' and, together with DTC, the
'DEPOSITARIES') which in turn will hold such positions in customers' securities
accounts in the Depositaries' names on the books of DTC.
Transfers between Direct Participants will occur in accordance with DTC
rules. Transfers between Cedel Participants and Euroclear Participants will
occur in the ordinary way in accordance with their applicable rules and
operating procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC in the United States, on the one hand, and directly or indirectly
through Cedel or Euroclear, on the other, will be effected through DTC in
accordance with DTC rules through the relevant European international clearing
system through its Depositary; however, such cross-market transactions will
require delivery of instructions to the relevant European international clearing
system by the counterparty in such system in accordance with its rules and
procedures and within its established deadlines (European time). The relevant
European international clearing system will, if the transaction meets its
settlement requirements, deliver instructions to its Depositary to take action
to effect final settlement on its behalf by delivering or receiving securities
through DTC, and making or receiving payment in accordance with normal
procedures for same-day funds settlement applicable to DTC. Cedel Participants
and Euroclear Participants may not deliver instructions directly to the
Depositaries.
Because of time-zone differences, credits of securities in Cedel or
Euroclear as a result of a transaction with a DTC Participant will be made
during the subsequent securities settlement processing day, dated the business
day following the DTC settlement date, and such credits or any transactions in
such securities settled during such processing day will be reported to the
relevant Cedel Participant or Euroclear Participant on such business day. Cash
received in Cedel or Euroclear as a result of sales of securities by or through
a Cedel Participant or a Euroclear Participant to a DTC Participant will be
received with value on the DTC settlement date but will be available in the
relevant Cedel or Euroclear cash account only as of the business day following
settlement through DTC.
Cedel is incorporated under the laws of Luxembourg as a professional
depository. Cedel holds securities for its participating organizations ('CEDEL
PARTICIPANTS') and facilitates the clearance and settlement of securities
transactions between Cedel Participants through electronic book-entry changes in
accounts of Cedel Participants, thereby eliminating the need for physical
movement of certificates. Transactions may be settled in Cedel in any of 36
currencies, including United States dollars. Cedel provides to its Cedel
Participants, among other things, services for safekeeping, administration,
clearance and settlement of internationally traded securities and securities
lending and borrowing. Cedel interfaces with domestic markets in several
countries. As a professional depository, Cedel is subject to regulation by the
Luxembourg Monetary Institute. Cedel Participants are recognized financial
institutions around the world, including underwriters, securities brokers and
dealers, banks, trust companies, clearing corporations and certain other
organizations and may include the Underwriter. Indirect access to Cedel is also
available to others, such as banks, brokers, dealers and trust companies that
clear through or maintain a custodial relationship with a Cedel Participant,
either directly or indirectly.
The Euroclear System was created in 1968 to hold securities for
participants of the Euroclear System ('EUROCLEAR PARTICIPANTS') and to clear and
settle transactions between Euroclear Participants through simultaneous
electronic book-entry delivery against payment, thereby eliminating the need for
physical movement of certificates and any risk from lack of simultaneous
transfers of securities and cash. Transactions may now be settled in any of 34
currencies, including United States dollars. The Euroclear System includes
various other services, including securities lending and borrowing and
interfaces with domestic markets in several countries generally similar to the
arrangements for cross-market transfers with DTC described above. The Euroclear
System is operated by Morgan Guaranty Trust Company of New York, Brussels,
Belgium office, under contract with Euroclear Clearance System, S.C., a Belgian
cooperative corporation (the
26
<PAGE>
'COOPERATIVE'). All operations are conducted by the Euroclear Operator, and all
Euroclear securities clearance accounts and Euroclear cash accounts are accounts
with the Euroclear Operator, not the Cooperative. The Cooperative establishes
policy for the Euroclear System on behalf of Euroclear Participants. Euroclear
Participants include banks (including central banks), securities brokers and
dealers and other professional financial intermediaries and may include the
Underwriter. Indirect access to the Euroclear System is also available to other
firms that clear through or maintain a custodial relationship with a Euroclear
Participant, either directly or indirectly.
The Euroclear Operator is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. As such, it is
regulated and examined by the Board of Governors of the Federal Reserve System
and the New York State Banking Department, as well as the Belgian Banking
Commission.
Securities clearance accounts and cash accounts with the Euroclear Operator
are governed by the Terms and Conditions Governing Use of Euroclear and the
related Operating Procedures of the Euroclear System and applicable Belgian law
(collectively, the 'TERMS AND CONDITIONS'). The Terms and Conditions govern
transfers of securities and cash within the Euroclear System, withdrawal of
securities and cash from the Euroclear System, and receipts of payments with
respect to securities in the Euroclear System. All securities in the Euroclear
System are held on a fungible basis without attribution of specific securities
to specific securities clearance accounts. The Euroclear Operator acts under the
Terms and Conditions only on behalf of Euroclear Participants and has no record
of or relationship with persons holding through Euroclear Participants.
Payments on Offered Certificates held through Cedel or Euroclear will be
credited to the cash accounts of Cedel Participants or Euroclear Participants in
accordance with the relevant system's rules and procedures, to the extent
received by its Depositary. Such payments will be subject to tax reporting in
accordance with relevant United States tax laws and regulations. See 'Certain
Federal Income Tax Considerations' and Annex A. Cedel or the Euroclear Operator,
as the case may be, will take any other action permitted to be taken by
Certificateholders of any class of Certificates under the related agreement on
behalf of a Cedel Participant or Euroclear Participant only in accordance with
its relevant rules and procedures and subject to its Depositary's ability to
effect such actions on its behalf through DTC.
Although DTC, Cedel and Euroclear have agreed to the foregoing procedures
in order to facilitate transfers of Certificates among participants of DTC,
Cedel and Euroclear, they are under no obligation to perform or continue to
perform such procedures and such procedures may be discontinued at any time.
The information in this section concerning DTC, Cedel and Euroclear and
their respective book-entry systems has been obtained from sources that the
Transferor believes to be reliable, but the Transferor takes no responsibility
for the accuracy thereof.
DTC'S YEAR 2000 EFFORTS
DTC's management is aware that some computer applications, systems and the
like for processing data ('SYSTEMS') that are dependent upon calendar dates,
including dates before, on and after January 1, 2000, may encounter 'Year 2000
problems.' DTC has informed the Participants and other members of the financial
community (the 'INDUSTRY') that it has developed and is implementing a program
so that its Systems, as the same relate to the timely payment of distributions
(including principal and interest payments) to securityholders, book-entry
deliveries and settlement of trades within DTC, continue to function
appropriately. This program includes a technical assessment and a remediation
plan, each of which is complete. Additionally, DTC's plan includes a testing
phase, which is expected to be completed within appropriate time frames.
However, DTC's ability to perform properly its services is also dependent
upon other parties, including but not limited to issuers and their agents, as
well as third party vendors from whom DTC licenses software and hardware, and
third party vendors on whom DTC relies for information and the provision of
services, including telecommunication and electrical utility service
27
<PAGE>
providers, among others. DTC has informed the Industry that it is contacting
(and will continue to contact) third party vendors from whom DTC acquires
services to: (a) impress upon them the importance of such services being Year
2000 compliant and (b) determine the extent of their efforts for Year 2000
remediation (and, as appropriate, testing) of their services. In addition, DTC
is in the process of developing such contingency plans as it deems appropriate.
According to DTC, the foregoing information with respect to DTC has been
provided to the Industry for informational purpose only and is not intended to
serve as a representation, warranty or contract modification of any kind.
DEFINITIVE CERTIFICATES
The Certificates will be issued in fully registered, certificated form (the
'DEFINITIVE CERTIFICATES') to Certificate Owners or their nominees, rather than
to DTC or its nominee only if:
(1) 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;
(2) the Servicer, at its option, elects to terminate the book-entry system
through DTC; or
(3) 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 (the
'HOLDERS').
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.
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The Agreement sets forth criteria that must be satisfied by each
Receivable. The criteria in the Agreement include, among others, the following:
(1) 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;
(2) 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;
(3) 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;
(4) 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;
(5) 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;
(6) 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;
(7) 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;
(8) each Receivable requires that the Obligor thereunder obtain
comprehensive and collision insurance covering the Financed Vehicle;
and
(9) 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
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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'.
DESCRIPTION OF THE TRUST'S 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 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 Federal Deposit
Insurance Corporation (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, 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 Bank of New York, 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.
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.
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In the event that, subsequent to the Closing Date, (a) the Bank obtains a
short-term certificate of deposit rating of the Bank from Standard & Poor's
Ratings Services ('STANDARD & POOR'S') and Moody's Investors Service, Inc.
('MOODY'S' and, together with Standard & Poor's each, a 'RATING AGENCY') of
'A-1' and 'P-1', respectively, or certain conditions satisfactory to Standard &
Poor's and Moody's are satisfied, and (b) 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 the
Business Day preceding each Distribution Date (each, a '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 February 15, 2006
Distribution Date (the 'FINAL SCHEDULED 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'.
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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:
(1) 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
(2) 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 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 (a) 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, over
(b) the interest actually received by the Servicer with respect to such
Receivable from the Obligor or the Seller pursuant to the Yield Supplement
Agreement (if applicable) or from the 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 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 (b) above with respect to
a Receivable is greater than the amount set forth in clause (a) 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 (the 'OUTSTANDING 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 a monthly fee (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
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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.
THE RESERVE ACCOUNT
The Reserve Account will be created with an initial deposit of cash of
$5,245,321 (the 'RESERVE ACCOUNT INITIAL DEPOSIT') from the proceeds of the sale
of the Certificates. 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 Bank of New York as collateral agent (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 (a) the amount on deposit
in the Reserve Account (exclusive of investment earnings) and (b) 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 (a) 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 (b) 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 (a) 1.25% of the Pool Balance as of the last day of the preceding
Collection Period and (b) 0.50% 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 2.50%, instead of 1.25%, for any Distribution Date on
which the Average Net Loss Ratio exceeds 0.85% or the Average Delinquency Ratio
exceeds 0.85%; provided that such higher percentage would remain in effect until
the Average Net Loss Ratio and the Average Delinquency Ratio are equal to or
less than 0.85% for at least six consecutive Collection Periods. 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
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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 (a) 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 (b)
the Pool Balance as of the last day of such Collection Period.
'LIQUIDATION PROCEEDS' means with respect to any Receivable (a) insurance
proceeds received by the Servicer and (b) 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.
'NET LOSS RATIO' means, for any Collection Period, an amount, expressed as
an annualized percentage, equal to (a) Realized Losses minus Recoveries for such
Collection Period, divided by (b) 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.
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.
THE YIELD SUPPLEMENT AGREEMENT
If any Receivable has, as of the Cutoff Date, a Contract Rate below 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 Seller, the Servicer and
the Trust will, simultaneously with the sale and assignment of the Receivables,
enter in a Yield Supplement Agreement (the 'YIELD SUPPLEMENT AGREEMENT'). The
Yield Supplement Agreement will, with respect to each Receivable subject
thereto, provide for the payment into the Certificate Account on or prior to the
Deposit Date of an amount calculated by the Servicer which will be equal to
one-twelfth of the excess, if any, of (i) interest on such Receivable's
principal balance as of the first day of the preceding Collection Period
calculated 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
over (ii) interest accrued at the Contract Rate on such Receivable's principal
balance as of the first day of such Collection Period (in the aggregate for all
Receivables with respect to any Deposit Date, the 'YIELD SUPPLEMENT AMOUNT').
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Payments due under the Yield Supplement Agreement will be secured by funds
in the initial amount of $ deposited by the Seller on the Closing Date in a
segregated account (the 'YIELD SUPPLEMENT ACCOUNT') to be maintained by The Bank
of New York, as the Collateral Agent for the benefit of the holders of the
Certificates. The amount required to be retained (to the extent of funds
available therefor) in the Yield Supplement Account on any Distribution Date
will be equal to, as of any date of determination, the sum of the projected
Yield Supplement Amounts for all future Distribution Dates, assuming that future
scheduled payments on the Receivables are made on their scheduled due dates (the
'SPECIFIED YIELD SUPPLEMENT BALANCE').
Funds on deposit in the Yield Supplement Account will be invested in
certain permitted investments selected by the Seller; provided, however, that,
subject to satisfaction of the Rating Agency Condition, funds on deposit in the
Yield Supplement Account may be invested in such permitted investments that
mature later than the next Deposit Date. The Collateral Agent shall cause all
investment earnings attributable to the Yield Supplement Account to be
distributed on each Distribution Date to the Servicer.
Amounts on deposit in the Yield Supplement Account will be released from
the Trust to the Seller on each Distribution Date to the extent that the amount
on deposit in the Yield Supplement Account exceeds the Specified Yield
Supplement Balance. The Yield Supplement Account and any amounts on deposit
therein shall not be the property of the Trust, but will be pledged to the
Collateral Agent for the benefit of the Certificateholders. Upon any release of
amounts from the Yield Supplement Account, the Certificateholders will cease to
have any rights in, or claims to, such amounts.
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:
(1) the amount of aggregate collections on the Receivables;
(2) the aggregate amount of Advances to be remitted by the Servicer;
(3) the aggregate Repurchase Amount of Receivables to be repurchased by the
Seller or purchased by the Servicer;
(4) the aggregate amount to be withdrawn from the Reserve Account;
(5) the aggregate amount to be distributed as principal and interest
(including any Yield Supplement Amount included therein, if applicable)
on the Certificates; and
(6) 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;
(c) the Servicer will deposit all Advances for the related Distribution
Date into the Certificate Account; and
(d) the Collateral Agent will deposit the Yield Supplement Amount for such
Distribution Date (if applicable) into the Certificate Account.
'AVAILABLE INTEREST' means, with respect to any Distribution Date, the
excess of (a) the sum of:
(1) Interest Collections for such Distribution Date;
(2) the Yield Supplement Amount for such Distribution Date (if applicable);
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(3) all Advances made by the Servicer with respect to such Distribution
Date; and
(4) 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:
(1) 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;
(2) 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
(3) 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.
'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 July 31, 1999.
'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:
(1) 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;
(2) all Liquidation Proceeds, to the extent allocable to interest, received
during such Collection Period;
(3) 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
(4) 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 appearing as an exhibit
to the Agreement 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 (2) below in the Class A Interest Distribution, the Class
B Percentage of Available Principal to the extent of such shortfalls), in the
following priority:
(1) 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;
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(2) 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
(3) 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 (1), (2) and (3) above, in
the following priority:
(4) to the Class A Distribution Account, the Class A Principal Distribution
for such Distribution Date;
(5) to the Class B Distribution Account, the Class B Principal Distribution
for such Distribution Date;
(6) to the Reserve Account, any amounts remaining, until the amount on
deposit in the Reserve Account equals the Specified Reserve Account
Balance; and
(7) 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, (a) with respect to the
initial Distribution Date, zero, and (b) 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 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 96.25%.
'CLASS A PRINCIPAL CARRYOVER SHORTFALL' means, (a) with respect to the
initial Distribution Date, zero, and (b) 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.
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'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, (a) with respect to the
initial Distribution Date, zero, and (b) 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 3.75%.
'CLASS B PRINCIPAL CARRYOVER SHORTFALL' means, (a) with respect to the
initial Distribution Date, zero and (b) 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 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:
(1) the amount of the distribution allocable to principal on the Class A
Certificates and the Class B Certificates;
(2) the amount of the distribution allocable to interest (including any
Yield Supplement Amount, if applicable) on the Class A Certificates and
the Class B Certificates;
(3) the amount of the Servicing Fee paid to the Servicer with respect to
the related Collection Period;
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(4) 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 (1) above;
(5) the Pool Balance as of the close of business on the last day of the
related Collection Period;
(6) the amount of the aggregate Realized Losses, if any, for the related
Collection Period;
(7) the aggregate Repurchase Amount of Receivables repurchased by the
Seller or purchased by the Servicer;
(8) the balance of the Reserve Account on such Distribution Date, after
giving effect to changes therein on such Distribution Date; and
(9) the Specified Reserve Account Balance as of the close of business on
such Distribution Date.
Each amount in clauses (1), (2) and (3) 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 ' -- General' and ' -- Book-Entry Registration' above.
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
Trustee' below.
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 clauses (1) through (3) above for the purposes of such
Certificateholder's preparation of federal income tax returns. See 'Certain
Federal Income Tax Consequences'.
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, 2000, 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, 2000, 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 (a) upon determination
that the Servicer's performance of such duties is no longer permissible under
applicable law or (b) 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
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transfer or assignment (1) (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
(2) 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 Specified Reserve Account Balance have been made. In addition, the Agreement
will provide that the Servicer is 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 Specified Reserve Account Balance
have been made.
EVENTS OF SERVICING TERMINATION
'EVENTS OF SERVICING TERMINATION' under the Agreement will consist of:
(1) 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
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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;
(2) 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;
(3) 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;
(4) 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
(5) 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 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, and the Rating Agency Condition shall have been
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satisfied. 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:
(1) 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;
(2) reduce the aforesaid percentage of the Pool Balance, the
Certificateholders of which are required to consent to any such
amendment; or
(3) 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:
(1) state that they wish to communicate with other Certificateholders with
respect to their rights under the Agreement or under the Certificates;
and
(2) 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:
(1) 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
(2) 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 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
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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 Bank of New York is the Trustee (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
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held harmless against, any loss, liability, or expense incurred by the Trustee
not resulting from the Trustee's 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 101 Barclay Street, New
York, NY 10286, telephone: (212) 815-5738. The Seller, the Servicer and their
respective affiliates may have normal banking relationships with the Trustee and
its affiliates.
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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 some 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'.
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 (a) such security interest would be subordinate to, among others, holders
of perfected security interests and (b) 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
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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' 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.
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.
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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 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 ADVISORS TO DETERMINE THE
FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX CONSEQUENCES TO THEM OF THEIR
PURCHASE, OWNERSHIP AND DISPOSITION OF THE CERTIFICATES.
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
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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 'Summary of
Terms -- 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 advisor. Accordingly, each investor is advised to consult its own tax
advisors 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:
(a) an undivided interest in a single debt obligation having a principal
amount equal to the total stated principal amount of the Receivables;
or
(b) an interest in each of the Receivables, in the Yield Supplement
Agreement 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 (the
'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) and an interest in the Yield Supplement Agreement.
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 (a) the Contract Rate of
the Receivable and (b) 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 Class A Certificate Owner will be treated as owning its pro
rata percentage interest in (i) payments received under the Yield Supplement
Agreement, and (ii) the principal of each Receivable, plus a share of the
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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) and such interest in each Receivable will be treated as a 'stripped
bond' within the meaning of Section 1286 of the Code. Similarly, each Class B
Certificate Owner will be treated as owning its pro rata percentage in
(i) payments received under the Yield Supplement Agreement and (ii) the
principal of each Receivable, plus a share which, if the Class B Pass-Through
Rate exceeds the Class A Pass-Through Rate, will be disproportionate, of the
interest payable on each Receivable (minus the Retained Yield on the Stripped
Receivable).
Those Receivables, if any, that bear interest at a rate which is less than
or equal to the sum of the applicable Pass-Through Rate and the Servicing Fee
Rate (the 'SUPPLEMENTED RECEIVABLES') will not be treated as Stripped
Receivables. Instead, Yield Supplement Amounts will be payable to eliminate the
difference between the actual yield on each Supplemented Receivable and the
yield such Receivable would have had if its interest rate had equaled the sum of
the applicable Pass-Through Rate and the Basic Servicing Fee Rate. See
' -- Yield Supplement Amounts'.
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'), payments received
under the Yield Supplement Agreement, if applicable (to the extent treated as
income), 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 (a) interest accrues on the Receivables over differing monthly periods
and is paid in arrears and (b) 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 IRS 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
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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 and the Yield
Supplement Agreement, if applicable 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 (a) on an asset-by-asset basis,
accounting separately for each Receivable and the Yield Supplement Agreement, if
applicable or (b) aggregating all Stripped Receivables under the aggregation
rule described below. See ' -- Discount and Premium -- 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 and its
interest in the Yield Supplement Agreement, if applicable, in proportion to
their fair market values.
The remainder of the disclosure generally describes the Code provisions
governing reporting of income on the Receivables and the Yield Supplement
Agreement, if applicable, on a separate asset basis.
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 of $126,600 in the case of a married couple filing jointly for the
taxable year beginning in 1999. 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 the
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 and rights to receive Yield Supplement Amounts, if applicable. 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.
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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 (the '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 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 IRS 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
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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
Account.
There is, however, no authority addressing this point and the IRS 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.
YIELD SUPPLEMENT AMOUNTS
The proper Federal income tax characterization of the Yield Supplement
Amounts is not clear. Moreover, the sum of the income and deductions properly
reportable by a Certificate Owner in any taxable year may not equal the amounts
that would be reportable if a Certificate Owner held instead of an interest in
the Receivables and in the Yield Supplement Agreement either (i) a debt
instrument bearing interest at the applicable Pass-Through Rate or (ii) an
interest in a trust holding the Receivables each of which bears interest at a
rate at least equal to the applicable Pass-Through Rate plus the Servicing Fee
Rate.
It is likely that the right to receive Yield Supplement Amounts will be
treated as a separate asset purchased by each Certificate Owner, in which case a
portion of each Certificate Owner's purchaser price or other tax basis in its
Certificate equal to the fair market value of the right to receive Yield
Supplement Amounts should be allocated to the right to receive payments of Yield
Supplement Amounts. The right to receive Yield Supplement Amounts may be treated
as a loan made by a Certificate Owner to the Seller in an amount equal to the
present value, discounted at a rate equal to the sum of the applicable
Pass-Through Rate and the Servicing Fee Rate, of the projected Yield Supplement
Amounts. In that event, a portion of the Yield Supplement Amounts
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generally representing a yield equal to the applicable Pass-Through Rate plus
the Servicing Fee Rate on such discounted value should be treated as interest
includible in income as accrued or received, and the remainder should be treated
as a return of the principal amount of the deemed loan. Alternately, it is
possible that the entire amount of each Yield Supplement Amount should be
included in income as accrued or received, in which event a Certificate Owner
should also be entitled to amortize the portion of its purchase price allocable
to its right to receive Yield Supplement Amounts. The method of calculating such
amortization is unclear and could result in the inclusion of greater amounts of
income than a Certificate Owner's actual yield on a Receivable.
Alternately, it is possible that the Yield Supplement Amounts could be
treated as payments adjusting the purchase price of the Supplemented
Receivables, rather than as a separate asset. In that event, a Certificate Owner
could be treated as having purchased each such Supplemented Receivable at a
discount (consisting of imputed interest and/or market discount) that, combined
with the actual coupon rate of such Supplemented Receivable, produces a yield
equal to the sum of the applicable Pass-Through Rate and the Servicing Fee Rate.
It is not clear whether and to what extent the amounts includible in income
or amortizable under any of these methods would be adjusted to take account of
prepayments on the Receivables. Moreover, it is possible that the IRS might
contend that none of the above methods is appropriate and that income with
respect to the Yield Supplement Agreement should be reported by a Certificate
Owner in some other manner. In addition, to the extent that the amounts payable
pursuant to the Yield Supplement Agreement decline during any period by reason
of prepayments on the related Receivables, it is possible that a portion of the
amount amortizable by the Certificate Owner during such period would be treated
as a capital loss (which would not offset ordinary income), rather than as an
ordinary deduction. It is expected that the annual statement furnished to the
Certificateholders will report the net income derived from the Yield Supplement
Agreement using a method that causes the total income attributable to a
Certificate to equal income at the applicable Pass-Through Rate on the
applicable class of Certificates. Certificate Owners are advised to consult
their tax advisors regarding the appropriate method of accounting for income
attributable to the Yield Supplement Agreement.
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
53
<PAGE>
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, 2000 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.
CERTAIN STATE TAX CONSEQUENCES
Because of the variation in each state's and locality's tax laws, it is
impossible to predict the tax consequences to the Trust or to holders of
Certificates in all of the state and local taxing jurisdictions in which they
may be subject to tax. Prospective investors are urged to consult with their own
tax advisors regarding the state and local tax treatment of the Trust as well as
any state and local tax consequences to them of purchasing, holding and
disposing of the Certificates.
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.
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 Section 4975 of 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. Accordingly, under Section 2510.3-101 of the
United States Department of Labor (the '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 Section 4975 of 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') 90-23, as amended by PTE 97-34, to J.P. Morgan Securities Inc.
(the 'EXEMPTION'). The
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<PAGE>
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:
(a) yield supplement agreements or similar yield maintenance arrangements,
provided such arrangements do not involve swap agreements or certain
other principal contracts; and
(b) 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 provided that all conditions of the Exemption including
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
Credit Rating Co. or Fitch IBCA, Inc.;
(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
(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 SEC 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
55
<PAGE>
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.
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 'Description of 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.
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.
EXEMPTIONS 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, PTE 84-14, which
applies to certain transactions entered into on behalf of a Plan by qualified
professional asset managers, and PTE 96-23, which applies to certain
transactions entered into on behalf of a Plan by an in-house asset manager.
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<PAGE>
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 90-23, 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.
SPECIAL CONSIDERATIONS APPLICABLE TO INSURANCE COMPANY GENERAL ACCOUNTS
It should be noted that the Small Business Job Protection Act of 1996 added
new Section 401(c) of ERISA relating to the status of the assets of insurance
company general accounts under ERISA and Section 4975 of the Code. Pursuant to
Section 401(c), the DOL is required to issue final regulations (the 'GENERAL
ACCOUNT REGULATIONS') with respect to insurance policies issued on or before
December 31, 1998 that are supported by an insurer's general account. The
General Account Regulations are to provide guidance on which assets held by the
insurer constitute 'plan assets' for purposes of the fiduciary responsibility
provisions of ERISA and Section 4975 of the Code. Section 401(c) also provides
that, except in the case of avoidance of the General Account Regulations, and
actions brought by the Secretary of Labor relating to certain breaches of
fiduciary duties that also constitute breaches of state or federal criminal law,
until the date that is 18 months after the General Account Regulations become
final, no liability under the fiduciary responsibility and prohibited
transaction provisions of ERISA and Section 4975 of the Code may result on the
basis of a claim that the assets of the general account of an insurance company
constitute the assets of any Plan. The plan asset status of insurance company
separate accounts is unaffected by new Section 401(c) of ERISA, and separate
account assets continue to be treated as the assets of any Plan invested in the
separate account. Insurance companies should consult with their counsel
regarding the potential impact of Section 401(c) on their purchase of
Certificates.
As of the date hereof, the DOL has issued proposed regulations under
Section 401(c). It should be noted that if the General Account Regulations are
adopted substantially in the form in which proposed, the General Account
Regulations may not exempt the assets of insurance company general accounts from
treatment as 'plan assets' after December 31, 1998. The proposed regulations
should not, however, adversely affect the applicability of PTCE 95-60 to
purchases of Certificates.
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<PAGE>
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 Class A Certificates set
forth opposite its name below:
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT OF
UNDERWRITERS CLASS A CERTIFICATES
------------ --------------------
<S> <C>
J.P. Morgan Securities Inc.................................. $--
Chase Securities Inc........................................ --
Credit Suisse First Boston Corporation...................... --
Salomon Smith Barney Inc.................................... --
----------
Total.................................................. $
----------
----------
</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 Class B Certificates will be purchased by an affiliate of the Seller.
Such affiliate may subsequently use this Prospectus in connection with offers
and sales of the Class B Certificates to third parties at market prices
prevailing at the time of such offers and sales. In order to facilitate the
book-entry registration of the Class B Certificates, J.P. Morgan Securities Inc.
will act as agent for the Seller in connection with such purchase. J.P. Morgan
Securities Inc. will receive no compensation in connection therewith.
In connection with the offering of the Class A Certificates, the
Underwriters may engage in transactions that stabilize, maintain or otherwise
affect the price of the Class A Certificates. Specifically, the Underwriters may
overallot the offering, creating a syndicate short position. The Underwriters
may bid for and purchase Class A Certificates in the open market to cover
syndicate short positions. In addition, the Underwriters may bid for and
purchase Class A Certificates in the open market to stabilize the price of the
Class A Certificates. These activities may stabilize or maintain the market
price of the Class A Certificates above independent market levels. The
Underwriters are not required to engage in these activities and may end these
activities at any time.
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.
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<PAGE>
GLOSSARY OF TERMS
<TABLE>
<S> <C>
Accounts.................................................... 30
Advance..................................................... 32
Agreement................................................... 18
Applicant................................................... 13
Available Interest.......................................... 35
Available Principal......................................... 36
Available Reserve Amount.................................... 33
Average Delinquency Ratio................................... 34
Average Net Loss Ratio...................................... 34
Bank........................................................ 13
Business Day................................................ 22
Cede........................................................ 24
Cedel....................................................... 24
Cedel Participants.......................................... 26
Certificate Account......................................... 30
Certificate Owner........................................... 24
Certificateholders.......................................... 19
Certificates................................................ 18
Class A Certificate Balance................................. 37
Class A Certificateholders.................................. 19
Class A Certificates........................................ 18
Class A Distribution Account................................ 30
Class A Interest Carryover Shortfall........................ 37
Class A Interest Distribution............................... 37
Class A Monthly Interest.................................... 37
Class A Monthly Principal................................... 37
Class A Pass-Through Rate................................... 22
Class A Percentage.......................................... 37
Class A Pool Factor......................................... 22
Class A Principal Carryover Shortfall....................... 37
Class A Principal Distribution.............................. 37
Class B Certificate Balance................................. 38
Class B Certificateholders.................................. 19
Class B Certificates........................................ 18
Class B Distribution Account................................ 30
Class B Interest Carryover Shortfall........................ 38
Class B Interest Distribution............................... 38
Class B Monthly Interest.................................... 38
Class B Monthly Principal................................... 38
Class B Pass-Through Rate................................... 22
Class B Percentage.......................................... 38
Class B Pool Factor......................................... 22
Class B Principal Carryover Shortfall....................... 38
Class B Principal Distribution.............................. 38
Closing Date................................................ 22
Code........................................................ 47
Collateral Agent............................................ 33
Collection Period........................................... 36
Collections................................................. 36
Contract Rate............................................... 18
Cooperative................................................. 27
Cutoff Date................................................. 18
Defaulted Receivable........................................ 32
</TABLE>
59
<PAGE>
<TABLE>
<S> <C>
Definitive Certificates..................................... 28
Delinquency Ratio........................................... 34
Depositaries................................................ 26
Depositary.................................................. 26
Deposit Date................................................ 31
Direct Participants......................................... 24
Distribution Date........................................... 22
DOL......................................................... 54
DTC......................................................... 24
DTC Participants............................................ 25
Due Date.................................................... 19
ERISA....................................................... 54
Euroclear................................................... 24
Euroclear Operator.......................................... 24
Euroclear Participants...................................... 26
Events of Servicing Termination............................. 40
Excluded Plan............................................... 56
Exemption................................................... 54
FDIC........................................................ 30
Final Scheduled Distribution Date........................... 31
Financed Vehicles........................................... 18
Force Placed Insurance...................................... 15
FTC Rule.................................................... 47
General Account Regulations................................. 57
Holders..................................................... 28
Indirect Participants....................................... 25
Industry.................................................... 27
Interest Collections........................................ 36
Liquidation Proceeds........................................ 34
Moody's..................................................... 31
Motor Vehicle Loans......................................... 13
Net Loss Ratio.............................................. 34
Obligor..................................................... 15
OID......................................................... 48
OID Regulations............................................. 51
Original Certificate Balance................................ 24
Original Class A Certificate Balance........................ 24
Original Class B Certificate Balance........................ 24
Original Pool Balance....................................... 24
Outstanding Advances........................................ 32
Pass-Through Rate........................................... 22
Paying Agent................................................ 30
Plan........................................................ 54
Pool Balance................................................ 24
Prepayment Assumption....................................... 48
PTE......................................................... 54
Purchase Price.............................................. 50
Purchased Receivable........................................ 36
Qualified Institution....................................... 30
Qualified Trust Company..................................... 30
Rating Agency............................................... 31
Rating Agency Condition..................................... 34
Realized Losses............................................. 38
Receivables................................................. 18
Receivables Pool............................................ 18
Record Date................................................. 22
</TABLE>
60
<PAGE>
<TABLE>
<S> <C>
Recoveries.................................................. 34
Regulation.................................................. 54
Repurchase Amount........................................... 29
Reserve Account............................................. 18
Reserve Account Initial Deposit............................. 33
Restricted Group............................................ 55
Retained Yield.............................................. 48
Section 1286 Regulations.................................... 51
Seller...................................................... 13
Servicer.................................................... 13
Servicing Fee............................................... 32
Servicing Fee Rate.......................................... 32
Shortfall Amount............................................ 52
Specified Reserve Account Balance........................... 33
Specified Yield Supplement Balance.......................... 35
Special Tax Counsel......................................... 47
Standard & Poor's........................................... 31
Stripped Receivable......................................... 49
Supplemented Receivables.................................... 48
Systems..................................................... 27
Terms and Conditions........................................ 27
Transfer Agent and Registrar................................ 28
Treasury Regulations........................................ 51
Trust....................................................... 18
Trustee..................................................... 43
UCC......................................................... 45
Underwriters................................................ 58
Underwriting Agreement...................................... 58
United States Person........................................ 53
USAA........................................................ 14
Yield Supplement Account.................................... 35
Yield Supplement Agreement.................................. 34
Yield Supplement Amount..................................... 34
</TABLE>
61
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<PAGE>
ANNEX A
GLOBAL CLEARANCE, SETTLEMENT AND
TAX DOCUMENTATION PROCEDURES
Except in certain limited circumstances, the globally offered Class A
Certificates and Class B Certificates will be available only in book-entry form.
Investors in the Offered Certificates may hold such Offered Certificates through
any of DTC, Cedel or Euroclear. The Offered Certificates will be tradeable as
home market instruments in both the European and U.S. domestic markets. Initial
settlement and all secondary trades will settle in same-day funds.
Secondary market trading between investors holding Offered Certificates
through Cedel and Euroclear will be conducted in the ordinary way in accordance
with their normal rules and operating procedures and in accordance with
conventional eurobond practice (i.e., seven calendar day settlement).
Secondary market trading between investors holding Offered Certificates
directly through DTC will be conducted according to the rules and procedures
applicable to U.S. corporate debt obligations.
Secondary cross-market trading between Cedel or Euroclear and DTC
Participants holding Offered Certificates will be effected on a
delivery-against-payment basis through the respective Depositaries of Cedel and
Euroclear (in such capacity) and as DTC Participants.
Non-U.S. holders (as described below) of Offered Certificates will be
subject to U.S. withholding taxes unless such holders meet certain requirements
and deliver appropriate U.S. tax documents to the securities clearing
organizations or their participants.
INITIAL SETTLEMENT
All Offered Certificates will be held in book-entry form by DTC in the name
of Cede & Co. as nominee of DTC. Investors' interests in the Offered
Certificates will be represented through financial institutions acting on their
behalf as DTC Participants. As a result, Cedel and Euroclear will hold positions
on behalf of their participants through their respective Depositaries, which in
turn will hold such positions in accounts as DTC Participants.
Investors electing to hold their Offered Certificates through DTC will
follow the settlement practices applicable to U.S. corporate debt obligations.
Investor securities custody accounts will be credited with their holdings
against payment in same-day funds on the settlement date.
Investors electing to hold their Offered Certificates through Cedel or
Euroclear accounts will follow the settlement procedures applicable to
conventional eurobonds, except that there will be no temporary global security
and no 'lock-up' or restricted period. Offered Certificates will be credited to
the securities custody accounts on the settlement date against payment in
same-day funds.
SECONDARY MARKET TRADING
Since the purchaser determines the place of delivery, it is important to
establish at the time of the trade where both the purchaser's and seller's
accounts are located to ensure that settlement can be made on the desired value
date.
Trading between DTC Participants. Secondary market trading between DTC
Participants will be settled using the procedures applicable to U.S. corporate
debt obligations in same-day funds.
Trading between Cedel and/or Euroclear Participants. Secondary market
trading between Cedel Participants or Euroclear Participants will be settled
using the procedures applicable to conventional eurobonds in same-day funds.
Trading between DTC seller and Cedel or Euroclear purchaser. When Offered
Certificates are to be transferred from the account of a DTC Participant to the
accounts of a Cedel Participant or a Euroclear Participant, the purchaser will
send instructions to Cedel or Euroclear through a Cedel
A-1
<PAGE>
Participant or Euroclear Participant at least one business day prior to
settlement. Cedel or Euroclear, as the case may be, will instruct the respective
Depositary to receive the Offered Certificates against payment. Payment will
include interest accrued on the Offered Certificates from and including the last
coupon payment date to and excluding the settlement date, which will be on the
basis of a 360-day year and the actual number of days elapsed. Payment will then
be made by the Depositary to the DTC Participant's account against delivery of
the Offered Certificates. After settlement has been completed, the Offered
Certificates will be credited to the respective clearing system and by the
clearing system, in accordance with its usual procedures, to the Cedel
Participant's or Euroclear Participant's account. The Offered Certificates
credit will appear the next day (European time) and the cash debit will be
back-valued to, and the interest on the Offered Certificates will accrue from,
the value date (which would be the preceding day when settlement occurred in New
York). If settlement is not completed on the intended value date (i.e., the
trade fails), the Cedel or Euroclear cash debit will be valued instead as of the
actual settlement date.
Cedel Participants and Euroclear Participants will need to make available
to the respective clearing systems the funds necessary to process same-day funds
settlement. The most direct means of doing so is to pre-position funds for
settlement, either from cash on hand or existing lines of credit, as they would
for any settlement occurring within Cedel or Euroclear. Under this approach,
they may take on credit exposure to Cedel or Euroclear until the Offered
Certificates are credited to their accounts one day later.
As an alternative, if Cedel or Euroclear has extended a line of credit to
them, Cedel Participants or Euroclear Participants can elect not to pre-position
funds and allow that credit line to be drawn upon the finance settlement. Under
this procedure, Cedel Participants or Euroclear Participants purchasing Offered
Certificates would incur overdraft charges for one day, assuming they cleared
the overdraft when the Offered Certificates were credited to their accounts.
However, interest on the Offered Certificates would accrue from the value date.
Therefore, in many cases the investment income on the Offered Certificates
earned during that one-day period may substantially reduce or offset the amount
of such overdraft charges, although this result will depend on each Cedel
Participant's or Euroclear Participant's particular cost of funds.
Since the settlement is taking place during New York business hours, DTC
Participants can employ their usual procedures for sending Offered Certificates
to the respective Depositary for the benefit of Cedel Participants or Euroclear
Participants. The sale proceeds will be available to the DTC seller on the
settlement date. Thus, to the DTC Participants a cross-market transaction will
settle no differently than a trade between two DTC Participants.
Trading between Cedel or Euroclear seller and DTC purchaser. Due to time
zone differences in their favor, Cedel Participants and Euroclear Participants
may employ their customary procedures for transactions in which Offered
Certificates are to be transferred by the respective clearing system, through
the respective Depositary, to a DTC Participant. The seller will send
instructions to Cedel or Euroclear through a Cedel Participant or Euroclear
Participant at least one business day prior to settlement. In these cases, Cedel
or Euroclear will instruct the respective Depositary, as appropriate, to deliver
the Offered Certificates to the DTC Participant's account against payment.
Payment will include interest accrued on the Offered Certificates from and
including the last coupon payment date to and excluding the settlement date,
which will be on the basis of a 360-day year and the actual number of days
elapsed. The payment will then be reflected in the account of the Cedel
Participant or Euroclear Participant the following day, and receipt of the cash
proceeds in the Cedel Participant's or Euroclear Participant's account would be
back-valued to the value date (which would be the preceding day, when settlement
occurred in New York). Should the Cedel Participant or Euroclear Participant
have a line of credit with its respective clearing system and elect to be in
debt in anticipation of receipt of the sale proceeds in its account, the
back-valuation will extinguish any overdraft charges incurred over that one-day
period. If settlement is not completed on the intended value date (i.e., the
trade fails), receipt of the cash proceeds in the Cedel Participant's or
Euroclear Participant's account would instead be valued as of the actual
settlement date.
A-2
<PAGE>
Finally, day traders that use Cedel or Euroclear and that purchase Offered
Certificates from DTC Participants for delivery to Cedel Participants or
Euroclear Participants should note that these trades would automatically fail on
the sale side unless affirmative action were taken. At least three techniques
should be readily available to eliminate this potential problem:
(a) borrowing through Cedel or Euroclear for one day (until the
purchase side of the day trade is reflected in their Cedel or Euroclear
accounts) in accordance with the clearing system's customary procedures;
(b) borrowing the Offered Certificates in the U.S. from a DTC
Participant no later than one day prior to settlement, which would give the
Offered Certificates sufficient time to be reflected in their Cedel or
Euroclear account in order to settle the sale side of the trade; or
(c) staggering the value dates for the buy and sell sides of the trade
so that the value date for the purchase from the DTC Participant is at
least one day prior to the value date for the sale to the Cedel Participant
or Euroclear Participant.
CERTAIN U.S. FEDERAL INCOME TAX DOCUMENTATION REQUIREMENTS
A beneficial owner of Offered Certificates holding securities through Cedel
or Euroclear (or through DTC if the holder has an address outside the U.S.) will
be subject to the 30% U.S. withholding tax that generally applies to payments of
interest (including original issue discount) on registered debt issued by U.S.
Persons, unless (a) each clearing system, bank, or other financial institution
that holds customers' securities in the ordinary course of its trade or business
in the chain of intermediaries between such beneficial owner and the U.S. entity
required to withhold tax complies with applicable certification requirements and
(b) such beneficial owner takes one of the following steps to obtain an
exemption or reduced tax rate:
Exemption for non-U.S. Persons (Form W-8). Beneficial owners of Offered
Certificates that are non-U.S. Persons can obtain a complete exemption from the
withholding tax by filing a signed Form W-8 (Certificate of Foreign Status). If
the information shown on Form W-8 changes, a new Form W-8 must be filed within
30 days of such change.
Exemption for non-U.S. Persons with effectively connected income (Form
4224). A non-U.S. Person, including a non-U.S. corporation or bank with a U.S.
branch, for which the interest income is effectively connected with its conduct
of a trade or business in the United States, can obtain an exemption from the
withholding tax by filing Form 4224 (Exemption from Withholding of Tax on Income
Effectively Connected with the Conduct of a Trade or Business in the United
States).
Exemption or reduced rate for non-U.S. persons resident in treaty countries
(Form 1001). Non-U.S. Persons that are Certificate Owners residing in a country
that has a tax treaty with the United States can obtain an exemption or reduced
tax rate (depending on the treaty terms) by filing Form 1001 (Ownership,
Exemption or Reduced Rate Certificate). If the treaty provides only for a
reduced rate, withholding tax will be imposed at that rate unless the filer
alternatively files Form W-8. Form 1001 may be filed by the Certificate Owner or
his agent.
Exemption for U.S. Persons (Form W-9). U.S. Persons can obtain a complete
exemption from the withholding tax by filing Form W-9 (Payer's Request for
Taxpayer Identification Number and Certification).
U.S. Federal income tax reporting procedure. The Certificate Owner or, in
the case of a Form 1001 or a Form 4224 filer, his agent, files by submitting the
appropriate form to the person through whom it holds (the clearing agency, in
the case of persons holding directly on the books of the clearing agency). Form
W-8 and Form 1001 are effective for three calendar years and Form 4224 is
effective for one calendar year.
The term 'U.S. PERSON' means (a) a citizen or resident of the United
States, (b) a corporation or partnership (including an entity treated as a
corporation or partnership) organized in or under the laws of the United States
or any state or the District of Columbia (unless, in the case of a partnership,
Treasury regulations provide otherwise), (c) an estate the income of which is
A-3
<PAGE>
includible in gross income for United States tax purposes, regardless of its
source, or (d) a trust if a U.S. court is able to exercise primary supervision
over the administration of such trust and one or more U.S. persons has the
authority to control all substantial decisions of the trust. This summary does
not deal with all aspects of U.S. Federal income tax withholding that may be
relevant to foreign holders of the Offered Certificates. Investors are advised
to consult their own tax advisors for specific tax advice concerning their
holding and disposing of the Offered Certificates.
Recent Treasury regulations could affect the procedures to be followed by a
non-U.S. Person in complying with the United States federal withholding, backup
withholding and information reporting rules. The regulations generally will be
effective for payments made after December 31, 1999. Prospective investors are
advised to consult their own tax advisors regarding the effect, if any, of the
regulations on the purchase, ownership and disposition of the Offered
Certificates.
A-4
<PAGE>
USAA AUTO LOAN GRANTOR TRUST 1999-1
$673,149,000 %
Automobile Loan Pass-Through Certificates, Class A
$26,227,130 %
Automobile Loan Pass-Through Certificates, Class B
[Logo]
USAA FEDERAL SAVINGS BANK
SELLER AND SERVICER
------------------------
PROSPECTUS
------------------------
J.P. MORGAN & CO.
CHASE SECURITIES INC.
CREDIT SUISSE FIRST BOSTON
SALOMON SMITH BARNEY
You should rely only on the information contained or incorporated by
reference in this prospectus. We have not authorized anyone to provide you with
different information.
We are not offering these certificates in any state where the offer is not
permitted.
We do not claim the accuracy of the information in this prospectus as of
any date other than the date stated on the cover of this prospectus.
Dealers will deliver a prospectus when acting as underwriters on these
certificates and with respect to their unsold allotments or subscriptions. In
addition, all dealers selling these certificates will deliver a prospectus until
, 1999.
, 1999
<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............................................ $194,426*
Legal Fees and Expenses..................................... $ 70,000
Accounting Fees and Expenses................................ $ 25,000
Blue Sky Fees and Expenses.................................. $ 10,000
Rating Agency Fees.......................................... $180,000
Trustee's Fees and Expenses................................. $ 9,000
Printing.................................................... $ 40,000
Miscellaneous............................................... $ 22,574
--------
Total.................................................. $551,000
--------
--------
</TABLE>
- ------------
* $278 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. 'SS'545.121.
For the undertaking with respect to indemnification, see Item 17
herein.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a)
<TABLE>
<CAPTION>
EXHIBITS DESCRIPTION
-------- -----------
<S> <C>
1.1 -- Form of Underwriting Agreement.
3.1 -- Charter of the Registrant -- filed as Exhibit 3.1 to
Registration Statement No. 333-37471 and incorporated
herein by reference.
3.2 -- By-laws of the Registrant -- filed as Exhibit 3.2 to
Registration Statement No. 333-37471 and incorporated
herein by reference.
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>
(b) Financial Statements:
Not applicable.
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(a) To file, during any period in which offers or sales are being
made, a post effective amendment to this Registration Statement to include
any material information with respect to the plan of distribution not
previously disclosed in this Registration Statement or any material change
to such information in this Registration Statement.
II-1
<PAGE>
(b) 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.
(c) 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.
(d) 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.
(e) 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.
(f) 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>
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 16th day of July, 1999.
USAA FEDERAL SAVINGS BANK
By *
...................................
MARK H. WRIGHT
PRESIDENT AND CHIEF EXECUTIVE
OFFICER
(PRINCIPAL EXECUTIVE OFFICER)
By *
...................................
ROSEMARY M. ELIZALDE
VICE PRESIDENT,
SENIOR FINANCIAL OFFICER
(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
--------- -------- -----
<S> <C> <C>
* Chairman July 16, 1999
..........................................
(ROBERT G. DAVIS)
Director
.........................................
(CHARLES E. BISHOP)
* Director July 16, 1999
.........................................
(ARTHUR R. EMERSON)
* Director July 16, 1999
.........................................
(CARLOS R. MONTEMAYOR)
* Director July 16, 1999
.........................................
(JAMES E. OLSSON)
Director July 16, 1999
.........................................
(JANE B. PHIPPS)
Director
.........................................
(DAVID M. ROBINSON)
* Director July 16, 1999
.........................................
(MARK H. WRIGHT)
* /s/ MICHAEL J. BROKER
.........................................
(MICHAEL J. BROKER,
ATTORNEY-IN-FACT)
</TABLE>
II-3
STATEMENT OF DIFFERENCES
------------------------
The section symbol shall be expressed as ................................. 'SS'
<PAGE>
USAA AUTO LOAN GRANTOR TRUST 1999-1
--% AUTOMOBILE LOAN PASS-THROUGH
CERTIFICATES, CLASS A
USAA FEDERAL SAVINGS BANK
(Bank)
USAA FEDERAL SAVINGS BANK
(Seller and Servicer)
UNDERWRITING AGREEMENT
_______, 1999
J.P. Morgan Securities Inc.
As Representative of the
Several Underwriters named
in Schedule I (the "Representative")
c/o J.P. Morgan Securities Inc.
60 Wall Street
New York, New York 10260
Ladies and Gentlemen:
USAA Federal Savings Bank, a federally chartered savings
association (the "Bank"), proposes to sell to the several Underwriters named in
Schedule I hereto (the "Underwriters") $673,149,000 principal amount of ____%
Automobile Loan Pass-Through Certificates, Class A (the "Class A Certificates")
to be issued by the USAA Auto Loan Grantor Trust 1999-1 (the "Trust"). Each
Class A Certificate will represent a specified percentage undivided interest in
the Trust. The assets of the Trust include, among other things, a pool of fixed
rate simple interest motor vehicle installment loans secured by new and used
automobiles and light-duty trucks (the "Receivables") and certain monies due
thereunder on or after July 1, 1999 (the "Cutoff Date"), such Receivables to be
sold to the Trust by the Bank (in such capacity, the "Seller") and to be
serviced for the Trust by the Bank (in such capacity, the "Servicer"). The Class
A Certificates will be issued in an aggregate principal amount of $673,149,000,
which is equal to approximately [96.25]% of the aggregate principal balance of
the Receivables as of the Cutoff Date. Simultaneously with the issuance and sale
of the Class A Certificates as contemplated herein, the Trust will also issue
the ____% Automobile Loan Pass-Through Certificates, Class B (the "Class B
Certificates" and, together with the Class A Certificate, the "Certificates")
evidencing an undivided ownership interest of approximately [3.75]% in the
Trust, payments in respect of which are, to the extent specified in the Pooling
and Servicing Agreement, subordinated to the rights of the holders of the Class
A Certificates. The Certificates will be issued pursuant to a Pooling and
Servicing Agreement dated as of July __, 1999 (the "Pooling and Servicing
Agreement"), among the Bank, as Seller and Servicer, and The Bank of New York,
as trustee (the "Trustee").
The Bank has prepared and filed with the Securities and Exchange
Commission (the "Commission") in accordance with the provisions of the
Securities Act of 1933, as amended (the "Act"), and the
<PAGE>
rules and regulations of the Commission thereunder (the "Rules and
Regulations"), a registration statement, including a prospectus, relating to the
Certificates. Any preliminary prospectus included in such registration statement
or filed with the Commission pursuant to Rule 424(a) of the Rules and
Regulations is referred to in this Agreement as the "Preliminary Prospectus."
The registration statement as amended at the time when it shall become
effective, or, if a post-effective amendment is filed with respect thereto, as
amended by such post-effective amendment at the time of its effectiveness,
including in each case information (if any) deemed to be part of the
registration statement at the time of effectiveness pursuant to Rule 430A under
the Act, is referred to in this Agreement as the "Registration Statement," and
the prospectus in the form used to confirm sales of the Class A Certificates is
referred to in this Agreement as the "Prospectus."
The terms which follow, when used in this Agreement, shall
have the meanings indicated. "Effective Date" shall mean each date that the
Registration Statement and any post-effective amendment or amendments thereto
became or become effective. "Execution Time" shall mean the date and time that
this Agreement is executed and delivered by the parties hereto. "Rule 424" and
"Rule 430A" refer to such rules under the Act. To the extent not defined herein,
capitalized terms used herein shall have the meanings assigned to such terms in
the Pooling and Servicing Agreement.
The Bank agrees with the Underwriters as follows:
1. The Bank agrees to sell and deliver the Class A
Certificates to the several Underwriters as hereinafter provided, and each
Underwriter, upon the basis of the representations and warranties herein
contained, but subject to the conditions hereinafter stated, agrees to purchase,
severally and not jointly, from the Bank the respective principal amount of
Class A Certificates set forth opposite such Underwriter's name in Schedule I
hereto. The Class A Certificates are to be purchased by the Underwriters at a
purchase price equal to ___________% of the aggregate principal amount thereof
plus accrued interest on the principal amount thereof at the Class A
Pass-Through Rate (as defined in the Prospectus) calculated from (and
including)______, 1999, to (but excluding) the Closing Date.
2. The Bank understands that the Underwriters intend (i) to
make a public offering of their respective portions of the Class A Certificates
as soon after the Registration Statement and this Agreement have become
effective as in the judgment of the Representative is advisable and (ii)
initially to offer the Class A Certificates upon the terms set forth in the
Prospectus.
3. Payment for the Class A Certificates shall be made to the
Bank or to its order by wire transfer of same day funds at the office of
Skadden, Arps, Slate, Meagher & Flom LLP, 919 Third Avenue, New York, New York
10022 at 9:00 A.M., New York City time, on July 28, 1999 (the "Closing Date"),
or at such other time on the same or such other date, not later than the fifth
Business Day thereafter, as the Representative and the Bank may agree upon in
writing. As used herein, the term "Business
2
<PAGE>
Day" means any day other than a day on which banks are permitted or required to
be closed in New York City.
Payment for the Class A Certificates shall be made against
delivery to the Representative (for the respective accounts of the several
Underwriters) of the Class A Certificates registered in the name of Cede & Co.
as nominee of The Depository Trust Company and in such denominations, as
permitted by the Pooling and Servicing Agreement, as the Representative shall
request in writing not later than two full Business Days prior to the Closing
Date, with any transfer taxes payable in connection with the transfer to the
Underwriters of the Certificates duly paid by the Bank. The physical
certificates representing interests in the Class A Certificates will be made
available for inspection and packaging by the Representative at the office of
Skadden, Arps, Slate, Meagher & Flom LLP, 919 Third Avenue, New York, New York
10022 not later than 1:00 P.M., New York City time, on the Business Day prior to
the Closing Date.
4. The Bank represents and warrants to and agrees with each
Underwriter that:
(1) The Registration Statement on Form S-3 (No.
333-81385), including the Prospectus and such amendments thereto as may have
been required on or prior to the date hereof, relating to the Certificates, has
been filed with the Commission and such Registration Statement as amended has
become effective. With respect to the Registration Statement, the conditions to
the use of a registration statement on Form S-3 under the Act, as set forth in
the General Instructions to Form S-3, have been satisfied by the Bank;
(2) No stop order suspending the effectiveness of the
Registration Statement has been issued and no proceeding for that purpose has
been instituted or, to the knowledge of the Bank, threatened by the Commission,
and on the Effective Date of the Registration Statement, the Registration
Statement and the Prospectus conformed in all respects to the requirements of
the Act and the Rules and Regulations, and did not include any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading, and, on the
Closing Date, the Registration Statement and the Prospectus will conform in all
respects to the requirements of the Act and the Rules and Regulations, and
neither of such documents will include any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary to
make the statements therein not misleading; provided, however, that this
representation and warranty shall not apply to any statements or omissions made
in reliance upon and in conformity with information furnished to the Bank in
writing by any Underwriter through the Representative expressly for use
therein;
3
<PAGE>
(3) As of the Closing Date, the representations and
warranties of the Bank, in its capacity as Seller and Servicer under the Pooling
and Servicing Agreement, will be true and correct, and each Receivable will
satisfy the conditions set forth in Section 12.1(b) thereof;
(4) The Bank has been duly organized and is validly
existing as a federally chartered savings association and is a member of the
Federal Home Loan Bank System. The Bank is in good standing with the Office of
Thrift Supervision and has power and authority (corporate and other) to own,
lease and operate its properties and conduct its business as described in the
Prospectus, and to enter into and perform its obligations under this Agreement;
(5) The Class A Certificates have been duly
authorized, and, when issued and delivered pursuant to the Pooling and Servicing
Agreement, duly authenticated by the Trustee and paid for by the Underwriters in
accordance with the terms of this Agreement, will be duly and validly issued,
authenticated and delivered and entitled to the benefits provided by the Pooling
and Servicing Agreement; each of the Pooling and Servicing Agreement, and this
Agreement have been duly authorized by the Bank and, when executed and
delivered by the Bank and the other party thereto (in the case of the Pooling
and Servicing Agreement), each of the Pooling and Servicing Agreement and this
Agreement will constitute a valid and binding agreement of the Bank; the Class A
Certificates and the Pooling and Servicing Agreement will conform to the
descriptions thereof in the Prospectus in all material respects;
(6) 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 or the Pooling and Servicing 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;
(7) The Bank is not in violation of its By-laws or
Charter 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 is 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 Class A Certificates and compliance with the terms and provisions hereof and
thereof will not result in a breach or violation of any of the terms and
provisions of,
4
<PAGE>
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 the By-laws or Charter of the Bank; and the Bank has full
power and authority to authorize and sell, and establish, the Trust that will
issue the Class A Certificates as contemplated by this Agreement and to enter
into this Agreement and the Pooling and Servicing Agreement and consummate the
transactions contemplated hereby and thereby;
(8) Since the respective dates as of which
information is given in the Registration Statement and the Prospectus, except
as otherwise stated therein, (A) there has been no material adverse change in
the condition, financial or otherwise, or in the earnings, business affairs or
business prospects of the Bank and its subsidiaries considered as one
enterprise, whether or not arising in the ordinary course of business (a
"Material Adverse Effect"), and (B) there have been no transactions entered into
by the Bank or any of its subsidiaries, other than those in the ordinary course
of business, which are material with respect to the Bank and its subsidiaries
considered as one enterprise;
(9) Other than as set forth or contemplated in the
Prospectus, there are no legal or governmental proceedings pending or, to the
knowledge of the Bank, threatened to which the Bank is or may be a party or to
which any property of the Bank is or may be the subject which, if determined
adversely to the Bank, could individually or in the aggregate reasonably be
expected to have a Material Adverse Effect or that would reasonably be expected
to materially adversely affect the interests of the holders of the Class A
Certificates; and there are no contracts or other documents of a character
required to be filed as an exhibit to the Registration Statement or required to
be described in the Registration Statement or the Prospectus which are not filed
or described as required; and
(10) By assignment and delivery of each of the
Receivables to the Trust as of the Closing Date, the Bank will transfer all of
its right, title and interest in, to and under the Receivables to the Trust,
subject to no prior lien, mortgage, security interest, pledge, adverse claim,
charge or other encumbrance.
5. The Bank covenants and agrees with the several Underwriters
that:
(1) Prior to the termination of the offering of the
Class A Certificates, the Bank will not file or cause to be filed any amendment
of the Registration Statement or supplement
5
<PAGE>
to the Prospectus which shall be reasonably disapproved of promptly by the
Representative after reasonable notice thereof. Subject to the foregoing
sentence, 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 cause the Prospectus, properly completed, and any
supplement thereto, to be filed with the Commission pursuant to the applicable
paragraph of Rule 424(b) within the time period prescribed and will provide
evidence satisfactory to the Underwriters of such timely filing. The Bank will
promptly advise the Underwriters (i) when the Prospectus, and any supplement
thereto, shall have been filed (if required) with the Commission pursuant to
Rule 424(b), (ii) when, prior to termination of the offering of the Class A
Certificates, any amendment to the Registration Statement shall have become
effective, (iii) of any request by the Commission for any amendment of the
Registration Statement or supplement to the Prospectus or for any additional
information, (iv) of the receipt by the Bank of notification with respect to the
issuance by the Commission of any stop order suspending the effectiveness of the
Registration Statement or the institution or threatening of any proceeding for
that purpose and (v) of the receipt by the Bank of notification with respect to
the suspension of the qualification of the Class A Certificates for sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purpose. The Bank will use its reasonable best efforts to prevent the issuance
of any such stop order and, if issued, to obtain as soon as possible the
withdrawal thereof;
(2) The Bank will deliver, at its expense, to the
Representative, two signed copies of the Registration Statement (as originally
filed) and each amendment thereto, in each case including exhibits, and to each
other Underwriter a conformed copy of the Registration Statement and each
amendment thereto, in each case without exhibits, and, during the period
mentioned in paragraph (e) below, to each of the Underwriters as many copies of
the Prospectus (including all amendments and supplements thereto) as the
Representative may reasonably request. The Bank will furnish or cause to be
furnished to the Representative copies of all reports on Form SR required by
Rule 463 under the Act;
(3) The Bank will if (i) during such period of time
after the first date of the public offering of the Class A Certificates as in
the opinion of counsel for the Underwriters a Prospectus relating to the Class A
Certificates is required by law to be delivered in connection with sales by an
Underwriter or dealer, (ii) any event shall occur as a result of which it is
necessary to amend or supplement the Prospectus in order to make the statements
therein, in the light of the circumstances when the Prospectus is delivered to
a purchaser, not misleading, or (iii) it is necessary to amend or supplement the
Prospectus to comply with the applicable law, forthwith prepare and furnish, at
6
<PAGE>
the expense of the Bank, to the Underwriters and to the dealers (whose names and
addresses the Representative will furnish to the Bank) to which Class A
Certificates may have been sold by the Representative on behalf of the
Underwriters and upon request by the Representative to any other dealers
identified by the Representative, such amendments or supplements to the
Prospectus as may be necessary so that the statements in the Prospectus as so
amended or supplemented will not, in the light of the circumstances when the
Prospectus is delivered to a purchaser, be misleading or so that the Prospectus
will comply with the law;
(4) The Bank will endeavor to qualify the Class A
Certificates for offer and sale under the securities or "Blue Sky" laws of such
jurisdictions as the Representative shall reasonably request and will continue
such qualification in effect so long as reasonably required for distribution of
the Class A Certificates and will pay all fees and expenses (including fees and
disbursements of counsel to the Underwriters) reasonably incurred in connection
with such qualification and in connection with the determination of the
eligibility of the Class A Certificates for investment under the laws of such
jurisdictions as the Representative may designate; 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; and provided further that the Bank shall
not be required to file a general consent to service of process in any
jurisdiction;
(5) On or before January 31, 2001, the Bank will
cause the Trust to make generally available to the holders of the Certificates
and to the Representative as soon as practicable an earnings statement covering
a period of at least twelve months beginning with the first fiscal quarter of
the Trust occurring after the Effective Date of the Registration Statement,
which shall satisfy the provisions of Section 11(a) of the Act and Rule 158 of
the Commission promulgated thereunder;
(6) For the period from the date of this Agreement
until the retirement of the Class A Certificates, the Servicer will furnish to
the Representative (x) 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 certified public accountant's
servicing reports furnished to the Trustee pursuant to Article XIII of the
Pooling and Servicing Agreement, by first-class mail as soon as practicable
after such statements and reports are furnished to the Trustee and (y) copies of
each amendment to the Pooling and Servicing Agreement, and on each Determination
Date or as soon thereafter as practicable, the Servicer shall give notice
substantially in the form of Schedule II hereto by telex or telecopy to the
Representative of the Class A Pool Factor as of the related Record Date;
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<PAGE>
(7) During the period beginning on the date hereof
and continuing to and including the Business Day following the Closing Date, the
Bank will not offer, sell, contract to sell or otherwise dispose of any
securities of or guaranteed by the Bank which are substantially similar to the
Class A Certificates without the prior written consent of the Representative;
(8) 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;
(9) 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. ("Moody's") and Standard & Poor's Ratings Services, a
division of The McGraw-Hill Companies, Inc. ("S&P"), 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;
(10) So long as any of the Class A Certificates are
outstanding, the Bank will furnish to the Representative by first class mail (i)
as soon as practical after the end of the Bank's fiscal year, copies of all
documents, records and financial statements required to be distributed to
Certificateholders (including Certificate Owners) or filed with the Commission
pursuant to the Exchange Act, or any order of the Commission thereunder and (ii)
from time to time, any other information concerning the Bank filed with any
government or regulatory authority or national securities exchange which is
otherwise publicly available, as the Representative may reasonably request; and
(11) The Bank is not, and upon the issuance and sale
of the Class A Certificates as herein contemplated and the application of the
net proceeds therefrom as described in the Prospectus will not be, an
"investment company" or an entity "controlled" by an "investment company" as
such terms are defined in the Investment Company Act of 1940, as amended (the
"1940 Act").
6. 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
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<PAGE>
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. The obligations of the several Underwriters to purchase and
pay for the Class A Certificates will be subject to the accuracy of the
representations and warranties on the part of the 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:
(1) At the time this Agreement is executed and
delivered by the Bank KPMG Peat Marwick shall have furnished to the
Representative a letter dated as of the date of this Agreement substantially in
the form of the draft to which the Representative previously agreed.
(2) The Prospectus shall have been filed with the
Commission pursuant to Rule 424(b) within the applicable time period prescribed
for such filing by the Rules and Regulations and in accordance with Section 5(a)
of this Agreement; no stop order suspending the effectiveness of the
Registration Statement shall be in effect, and no proceedings for such purpose
shall be pending before or, to the knowledge of the Bank, threatened by the
Commission; and all requests for additional information from the Commission with
respect to the Registration Statement shall have been complied with to the
satisfaction of the Representative.
(3) Subsequent to the execution and delivery of this
Agreement, there shall have not occurred (i) 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 Representative materially impairs the investment quality of the
Class A Certificates that makes it impracticable or inadvisable to proceed with
completion of the sale of, and any payment for, the Class A Certificates, or
(ii) any downgrading in the rating of any debt securities of the Bank or any of
its direct or indirect subsidiaries by any "nationally recognized statistical
rating organization" (as defined for purposes of Rule 436(g) under the Act), or
any public announcement that any such organization has under surveillance or
review its rating of any such debt securities (other than an announcement with
positive implications of a possible upgrading, and no implication of a possible
downgrading, of such rating).
(4) Michael J. Broker, Vice President and Banking
Counsel of the Bank, shall have furnished to the Representative his written
opinion dated the Closing Date, in
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<PAGE>
form and substance satisfactory to the Representative, to the effect that:
(1) 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;
(2) 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;
(3) 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;
(4) None of the execution, delivery and
performance by the Bank of this Agreement or the Pooling and Servicing
Agreement, 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 Class A 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 ByLaws 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;
(5) 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
10
<PAGE>
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 or 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";
(6) The Pooling and Servicing Agreement has
been duly authorized, executed and delivered by the Bank;
(7) This Agreement has been duly authorized,
executed and delivered by the Bank; and
(8) 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 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.
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 (d) include any
supplements thereto.
(5) Jones, Day, Reavis & Pogue, special counsel to
the Bank, shall have furnished to the Representative their written opinion dated
the Closing Date, in form and substance satisfactory to the Representative, to
the effect that:
(1) 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, in the
case of the Class A Certificates, and when delivered to and paid for by
the purchaser thereof, in the case of the Class B Certificates, will be
duly and validly issued and outstanding and will be entitled to the
benefits of the Pooling and Servicing Agreement;
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<PAGE>
(2) 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 (regardless of whether such
enforceability is considered in a proceeding in equity or at law); and
(3) the unenforceability under certain circumstances of provisions
indemnifying a party against liability where such indemnification is
contrary to public policy;
(3) 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 and as of the Closing
Date 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, and as of
the Closing Date contained any untrue statement of a material fact or
omitted to state any material fact required to be stated therein or
necessary to make the statements therein, 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;
(4) The Class A 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;
(5) The Pooling and Servicing Agreement is not
required to be qualified under the Trust Indenture Act of 1939, as
amended; and
(6) The Trust is not now, and immediately
following the sale of the Certificates pursuant to this
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<PAGE>
Agreement will not be, required to be registered under the Investment
Company Act of 1940, as amended.
In addition, such counsel shall opine, based upon certain
representations made by the Bank, 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, New York 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 (e) include
any supplements thereto.
(6) Jones, Day, Reavis & Pogue, special counsel to
the Bank, shall have furnished to the Representative a written opinion or
opinions dated the Closing Date, in form and substance satisfactory to the
Representative, 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.
(7) Skadden, Arps, Slate, Meagher & Flom LLP,
counsel to the Underwriters, shall have furnished to the Representative a
written opinion or opinions dated the Closing Date, in form and substance
satisfactory to the Representative, with respect to the validity of the Class A
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.
(8) Jones, Day, Reavis & Pogue, special tax counsel
to the Bank, shall have furnished to the Representative a written opinion dated
as of the Closing Date, in form and substance satisfactory to the
Representative, to the effect that:
(1) the Trust will be treated as a grantor
trust, under subpart E, part I of subchapter J of the Internal Revenue
Code of 1986, as amended, and not as a partnership or an association
taxable as a corporation for federal income tax purposes and the
holders of the Class A Certificates will each be treated as owning
their respective shares of the Trust's assets and income for federal
income tax purposes; and
13
<PAGE>
(2) The statements in the Registration
Statement and Prospectus under the headings "Prospectus Summary -- Tax
Status" and "Certain Federal Income Tax Consequences" to the extent
that they address matters of law or legal conclusions with respect
thereto, are correct in all material respects.
(9) Counsel to the Trustee shall have furnished to
the Representative a written opinion dated as of the Closing Date, in form and
substance satisfactory to the Representative, to the effect that:
(1) the Trustee has been duly incorporated and
is validly existing as a banking organization organized under the laws
of the state of New York;
(2) The Trustee has full corporate trust power
and authority to enter into and perform its obligations under the
Pooling and Servicing Agreement;
(3) 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);
(4) The Trustee has duly executed and
authenticated the Certificates issued on the date hereof on behalf of
the Trust;
(5) 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 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
(6) 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,
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<PAGE>
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.
(10) The Underwriters shall have received a letter,
dated the Closing Date, of KPMG Peat Marwick which meets the requirements of the
subsection (a) of this Section 7, except that the specified date referred to in
such subsection will be a date not more than three days prior to the Closing
Date for the purposes of this subsection.
(11) The Underwriters shall have received evidence
satisfactory to them that the Class A Certificates have been rated in the
highest rating category by each of Moody's and by S&P and that the Class B
Certificates have been rated at least "BBB" or its equivalent by each of the
foregoing Rating Agencies.
(l2) The Bank shall have furnished to the
Representative a certificate, in form and substance satisfactory to the
Representative, signed by a Vice President or more senior officer of the Bank
and dated the Closing Date, 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 Agreement are true and correct 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.
(13) The Class B Certificates shall have been issued
by the Trust and an affiliate of the Seller shall have
15
<PAGE>
entered into a valid and binding agreement to purchase the full aggregate
principal amount of such Class B Certificates.
(14) The Representative shall have received a letter
or letters from each counsel delivering any written opinion to any Rating Agency
in connection with the transaction described herein which is not otherwise
described in this Agreement allowing the Underwriters to rely on such opinion as
if it were addressed to the Underwriters.
(15) On the Closing Date, the representations and
warranties of the Bank in the Pooling and Servicing Agreement will be true and
correct.
(16) Any taxes, fees and other governmental charges
which are due and payable in connection with the execution, delivery and
performance of this Agreement, the Pooling and Servicing Agreement, and the
Certificates shall have been paid by the Bank at or prior to the Closing Date.
8. The Bank agrees to indemnify and hold harmless each
Underwriter and each person, if any, who controls any Underwriter within the
meaning of either Section 15 of the Act or Section 20 of the Exchange Act, from
and against any and all losses, claims, damages and liabilities (including,
without limitation, the legal fees and other expenses reasonably incurred in
connection with investigating, preparing or defending any suit, action or
proceeding or any claim asserted, except as otherwise provided below regarding
the limitation on use of counsel) caused by any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement or
the Prospectus (as amended or supplemented if the Bank shall have furnished such
amendments or supplements thereto) or any preliminary prospectus, or caused by
any omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading,
except insofar as such losses, claims, damages or liabilities are caused by any
untrue statement or omission or alleged untrue statement or omission made in
reliance upon and in conformity with information furnished to the Bank in
writing by any Underwriter through the Representative expressly for use therein;
provided that the foregoing indemnity with respect to any preliminary prospectus
shall not inure to the benefit of any Underwriter (or to the benefit of any
person controlling such Underwriter) from whom the person asserting any losses,
claims or damages purchased Certificates if such untrue statement or omission or
alleged untrue statement or omission made in such preliminary prospectus is
eliminated or remedied in the Prospectus (as amended or supplemented if the Bank
shall have furnished any amendments or supplements thereto) and, if the
furnishing of a copy of the Prospectus (as so amended or supplemented) to such
person was required by law or was requested in writing by the
16
<PAGE>
Bank, a copy of the Prospectus (as so amended or supplemented) shall not have
been furnished to such person at or prior to the written confirmation of the
sale of such Certificates to such person.
Each Underwriter agrees, severally and not jointly, to
indemnify and hold harmless the Bank, each director and officer of the Bank who
signed the Registration Statement, and each person who controls the Bank within
the meaning of Section 15 of the Act or Section 20 of the Exchange Act to the
same extent as the foregoing indemnity from the Bank to each Underwriter, but
only with reference to information furnished to the Bank in writing by such
Underwriter through the Representa tive expressly for use in the Registration
Statement, the Prospectus, any amendment or supplement thereto, or any
preliminary prospectus.
If any suit, action, proceeding (including any
governmental or regulatory investigation), claim or demand shall be brought or
asserted against any person in respect of which indemnity may be sought pursuant
to either of the two preceding paragraphs, such person (the "Indemnified
Person") shall promptly notify the person against whom such indemnity may be
sought (the "Indemnifying Person") in writing, and the Indemnifying Person,
upon request of the Indemnified Person, shall retain counsel reasonably
satisfactory to the Indemnified Person to represent the Indemnified Person and
any others the Indemnifying Person may designate in such proceeding and shall
pay the fees and expenses of such counsel related to such proceeding. In any
such proceeding, any Indemnified Person shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense of
such Indemnified Person unless (i) the Indemnifying Person and the Indemnified
Person shall have mutually agreed to the contrary, (ii) the Indemnifying Person
has failed within a reasonable time to retain counsel reasonably satisfactory to
the Indemnified Person or (iii) the named parties in any such proceeding
(including any impleaded parties) include both the Indemnifying Person and the
Indemnified Person and representation of both parties by the same counsel would
be inappropriate due to actual or potential differing interests between them, in
which case such counsel for the Indemnified Person shall be reasonably
satisfactory to the Indemnifying Person. It is understood that the Indemnifying
Person shall not, in connection with any proceeding or related proceeding in the
same jurisdiction, be liable for the fees and expenses of more than one separate
firm (in addition to one local counsel in each applicable jurisdiction) for all
Indemnified Persons, and that all such fees and expenses shall be reimbursed as
they are incurred. Any such separate firm for the Underwriters and such control
persons of Underwriters shall be designated in writing by the Representative and
any such separate firm for the Bank or of its directors and officers who sign
the Registration Statement or control persons shall be designated in writing by
the Bank. The Indemnifying
17
<PAGE>
Person shall not be liable for any settlement of any claim or proceeding
effected without its written consent. Notwithstanding the foregoing sentence, if
at any time an Indemnified Person shall have requested an Indemnifying Person to
reimburse the Indemnified Person for fees and expenses of counsel as
contemplated by the third sentence of this paragraph, the Indemnifying Person
agrees that it shall be liable for any settlement of any proceeding effected
without its written consent if (i) such settlement is entered into more than 30
days after receipt by such Indemnifying Person of the aforesaid request and (ii)
such Indemnifying Person shall not have reimbursed the Indemnified Person in
accordance with such request prior to the date of such settlement. No
Indemnifying Person shall, without the prior written consent of the Indemnified
Person, effect any settlement of any pending or threatened proceeding in respect
of which any Indemnified Person is or could have been a party and indemnity
could have been sought hereunder by such Indemnified Person, unless such
settlement includes an unconditional release of such Indemnified Person from all
liability on claims that are the subject matter of such proceeding.
If the indemnification provided for in the first and second
paragraphs of this Section 8 is unavailable other than in accordance with its
terms to an Indemnified Person in respect of any losses, claims, damages or
liabilities referred to therein, then each Indemnifying Person under such
paragraph, in lieu of indemnifying such Indemnified Person thereunder, shall
contribute to the amount paid or pay able by such Indemnified Person as a result
of such losses, claims, damages or liabilities (i) in such proportion as is
appropriate to reflect the relative benefits received by the Bank on the one
hand and the Underwriters on the other hand from the offering of the Class A
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 the Underwriters on the other in
connection with the statements or omissions that resulted in such losses,
claims, damages or liabilities, as well as any other relevant equitable consider
ations. The relative benefits received by the Bank on the one hand and the
Underwriters on the other shall be deemed to be in the same respective
proportions as the net proceeds from the offering (before deducting expenses)
received by the Bank and the total underwriting discounts and the commissions
received by the Underwriters, in each case as set forth in the table on the
cover of the Prospectus, bear to the aggregate public offering price of the
Class A Certificates. The relative fault of the Bank on the one hand and the
Underwriters on the other shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Bank or by any of the Underwriters and the parties' rela-
18
<PAGE>
tive intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.
The Bank and the Underwriters agree that it would not be just
and equitable if contri bution pursuant to this Section 8 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 that does not take account of the
equitable considerations referred to in the immediately preceding paragraph. The
amount paid or payable by an Indemnified Person as a result of the losses,
claims, damages and liabilities referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses reasonably incurred by such Indemnified
Person in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 8, in no event shall an
Underwriter be required to contribute any amount in excess of the amount by
which the total price at which the Class A Certificates underwritten by it and
distributed to the public were offered to the public exceeds the amount of any
damages that such Underwriter has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The Underwriters' obligations to
contribute pursuant to this Section 8 are several in proportion to the
respective principal amount of Class A Certificates set forth opposite their
names in Schedule I hereto, and not joint.
The indemnity and contribution agreements contained in this
Section 8 are in addition to any liability which the Indemnifying Persons may
otherwise have to the Indemnified Persons referred to above.
The indemnity and contribution agreements contained in this
Section 8 and the representations and warranties of the Bank set forth in this
Agreement shall remain operative and in full force and effect regardless of (i)
any termination of this Agreement, (ii) any investigation made by or on behalf
of any Underwriter or any person controlling any Underwriter or by or on behalf
of the Bank, or any of their officers or directors or any other person
controlling the Bank and (iii) acceptance of and payment for any of the
Certificates.
9. Notwithstanding anything herein contained, this Agreement
may be terminated in the absolute discretion of the Representative, by notice
given to the Bank, if after the execution and delivery of this Agreement and
prior to the Closing Date (i) trading generally shall have been suspended or
materially limited on or by, as the case may be, the New York Stock Exchange or
the American Stock Exchange; (ii) trading of any securities
19
<PAGE>
issued or guaranteed by the Bank or USAA Capital Corporation shall have been
suspended on any exchange or in any over-the-counter market; (iii) a general
moratorium on commercial banking activities shall have been declared by Federal,
Texas or New York State authorities; or (iv) there shall have occurred any
outbreak or escalation of hostilities or any change in financial markets or any
calamity or crisis that, in the judgment of the Representative is material and
adverse and which, in the judgment of the Representative, makes it impracticable
to market the Class A Certificates on the terms and in the manner contemplated
in the Prospectus.
10. This Agreement shall become effective upon the later of
(x) execution and delivery hereof by the parties hereto and (y) release of
notification of the effectiveness of the Registration Statement (or, if
applicable, any post-effective amendment) by the Commission.
If on the Closing Date any one or more of the Underwriters
shall fail or refuse to purchase Class A Certificates which it or they have
agreed to purchase hereunder on such date, and the aggregate principal
amount of Class A Certificates which such defaulting Underwriter or Underwriters
agreed but failed or refused to purchase is not more than one-tenth of the
aggregate principal amount of the Class A Certificates to be purchased on such
date, the other Underwriters shall be obligated severally in the proportions
that the principal amount of Class A Certificates set forth opposite their
respective names in Schedule I bears to the aggregate principal amount of Class
A Certificates set forth opposite the names of all such non-defaulting
Underwriters, or in such other proportions as the Representative may specify,
to purchase the Class A Certificates which such defaulting Underwriter or
Underwriters agreed but failed or refused to purchase on such date; provided
that in no event shall the principal amount of Class A Certificates that any
Underwriter has agreed to purchase pursuant to Section 1 be increased pursuant
to this Section 10 by an amount in excess of one-ninth of such principal amount
of Class A Certificates without the written consent of such Underwriter. If on
the Closing Date any Underwriter or Underwriters shall fail or refuse to
purchase Class A Certificates which it or they have agreed to purchase hereunder
on such date, and the aggregate principal amount of Class A Certificates with
respect to which such default occurs is more than one-tenth of the aggregate
principal amount of Class A Certificates to be purchased on such date, and
arrangements satisfactory to the Representative and the Bank for the purchase of
such Class A Certificates are not made within 36 hours after such default, this
Agreement shall terminate without liability on the part of any non-defaulting
Underwriter or the Bank. In any such case either the Representative or the Bank
shall have the right to postpone the Closing Date, but in no event for longer
than seven days, in order that the required changes, if any, in the Registration
Statement and in the Prospectus or in any other documents
20
<PAGE>
or arrangements may be effected. Any action taken under this paragraph shall not
relieve any defaulting Underwriter from liability in respect of any default of
such Underwriter under this Agreement.
11. J.P. Morgan Securities Inc. ("JPMSI") and the Bank agree
that JPMSI shall act as the agent of the Bank in connection with the sale of the
Class B Certificates by the Seller to one of its affiliates. The indemnification
and contribution provisions set forth in Section 8 hereof shall apply to JPMSI
in its capacity as such agent in respect of the Class B Certificates to the
extent such provisions apply to each Underwriter in respect of the Class A
Certificates. No compensation shall be payable by the Bank to JPMSI in
connection with acting as such agent.
12. If this Agreement shall be terminated by the Underwriters,
or any of them, because of any failure or refusal on the part of the Bank to
comply with the terms or to fulfill any of the conditions of this Agreement, or
if for any reason the Bank shall be unable to perform its obligations under this
Agreement or any condition of the Underwriters' obligations cannot be fulfilled,
the Bank agrees to reimburse the Underwriters or such Underwriters as have so
terminated this Agreement with respect to themselves, severally, for all
out-of-pocket expenses (including the fees and expenses of their counsel)
reasonably incurred by such Underwriters in connection with this Agreement or
the offering contemplated hereunder.
13. Any action by the Underwriters hereunder may be taken by
the Representative alone on behalf of the Underwriters, and any such action
taken by the Representative alone shall be binding upon the Underwriters. All
notices and other communications hereunder shall be in writing and shall be
deemed to have been duly given if mailed, delivered by hand or transmitted by
any standard form of telecommunication. Notices to the Underwriters shall be
given to the Representative, c/o J.P. Morgan Securities Inc., 60 Wall Street,
New York, New York 10260 (Facsimile No.: 212-648-5909), Attention: Syndicate
Desk. Notices to the Bank shall be given to it at USAA Federal
Savings Bank, 10750 McDermott Freeway, San Antonio, Texas 78288 (Facsimile No.:
210-498-3207), Attention: Michael J. Broker.
14. This Agreement shall inure to the benefit of and be
binding upon the Bank, the Underwriters, any controlling persons referred to
herein and their respective successors and assigns. Nothing expressed or
mentioned in this Agreement is intended or shall be construed to give any other
person, firm or corporation any legal or equitable right, remedy or claim under
or in respect of this Agreement or any provision herein contained. No purchaser
of Class A Certificates from any Under-
21
<PAGE>
writer shall be deemed to be a successor by reason merely of such purchase.
15. This Agreement may be signed in counterparts, each of
which shall be an original and all of which together shall constitute one and
the same instrument. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE
CONFLICTS OF LAWS PROVISIONS THEREOF.
22
<PAGE>
If the foregoing is in accordance with your understanding of
our agreement, kindly sign and return to us the enclosed duplicate hereof,
whereupon it will become a binding agreement among the Bank and the Underwriters
in accordance with its terms.
Very truly yours,
USAA FEDERAL SAVINGS BANK
By:_____________________________________
Name: Edwin T. McQuiston
Title: Vice President
The foregoing Underwriting
Agreement is hereby confirmed
and accepted as of the date
first above written.
J.P. MORGAN SECURITIES INC.
As Representative of the
Underwriters
By:___________________________________
Name: Robert W. Flanigan
Title Vice President
23
<PAGE>
SCHEDULE I
UNDERWRITERS
Principal Amount of Class A Certificates
<TABLE>
<S> <C>
J.P. Morgan Securities Inc....................................... $__________
____________________............................................. $__________
____________________............................................. $__________
____________________............................................. $__________
------------
Total.................................................... $__________
===========
</TABLE>
A-1
<PAGE>
SCHEDULE II
FORM OF SERVICER'S CERTIFICATE
J.P. Morgan Securities Inc.
60 Wall Street
New York, New York 10260
Attention:
Re: Pooling and Servicing Agreement dated as of ______, 1999 (the
"Pooling and Servicing Agreement") between USAA Federal Savings
Bank, as Seller and Servicer, and The Bank of New York, as
Trustee
Determination Date to which this Certificate relates:
___________, 19__
For Monthly Period ending on _________, 19__
1. The undersigned Servicing Officer does hereby
certify that the Class A Pool Factor is __________.
2. Capitalized terms used in this Certificate shall
have the same meanings as in the Pooling and Servicing Agreement.
IN WITNESS WHEREOF, I have hereunto set my hand as of
the above-referenced Determination Date.
USAA FEDERAL SAVINGS BANK,
as Servicer
By:
Servicing Officer
BY: ___________________________________________________________________________
B-1
<PAGE>
================================================================================
USAA FEDERAL SAVINGS BANK
Seller and Servicer
and
THE BANK OF NEW YORK
---------------------------------------------------------
Trustee and Collateral Agent
on behalf of the Certificateholders
---------------------------------------------------------
POOLING AND SERVICING AGREEMENT
Dated as of ________ __, 1999
$699,376,130
USAA Auto Loan Grantor Trust 1999-1
_____% Automobile Loan Pass-Through Certificates, Class A
_____% Automobile Loan Pass-Through Certificates, Class B
<PAGE>
This Pooling and Servicing Agreement, dated as of _____ __, 1999, is made
with respect to the formation of the USAA Auto Loan Grantor Trust 1999-1 (the
"Trust"), between USAA Federal Savings Bank, a federally chartered savings
association (the "Seller" and the "Servicer" in its respective capacities as
such), and The Bank of New York, a banking corporation organized under the laws
of the State of New York, as trustee (the "Trustee") and as collateral agent
with respect to the Reserve Account and the Yield Supplement Account (in such
capacity, the "Collateral Agent").
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 1999-1.
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 Receivables 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
<PAGE>
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), (ii) and (iii)
above 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 consider ation upon the trusts herein set forth for
the benefit of the Certificateholders, subject to the terms and provisions of
this Agreement.
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 1999-1 effective _____ ___,1999 (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 360-day year comprised 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 July 28, 1999.
The "Corporate Trust Office" at the date hereof is located at 101 Barclay
Street, New York, New York 10286.
2
<PAGE>
The "Cutoff Date" shall be the opening of business on July 1, 1999.
The first "Distribution Date" shall be August 16, 1999.
The "Final Scheduled Distribution Date" shall be February 15, 2006 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 $699,376,130.44.
The "Reserve Account Initial Deposit" shall be $5,245,321.
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, the greater of (i) 1.25% of the Pool Balance as of the last day of the
preceding Collection Period and (ii) 0.50% of the initial Pool Balance (such
amount not to exceed the outstanding Pool Balance as of the last day of the
preceding Collection Period); provided, however, that the Specified Reserve
Account Balance will be calculated using a percentage of [2.50]% for any
Distribution Date (beginning with the _____ __, 1999 Distribution Date) on which
the Average Net Loss Ratio exceeds [0.85]% or the Average Delinquency Ratio
exceeds [0.85]%; provided, further, that such higher percentage shall remain in
effect until the Average Net Loss Ratio and the Average Delinquency Ratio have
been equal to or less than [0.85]% for at least six consecutive Collection
Periods. 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.
"Specified Yield Supplement Balance" means with respect to any Distribution
Date, an amount equal to at least the sum of all projected Yield Supplement
Amounts for all future Distribution Dates, assuming that future scheduled
payments on the Receivables are made on their scheduled due dates; provided that
if on any date the Servicer shall fail to pay the amount payable under the Yield
Supplement Agreement in accordance with the terms thereof, then, in such event,
the Specified Yield Supplement Balance shall not thereafter be reduced
hereunder.
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 such
representations and warranties in accepting the Receivables in trust and
authenticating the Certificates:
3
<PAGE>
(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
72 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 9 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 [7.5]%, 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;
(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]
4
<PAGE>
USAA AUTO LOAN GRANTOR
TRUST 1999-1 STANDARD TERMS
AND CONDITIONS OF AGREEMENT
EFFECTIVE _____ __, 1999
for the USAA Auto Loan
Grantor Trust 1999-1 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 1999-1 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, the Yield Supplement Account
and all amounts, Financial Assets and other investments held from time to time
in the Reserve Account, the Yield Supplement 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.
"Agent" means any of the Paying Agent, the Collateral Agent, the
Authenticating Agent and the Transfer Agent.
"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.
"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 16.12.
I-1
<PAGE>
"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,
(ii) the Yield Supplement Amount for such Distribution Date and (iii) 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 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)
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.
"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.
"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
I-2
<PAGE>
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.
"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
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.
I-3
<PAGE>
"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 Distribu tion 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 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
represent ing 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 excess of Class B Monthly Interest for the preceding Distribution
Date, and any outstanding Class B Interest Carryover Shortfall on such
I-4
<PAGE>
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 Distribu tion 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, (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.
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"Collateral Agent" means The Bank of New York, a banking corporation, in
its capacity as collateral agent for the benefit of the Certificateholders with
respect to the Reserve Account and the Yield Supplement Account.
"Collection Period" means, during the term of this Agreement, the calendar
month preceding each Distribution Date, or in the case of the initial Collection
Period, the period from the Cutoff Date to July 31, 1999. 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.
"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 either (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, whichever occurs first.
"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 Receiv ables and Defaulted Receivables) which are sixty
(60) or more days delinquent, including, without limitation, any Account with
respect to which the Collateral has been repossessed and not liquidated, 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.
"Deposit Date" shall mean the Business Day immediately preceding each
Distribution Date.
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"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 Scheduled 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)(9) of the
UCC.
"FNMA" means the Federal National Mortgage Association or any successor
thereto.
"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 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. "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.
"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.
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"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.
"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 16.11 and shall
initially be The Bank of New York.
"Permitted Investments" means, at any time, any one or more of the
following obligations and securities:
(i) obligations guaranteed as to timely payment of interest and
principal 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;
(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;
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(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;
(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
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pursuant to which the investment company 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 Certifi cates 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 Repurchase Amount has been made by the Seller or the
Servicer pursuant to the Agreement.
"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.
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"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 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.
"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 14.6.
"Securities Act" means the Securities Act of 1933, as amended.
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"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 Group, a division of
The McGraw-Hill Companies, Inc.
"Total Collections" means with respect to any Collection Period all amounts
deposited in the Certificate 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 The Bank of New York.
"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) and certain
rights under the Yield Supplement Agreement (but not the Yield Supplement
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.
"Yield Supplement Account" means the account established, maintained and
designated as the "Yield Supplement Account" pursuant to Section 15.2.
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"Yield Supplement Account Property" has the meaning specified in Section
15.2(b).
"Yield Supplement Agreement" means the Yield Supplement Agreement dated as
of the Closing Date between the Seller, the Servicer and Trustee, substantially
in the form attached hereto as Exhibit F.
"Yield Supplement Amount" shall have the meaning specified in Section 15.1.
"Yield Supplement Initial Deposit" means cash or Permitted Investments
having a value of at least $____.
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 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 contem plated,
the Seller had 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, encum brances, 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 Receiv
able.
(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 custom ary 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
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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 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 municipal ity 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 representa
tions 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 Files pursuant to Section 13.2 and no such
amendment has caused such Receivable either to fail to meet all of the
representations and warran ties made by the Seller herein with respect
thereto or to fail to meet all of the condi tions 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
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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.
(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 warran ties 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 Receiv able pursuant to Section
13.3) in the manner specified in Section 14.4; 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)
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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 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
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accounts, records, and computer systems as herein provided, and promptly take
appropriate action to remedy any such failure.
(b) Maintenance of and Access to Records. The Servicer shall maintain each
Receivable File 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,
at its expense, 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 relating 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 Receivable 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 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
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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 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 Receiv able 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
administrative 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:
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(i) Security Interest to Remain in Force. The Financed Vehicle
securing each Receivable shall not be released from the security interest
grant ed 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 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
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
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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 and
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 informa
tion 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 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, 2000, 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, 2000, 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 Agreement and that, on the
basis of such examination, such firm is of the opinion that 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
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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
Receiv ables. 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 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 14.8 and any other reports it may
receive pursuant to this Agreement to (i) Standard & Poor's Ratings Group,
Asset-Backed Surveillance Group, 55 Water Street, 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.
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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
(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, upon
thirty (30) days notice to the Trustee, 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. Subject to Section
14.5(b), 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.
Should any depositary of the Reserve Account cease to be a Qualified Trust
Institution, then the Collateral Agent shall, upon thirty (30) days notice to
the Trustee, with the Seller's assistance as necessary, cause such account to be
moved to a Qualified Trust Institution, unless the Seller provides the Trustee
and the Collateral Agent 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
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depositary's ceasing to be a Qualified Trust Institution. 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 in writing 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
written 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 Permitted
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 (including, without limitation, investment property,
securities, instruments and cash) 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
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(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 Obligors on the Receivables and all Liquidation Proceeds (net of
expenses), both as collected during the Collection Period. Notwith standing 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 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
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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. The
Trustee shall deposit in the Certificate Account the aggregate of any amounts
received pursuant to the Yield Supplement Agreement on the date of receipt
thereof.
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.
(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 from amounts on deposit in the Certificate Account of Outstanding
Advances pursuant to Section 14.3, the Trustee shall withdraw from the
Certificate Account, the Available Interest and Available Principal for such
Distribution Date, withdraw from the Reserve Account such amounts as may be
required to satisfy amounts requested by the Servicer for such Distribution
Date, make the following deposits and distributions, 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 less any amounts owing to the
Trustee pursuant to Section 20.7 hereof, which shall be paid to the
Trustee;
(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 application of clauses (i), (ii) and (iii) above,
in the following priority:
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(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 less any accrued and unpaid
Trustee fees and expenses which shall be paid to the Trustee;
(c) On each Distribution Date, all amounts on deposit in the Class A
Distribution Account will be distributed pro rata to the Class A
Certificateholders by the Trustee and all amounts on deposit in the Class B
Distribution Account will be distributed pro rata 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 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 The
Bank of New York, as Collateral Agent. The Bank of New York hereby accepts such
appointment as Collateral Agent. The Collateral Agent accepts such
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appointment and agrees to establish the Reserve Account at the Corporate Trust
Office and to comply with Section 14.1(f).
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
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 Yield Supplement Amount;
(iv) the amount of the Servicing Fee paid to the Servicer with respect
to the related Collection Period;
(v) 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;
(vi) the Pool Balance as of the close of business of the Servicer on
the last day of the preceding Collection Period;
(vii) the amount of the aggregate Realized Losses, if any, for such
Collection Period;
(viii) the aggregate Repurchase Amount of Receivables repurchased by
the Seller or purchased by the Servicer;
(ix) the balance of the Reserve Account on such Distribution Date,
after giving effect to changes therein on such Distribution Date; and
(x) the Specified Reserve Account Balance as of the close of business
on such Distribution Date.
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Each amount set forth pursuant to clauses (i), (ii) and (v) 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.
ARTICLE XV
Yield Supplement Agreement
Section 15.1 Yield Supplement Agreement. Simultaneously with the execution
of this Agreement, the Seller shall convey the Yield Supplement Agreement to the
Trust as part of the Trust Property. The Yield Supplement Agreement, with
respect to each Receivable (other than Repurchased Receivables and Defaulted
Receivables), provides for the payment by the Seller, to the extent of the funds
available in the Yield Supplement Account, on or prior to each Deposit Date of
an amount (if positive) calculated by the Servicer equal to one-twelfth of the
difference between (i) interest on such Receivable's Principal Balance as of the
first day of the preceding Collection Period calcu lated 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 Servic ing Fee Rate over (ii) interest accrued on such
Receivable's Principal Balance as of the first day of the preceding Collection
Period at its Contract Rate (in the aggregate for all Receivables with respect
to any Distribution Date, the "Yield Supplement Amount").
SECTION 15.2 Yield Supplement Account. (a) The Seller shall establish and
maintain in the name of the Collateral Agent a segregated trust account to
secure the Seller's obligations under the Yield Supplement Agreement (the "Yield
Supplement Account"). The Yield Supplement Account and any amounts therein shall
not be property of the Trust, but shall be pledged to the Collateral Agent for
the benefit of Certificateholders.
(b) In order to provide for the prompt payment by the Seller of the Yield
Supplement Amount, to assure availability of the amounts maintained in the Yield
Supplement Account and as security for the performance by the Seller of its
obligations under the Yield Supplement Agreement, the Seller, on behalf of
itself and its succes sors and assigns, hereby pledges to the Collateral Agent
and its successors and assigns for the benefit of the Certificateholders, all of
its right, title and interest in and to the Yield Supplement Ac count, and all
proceeds of the foregoing, including, without limitation, all other amounts and
investments held from time to time in the Yield Supplement Account (whether in
the form of deposit accounts, physical securities, book-entry securities,
uncertificated securities
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or otherwise) including the Yield Supplement Initial Deposit, subject, however,
to the limitations set forth below, and solely for the purpose of securing
payment of the Yield Supplement Amount (all of the foregoing, subject to the
limitations set forth in this Section, the "Yield Supplement Account Property"),
to have and to hold all the aforesaid property, rights and privileges unto the
Collateral Agent, its successors and assigns, in trust for the uses and
purposes, and subject to the terms and provisions, set forth in this Section.
The Collateral Agent hereby acknowledges such transfer and accepts the trust
hereunder and shall hold and distribute the Yield Supplement Account Property
in accordance with the terms and provisions of this Section.
(c) Funds on deposit in the Yield Supplement Account shall be invested by
the Collateral Agent in Permitted Investments selected by the Seller and
designated in writing by the Seller to the Collat eral Agent; provided, however,
it is understood and agreed that the Collateral Agent shall not be liable for
any loss arising from such investment in Permitted Investments. Funds on deposit
in the Yield Supplement Account shall be invested in Permitted Investments that
will mature so that all such funds will be available at the opening of business
on each Deposit Date; provided, however, that to the extent permitted by the
Rating Agencies, funds on deposit in the Yield Supplement Account may be
invested in Permitted Investments that mature later than the next Deposit Date.
Funds deposited in the Yield Supplement Account on a Deposit Date upon the
maturity of any Permit ted Investments are not required to be (but may be)
invested over night. The Seller will treat the funds, Permitted Investments and
other assets in the Yield Supplement Account as its own for Federal, state and
local income tax and franchise tax purposes and will report on its tax returns
all income, gain and loss from the Yield Supplement Account.
(d) No later than 11:00 A.M. (New York time) on each Deposit Date, the
Servicer shall deposit to the Certificate Account an amount equal to the Yield
Supplement Amount for the related Collection Period; provided that if, on any
Distribution Date, the Servicer fail to pay the Yield Supplement Amount, then,
in such event, the Trustee shall direct the Collateral Agent to withdraw from
the Yield Supple ment Account an amount equal to such deficiency and deposit
such amount to the Certificate Account.
(e) The Yield Supplement Account shall be under the sole custody and
control of the Collateral Agent. If, at any time, the Yield Supplement Account
ceases to be a segregated trust account, the Collateral Agent shall within ten
(10) Business Days (or such longer period, not to exceed thirty (30) calendar
days, as to which each Rating Agency may consent) establish a new Yield
Supplement Account as a segregated trust account and shall transfer any cash
and/or any investments that are in the existing Yield Supplement Account which
is no longer a segregated trust account to such new Yield Supplement Account.
(f) Amounts on deposit in the Yield Supplement Account will be released to
the Seller on each Distribution Date to the extent that the amount on deposit in
the Yield Supplement Account would exceed the Specified Yield Supplement
Balance. Upon a distribution to the Seller of amounts from the Yield Supplement
Account, the Certificateholders
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will not have any rights in, or claims to, such amounts. Amounts properly
distributed to the Seller from the Yield Supplement Account or otherwise shall
not be available under any circumstances to the Trust, the Trustee, the
Collateral Agent or the Certificateholders and the Seller shall in no event
thereafter be required to refund any such distributed amounts.
(g) With respect to the Yield Supplement Account Property, the Seller and
the Collateral Agent agree that:
(i) any Yield Supplement Account Property that is held in deposit
accounts shall be held solely in the name of the Collateral Agent at
one or more depository institu tions having the Required Deposit
Rating; each such deposit account shall be subject to the exclusive
custody and con trol of the Collateral Agent, and the Collateral Agent
shall have sole signature authority with respect thereto;
(ii) any Yield Supplement Account Property that constitutes
physical securities shall be delivered to the Collateral Agent in
accordance with paragraph (i) of the definition of "Delivery" (except
that all references therein to the "Trustee" shall be deemed to be
references to the Collateral Agent) and shall be held, pending
maturity or disposition, solely by the Collateral Agent or a financial
intermediary (as such term is defined in the relevant UCC) acting
solely for the benefit of Certificateholders;
(iii) any Yield Supplement Account Property that is a book-entry
security held through the Federal Reserve System pursuant to Federal
book-entry regulations shall be delivered in accordance with paragraph
(b) of the definition of "Delivery" and shall be maintained by the
Collateral Agent, pending maturity or disposition, through continued
book-entry registration of such Yield Supplement Account Property as
described in such paragraph; and
(iv) any Yield Supplement Account Property that is an
"uncertificated security" under the relevant UCC and that is not
governed by clause (iii) above shall be delivered to the Collateral
Agent in accordance with paragraph (iii) of the definition of
"Delivery" (except that all references therein to the "Trustee" shall
be deemed to be references to the Collateral Agent) and shall be
maintained by the Collateral Agent, pending maturity or disposition,
through continued registration of the Collateral Agent's (or its
nominee's) ownership of such security.
Effective upon Delivery of any Yield Supplement Account Property in the form of
physical securities, book-entry securities or uncertifi cated securities, the
Collateral Agent shall be deemed to have repre sented that it has purchased such
Yield Supplement Account Property for value, in good faith and without notice of
any adverse claim thereto.
(h) The Seller 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 instru-
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ments (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 15.2 and otherwise fully to effectuate the
purposes, terms and conditions of this Section 15.2. The Seller and Servicer
shall:
(A) promptly execute, deliver and file any financing statements,
amendments, continuation statements, assignments, certifi cates and other
documents with respect to such interests and perform all such other acts as may
be necessary in order to perfect or to maintain the perfection of the Collateral
Agent's security interest; and
(B) make the necessary filings of financing statements or amendments
thereto within five days after the occurrence of any of the following: (1) any
change in their respective names or any trade names, (2) any change in the
location of their respective chief execu tive offices or principal places of
business and (3) any merger or consolidation or other change in their respective
identities or corporate structures; and all promptly notify the Collateral Agent
of any such filings.
(i) Investment earnings attributable to the Yield Supple ment Account
Property and proceeds therefrom shall be held by the Collateral Agent for the
benefit of the Seller. Investment earnings attributable to the Yield Supplement
Account Property shall not be available to pay the Yield Supplement Amount and
shall not otherwise be subject to any claims or rights of the Certificateholders
or the Servicer. The Collateral Agent shall cause all investment earnings
attributable to the Yield Supplement Account to be distributed on each
Distribution Date to the Seller.
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 Certificate
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 Agree ment, 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
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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.
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. The Bank of New York 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.
The Bank of New York 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
The Bank of New York 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 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,
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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 Certificate 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 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
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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 450 West 33rd Street, 8th Floor, New York, New
York 10001, Attention: Structured Finance Operations, 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 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 Certificateholders 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
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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, 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.
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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 The Bank of New York. The Bank of New York 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 The Bank of New York 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.
(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 Certificateholders
or Class B Certificateholders.
(c) The Bank of New York 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
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
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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:
This is one of the certificates referred to in the within mentioned
Agreement.
[NAME OF TRUSTEE]
as Trustee
By:______________________
Authorized Signatory
or
[NAME OF AUTHENTICATING AGENT]
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.
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(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 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 16.13 as it shall deem necessary.
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ARTICLE XVII
The Seller
Section 17.1 Representations of Seller. The Seller makes the following
representa tions 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 perfor mance 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 enforce ment of
creditors' rights in 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 contem plated
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,
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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 Agree ment or
the Certificates or (d) relating to the Seller and which might adversely
affect the federal income tax attributes of the Certificates.
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 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
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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.
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 author ity 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.
(iv) No Violation. The consummation of the transactions contem plated
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
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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 custodian 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 liability arose out of, or was imposed
upon the Trustee and the Trust or the Certificateholders through the
willful
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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 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
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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 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 appointment 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 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
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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.
ARTICLE XIX
Events of Servicing Termination
Section 19.1 Events of Servicing Termination. If any one of the following
events (an "Event 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 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
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(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
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 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
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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
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.
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
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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 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 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, advance 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.
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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 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 refraining 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
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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 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.
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(vi) The Trustee may execute any of the trusts or powers hereunder or
perform any 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.
(viii) In the event that the Trustee is also acting as Paying Agent,
Collateral Agent, Authenticating Agent or Transfer Agent and Registrar
hereunder, the rights and protections afforded to the Trustee pursuant to
this Article 20 shall also be afforded to each Paying Agent, Collateral
Agent, Authenticating Agent or Transfer Agent and Registrar.
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 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.
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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, an annual fee agreed upon in writing between the
Servicer and the Trustee payable in advance on the Closing Date and on each one
year anniversary thereof (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 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. To the extent that the Trustee has not
been paid for any of the foregoing items by the Servicer, the Trustee shall be
entitled to be paid such amounts from amounts which are payable to the Servicer
pursuant to Section 14.5(b)(i) before payment to the Servicer of any portion
thereof; provided, however, that in the event that the Servicer shall have
elected to waive its rights to payment of the Servicing Fee or the Servicing Fee
is deferred, the Trustee shall nonetheless be entitled to receive such amounts
from payments which would ordinarily be applied to the payment of the Servicing
Fee, in the same order of priority as though such Servicing Fee were payable.
The Trustee shall be entitled to reimbursement by the Servicer for any
out-of-pocket costs or expenses (including, without limitation reasonable fees
and disbursements of one counsel to the Trustee) incurred in connection with the
review, negotiation, preparation, execution and delivery of this Agreement or in
connection with the issuance of any Certificate on the Closing Date. 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.
To the extent that the Trustee has not been paid by the Servicer for any of
the items described in the preceding paragraph for which the Servicer is
obligated, the Trustee shall be entitled to be paid for such items from amounts
which would otherwise be distributable to the Seller under Section 14.5 of this
Agreement. The covenants and agreements contained in this Section 20.7 shall
survive the termination of this Agreement and shall be binding, as applicable,
on the Servicer, and any successor Servicer and the Seller.
Section 20.8 Indemnity. The Trustee, the Agents and their officers,
directors, agents and employees (each of the foregoing, an "Indemnified Person")
shall be indemnified by the Servicer and the Seller 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 Indemnified Person's willful misfeasance, bad
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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 Indemnified
Person and their 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 Indemnified Person 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, 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 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.
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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 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 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.
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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 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 banking
corporation duly organized, validly existing, and in good standing under
the laws of the State of New York.
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(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 Agreement 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, 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,
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
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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 New York, 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.
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.
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
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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 effect that such purchase will not
constitute a fraudulent transfer of assets of the Servicer under applicable
state and federal law.
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 and the Rating Agency Condition shall be satisfied, 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
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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.
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
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.
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(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 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, 2000, 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 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
Agree ment 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
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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 450 West 33rd Street, 15th Floor, New York, New York 10001,
Attention: Structured Finance Services, Telecopy Number: (212) 946-3240 or at
such other address as shall be designated in a written notice to the Trustee.
Any notice required 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 assign ment, 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 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.
56
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Pooling and Servicing
Agreement to be duly executed by their respective officers as of the day and
year first above written.
USAA FEDERAL SAVINGS BANK,
as Seller and Servicer
By:__________________________
Name: Edwin T. McQuiston
Title: Vice President
The Bank of New York,
as Trustee
By:___________________________
Name:
Title:
<PAGE>
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.
A-1
<PAGE>
SCHEDULE B
Location of Receivable Files
----------------------------
USAA Federal Savings Bank
10750 McDermott Freeway
San Antonio, TX 78288
B-1
<PAGE>
EXHIBIT A
FORM OF CLASS A CERTIFICATE
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION, 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 1999-1
___% 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 ______
R-[ ]
$[ ]
Final Distribution Date:
____, ____, 20-
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 Loan Grantor Trust 1999-1 (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 __ __, 1999
(the "Agreement") between the Seller, acting as Seller and Servicer, and The
Bank of New York, National Association, 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 Class A
Certificate is one of the duly authorized Certificates designated as "____%
Automobile Loan Pass-Through Certificates, Class A" (herein called the "Class A
Certificates" or the "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 its
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 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.
A-1
<PAGE>
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 (a "Distribution Date"), commencing on __ __, 1999 , 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 Pass-Through Rate of ___% per annum on the Class A
Certificate Balance as of the preceding Distribution Date after giving effect to
any amounts distributed with respect to principal on such preceding Distribution
Date (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 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 below, which further provisions shall for all purposes
have the same effect as if set forth at this place.
All capitalized terms used herein and not otherwise defined shall have the
meaning assigned thereto in the Agreement.
A-2
<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 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 1999-1
The Bank of New York, National Association,
as Trustee
By:____________________________
Authorized Signatory
Dated: __ __, 1999
This is one of the Class A Certificates referred to in the within-mentioned
Agreement.
The Bank of New York, National Association,
as Trustee
By: _____________________
Authorized Signatory
A-3
<PAGE>
USAA AUTO LOAN GRANTOR TRUST 1999-1
____% AUTOMOBILE LOAN PASS-THROUGH CERTIFICATES
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
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 withdrawal from the
Reserve Account in the amount required by the Agreement, but in no event in an
amount greater than the Available Reserve Amount with respect to such
Distribution Date.
The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights of the Certificateholders
under the Agreement at any time by the Seller, the Servicer and the Trustee with
the consent of the Holders of Certificates evidencing not less than 51% of the
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. 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.
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. As
provided in the Agreement and subject to certain limitations therein set forth,
Class A Certificates are exchangeable for new 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.
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 herein, 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 Class A 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.
A-4
<PAGE>
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; provided, however,
that 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-5
<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-6
<PAGE>
EXHIBIT B
FORM OF CLASS B CERTIFICATE
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 1999-1
___% 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 ____
R-[ ]
$[ ]
Final Distribution Date:
__ __, 20__
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 Loan Grantor Trust 1999-1 (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 __ __, 1999
(the "Agreement") between the Seller, acting as Seller and Servicer, and The
Bank of New York, National Association, 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 Class B
Certificate is one of the duly authorized Certificates designated as "___%
Automobile Loan Pass-Through Certificates, Class B" (herein called the "Class B
Certificates" or the "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 its
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 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.
B-1
<PAGE>
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 (each, a "Distribution Date"), commencing on __ __, 1999, 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 Pass-Through Rate of ___% per annum on the Class B
Certificate Balance as of the preceding Distribution Date after giving effect to
any amounts distributed with respect to principal on such preceding Distribution
Date (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 Certificateholder of record in the Certificate Register
without the presentation or surrender of this Class B Certificate or the making
of any notation hereon, except 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 below, which further provisions shall for all purposes
have the same effect as if set forth at this place.
All capitalized terms used herein and not otherwise defined shall have the
meaning assigned thereto in the Agreement.
B-2
<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 1999-1
The Bank of New York, National Association,
as Trustee
By:____________________________
Dated: __ __, 1999
This is one of the Class B Certificates referred to in the within-mentioned
Agreement.
The Bank of New York, National Association,
as Trustee
By: _____________________
Authorized Signatory
B-3
<PAGE>
USAA AUTO LOAN GRANTOR TRUST 1999-1
___% AUTOMOBILE LOAN PASS-THROUGH CERTIFICATES
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
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 withdrawal from the
Reserve Account in the amount required by the Agreement, but in no event in an
amount greater than the Available Reserve Amount with respect to such
Distribution Date.
The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights of the Certificateholders
under the Agreement at any time by the Seller, the Servicer and the Trustee with
the consent of the Holders of Certificates evidencing not less than 51% of the
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. 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.
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 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.
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 herein, 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 Class B Certificate is
registered as the owner hereof for all purposes, and none of the
B-4
<PAGE>
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; provided, however,
that 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-5
<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-6
<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 1999-1 created pursuant to the Pooling and Servicing
Agreement (the "Pooling and Servicing Agreement"), dated as of __ __, 1999,
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-1-1
<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 1999-1 created pursuant to the Pooling and Servicing
Agreement (the "Pooling and Servicing Agreement"), dated as of __ __, 1999
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-2-1
<PAGE>
EXHIBIT D
USAA Auto Loan Grantor Trust 1999-1
___% Automobile Loan Pass-Through Certificates, Class A
____% Automobile Loan Pass-Through Certificates, Class B
SERVICER'S REPORT
D-1
<PAGE>
Exhibit E
FORM OF CERTIFICATEHOLDER REPORT
USAA Auto Loan Grantor Trust 1999-1
___% Automobile Loan Pass-Through Certificates, Class A
___% Automobile Loan Pass-Through Certificates, Class B
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 __ __, 1999.
This payment per $1000 of original issuance of your holdings is allocated as
follows:
<TABLE>
<S> <C> <C>
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 _______
</TABLE>
E-1
<PAGE>
EXHIBIT F
FORM OF YIELD SUPPLEMENT AGREEMENT
USAA Auto Loan Grantor Trust 1999-1
c/o The Bank of New York, National Association, as Trustee
and as Collateral Agent
- ------------
July __, 1999
Ladies and Gentlemen:
For good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, we (the "Seller") hereby confirm arrangements made as
of the date hereof with you (the "Trust") to be effective upon receipt by the
Seller of the enclosed copy of this letter agreement (as amended, supplemented
or otherwise modified and in effect from time to time, the "Yield Supplement
Agreement").
1. On or prior to the Determination Date preceding each Distribution Date,
the Servicer shall notify the Trust and the Seller of the Yield Supplement
Amount for such Distribution Date.
2. The Seller agrees to establish a Yield Supplement Account pursuant to
Article XV of the Pooling and Servicing Agreement, dated as of July __, 1999 (as
amended, supplemented or otherwise modified and in effect from time to time, the
"Pooling and Servicing Agreement") by and among the Seller, in its individual
capacity and as a Servicer thereunder (the "Servicer") and The Bank of New York,
National Association, as trustee thereunder (the "Trustee"), and the Seller
hereby agrees, to make a payment of the Yield Supplement Amount to the Trustee
on behalf of the Trust, or to any assignee of the Trustee on behalf of the Trust
referred to in Section 15.1 hereof, prior to 11:00 A.M. on each Distribution
Date. If and to the extent that such amounts shall not have been paid by the
Seller in full at or prior to 11:00 A.M. (New York time), then, in such event,
pursuant to Sections 15.2(d) and (f) of the Pooling and Servicing Agreement, the
Trustee shall instruct the Collateral Agent to withdraw the amount of any such
insufficiency from the Yield Supplement Account and deposit such funds to the
Certificate Account.
3. All payments pursuant hereto shall be made by federal wire transfer
(same day) funds or in immediately available funds, to such account as the
Trustee on behalf of the Trust, may designate in writing to the Seller prior to
the relevant Distribution Date.
4. Our agreements set forth in this Yield Supplement Agreement are our
primary obligations and such obligations are irrevocable, absolute and
unconditional, shall not be subject to any counterclaim, setoff or defense
(other than full and strict compliance by us with our obligations hereunder) and
shall remain in full force and effect without regard to, and shall not be
released, discharged or in any way affected by, any circumstances or condition
whatsoever.
5. This Yield Supplement Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York.
6. Except as otherwise provided herein, all demands, notices and
communications under this Yield Supplement Agreement shall be in writing,
personally delivered, sent by telecopier, sent by courier or mailed by certified
mail, return receipt requested, and shall be deemed to have been duly given upon
receipt by the Purchaser
F-2
<PAGE>
or the Seller. All notices shall be directed as set forth below, or to such
other address or to the attention of such other person as the relevant party
shall have designated for such purpose in a written notice.
The Trust:
USAA Auto Loan Grantor Trust 1999-1
c/o The Bank of New York, National Association,
as Trustee
-------------
-----------
Attention: Corporate Trust Department
Telecopy: ()
F-3
<PAGE>
The Seller:
USAA Federal Savings Bank
10750 McDermott Freeway__________________
San Antonio, TX 78288__________________
Attention:
Telecopy: ()
7. This Yield Supplement Agreement may be executed in one or more
counterparts and by the different parties hereto on separate counterparts, all
of which shall be deemed to be one and the same document.
8. Capitalized terms used herein but not otherwise defined shall have
the meanings assigned thereto in the Pooling and Servicing Agreement.
[REMAINDER OF THIS PAGE LEFT INTENTIONALLY BLANK]
F-4
<PAGE>
If the foregoing satisfactorily sets forth the terms and conditions of
our agreement, please indicate your acceptance thereof by signing in the space
provided below and returning to us the enclosed duplicate original of this
letter.
Very truly yours,
USAA FEDERAL SAVINGS BANK
By: _______________________
Name:
Title:
Agreed and accepted as of
the date first above written:
USAA AUTO LOAN GRANTOR TRUST 1999-1
By: The Bank of New York, National Association,
as Trustee and as Collateral Agent
- ------------------------
Authorized Signatory
<PAGE>
ANNEX I
USAA FEDERAL SAVINGS BANK
Seller and Servicer
Standard Terms and Conditions of Agreement
Effective __ __, 1999
A-I
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
<S> <C>
ARTICLE I
Section 1.1 Creation of Trust............................................ 1
ARTICLE II
Section 2.1 Conveyance of Receivables.................................... 2
ARTICLE III
[Reserved] . . . . . . . . . . . 3
ARTICLE IV
Section 4.1 Acceptance by Trustee........................................ 3
ARTICLE V
Section 5.1 Incorporation of Standard Terms and Conditions of Agreement.. 4
ARTICLE VI
Section 6.1 Special Definitions and Terms................................ 4
ARTICLE VII
Section 7.1 Additional Representations and Warranties of Seller.......... 5
ARTICLES VIII-X
[Reserved]................................................... 7
ARTICLE XI (Attached as ANNEX I)
Definitions
Section 11.1 Definitions................................................ I-1
Section 11.2 Usage of Terms. ......................................... I-11
Section 11.3 Simple Interest Method; Allocations....................... I-11
Section 11.4 References................................................ I-11
Section 11.5 Section References........................................ I-12
Section 11.6 Separate Agreements....................................... I-12
</TABLE>
i
<PAGE>
ARTICLE XII
The Receivables
<TABLE>
<S> <C>
Section 12.1 Representations and Warranties of Seller; Conditions Relating to Receivables.. 31
Section 12.2 Repurchase Upon Breach or Failure of a Condition............................... 35
Section 12.3 Custody of Receivable Files.................................................... 36
Section 12.4 Duties of Servicer as Custodian................................................ 37
Section 12.5 Instructions; Authority to Act................................................. 38
Section 12.6 Custodian's Indemnification.................................................... 38
Section 12.7 Effective Period and Termination............................................... 39
ARTICLE XIII
Administration and Servicing of Receivables
Section 13.1 Duties of Servicer............................................................. 40
Section 13.2 Collection of Receivable Payments.............................................. 40
Section 13.3 Realization Upon Receivables................................................... 41
Section 13.4 [Reserved]..................................................................... 42
Section 13.5 Maintenance of Security Interests in Financed Vehicles......................... 42
Section 13.6 Covenants of Servicer.......................................................... 43
Section 13.7 Purchase of Receivables Upon Breach............................................ 44
Section 13.8 Servicing Fee.................................................................. 44
Section 13.9 Servicer's Certificate......................................................... 45
Section 13.10 Annual Statement as to Compliance............................................. 46
Section 13.11 Annual Audit Report........................................................... 46
Section 13.12 Access to Certain Documentation and Information Regarding Receivables......... 47
Section 13.13 Reports to Certificateholders and the Rating Agencies......................... 47
Section 13.14 Insurance..................................................................... 48
ARTICLE XIV
Distributions; Statements to Certificateholders
Section 14.1 Accounts....................................................................... 48
Section 14.2 Collections.................................................................... 52
Section 14.3 Advances....................................................................... 52
Section 14.4 Additional Deposits............................................................ 53
Section 14.5 Distributions.................................................................. 54
Section 14.6 Reserve Account................................................................ 56
Section 14.7 Net Deposits................................................................... 57
Section 14.8 Statements to Certificateholders............................................... 57
ARTICLE XV
Yield Supplement Agreement
Section 15.1 Yield Supplement Agreement...................................................... 59
Section 15.2 Yield Supplement Account....................................................... 59
</TABLE>
ii
<PAGE>
ARTICLE XVI
The Certificates
<TABLE>
<S> <C>
Section 16.1 The Certificates............................................................... 60
Section 16.2 Execution, Authentication and Delivery of Certificates........................ 60
Section 16.3 Registration of Transfer and Exchange of Certificates.......................... 61
Section 16.4 Mutilated, Destroyed, Lost, or Stolen Certificates............................. 62
Section 16.5 Persons Deemed Owners.......................................................... 63
Section 16.6 Access to List of Certificateholders' Names and Addresses...................... 63
Section 16.7 Maintenance of Office or Agency................................................ 64
Section 16.8 Book-Entry Certificates........................................................ 64
Section 16.9 Notices to Clearing Agency..................................................... 66
Section 16.10 Definitive Certificates....................................................... 66
Section 16.11 Appointment of Paying Agent................................................... 67
Section 16.12 Authenticating Agent.......................................................... 68
Section 16.13 Actions of Certificateholders................................................. 70
ARTICLE XVII
The Seller
Section 17.1 Representations of Seller...................................................... 72
Section 17.2 Liability of Seller; Indemnities............................................... 74
Section 17.3 Merger or Consolidation of Seller.............................................. 74
Section 17.4 Limitation on Liability of Seller and Others.................................. 75
Section 17.5 Seller May Own Certificates.................................................... 75
ARTICLE XVIII
The Servicer
Section 18.1 Representations of Servicer.................................................... 76
Section 18.2 Liability of Servicer; Indemnities............................................. 78
Section 18.3 Merger or Consolidation of Servicer............................................ 79
Section 18.4 Limitation on Liability of Servicer and Others................................. 80
Section 18.5 Servicer Not To Resign......................................................... 81
Section 18.6 Delegation of Duties........................................................... 82
ARTICLE XIX
Events of Servicing Termination
Section 19.1 Events of Servicing Termination................................................ 83
Section 19.2 Trustee to Act; Appointment of Successor...................................... 85
Section 19.3 Notification to Certificateholders............................................. 86
Section 19.4 Waiver of Past Defaults........................................................ 86
</TABLE>
iii
<PAGE>
ARTICLE XX
The Trustee
<TABLE>
<S> <C>
Section 20.1 No Power to Engage in Business or to Vary Investments.......................... 88
Section 20.2 Duties of Trustee.............................................................. 88
Section 20.3 Trustee's Assignment of Repurchased Receivables and Trustee's Certificate...... 91
Section 20.4 Certain Matters Affecting the Trustee.......................................... 91
Section 20.5 Trustee Not Liable for Certificates or Receivables..............................94
Section 20.6 Trustee May Own Certificates....................................................95
Section 20.7 Trustee's Fees and Expenses.....................................................96
Section 20.8 Indemnity.......................................................................97
Section 20.9 Eligibility Requirements for Trustee............................................98
Section 20.10 Resignation or Removal of Trustee..............................................98
Section 20.11 Successor Trustee..............................................................99
Section 20.12 Merger or Consolidation of Trustee............................................100
Section 20.13 Appointment of Co-Trustee or Separate Trustee.................................100
Section 20.14 Representations and Warranties of Trustee.....................................102
Section 20.15 Tax Returns...................................................................103
Section 20.16 Trustee May Enforce Claims Without Possession of Certificates.................104
Section 20.17 Suits for Enforcement.........................................................104
Section 20.18 Maintenance of Office or Agency...............................................104
ARTICLE XXI
Termination
Section 21.1 Termination of the Trust.......................................................105
Section 21.2 Optional Purchase of All Receivables...........................................106
ARTICLE XXII
Miscellaneous Provisions
Section 22.1 Amendment......................................................................108
Section 22.2 Protection of Title to Trust...................................................109
Section 22.3 Limitation on Rights of Certificateholders.....................................112
Section 22.4 Governing Law..................................................................113
Section 22.5 Notices........................................................................113
Section 22.6 Severability of Provisions.....................................................114
Section 22.7 Assignment.....................................................................114
Section 22.8 Certificates Nonassessable and Fully Paid......................................114
Section 22.9 Third-Party Beneficiaries......................................................115
</TABLE>
iv
<PAGE>
SCHEDULES and EXHIBITS
Schedule A: Schedule of Receivables
Schedule B: Locations of Receivable Files
Exhibit A: Form of Class A Certificate
Exhibit B: Form of Class B Certificate
Exhibit C-1:
Exhibit C-2:
Exhibit D:
Exhibit E: Form of Certificateholder Report
Exhibit F: Form of Yield Supplement Agreement
v
<PAGE>
Exhibit 5.1
[JONES, DAY, REAVIS & POGUE]
July 16, 1999
USAA Federal Savings Bank
10750 McDermott Freeway
San Antonio, Texas 78288
Re: USAA Auto Loan Grantor Trust 1999-1
-----------------------------------
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. 333-81385 (the "Registration Statement"), filed by the Bank on
behalf of USAA Auto Loan Grantor Trust 1999-1 (the "Trust") 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 Trust is to be formed and the
Certificates are to be issued pursuant to a Pooling and Servicing Agreement (the
"Pooling and Servicing Agreement") between the Bank, as seller and servicer, and
The Bank of New York, a banking corporation organized under the laws of the
State of New York, 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,
/s/ JONES, DAY, REAVIS & POGUE
JONES, DAY, REAVIS & POGUE
<PAGE>
[Letterhead of Jones, Day, Reavis & Pogue]
July , 1999
The Bank of New York, in
its capacity as Trustee
1101 Park Place
New York, New York 10286
Re: USAA Auto Loan Grantor Trust 1999-1
-----------------------------------
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
1999-1 (the "Trust") of $673,149,000 of Class A Automobile Loan Pass-Through
Certificates and $26,227,130 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 Bank of New York, as trustee, and the sale of the Certificates as
contemplated by the Registration Statement on Form S-3 (Registration No.
333-81385) (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 terms and conditions 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.
<PAGE>
The Bank of New York
July , 1999
Page 2
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.
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.
We hereby consent to the filing of this opinion as Exhibit 8.1
to 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 Securities Act of 1933.
Very truly yours,
/S/ JONES, DAY, REAVIS & POGUE
JONES, DAY, REAVIS & POGUE
