As filed with the Securities and Exchange Commission on August 4, 2000
Registration No. 333-30840
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
PRE-EFFECTIVE AMENDEMENT NO. 2
TO FORM S-3 REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
--------------------------
USAA FEDERAL SAVINGS BANK
(Originator of the trusts described herein)
(Exact Name of Registrant as specified in its charter)
--------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
United States 0749 74-2291652
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
--------------------------
10750 McDermott Freeway, San Antonio, Texas 78288
(210) 498-2265
(Address, including zip code, and telephone number, including area code, or
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:
Renwick D. Martin Laura Palma
Brown & Wood LLP Simpson Thacher & Bartlett
One World Trade Center 425 Lexington Avenue
New York, New York 10048 New York, New York 10017
(212) 839-5319 (212) 455-2000
--------------------------
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./X/
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./ /
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
============================================================================================================================
Proposed
Proposed Maximum
Maximum Aggregate Amount of
Title of Each Class of Amount to be Offering Price Offering Registration
Securities to be Registered Registered Per Unit(1) Price(1) Fee(2)
---------------------------------------------------- ------------------ ------------------ ----------------- ---------------
<S> <C> <C> <C> <C>
Asset Backed Notes and Certificates................ $2,000,000,000 100% $2,000,000,000 $528,000
==================================================== ================== ================== ================= ===============
(1) Estimated solely for purposes of calculating the Registration Fee.
(2) $264 was previously paid.
</TABLE>
------------------------------------
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933, or until this Registration
Statement shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
<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 supplement
and the attached prospectus are not an offer to sell these securities and they
are not soliciting an offer to buy these securities in any state where the
offer or sale is not permitted.
Subject to completion, dated August 4, 2000.
Prospectus Supplement to Prospectus Dated _____________, 200_
$-------------------
USAA Auto Owner Trust _______
[USAA LOGO]
USAA Federal Savings Bank
Seller and Servicer
Before you purchase any of these securities, be sure you read this
prospectus supplement and the attached prospectus, especially the risk factors
beginning on page S-12 of this prospectus supplement and on page __ of the
prospectus.
A security is not a deposit and neither the securities nor the underlying
motor vehicle loans are insured or guaranteed by the FDIC or any other
governmental authority.
These securities are issued by the trust. The securities are not
obligations of USAA Federal Savings Bank or any of its affiliates.
No one may use this prospectus supplement to offer and sell these
securities unless it is accompanied by the prospectus.
The underwriters are offering the following securities by this prospectus
supplement:
Class A-1 Class A-2 Class A-3 Class B
Notes Notes Notes Certificates
Principal Amount................ $ $ $ $
Per Annum Interest Rate......... % % % %
Final Scheduled Payment Date....
Initial Public Offering Price(1). $ % $ % $ % $ %
Underwriting Discount............ $ % $ % $ % $ %
Proceeds to Seller(1)(2)......... $ % $ % $ % $ %
---------------
(1) The price of the securities will also include interest accrued on the
securities, if any, from _________________.
(2) Before deducting expenses payable by the seller estimated to be
$___________.
The total initial public offering price is $____, the total underwriting
discount is $____ and the total proceeds to seller is $________.
o The trust will pay interest and principal on the securities on the ___th day
of each month. The first payment date will be ________________.
o The trust will pay principal sequentially to the earliest maturing class of
securities then outstanding until paid in full.
o The certificates are subordinated to the notes.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus supplement or the attached prospectus.
Any representation to the contrary is a criminal offense.
[Underwriters]
The date of this prospectus supplement is _____________.
<PAGE>
TABLE OF CONTENTS
READING THESE DOCUMENTS...........................S-3
SUMMARY OF TERMS OF THE SECURITIES................S-4
RISK FACTORS.....................................S-10
THE TRUST........................................S-13
Limited Purpose and Limited Assets............S-13
Capitalization of the Trust...................S-14
The Owner Trustee.............................S-14
THE RECEIVABLES POOL.............................S-14
The Bank's Delinquency, Loan Loss
and Recovery Information.....................S-18
HOW YOU CAN COMPUTE
YOUR PORTION OF THE
AMOUNT OUTSTANDING ON
THE NOTES OR CERTIFICATES.......................S-19
Notes.........................................S-20
Certificates..................................S-20
The Factors Described Above Will
Decline as the Trust Makes Payments
on the Securities............................S-20
MATURITY AND PREPAYMENT CONSIDERATIONS...........S-21
Weighted Average Life of the Securities.......S-23
DESCRIPTION OF THE NOTES.........................S-27
Payments of Interest..........................S-27
Payments of Principal.........................S-28
Optional Prepayment...........................S-28
DESCRIPTION OF THE CERTIFICATES..................S-28
Distributions.................................S-29
Subordination of Certificates.................S-29
Optional Prepayment...........................S-30
APPLICATION OF AVAILABLE FUNDS...................S-30
Sources of Funds of Distributions.............S-30
Priority of Distributions.....................S-31
DESCRIPTION OF THE SALE AND SERVICING AGREEMENT..S-32
Accounts......................................S-32
Servicing Compensation and Expenses...........S-32
Rights Upon Event of Servicing Termination....S-33
Waiver of Past Events of Servicing TerminationS-33
Deposits to the Collection Account............S-33
Reserve Account...............................S-35
CERTAIN FEDERAL INCOME TAX CONSEQUENCES..........S-36
CERTAIN STATE TAX CONSEQUENCES...................S-36
ERISA CONSIDERATIONS.............................S-36
The Notes.....................................S-36
The Certificates..............................S-37
UNDERWRITING.....................................S-38
LEGAL OPINIONS...................................S-40
GLOSSARY OF TERMS................................S-40
PAGE>
READING THESE DOCUMENTS
We provide information on the securities in two documents that offer
varying levels of detail:
1. Prospectus - provides general information, some of which may not apply
to the securities.
2. Prospectus Supplement - provides a summary of the specific terms of
the securities.
We suggest you read this prospectus supplement and the prospectus in
their entirety. The prospectus supplement pages begin with "S". If the terms
of the offered securities described in this prospectus supplement vary with
the accompanying prospectus, you should rely on the information in this
prospectus supplement.
We include cross-references to sections in these documents where you can
find further related discussions. Refer to the table of contents on page S-4
in this document and on page 4 in the prospectus to locate the referenced
sections.
The Glossary of Terms on page S-4 of this prospectus supplement and the
Glossary of Terms on page __ in the prospectus list definitions of certain
terms used in this prospectus supplement or the prospectus.
You should rely only on information on the securities provided in this
prospectus supplement and the prospectus. We have not authorized anyone to
provide you with different information.
In this prospectus supplement, the terms "we," "us" and "our" refer to
USAA Federal Savings Bank.
SUMMARY OF TERMS OF THE SECURITIES
The following summary is a short description of the main terms of the
offering of the securities. For that reason, this summary does not contain all
of the information that may be important to you. To fully understand the terms
of the offering of the securities, you will need to read both this prospectus
supplement and the attached prospectus in their entirety.
Issuer
USAA Auto Owner Trust ____, a Delaware [common law] [statutory business]
trust, will use the proceeds from the issuance and sale of the securities to
purchase from the seller a pool of motor vehicle installment loans which
constitute the receivables. The trust will rely upon collections on the
receivables and the funds on deposit in certain accounts to make payments on
the securities. The trust will be solely liable for the payment of the
securities.
Offered Securities
The following securities are being offered by this prospectus supplement:
$____________ Class A-1 ____% Asset Backed Notes
$____________ Class A-2 ____% Asset Backed Notes
$____________ Class A-3 ____% Asset Backed Notes
$____________ Class B ____% Asset Backed Certificates
Closing Date
The trust expects to issue the securities on __________________.
Seller and Servicer
USAA Federal Savings Bank.
Owner Trustee
------------------.
Indenture Trustee
------------------.
Payment Dates
On the ___th day of each month (or if the ___th day is not a Business Day, the
next Business Day), the trust will pay interest and principal on the
securities.
First Payment Date
The first payment date will be _________________.
Record Dates
On each payment date, the trust will pay interest and principal to the
holders of the securities as of the related record date. The record dates for
the securities will be the day immediately preceding the payment date. If
definitive securities are issued for the securities, the record date will be
the last day of the month immediately preceding the payment date.
Interest Rates
The trust will pay interest on each class of securities at the rates specified
on the cover of this prospectus supplement.
Interest Accrual
Class A-1 Notes
<PAGE>
"Actual/360", accrued from the prior payment (or the closing date, in the case
of the first payment date) to and excluding the current payment date) .
Class A-2 Notes; Class A-3 Notes and Certificates
"30/360", accrued from the 15th day of the previous month (or the closing
date, in the case of the first payment date) to and excluding the 15th day of
the current month.
This means that, if there are no outstanding shortfalls in the payment of
interest, the interest due on each payment date will be the product of:
1. the outstanding principal balance;
2. the interest rate; and
3. [(i) in the case of the Class A-1 Notes:
the actual number of days in the accrual period divided by 360; and
(ii) in the case of the other classes of notes and the certificates:
30 (or in the case of the first payment date, _____) divided by 360.]
For a more detailed description of the payment of interest, refer to the
sections of this prospectus supplement entitled "Description of the Notes --
Payments of Interest" and "Description of the Certificates -- Distributions."
Priority of Distributions
From collections on the receivables received during the prior calendar month
and amounts withdrawn from the reserve account, the trust will pay the
following amounts on each payment date in the following order of priority,
after reimbursement of advances made in prior months by the servicer for
interest payments due from obligors but not received:
(1) Servicing Fee-- the servicing fee payable to the servicer;
(2) Note Interest-- interest due on all the notes ratably to the holders
of each class of notes;
(3) Certificate Interest -- interest distributable to the holders of the
certificates; however, if the notes have been accelerated because of
a failure to pay an amount due on the notes or certain insolvency
events in respect of the trust, this distribution will instead be
made after the notes have been paid in full;
(4) Regular Principal Payment-- An amount equal to the sum of
o the principal collections on the receivables received during
the prior calendar month and
o the aggregate principal balance (net of liquidation proceeds
applied to principal) of all receivables designated as
"defaulted receivables" in that month,
will be applied to pay principal on the securities in the following order
of priority:
(i) on the Class A-1 Notes until they are paid in full;
(ii) on the Class A-2 Notes, until they are paid in full;
(iii) on the Class A-3 Notes until they are paid in full; and
(iv) on the certificates until they are paid in full;
If payment of the notes is accelerated after an event of default due
to breach of a material covenant or agreement by the issuer, all of
the funds remaining after clause (3) will be paid as principal pro
rata on all classes of the notes until they are paid in full and
then will be distributed to the holders of the certificates. If
payment of the notes is accelerated because of a failure to pay an
amount due on the notes or certain insolvency events in respect of
the trust, all of the funds remaining after clause (2) will be paid
as principal pro rata on all classes of notes until they are paid in
full and then will be distributed to the holders of the
certificates, first to pay interest distributable to the holders of
the certificates and, second to pay principal on the certificates
until they are paid in full;
(5) Final Scheduled Payment Date -- if the payment date is a
final scheduled payment date for a class of securities, the amount,
if any, necessary to pay that class in full after giving effect to
the payment pursuant to clause (4) will be paid on that class;
(6) Reserve Account Deposit-- to the reserve account, the amount, if
any, necessary to reinstate the balance of the reserve account up to
its required amount; and
(7) any amounts remaining after the above distributions will be paid to
the seller.
For a more detailed description of the priority of distributions and the
allocation of funds on each payment date, you should refer to "Application of
Available Funds" in this prospectus supplement.
Credit Enhancement
The credit enhancement for the securities will be as follows:
Subordination of Principal and Interest
Payments of interest on the certificates will be subordinated to payments of
interest on the notes, and no payments of principal will be made on the
certificates until the notes have been paid in full. If an event of default
occurs because of a failure to pay an amount due on the notes or certain
insolvency events in respect of the trust and the notes are accelerated, no
payments will be made on the certificates until the notes are paid in full.
Reserve Account
---------------
On the closing date, the trust will deposit $______________ to the reserve
account.
On each payment date, if collections on the receivables are insufficient to
pay the first five items listed in "Priority of Distributions" above, the
indenture trustee will withdraw funds from the reserve account to pay such
amounts.
Generally, the balance required to be on deposit in the reserve account will
be the lesser of (a) __% of the outstanding principal balance of the
receivables and (b) __% of the principal balance of the receivables as of the
Cut-off Date.
On each payment date, the trust will deposit into the reserve account, to the
extent necessary to reinstate the required balance of the reserve account, any
collections on the receivables remaining after the first five items listed in
"Priority of Distributions" above are satisfied.
On each payment date, the trust will distribute funds on deposit in the
reserve account in excess of the required balance to the seller.
For a more detailed description of the deposits to and withdrawals from the
reserve account, you should refer to "Description of the Sale and Servicing
Agreement -- Reserve Account" in this prospectus supplement.
Optional Prepayment
The servicer has the option to purchase the receivables on any payment date on
which the aggregate principal balance of the receivables is ___% or less of
the aggregate principal balance of the receivables at the time they were sold
to the trust. The purchase price will equal the outstanding principal balance
of the receivables plus interest accrued thereon at the weighted average
interest rate borne by the securities. The trust will apply such payment to
the payment of the securities in full.
It is expected that at the time this purchase option becomes available to the
servicer only the Class A-3 Notes and the certificates will be outstanding.
Final Scheduled Payment Dates
The trust is required to pay the entire principal amount of each class of
securities, to the extent not previously paid, on the respective final
scheduled payment dates specified on the cover page of this prospectus
supplement.
Property of the Trust
The property of the trust will include the following:
o the receivables and the collections on the receivables on or after
________;
o security interests in the vehicles financed by the receivables;
o bank accounts; and
o rights to proceeds under insurance policies that cover the
obligors under the receivables or the vehicles financed by the
receivables.
Composition of the Receivables
The composition of the receivables as of ________________ is as follows:
o Aggregate Principal Balance.................... $
o Number of Receivables..........................
o Average Principal Balance...................... $
(Range)........................................ $ to $
o Average Original
Amount Financed................................ $
(Range)........................................ $ to $
o Weighted Average
Contract Rate.................................. %
(Range)........................................ % to % o
Weighted Average
Original Term.................................. months
(Range)........................................ months to
months
o Weighted Average
Remaining Term................................. months
(Range)........................................ month to
months
Servicer of the Receivables
The trust will pay the servicer a servicing fee on each payment date for the
previous month equal to 1/12 of __% of the principal balance of the
receivables at the beginning of the previous month. In addition to the
servicing fee, the trust will also pay the servicer a supplemental servicing
fee equal to any late fees and other administrative fees and expenses, if any,
collected during each month and any reinvestment earnings on any payments
received on the receivables and deposited into the collection account.
Ratings
It is a condition to the issuance of the securities that:
o [the Class A-1 Notes be rated in the highest short-term rating
category by at least two nationally recognized rating agencies;]
o [the Class A-2 Notes and Class A-3 Notes] be rated in the
[highest] long-term rating category by at least [two] nationally
recognized rating agencies; and
o the certificates be rated "____" or its equivalent by at least [two]
nationally recognized rating agencies.
A rating is not a recommendation to purchase, hold or sell the offered notes
and certificates, inasmuch as such rating does not comment as to market price
or suitability for a particular investor. The ratings of the securities
address the likelihood of the payment of principal and interest on the
securities according to their terms. A rating agency rating the securities may
lower or withdraw its rating in the future, in its discretion, as to any class
of the securities.
Minimum Denominations
Notes $1,000 and integral multiples thereof
Certificates $1,000 and integral multiples thereof
Registration, Clearance and Settlement
Notes book-entry through DTC/Clearstream/ Euroclear
Certificates book-entry through DTC
Tax Status
Opinions of Counsel
-------------------
Brown & Wood LLP will deliver its opinion that for federal income tax purposes:
o the notes will be characterized as debt; and
o the trust will not be characterized as an association (or a publicly
traded partnership) taxable as a corporation.
Investor Representations
Notes If you purchase the notes, you agree by your purchase that you
will treat the notes as indebtedness for federal income tax
purposes.
Certificates If you purchase the certificates, you agree by your purchase
that you will treat the trust as a partnership in which the
certificateholders are partners for federal income tax purposes.
Tax-Related Investment Restrictions on Certificates
Certificates The certificates may not be purchased by persons who are not
U.S. Persons for federal income tax purposes.
If you are considering purchasing the certificates, you should refer to
"Certain Federal Income Tax Consequences" in this prospectus supplement and in
the prospectus and "Certain State Tax Consequences" in this prospectus
supplement for more details.
ERISA CONSIDERATIONS
Notes The notes are generally eligible for purchase by employee
benefit plans, subject to the considerations discussed under
"ERISA Considerations" in this prospectus supplement
and the prospectus.
Certificates The certificates may not be acquired by an employee
benefit plan or by an individual retirement account. However,
an insurance company using its general account may acquire the
certificates subject to the considerations discussed under
"ERISA Considerations" in this prospectus supplement and in the
prospectus.
Investor Information -- Mailing Address and Telephone Number
The mailing address of the principal executive offices of USAA Federal Savings
Bank is 10750 McDermott Freeway, San Antonio, Texas 78288. Its telephone
number is (210) 498-2265.
<PAGE>
RISK FACTORS
You should consider the following risk factors in deciding whether to
purchase any of these securities.
Certificates are Subject to Greater
Credit Risk Because the Certificates
are Subordinate to the Notes
The certificates bear greater credit
risk than the notes because payments of
interest and principal on the
certificates are subordinated, to the
extent described below, to payments of
interest and principal on the notes.
Interest payments on the certificates
on each payment date will be
subordinated to interest payments on
the notes and, if the notes have been
accelerated because of a failure to pay
an amount due on the notes or certain
events of insolvency in respect of the
trust, to principal payments on the
notes.
Principal payments on the certificates
will be fully subordinated to principal
payments on the notes since no
principal will be paid on the
certificates until the notes have been
paid in full.
Prepayments and Losses on Your
Securities May Result From an Event of
Default under the Indenture
An event of default under the indenture
may result in
o losses on your notes or certificates
if the receivables are sold and the
sale proceeds, together with any
other assets of the trust, are
insufficient to pay the amounts owed
on the notes and the certificates;
and
o your notes or certificates being
repaid earlier than scheduled, which
may require you to reinvest your
principal at a lower rate of return.
See "The Indenture" in the prospectus.
You May Suffer Losses Because You Have
Limited Control Over Actions of the
Trust and Conflicts Between the
Noteholders and the Certificateholders
May Occur
Because the trust has pledged its
property to the indenture trustee to
secure payment on the notes, the
indenture trustee may, and at the
direction of the holders of the
specified percentage of the notes
will, take one or more of the other
actions specified in the indenture
relating to the property of the
trust, including a sale of the
receivables. Furthermore, the
holders of a majority of the notes,
or the indenture trustee acting on
behalf of the holders of the notes,
under certain circumstances, has the
right to waive Events of Servicing
Termination or to terminate the
servicer as the servicer of the
receivables without consideration of
the effect such waiver or
termination would have on the
holders of the certificates. The
holders of certificates will not
have the ability to waive Events of
Servicing Termination or to remove
the servicer until the notes have
been paid in full.
See "Description of the Receivables
Transfer and Servicing Agreements --
Events of Servicing Termination", "
-- Rights Upon Event of Servicing
Termination" and "-- Waiver of Past
Events of Servicing Termination" in
the prospectus.
Geographic Concentration May Result in
More Risk to You
The servicer's records indicate that
the billing addresses of the obligors
of the receivables as of ________,
were in the following states:
Percentage of
Aggregate
Principal
Balance
[ ].............................. %
[ ].............................. %
[ ].............................. %
[ ].............................. %
No other state, by those billing
addresses, constituted more than 5%
of the balance of the receivables as
of _____________. Economic conditions
or other factors affecting these
states in particular could adversely
affect the delinquency, credit loss
or repossession experience of the
trust.
<PAGE>
THE TRUST
Limited Purpose and Limited Assets
USAA Auto Owner Trust _____-__ is a [common law] [statutory] business trust
formed under the laws of the State of Delaware by a trust agreement dated as
of __________ between USAA Federal Savings Bank (the "Bank") and __________,
as the owner trustee. The trust will not engage in any activity other than:
o acquiring, holding and managing the assets of the trust, including
the receivables, and the proceeds of those assets;
o issuing the securities;
o making payments on the securities; and
o engaging in other activities that are necessary, suitable
or convenient to accomplish any of the other purposes listed above
or are in any way connected with those activities.
The trust will be capitalized by the issuance of the notes and the
certificates. The trust will issue the securities to the order of the seller
in exchange for the seller's transfer of the receivables and an initial
deposit of $_______ into the Reserve Account.
The trust property will also include:
o all monies received on the receivables on or after ___________ (the
"Cut-off Date");
o security interests in the financed vehicles;
o the rights to proceeds, if any, from claims on certain
theft, physical damage, credit life or credit disability insurance
policies, if any, covering the financed vehicles or the obligors;
o the seller's rights to certain documents and instruments relating to
the receivables;
o such amounts as from time to time may be held in the accounts
maintained for the trust;
o certain payments and proceeds with respect to the receivables held
by the servicer;
o certain rebates of premiums and other amounts relating to certain
insurance policies and other items financed under the receivables;
and
o any proceeds of the above items.
If the protection provided to the noteholders by the subordination of the
certificates and to the noteholders and the certificateholders by the Reserve
Account is insufficient, the trust will have to look solely to the obligors on
the receivables and the proceeds from the repossession and sale of the
financed vehicles which secure defaulted receivables. In that event, various
factors, such as the trust not having perfected security interests in the
financed vehicles securing the receivables in all states, may affect the
servicer's ability to repossess and sell the collateral securing the
receivables, and thus may reduce the proceeds which the trust can distribute
to the noteholders and the certificateholders. See "Application of Available
Funds-- Priority of Distributions" and "Description of the Sale and Servicing
Agreement-- Reserve Account" in this prospectus supplement and "Some Important
Legal Issues Relating to the Receivables" in the prospectus.
Capitalization of the Trust
The following table illustrates the capitalization of the trust as of the
closing date, as if the issuance and sale of the notes and the certificates
had taken place on such date:
Class A-1 Notes....................................................... $
Class A-2 Notes.......................................................
Class A-3 Notes.......................................................
Certificates..........................................................
Total................................................................. $
The Owner Trustee
___________ will be the owner trustee under the trust agreement.
_______________is a ________________ and its principal offices are located at
_________________________________. The seller and its affiliates may maintain
normal commercial banking relations with the owner trustee and its affiliates.
THE RECEIVABLES POOL
The trust will own a pool of receivables consisting of motor vehicle
installment loans secured by security interests in the motor vehicles financed
by those contracts. The pool will consist of the receivables which the seller
sells to the trust on the closing date. The receivables will include payments
on the receivables which are made on or after the Cut-off Date.
Criteria Applicable to Selection of Receivables.
The receivables were selected from the seller's portfolio for inclusion
in the pool by several criteria, some of which are set forth in the prospectus
under "The Receivables Pools." These criteria include the requirement that
each receivable:
o has a remaining maturity, as of the Cut-off Date, of at least ____ months
and not more than ___ months;
o with respect to loans secured by new financed vehicles, had an
original maturity of at least ____ months and not more than ____ months;
with respect to loans secured by used financed vehicles, had an original
maturity of at least _____ months and not more than ____ months;
o is a fully-amortizing, fixed rate simple interest loan which provides for
level scheduled monthly payments (except for the last payment, which may
be minimally different from the level payments) over its remaining term
and has a simple interest contract rate (a "Contract Rate") that equals
or exceeds ____% per annum, is not secured by any interest in real
estate, and has not been identified on the computer files of the seller
as relating to an obligor who had requested a reduction in the periodic
finance charges, as of the Cut-off Date, by application of the Soldiers'
and Sailors' Civil Relief Act of 1940, as amended;
o is secured by a financed vehicle that, as of the Cut-off Date, had not
been repossessed without reinstatement;
o has not been identified on the computer files of the seller as relating
to an obligor who was in bankruptcy proceedings as of the Cut-off Date;
o has no payment more than ____ days past due as of the Cut-off Date; and
o has a remaining principal balance, as of the Cut-off Date, of at least
$___________.
The receivables were selected from the seller's portfolio of installment
loans for new and used vehicles, in each case meeting the criteria described
above and in the prospectus. No selection procedures believed by the seller to
be adverse to the securityholders were utilized in selecting the receivables.
No receivable has a scheduled maturity later than ____________________ .
The composition of the receivables as of the Cut-off Date is as follows:
o Aggregate Principal
Balance.............................................. $
o Number of
Receivables..........................................
o Average Principal
Balance.............................................. $
(Range)............................................. $ to $
o Average Original
Amount Financed...................................... $
(Range)............................................. $ to $
o Weighted Average
Contract Rate........................................ %
(Range)............................................. % to %
o Weighted Average
Original Term........................................ months
(Range)............................................. months to months
o Weighted Average
Remaining Term....................................... months
(Range)............................................. months to months
o Percentage of Aggregate Principal
Balance of Receivables for
New/Used Vehicles.................................... % / %
The geographical distribution and distribution by Contract Rate of the
receivables as of the Cut-off Date are set forth in the following tables.
<TABLE>
<CAPTION>
Geographic Distribution of the Receivables as of the Cut-off Date
Percentage Percentage
of of
Number Aggregate Aggregate
of Principal Principal Number of Principal Principal
State (1) Receivable Balance Balance(2) State(1) Receivables Balance Balance (2)
<S> <C> <C> <C> <C> <C> <C> <C>
Alabama................. Montana...........
Alaska.................. Nebraska..........
Arizona................. Nevada............
Arkansas................ New Hampshire.....
California.............. New Jersey........
Colorado................ New Mexico........
Connecticut............. New York..........
Delaware................ North Carolina....
District of Columbia.... North Dakota......
Florida................. Ohio..............
Georgia................. Oklahoma..........
Hawaii.................. Oregon............
Idaho................... Pennsylvania......
Illinois................ Rhode Island......
Indiana................. South Carolina....
Iowa.................... South Dakota......
Kansas.................. Tennessee.........
Kentucky................ Texas.............
Louisiana............... Utah..............
Maine................... Vermont...........
Maryland................ Virginia..........
Massachusetts........... Washington........
Michigan................ West Virginia.....
Minnesota............... Wisconsin.........
Mississippi............. Wyoming...........
Missouri................
--------------
(1) Based on the billing addresses of the obligors as of the Cut-off Date.
(2) May not add to 100% due to rounding.
</TABLE>
Distribution by Contract Rate of the Receivables as of the Cut-off Date
<TABLE>
<CAPTION>
Percentage of
Aggregate
Number of Principal
Contract Rate Receivables Principal Balance Balance (1)
<S> <C> <C> <C>
1.90 to 1.99%..................................
2.00 to 2.49...................................
2.50 to 2.99...................................
3.00 to 3.49...................................
3.50 to 3.99...................................
4.00 to 4.49...................................
4.50 to 4.99...................................
5.00 to 5.49...................................
5.50 to 5.99...................................
6.00 to 6.49...................................
6.50 to 6.99...................................
7.00 to 7.49...................................
7.50 to 7.99...................................
8.00 to 8.49...................................
8.50 to 8.99...................................
9.00 to 9.49...................................
9.50 to 9.99...................................
10.00 to 10.49.................................
10.50 to 10.99.................................
11.00 to 11.49.................................
11.50 to 11.99.................................
12.00 to 12.49.................................
12.50 to 12.99.................................
13.00 to 13.49.................................
13.50 to 13.99.................................
14.00 to 14.49.................................
14.50 to 14.99.................................
15.00 to 15.49.................................
15.50 to 15.99.................................
16.00 to 16.49.................................
16.50 to 16.99.................................
17.00 to 17.49.................................
17.50 to 17.99.................................
18.00 to 18.49.................................
18.50 to 18.99.................................
19.00 to 19.49.................................
19.50 to 19.99.................................
20.00..........................................
Totals.........................................
--------------
(1) May not add to 100.00% due to rounding.
</TABLE>
The Bank's Delinquency, 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 following tables also include information with respect to certain
consumer loans which are not motor vehicle loans. These other consumer loans
did not exceed 15% of outstandings as of each of the dates shown in the
following tables. The Bank believes that the inclusion of variable rate motor
vehicle loans and these consumer 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 on its fixed
rate motor vehicle loans.
Delinquency Experience
At March 31,
-----------------------------------------------
2000 1999
-------------------- -----------------------
Dollars Number Dollars Number
(in of (in of
000s) Loans 000s) Loans
---------- ------- ---------- --------
Outstandings $3,803,288 293,369 $3,039,670 247,940
Delinquencies over
30 days(1)(2) $14,967 1,519 $12,852 1,332
Delinquencies over
30 days (%)(3) 0.39% 0.52% 0.42% 0.54%
<TABLE>
<CAPTION>
At December 31,
---------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
-------------------- --------------------- --------------------- -------------------- ---------------------
Dollars Number Dollars Number Dollars Number Dollars Number Dollars Number
(in 000s) of Loans (in 000s) of Loans (in 000s) of Loans (in 000s) of Loans (in 000s) of Loans
---------- -------- ---------- -------- ---------- -------- ---------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Outstandings...... $3,661,825 283,810 $2,802,144 234,281 $2,076,318 186,560 $1,687,922 159,812 $1,454,843 145,246
Delinquencies over
30 days(1)(2)..... $16,927 1,689 $12,297 1,366 $7,028 871 $8,634 1,082 $4,910 580
Delinquencies over
30 days (%)(3).... 0.46% 0.60% 0.44% 0.58% 0.34% 0.47% 0.51% 0.68% 0.34% 0.40%
(1) Delinquencies include principal amounts only.
(2) The period of delinquency is based on the number of days payments are contractually past due.
(3) As a percent of outstandings.
</TABLE>
Loan Loss Experience
Three Months
Ended March 31,
--------------------
2000 1999
---- ----
(Dollars in 000s)
Number of Loans(1) .......................... 293,369 247,940
Period Ending Outstandings................... $3,803,288 $3,039,670
Average Outstandings(2) ..................... $3,678,477 $2,883,185
Number of Gross Charge-Offs ................. 386 324
Gross Charge-Offs(3)......................... $4,774 $3,604
Gross Charge-Offs as a % of Period End
Outstandings(4).............................. 0.50% 0.48%
Gross Charge-Offs as a % of Average
Outstandings(4).............................. 0.52% 0.51%
Recoveries(5)................................ $2,319 $1,490
Net Charge-Offs(6)........................... $2,455 $2,113
Net Charge-Offs as a % of Period End
Outstandings(4).............................. 0.26% 0.28%
Net Charge-Offs as a % of Average
Outstandings(4).............................. 0.27% 0.30%
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
(Dollars in 000s)
<S> <C> <C> <C> <C> <C>
Number of Loans(1) .......................... 283,810 234,281 186,560 159,812 145,246
Period Ending Outstandings................... $3,661,825 $2,802,144 $2,076,318 $1,687,922 $1,454,843
Average Outstandings(2) ..................... $3,281,001 $2,375,294 $1,867,280 $1,527,686 $1,298,116
Number of Gross Charge-Offs ................. 1,438 874 797 805 422
Gross Charge-Offs(3)......................... $16,066 $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................................. 0.49% 0.39% 0.33% 0.27% 0.17%
Recoveries(5)................................ $7,296 $4,856 $2,158 $1,068 $683
Net Charge-Offs(6)........................... $8,770 $4,455 $3,999 $3,063 $1,560
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................................. 0.27% 0.19% 0.21% 0.20% 0.12%
----------
(1) Number of loans as of period end.
(2) 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 the loans sold and serviced by the Bank
for each period presented.
(3) 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.
(4) Percentages have been annualized for the three months ended March 31
and are not necessarily indicative of the experience for the
entire year.
(5) Recoveries are not net of expenses and generally include
amounts received with respect to loans previously charged off. Prior
to July 1997, the proceeds realized in connection with the sale of
the financed vehicles are not included in recoveries.
(6) Net charge-offs means gross charge-offs minus recoveries of loans
previously charged off.
</TABLE>
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. The mix of the credit quality
of the obligors will vary from time to time and will affect losses and
delinquencies. We cannot assure you that the delinquency and loan loss
information of the Bank, or that of the trust with respect to its receivables,
in the future will be similar to that set forth above.
HOW YOU CAN COMPUTE YOUR PORTION OF THE AMOUNT
OUTSTANDING ON THE NOTES OR CERTIFICATES
The servicer will provide to you in each report which it will deliver
to you a factor which you can use to compute your portion of the principal
amount outstanding on the notes or certificates.
Notes
How the Servicer Computes the Factor For Your Class of Notes. The
servicer will compute a separate factor for each class of notes. The factor
for each class of notes will be a seven-digit decimal which the servicer will
compute prior to each distribution with respect to such class of notes
indicating the remaining outstanding principal amount of such class of notes,
as of the applicable payment date. The servicer will compute the factor after
giving effect to payments to be made on such payment date, as a fraction of
the initial outstanding principal amount of such class of notes.
Your Portion of the Outstanding Amount of the Notes. For each note
you own, your portion of that class of notes is the product of:
o the original denomination of your note; and
o the factor relating to your class of notes computed by the servicer in
the manner described above.
Certificates
How the Servicer Computes the Factor For The Certificates. The
servicer will compute a separate factor for the certificates. The factor for
the certificates will be a seven-digit decimal which the servicer will compute
prior to each distribution with respect to the certificates indicating the
remaining certificate balance of the certificates, as of the applicable
payment date. The factor will be calculated after giving effect to
distributions to be made on such payment date, as a fraction of the initial
certificate balance of the certificates.
Your Portion of the Outstanding Amount of the Certificates. For each
certificate you own, your portion of the certificates is the product of:
o the original denomination of your certificate; and
o the factor relating to the certificates computed by the servicer in
the manner described above.
The Factors Described Above Will Decline as the Trust Makes Payments on the
Securities
Each of the factors described above will initially be 1.0000000. They
will then decline to reflect reductions, as applicable, in:
o the outstanding principal amount of the applicable class of notes; or
o the outstanding certificate balance of the certificates.
These amounts will be reduced over time as a result of scheduled
payments, prepayments, purchases of the receivables by the seller or the
servicer and liquidations of the receivables.
MATURITY AND PREPAYMENT CONSIDERATIONS
Information regarding certain maturity and prepayment considerations
with respect to the securities is set forth under "Maturity and Prepayment
Considerations" in the prospectus. In addition, no principal payments will be
made:
o on the Class A-2 Notes until the Class A-1 Notes have been paid in
full;
o on the Class A-3 Notes until the Class A-2 Notes have been paid in
full; or
o on the certificates until the Class A-3 Notes have been paid in full.
However, if the notes are accelerated after an Event of Default, principal
payments will be applied pro rata all classes of the notes. See "Application
of Available Funds" in this prospectus supplement.
Since the rate of payment of principal of each class of notes and the
certificates depends on the rate of payment (including prepayments) of the
principal balance of the receivables, final payment of any class of notes and
the final distribution in respect of the certificates could occur
significantly earlier than the respective Final Scheduled Payment Dates.
We Cannot Assure You That Your Securities Will Be Repaid on the
related Final Scheduled Payment Date. It is expected that final payment of
each class of notes and the final distribution in respect of the certificates
will occur on or prior to the respective Final Scheduled Payment Dates.
Failure to make final payment of any class of notes by the respective Final
Scheduled Payment Dates would constitute an Event of Default under the
indenture. See "The Indenture -- Rights upon Event of Default" in the
prospectus. In addition, the remaining certificate balance of the certificates
is required to be paid in full on or prior to its Final Scheduled Payment
Date. However, we cannot assure you that sufficient funds will be available to
pay each class of notes and the certificates in full on or prior to the
respective Final Scheduled Payment Dates. If sufficient funds are not
available, final payment of any class of notes and the final distribution in
respect of the certificates could occur later than such dates.
The Level of Prepayments of the Receivables and Required Purchases by
the Seller and the Servicer are Unpredictable and May Affect Payments on the
Securities. The rate of prepayments of the receivables may be influenced by a
variety of economic, social and other factors. In addition, under
circumstances relating to breaches of representations, warranties or
covenants, the seller and/or the servicer may be obligated to purchase
receivables from the trust. See "The Receivables Pool" in this prospectus
supplement and "Description of the Receivables Transfer and Servicing
Agreements -- Sale and Assignment of Receivables" in the prospectus. A higher
than anticipated rate of prepayments will reduce the aggregate principal
balance of the receivables more quickly than expected and thereby reduce the
outstanding amounts of the securities and the anticipated aggregate interest
payments on the securities. The noteholders and the certificateholders alone
will bear any reinvestment risks resulting from a faster or slower incidence
of prepayment of receivables as set forth in the priority of distributions in
this prospectus supplement. Such reinvestment risks include the risk that
interest rates may be lower at the time such holders received payments from
the trust than interest rates would otherwise have been had such prepayments
not been made or had such prepayments been made at a different time.
Risks of slower or faster repayments. Noteholders and
certificateholders should consider:
o in the case of notes or certificates purchased at a discount,
the risk that a slower than anticipated rate of principal payments on the
receivables could result in an actual yield that is less than the
anticipated yield; and
o in the case of notes or certificates purchased at a premium, the
risk that a faster than anticipated rate of principal payments on the
receivables could result in an actual yield that is less than the
anticipated yield.
Weighted Average Life of the Securities
The following information is given solely to illustrate the effect of
prepayments of the receivables on the weighted average life of the securities
under the stated assumptions and is not a prediction of the prepayment rate
that might actually be experienced by the receivables.
Prepayments on motor vehicle receivables can be measured relative to
a prepayment standard or model. The model used in this prospectus supplement,
the Absolute Prepayment Model ("ABS"), represents an assumed rate of
prepayment each month relative to the original number of receivables in a pool
of receivables. ABS further assumes that all the receivables are the same size
and amortize at the same rate and that each receivable in each month of its
life will either be paid as scheduled or be prepaid in full. For example, in a
pool of receivables originally containing 10,000 receivables, a 1% ABS rate
means that 100 receivables prepay each month. ABS does not purport to be a
historical description of prepayment experience or a prediction of the
anticipated rate of prepayment of any pool of assets, including the
receivables.
The rate of payment of principal of each class of notes and the
certificates will depend on the rate of payment (including prepayments) of the
principal balance of the receivables. For this reason, final payment of any
class of notes and the final distribution in respect of the certificates could
occur significantly earlier than the respective Final Scheduled Payment Dates.
The noteholders and the certificateholders will exclusively bear any
reinvestment risk associated with early payment of their notes and
certificates.
The table (the "ABS Table") captioned "Percent of Initial Note
Principal Amount or Initial Certificate Balance at Various ABS Percentages"
has been prepared on the basis of the characteristics of the receivables. The
ABS Table assumes that :
o the receivables prepay in full at the specified constant percentage of
ABS monthly, with no defaults, losses or repurchases;
o each scheduled monthly payment on the receivables is made on the last
day of each month and each month has 30 days;
o payments on the notes and the certificates are made on each payment
date (and each payment date is assumed to be the fifteenth day of the
applicable month);
o the balance in the Reserve Account on each payment date is equal to
the Specified Reserve Balance; and
o the servicer does not exercise its option to purchase the receivables.
The ABS Table indicates the projected weighted average life of each
class of notes and the certificates and sets forth the percent of the initial
principal amount of each class of notes and the percent of the initial
certificate balance of the certificates that is projected to be outstanding
after each of the payment dates shown at various constant ABS percentages.
The ABS Table also assumes that the receivables have been aggregated
into hypothetical pools with all of the receivables within each such pool
having the following characteristics and that the level scheduled monthly
payment for each of the pools (which is based on its aggregate principal
balance, contract rate of interest, original term to maturity and remaining
term to maturity as of the cut-off date) will be such that each pool will be
fully amortized by the end of its remaining term to maturity. The pools have
an assumed cut-off date of _______________________.
<TABLE>
<CAPTION>
Contract Original Term
Aggregate Rate of to Maturity Remaining Term to
Pool Principal Balance Interest (In Months) Maturity (In Months)
------------------------------ ----------------- -------- -------------- --------------------
<S> <C> <C> <C> <C>
1.............................
2.............................
3.............................
4.............................
5.............................
6.............................
7.............................
8.............................
9.............................
10............................
11............................
12............................
13............................
14............................
15............................
16............................
17............................
18............................
</TABLE>
The actual characteristics and performance of the receivables will
differ from the assumptions used in constructing the ABS Table. The
assumptions used are hypothetical and have been provided only to give a
general sense of how the principal cash flows might behave under varying
prepayment scenarios. For example, it is very unlikely that the receivables
will prepay at a constant level of ABS until maturity or that all of the
receivables will prepay at the same level of ABS. Moreover, the diverse terms
of receivables within each of the hypothetical pools could produce slower or
faster principal distributions than indicated in the ABS Table at the various
constant percentages of ABS specified, even if the original and remaining
terms to maturity of the receivables are as assumed. Any difference between
such assumptions and the actual characteristics and performance of the
receivables, or actual prepayment experience, will affect the percentages of
initial amounts outstanding over time and the weighted average lives of each
class of notes and the certificates.
<TABLE>
<CAPTION>
Percent of Initial Note Principal Amount at Various ABS Percentages
Class A-1 Notes Class A-2 Notes Class A-3 Notes
--------------------------- ---------------------------- ---------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Payment Date % % % % % % % % % % % %
--------------- --- --- --- --- --- --- --- --- --- --- --- ---
...............
...............
...............
...............
...............
...............
...............
...............
...............
...............
...............
...............
...............
...............
...............
...............
...............
...............
...............
...............
...............
...............
...............
...............
...............
...............
...............
...............
...............
...............
...............
...............
...............
...............
...............
...............
...............
...............
...............
...............
...............
...............
...............
...............
Weighted Average
Life(1)........
Weighted Average
Life to Call
(1)(2)
Optional Call
Date
----------
(1) The weighted average life of a note is determined by (a)
multiplying the amount of each principal payment on a note by the number
of years from the date of the issuance of the note to the related payment
date, (b) adding the results and (c) dividing the sum by the related
initial principal amount of the note.
(2) This calculation assumes the servicer purchases the receivables on the
earliest payment date on which it is permitted to do so.
</TABLE>
The ABS Table has been prepared based on the assumptions described
above (including the assumptions regarding the characteristics and performance
of the receivables which will differ from the actual characteristics and
performance thereof) and should be read in conjunction therewith.
Percent of Initial
Certificate Balance at Various ABS Percentages
Class B Certificates
-----------------------------------
Payment Date % % % %
---------------------------- --- --- --- ---
............................
............................
............................
............................
............................
............................
............................
............................
............................
............................
............................
............................
............................
............................
............................
............................
............................
............................
............................
............................
............................
............................
............................
............................
............................
............................
............................
............................
............................
............................
............................
............................
............................
............................
............................
............................
............................
............................
............................
Weighted Average Life(1)....
Weighted Average Life to Call
(1)(2)
Optional Call Date
-----------------------------
(1) The weighted average life of a certificate is determined by (a)
multiplying the amount of each principal payment on a certificate by the
number of years from the date of the issuance of the certificate to the
related payment date, (b) adding the results and (c) dividing the sum by
the related initial certificate balance of the certificate.
(2) This calculation assumes that the servicer purchases the
receivables on the first payment date on which it is permitted to do so.
The ABS Table has been prepared based on the assumptions described
above (including the assumptions regarding the characteristics and performance
of the receivables which will differ from the actual characteristics and
performance thereof) and should be read in conjunction therewith.
DESCRIPTION OF THE NOTES
The trust will issue the notes under an indenture to be dated as of
_______________ between the trust and _____________, as indenture trustee. We
will file a copy of the indenture in its execution form with the SEC
after the trust issues the notes. We summarize below some of the most
important terms of the notes. This summary is not a complete description of
all the provisions of the notes and the indenture. The following summary
supplements the description of the general terms and provisions of the notes
of any trust and the related indenture set forth under the headings "Certain
Information Regarding the Securities" and "The Indenture" in the prospectus.
We refer you to those sections.
Payments of Interest
Interest on the principal amounts of the notes will accrue at the
respective per annum interest rates for the various classes of notes and will
be payable to the noteholders on each payment date. The trust will make
payments to the noteholders as of each Record Date.
Calculation of interest. Interest will accrue and will be calculated
on the various classes of notes as follows:
[o Actual/360. Interest on the Class A-1 Notes will accrue from and
including the prior payment date (or the closing date, in the case of the
first payment date) to but excluding the current payment date and be
calculated on the basis of actual days elapsed and a 360-day year.]
o 30/360. Interest on the Class A-2 Notes and Class A-3 Notes will
accrue from and including the th day of the previous month (or the
closing date, in the case of the first payment date) to but excluding the
th of the current month and be calculated on the basis of a 360-day year
of twelve 30-day months.
o Unpaid Interest. Interest accrued as of any payment date but not
paid on such payment date will be due on the next payment date, together
with interest on such amount at the applicable interest rate (to the
extent lawful).
Priority of Interest Payments. The trust will pay interest on the
notes (without priority among the classes of notes) on each payment date with
available funds in accordance with the priority set forth under "Application
of Available Funds" in this prospectus supplement.
The Trust Will Pay Interest Pro Rata to Noteholders if it Does Not
Have Enough Funds Available to Pay All Interest Due on the Notes. The amount
available for interest payments on the notes could be less than the amount of
interest payable on the notes on any payment date. In that event, the holders
of each class of notes will receive their ratable share of the aggregate
amount available to be distributed in respect of interest on the notes. Each
such class' ratable share of the amount available to pay interest will be
based on the amount of interest due on such class relative to the total amount
of interest due to the noteholders.
Payments of Principal
Priority and Amount of Principal Payments. The trust will generally
make principal payments to the noteholders on each payment date in the amount
and in the priority set forth under "Application of Available Funds" in this
prospectus supplement.
Event of Default. An Event of Default will occur under the indenture
if the outstanding principal amount of any note has not been paid in full on
its Final Scheduled Payment Date. The failure to pay principal of a note is
not an Event of Default until its Final Scheduled Payment Date. Payments on
the notes may be accelerated upon an Event of Default. Upon an acceleration of
the notes, payments of principal will be made pro rata to the holders of each
class of notes. Upon an acceleration of the notes because of a failure to make
a payment due on the notes or certain insolvency events in respect of the
trust, the priority in which the trust makes distributions to the noteholders
and certificateholders will change such that interest payments on the
certificates will not be made until the notes are paid in full.
Notes Might Not Be Repaid on Their Final Scheduled Payment Dates. The
principal balance of any class of notes to the extent not previously paid will
be due on the Final Scheduled Payment Date relating to that class shown on the
cover of this prospectus supplement. The actual date on which the aggregate
outstanding principal amount of any class of notes is paid may be earlier or
later than the Final Scheduled Payment Date for that class of notes based on a
variety of factors, including those described under "Maturity and Prepayment
Considerations" in this prospectus supplement and in the prospectus.
Optional Prepayment
All outstanding notes will be prepaid in whole, but not in part, on
any payment date on which the servicer exercises its option to purchase the
receivables. The servicer may purchase the receivables when aggregate
principal balance of the receivables has declined to __% or less of the
aggregate principal balance of the receivables as of the Cut-off Date, as
described in the prospectus under "Description of the Receivables Transfer and
Servicing Agreements -- Termination." Upon such purchase by the servicer, you
will receive:
o the unpaid principal amount of your notes plus accrued and unpaid
interest on your notes; plus
o interest on any past due interest at the rate of interest on your
notes (to the extent lawful).
DESCRIPTION OF THE CERTIFICATES
The trust will issue the certificates under the trust agreement. We
will file a copy of the trust agreement with the SEC after the trust issues
the certificates. We summarize below some of the most important terms of the
certificates. This summary is not a complete description of all the provisions
of the trust agreement and the certificates. The following summary is a
supplement to the description of the general terms and provisions of the
certificates of any given trust and the related trust agreement provided under
the headings "Certain Information Regarding the Securities" and "Description
of the Receivables Transfer and Servicing Agreements" in the prospectus. We
refer you to those sections.
Distributions
Interest. On each payment date, commencing _____________ , the
certificateholders will be entitled to receive the amount of interest that
accrues on the certificate balance at the applicable rate of interest set
forth on the cover page of this prospectus supplement.
Interest will accrue:
o in the case of the first payment date, from and including the
closing date to but excluding the ____th day of the following
calendar month; or
o otherwise, from and including the ____ th day of the calendar
month preceding the payment date to but excluding the ____ th day
of the calendar month of that payment date.
Interest is Calculated 30/360. Interest on the certificates will be
calculated on the basis of a 360-day year of twelve 30-day months.
Unpaid Interest Accrues. Interest distributions due for any payment
date but not distributed on such payment date will be due on the next payment
date increased by an amount equal to interest on such amount at the rate of
interest on the certificates (to the extent lawful).
Distributions on Certificates. The trust will make distributions on
the certificates in the amounts and in the priority set forth under
"Application of Available Funds" in this prospectus supplement.
Certificateholders will not receive any distributions of principal until the
notes are paid in full. Following the acceleration of the notes because of a
failure to make a payment due on the notes or certain insolvency events in
respect of the trust, the noteholders will be entitled to be paid interest and
all principal in full before any distributions may be made on the
certificates.
The outstanding certificate balance of the certificates will be
payable in full on the Final Scheduled Payment Date for the certificates. The
actual date on which the trust pays the certificate balance of the
certificates may be earlier or later than that Final Scheduled Payment Date,
based on a variety of factors, including those described under "Maturity and
Prepayment Considerations" in this prospectus supplement and in the
prospectus.
Subordination of Certificates
The rights of the certificateholders to receive distributions of
interest are subordinated to the rights of noteholders to receive payments of
interest and, if the notes have been accelerated because of failure to make a
payment due on the notes or certain insolvency events in respect of the trust,
principal. In addition, the certificateholders will have no right to receive
distributions of principal until the aggregate principal amount of all the
notes has been paid in full. This subordination is effected by the priority of
distributions set forth under "Application of Available Funds" in this
prospectus supplement.
Optional Prepayment
If the servicer exercises its option to purchase the receivables when
the aggregate principal balance of the receivables declines to __% or less of
the aggregate principal balance of the receivables as of the Cut-off Date, you
will receive an amount in respect of your certificates equal to the sum of:
o the outstanding certificate balance of your certificates together
with accrued and unpaid interest at the rate of interest for the
certificates; and
o interest on any past due interest at the rate of interest for the
certificates, to the extent lawful.
That distribution will cause the early retirement of your
certificates. See "Description of the Receivables Transfer and Servicing
Agreements -- Termination" in the prospectus.
APPLICATION OF AVAILABLE FUNDS
Sources of Funds for Distributions
The funds available to the trust to make payments on the securities
on each payment date will come from the following sources:
o collections received on the receivables during the prior calendar
month,
o net recoveries received during the prior calendar month on
receivables that were charged off as losses in prior months,
o the aggregate amount of Advances remitted by the servicer,
o proceeds of repurchases of receivables by the seller or purchases
of receivables by the servicer because of certain breaches of
representations or covenants, and
o funds, if any, withdrawn from the Reserve Account for that
payment date.
The precise calculation of the funds available to make payments on
the securities is in the definition of Available Funds in the section
"Glossary of Terms". We refer you to that definition. Among other things,
Available Funds are calculated net of (i) reimbursements of outstanding
Advances to the servicer and (ii) payments to the servicer of various fees, if
any, paid by the obligors that constitute the Supplemental Servicing Fee. See
"Description of the Receivables Transfer and Servicing Agreements -- Advances"
and " -- Servicing Compensation and Expenses" in the prospectus.
Priority of Distributions
On each payment date the trust will apply the Available Funds for
that payment date in the following amounts and order of priority:
(1) Servicing Fee-- the Servicing Fee payable to the servicer;
(2) Note Interest-- interest due on all the notes ratably to the
holders of each class of notes;
(3) Certificate Interest -- interest distributable to the holders of
the certificates; however, if an Event of Default due to a
failure to make a payment due on the notes or certain insolvency
events in respect of the trust has occurred and the notes have
been accelerated, interest will not be distributed to the holders
of the certificates until the notes are paid in full;
(4) Principal Payment -- An amount equal to the sum of (i) the
principal collections on the receivables received during the
prior calendar month and (ii) the aggregate principal balance
(net of liquidation proceeds received during that month applied
to principal) of all receivables designated as "defaulted
receivables" in that month will be applied to pay principal on
the securities in the following order of priority:
(i) the Class A-1 Notes until they are paid in full; and
(ii) the Class A-2 Notes until they are paid in full;
(iii) the Class A-3 Notes until they are paid in full; and
(iv) the certificates until they are paid in full;
however, (a) if the notes are accelerated after an Event of
Default due to a breach of a material covenant or agreement by
the issuer, the Available Funds remaining after clause (3) will
be applied to pay principal pro rata on all classes of the notes
until they are paid in full and then to distribute interest and
principal on the certificates until they are paid in full and (b)
if the notes are accelerated after an Event of Default due to a
failure to make a payment due on the notes or certain insolvency
events in respect of the trust, the Available Funds remaining
after clause (2) will be applied to pay principal pro rata on all
classes of notes until they are paid in full and then to
distribute interest and principal on the certificates until they
are paid in full;
(5) Final Scheduled Payment Date -- if the payment date is a Final
Scheduled Payment Date for a class of securities, the amount, if
any, necessary to pay that class in full after giving effect to
the payment pursuant to clause (4) will be paid on that class;
(6) Reserve Account Deposit -- to the Reserve Account, the amount, if
any, necessary to reinstate the balance of the Reserve Account up
to the Specified Reserve Balance;
(7) Indenture Trustee Fees and Expenses-- to pay any unpaid fees and
expenses of the indenture trustee; and
(8) any amounts remaining after the above distributions shall be paid
to the seller.
If the Available Funds are insufficient to make the payments in clauses (1)
through (5), funds, if any, on deposit in the Reserve Account will be applied
to cover those shortfalls. See "Description of the Sale and Servicing
Agreement -- Deposits to the Collection Account".
A receivable will be designated as a "defaulted receivable" when the
servicer determines that it is unlikely to be paid in full or when at least 5%
of a scheduled payment is 120 or more days delinquent.
DESCRIPTION OF THE SALE
AND SERVICING AGREEMENT
We have summarized below some of the important terms of the sale and
servicing agreement. We will file a copy of the sale and servicing agreement
with the SEC after we issue the securities. This summary is not a complete
description of all of the provisions of the sale and servicing agreement. You
can find more information about the transfer of the receivables from the
seller to the trust on the closing date in the prospectus under "Description
of the Receivables Transfer and Servicing Agreements".
Accounts
In addition to the Collection Account, the servicer will cause to be
established:
o one or more distribution accounts for the benefit of the
noteholders;
o one or more distribution accounts for the benefit of the
certificateholders; and
o the Reserve Account in the name of the indenture trustee on
behalf of the noteholders and the certificateholders.
Any of the distribution accounts may be a subaccount of the Collection
Account.
Servicing Compensation and Expenses
The servicer is entitled to receive the Servicing Fee on each payment
date. The Servicing Fee, together with any portion of the Servicing Fee that
remains unpaid from prior payment dates, will be payable on each payment date.
The Servicing Fee will be paid only to the extent of the funds deposited in
the Collection Account with respect to the Collection Period preceding such
payment date, plus funds, if any, deposited into the Collection Account from
the Reserve Account. The servicer also is entitled to receive the Supplemental
Servicing Fee. See "Description of the Receivables Transfer and Servicing
Agreements -- Servicing Compensation and Expenses" in the prospectus.
Rights Upon Event of Servicing Termination
If an Event of Servicing Termination occurs, the indenture trustee or
holders of not less than a majority of the principal amount of the notes (or,
if no notes are outstanding, a majority of the certificate balance of the
certificates) may remove the servicer without the consent of any of the other
securityholders.
Waiver of Past Events of Servicing Termination
If an Event of Servicing Termination occurs, holders of not less than
a majority of the principal amount of the notes (or, if no notes are
outstanding, a majority of the certificate balance of the certificates),
subject to the exceptions provided in the sale and servicing agreement, may
waive any Event of Servicing Termination except for a failure to make any
required deposits to or payments from any account, without the consent of any
of the other securityholders. The certificateholders will not have the right
to determine whether any Event of Servicing Termination should be waived until
the notes have been paid in full.
Deposits to the Collection Account
The servicer will establish the Collection Account as described under
"Description of the Receivables Transfer and Servicing Agreements" in the
prospectus. In general, the servicer will be permitted to retain collections
on the receivables until the Business Day preceding any payment date. However,
the servicer will be required to remit collections received with respect to
the receivables not later than the second Business Day after receipt to the
Collection Account (1) if there is an Event of Servicing Termination, (2) if
the Bank is no longer the servicer or (3) if one of the other conditions set
forth in the sale and servicing agreement is not met.
On or before the payment date, the servicer will cause all
collections on receivables, Advances by the servicer and other amounts
constituting Available Funds to be deposited into the Collection Account. See
"Description of Receivables Transfer and Servicing Agreements -- Collections"
and "-- Advances" in the prospectus.
On or before each payment date, the servicer will notify the
indenture trustee to withdraw the following amounts from the Reserve Account
and deposit them into the Collection Account. In each case, the amount will be
withdrawn only to the extent of funds in the Reserve Account after giving
effect to all prior withdrawals. The amounts to be withdrawn from the Reserve
Account are:
o the amount, if any, by which (a) the Total Required Payment
exceeds (b) the Available Funds for that payment date; and
o the Reserve Account Excess Amount.
The "Total Required Payment" on any payment date, will be the sum of:
(1) the Servicing Fee and all unpaid Servicing Fees from prior
Collection Periods;
(2) all interest payable on the notes, including any accrued interest
and interest on accrued interest;
(3) all interest distributable on the certificates, including any
accrued interest and interest on accrued interest;
(4) the sum of (i) all principal collected on the receivables during
the related Collection Period and (ii) the aggregate principal
balance (net of liquidation proceeds received during that
Collection Period applied to principal) of all receivables that
were designated as defaulted receivables during that Collection
Period; and
(5) if the payment date is a Final Scheduled Payment Date for a class
of securities, the amount, if any, required to reduce the
principal balance of that class of securities to zero after
giving effect to the amount in clause (4) under "Priority of
Distributions" in this prospectus supplement.
However, following the acceleration of the notes after the occurrence of an
Event of Default due to a failure to pay an amount due on the notes or certain
insolvency events in respect of the trust, the Total Required Payment will
equal the sum of:
o the Servicing Fee and all unpaid Servicing Fees from prior
Collection Periods;
o all interest payable on the notes, including any accrued interest
thereon;
o the amount necessary to reduce the outstanding principal amount
of all the notes to zero;
o all interest payable on the certificates, including any accrued
interest thereon; and
o the amount necessary to reduce the outstanding principal amount
of the certificates to zero.
Consequently, if the notes are accelerated for any of those reasons,
certificateholders will not receive any distributions until the notes are paid
in full. Also, funds on deposit in the Reserve Account will be applied solely
toward payment of the notes until the notes are paid in full.
The "Reserve Account Excess Amount", with respect to any payment
date, will be the amount equal to the excess, if any, of:
o the amount of cash or other immediately available funds in the
Reserve Account on that payment date, prior to giving effect to
any withdrawals from the Reserve Account relating to that payment
date, over
o the Specified Reserve Balance with respect to that payment date.
The "Specified Reserve Balance" will be the lesser of (a) __% of the
outstanding principal balance of the receivables and (b) __% of the principal
balance of the receivables as of the Cut-off Date.
Servicer Will Provide Information to Indenture Trustee. On the
Business Day prior to each payment date, the servicer will provide the
indenture trustee with the information required pursuant to the sale and
servicing agreement with respect to the Collection Period preceding such
payment date, including:
o the aggregate amount of collections on the receivables;
o the aggregate amount of receivables designated as defaulted
receivables;
o the aggregate Advances to be made by the servicer; and
o the aggregate Purchase Amount of receivables to be repurchased by
the seller or to be purchased by the servicer.
Reserve Account
The servicer will establish the Reserve Account. It will be held in
the name of the indenture trustee for the benefit of the noteholders and
certificateholders. To the extent that amounts on deposit in the Reserve
Account are depleted, the noteholders and the certificateholders will have no
recourse to the assets of the seller or servicer as a source of payment to the
securities.
Deposits to the Reserve Account. The Reserve Account will be funded
by a deposit by the trust on the closing date in the amount of $
_________________________ . The amount on deposit in the Reserve Account may
increase from time to time up to the Specified Reserve Balance by deposits of
funds withdrawn from the Collection Account after payment of the Total
Required Payment.
Withdrawals From the Reserve Account. The amount on deposit in the
Reserve Account may be deposited into the Collection Account to the extent
described under " -- Deposits to the Collection Account" above.
Investment. Amounts on deposit in the Reserve Account will be
invested by the indenture trustee at the direction of the seller in Permitted
Investments and investment earnings (net of losses and investment expenses)
therefrom will be deposited into the Reserve Account. Permitted Investments
are generally limited to obligations or securities that mature on or before
the next payment date. However, to the extent each Rating Agency rating the
notes or the certificates confirms that such actions will not adversely affect
its ratings of the securities, funds in the Reserve Account may be invested in
obligations that will not mature prior to the next payment date and will not
be sold to meet any shortfalls.
Funds in the Reserve Account Will be Limited. Amounts on deposit in
the Reserve Account from time to time are available to--
o enhance the likelihood that you will receive the amounts due on
your notes or certificates; and
o decrease the likelihood that you will experience losses on your
notes or certificates.
However, the amounts on deposit in the Reserve Account are limited to
the Specified Reserve Balance. If the amount required to be withdrawn from the
Reserve Account to cover shortfalls in funds on deposit in the Collection
Account exceeds the amount available to be withdrawn from the Reserve Account,
a shortfall in the amounts distributed to the noteholders and
certificateholders could result. Depletion of the Reserve Account ultimately
could result in losses on your notes or certificates.
After the payment in full, or the provision for such payment of all
accrued and unpaid interest on the notes and certificates and the outstanding
principal amount of the notes and the certificate balance of the certificates,
any funds remaining on deposit in the Reserve Account, subject to certain
limitations, will be paid to the seller.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
In the opinion of Brown & Wood LLP, counsel for the Bank and Federal
Tax Counsel for the trust, for federal income tax purposes, the notes will be
characterized as debt, and the trust will not be characterized as an
association (or a publicly traded partnership) taxable as a corporation. See
"Certain Federal Income Tax Consequences" in the prospectus.
CERTAIN STATE TAX CONSEQUENCES
The tax discussion in the prospectus does not address the tax
treatment of the trust, the notes, the certificates, noteholders or
certificateholders under any state tax laws. You are urged to consult with
your own tax advisors regarding the state tax treatment of the trust as well
as any state tax consequences to you, particularly in the case of financial
institutions, of purchasing, holding and disposing of your notes or
certificates.
ERISA CONSIDERATIONS
The Notes
The notes may, in general, be purchased by or on behalf of Benefit
Plan Investors. Although we cannot assure you in this regard, the notes should
be treated as "debt" and not as "equity interests" for purposes of the Plan
Assets Regulation because the notes:
o are expected to be treated as indebtedness under local law and
will, in the opinion of Federal Tax Counsel for the trust, be
treated as debt, rather than equity, for federal income tax
purposes (see "Certain Federal Income Tax Consequences" in the
prospectus); and
o should not be deemed to have any "substantial equity features."
See "ERISA Considerations" in the prospectus.
However, the acquisition and holding of notes of any class by or on
behalf of a Benefit Plan Investor could be considered to give rise to a
prohibited transaction under ERISA and Section 4975 of the Code if the trust,
the owner trustee, the indenture trustee, any certificateholder or any of
their respective affiliates, is or becomes a "party in interest" or a
"disqualified person" (as defined in ERISA and the Code, respectively) with
respect to such Benefit Plan Investor. In such case, certain exemptions from
the prohibited transaction rules could be applicable to such acquisition and
holding by a Benefit Plan Investor depending on the type and circumstances of
the Benefit Plan Investor fiduciary making the decision to acquire a note. For
additional information regarding treatment of the notes under ERISA, see
"ERISA Considerations" in the prospectus.
The Certificates
The certificates are not Senior Certificates. Benefit Plan Investors
may not acquire the certificates. An insurance company using the assets of its
general account may purchase certificates on the condition that:
o such insurance company is able to represent that, as of the date
it acquires an interest in a certificate, less than 25% of the
assets of such general account constitute "plan assets" for
purposes of Title I of ERISA and Section 4975 of the Code; and
o such insurance company agrees that if at any time during any
calendar quarter while it is holding an interest in the
certificates, 25% or more of the assets of such general account
constitute "plan assets" for purposes of Title I of ERISA and
Section 4975 of the Code, and, at that time, if no exemption or
exception applies to the continued holding of the certificates
under ERISA, by the end of the next quarter such insurance
company will dispose of all certificates then held in its general
account by the end of the next quarter.
In addition, investors other than Benefit Plan Investors should be
aware that a prohibited transaction under ERISA and the Code could be deemed
to occur if any holder of the certificates or any of its affiliates is or
becomes a party in interest or a disqualified person with respect to any
Benefit Plan Investor that acquires and holds the notes without such Benefit
Plan Investor being covered by one or more exemptions from the prohibited
transaction rules.
Each purchaser of the certificates will be deemed to represent and
certify that it either :
o is not a Benefit Plan Investor and is not acquiring its
certificates on behalf of any such Benefit Plan Investor; or
o is an insurance company using the assets of its general account
under the limitations described above.
For additional information regarding treatment of the certificates
under ERISA, we refer you to "ERISA Considerations" in the prospectus.
UNDERWRITING
Subject to the terms and conditions set forth in the underwriting
agreement, the seller has agreed to sell to each of the underwriters named
below, and each of those underwriters has severally agreed to purchase, the
initial principal amount of Class A-1 Notes, Class A-2 Notes and Class A-3
Notes set forth opposite its name below:
<TABLE>
<CAPTION>
Principal
Amount of Principal Amount of Principal Amount of
Class A-1 Class A-2 Class A-3
Note Underwriters Notes Notes Notes
<S> <C> <C> <C>
..................................................
..................................................
..................................................
..................................................
Total........................................
</TABLE>
The seller has been advised by the underwriters of the notes that
they propose initially to offer the notes to the public at the applicable
prices set forth on the cover page of this prospectus supplement. After the
initial public offering of the Class A-1 Notes, the Class A-2 Notes and the
Class A-3 Notes, the public offering prices may change.
Subject to the terms and conditions set forth in the underwriting
agreement, the seller has agreed to sell to each of the underwriters named
below, and each of those underwriters has severally agreed to purchase, the
initial certificate balance of the certificates set forth below opposite its
name.
Certificate
Balance of
Certificate Underwriters Certificates
----------------------------- -------------
Total........................
The seller has been advised by the underwriters of the certificates
that they propose initially to offer the certificates to the public at the
price set forth on the cover page of this prospectus supplement. After the
initial public offering of the certificates, the public offering price may
change.
The underwriting discounts and commissions, the selling concessions
that the underwriters of the notes and the certificates may allow to certain
dealers, and the discounts that such dealers may reallow to certain other
dealers, expressed as a percentage of the principal amount of each class of
notes or as a percentage of the certificate balance of the certificates and as
an aggregate dollar amount, shall be as follows:
<TABLE>
<CAPTION>
Underwriting Net Proceeds Selling
Discount and to the Concessions Reallowance
Commissions Seller(1) not to exceed not to exceed
------------ ------------ ------------- -------------
<S> <C> <C> <C> <C>
Class A-1 Notes.................
Class A-2 Notes.................
Class A-3 Notes.................
Certificates....................
Total for the
notes and certificates....
--------------
(1) Plus accrued interest, if any, from ______________ and before deducting
other expenses estimated at $_________________________.
</TABLE>
Until the distribution of the notes and the certificates is
completed, rules of the SEC may limit the ability of the underwriters and
certain selling group members to bid for and purchase the notes and the
certificates. As an exception to these rules, the underwriters are permitted
to engage in certain transactions that stabilize the price of the notes and
the certificates. Such transactions consist of bids or purchases for the
purpose of pegging, fixing or maintaining the price of the notes and the
certificates.
If the underwriters create a short position in the notes or the
certificates in connection with this offering (i.e., they sell more notes or
certificates than are set forth on the cover page of this prospectus
supplement), the underwriters may reduce that short position by purchasing
notes or certificates, as the case may be, in the open market.
The underwriters may also impose a penalty bid on certain
underwriters and selling group members. This means that if the underwriters
purchase notes or certificates in the open market to reduce the underwriters'
short position or to stabilize the price of such notes or certificates, they
may reclaim the amount of the selling concession from any underwriter or
selling group member who sold those notes or certificates, as the case may be,
as part of the offering.
In general, purchases of a security for the purpose of stabilization
or to reduce a short position could cause the price of the security to be
higher than it might be in the absence of such purchases. The imposition of a
penalty bid might also have an effect on the price of a security to the extent
that it were to discourage resales of the security.
Neither the seller nor any of the underwriters makes any
representation or prediction as to the direction or magnitude of any effect
that the transactions described above may have on the price of the notes or
the certificates. In addition, neither the seller nor any of the underwriters
makes any representation that the underwriters will engage in such
transactions or that such transactions, once commenced, will not be
discontinued without notice.
The notes and the certificates are new issues of securities and there
currently is no secondary market for the notes or the certificates. The
underwriters for the notes and the certificates expect to make a market in
such securities but will not be obligated to do so. We cannot assure you that
a secondary market for the notes or the certificates will develop. If a
secondary market for the notes or the certificates does develop, it might end
at any time or it might not be sufficiently liquid to enable you to resell any
of your notes or certificates.
The indenture trustee may, from time to time, invest the funds in the
Collection Account and the Reserve Account in investments acquired from or
issued by the underwriters.
In the ordinary course of business, the underwriters and their
affiliates have engaged and may engage in investment banking and commercial
banking transactions with the seller and its affiliates.
The seller has agreed to indemnify the underwriters against certain
liabilities, including civil liabilities under the Securities Act of 1933, as
amended, or to contribute to payments which the underwriters may be required
to make in respect thereof.
The closings of the sale of each class of the notes and the
certificates are conditioned on the closing of the sale of each other class of
notes and those certificates.
Upon receipt of a request by an investor who has received an
electronic prospectus from an underwriter or a request by such investor's
representative within the period during which there is an obligation to
deliver a prospectus, the seller or the underwriter will promptly deliver,
without charge, a paper copy of this prospectus supplement and the prospectus.
LEGAL OPINIONS
Certain legal matters and federal income tax matters relating to the
notes and the certificates will be passed upon for the seller and the servicer
by Brown & Wood LLP. Certain legal matters relating to the certificates will
be passed upon for the seller and servicer by Richards Layton & Finger.
Certain legal matters relating to the notes and the certificates will be
passed upon for the underwriters by Simpson Thacher & Bartlett.
GLOSSARY OF TERMS
Additional defined terms used in this prospectus supplement are
defined under "Glossary of Terms" in the prospectus.
"ABS" means the Absolute Prepayment Model which we use to measure
prepayments on receivables and we describe under "The Receivables
Pool--Weighted Average Life of the Securities".
"ABS Table" means the table captioned "Percent of Initial Note
Principal Amount or Initial Certificate Balance at Various ABS Percentages"
beginning on page S-__ of this prospectus supplement.
"Available Collections" for a payment date will be the sum of the
following amounts with respect to the Collection Period preceding that payment
date (subject to the exclusions set forth below such amounts):
o all payments collected on the receivables;
o all liquidation proceeds in respect of receivables which were
designated as defaulted receivables in prior Collection Periods;
o all Advances made by the servicer of interest due on the
receivables;
o the Purchase Amount of each receivable that was repurchased by
the seller or purchased by the servicer under an obligation which
arose during the related Collection Period; and
o partial prepayments of any refunded item included in the
principal balance of a receivable, such as extended warranty
protection plan costs, or physical damage, credit life,
disability insurance premiums, or any partial prepayment which
causes a reduction in the obligor's periodic payment to an amount
below the scheduled payment as of the Cut-off Date.
Available Collections on any payment date will exclude the following:
o amounts received on any receivable to the extent that the
servicer has previously made an unreimbursed Advance with respect
to such receivable and the amount received exceeds the accrued
and unpaid interest on such receivable;
o amounts received on any of the receivables to the extent that the
servicer has previously made an unreimbursed Advance on a
receivable which is not recoverable from collections on the
particular receivable;
o all payments and proceeds (including liquidation proceeds) of any
receivables the Purchase Amount of which has been included in the
Available Funds in a prior Collection Period;
o liquidation proceeds with respect to accrued and unpaid interest
on any receivable but only to the extent of any unreimbursed
Advances on that receivable; and
o amounts constituting the Supplemental Servicing Fee.
"Available Funds" for a payment date shall be the sum of the
Available Collections and the Reserve Account Excess Amount.
"Business Day" is a day other than a Saturday, a Sunday or a day on
which banking institutions or trust companies in the State of New York or the
State of Texas are authorized by law, regulation or executive order to be
closed.
"certificate balance" means, with respect to the certificates,
initially, $ ________________ and, thereafter, means the initial certificate
balance of the certificates, reduced by all amounts allocable to principal
previously distributed to the certificateholders.
"Clearstream" means Clearstream, Luxembourg, a professional
depository under the laws of Luxembourg.
"closing date" means .
"Code" means the Internal Revenue Code of 1986, as amended.
"Collection Account" means an account established pursuant to the
sale and servicing agreement, held in the name of the indenture trustee, into
which the servicer is required to deposit collections on the receivables and
other amounts.
"Collection Period" means, with respect to the first payment date,
the calendar month ending on , and with respect to each subsequent payment
date, the calendar month preceding the calendar month in which such payment
date occurs.
"Contract Rate" means the per annum interest borne by a receivable.
"Cut-off Date" means the date as of which the seller will transfer
the receivables to the trust, which is .
"defaulted receivable" means a receivable (i) that the servicer
determines is unlikely to be paid in full or (ii) with respect to which at
least 5% of a scheduled payment is 120 or more days delinquent as of the end
of a calendar month.
"DTC" means The Depository Trust Company and any successor depository
selected by the trustee.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Euroclear" means a professional depository operated by the Brussels,
Belgium office of Morgan Guaranty Trust Company of New York under contract
with Euroclear Clearance System, S.C., a Belgian cooperative corporation.
"Federal Tax Counsel" means Brown & Wood LLP.
"Final Scheduled Payment Date" for each class of notes and
certificates means the respective dates set forth on the cover page of this
prospectus supplement or, if such date is not a Business Day, the next
succeeding Business Day.
"indenture trustee" means _________________, a ________________, as
indenture trustee under the indenture.
"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.
"owner trustee" means _________________, a Delaware _________________,
as owner trustee under the trust agreement under which the trust is formed.
"payment date" means the date on which the trust will pay interest
and principal on the notes and certificates, which will be the
_________________ day of each month or, if any such day is not a Business Day,
on the next Business Day, commencing ________________________ .
"Record Date" with respect to any payment date means the day
immediately preceding the payment date or, if the securities are issued as
Definitive Securities, the last day of the preceding month.
"Reserve Account" means the account which the servicer will establish
pursuant to the sale and servicing agreement in the name of the indenture
trustee into which the trust will deposit the Reserve Initial Deposit and into
which the indenture trustee will make the other deposits and withdrawals
specified in this prospectus supplement.
"Reserve Account Excess Amount", with respect to any payment date,
means the amount equal to the excess, if any, of --
o the amount of cash or other immediately available funds in the
Reserve Account on that payment date, prior to giving effect to
any withdrawals from the Reserve Account relating to that payment
date, over
o the Specified Reserve Balance with respect to that payment date.
"Reserve Initial Deposit" means the $_________ initially deposited
into the Reserve Account.
"SEC" means the Securities and Exchange Commission.
"Servicing Fee" means a fee payable to the servicer on each payment
date for servicing the receivables which is equal to the product of 1/12 of
___% and the aggregate principal balance of the receivables as of the first
day of the related Collection Period.
"Specified Reserve Balance" means the lesser of (a) ___% of the
outstanding principal balance of the receivables and (b) ___% of the principal
balance of the receivables as of the Cut-off Date.
"Supplemental Servicing Fee" means, for each Collection Period, the
amount of any late fees and other administrative fees and expenses collected
during that Collection Period, plus any interest earned during the Collection
Period on amounts on deposit in the Collection Account during the Collection
Period. The servicer does not currently collect such fees and expenses from
obligors, but may do so in the future.
"Total Required Payment", with respect to any payment date, means the
sum of:
(1) the Servicing Fee and all unpaid Servicing Fees from prior
Collection Periods;
(2) all interest payable on the notes, including any accrued interest
and, to the extent lawful, interest on accrued interest;
(3) all interest distributable on the certificates, including any
accrued interest and, to the extent lawful, interest on accrued
interest;
(4) the sum of (i) all principal collected on the receivables during
the related Collection Period and (ii) the aggregate principal
balance (net of liquidation proceeds received during that
Collection Period applied to principal) of all receivables that
were designated as defaulted receivables during that Collection
Period; and
(5) if that payment date is a Final Scheduled Payment Date for a
class of securities, the amount, if any, required to reduce the
principal balance of that class of securities to zero after
giving effect to the amount in clause (4).
However, following the acceleration of the notes after the occurrence of an
Event of Default due to a failure to pay an amount due on the notes or certain
insolvency events in respect of the trust, the Total Required Payment will
equal the sum of:
o the Servicing Fee and all unpaid Servicing Fees from prior
Collection Periods;
o all interest payable on the notes, including any accrued interest
thereon;
o the amount necessary to reduce the outstanding principal amount
of the notes to zero;
o all interest payable on the certificates, including any accrued
interest thereon; and
o the amount necessary to reduce the outstanding principal amount
of the certificates to zero.
<PAGE>
Information contained 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, in effect, to buy
these securities in any state where the offer or sale is not permitted.
Subject to completion, dated August 4, 2000.
Prospectus Supplement to Prospectus Dated _____________, 200_
$__________________
USAA Auto Grantor Trust _______
[USAA LOGO]
USAA Federal Savings Bank
Seller and Servicer
Before you purchase any of these certificates, be sure you read this
prospectus supplement and the attached prospectus, especially the risk factors
beginning on page S-__ of this prospectus supplement and on page __ of the
prospectus.
A security is not a deposit and neither the certificates nor the underlying
motor vehicle loans are insured or guaranteed by the FDIC or any other
governmental authority.
These certificates are issued by the trust. The certificates are not
obligations of USAA Federal Savings Bank or any of its affiliates.
No one may use this prospectus supplement to offer and sell these certificates
unless it is accompanied by the prospectus.
The underwriters are offering the following certificates by this prospectus
supplement:
Class A Class B
Certificates Certificates
Certificate Balance.................... $ $
Per Annum Interest Rate................ % %
Final Scheduled Payment Date...........
Initial Public Offering Price(1)....... $ % $ %
Underwriting Discount.................. $ % $ %
Proceeds to Seller(1)(2)............... $ % $ %
---------------
(1) The price of the certificates will include interest accrued on the
certificates, if any, from _________________.
(2) Before deducting expenses payable by the seller estimated to be
$___________.
The total initial public offering price is $_______, the total underwriting
discount is $____________ and the total proceeds to seller is $___________.
o The trust will distribute interest and principal on the certificates on
the ___th day of each month. The first payment date will be
________________.
o The Class B Certificates are subordinated to the Class A Certificates.
Neither the certificates and Neither the Securities and Exchange Commission
nor any state securities commission has approved or disapproved of these
securities or passed upon the adequacy or accuracy of this prospectus
supplement or the attached prospectus. Any representation to the contrary is a
criminal offense.
[Underwriters]
The date of this prospectus supplement is _____________.
TABLE OF CONTENTS
READING THESE DOCUMENTS...................................................S-3
SUMMARY OF TERMS OF THE CERTIFICATES......................................S-4
RISK FACTORS..............................................................S-9
THE TRUST................................................................S-10
THE RECEIVABLES POOL.....................................................S-10
Criteria Applicable to Selection of Receivables.......................S-10
The Bank's Delinquency, Loan Loss and Recovery Information............S-15
HOW YOU CAN COMPUTE YOUR PORTION OF THE AMOUNT OUTSTANDING ON THE
CERTIFICATES.............................................................S-16
The Factors Described Above Will Decline as the Trust
Makes Payments on the Certificates....................................S-17
MATURITY AND PREPAYMENT CONSIDERATIONS...................................S-17
Weighted Average Life of the Certificates.............................S-18
DESCRIPTION OF THE CERTIFICATES..........................................S-22
General...............................................................S-22
Distributions on Certificates.........................................S-22
Statements to Certificateholders......................................S-25
Subordination of Class B Certificates.................................S-25
Optional Redemption...................................................S-25
Accounts..............................................................S-26
Servicing Compensation and Expenses...................................S-26
Rights Upon Event of Servicing Termination............................S-26
Waiver of Past Events of Servicing Termination........................S-26
Reserve Account.......................................................S-26
CERTAIN FEDERAL INCOME TAX CONSEQUENCES..................................S-27
CERTAIN STATE TAX CONSEQUENCES...........................................S-28
ERISA CONSIDERATIONS.....................................................S-28
Class A Certificates..................................................S-28
Class B Certificates..................................................S-28
UNDERWRITING.............................................................S-29
LEGAL OPINIONS...........................................................S-31
GLOSSARY OF TERMS........................................................S-31
READING THESE DOCUMENTS
We provide information on the certificates in two documents that
offer varying levels of detail:
1. Prospectus - provides general information, some of which may
not apply to the certificates.
2. Prospectus Supplement - provides a summary of the specific
terms of the certificates.
We suggest you read this prospectus supplement and the prospectus in
their entirety. The prospectus supplement pages begin with "S". If the terms
of the offered certificates described in this prospectus supplement vary with
the accompanying prospectus, you should rely on the information in this
prospectus supplement.
We include cross-references to sections in these documents where you can
find further related discussions. Refer to the table of contents on page S-3
in this document and on page 4 in the prospectus to locate the referenced
sections.
The Glossary of Terms on page S-__ of this prospectus supplement and the
Glossary of Terms on page __ in the prospectus list definitions of certain
terms used in this prospectus supplement or the prospectus.
You should rely only on information on the certificates provided in this
prospectus supplement and the attached prospectus. We have not authorized
anyone to provide you with different information.
In this prospectus supplement, the terms "we," "us" and "our" refer to
USAA Federal Savings Bank.
SUMMARY OF TERMS OF THE CERTIFICATES
The following summary is a short description of the main terms of the
offering of the certificates. For that reason, this summary does not contain
all of the information that may be important to you. To fully understand the
terms of the offering of the certificates, you will need to read both this
prospectus supplement and the attached prospectus in their entirety.
Issuer
USAA Auto Grantor Trust ____ will acquire, in exchange for the issuance of its
certificates, a pool of motor vehicle installment loans, which constitute the
receivables. The trust will rely upon collections on the receivables and the
funds on deposit in certain accounts to make payments on the certificates. The
trust will be solely liable for the payment of the certificates.
Offered Certificates
The following certificates are being offered by this prospectus supplement:
o $____________ Class A ____% Asset Backed Certificates
o $____________ Class B ____% Asset Backed Certificates
Closing Date
The trust expects to issue the certificates on __________________.
Seller and Servicer
USAA Federal Savings Bank.
Trustee
------------------.
Payment Dates
On the ___th day of each month (or if the ___th day is not a business day, the
next business day), the trust will distribute interest and principal on the
certificates.
First Payment Date
The first payment date will be _________________.
Record Dates
On each payment date, the trust will distribute interest and principal to the
holders of the certificates as of the related record date. The record date for
the certificates will be the day immediately preceding the payment date. If
definitive certificates are issued for the certificates, the record date will
be the last day of the month immediately preceding the payment date.
Interest Rates
The trust will distribute interest on each class of certificates at the per
annum rates specified on the cover of this prospectus supplement.
Interest Accrual
"30/360", accrued from the __th day of the previous month (or the closing date
cin the case of the first payment date) to the __th day of the current month.
This means that, if there are no outstanding shortfalls in the payment of
interest, the interest due on a class of certificates on each payment date
will be the product of:
1. the outstanding certificate balance of that class;
2. the interest rate for that class; and
3. 30 (or in the case of the first payment date, _____) divided by 360.
For a more detailed description of the payment of interest, refer to the
sections of this prospectus supplement entitled "Description of the
Certificates -- Distributions."
Priority of Distributions
From collections on the receivables received during the prior calendar month
and amounts withdrawn from the reserve account, the trust will distribute the
following amounts on each payment date in the following order of priority,
after reimbursement of advances made in prior months by the servicer for
interest payments due from obligors but not received:
(1) Servicing Fee-- the servicing fee payable to the servicer;
(2) Class A Certificate Interest-- accrued and unpaid interest on
the Class A Certificates distributable to the holders of those
certificates;
(3) Class B Certificate Interest-- accrued and unpaid interest on
the Class B Certificates distributable to the holders of those
certificates;
(4) Class A Principal - principal in the amount described in this
prospectus supplement to the Class A Certificateholders;
(5) Class B Principal - principal in the amount described in this
prospectus supplement to the Class B Certificateholders;
(6) any remaining amount will be deposited in the reserve account
until the amount on deposit in the reserve account equals the
required amount; and
(7) any remaining amount will be distributed to the seller.
For a more detailed description of the funds available to the trust to make
distributions, the priority of distributions and the allocation of funds on
each payment date, you should refer to "Description of the Certificates" in
this prospectus supplement.
Credit Enhancement
------------------
The credit enhancement for the certificates will be as follows:
Subordination of Principal and Interest
---------------------------------------
Payments of interest on the Class B Certificates will be subordinated to
payments of interest on the Class A Certificates. Payments of principal on the
Class B Certificates will be subordinated to payments of interest and
principal on the Class A Certificates.
Reserve Account
---------------
On the closing date, the seller will deposit $______________ to the reserve
account for the trust.
On each payment date, if collections on the receivables are insufficient to
distribute the first five items listed in "Priority of Distributions" above,
the trustee will withdraw funds from the reserve account, to the extent
available, to distribute such amounts in full.
The balance required to be on deposit in the reserve account will be the
lesser of (a) _______ % of the outstanding principal balance of the
receivables and (b) __% of the principal balance of the receivables as of
---------.
On each payment date, the trust will distribute funds on deposit in the
reserve account in excess of the required balance to the seller.
For a more detailed description of the deposits to and withdrawals from the
reserve account, you should refer to "Description of the Certificates --
Reserve Account" in this prospectus supplement.
Optional Prepayment
The servicer has the option to purchase the receivables on any payment date on
which the aggregate principal balance of the receivables is __% or less of the
aggregate principal balance of the receivables as of _________. The purchase
price will equal the outstanding principal balance of the receivables plus
accrued and unpaid interest thereon at the weighted average interest rate for
the certificates. The trust will apply such payment to the payment of the
certificates in full.
Final Scheduled Payment Dates
The trust is required to distribute the entire principal amount of each class
of certificates, to the extent not previously paid, on the respective Final
Scheduled Payment Dates specified on the cover page of this prospectus
supplement.
Property of the Trust
The property of the trust will include the following:
o ________ the receivables and the collections on the receivables on
or after ___________;
o security interests in the vehicles financed by the receivables;
o bank accounts (other than the reserve account); and
o rights to proceeds under insurance policies that cover the obligors
under the receivables or the vehicles financed by the receivables.
Composition of the Receivables
The composition of the receivables as of ________________ is as follows:
o Aggregate Principal
Balance.................... $
o Number of
Receivables................
o Average Principal
Balance.................... $
(Range)................ $ to $
o Average Original
Amount Financed............ $
(Range)................ $ to $
o Weighted Average
Contract Interest
Rate....................... %
(Range)................ % to
%
o Weighted Average
Original Term.............. months
(Range)................ months to
months
o Weighted Average
Remaining Term............. Months
(Range)................ month to
months
Servicer of the Receivables
The trust will pay the servicer a servicing fee on each payment date equal to
1/12 of ___% of the principal balance of the receivables at the beginning of
the previous month. In addition to the servicing fee, the trust will also pay
the servicer a supplemental servicing fee equal to any late fees and other
administrative fees and expenses collected during each month and any
reinvestment earnings on any payments received on the receivables and
deposited into the collection account.
Ratings
It is a condition to the issuance of the certificates that:
o the Class A Certificates be rated in the [highest] long-term rating
category by at least two nationally recognized rating agencies; and
o ________ [the Class B Certificates] be rated "____" or its
equivalent by at least [two] nationally recognized rating agencies.
A rating is not a recommendation to purchase, hold or sell the certificates,
inasmuch as such rating does not comment as to market price or suitability for
a particular investor. The ratings of the certificates address the likelihood
of the payment of principal and interest on the certificates according to
their terms. A rating agency rating the certificates may lower or withdraw its
rating in the future, in its discretion, as to any class of the certificates.
Minimum Denominations
$1,000 and integral multiples thereof
Registration, Clearance and Settlement
Book-entry through DTC/Clearstream/
Euroclear
Tax Status
Opinions of Counsel
-------------------
Brown & Wood LLP will deliver its opinion that for federal income tax purposes
the trust will be characterized as a grantor trust and not as an association
(or a publicly traded partnership) taxable as a corporation.
ERISA CONSIDERATIONS
Class A
Certificates The Class A Certificates are generally eligible for
purchase by employee benefit plans, subject to the
considerations discussed under "ERISA Considerations" in
this prospectus supplement and the prospectus.
Class B
Certificates The Class B Certificates may not be acquired by an
employee benefit plan or by an individual retirement
account. However, an insurance company using its general
account may acquire the Class B Certificates subject to
the considerations discussed under "ERISA
Considerations" in this prospectus supplement and in the
prospectus.
Investor Information -- Mailing Address and Telephone Number
The mailing address of the principal executive offices of USAA Federal Savings
Bank is 10750 McDermott Freeway, San Antonio, Texas 78288. Its telephone
number is (210) 498-2265.
RISK FACTORS
You should consider the following risk factors in deciding whether to
purchase any of these certificates.
Class B Certificates are
Subject to Greater Credit
Risk Because the Class B
Certificates are Subordinate
to the Class A Certificates The Class B Certificates bear greater credit
risk than the Class A Certificates because
payments of interest and principal on the
Class B Certificates are subordinated to
payments of interest and principal on the
Class A Certificates.
Geographic Concentration
May Result in More Risk
to You The servicer's records indicate that the
billing addresses of the obligors of the
receivables as of ____________ were in the
following states:
Percentage
of
Aggregate
Principal
Balance
----------
[ ]................. %
[ ]................. %
[ ]................. %
[ ]................. %
No other state, by those billing addresses,
constituted more than 5% of the balance of the
receivables as of _____________. Economic
conditions or other factors affecting these
states in particular could adversely affect the
delinquency, credit loss or repossession
experience of the trust.
THE TRUST
The seller will establish the USAA Auto Grantor Trust _____ by
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"). Each certificate will represent a fractional undivided
interest in the trust. The trust property will include a pool of [fixed rate
simple interest] motor vehicle installment loans for the purchase of new and
used automobiles and light-duty trucks. The trust property will also include:
o all monies received on the receivables on or after _____ (the
"Cut-off Date");
o security interests in the financed vehicles;
o ________ the rights to proceeds, if any, from claims on certain
theft, physical damage, credit life or credit disability insurance
policies, if any, covering the financed vehicles or the obligors;
o the seller's rights to certain documents and instruments relating to
the receivables;
o such amounts as from time to time may be held in the accounts
maintained for the trust;
o certain payments and proceeds with respect to the receivables held
by the servicer;
o certain rebates of premiums and other amounts relating to certain
insurance policies and other items financed under the receivables;
and
o any proceeds of the above items.
The trust will be formed for this transaction pursuant to the pooling
and servicing 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 pooling and servicing agreement. The trust will not acquire
any contracts or assets other than the trust property described above.
THE RECEIVABLES POOL
The trust will own a pool of receivables consisting of motor vehicle
installment loans secured by security interests in the motor vehicles financed
by those contracts. The pool will consist of the receivables which the seller
transfers to the trust on the closing date. The receivables will include
payments on the receivables which are made on or after the Cut-off Date.
Criteria Applicable to Selection of Receivables.
The receivables were selected from the seller's portfolio for
inclusion in the pool by several criteria, some of which are set forth in the
prospectus under "The Receivables Pools." These criteria include the
requirement that each receivable:
o has a remaining maturity, as of the Cut-off Date, of at least ____
months and not more than ___ months;
o with respect to loans secured by new financed vehicles, had an
original maturity of at least ____ months and not more than ____
months; with respect to loans secured by used financed vehicles, had
an original maturity of at least _____ months and not more than ____
months;
o is a fully-amortizing, fixed rate simple interest loan which
provides for level scheduled monthly payments (except for the last
payment, which may be minimally different from the level payments)
over its remaining term and has a [simple interest] contract rate (a
"Contract Rate") that equals or exceeds ____% per annum, is not
secured by any interest in real estate, and has not been identified
on the computer files of the seller as relating to an obligor who
had requested a reduction in the periodic finance charges, as of the
Cut-off Date, by application of the Soldiers' and Sailors' Civil
Relief Act of 1940, as amended;
o is secured by a financed vehicle that, as of the Cut-off Date, had
not been repossessed without reinstatement;
o has not been identified on the computer files of the seller as
relating to an obligor who was in bankruptcy proceedings as of the
Cut-off Date;
o has no payment more than ____ days past due as of the Cut-off Date;
and
o has a remaining principal balance, as of the Cut-off Date, of at
least $___________.
No selection procedures believed by the seller to be adverse to the
certificateholders were utilized in selecting the receivables. No receivable
has a scheduled maturity later than ____________________ .
The composition of the receivables as of the Cut-off Date is as
follows:
o Aggregate Principal
Balance.................... $
o Number of
Receivables................
o Average Principal
Balance.................... $
(Range)................ $ to $
o Average Original
Amount Financed............ $
(Range)................ $ to $
o Weighted Average Contract
Rates...................... %
(Range)................ % to
%
o Weighted Average
Original Term.............. months
(Range)................ months to
months
o Weighted Average
Remaining Term............. Months
(Range)................ month to
months
The geographical distribution and distribution by Contract Rate of
the receivables pool as of the Cut-off Date are set forth in the following
tables.
Geographic Distribution of the Receivables as of the Cut-off Date
<TABLE>
<CAPTION>
Percentage of Percentage of
Aggregate Aggregate
Number of Principal Principal Number of Principal Principal
State (1) Receivables Balance Balance (2) State (1) Receivables Balance Balance (2)
------------------ ----------- --------- ------------- ----------------- ----------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Alabama........... Montana..........
Alaska............ Nebraska.........
Arizona........... Nevada...........
Arkansas.......... New Hampshire....
California........ New Jersey.......
Colorado.......... New Mexico.......
Connecticut....... New York.........
Delaware.......... North Carolina...
District of
Columbia.......... North Dakota.....
Florida........... Ohio.............
Georgia........... Oklahoma.........
Hawaii............ Oregon...........
Idaho............. Pennsylvania.....
Illinois.......... Rhode Island.....
Indiana........... South Carolina...
Iowa.............. South Dakota.....
Kansas............ Tennessee........
Kentucky.......... Texas............
Louisiana......... Utah.............
Maine............. Vermont..........
Maryland.......... Virginia.........
Massachusetts..... Washington.......
Michigan.......... West Virginia....
Minnesota......... Wisconsin........
Mississippi....... Wyoming..........
Missouri..........
</TABLE>
--------------
(1) Based on the billing addresses of the obligors as of the Cut-off Date.
(2) May not add to 100% due to rounding.
Distribution by Contract Rate of the Receivables
as of the Cut-off Date
<TABLE>
<CAPTION>
Percentage of
Aggregate
Number of Principal
Contract Rate Receivables Principal Balance Balance (1)
----------------------------------------------- --------------- --------------------- -----------------
<S> <C> <C> <C>
1.90 to 1.99%..................................
2.00 to 2.49...................................
2.50 to 2.99...................................
3.00 to 3.49...................................
3.50 to 3.99...................................
4.00 to 4.49...................................
4.50 to 4.99...................................
5.00 to 5.49...................................
5.50 to 5.99...................................
6.00 to 6.49...................................
6.50 to 6.99...................................
7.00 to 7.49...................................
7.50 to 7.99...................................
8.00 to 8.49...................................
8.50 to 8.99...................................
9.00 to 9.49...................................
9.50 to 9.99...................................
10.00 to 10.49.................................
10.50 to 10.99.................................
11.00 to 11.49.................................
11.50 to 11.99.................................
12.00 to 12.49.................................
12.50 to 12.99.................................
13.00 to 13.49.................................
13.50 to 13.99.................................
14.00 to 14.49.................................
14.50 to 14.99.................................
15.00 to 15.49.................................
15.50 to 15.99.................................
16.00 to 16.49.................................
16.50 to 16.99.................................
17.00 to 17.49.................................
17.50 to 17.99.................................
18.00 to 18.49.................................
18.50 to 18.99.................................
19.00 to 19.49.................................
19.50 to 19.99.................................
20.00..........................................
Totals.........................................
</TABLE>
--------------
(1) May not add to 100.00% due to rounding.
The Bank's Delinquency, 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 following tables also include information with respect to certain
consumer loans which are not motor vehicle loans. These other consumer loans
did not exceed 15% of outstandings as of any of the dates shown in the
following tables. The Bank believes that the inclusion of variable rate motor
vehicle loans and the consumer 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 on its fixed
rate motor vehicle loans.
Delinquency Experience
<TABLE>
<CAPTION>
At March 31,
---------------------------------------
2000 1999
------------------ -------------------
Dollars Number Dollars Number
(in 000s) of Loans (in 000s) of Loans
--------- -------- --------- --------
<S> <C> <C> <C> <C>
Outstandings...... $3,803,288 293,369 $3,039,670 247,940
Delinquencies over
30 days(1)(2)..... $14,967 1,519 $12,852 1,332
Delinquencies over
30 days (%)(3).... 0.39% 0.52% 0.42% 0.54%
</TABLE>
<TABLE>
<CAPTION>
At December 31,
----------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
------------------- ------------------- ------------------- -------------------- --------------------
Dollars Number Dollars Number Dollars Number Dollars Number Dollars Number
(in 000s) of Loans (in 000s) of Loans (in 000s) of Loans (in 000s) of Loans (in 000s) of Loans
--------- -------- --------- -------- --------- -------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Outstandings.... $3,661,825 283,810 $2,802,144 234,281 $2,076,318 186,560 $1,687,922 159,812 $1,454,843 145,246
Delinquencies
over
30 days(1)(2)... $16,927 1,689 $12,297 1,366 $7,028 871 $8,634 1,082 $4,910 580
Delinquencies
over
30 days (%)(3).. 0.46% 0.60% 0.44% 0.58% 0.34% 0.47% 0.51% 0.68% 0.34% 0.40%
</TABLE>
----------
(1) Delinquencies include principal amounts only.
(2) The period of delinquency is based on the number of days payments are
contractually past due.
(3) As a percent of outstandings.
Loan Loss Experience
<TABLE>
<CAPTION>
Three Months Ended March 31,
------------------------------
2000 1999
---- ----
(Dollars in 000s)
<S> <C> <C>
Number of Loans(1) 293,369 247,940
Period Ending Outstandings $3,803,288 $3,039,670
Average Outstandings(2) $3,678,477 $2,883,185
Number of Gross Charge-Offs 386 324
Gross Charge-Offs(3) $4,774 $3,604
Gross Charge-Offs as a % of Period End 0.50% 0.48%
Outstandings(4)
Gross Charge-Offs as a % of Average 0.52% 0.51%
Outstandings(4)
Recoveries(5) $2,319 $1,490
Net Charge-Offs(6) $2,455 $2,113
Net Charge-Offs as a % of Period End 0.26% 0.28%
Outstandings(4).
Net Charge-Offs as a % of Average 0.27% 0.30%
Outstandings(4)
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
(Dollars 000s)
<S> <C> <C> <C> <C> <C>
Number of Loans(1) ........................... 283,810 234,281 186,560 159,812 145,246
Period Ending Outstandings.................... $3,661,825 $2,802,144 $2,076,318 $1,687,922 $1,454,843
Average Outstandings(2) ...................... $3,281,001 $2,375,294 $1,867,280 $1,527,686 $1,298,116
Number of Gross Charge-Offs .................. 1,438 874 797 805 422
Gross Charge-Offs(3).......................... $16,066 $9,311 $6,157 $4,131 $2,244
Gross Charge-Offs as a % of Period End 0.44% 0.33% 0.30% 0.24% 0.15%
Outstandings..................................
Gross Charge-Offs as a % of Average 0.49% 0.39% 0.33% 0.27% 0.17%
Outstandings..................................
Recoveries(5)................................. $7,296 $4,856 $2,158 $1,068 $683
Net Charge-Offs(6)............................ $8,770 $4,455 $3,999 $3,063 $1,560
Net Charge-Offs as a % of Period End 0.24% 0.16% 0.19% 0.18% 0.11%
Outstandings..................................
Net Charge-Offs as a % of Average 0.27% 0.19% 0.21% 0.20% 0.12%
Outstandings..................................
</TABLE>
----------
(1) Number of loans as of period end.
(2) 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 the loans sold and still serviced by the Bank for each
period presented.
(3) 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.
(4) Percentages have been annualized for the three months ended March 31
and are not necessarily indicative of the experience for the entire year.
(5) Recoveries are not net of expenses and generally include amounts
received with respect to loans previously charged off. Prior to July
1997, the proceeds realized in connection with the sale of the financed
vehicles are not included in recoveries.
(6) Net charge-offs means gross charge-offs minus recoveries of loans
previously charged off.
The data presented in the foregoing tables are for illustrative
purposes only. Delinquency and loan loss experience may be influenced by a
variety of economic, social and other factors. The mix of the credit quality
of the obligations will vary from time to time and will affect losses and
delinquencies. We cannot assure you that the delinquency and loan loss
experience of the trust with respect to its receivables will be similar to
that set forth above.
HOW YOU CAN COMPUTE YOUR PORTION OF THE AMOUNT
OUTSTANDING ON THE CERTIFICATES
The servicer will provide to you in each report which it delivers to
you a factor which you can use to compute your portion of the certificate
balance outstanding on your class of certificates.
How the Servicer Computes the Factor for Your Class of Certificates.
The servicer will compute a separate factor for each class of certificates.
The factor for a class of certificates will be a seven-digit decimal which the
servicer will compute prior to each distribution with respect to that class of
certificates indicating the remaining certificate balance of that class of
certificates, as of the applicable payment date. The factor will be calculated
after giving effect to distributions to be made on such payment date, as a
fraction (expressed as a decimal) of the initial certificate balance of that
class of certificates.
Your Portion of the Outstanding Certificate Balance of Your
Certificates. For each certificate you own, your portion of your class
certificates is the product of--
o the original denomination of your certificate; and
o the factor relating to your class certificates computed by the
servicer in the manner described above.
The Factors Described Above Will Decline as the Trust Makes Payments on the
Certificates
The factor for each class of certificates above will initially be
1.0000000. They will then decline to reflect reductions, as applicable, in the
outstanding certificate balance of the applicable class of certificates. These
amounts will be reduced over time as a result of scheduled payments,
prepayments, purchases of the receivables by the seller or the servicer and
liquidations of the receivables.
MATURITY AND PREPAYMENT CONSIDERATIONS
Information regarding certain maturity and prepayment considerations
with respect to the certificates is set forth under "Maturity and Prepayment
Considerations" in the prospectus. In addition, on each payment date, no
principal payments will be made on the Class B Certificates until the amount
of interest and principal due on the Class A Certificates has been paid.
Since the rate of payment of principal of each class of certificates
depends on the rate of payment (including prepayments) of the principal
balance of the receivables, final payment of either class of certificates
could occur significantly earlier than the Final Scheduled Payment Date.
We Cannot Assure You That Your Certificates Will Be Repaid on the
Final Scheduled Payment Date. We expect that final payment of each class of
certificates will occur on or prior to the Final Scheduled Payment Date.
However, we cannot assure you that sufficient funds will be available to pay
each class of certificates in full on or prior to the Final Scheduled Payment
Date. If sufficient funds are not available, the final distribution in respect
of each class of certificates could occur later than such date.
The Level of Prepayments of the Receivables and Required Purchases by
the Seller and the Servicer are Unpredictable and May Affect Payments on the
Certificates. The rate of prepayments of the receivables may be influenced by
a variety of economic, social and other factors. In addition, under
circumstances relating to breaches of representations, warranties or
covenants, the seller and/or the servicer may be obligated to purchase
receivables from the trust. See "The Receivables Pool" in this prospectus
supplement and "Description of the Receivables Transfer and Servicing
Agreements -- Sale and Assignment of Receivables" in the prospectus. A higher
than anticipated rate of prepayments will reduce the aggregate principal
balance of the receivables and thus the outstanding certificate balances of
the certificates more quickly than expected and thereby reduce anticipated
aggregate interest payments on the certificates. The certificateholders alone
will bear any reinvestment risks resulting from a faster or slower incidence
of prepayment of receivables. Such reinvestment risks include the risk that
interest rates may be lower at the time such holders received payments from
the trust than interest rates would otherwise have been had such prepayments
not been made or had such prepayments been made at a different time.
Risks of slower or faster repayments. You should consider--
o ________ in the case of certificates purchased at a discount,
the risk that a slower than anticipated rate of principal
payments on the receivables could result in an actual yield
that is less than the anticipated yield; and
o ________ in the case of certificates purchased at a premium,
the risk that a faster than anticipated rate of principal
payments on the receivables could result in an actual yield
that is less than the anticipated yield.
Weighted Average Life of the Certificates
The following information is given solely to illustrate the effect of
prepayments of the receivables on the weighted average life of the
certificates under the stated assumptions and is not a prediction of the
prepayment rate that might actually be experienced by the receivables.
Prepayments on motor vehicle receivables can be measured relative to
a prepayment standard or model. The model used in this prospectus supplement,
the Absolute Prepayment Model ("ABS"), represents an assumed rate of
prepayment each month relative to the original number of receivables in a pool
of receivables. ABS further assumes that all the receivables are the same size
and amortize at the same rate and that each receivable in each month of its
life will either be paid as scheduled or be prepaid in full. For example, in a
pool of receivables originally containing 10,000 receivables, a 1% ABS rate
means that 100 receivables prepay each month. ABS does not purport to be a
historical description of prepayment experience or a prediction of the
anticipated rate of prepayment of any pool of assets, including the
receivables.
The rate of payment of principal of each class of certificates will
depend on the rate of payment (including prepayments) of the principal balance
of the receivables. For this reason, final payment on the certificates could
occur significantly earlier than the Final Scheduled Payment Date. The
certificateholders will exclusively bear any reinvestment risk associated with
early payment of their certificates.
The table (the "ABS Table") captioned "Percent of Initial Certificate
Balance" at Various ABS Percentages" has been prepared on the basis of the
characteristics of the receivables. The ABS Table assumes that --
o the receivables prepay in full at the specified constant
percentage of ABS monthly, with no defaults, losses or
repurchases;
o each scheduled monthly payment on the receivables is made on
the last day of each month and each month has 30 days;
o payments on the certificates are made on each payment date (and
each payment date is assumed to be the ____day of the
applicable month);
o the balance in the Reserve Account on each payment date is
equal to the Specified Reserve Account Balance; and
o the servicer does not exercise its option to purchase the
receivables.
The ABS Table indicates the projected weighted average life of each
class of certificates and sets forth the percent of the initial certificate
balance of each class of certificates that is projected to be outstanding
after each of the payment dates shown at various constant ABS percentages.
The ABS Table also assumes that the receivables have been aggregated
into hypothetical pools with all of the receivables within each such pool
having the following characteristics and that the level scheduled monthly
payment for each of the pools (which is based on its aggregate principal
balance, contract rate of interest, original term to maturity and remaining
term to maturity as of the Cut-off Date) will be such that each pool will be
fully amortized by the end of its remaining term to maturity. The pools have
an assumed cut-off date of ----------------.
<TABLE>
<CAPTION>
Contract Original Term
Aggregate Rate of to Maturity Remaining Term to
Pool Principal Balance Interest (In Months) Maturity (In Months)
------------------------------ ---------------------- --------------- ----------------- ----------------------
<S> <C> <C> <C> <C>
1.............................
2.............................
3.............................
4.............................
5.............................
6.............................
7.............................
8.............................
9.............................
10............................
11............................
12............................
13............................
14............................
15............................
16............................
17............................
18............................
</TABLE>
The actual characteristics and performance of the receivables will
differ from the assumptions used in constructing the ABS Table. The
assumptions used are hypothetical and have been provided only to give a
general sense of how the principal cash flows might behave under varying
prepayment scenarios. For example, it is very unlikely that the receivables
will prepay at a constant level of ABS until maturity or that all of the
receivables will prepay at the same level of ABS. Moreover, the diverse terms
of receivables within each of the hypothetical pools could produce slower or
faster principal distributions than indicated in the ABS Table at the various
constant percentages of ABS specified, even if the original and remaining
terms to maturity of the receivables are as assumed. Any difference between
such assumptions and the actual characteristics and performance of the
receivables, or actual prepayment experience, will affect the percentages of
initial amounts outstanding over time and the weighted average lives of each
class of certificates.
Percent of Initial Certificate Balance at Various ABS Percentages
<TABLE>
<CAPTION>
Class A Certificates and
Class B Certificates
-----------------------------
Payment Date % % % %
------------------------ ----- ----- ----- -----
<S> <C> <C> <C> <C>
........................
........................
........................
........................
........................
........................
........................
........................
........................
........................
........................
........................
........................
........................
........................
........................
........................
........................
........................
........................
........................
........................
........................
........................
........................
........................
........................
........................
........................
........................
........................
........................
........................
........................
........................
........................
........................
........................
........................
........................
........................
........................
........................
........................
Weight Average Life (1)
Weight Average Life
to Optional
Repurchase (1)(2)
</TABLE>
----------
(1) The weighted average life of a certificate is determined by (a)
multiplying the amount of each principal payment on a certificate by the
number of years from the date of the issuance of the certificate to the
related payment date, (b) adding the results and (c) dividing the sum by
the related initial certificate balance of the certificate.
(2) This calculation assumes the servicer purchases the receivables on the
first payment date on which it is permitted to do so.
The ABS Table has been prepared based on the assumptions described
above (including the assumptions regarding the characteristics and performance
of the receivables which will differ from the actual characteristics and
performance thereof) and should be read in conjunction therewith.
DESCRIPTION OF THE CERTIFICATES
We have filed a form of the pooling and servicing agreement as an
exhibit to the registration statement of which the prospectus is a part. A
copy of the pooling and servicing agreement will be filed with the SEC after
the trust issues the certificates. We summarize below some of the most
important terms of the certificates. This summary is not a complete
description of all the provisions of the pooling and servicing agreement and
the certificates. The following summary is a supplement to the description of
the general terms and provisions of the certificates of any series and the
related pooling and servicing agreement provided under the headings "Certain
Information Regarding the Securities" and "Description of the Receivables
Transfer and Servicing Agreements" in the prospectus. We refer you to those
sections.
General
The certificates will be Book-Entry Securities. Definitive
Certificates for the certificates will be issued only in the limited
circumstances specified under "Certain Information Regarding the
Securities--Definitive Securities" in the prospectus. Distributions on the
certificates on a payment date will be made to persons who were the holders of
record on the Record Date. You may purchase certificates in denominations of
$1,000 and integral multiples thereof.
Distributions on Certificates
Deposits to Collection Account. The servicer will establish the
Collection Account as described under "Description of the Receivables Transfer
and Servicing Agreements--Accounts" in the prospectus. In general, the
servicer will be permitted to retain collections on the receivables until the
Business Day preceding any payment date. However, the servicer will be
required to remit collections received with respect to the receivables not
later than the second Business Day after receipt to the Collection Account (1)
if there is an Event of Servicing Termination, (2) if the Bank is no longer
the servicer or (3) if one of the other conditions set forth in the pooling
and servicing agreement is not met.
On or before the __th day of each month or, if such __th day is not a
Business Day, the preceding Business Day, the servicer will inform the trustee
of the following amounts with respect to the preceding Collection Period:
(1) the amount of aggregate collections on the receivables,
including all liquidation proceeds and recoveries;
(2) the aggregate amount of Advances to be remitted by the
servicer;
(3) the aggregate Purchase Amount for the 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 on the certificates; and
(6) the Servicing Fee.
On or before the Business Day preceding each payment date:
(a) the servicer will cause all collections on the receivables,
liquidation proceeds and recoveries to be deposited into the
Collection Account and will deposit into the Collection Account
all Purchase Amounts for the receivables to be purchased by the
servicer on that date;
(b) the seller will deposit into the Collection Account all
Purchase Amounts of receivables to be repurchased by the seller
on that date; and
(c) the servicer will deposit all Advances for the payment date
into the Collection Account.
On each payment date the servicer will allocate collections and
Advances for the preceding calendar month (the "Collection Period") to
Available Interest and Available Principal. The amounts represented by those
terms are more precisely described in the section "Glossary of Terms" in this
prospectus supplement. In general, Available Interest for a Collection Period
includes interest collections on the receivables (including the interest
portion of Purchased Amounts and liquidation proceeds on receivables
designated as defaulted receivables in that Collection Period) and recoveries
on receivables that were designated as defaulted receivables prior to that
Collection Period, minus reimbursements to the servicer of its outstanding
Advances. Available Principal for a Collection Period includes principal
collections on the receivables (including the principal portion of Purchased
Amounts and liquidation proceeds on receivables designated as defaulted
receivables in that Collection Period). A receivable will be designated as a
"defaulted receivable" when the servicer determines that it is unlikely to be
paid in full or when at least 5% of a scheduled payment is 120 or more days
delinquent at the end of a Collection Period.
The servicer will be entitled to receive reimbursements of its
outstanding Advances as described under the section entitled "Description of
the Receivables Transfer and Servicing Agreements--Advances" in the
prospectus. We refer you to that section.
Distributions. On each payment date the trustee will make the
following deposits and distributions, to the extent of Available Interest and
any available funds in the Reserve Account (net of investment earnings)
remaining after such reimbursements (and, to the extent indicated in clause
(2) below, the Class B Percentage of Available Principal), in the following
order of priority:
(1) to the servicer, first from Available Interest and then, if
necessary, from any such funds in the Reserve Account, any
unpaid Servicing Fee for the related Collection Period and
all unpaid Servicing Fees from prior Collection Periods;
(2) to the distribution account for the Class A
Certificateholders, first from Available Interest, then, if
necessary, from any such funds in the Reserve Account, and
finally, if necessary, from the Class B Percentage of
Available Principal, interest distributable on the Class A
Certificates for such payment date; and
(3) to the distribution account for the Class B
Certificateholders, first from Available Interest and then,
if necessary, from any such funds in the Reserve Account,
the interest distributable on the Class B Certificates for
such payment date.
The interest distributable on a class of certificates on a payment
date will accrue on its certificate balance at the applicable per annum rate
set forth on the cover of this prospectus supplement from and including the
prior payment date (or the closing date in the case of the first payment date)
to but excluding the current payment date. Interest will be calculated on the
basis of a 360-day year consisting of twelve 30-day months. Interest accrued
as of any payment date but not paid on such payment date will be due on the
next payment date, together with interest on such amount at the applicable
interest rate (to the extent lawful).
On each payment date, the trustee will make the following deposits
and distributions, to the extent of the portion of Available Principal,
Available Interest and any such funds in the Reserve Account (to be applied in
that order of priority) remaining after the application of clauses (1), (2)
and (3) above, in the following order of priority:
(4) to the distribution account for the Class A Certificateholders,
the Class A Principal Distribution for such payment date;
(5) to the distribution account for the Class B Certificateholders,
the Class B Principal Distribution for such payment 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 payment date, the trustee will distribute (i) to the Class A
Certificateholders, all amounts on deposit in the distribution account for the
Class A Certificateholders and (ii) to the Class B Certificateholders, all
amounts on deposit in the distribution account for the Class B
Certificateholders.
The Class A Principal Distribution for a payment date will equal the
sum of (i) the Class A Percentage of the Available Principal plus the Class A
Percentage of Realized Losses, (ii) the Class A Percentage of the Available
Principal for any prior payment date and the Class A Percentage of Realized
Losses for any prior payment date, in each case only to the extent, if any,
that they have not already been distributed to the Class A Certificateholders
and (iii) if that payment date is the Final Scheduled Payment Date, the
additional amount, if any, needed to reduce the certificate balance of the
Class A Certificates to zero.
The Class B Principal Distribution for a payment date will equal the
sum of (i) the Class B Percentage of the Available Principal plus the Class B
Percentage of Realized Losses, (ii) the Class B Percentage of the Available
Principal for any prior payment date and the Class B Percentage of Realized
Losses for any prior payment date, in each case only to the extent, if any,
that they have not already been distributed to the Class B Certificateholders
and (iii) if that payment date is the Final Scheduled Payment Date, the
additional amount, if any, needed to reduce the certificate balance of the
Class B Certificates to zero.
The Class B Percentage is ___% and the Class A Percentage is _____%.
Realized Losses for any Collection Period will be the excess of the
aggregate principal balance of those receivables that were designated as
defaulted receivables during that Collection Period over liquidation proceeds
received with respect to such receivables during such Collection Period and
allocable to principal.
Statements to Certificateholders
On each payment date, the trustee will include with each distribution
to each certificateholder a statement setting forth the applicable information
under the heading "Certain Information Regarding the Securities--Reports to
Securityholders" in the prospectus.
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. Copies of such statements may be obtained by
beneficial owners of certificates by a request in writing addressed to the
trustee at its corporate trust office at _____________.
Subordination of Class B Certificates
The rights of the Class B Certificateholders to receive distributions
of interest are subordinated to the rights of Class A Certificateholders to
receive payments of interest and principal. In addition, on each payment date
the Class B Certificateholders will not receive a distribution of principal
until the Class A Certificateholders have received their distribution of
principal. This subordination is effected by the allocation of funds set forth
under "--Distributions on Certificates" above.
Optional Redemption
If the servicer exercises its option to purchase the receivables when
the aggregate principal balance of the receivables declines to 10% or less of
the aggregate principal balance of the receivables as of the Cut-off Date, you
will receive an amount in respect of your certificates equal to the sum of:
o the outstanding certificate balance of your certificates
together with accrued and unpaid interest at the rate of
interest for your certificates; and
o interest on any past due interest at the rate of interest for
your certificates, to the extent lawful.
See "Description of the Receivables Transfer and Servicing Agreements
-- Termination" in the prospectus.
Accounts
In addition to the Collection Account,
o the trustee will establish a distribution account for the
benefit of the Class A Certificateholders;
o the trustee will establish a distribution account for the
benefit of the Class B Certificateholders; and
o ________ the seller will establish and will maintain the
Reserve Account at an Eligible Institution in the name of
_______________ (the "Collateral Agent") on behalf of the
certificateholders.
The Reserve Account and the funds in the Reserve Account will not be
property of the trust, but will be pledged to the Collateral Agent for the
benefit of certificateholders.
Servicing Compensation and Expenses
On each payment date the servicer is entitled to receive the
Servicing Fee, together with any portion of the Servicing Fee that remains
unpaid from prior payment dates. The Servicing Fee will be paid only to the
extent of Available Interest for such payment date, plus funds, if any,
deposited into the Collection Account from the Reserve Account. The servicer
also is entitled to receive the Supplemental Servicing Fee. See "Description
of the Receivables Transfer and Servicing Agreements -- Servicing Compensation
and Expenses" in the prospectus.
Rights Upon Event of Servicing Termination
If an Event of Servicing Termination occurs, the trustee or holders
of certificates evidencing not less than a majority of the certificate balance
may remove the servicer without the consent of any of the other
certificateholders.
Waiver of Past Events of Servicing Termination
If an Event of Servicing Termination occurs, holders of certificates
evidencing at least a majority of the aggregate principal balance of the
receivables, subject to the exceptions provided in the pooling and servicing
agreement, may waive any Event of Servicing Termination except for a failure
to make any required deposits to or payments from any account, without the
consent of any of the other certificateholders.
Reserve Account
Deposits to the Reserve Account. The Reserve Account will be funded
by a deposit by the seller on the closing date in the amount of $___________.
The amount on deposit in the Reserve Account may increase from time to time
up to the Specified Reserve Account Balance by deposits of funds withdrawn
from the Collection Account to the extent available as described under
"--Distribution on the Certificates -- Distributions" above. The "Specified
Reserve Account Balance" will equal the lesser of (a) ____% of the outstanding
principal balance of the receivables and (b) ____% of the principal balance of
the receivables as of the Cut-off Date.
Withdrawals From the Reserve Account. On each payment date, the
amount available in the Reserve Account will equal the lesser of (a) the
amount on deposit in the Reserve Account and (b) the Specified Reserve Account
Balance. The funds on deposit in the Reserve Account may be deposited into the
Collection Account to the extent described under "-- Distributions on the
Certificates -- Distributions" above. Funds on deposit in the Reserve Account
in excess of the Specified Reserve Account Balance will be paid to the seller.
Investment. Amounts on deposit in the Reserve Account will be
invested by the Collateral Agent at the direction of the seller in Permitted
Investments and investment earnings (net of losses and investment expenses)
therefrom will be deposited into the Reserve Account. Permitted Investments
are generally limited to obligations or securities that mature on or before
the next payment date. However, to the extent each Rating Agency rating the
certificates confirms that such actions will not adversely affect its ratings
of the certificates, funds in the Reserve Account may be invested in
obligations that will not mature prior to the next payment date and will not
be sold to meet any shortfalls.
Funds in the Reserve Account Will be Limited. Amounts on deposit in
the Reserve Account from time to time are available to--
o enhance the likelihood that you will receive the amounts due on
your certificates; and
o decrease the likelihood that you will experience losses on your
certificates.
However, the amounts on deposit in the Reserve Account are limited to
the Specified Reserve Account Balance. If the amount required to cover
shortfalls in funds on deposit in the Collection Account exceeds the amount
available to be withdrawn from the Reserve Account, a shortfall in the amounts
distributed to the certificateholders could result. Depletion of the Reserve
Account ultimately could result in losses on your certificates.
After the payment in full, or the provision for such payment of all
accrued and unpaid interest on the certificates and the outstanding
certificate balance of the certificates, any funds remaining on deposit in the
Reserve Account, subject to certain limitations, will be paid to the seller.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
In the opinion of Brown & Wood LLP, counsel for the Bank and Federal
Tax Counsel for the trust, for federal income tax purposes, the trust will be
a grantor trust and will not be treated as an association (or a publicly
traded partnership) taxable as a corporation. See "Certain Federal Income Tax
Consequences -- Trusts Treated as Grantor Trusts" in the prospectus.
CERTAIN STATE TAX CONSEQUENCES
The tax discussion in the prospectus does not address the tax
treatment of the trust, the certificates or the certificateholders under any
state tax laws. You are urged to consult with your own tax advisors regarding
the state tax treatment of the trust as well as any state tax consequences to
you, particularly in the case of financial institutions, of purchasing,
holding and disposing of your certificates.
ERISA CONSIDERATIONS
For a general discussion of ERISA considerations in respect of the
certificates, we refer you to the section entitled "ERISA Considerations" in
the prospectus.
Class A Certificates
The U.S. Department of Labor has granted an individual administrative
exemption to [name of lead underwriter] (Prohibited Transaction Exemption
____, as amended, Exemption Application No. ________, 55 Fed. Reg. ___ (1990))
(the "Exemption") from some of the prohibited transaction rules of ERISA and
the related excise tax provisions of Section 4975 of the Code with respect to
the initial purchase, the holding and the subsequent resale by Plans of
certificates in pass-through trusts that consist of specified receivables,
loans and other obligations that meet the conditions and requirements of the
Exemption. The Exemption applies to motor vehicle installment loans such as
the receivables owned by the trust. A "Plan" is an employee benefit or other
plan or arrangement (such as an individual retirement plan or Keogh plan) that
is subject to ERISA, Section 4975 of the Code or a Similar Law.
For a general description of the Exemption and the conditions that
must be satisfied for the Exemption to apply, see "ERISA Considerations --
Senior Certificates Issued by Trusts" in the prospectus.
Before purchasing a Class A Certificate, a fiduciary of a Plan must
satisfy itself that (i) the Class A Certificates are "certificates" for
purposes of the Exemption and (ii) the general and specific conditions and
requirements in the Exemption would be met in the case of the Class A
Certificates.
Prospective Plan investors are encouraged to consult with their legal
advisors concerning the impact of ERISA and the Code and the applicability of
the Exemption, and the potential consequences in their specific circumstances,
before making an investment in any of the certificates. Moreover, each Plan
fiduciary is encouraged to determine whether, under the general fiduciary
standards of investment prudence and diversification, an investment in the
Class A Certificates is appropriate for the Plan, taking into account the
overall investment policy of the Plan and the composition of the Plan's
investment portfolio.
Class B Certificates
Because the characteristics of the Class B Certificates will not meet
the requirements of the Exemption and may not meet any other exemption issued
under ERISA, a Plan may be engaging in a prohibited transaction or may incur
excise taxes or civil penalties if it purchases and holds Class B
Certificates. Consequently, transfers of the Class B Certificates will not be
registered by the trustee unless the trustee receives a deemed representation
from the transferee of the Class B Certificate that:
o the transferee is not a Plan or a person acting on behalf of a
Plan or using a Plan's assets to effect the transfer; or
o if the purchaser is an insurance company, the purchaser is an
insurance company which is purchasing the certificates with
funds contained in an "insurance company general account" (as
defined in Section V(e) of Prohibited Transaction Class
Exemption 95-60 ("PTE 95-60")) and that the purchase and
holding of the certificates are covered under Sections I and
III of PTE 95-60.
This representation will be deemed to have been made to the trustee
by the transferee's acceptance of a Class B Certificate. If the representation
is not true, the attempted transfer or acquisition shall be void ab initio.
UNDERWRITING
Subject to the terms and conditions set forth in the underwriting
agreement, the seller has agreed to sell to each of the underwriters named
below, and each of those underwriters has severally agreed to purchase, the
initial certificate balances of Class A Certificates and Class B Certificates
set forth opposite its name below:
<TABLE>
<CAPTION>
Certificate Certificate
Balance of Balance of
Class A Class B
Underwriters Certificates Certificates
----------------------------------- --------------------- ------------------
<S> <C> <C>
...................................
...................................
...................................
...................................
Total.........................
</TABLE>
The seller has been advised by the underwriters that they propose to
offer the certificates to the public initially at the applicable prices set
forth on the cover page of this prospectus supplement. After the initial
public offering of the Class A Certificates and Class B Certificates, the
public offering prices may change.
The underwriting discounts and commissions, the selling concessions
that the underwriters may allow to certain dealers, and the discounts that
such dealers may reallow to certain other dealers, expressed as a percentage
of the certificate balance of each class of certificates and as an aggregate
dollar amount, shall be as follows:
<TABLE>
<CAPTION>
Underwriting Selling
Discount and Net Proceeds Concessions Reallowance
Commissions to Seller(1) not to exceed not to exceed
--------------------- ---------------- ------------------ ------------------
<S> <C> <C> <C> <C>
Class A Certificates............
Class B Certificates............
Total.......................
</TABLE>
--------------
(1) Plus interest accrued on the certificates, if any, from ________ and
before deducting other expenses estimated at $___________.
Until the distribution of the certificates is completed, rules of the
SEC may limit the ability of the underwriters and certain selling group
members to bid for and purchase the certificates. As an exception to these
rules, the underwriters are permitted to engage in certain transactions that
stabilize the price of the certificates. Such transactions consist of bids or
purchases for the purpose of pegging, fixing or maintaining the price of the
certificates.
If the underwriters create a short position in the certificates in
connection with this offering (i.e., they sell more certificates than are set
forth on the cover page of this prospectus supplement), the underwriters may
reduce that short position by purchasing certificates, as the case may be, in
the open market.
The underwriters may also impose a penalty bid on certain
underwriters and selling group members. This means that if the underwriters
purchase certificates in the open market to reduce the underwriters' short
position or to stabilize the price of such certificates, they may reclaim the
amount of the selling concession from any underwriter or selling group member
who sold those certificates, as the case may be, as part of the offering.
In general, purchases of a security for the purpose of stabilization
or to reduce a short position could cause the price of the security to be
higher than it might be in the absence of such purchases. The imposition of a
penalty bid might also have an effect on the price of a security to the extent
that it were to discourage resales of the security.
Neither the seller nor any of the underwriters makes any
representation or prediction as to the direction or magnitude of any effect
that the transactions described above may have on the price of the
certificates. In addition, neither the seller nor any of the underwriters
makes any representation that the underwriters will engage in such
transactions or that such transactions, once commenced, will not be
discontinued without notice.
The certificates are new issues of securities and there currently is
no secondary market for the certificates. The underwriters for the
certificates expect to make a market in such securities but will not be
obligated to do so. We cannot assure you that a secondary market for the Class
A Certificates or the Class B Certificates will develop. If a secondary market
for the Class A Certificates or the Class B Certificates does develop, it
might end at any time or it might not be sufficiently liquid to enable you to
resell any of your certificates.
The trustee and the Collateral Agent may, from time to time, invest
the funds in the Collection Account and the Reserve Account, as applicable, in
investments acquired from or issued by the underwriters.
In the ordinary course of business, the underwriters and their
affiliates have engaged and may engage in investment banking and commercial
banking transactions with the seller and its affiliates.
The seller has agreed to indemnify the underwriters against certain
liabilities, including civil liabilities under the Securities Act of 1933, as
amended, or to contribute to payments which the underwriters may be required
to make in respect thereof.
The closing of the sale of each class of the certificates is
conditioned on the closing of the sale of the other class of certificates.
Upon receipt of a request by an investor who has received an
electronic prospectus from an underwriter or a request by such investor's
representative within the period during which there is an obligation to
deliver a prospectus, the seller or the underwriter will promptly deliver,
without charge, a paper copy of this prospectus supplement and the prospectus.
LEGAL OPINIONS
Certain legal matters and federal income tax matters relating to the
certificates will be passed upon for the seller and the servicer by Brown &
Wood LLP. Certain legal matters relating to the certificates will be passed
upon for the underwriters by Simpson Thacher & Bartlett.
GLOSSARY OF TERMS
Additional defined terms used in this prospectus supplement are
defined under "Glossary of Terms" in the prospectus.
"ABS" means the Absolute Prepayment Model which we use to measure
prepayments on receivables and we describe under "The Receivables
Pool--Weighted Average Life of the Certificates".
"ABS Table" means the table captioned "Percent of Initial Certificate
Balance at Various ABS Percentages" beginning on page S-__ of this prospectus
supplement.
"Available Interest" means, with respect to any payment date, the
excess of (a) the sum of:
o Interest Collections for such payment date; and
o all Advances made by the servicer for such payment date,
over (b) the amount of Outstanding Advances to be reimbursed on or with
respect to such payment date.
"Available Principal" means, with respect to any payment date, the
sum of the following amounts with respect to the preceding Collection Period:
o 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;
o to the extent attributable to principal, the Purchase Amount
received with respect to each receivable repurchased by the
seller or purchased by the servicer under an obligation which
arose during that Collection Period; and
o all liquidation proceeds, to the extent allocable to principal,
received during such Collection Period.
Available Principal on any payment date will exclude all payments and proceeds
of any receivables the Purchase Amount of which has been distributed on a
prior payment date.
"Book-Entry Securities" means securities that are held in the U.S.
through DTC and in Europe through Clearstream or Euroclear.
"Business Day" is a day other than a Saturday, a Sunday or a day on
which banking institutions or trust companies in the State of New York or the
State of Texas are authorized by law, regulation or executive order to be
closed.
"certificates" means, collectively, the Class A Certificates and the
Class B Certificates.
"certificate balance" means, with respect to a class of certificates,
the original certificate balance for that class as reduced by all prior
distributions of principal to the holders of record of that class of
certificates. The original certificate balance of each class of certificates
is set forth on the cover of this prospectus supplement.
"Class A Certificateholders" means the holders of record of Class A
Certificates.
"Class A Certificates" means the __% Automobile Loan Pass-Through
Certificates, Class A.
"Class A Percentage" means _____%.
"Class A Principal Distribution" means, with respect to any payment
date, the sum of (i) the Class A Percentage of the Available Principal plus
the Class A Percentage of Realized Losses, (ii) the Class A Percentage of the
Available Principal for any prior payment date and the Class A Percentage of
Realized Losses for any prior payment date, in each case only to the extent,
if any, that they have not already been distributed to the Class A
Certificateholders and (iii) if that payment date is the Final Scheduled
Payment Date, the additional amount, if any, needed to reduce the certificate
balance of the Class A Certificates to zero.
"Class B Certificateholders" means the holders of record of Class B
Certificates.
"Class B Certificates" means the __% Automobile Loan Pass-Through
Certificates, Class B.
"Class B Percentage" means _____%.
"Class B Principal Distribution" means, with respect to any payment
date, the sum of (i) the Class B Percentage of the Available Principal plus
the Class B Percentage of Realized Losses, (ii) the Class B Percentage of the
Available Principal for any prior payment date and the Class B Percentage of
Realized Losses for any prior payment date, in each case only to the extent,
if any, that they have not already been distributed to the Class B
Certificateholders and (iii) if that payment date is the Final Scheduled
Payment Date, the additional amount, if any, needed to reduce the certificate
balance of the Class B Certificates to zero.
"Clearstream" means Clearstream Bank, societe anonyme, a professional
depository under the laws of Luxembourg.
"closing date" means ___________________.
"Code" means the Internal Revenue Code of 1986, as amended.
"Collateral Agent" means _______________________________________ and
its successors and assigns as the collateral agent to which the funds and
investments in the Reserve Account have been pledged for the benefit of the
certificateholders.
"Collection Account" means an account established pursuant to the
pooling and servicing agreement, held in the name of the trustee, into which
the servicer is required to deposit collections on the receivables and other
amounts.
"Collection Period" means, with respect to a payment date, the
calendar month preceding that payment date, or in the case of the initial
payment date, the period from the Cut-off Date to .
"Contract Rate" means the per annum interest rate borne by a
receivable.
"Cut-off Date" means the date as of which the seller will transfer
the receivables to the trust, which is ___________________.
"defaulted receivable" means a receivable (i) that the servicer
determines is unlikely to be paid in full or (ii) with respect to which at
least 5% of a scheduled payment is 120 or more days delinquent as of the end
of a calendar month.
"Definitive Certificates" means with respect to any class of
certificates, such certificates issued in fully registered, certificated form
to certificateholders or their respective nominees, rather than to DTC or its
nominee.
"DTC" means The Depository Trust Company and any successor depository
selected by the trustee.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Euroclear" means a professional depository operated by the Brussels,
Belgium office of Morgan Guaranty Trust Company of New York under contract
with Euroclear Clearance System, S.C., a Belgian cooperative corporation.
"Federal Tax Counsel" means Brown & Wood LLP.
"Final Scheduled Payment Date" means ________________________________.
"Interest Collections" means, with respect to any payment 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 received during such Collection Period; and
(4) ______ to the extent attributable to interest, the Purchase
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 payment date shall exclude all payments and
proceeds of any receivables the Purchase Amount of which has been distributed
on a prior payment date.
"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.
"payment date" means the date on which the trust will distribute
interest and principal on the certificates, which will be the
_________________ day of each month or, if any such day is not a Business Day,
on the next Business Day, commencing ________________________ .
"Plan" means an employee benefit or other plan or arrangement (such
as an individual plan or Keogh plan) that is subject to ERISA, Section 4975 of
the Code or a Similar Law.
"Realized Losses" means, for any Collection Period, the excess of the
aggregate principal balance of those receivables that were designated as
defaulted receivables during that Collection Period over liquidation proceeds
received with respect to those receivables during that Collection Period, to
the extent allocable to principal.
"Record Date" with respect to any payment date means the day
immediately preceding the payment date or, if the certificates are issued as
Definitive Certificates, the last day of the preceding month.
"recoveries" means, with respect to any Collection Period after a
Collection Period in which a receivable becomes a defaulted receivable, all
monies received by the servicer with respect to such defaulted receivable
during that Collection Period, net of any fees, costs and expenses incurred by
and reimbursed to the servicer in connection with the collection of such
defaulted receivable and any payments required by law to be remitted to the
obligor.
"Reserve Account" means the account which the seller will establish
in the name of the Collateral Agent into which the seller will deposit the
Reserve Initial Deposit. The trustee will make the other deposits into and
withdrawals from the Reserve Account as specified in this prospectus
supplement.
"Reserve Initial Deposit" means the $______________ initially
deposited into the Reserve Account.
"SEC" means the Securities and Exchange Commission.
"Servicing Fee" means a fee payable to the servicer on each payment
date for servicing the receivables which is equal to the product of 1/12 of
__% and the aggregate principal balance of the receivables as of the first day
of the related Collection Period.
"Specified Reserve Account Balance" means the lesser of--
o __% of the outstanding principal balance of the receivables;
and
o __% of the principal balance of the receivables as of the
Cut-off Date.
"Supplemental Servicing Fee" means, for each Collection Period, the
amount of any late fees and other administrative fees and expenses collected
during that Collection Period, plus any interest earned during the Collection
Period on amounts on deposit in the Collection Account during the Collection
Period. The servicer does not currently collect such fees and expenses but may
do so in the future.
<PAGE>
Information contained 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.
Before you purchase any of these securities, be sure to read the risk
factors beginning on page of this prospectus and the risk factors set forth in
the related prospectus supplement.
A security is not a deposit and neither the securities nor the underlying
motor vehicle installment loans are insured or guaranteed by the FDIC or any
other governmental authority.
The notes and the certificates will represent obligations of or interests
in the trust only and will not represent obligations of or interests in USAA
Federal Savings Bank or any of its affiliates.
Subject to completion, dated August 4, 2000
(LOGO)
USAA Auto Trusts
Asset Backed Notes
Asset Backed Certificates
USAA Federal Savings Bank
Seller and Servicer
Each trust -
o will issue asset-backed notes and/or certificates in one or more
classes, rated in one of the four highest rating categories by at least
one nationally recognized statistical rating organization;
o will own --
____ a portfolio of motor vehicle installment loans;
____ collections on those loans;
____ security interests in the vehicles financed by those
loans; and
____ funds in the accounts of the trust; and
o may have the benefit of some form of credit or payment enhancement.
The main sources of funds for making payments on a trust's securities will be
collections on its motor vehicle installment loans and any enhancement that
the trust may have.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus or any related prospectus supplement.
Any representation to the contrary is a criminal offense.
--------------------
The date of this prospectus is August 4, 2000
TABLE OF CONTENTS
READING THIS PROSPECTUS AND THE ACCOMPANYING
PROSPECTUS SUPPLEMENT...............................3
WHERE YOU CAN FIND ADDITIONAL INFORMATION...........3
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE.....4
Copies of the Documents.........................4
SUMMARY.............................................5
RISK FACTORS........................................9
THE TRUSTS.........................................17
The Receivables................................17
The Trustee....................................18
USAA FEDERAL SAVINGS BANK..........................18
THE BANK'S PORTFOLIO OF MOTOR VEHICLE LOANS........19
THE RECEIVABLES POOLS..............................23
We Will Provide More Specific Information
About the Receivables in the Prospectus
Supplement.....................................24
MATURITY AND PREPAYMENT CONSIDERATIONS.............25
USE OF PROCEEDS....................................26
PRINCIPAL DOCUMENTS................................26
PAYMENTS ON THE SECURITIES.........................28
CERTAIN INFORMATION REGARDING THE SECURITIES.......28
Fixed Rate Securities..........................29
Floating Rate Securities.......................29
Book-Entry Registration........................29
Definitive Securities..........................35
Reports to Securityholders.....................36
THE INDENTURE......................................38
The Indenture Trustee..........................44
DESCRIPTION OF THE RECEIVABLES TRANSFER AND
SERVICING AGREEMENTS...........................45
Sale and Assignment of Receivables.............45
Accounts.......................................47
Servicing Procedures...........................48
Collections....................................48
Advances.......................................49
Servicing Compensation and Expenses............49
Distributions..................................50
Credit and Payment Enhancement.................50
Net Deposits...................................51
Statements to Trustees and Trusts..............52
Evidence as to Compliance......................52
Certain Matters Regarding the Servicer.........52
Events of Servicing Termination................53
Rights Upon Event of Servicing Termination.....54
Waiver of Past Events of Servicing Termination.54
Amendment......................................55
Payment of Notes...............................55
Termination....................................55
List of Certificateholders.....................56
Administration Agreement.......................56
Duties of Trustee..............................57
The Trustee....................................57
SOME IMPORTANT LEGAL ISSUES
RELATING TO THE RECEIVABLES........................58
Security Interest in the Receivables...........58
Security Interests in the Financed Vehicles....58
Enforcement of Security Interests in Financed
Vehicles.......................................60
Other Matters..................................60
CERTAIN FEDERAL INCOME TAX CONSEQUENCES............61
TRUSTS FOR WHICH A PARTNERSHIP
ELECTION IS MADE...............................61
Tax Characterization of the Trust as a
Partnership....................................61
Tax Consequences to Holders of the Notes.......62
Tax Consequences to Holders of the
Certificates...................................64
TRUSTS IN WHICH ALL CERTIFICATES
ARE RETAINED BY THE SELLER OR AN
AFFILIATE OF THE SELLER........................69
Tax Characterization of the Trust..............69
TRUSTS TREATED AS GRANTOR TRUSTS...............70
Tax Characterization of the Trust as a Grantor
Trust..........................................70
FASIT PROVISIONS...............................76
CERTAIN STATE TAX CONSEQUENCES.....................80
ERISA CONSIDERATIONS...............................80
Senior Certificates Issued by Trusts...........82
Special Considerations Applicable to Insurance
Company General Accounts.......................86
PLAN OF DISTRIBUTION...............................86
LEGAL OPINIONS.....................................87
GLOSSARY OF TERMS FOR THE PROSPECTUS...............87
READING THIS PROSPECTUS AND THE ACCOMPANYING
PROSPECTUS SUPPLEMENT
We provide information on your securities in two separate documents that
offer varying levels of detail:
o this prospectus provides general information, some of which may
not apply to a particular series of securities, including your
securities, and
o the accompanying prospectus supplement will provide a summary
of the specific terms of your securities.
If the terms of the securities described in this prospectus vary with the
accompanying prospectus supplement, you should rely on the information in the
prospectus supplement.
We include cross-references to sections in these documents where you can
find further related discussions. Refer to the table of contents in the front
of each document to locate the referenced sections.
You will find a glossary of defined terms used in this prospectus on page
--.
You should rely only on the information contained in this prospectus and
the accompanying prospectus supplement, including any information incorporated
by reference. We have not authorized anyone to provide you with different
information. The information in this prospectus or the accompanying prospectus
supplement is only accurate as of the dates on their respective covers.
In this prospectus, the terms "we," "us" and "our" refer to USAA Federal
Savings Bank.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
USAA Federal Savings Bank, as the originator of each trust, has filed a
registration statement with the Securities and Exchange Commission ("SEC")
under the Securities Act of 1933, as amended. This prospectus is part of the
registration statement but the registration statement includes additional
information.
You may inspect and copy the registration statement at:
o the public reference facilities maintained by the SEC at 450 Fifth
Street, N.W., Washington, D.C. 20549 (telephone 1-800-732-0330),
o the SEC's regional office at Citicorp Center, 500 West Madison
Street, 14th Floor, Chicago, Illinois 60661, and
o the SEC's regional office at Seven World Trade Center, New York,
New York 10048.
Also, the SEC maintains a Web site at http://www.sec.gov containing reports,
proxy and information statements and other information regarding registrants
that file electronically with the SEC.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows us to "incorporate by reference" information we file with
it, which means that we can disclose important information to you by referring
you to those documents. The information incorporated by reference is
considered to be part of this prospectus. Information that we file later with
the SEC will automatically update the information in this prospectus. In all
cases, you should rely on the later information over different information
included in this prospectus or the related prospectus supplement. We
incorporate by reference any future annual, monthly or special SEC reports and
proxy materials filed by or on behalf of a trust until we terminate our
offering of the securities by that trust.
Copies of the Documents
You may receive a free copy of any or all of the documents incorporated
by reference in this prospectus or incorporated by reference into the
accompanying prospectus supplement if:
o you received this prospectus and
o you request such copies from USAA Federal Savings Bank, 10750
McDermott Freeway, San Antonio, Texas 78288 (Telephone: 210-498-2265).
This offer only includes the exhibits to such documents if such exhibits are
specifically incorporated by reference in such documents. You may also read
and copy these materials at the public reference facilities of the SEC in
Washington, D.C. referred to above.
SUMMARY
The following summary is a short description of the main structural
features that a trust's securities may have. For that reason, this summary
does not contain all of the information that may be important to you or that
describes all of the terms of a security. To fully understand the terms of a
trust's securities, you will need to read both this prospectus and the related
prospectus supplement, in their entirety.
The Trusts
A separate trust will be formed to issue each series of securities. Each trust
will be created by an agreement between the seller and the trustee.
The Seller and the Servicer
USAA Federal Savings Bank.
Trustee
The prospectus supplement will name the trustee for the trust.
Indenture Trustee
If a trust issues notes, the prospectus supplement will name the indenture
trustee.
Securities
A trust's securities may include one or more classes of notes and/or
certificates. You will find the following information about each class of
securities in the prospectus supplement:
o its principal amount;
o its interest rate, which may be fixed or variable or a combination;
o the timing, amount and priority or subordination of payments of
principal and interest;
o the method for calculating the amount of principal payments;
o its final payment date;
o whether and when it may be redeemed prior to its final payment date;
and
o how losses on the receivables are allocated among the classes of
securities.
Some classes of securities may be entitled to:
o principal payments with disproportionate, nominal or no interest
payments or
o interest payments with disproportionate, nominal or no principal
payments.
The prospectus supplement will identify any class of securities that is not
being offered to the public.
Optional Prepayment
Generally, the servicer will have the option to purchase the receivables of
each trust on any payment date when the aggregate principal balance of the
receivables sold to the trust has declined to 10% (or such other percentage
specified in the prospectus supplement) or less of the initial principal
balance. Upon such a purchase, the securities of that trust will be prepaid in
full.
The Receivables and Other Trust Property
The receivables of each trust will consist of a pool of motor vehicle
installment loans made by the seller and secured by new and used automobiles
and light-duty trucks and other property, including:
o the rights to receive payments made on the receivables after the
cut-off date specified in the related prospectus supplement;
o security interests in the vehicles financed by the receivables; and
o any proceeds from claims on various related insurance policies.
You will find a description of the characteristics of the trust's receivables
in the prospectus supplement.
For a more detailed description of the receivables, including the criteria
they must meet in order to be included in a trust, and the other property
supporting the securities, see "The Receivables Pools" in this prospectus.
Other Property of the Trust
In addition to the receivables, each trust will own amounts on deposit in
various trust accounts, which may include:
o an account into which collections are deposited;
o an account to fund post-closing purchases of additional receivables;
or
o a reserve account or other account relating to credit enhancement.
Purchase of Receivables After the Closing Date
If a trust has not purchased all of its receivables at the time you purchase
your securities, it will purchase the remainder of its receivables from the
seller over a period specified in the prospectus supplement.
Credit or Payment Enhancement
The prospectus supplement will specify the credit or payment enhancement, if
any, for each trust. Credit or payment enhancement may consist of one or more
of the following:
o subordination of one or more classes of securities;
o a reserve account;
o overcollateralization (i.e., the amount by which the principal amount
of the receivables exceeds the principal amount of all of the trust's
securities);
o excess interest collections (i.e., the excess of anticipated interest
collections on the receivables over servicing fees, interest on the
trust's securities and any amounts required to be deposited in a
reserve account, if any);
o letter of credit or other credit facility;
o surety bond;
o liquidity arrangements;
o swaps (including currency swaps) and other derivative instruments and
interest rate protection agreements;
o repurchase or put obligations;
o yield supplement accounts or agreements;
o guaranteed investment contracts;
o guaranteed rate agreements; or
o other agreements with respect to third party payments or other
support.
Limitations or exclusions from coverage could apply to any form of credit or
payment enhancement. The prospectus supplement will describe the credit or
payment enhancement and related limitations and exclusions applicable for
securities issued by a trust. Enhancements cannot guarantee that losses will
not be incurred on the securities.
Reserve Account
If there is a reserve account, the seller will initially deposit in it cash or
securities having a value equal to the amount specified in the prospectus
supplement.
Amounts on deposit in a reserve account will be available to cover shortfalls
in the payments on the securities as described in the prospectus supplement.
The prospectus supplement may also specify (1) a minimum balance to be
maintained in the reserve account and what funds are available for deposit to
reinstate that balance, and (2) when and to whom any amount will be
distributed if the balance exceeds this minimum amount.
For more information about credit enhancement, see "Description of the
Receivables Transfer and Servicing Agreements -- Credit and Payment
Enhancement" in this prospectus.
Transfer and Servicing of the Receivables
The seller will transfer receivables to a trust under an agreement. The
servicer will agree with the trust to be responsible for servicing, managing,
maintaining custody of and making collections on the receivables.
For more information about the sale and servicing of the receivables, see
"Description of the Receivables Transfer and Servicing Agreements -- Sale and
Assignment of Receivables" in this prospectus.
Servicing Fees
Each trust will pay the servicer a servicing fee based on the outstanding
balance of the receivables. The amount of the servicing fee will be specified
in the prospectus supplement. The servicer will also be entitled to retain as
supplemental servicing compensation certain fees and charges paid by obligors
and net investment income from reinvestment of collections on the receivables.
Servicer Advances of Certain Late Interest Payments
When interest collections received on the receivables are less than the
scheduled interest collections in a collection period, the servicer will
advance to the trust that portion of the shortfalls that the servicer, in its
sole discretion, expects to be paid in the future by the related obligors.
The servicer will be entitled to reimbursement from other collections of the
trust for these advances that are not repaid out of collections of the related
late payments.
Repurchase May Be Required For Modified Receivables
In the course of its normal servicing procedures, the servicer may defer or
modify the payment schedule of a receivable. Some of these arrangements may
obligate the servicer to repurchase the receivable.
For a discussion of the servicer's repurchase obligations, see "Description of
the Receivables Transfer and Servicing Agreements -- Servicing Procedures" in
this prospectus.
Repurchase May Be Required For Breaches of Representation or Warranty
The seller will make representations and warranties relating to the
receivables when it sells them to the trust.
The seller will be required to repurchase a receivable from the trust if (1)
one of the seller's representations or warranties is breached with respect to
that receivable and (2) the receivable is materially and adversely affected by
the breach.
For a discussion of the representations and warranties given by the seller and
its related repurchase obligations, see "Description of the Receivables
Transfer and Servicing Agreements -- Sale and Assignment of Receivables" in
this prospectus.
Tax Status
If the trust issues notes and the trust does not elect to be characterized as
a Financial Asset Securitization Investment Trust, federal tax counsel to the
trust will deliver an opinion when the notes are issued that for federal
income tax purposes:
o the notes will be characterized as debt unless otherwise stated in the
prospectus supplement and
o the trust will not be characterized as an association (or a publicly
traded partnership) taxable as a corporation.
If the trust is a grantor trust or elects to be treated as a Financial Asset
Securitization Investment Trust, you will find a discussion of the federal
income tax characterization of its certificates and the trust in this
prospectus and the prospectus supplement.
See "Certain Federal Income Tax Consequences" and "Certain State Tax
Consequences" in this prospectus for additional information concerning the
application of federal and state tax laws to the securities.
ERISA Considerations
If you are an employee benefit plan, you should review the matters discussed
under "ERISA Considerations" in this prospectus before investing in the
securities.
Form, Denomination and Record Date
Generally, you may purchase securities only in book-entry form and will not
receive your securities in definitive form. You may purchase securities in the
denominations set forth in the prospectus supplement. The record date for a
payment date will be the business day immediately preceding the payment date
or, if definitive securities are issued, the last day of the preceding
calendar month.
RISK FACTORS
You should consider the following risk factors in deciding whether to
purchase any of the securities.
Interests of other persons in the receivables could reduce the funds available
to make payments on your securities
Financing statements under the Uniform
Commercial Code will be filed reflecting
the sale of the receivables by us to the
trust. Our accounting records and computer
systems will also be marked to reflect a
sale of the receivables to the trust.
However, because the servicer will maintain
possession of the receivables and not
segregate or mark the receivables as
belonging to the trust, another person
could acquire an interest in a receivable
that is superior to the trust's interest by
obtaining physical possession of the loan
document representing that receivable
without knowledge of the assignment of the
receivable to the trust. If another person
acquires an interest in a receivable that
is superior to the trust's interest in the
receivable, some or all of the collections
on that receivable may not be available to
make payment on the securities.
If another person acquires a security or
other interest in a financed vehicle that
is superior to the trust's security
interest in the vehicle, some or all of the
proceeds from the sale of the vehicle may
not be available to make payments on the
securities.
The trust's security interest in the
financed vehicles could be impaired for one
or more of the following reasons:
o we might fail to perfect our security
interest in a financed vehicle;
o another person may acquire an interest
in a financed vehicle that is superior
to the trust's security interest
through fraud, forgery, negligence or
error because the servicer will not
amend the certificate of title or
ownership to identify the trust as
the new secured party;
o the trust may not have a security
interest in the financed vehicles in
certain states because the
certificates of title to the financed
vehicles will not be amended to
reflect assignment of a security
interest therein to the trust;
o holders of some types of liens,
such as tax liens or mechanics liens,
may have priority over the trust's
security interest; and
o the trust may lose its security
interest in vehicles confiscated by
the government.
Neither the seller nor the servicer will be
required to repurchase a receivable if the
security interest in a related vehicle or
the receivable becomes impaired after the
receivable is sold to the trust.
Consumer protection laws
may cause a trust to experience
losses on its receivables
Federal and state consumer protection laws
impose requirements upon creditors in
connection with extensions of credit and
collections on retail installment loans.
Some of these laws make an assignee of the
loan (such as a trust) liable to the
obligor for any violation by the lender.
Any liabilities of the trust under these
laws could reduce the funds that the trust
would otherwise have to make payments on
your securities.
Only the assets of the trust
are available to pay your
securities
Neither the seller nor any of its
affiliates is obligated to make any
payments relating to (1) the securities of
a trust or (2) the receivables owned by a
trust. Therefore, you must rely solely on
the assets of the trust for repayment of
your securities. If these assets are
insufficient, you may suffer losses on your
securities.
The assets of a trust will consist solely
of its receivables and, to the extent
specified in the prospectus supplement,
various deposit accounts and any credit or
payment enhancement.
Amounts on deposit in any reserve account
will be limited and subject to depletion.
The amount required to be on deposit in any
reserve account will be limited. If the
amounts in the reserve account are depleted
as amounts are paid out to cover shortfalls
in distributions of principal and interest
on your securities, the trust will depend
solely on collections on the receivables
and any other credit or payment enhancement
to make payments on your securities. In
addition, the minimum required balance in a
reserve account may decrease as the
outstanding balance of the receivables
decreases.
You may suffer losses upon a liquidation of
the receivables if the proceeds of the
liquidation are less than the amounts due
on the outstanding securities. Under
certain circumstances described herein, the
receivables of a trust may be sold after
the occurrence of an event of default. The
related securityholders will suffer losses
if the trust sells the receivables for less
than the total amount due on its
securities. We cannot assure you that
sufficient funds would be available to
repay those securityholders in full.
Delays in collecting payments
could occur if USAA Federal
Savings Bank ceases to be the
servicer
If we were to cease acting as servicer, the
processing of payments on the receivables
and information relating to collections
could be delayed, which could delay
payments to securityholders. We can be
removed as servicer if we default on our
servicing obligations as described in this
prospectus. See "Description of the
Receivables Transfer and Servicing
Agreements -- Events of Servicing
Termination." We may resign as servicer
under certain circumstances described in
this Prospectus. See "Description of the
Receivables Transfer and Servicing
Agreements -- Certain Matters Regarding the
Servicer."
The insolvency of the seller
may delay payments on your
securities or cause you to incur
a loss
The seller intends that each transfer of
receivables by it to a trust under a sale
and servicing agreement or a pooling and
servicing agreement constitutes a sale. In
the event that the seller were to become
insolvent, the Federal Deposit Insurance
Act("FDIA"), as amended by the Financial
Institutions Reform, Recovery and
Enforcement Act of 1989 ("FIRREA"), sets
forth certain powers that the Federal
Deposit Insurance Corporation may exercise
if it were appointed receiver of the
seller. To the extent that the seller has
granted a security interest in the
receivables to a trust and that security
interest was validly perfected before the
seller's insolvency and was not taken in
contemplation of insolvency or with the
intent to hinder, delay or defraud the
seller or its creditors, that security
interest would not be subject to avoidance
by the Federal Deposit Insurance
Corporation as receiver of the seller.
Positions taken by the staff of the Federal
Deposit Insurance Corporation prior to the
passage of FIRREA do not suggest that the
Federal Deposit Insurance Corporation, if
appointed receiver of the seller, would
interfere with the timely transfer to the
trust of payments collected on the related
receivables If, however, the Federal
Deposit Insurance Corporation were to
assert a contrary position, or were to
require the trustee or the indenture
trustee to establish its rights to those
payments by submitting to and completing
the administrative claims procedure
established under the FDIA, or the
conservator or receiver were to request a
stay of proceedings with respect to the
seller as provided under the FDIA, delays
in payments on the related securities and
possible reductions in the amount of those
payments could occur.
Recently, the FDIC adopted a proposed rule,
"Treatment by the Federal Deposit Insurance
Corporation as Conservator or Receiver of
Financial Assets Transferred by an Insured
Depository Institution in Connection with a
Securitization or Participation". If the
proposed rule were effective and the
seller's transfer of receivables to a trust
were to satisfy the requirements of the
proposed rule, then the Federal Deposit
Insurance Corporation, as conservator or
receiver of the seller, would not seek to
treat the receivables and collections as
the seller's property or property of the
conservatorship or receivership of the
seller rather than the trust's property. If
the proposed rule becomes effective, we
will indicate in the prospectus supplement
whether the seller will rely on the rule.
We cannot predict whether the proposed rule
will become effective and we cannot assure
you that a transfer of receivables by the
seller to a trust will comply with the
rule.
Subordination may cause some
classes of securities to bear
additional credit risk
The rights of the holders of any class of
securities to receive payments of interest
and principal may be subordinated to one or
more other classes of securities.
Holders of subordinated classes of
securities will bear more credit risk than
more senior classes. Subordination may take
the following forms:
o interest payments on any date on which
interest is due may first be allocated
to the more senior classes;
o principal payments on the
subordinated classes might not begin
until principal of the more senior
classes is repaid in full;
o principal payments on the more
senior classes may be made on a
payment date before interest payments
on the subordinated classes are made;
o subordinated classes bear the
risk of losses on the receivables and
the resulting cash shortfalls before
the more senior classes do; and
o if the trustee sells the
receivables after an event of default,
the net proceeds of that sale may be
allocated first to pay principal and
interest on the more senior classes.
The timing and priority of payment,
seniority, allocations of losses and method
of determining payments on the respective
classes of securities of any trust will be
described in the prospectus supplement.
Prepayments on the
receivables may
adversely affect
the average life of
and rate of return on
your securities
Faster than expected prepayments on the
receivables will cause the trust to make
payments on its securities earlier than
expected. You may not be able to reinvest
the principal repaid to you at a rate of
return that is equal to or greater than the
rate of return on your securities. We
cannot predict the effect of prepayments on
the average life of your securities.
All the receivables by their terms may be
prepaid at any time. Prepayments include:
o prepayments in whole or in part by the
obligor;
o liquidations due to default;
o partial payments with proceeds from
physical damage, credit life and
disability insurance policies;
o required purchases of receivables by
the servicer or repurchases of
receivables by the seller for
specified breaches of their
representations or covenants; and
o an optional repurchase of a
trust's receivables by the servicer
when their aggregate principal balance
is 10% (or such other percentage
specified in the prospectus
supplement) or less of the initial
aggregate principal balance.
A variety of economic, social and other
factors will influence the rate of optional
prepayments on the receivables and
defaults.
The final payment of each class of
securities is expected to occur prior to
its final scheduled payment date because of
the prepayment and purchase considerations
set forth above. If sufficient funds are
not available to pay any class of notes in
full on its final payment date, an event of
default will occur and final payment of
such class of notes will occur later than
such date.
For more information regarding the timing
of repayments of the securities, see
"Maturity and Prepayment Considerations" in
the prospectus supplement and in this
prospectus.
You may suffer losses on
your securities because the
servicer will hold collections
and commingle them with its
own funds
The servicer will generally be permitted to
hold with its own funds (1) collections it
receives from obligors on the receivables
and (2) the purchase price of receivables
required to be repurchased from the trust
until the day prior to the next date on
which distributions are made on the
securities. During this time, the servicer
may invest those amounts at its own risk
and for its own benefit and need not
segregate them from its own funds. If the
servicer is unable for any reason to pay
these amounts to the trust on the payment
date, you might incur a loss on your
securities.
For more information about the servicer's
obligations regarding payments on the
receivables, see "Description of the
Receivables Transfer and Servicing
Agreements -- Collections" in this
prospectus.
The senior class of securities
controls removal of the
servicer upon a default on its
servicing obligations
Generally, the holders of a majority of a
trust's senior class of securities (or the
applicable trustee acting on their behalf)
can remove the servicer if the servicer --
o does not deliver to the applicable
trustee the available funds for
application to a required payment
after a grace period after notice or
discovery;
o defaults on a servicing obligation
which materially and adversely affects
the trust after a grace period after
notice; or
o becomes the subject of certain
insolvency proceedings.
Those holders may also waive a default by
the servicer. The holders of any
subordinate class of securities do not have
any rights to participate in such
determinations for so long as any of the
more senior classes are outstanding, and
the subordinate classes of securities may
be adversely affected by determinations
made by the more senior classes. See
"Description of the Receivables Transfer
and Servicing Agreements -- Events of
Servicing Termination."
You may not be able to resell
your securities
There may be no secondary market for the
securities. Underwriters may participate in
making a secondary market in the
securities, but are under no obligation to
do so. We cannot assure you that a
secondary market will develop. If a
secondary market does develop, we cannot
assure you that it will continue or that
you will be able to resell your securities.
Geographic concentration of a
a trust's auto loans may adversely
affect your securities
Adverse economic conditions or other
factors particularly affecting any state or
region where there is a high concentration
of a trust's auto loans could adversely
affect the securities of that trust. We are
unable to forecast, with respect to any
state or region, whether any such
conditions may occur, or to what extent
such conditions may affect auto loans or
the repayment of your securities. The
location of a trust's auto loans by state,
based upon borrowers' addresses at the time
the auto loans were made, will be set out
in the prospectus supplement.
Ratings of the securities At the initial issuance of the securities
of a trust, at least one nationally
recognized statistical rating organization
will rate the offered securities in one of
the four highest rating categories. A
rating is not a recommendation to purchase,
hold or sell securities, and it does not
comment as to market price or suitability
for a particular investor. The ratings of
the securities address the likelihood of the
payment of principal and interest on the
securities according to their terms. We
cannot assure you that a rating will remain
for any given period of time or that a
rating agency will not lower or withdraw its
rating if, in its judgment, circumstances in
the future so warrant. A reduction or
withdrawal of a security's rating will
adversely affect its market value.
If book-entry registration is
used, you will be able to
exercise your rights as a
securityholder only through
the clearing agency and your
ability to transfer your
securities may be limited
The securities will be delivered to you in
book-entry form through the facilities of
The Depository Trust Company ("DTC") or
Clearstream (formerly Cedelbank) or
Euroclear. Consequently, your securities
will not be registered in your name and you
will not be recognized as a securityholder
by the trustee or any applicable indenture
trustee. You will only be able to exercise
the rights of a securityholder indirectly
through DTC and its participating
organizations. Specifically, you may be
limited in your ability to resell the
securities to a person or entity that does
not participate in the DTC system or
Clearstream or Euroclear. Physical
certificates will only be issued in the
limited circumstances described in the
prospectus. See "Certain Information
Regarding the Securities -- Definitive
Securities" in this prospectus.
Potential delays in payments on
your securities due to potential
computer program problems
because of the year 2000 issue 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. Thus far, the
servicer has not encountered any material
year 2000 problems arising from its own
operations or from those of its suppliers,
customers or agents. We cannot assure you
that such problems will not arise in the
future.
In the event that the servicer, or any of
its suppliers, customers or agents
encounter substantial problems because of
the year 2000 issue, the servicer's
performance of its obligations under the
agreements to which it is a party 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.
THE TRUSTS
The seller will establish a separate trust as either a Delaware business
trust or a common law trust to issue each series of notes and/or certificates.
Each trust will be established for the transactions described in this
prospectus and in the related prospectus supplement. If a trust is a grantor
trust for federal income tax purposes, the prospectus supplement will so
state.
The Receivables
Certain information concerning the seller's experience with respect to
its portfolio of Motor Vehicle Loans (including previously sold Motor Vehicle
Loans which the seller continues to service) will be set forth in each
prospectus supplement. We cannot assure you that the delinquency, repossession
and net loss experience on any pool of receivables owned by a trust will be
comparable to that information.
On the closing date for a trust, the seller will sell and transfer
receivables to the trust in an amount specified in the related prospectus
supplement. Generally, the trust will have the right to receive all payments
on those receivables that are received on or after the date (a "cut-off date")
specified in the prospectus supplement. To the extent provided in the
prospectus supplement, the seller will convey additional receivables
("Subsequent Receivables") to the trust as frequently as daily during the
period (the "Funding Period") specified in the prospectus supplement. A trust
will purchase any Subsequent Receivables with amounts deposited in a
pre-funding account on the closing date. Up to 50% of the net proceeds from
the sale of the securities issued by a trust may be deposited into a
pre-funding account for the purchase of Subsequent Receivables. Any Subsequent
Receivables will also be assets of the trust.
The property of each trust will also include:
o security interests in the financed vehicles;
o the rights to proceeds, if any, from claims on certain theft,
physical damage, credit life or credit disability insurance policies, if
any, covering the financed vehicles or the obligors;
o the seller's rights to certain documents and instruments relating to
the receivables;
o such amounts as from time to time may be held in one or more accounts
maintained for the trust;
o any credit or payment enhancement specified in the prospectus
supplement;
o certain payments and proceeds with respect to the receivables held
by the servicer;
o certain rebates of premiums and other amounts relating to certain
insurance policies and other items financed under the receivables; and
o any and all proceeds of the above items.
If the trust issues notes, the trust's rights and benefits with respect
to the property of the trust will be assigned to the indenture trustee for the
benefit of the noteholders.
The Trustee
The trustee for each trust will be specified in the related prospectus
supplement. The trustee's liability in connection with the issuance and sale
of the securities is limited solely to the express obligations of the trustee
set forth in the trust agreement or the pooling and servicing agreement. The
trustee may resign at any time, in which event the administrator, in the case
of a trust agreement, or the servicer, in case of a pooling and servicing
agreement, will be obligated to appoint a successor trustee. The administrator
or the servicer may also remove the trustee if:
o the trustee ceases to be eligible to continue as trustee under the
trust agreement or the pooling and servicing agreement, as applicable, or
o the trustee becomes insolvent.
In either of these circumstances, the administrator or servicer must
appoint a successor trustee. If the trustee resigns or is removed, the
resignation or removal and appointment of a successor trustee will not become
effective until the successor trustee accepts its appointment.
You will find the addresses of the principal offices of the trust and the
trustee in the prospectus supplement.
USAA FEDERAL SAVINGS BANK
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, and
its deposits are insured by the Federal Deposit Insurance Corporation. The
Bank is an indirect wholly-owned subsidiary of the United Services Automobile
Association ("USAA") and 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, 1999, its total assets and total common and preferred stockholders' equity
were $8.9 billion and $806 million, respectively.
The Bank's executive offices are located at 10750 McDermott Freeway, San
Antonio, Texas 78288 and its telephone number is (210) 498-2265.
USAA is a reciprocal interinsurance exchange formed in 1922. As of
December 31, 1999, USAA and its various property and casualty insurance
subsidiaries had approximately 3.6 million members.
USAA and its various property and casualty insurance subsidiaries provide
personal line 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 seventh largest private passenger
automobile and the sixth largest homeowners insurer in the United States,
based on 1999 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
Investors Service, Inc. and Standard & Poor's Ratings Services, respectively.
USAA is headquartered in San Antonio, Texas and employs approximately 23,000
people.
THE BANK'S PORTFOLIO OF MOTOR VEHICLE LOANS
Origination of Motor Vehicle Loans
The Bank directly originates motor vehicle installment loans secured by
new and used automobiles and light-duty trucks (the "Motor Vehicle Loans").
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 generally accepted by
telephone but may also be accepted in person or by mail. The Bank's primary
source of applicants is the membership and associate membership of USAA, which
consist of officers and former officers of the U.S. military, their dependents
and former dependents and, more recently, enlisted personnel in the U.S.
military.
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 Bank may change its servicing and origination policies and practices 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 pre-approved basis or on a judgmental basis, which,
since September 1992, has included a credit scoring process.
Pre-Approval Process. 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.
All potential pre-approved customer names are screened against the
database maintained by the Bank's parent company USAA. USAA's database must
show that the potential customer:
o is an active USAA insurance policyholder or is eligible to be one;
and
o is not identified in USAA's database as a customer who should
not receive advertising from USAA or its subsidiary companies.
The Bank then screens those potential customer names against its database
of credit card accounts, although an existing credit card account is not a
prerequisite for pre-approval. If the potential customer has a credit card
account, the Bank's credit card database must show that the account:
o is current and has been active more than twelve months;
o has not been more than 30 days delinquent on more than two
occasions in the most recent 12 month period;
o has had no record of bankruptcy, closed account or collection
problems; and
o has no lost or stolen account or fraudulent activity record.
A potential customer who is pre-approved using the credit card account
screening process 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. The Bank offers those pre-approved
potential customers Motor Vehicle Loans in amounts of $15,000 to $30,000.
A potential customer without a credit card account with the Bank is
eligible for a pre-approved Motor Vehicle Loan in an amount of $15,000 to
$30,000 if the individual has no record of bankruptcy or collection problems
on any Bank loan products and has an existing Motor Vehicle Loan with the Bank
that:
o has not been more than 30 days delinquent;
o has a term greater than one year and has been outstanding for more
than one year; and
o had an original principal balance in excess of $ 7,500.
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 need only
identify 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.
Judgmental Process. If an applicant is not pre-approved for a Motor
Vehicle Loan as described above, the Bank requires the applicant to complete
an application, generally over the telephone, 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. The Bank reviews each application for
completeness and for compliance with the Bank's guidelines and applicable
consumer regulations.
The Bank evaluates each applicant 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 and the credit bureau reports
referred to below.
Automated Review. The Bank first performs the evaluation on an automated
basis. If the automated review of the application shows that the applicant
meets certain criteria in the Bank's underwriting guidelines described below
at specified levels and has at least a specified credit score in the Bank's
credit scoring process referred to below, then the application is approved. If
the application is not approved in the automated review and has not been
submitted by a pre-approved customer, a credit analyst performs a judgmental
review using the same criteria and standards.
Credit Criteria. Among the criteria considered in evaluating each
application are:
o stability of the applicant with specific regard to the applicant's
occupation and length of employment;
o 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;
o a debt service to gross monthly income ratio test; and
o 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%.
The Bank uses an empirically based credit scoring process that uses
credit scores provided by credit bureaus to objectively assess an applicant's
creditworthiness. This credit scoring process was created using historical
information from the database of Motor Vehicle Loans owned or 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 Bank's credit scoring
process is periodically reviewed and, if necessary, updated to reflect current
statistical data. The Bank's credit scoring process is intended to provide a
basis for lending decisions, not to supersede the judgment of the credit
analyst.
The Bank has approved applications that do not meet its standard credit
guidelines, both before and after implementation of the credit scoring
process. Generally, those approvals require concurrent approval of a second,
designated senior credit analyst or credit manager of the Bank. Applications
that do not comply with all the Bank's guidelines must have compensating
factors which indicate a strong capacity to repay the loan. In such cases, the
reason for approving the Motor Vehicle Loan is often because the applicant has
made a down payment and the amount financed is lower than the maximum
permitted by the Bank's guidelines.
Amount Advanced. 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 the lesser of the purchase price and:
o for a new financed vehicle, the manufacturer's suggested retail
price plus taxes and title and license fees on the financed vehicle
or
o for a used financed vehicle the "retail" value stated in the
most recently published National Auto Research Black Book used
vehicle guide, adjusted for high or low mileage and before credit
for any optional equipment, plus taxes and title and license fees.
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, the Bank adjusts its credit guidelines to maintain the asset quality
deemed acceptable by the Bank's management. The Bank reviews, on an annual
basis, the quality of its Motor Vehicle Loans by conducting internal audits of
certain randomly selected Motor Vehicle Loans to ensure compliance with
established policies and procedures.
Insurance
Each Motor Vehicle Loan requires the obligor to obtain comprehensive and
collision insurance with respect to the financed vehicle. After the funding of
the Motor Vehicle Loan, the Bank does not monitor the obligor's compliance
with such requirement. Most obligors obtain the required comprehensive and
collision insurance from USAA or an affiliate thereof.
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 those of 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 an obligor fails to
maintain the required insurance.
Collection Procedures
The Bank performs collection activities with respect to delinquent Motor
Vehicle Loans including the 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 95% 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, the Bank sends a demand letter. After 50 days of delinquency, the
Bank accelerates the Motor Vehicle Loan. Repossession procedures generally
will be initiated after a Motor Vehicle Loan continues to be delinquent for 60
to 90 days, depending on factors such as payments made and credit score.
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 engaged in the business of repossessing vehicles for secured
parties. After repossession, the obligor generally has an additional 15 days
to redeem the financed vehicle before the financed vehicle is resold.
Losses may occur in connection with delinquent Motor Vehicle Loans and
can arise in several ways, including inability to locate the financed vehicle
or the obligor, or because of a discharge of the obligor in a bankruptcy
proceeding. The current policy of the Bank is to recognize losses when it
determines that the Motor Vehicle Loan is uncollectible, or during the month
the Motor Vehicle Loan becomes 120 days delinquent, whichever occurs first.
Upon repossession and sale of the financed vehicle, the Bank pursues any
deficiency remaining 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:
o 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;
o the extension will result in the obligor's payments being brought
current;
o 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
o 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 Receivables Transfer and Servicing
Agreements--Servicing Procedures" for certain additional conditions on
credit-related extensions which must be satisfied with respect to receivables
owned by a trust.
THE RECEIVABLES POOLS
Criteria for Selecting the Receivables. The receivables, including
Subsequent Receivables, to be held by each trust will be selected from the
Bank's portfolio of Motor Vehicle Loans on the basis of several criteria,
including that each receivable:
o is secured by a new or used automobile or light-duty truck;
o was originated in the U.S.;
o has a fixed or variable interest rate;
o provides for level monthly payments that fully amortize the
amount financed over its original term to maturity or provides for a
different type of amortization described in the prospectus
supplement; and
o satisfies the other criteria, if any, set forth in the prospectus
supplement.
The Bank will select the receivables from the Motor Vehicle Loans in its
portfolio that satisfy the above criteria. No selection procedures which the
Bank believes to be adverse to the securityholders of the trust will be used
in selecting the receivable for the trust.
Simple Interest Receivables. The receivables may provide for the
application of payments on the simple interest method. If an obligor on a
simple interest receivable pays a fixed monthly installment before its
scheduled due date --
o the portion of the payment allocable to interest for the period
since the preceding payment was made will be less than it would have
been had the payment been made as scheduled; and
o the portion of the payment applied to reduce the unpaid
principal balance will be correspondingly greater.
Conversely, if an obligor pays a fixed monthly installment after its
scheduled due date --
o the portion of the payment allocable to interest for the period
since the preceding payment was made will be greater than it would
have been had the payment been made as scheduled; and
o the portion of the payment applied to reduce the unpaid
principal balance will be correspondingly less.
In either case, the obligor pays a fixed monthly installment until the
final scheduled payment date, at which time the amount of the final
installment is increased or decreased as necessary to repay the then
outstanding principal balance. If a simple interest receivable is prepaid, the
obligor is required to pay interest only to the date of prepayment.
Receivables Other Than Simple Interest Receivables. If the receivables
are not simple interest receivables, the prospectus supplement will describe
the method of applying payments on the receivables.
We Will Provide More Specific Information About the Receivables in the
Prospectus Supplement
We will provide information about the receivables to be held by each
trust in the related prospectus supplement, including, to the extent
appropriate:
o the portion of the receivables secured by new vehicles and by used
vehicles;
o the aggregate principal balance of all of the receivables;
o the average principal balance of the receivables and the range of
principal balances;
o the number of receivables;
o the average original amount financed and the range of original
amounts financed;
o the weighted average contract rate of interest and the range of such
rates;
o the weighted average original term and the range of original terms;
o the weighted average remaining term and the range of remaining terms;
o the scheduled weighted average life; and
o the distribution by contract rate of interest and by the states of
origination.
MATURITY AND PREPAYMENT CONSIDERATIONS
The weighted average life of the securities of any trust will generally
be influenced by the rate at which the principal balances of its receivables
are paid, which payment may be in the form of scheduled amortization or
prepayments. "Prepayments" for these purposes includes the following
circumstances:
o Prepayments by obligors, who may repay at any time without
penalty.
o The seller may be required to repurchase a receivable from the
trust if certain breaches of representations and warranties occur
and the receivable is materially and adversely affected by the
breach.
o The servicer may be obligated to purchase a receivable from the
trust if certain breaches of covenants occur or if the servicer
extends or modifies the terms of a receivable beyond the Collection
Period preceding the final payment date for the securities specified
in the prospectus supplement.
o Partial prepayments, including those related to rebates of
extended warranty contract costs and insurance premiums.
o Liquidations of the receivables due to default.
o Partial prepayments from proceeds from physical damage, credit
life and disability insurance policies.
In light of the above considerations, we cannot assure you as to the
amount of principal payments to be made on the securities of a trust on each
payment date since that amount will depend, in part, on the amount of
principal collected on the trust's receivables during the applicable
Collection Period. Any reinvestment risks resulting from a faster or slower
incidence of prepayment of receivables will be borne entirely by the
securityholders. The related prospectus supplement may set forth certain
additional information with respect to the maturity and prepayment
considerations applicable to the receivables and the securities of the trust.
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 without the seller's consent. These
factors may also include unemployment, servicing decisions, seasoning of
loans, destruction of vehicles by accident, sales of vehicles and market
interest rates. A predominant factor affecting the prepayment of a large group
of loans is the difference between the interest rates on the loans and
prevailing market interest rates. If the prevailing market interest rates were
to fall significantly below the interest rates borne by the loans, the rate of
prepayment and refinancings would be expected to increase. Conversely, if
prevailing market interest rates were to increase significantly above those
interest rates, the rate of prepayments and refinancings would be expected to
decrease.
USE OF PROCEEDS
The net proceeds from the sale of the securities of a trust will be
applied by the trust or the seller, as indicated in the prospectus supplement
o if by the trust, to the purchase of the receivables from the seller;
o if the trust has a pre-funding account, to make the deposit into that
account;
o if the trust has a yield supplement account, to make the deposit into
that account;
o if the trust has a reserve account, to make the initial deposit into
that account; and
o for any other purposes specified in the prospectus supplement.
The seller will add the funds received by it to its general funds. The
trust may also issue certain classes of securities to the seller in partial
payment for the receivables.
PRINCIPAL DOCUMENTS
In general, the operations of a trust will be governed by the following
documents:
If the trust issues notes:
<TABLE>
<CAPTION>
Document Parties Primary Purposes
------------------------------------- ------------------------------------- -------------------------------------
<S> <C> <C>
Trust Agreement Trustee and Bank, as depositor o Creates the trust
o Provides for issuance
of certificates and payments
to certificateholders
o Establishes rights and
duties of trustee
o Establishes rights of
certificateholders
Indenture Trust, as issuer of the notes, o Provides for issuance
and indenture trustee of the notes, the terms of
the notes and payments to
noteholders
o Establishes rights and
duties of indenture trustee
o Establishes rights of
noteholders
Sale and Servicing Agreement Bank, as seller and servicer, and o Effects sale of
a trust as purchaser receivables to the trust
o Contains
representations and
warranties of seller
concerning the receivables
o Contains servicing
obligations of servicer
o Provides for
compensation to servicer
o Directs how cash flow
will be applied to expenses
of the trust and payments on
its securities
</TABLE>
If the trust is a grantor trust (as specified in the prospectus
supplement):
<TABLE>
<CAPTION>
Document Parties Primary Purposes
------------------------------------- ------------------------------------- -------------------------------------
Pooling and Servicing Agreement Trustee and Bank, as seller and
servicer o Creates the trust
<S> <C> <C>
o Effects sale of
receivables to the trust
o Contains
representations and
warranties of seller
concerning the receivables
o Contains servicing
obligations of servicer
o Provides for
compensation to servicer
o Provides for issuance
of certificates and payments
to certificateholders
o Directs how cash flow
will be applied to expenses
of the trust and payments to
certificateholders
o Establishes rights and
duties of trustee
o Establishes rights of
certificateholders
</TABLE>
Various provisions of these documents are described throughout this
prospectus and in the related prospectus supplement. The prospectus supplement
for a series will describe any material provisions of these documents as used
in that series that differ in a material way from the provisions described in
this prospectus.
A form of each of these principal documents has been filed as an exhibit
to the registration statement of which this prospectus forms a part. The
summaries of the principal documents in this prospectus do not purport to be
complete and are subject to, and are qualified in their entirety by reference
to, all the provisions of those principal documents.
PAYMENTS ON THE SECURITIES
The prospectus supplement will describe
o the timing, amount and priority of payments of principal and
interest on each class of the securities,
o their interest rates or the formula for determining their
interest rates,
o the method of determining the amount of their principal payments,
o the priority of the application of the trust's available funds
to its expenses and payments on its securities, and
o the allocation of losses on the receivables among the classes of
securities.
The rights of any class of securities to receive payments may be senior
or subordinate to other classes of securities. A security may be entitled to
o principal payments with disproportionate, nominal or no interest
payments or
o interest payments with disproportionate, nominal or no principal
payments or
o residual cash flow remaining after all other classes have
been paid.
Interest rates may be fixed or floating. If a class of securities is
redeemable, the prospectus supplement will describe when they may be redeemed
and at what price. The aggregate initial principal amount of the securities
issued by a trust may be greater than, equal to or less than the aggregate
initial principal amount of the receivables held by that trust.
Payments of principal and interest on any class of securities will be
made on a pro rata basis among all the security holders of such class. If the
amount of funds available to make a payment on a class is less than the
required payment, the holders of the securities of that class will receive
their pro rata share of the amount available for the class. A series may
provide for a liquidity facility or similar arrangement that permits one or
more classes of securities to be paid in planned amounts on scheduled payment
dates.
CERTAIN INFORMATION REGARDING THE SECURITIES
Each class of securities entitled to receive interest payments may bear
interest at a fixed rate of interest or a floating rate of interest as more
fully described below and in the related prospectus supplement.
Fixed Rate Securities
Each class of fixed rate securities will bear interest at the applicable
per annum interest rate or pass-through rate, as the case may be, specified in
the related prospectus supplement. Interest on each class of fixed rate
securities may be computed on the basis of a 360-day year of twelve 30-day
months or on such other day count basis as is specified in the related
prospectus supplement.
Floating Rate Securities
Each class of floating rate securities will bear interest for each
applicable interest accrual period described in the prospectus supplement at a
rate determined (i) by reference to a base rate of interest, plus or minus the
number of basis points specified in the prospectus supplement, if any, or
multiplied by the percentage specified in the prospectus supplement, if any or
(ii) as otherwise specified in the related prospectus supplement. Interest on
each class of floating rate securities will be computed on the day count basis
specified in the related prospectus supplement.
The base rate of interest for any floating rate securities will be based
on a London interbank offered rate, commercial paper rates, Federal funds
rates, U.S. government treasury securities rates, negotiable certificates of
deposit rates or another rate set forth in the related prospectus supplement.
A class of floating rate securities may also have either or both of the
following (in each case expressed as a rate per annum):
o a maximum limitation, or ceiling, on the rate at which interest
may accrue during any interest accrual period. In addition to any
maximum interest rate that may be applicable to any class of
floating rate securities, the interest rate applicable to any class
of floating rate securities will in no event be higher than the
maximum rate permitted by applicable law; and
o a minimum limitation, or floor, on the rate at which interest may
accrue during any interest accrual period.
Each trust issuing floating rate securities may appoint a calculation
agent to calculate interest rates on each class of its floating rate
securities. The prospectus supplement will identify the calculation agent, if
any, for each such class of floating rate securities, which may be either the
trustee or indenture trustee with respect to such trust. All determinations of
interest by a calculation agent shall, in the absence of manifest error, be
conclusive for all purposes and binding on the holders of the floating rate
securities. All percentages resulting from any calculation of the rate of
interest on a floating rate security will be rounded, if necessary, to the
nearest 1/100,000 of 1% (.0000001), with five one-millionths of a percentage
point rounded upward.
Book-Entry Registration
The Trusts May Use Book-Entry Registration Instead of Issuing Definitive
Securities. Except for the securities, if any, of a trust retained by the
seller or its affiliates, each class of securities offered through this
prospectus and the related prospectus supplement may initially be represented
by one or more certificates registered in the name of DTC's nominee, except as
set forth below. The securities will be available for purchase in the
denominations specified in the related prospectus supplement and may be
available for purchase in book-entry form only. Accordingly, such nominee is
expected to be the holder of record of any class of securities issued in
book-entry form. If a class of securities is issued in book-entry form, unless
and until Definitive Securities are issued under the limited circumstances
described in this prospectus or in the related prospectus supplement, you, as
an owner of securities will not be entitled to receive a physical certificate
representing your interest in the securities of such class.
If a class of securities is issued in book-entry form, all references in
this prospectus and in the related prospectus supplement to actions by holders
of such class of securities refer to actions taken by DTC upon instructions
from its participating organizations and all references in this prospectus and
in the related prospectus supplement to distributions, notices, reports and
statements to certificateholders of such class of certificates refer to
distributions, notices, reports and statements to DTC or its nominee, as the
case may be, as the registered holder of such class of certificates, for
distribution to certificateholders of such class of certificates in accordance
with DTC's procedures with respect thereto.
Any securities of a given trust owned by the seller or its affiliates
will be entitled to equal and proportionate benefits under the applicable
indenture, trust agreement or pooling and servicing agreement, except that,
unless the seller and its affiliates own the entire class, such securities
will be deemed not to be outstanding for the purpose of determining whether
the requisite percentage of securityholders have given any request, demand,
authorization, direction, notice, consent or other action under those
documents.
The prospectus supplement will specify whether the holders of the notes
or certificates of the trust may hold their respective securities as
Book-Entry Securities.
You may hold your securities through DTC in the U.S., Clearstream or the
Euroclear System in Europe or in any manner described in the related
prospectus supplement. The global securities will be tradeable as home market
instruments in both the European and U.S. domestic markets. Initial settlement
and all secondary trades will settle in same-day funds.
Initial Settlement of the Global Securities. All global securities will
be held in book-entry form by DTC in the name of Cede & Co. as nominee of DTC.
Investors' interests in the global securities will be represented through
financial institutions acting on their behalf as direct and indirect
participants in DTC. As a result, Clearstream and Euroclear will hold
positions on behalf of their customers or participants through their
respective depositaries, which in turn will hold such positions in accounts as
DTC participants.
Investors electing to hold their global securities through DTC will
follow the settlement practices that apply 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 global securities through Clearstream or
Euroclear accounts will follow the settlement procedures that apply to
conventional eurobonds, except that there will be no temporary global security
and no "lock-up" or restricted period. Global securities will be credited to
the securities custody accounts on the settlement date against payment in
same-day funds.
Except as required by law, none of the administrator, if any, the
applicable trustee or the applicable indenture trustee, if any, will have any
liability for any aspect of the records relating to payments made on account
of beneficial ownership interests of the securities of any trust held by DTC's
nominee, or for maintaining, supervising or reviewing any records relating to
such beneficial ownership interests.
Secondary Market Trading of the Global Securities. 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 Clearstream customers and/or Euroclear participants.
Secondary market trading between Clearstream customers or Euroclear
participants will be settled using the procedures applicable to conventional
eurobonds in same-day funds.
Trading between DTC seller and Clearstream or Euroclear purchaser. When
global securities are to be transferred from the account of a DTC participant
to the account of a Clearstream customer or a Euroclear participant, the
purchaser will send instructions to Clearstream or Euroclear through a
Clearstream customer or Euroclear participant at least one business day prior
to settlement. Clearstream or Euroclear will instruct the respective
depositary, as the case may be, to receive the global securities against
payment. Payment will include interest accrued on the global securities from
and including the last coupon payment date to and excluding the settlement
date. Payment will then be made by the respective depositary to the DTC
participant's account against delivery of the global securities. After
settlement has been completed, the global securities will be credited to the
respective clearing system and by the clearing system, in accordance with its
usual procedures, to the Clearstream customer's or Euroclear participant's
account. The securities credit will appear the next day (European time) and
the cash debit will be back-valued to, and the interest on the global
securities will accrue from, the value date (which would be the preceding day
when settlement occurred in New York). If settlement is not completed on the
intended value date (that is, the trade fails), the Clearstream or Euroclear
cash debit will be valued instead as of the actual settlement date.
Clearstream customers 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 this 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 Clearstream or
Euroclear. Under this approach, they may take on credit exposure to
Clearstream or Euroclear until the global securities are credited to their
accounts one day later.
As an alternative, if Clearstream or Euroclear has extended a line of
credit to them, Clearstream customers or Euroclear participants can elect not
to pre-position funds and allow that credit line to be drawn upon to finance
settlement. Under this procedure, Clearstream customers or Euroclear
participants purchasing global securities would incur overdraft charges for
one day, assuming they cleared the overdraft when the global securities were
credited to their accounts. However, interest on the global securities would
accrue from the value date. Therefore, in many cases the investment income on
the global securities earned during that one-day period may substantially
reduce or offset the amount of such overdraft charges, although this result
will depend on each Clearstream customer'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 global securities
to the respective depositary for the benefit of Clearstream customers or
Euroclear participants. The sale proceeds will be available to the DTC seller
on the settlement date. Thus, to the DTC participant a cross-market
transaction will settle no differently than a trade between two DTC
participants.
Trading between Clearstream or Euroclear seller and DTC purchaser. Due to
time zone differences in their favor, Clearstream customers and Euroclear
participants may employ their customary procedures for transactions in which
global securities are to be transferred by the respective clearing system,
through the respective depositary, to a DTC participant. The seller will send
instructions to Clearstream or Euroclear through a Clearstream customer or
Euroclear participant at least one business day prior to settlement. In these
cases, Clearstream or Euroclear will instruct the respective depositary, as
appropriate, to deliver the securities to the DTC participant's account
against payment. Payment will include interest accrued on the global
securities from and including the last coupon payment date to and excluding
the settlement date. The payment will then be reflected in the account of the
Clearstream customer or Euroclear participant the following day, and receipt
of the cash proceeds in the Clearstream customer'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 Clearstream customer or
Euroclear participant have a line of credit with its respective clearing
system and elect to be in debit 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 (that is, the trade fails), receipt of the cash
proceeds in the Clearstream customer's or Euroclear participant's account
would instead be valued as of the actual settlement date.
Finally, day traders that use Clearstream or Euroclear and that purchase
global securities from DTC participants for delivery to Clearstream customers
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:
o borrowing through Clearstream or Euroclear for one day (until
the purchase side of the day trade is reflected in their Clearstream
or Euroclear accounts) in accordance with the clearing system's
customary procedures;
o borrowing the global securities in the U.S. from a DTC
participant no later than one day prior to settlement, which would
give the global securities sufficient time to be reflected in their
Clearstream or Euroclear account in order to settle the sale side of
the trade; or
o 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 Clearstream customer or Euroclear participant.
The securityholders who are not participants, either directly or
indirectly, but who desire to purchase, sell or otherwise transfer ownership
of, or other interest in, securities may do so only through direct and
indirect participants. In addition, securityholders will receive all
distributions of principal and interest from the indenture trustee or the
applicable trustee through the participants who in turn will receive them from
DTC. Under a book-entry format, securityholders may experience some delay in
their receipt of payments, since such payments will be forwarded by the
applicable trustee to DTC's nominee. DTC will forward such payments to its
participants which thereafter will forward them to indirect participants or
securityholders. To the extent the related prospectus supplement provides that
Book-Entry Securities will be issued, the only "noteholder" or
"certificateholder," as applicable, will be DTC's nominee. Securityholders
will not be recognized by the indenture trustee or the trustee as
"noteholders" or "certificateholders" and securityholders will be permitted to
exercise the rights of securityholders only indirectly through DTC and its
participants.
Under the rules, regulations and procedures creating and affecting DTC
and its operations, DTC is required to make book-entry transfers of securities
among participants on whose behalf it acts with respect to the securities and
is required to receive and transmit distributions of principal and interest on
the securities. Participants and indirect participants with which
securityholders have accounts with respect to their respective securities
similarly are required to make book-entry transfers and receive and transmit
such payments on behalf of their respective securityholders. Accordingly,
although securityholders will not possess their respective securities, the
rules provide a mechanism by which participants will receive payments and will
be able to transfer their interests.
Because DTC can only act on behalf of participants, who in turn act on
behalf of indirect participants and certain banks, the ability of a
securityholder to pledge securities to persons or entities that do not
participate in the DTC system, or otherwise take actions with respect to such
securities, may be limited due to the lack of a physical certificate for such
securities.
DTC will advise the related administrator or servicer of each trust that
it will take any action permitted to be taken by a securityholder under the
related indenture, trust agreement or pooling and servicing agreement only at
the direction of one or more participants to whose accounts with DTC such
securities are credited. DTC may take conflicting actions with respect to
other undivided interests to the extent that such actions are taken on behalf
of participants whose holdings include such undivided interests.
Non-U.S. holders of global securities will be subject to U.S. withholding
taxes unless such holders meet certain requirements and deliver appropriate
U.S. tax documents to the securities clearing organizations or their
participants.
The Depositories. 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 Securities Exchange Act of 1934, as amended. DTC was created to hold
securities for its participants and facilitate the clearance and settlement of
securities transactions between participants through electronic book-entries,
thereby eliminating the need for physical movement of certificates.
Participants include securities brokers and dealers (who may include any of
the underwriters of securities of the trust), banks, trust companies and
clearing corporations and may include certain other organizations. Indirect
access to the DTC system also is available to others such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a participant, either directly or indirectly.
Clearstream Banking, societe anonyme ("Clearstream"), was incorporated in
1970 as "Cedel S.A.", a company with limited liability under Luxembourg law (a
societe anonyme). Cedel S.A. subsequently changed its name to Cedelbank. On
January 10, 2000, Cedelbank's parent company, Cedel International, societe
anonyme ("CI") merged its clearing, settlement and custody business with that
of Deutsche Borse Clearing AG ("DBC"). The merger involved the transfer by CI
of substantially all of its assets and liabilities (including its shares in
Clearstream) to a new Luxembourg company, New Cedel International, societe
anonyme ("New CI"), which is 50% owned by CI and 50% owned by DBC's parent
company Deutsche Borse AG.
Following the merger, the Board of Directors of CI renamed the companies
in the group "Clearstream". With effect from January 14, 2000, New CI has been
renamed "Clearstream International, societd anonyme". On January 18, 2000,
Cedelbank was renamed "Clearstream Banking, societe anonyme".
On January 17, 2000 DBC was renamed "Clearstream Banking AG".
Consequently, there are now two entities in the corporate group headed by
Clearstream International which share the name "Clearstream Banking", the
entity previously named "Cedelbank" and the entity previously named "Deutsche
Borse Clearing AG".
Clearstream holds securities for its customers and facilitates the
clearance and settlement of securities transactions between Clearstream
customers through electronic book-entry changes in accounts of Clearstream
customers, thereby eliminating the need for physical movement of certificates.
Transactions may be settled by Clearstream in any of 36 currencies, including
United States dollars. Clearstream provides to its Clearstream customers,
among other things, services for safekeeping, administration, clearance and
settlement of internationally traded securities and securities lending and
borrowing. Clearstream interfaces with domestic markets in several countries.
As a professional depository, Clearstream is subject in Luxembourg to
regulation by and supervision by the Commission for the Supervision of the
Financial Sector. Clearstream customers 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 any of the underwriters of any trust securities. Indirect
access to Clearstream is also available to others, such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a Clearstream customer, either directly or indirectly.
Euroclear was created in 1968 to hold securities for its 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 the risk from
transfers of securities and cash that are not simultaneous.
The Euroclear system has subsequently been extended to clear and settle
transactions between Euroclear participants and counterparties both in
Clearstream and in many domestic securities markets. Transactions may be
settled in any of 34 currencies. In addition to safekeeping (custody) and
securities clearance and settlement, the Euroclear system includes securities
lending and borrowing and money transfer services. The Euroclear system is
operated by the Brussels, Belgium office of Morgan Guaranty Trust Company of
New York under contract with Euroclear Clearance System, S.C., a Belgian
cooperative corporation that establishes policy on behalf of Euroclear
participants. 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.
All operations are conducted by the Euroclear operator and all Euroclear
securities clearance accounts and cash accounts are accounts with the
Euroclear operator. They are governed by the Terms and Conditions Governing
Use of Euroclear and the related Operating Procedures of the Euroclear system
and applicable Belgian law. These govern all transfers of securities and cash,
both within the Euroclear system, and receipts and withdrawals of securities
and cash. All securities in the Euroclear system are held on a fungible basis
without attribution of specific certificates to specific securities clearance
accounts.
Euroclear participants include banks (including central banks),
securities brokers and dealers and other professional financial intermediaries
and may include any of the underwriters of any trust securities. 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 acts under the Terms and
Conditions, the Operating Procedures of the Euroclear system and Belgian law
only on behalf of Euroclear participants and has no record of or relationship
with persons holding through Euroclear participants.
Definitive Securities
With respect to any class of notes and any class of certificates issued
in book-entry form, such notes or certificates will be issued as Definitive
Notes and Definitive Certificates, respectively, to noteholders or
certificateholders or their respective nominees, rather than to DTC or its
nominee, only if (1) the administrator of the trust or trustee of the trust
determines that DTC is no longer willing or able to discharge properly its
responsibilities as depository with respect to such securities and the
administrator or the seller, as the case may be, is unable to locate a
qualified successor and so notifies the indenture trustee or the trustee in
writing, (2) the administrator or the seller, as the case may be, at its
option, elects to terminate the book-entry system through DTC or (3) after the
occurrence of an Event of Default under the indenture or an Event of Servicing
Termination with respect to such securities, holders representing at least a
majority of the outstanding principal amount of the notes or the certificates,
as the case may be, of such class advise the indenture trustee or the trustee
through DTC in writing that the continuation of a book-entry system through
DTC (or a successor thereto) with respect to such notes or certificates is no
longer in the best interest of the holders of such securities.
Upon the occurrence of any event described in the immediately preceding
paragraph, the indenture trustee or the trustee will be required to notify all
applicable securityholders of a given class through participants of the
availability of Definitive Securities. Upon surrender by DTC of the definitive
certificates representing the corresponding securities and receipt of
instructions for re-registration, the indenture trustee or the trustee will
reissue such securities as Definitive Securities to such securityholders.
Distributions of principal of, and interest on, such Definitive
Securities will thereafter be made by the indenture trustee or the trustee in
accordance with the procedures set forth in the related indenture or the
related trust agreement directly to holders of Definitive Securities in whose
names the Definitive Securities were registered at the close of business on
the record date specified for such securities in the related prospectus
supplement. Such distributions will be made by check mailed to the address of
such holder as it appears on the register maintained by the indenture trustee
or trustee or, if the securityholder satisfies certain requirements in the
related indenture or the related trust agreement, by wire transfer. The final
payment on any such Definitive Security, however, will be made only upon
presentation and surrender of such Definitive Security at the office or agency
specified in the notice of final distribution to the applicable
securityholders.
Definitive Securities will be transferable and exchangeable at the
offices of the indenture trustee or the trustee or of a registrar named in a
notice delivered to holders of Definitive Securities. No service charge will
be imposed for any registration of transfer or exchange, but the indenture
trustee or the trustee may require payment of a sum sufficient to cover any
tax or other governmental charge imposed in connection therewith.
Reports to Securityholders
On or prior to each payment date, the administrator or the servicer will
prepare and provide to the related indenture trustee and/or trustee a
statement to be delivered to the securityholders on such payment date. With
respect to securities of each trust, each such statement to be delivered to
securityholders will include (to the extent applicable to those
securityholders) the following information (and any other information so
specified in the prospectus supplement) with respect to such payment date or
the period since the previous payment date, as applicable:
(1) the amount of the distribution allocable to principal of each
class of such securities;
(2) the amount of the distribution allocable to interest on or with
respect to each class of securities;
(3) the amount of the distribution allocable to draws from any
reserve account or payments in respect of any other credit or
payment enhancement arrangement;
(4) the aggregate principal balance of the receivables as of the
close of business on the last day of the preceding Collection
Period;
(5) any overcollateralization amount or credit enhancement amount;
(6) the aggregate outstanding principal amount for each class
of such securities, each after giving effect to all payments
reported under clause (1) above on such date;
(7) the amount of the servicing fee paid to the servicer and the
amount of any unpaid servicing fee with respect to the related
Collection Period or Collection Periods, as the case may be;
(8) the amount of the aggregate amount of losses realized on the
receivables during that Collection Period calculated as described
in the related prospectus supplement;
(9) previously due and unpaid interest payments (plus
interest accrued on such unpaid interest), if any, on each class
of securities, and the change in such amounts from the preceding
statement;
(10) previously due and unpaid principal payments (plus
interest accrued on such unpaid principal), if any, on each
class of securities, and the change in such amounts from the
preceding statement;
(11) the aggregate amount to be paid in respect of receivables, if
any, repurchased in such Collection Period;
(12) the balance of any reserve account, if any, on such date, after
giving effect to changes therein on such date;
(13) the amount of Advances to be remitted by the servicer on such
date;
(14) for each such date during any Funding Period, the amount
remaining in the pre-funding account;
(15) for the first such date that is on or immediately
following the end of any Funding Period, the amount remaining in
the pre- funding account that has not been used to fund the
purchase of Subsequent Receivables and is being passed through
as payments of principal on the securities of such trust; and
(16) the amount of any cumulative shortfall between payments
due in respect of any credit or payment enhancement arrangement
and payments received in respect of such credit or payment
enhancement arrangement, and the change in any such shortfall
from the preceding statement.
Each amount set forth under clauses (1), (2), (7), (9) and (10) with
respect to the notes or the certificates of any trust will be expressed as a
dollar amount per $1,000 of the initial principal amount of such securities.
Within the prescribed period of time for federal income tax reporting
purposes after the end of each calendar year during the term of each trust,
the indenture trustee or the trustee will mail to each person who at any time
during such calendar year has been a securityholder with respect to the trust
and received any payment thereon a statement containing certain information
for the purposes of such securityholder's preparation of federal income tax
returns. See "Certain Federal Income Tax Consequences."
THE INDENTURE
One or more classes of notes of a trust will be issued under the terms of
an indenture between the trust and the indenture trustee specified in the
prospectus supplement, a form of which has been filed as an exhibit to the
registration statement of which this prospectus forms a part. This summary
describes the material provisions common to the notes of each trust that
issues notes; the attached prospectus supplement will give you additional
information specific to the notes which you are purchasing This summary does
not purport to be complete and is subject to, and is qualified in its entirety
by reference to, all the provisions of the notes and the indenture.
Events of Default. With respect to the notes issued by a trust, "Events
of Default" under the related indenture will consist of:
o a default for five days (or such longer period specified in the
prospectus supplement) or more in the payment of any interest on
any notes;
o a default in the payment of the principal of or any installment
of the principal of any note when the same becomes due and
payable;
o a default in the observance or performance of any covenant or
agreement of the trust made in the related indenture other than
those dealt with specifically elsewhere as an Event of Default
which default materially and adversely affects the noteholders
and which default continues for a period of 60 days after notice
thereof is given to the trust by the applicable indenture trustee
or to the trust and such indenture trustee by the holders of at
least 25% in principal amount of the Controlling Class of notes;
o certain events of bankruptcy, insolvency, receivership or
liquidation of the applicable trust or its property as specified
in the indenture; or
o such other events, if any, set forth in the related prospectus
supplement.
The "Controlling Class" of notes of a trust will be its Class A Notes as
long as they are outstanding. When they have been paid in full, the next most
senior class of the trust's notes, if any, will become the Controlling Class
so long as they are outstanding, and so on.
The amount of principal due and payable to holders of a class of notes
under the related indenture until its final scheduled payment date generally
will be limited to amounts available to pay principal thereon. Therefore, the
failure to pay principal on a class of notes generally will not result in the
occurrence of an Event of Default under the indenture until the final
scheduled payment date for such class of notes.
Rights upon Event of Default. If an Event of Default should occur and be
continuing with respect to the notes of any trust, the related indenture
trustee or holders of a majority in principal amount of the Controlling Class
may declare the principal of such notes to be immediately due and payable.
Such declaration may be rescinded by the holders of a majority in principal
amount of the Controlling Class then outstanding if both of the following
occur:
o the issuer has paid or deposited with the indenture trustee enough
money to pay:
-- all payments of principal of and interest on all notes and all
other amounts that would then be due if the Event of Default causing
the acceleration of maturity had not occurred; and
-- all sums paid or advanced by the indenture trustee and the
reasonable compensation, expenses, disbursements and advances of the
indenture trustee and its agents and counsel; and
o all Events of Default, other than the nonpayment of the
principal of the notes that has become due solely by the
acceleration, have been cured or waived.
If an Event of Default has occurred with respect to the notes issued by
any trust, the related indenture trustee may institute proceedings to collect
amounts due or foreclose on trust property, exercise remedies as a secured
party or sell the related receivables. Upon the occurrence of an Event of
Default resulting in acceleration of the notes, the indenture trustee may sell
the related receivables if:
o the holders of 100% of the notes issued by such trust consent to
such sale (excluding notes held by the seller, the servicer or their
affiliates),
o the proceeds of such sale are sufficient to pay in full the
principal of and the accrued interest on the notes of such trust at
the date of such sale, or
o there has been an Event of Default arising from the failure
to pay principal or interest and the indenture trustee determines
that the proceeds of the receivables would not be sufficient on an
ongoing basis to make all payments on the notes of such trust as
such payments would have become due if such obligations had notbeen
declared due and payable, and such indenture trustee obtains the
consent of the holders of 66 2/3% of the aggregate outstanding
amount of the Controlling Class of such trust.
Any money received in realizing on trust property will first be applied to pay
any due and unpaid fees and expenses of the indenture trustee.
In addition, if the Event of Default relates to a default by a trust in
observing or performing any covenant or agreement (other than an Event of
Default relating to non-payment of interest or principal, insolvency or any
other event which is otherwise specifically dealt with by the indenture), the
indenture trustee is prohibited from selling the receivables unless the
holders of all outstanding notes and certificates issued by that trust consent
to such sale or the proceeds of such sale are sufficient to pay in full the
principal of and the accrued interest on the outstanding notes and
certificates of that trust. The indenture trustee may also elect to have the
trust maintain possession of the receivables and apply collections as received
without obtaining the consent of securityholders.
Subject to the provisions of the applicable indenture relating to the
duties of the related indenture trustee, if an Event of Default under the
indenture occurs and is continuing with respect to notes of the trust, such
indenture trustee will be under no obligation to exercise any of the rights or
powers under such indenture at the request or direction of any of the holders
of such notes, if such indenture trustee reasonably believes it will not be
adequately indemnified against the costs, expenses and liabilities which might
be incurred by it in complying with such request. Subject to the provisions
for indemnification and certain limitations contained in the related
indenture, the holders of a majority in principal amount of the Controlling
Class of a given trust will have the right to direct the time, method and
place of conducting any proceeding or any remedy available to the applicable
indenture trustee, and the holders of a majority in principal amount of the
Controlling Class may, in certain cases, waive any default with respect
thereto, except a default in the payment of principal or interest or a default
in respect of a covenant or provision of such indenture that cannot be
modified without the waiver or consent of the holders of all of the
outstanding notes of the related trust.
No holder of a note of any trust will have the right to institute any
proceeding with respect to the related indenture, unless --
o such holder previously has given to the applicable indenture
trustee written notice of a continuing Event of Default;
o the holders of not less than 25% in principal amount of
the Controlling Class of such trust have made written request
to such indenture trustee to institute such proceeding in its
own name as indenture trustee;
o such holder or holders have offered such indenture trustee
reasonable indemnity;
o such indenture trustee has for 60 days after such notice,
request and offer of indemnity failed to institute such
proceeding; and
o no direction inconsistent with such written request has
been given to such indenture trustee during such 60-day period
by the holders of a majority in principal amount of the
Controlling Class.
Each indenture trustee and the related noteholders, by accepting the
related notes, will covenant that they will not at any time institute against
the applicable trust any bankruptcy, reorganization or other proceeding under
any federal or state bankruptcy or similar law.
With respect to any trust, neither the related indenture trustee nor the
related trustee in its individual capacity, nor any holder of a certificate
representing an ownership interest in the trust nor any of their respective
owners, beneficiaries, agents, officers, directors, employees, affiliates,
successors or assigns will be personally liable for the payment of the
principal of or interest on the related notes or for the agreements of the
trust contained in the applicable indenture.
Each trust will be subject to covenants under the indenture. Each trust
will be subject to the covenants discussed below, as provided in the related
indenture.
o Restrictions on merger and consolidation. The related trust
may not consolidate with or merge into any other entity,
unless:
-- the entity formed by or surviving such consolidation or
merger is organized under the laws of the United States,
any state or the District of Columbia,
-- such entity expressly assumes the trust's obligation to
make due and punctual payments upon the notes of the
related trust and the performance or observance of every
agreement and covenant of the trust under the indenture,
-- no event that is (or with notice or lapse of time or both
would become) an Event of Default under the indenture
shall have occurred and be continuing immediately after
such merger or consolidation,
-- the trust has been advised that the rating of the notes
and the certificates of such trust then in effect would
not be reduced or withdrawn by the Rating Agencies as a
result of such merger or consolidation,
-- the trust has received an opinion of counsel to the effect
that such consolidation or merger would have no material
adverse federal income tax consequence to the trust or to
any related noteholder or certificateholder,
-- any action as is necessary to maintain the lien and
security interest created by the related indenture shall
have been taken, and
-- the trust has received an opinion of counsel and officer's
certificate each stating that such consolidation or merger
satisfies all requirements under the related indenture.
o Other negative covenants. Each trust will not, among other
things--
-- except as expressly permitted by the applicable Basic
Documents, sell, transfer, exchange or otherwise dispose
of any of the assets of the trust,
-- claim any credit on or make any deduction from the
principal and interest payable in respect of the notes of
the related trust (other than amounts withheld under the
tax code or applicable state law) or assert any claim
against any present or former holder of such notes because
of the payment of taxes levied or assessed upon the trust
or its property,
-- dissolve or liquidate in whole or in part,
-- permit the lien of the related indenture to be subordinated
or otherwise impaired,
-- permit the validity or effectiveness of the related
indenture to be impaired or permit any person to be
released from any covenants or obligations with respect to
such notes under such indenture except as may be expressly
permitted thereby, or
-- permit any lien, charge, excise, claim, security interest,
mortgage or other encumbrance to be created on or extend
to or otherwise arise upon or burden the assets of the
trust or any part thereof, or any interest therein or the
proceeds thereof, except for tax, mechanics' or certain
other liens and except as may be created by the terms of
the related indenture.
No trust may engage in any activity other than as specified under the
section of the related prospectus supplement titled "The Trust." No trust will
incur, assume or guarantee any indebtedness other than indebtedness incurred
under the related notes and indenture, the related certificates and as a
result of any Advances made to it by the servicer or otherwise in accordance
with the related sale and servicing agreement or other documents relating to
the trust.
List of Noteholders. With respect to the notes of any trust, three or
more holders of the notes of any trust or one or more holders of such notes
evidencing not less than 25% of the aggregate outstanding principal amount of
the Controlling Class may, by written request to the related indenture trustee
accompanied by a copy of the communication that the applicant proposes to
send, obtain access to the list of all noteholders maintained by such
indenture trustee for the purpose of communicating with other noteholders with
respect to their rights under the related indenture or under such notes. Such
indenture trustee may elect not to afford the requesting noteholders access to
the list of noteholders if it agrees to mail the desired communication or
proxy, on behalf of and at the expense of the requesting noteholders, to all
noteholders of the trust.
Annual Compliance Statement. Each trust will be required to file annually
with the related indenture trustee a written statement as to the fulfillment
of its obligations under the indenture.
Indenture Trustee's Annual Report. The indenture trustee for each trust
will be required to mail each year to all related noteholders a brief report
relating to its eligibility and qualification to continue as indenture trustee
under the related indenture, any amounts advanced by it under the indenture,
the amount, interest rate and maturity date of certain indebtedness owing by
the trust to the applicable indenture trustee in its individual capacity, the
property and funds physically held by such indenture trustee as such and any
action taken by it that materially affects the related notes and that has not
been previously reported.
Satisfaction and Discharge of Indenture. An indenture will be discharged
with respect to the collateral securing the related notes upon the delivery to
the related indenture trustee for cancellation of all such notes or, with
certain limitations, upon deposit with such indenture trustee of funds
sufficient for the payment in full of all such notes.
Modification of Indenture. Any trust, together with the related indenture
trustee, may, without the consent of the noteholders of the trust, execute a
supplemental indenture for any of the following purposes:
o to correct or amplify the description of any property at any
time subject to the lien of the indenture, or better to convey to
the indenture trustee any property subject or required to be
subjected to the lien of the indenture, or to subject to the lien of
the indenture additional property;
o to evidence the succession, in compliance with the applicable
provisions of the indenture, of another person to the trust, and the
assumption by any such successor of the covenants of the trust in
the indenture and in the notes;
o to add to the convenants of the trust, for the benefit of the
noteholders, or to surrender any right or power in the indenture
conferred upon the trust;
o to convey, transfer, assign, mortgage or pledge any property to
or with the indenture trustee;
o to cure any ambiguity, to correct or supplement any provision
in the indenture or in any supplemental indenture that may be
inconsistent with any other provision in the indenture or in any
supplemental indenture or to make any other provisions with respect
to matters or questions arising under the indenture or under any
supplemental indenture which shall not be inconsistent with the
provisions of the indenture; provided that such action shall not
materially adversely affect the interests of the noteholders;
o to evidence and provide for the acceptance of the appointment
under the indenture by a successor trustee with respect to the notes
and to add to or change any of the provisions of the indenture as
shall be necessary to facilitate the administration of the trusts
under the indenture by more than one trustee; or
o to modify, eliminate or add to the provisions of the
indenture to such extent as shall be necessary to effect the
qualification of the indenture under the Trust Indenture Act or
under any similar federal statute enacted after the date of the
indenture and to add to the indenture such other provisions as may
be required by the Trust Indenture Act.
The trust and the applicable indenture trustee may also enter into
supplemental indentures, without obtaining the consent of the noteholders of
the related trust, for the purpose of, among other things, adding any
provisions to or changing in any manner or eliminating any of the provisions
of the related indenture or modifying in any manner the rights of such
noteholders (except with respect to the matters listed in the next paragraph
which require the approval of the noteholders) provided that:
o such action will not, as evidenced by an opinion of counsel,
materially adversely affect the interest of any noteholder;
o such action will not, as confirmed by the Rating Agencies
rating the notes of the related trust, cause the then current rating
assigned to any class of such notes to be withdrawn or reduced; and
o an opinion of counsel as to certain tax matters is delivered.
Without the consent of the holder of each such outstanding note affected
thereby (in addition to the satisfaction of each of the conditions set forth
in the preceding paragraph), however, no supplemental indenture will:
o change the due date of any installment of principal of or
interest on any such note or reduce the principal amount thereof,
the interest rate thereon or the redemption price with respect
thereto, change the application of the proceeds of a sale of the
trust property to payment of principal and interest on the notes or
change any place of payment where, or the coin or currency in which,
any such note or any interest thereon is payable;
o impair the right to institute suit for the enforcement of
certain provisions of the related indenture regarding payment;
o reduce the percentage of the aggregate amount of the
Controlling Class or of the notes, the consent of the holders of
which is required for any such supplemental indenture or the consent
of the holders of which is required for any waiver of compliance
with certain provisions of the related indenture or of certain
defaults or events of default thereunder and their consequences as
provided for in such indenture;
o modify or alter the provisions of the related indenture
regarding the voting of notes held by the applicable trust, any
other obligor on such notes, the seller or an affiliate of any of
them;
o reduce the percentage of the aggregate outstanding amount of
the Controlling Class, the consent of the holders of which is
required to direct the related indenture trustee to sell or
liquidate the receivables after an Event of Default if the proceeds
of such sale would be insufficient to pay the principal amount and
accrued but unpaid interest on the outstanding notes and
certificates of such trust;
o decrease the percentage of the aggregate principal amount of
the Controlling Class or of the notes required to amend the sections
of the related indenture which specify the applicable percentage of
aggregate principal amount of the notes of such trust necessary to
amend such indenture or any of the other Basic Documents;
o affect the calculation of the amount of interest or principal
payable on any note on any payment date (including the calculation
of any of the individual components of such calculation);
o affect the rights of the noteholders to the benefit of any
provisions for the mandatory redemption of the notes provided in the
related indenture, or
o permit the creation of any lien ranking prior to or on a
parity with the lien of the related indenture with respect to any of
the collateral for such notes or, except as otherwise permitted or
contemplated in such indenture, terminate the lien of such indenture
on any such collateral or deprive the holder of any such note of the
security afforded by the lien of such indenture.
The Indenture Trustee
The indenture trustee of notes for each trust will be specified in the
related prospectus supplement. The indenture trustee for any trust may resign
at any time, in which event the administrator of the trust, on behalf of the
trust, will be obligated to appoint a successor trustee. The administrator of
a trust, on behalf of the trust, will be obligated to remove an indenture
trustee if such indenture trustee ceases to be eligible to continue as such
under the related indenture or if such indenture trustee becomes insolvent. In
such circumstances, the administrator of the trust will be obligated to
appoint a successor trustee for the notes of the applicable trust. In
addition, a majority of the Controlling Class may remove the indenture trustee
without cause and may appoint a successor indenture trustee. If a trust issues
a class of notes that is subordinated to one or more other classes of notes
and an Event of Default occurs under the related indenture, the indenture
trustee may be deemed to have a conflict of interest under the Trust Indenture
Act of 1939 and may be required to resign as trustee for one or more of the
classes of notes. In any such case, the indenture will provide for a successor
indenture trustee to be appointed for those classes of notes. Any resignation
or removal of the indenture trustee and appointment of a successor trustee for
the notes of the trust does not become effective until acceptance of the
appointment by the successor trustee for such trust.
DESCRIPTION OF THE RECEIVABLES TRANSFER
AND SERVICING AGREEMENTS
The following summary describes certain terms of the documents pursuant
to which the seller sells receivables to a trust and the servicer services the
receivables on behalf of the trust. In the case of a trust that is not a
grantor trust, that document is the sale and servicing agreement. For a
grantor trust, it is the pooling and servicing agreement. This section also
describes certain provisions of the trust agreement for a trust that is not a
grantor trust. Forms of those documents have been filed as exhibits to the
Registration Statement of which this prospectus forms a part. This summary
describes the material provisions common to the securities of each trust; the
attached prospectus supplement will give you additional information specific
to the securities which you are purchasing. This summary does not purport to
be complete and is subject to, and qualified in its entirety by reference to,
all the provisions of those documents.
Sale and Assignment of Receivables
Sale and Assignment by the Seller. When the trust issues securities, the
seller will sell and assign to the trust under a sale and servicing agreement
or a pooling and servicing agreement, without recourse, the seller's entire
interest in the Receivables, including its security interests in the related
financed vehicles. Each such receivable will be identified in a schedule to
the related sale and servicing agreement or a pooling and servicing agreement.
The trustee of the trust will not independently verify the existence and
eligibility of any receivables. The trustee of the trust will, concurrently
with such sale and assignment, execute and deliver the related notes and/or
certificates.
Sale and Assignment of Subsequent Receivables. The related prospectus
supplement for the trust will specify whether, and the terms, conditions and
manner under which, Subsequent Receivables will be sold by the seller to the
applicable trust from time to time during any Funding Period on each
Subsequent Transfer Date.
Representations and Warranties. In each sale and servicing agreement or
pooling and servicing agreement, the seller will represent and warrant to the
applicable trust, among other things, that at the date of issuance of the
related notes and/or certificates or at the applicable Subsequent Transfer
Date --
o 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;
o 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, and any consumer credit, equal
opportunity and disclosure laws applicable to such receivable and
sale;
o 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 and
other similar laws and equitable principles relating to or affecting
the enforcement of creditors' rights;
o 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;
o as of the cut-off 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;
o as of the cut-off 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;
o except for payment defaults continuing for a period of not
more than 30 days (or such other number of days specified in the
prospectus supplement) as of the cut-off 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;
o each receivable requires that the obligor thereunder obtain
comprehensive and collision insurance covering the financed vehicle;
and
o each receivable satisfies the criteria for the selection of
receivables for the trust described in the prospectus supplement.
Seller must repurchase the receivables relating to a breach of
representation or warranty. As of the last day of the first or second
Collection Period following the discovery by or notice to the seller of a
breach of any representation or warranty of the seller which materially and
adversely affects the interests of the related trust in any receivable, the
seller, unless the breach has been cured, will repurchase such receivable from
the trust. The repurchase price will equal the "Purchase Amount", which is the
unpaid principal balance of that receivable plus accrued interest thereon to
the date of purchase at the weighted average interest rate borne by the
trust's securities. The purchase obligation will constitute the sole remedy
available to the certificateholders or the trustee and any noteholders or
indenture trustee in respect of the related trust for any such uncured breach.
Servicing of the receivables. Under each sale and servicing agreement or
pooling and servicing agreement, the servicer will service and administer the
receivables held by each trust and, as custodian on behalf of the trust, will
maintain possession of the installment loan agreements and any other documents
relating to such receivables. To assure uniform quality in servicing the
receivables, as well as to facilitate servicing and save administrative costs,
the installment loan agreements and other documents relating thereto will not
be physically segregated from other similar documents that are in the
servicer's possession or otherwise stamped or marked to reflect the transfer
to the trust. The obligors under the receivables will not be notified of the
transfer. However, Uniform Commercial Code financing statements reflecting the
sale and assignment of the receivables by the seller to the trust will be
filed, and the servicer's accounting records and computer systems will be
marked to reflect such sale and assignment. Because those receivables will
remain in the servicer's possession and will not be stamped or otherwise
marked to reflect the assignment to the trust if a subsequent purchaser were
to obtain physical possession of such receivables without knowledge of the
assignment, the trust's interest in the receivables could be defeated. See
"Some Important Legal Issues Relating to the Receivables -- Security Interests
in Vehicles."
Accounts
For each trust, the servicer will establish and maintain one or more
collection accounts in the name of the indenture trustee on behalf of the
related securityholders or, if the trust does not issue notes, in the name of
the trustee for the related certificateholders. The servicer will deposit all
collections on the receivables into the collection account. If the trust
issues notes, the servicer or the indenture trustee may establish and maintain
a distribution account (which may be a subaccount of the collection account),
in the name of the indenture trustee on behalf of such noteholders, into which
amounts released from the collection account and any other accounts of the
trust for payment to such noteholders will be deposited and from which
distributions of interest and/or principal to such noteholders will be made.
The servicer or the trustee may establish and maintain one or more certificate
distribution accounts, in the name of the trustee on behalf of the
certificateholders, into which amounts released from the collection account
and any other accounts of the trust for distribution to the certificateholders
will be deposited and from which all distributions to the certificateholders
will be made.
Any other accounts to be established with respect to securities of the
trust, including any pre-funding account, yield supplement account or reserve
account, will be described in the related prospectus supplement.
For any securities of the trust, funds in the trust accounts will be
invested as provided in the related sale and servicing agreement or pooling
and servicing agreement in Permitted Investments. Permitted Investments
satisfy criteria established by the Rating Agencies and are generally limited
to obligations or securities that mature on or before the date of the next
payment date. However, to the extent permitted by the Rating Agencies, funds
in any reserve account may be invested in securities that will not mature
prior to the date of the next distribution on the notes or certificates and
which will not be sold to meet any shortfalls. Thus, the amount of cash
available in any reserve account at any time may be less than the balance of
the reserve account. If the amount required to be withdrawn from any reserve
account to cover shortfalls in collections on the related receivables (as
provided in the related prospectus supplement) exceeds the amount of cash in
the reserve account, a temporary shortfall in the amounts distributed to the
related noteholders or certificateholders could result, which could, in turn,
increase the average life of the notes or the certificates of such trust. Net
investment earnings on funds deposited in the trust accounts shall be
deposited in the applicable collection account or distributed as provided in
the related prospectus supplement.
The trust accounts will be maintained as Eligible Deposit Accounts, which
are accounts at a depository institution satisfying certain requirements of
the Rating Agencies.
Servicing Procedures
The Bank will act as servicer and make reasonable efforts to collect all
payments due with respect to the receivables held by each trust and will use
the same collection procedures that it follows with respect to Motor Vehicle
Loans that it services for itself, in a manner consistent with the related
sale and servicing agreement or pooling and servicing agreement.
Consistent with its normal procedures, the servicer may, in its
discretion, arrange with the obligor on a receivable to defer or modify the
payment schedule. Some of such arrangements may require the servicer to
purchase the receivable while others may result in the servicer making
Advances with respect to the receivable. The servicer may be obligated to
purchase a receivable if, among other things, it extends the date for final
payment by the obligor of such receivable beyond the last day of the
Collection Period during which the latest maturing receivable matures, as set
forth in the related prospectus supplement, or changes the contract rate of
interest or the total amount or number of scheduled payments of such
receivable. If the servicer determines that eventual payment in full of a
receivable is unlikely, the servicer will follow its normal practices and
procedures to realize upon the receivable, including the repossession and
disposition of the financed vehicle securing the receivable at a public or
private sale, or the taking of any other action permitted by applicable law.
Collections
With respect to securities of each trust, so long as the Bank is the
servicer and provided that (1) there exists no Event of Servicing Termination
and (2) each other condition to making monthly deposits as may be required by
the related sale and servicing agreement or pooling and servicing agreement is
satisfied, the servicer may retain all payments on the related receivables
received from obligors and all proceeds of the related receivables collected
during a Collection Period until the business day preceding the applicable
payment date or the payment date itself. However, if such conditions are not
met, the servicer will be required to deposit such amounts into the related
collection account not later than the second business day after receipt. The
servicer or the seller, as the case may be, will remit the aggregate Purchase
Amount of any receivables to be purchased from the trust to its collection
account on or prior to the business day preceding the applicable payment date.
Pending deposit into the collection account, collections may be employed by
the servicer at its own risk and for its own benefit and will not be
segregated from its own funds. To the extent set forth in the related
prospectus supplement, the servicer may, in order to satisfy the requirements
described above, obtain a letter of credit or other security for the benefit
of the related trust to secure timely remittances of collections of the
related receivables and payment of the aggregate Purchase Amount with respect
to receivables purchased by the servicer.
Collections on a receivable made during a Collection Period shall be
applied first to any outstanding Advances made by the servicer with respect to
such receivable (to the extent described below under "--Advances"), second, to
the payment of accrued and unpaid interest, third, to the payment of principal
and, fourth, to the payment of any late fees or certain other fees or charges.
Advances
The servicer will make a payment with respect to each receivable (other
than a receivable designated as 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 of interest, over (b) the interest actually received by the servicer with
respect to such receivable from the obligor or from the payment of the
Purchase Amount during or with respect to such Collection Period (any such
payment, an "Advance") unless 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, if any. In the
event that the servicer does not make an Advance, any payment deficiency on
the securities resulting therefrom will be funded by the application of
available amounts, if any, in the reserve account or any other available
credit enhancement.
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 paid to the servicer on the related
payment date to reimburse the servicer for previous unreimbursed Advances (the
"Outstanding Advances") with respect to such receivable. Any such
reimbursement will be from past due interest paid by the obligor under such
receivable. Also, the servicer will reimburse itself for an Outstanding
Advance for a receivable out of any funds of the trust when the receivable is
designated a defaulted receivable.
The servicer will deposit all Advances into the collection account on the
business day immediately preceding the related payment date.
Servicing Compensation and Expenses
The servicer will be entitled to receive a servicing fee for each
Collection Period equal to a per annum percentage (specified in the prospectus
supplement) of the aggregate principal balance of the receivables as of the
first day of such Collection Period. The servicer also will be entitled to
receive as a supplemental servicing fee for each Collection Period any late
fees and other administrative fees and expenses collected during such
Collection Period. The servicer does not currently charge such fees and
expenses, but may do so in the future. If specified in the related prospectus
supplement, the supplemental servicing fee will include net investment
earnings on funds deposited in the trust accounts and other accounts with
respect to the trust. The servicer will be paid the servicing fee and the
supplemental servicing fee for each Collection Period on the applicable
payment date.
The servicing fee and the supplemental servicing fee are intended to
compensate the servicer for performing the functions of a third party servicer
of the receivables as an agent for the trust, including collecting and posting
all payments, responding to inquiries of obligors on the receivables,
investigating delinquencies, sending payment coupons to obligors, reporting
federal income tax information to obligors, paying costs of collections and
repossessions, and policing the collateral. The fees will also compensate the
servicer for administering the particular receivables pool, including making
advances, accounting for collections, furnishing monthly and annual statements
to the related trustee and indenture trustee with respect to distributions,
and generating federal income tax information for the trust. The fees, if any,
also will reimburse the servicer for certain taxes, the fees of the related
trustee and indenture trustee, if any, accounting fees, outside auditor fees,
data processing costs, and other costs incurred in connection with
administering the applicable 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 additional compensation consisting of investment earnings
described above, is comparable to fees that would be paid to parties
unaffiliated with the Bank.
Distributions
With respect to securities of each trust, beginning on the payment date
specified in the related prospectus supplement, distributions of principal and
interest (or, where applicable, of principal or interest only) on each class
of such securities entitled thereto will be made by the applicable trustee or
indenture trustee to the noteholders and the certificateholders of such trust.
The timing, calculation, allocation, order, source, priorities of and
requirements for all payments to each class of securityholders of such trust
will be set forth in the related prospectus supplement.
Allocation of Collections on Receivables. On the business day before each
payment date, the servicer shall determine the amount in the collection
account available to make payments or distributions to securityholders on the
related payment date and will direct the indenture trustee, if any, and/or the
trustee to make the distributions as described in the related prospectus
supplement.
Credit and Payment Enhancement
Any form of credit enhancement may be limited and may only apply to
certain classes of securities. The presence of a reserve account and other
forms of credit or payment enhancement for the benefit of any class or
securities of the trust is intended to (1) enhance the likelihood of receipt
by the securityholders of such class of the full amount of principal and
interest due thereon and (2) decrease the likelihood that such securityholders
will experience losses. The various types of credit or payment enhancement
that a trust may have are listed under "Summary--Credit or Payment
Enhancement." The credit or payment enhancement for a class of securities may
not provide protection against all risks of loss and may not guarantee
repayment of the entire principal amount and interest thereon. If losses occur
which exceed the amount covered by any credit enhancement or which are not
covered by any credit enhancement, securityholders will bear their allocable
share of deficiencies, as described in the related prospectus supplement.
Seller may replace credit or payment enhancement with rating
confirmation. If so provided in the related prospectus supplement, the seller
may replace the credit enhancement for any class of securities with another
form of credit enhancement without the consent of securityholders, provided
the Rating Agencies confirm in writing that substitution will not result in
the reduction or withdrawal of the rating of any class of securities of the
related trust.
Reserve Account. If so provided in the related prospectus supplement, the
reserve account will be funded by an initial deposit by the trust or the
seller on the closing date in the amount set forth in the related prospectus
supplement and, if the related trust has a Funding Period, will also be funded
by the trust on each Subsequent Transfer Date to the extent described in the
related prospectus supplement. As further described in the related prospectus
supplement, the amount on deposit in a reserve account will be increased on
each payment date thereafter up to the specified reserve balance by the
deposit therein of the amount of collections on the related receivables
available therefor or as described in the prospectus supplement. The related
prospectus supplement will describe the circumstances and manner under which
distributions may be made out of a reserve account.
Seller may assign rights in reserve account subject to conditions. The
seller may at any time, without consent of the securityholders of a trust,
sell, transfer, convey or assign in any manner its rights to and interests in
distributions from a reserve account of that trust provided that --
o the Rating Agencies confirm in writing that such action will
not result in a reduction or withdrawal of the rating of any class
of securities issued by that trust;
o the seller provides to the applicable trustee and any
indenture trustee an opinion of counsel from independent counsel
that such action will not cause the trust to be classified as an
association (or publicly traded partnership) taxable as a
corporation for federal income tax purposes; and
o such transferee or assignee agrees in writing to take
positions for federal income tax purposes consistent with the
federal income tax positions previously taken by the seller.
Net Deposits
As an administrative convenience and for so long as certain conditions
are satisfied (see "Collections" above), the servicer will be permitted to
make the deposit of collections, aggregate Advances and payments of Purchase
Amounts for any trust for or with respect to the related Collection Period,
net of distributions to the servicer as reimbursement of Advances or payment
of fees to the servicer with respect to such Collection Period. The servicer,
however, will account to the trustee, any indenture trustee, the noteholders,
if any, and the certificateholders with respect to each trust as if all
deposits, distributions, and transfers were made individually.
Statements to Trustees and Trusts
Prior to each payment date with respect to securities of each trust, the
servicer will provide to the applicable indenture trustee, if any, and the
applicable trustee as of the close of business on the last day of the
preceding Collection Period the report that is required to be provided to
securityholders of such trust described under "Certain Information Regarding
the Securities -- Reports to Securityholders."
Evidence as to Compliance
Each sale and servicing agreement and pooling and servicing agreement
will provide that a firm of independent certified public accountants will
furnish to the related trust and indenture trustee or trustee, as applicable,
annually a statement as to compliance by the servicer during the preceding
twelve months (or, in the case of the first such certificate, from the
applicable closing date) with certain standards relating to the servicing of
the applicable receivables.
Each sale and servicing agreement and pooling and servicing agreement
will also provide for delivery to the related trust and indenture trustee or
trustee, as applicable, substantially simultaneously with the delivery of such
accountants' statement referred to above, of a certificate signed by an
officer of the servicer stating that the servicer has fulfilled its
obligations under that agreement throughout the preceding twelve months (or,
in the case of the first such certificate, from the closing date) 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
securityholders by a request in writing addressed to the applicable trustee.
Certain Matters Regarding the Servicer
Each sale and servicing agreement and pooling and servicing agreement
will provide that the Bank may not resign from its obligations and duties as
servicer thereunder, except upon a determination that the Bank's performance
of such duties is no longer permissible under applicable law. No such
resignation will become effective until the related indenture trustee or
trustee, as applicable, or a successor servicer has assumed the Bank's
servicing obligations and duties under such sale and servicing agreement or
pooling and servicing agreement. The servicer will also have the right to
delegate any of its duties under those agreements to a third party without the
consent of any securityholder or the confirmation of any rating.
Notwithstanding any such delegation, the servicer will remain responsible and
liable for its duties under those agreements as if it had made no delegations.
Each sale and servicing agreement and pooling and servicing agreement
will further provide that neither the servicer nor any of its directors,
officers, employees and agents will be under any liability to the related
trust or the related noteholders or certificateholders for taking any action
or for refraining from taking any action under such sale and servicing
agreement or pooling and servicing agreement or for errors in judgment; except
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 the servicer's duties thereunder
or by reason of reckless disregard of its obligations and duties thereunder,
except that employees of the servicer or its affiliates will be protected
against liability that would otherwise be imposed by reason of negligence.
Such 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 the servicer's
performance of its duties under such 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. However,
such indemnification will be paid on a payment date only after all payments
required to be made to securityholders and the servicer have been made and all
amounts required to be deposited in enhancement accounts have been deposited.
In addition, each sale and servicing agreement and pooling and servicing
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 such sale and servicing agreement or pooling
and servicing agreement and that, in its opinion, may cause it to incur any
expense or liability. The servicer may, however, undertake any reasonable
action that it may deem necessary or desirable in respect of a particular sale
and servicing agreement or pooling and servicing agreement, the rights and
duties of the parties thereto, and the interests of the related
securityholders 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.
Under the circumstances specified in each sale and servicing agreement
and pooling and servicing agreement, any entity into which the servicer may be
merged or consolidated, or any entity resulting from any merger or
consolidation to which the servicer is a party, or any entity succeeding to
the business of the servicer or, with respect to its obligations as servicer,
any entity 50% or more of the equity of which is owned, directly or
indirectly, by USAA, which corporation or other entity in each of the
foregoing cases assumes the obligations of the servicer, will be the successor
of the servicer under such sale and servicing agreement or pooling and
servicing agreement.
Events of Servicing Termination
"Events of Servicing Termination" under each sale and servicing agreement
or pooling and servicing agreement will consist of:
o any failure by the servicer (or, so long as the seller is the
servicer, the seller) to deliver to the trustee or indenture trustee
for distribution to the securityholders of the related trust or for
deposit in any of the trust accounts or the certificate distribution
account any required payment, which failure continues unremedied for
five business days after written notice from the trustee or
indenture trustee is received by the servicer or the seller, as the
case may be, or after discovery by an officer of the servicer or the
seller, as the case may be;
o 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 in such sale and servicing
agreement or pooling and servicing agreement, which failure
materially and adversely affects the rights of the noteholders or
the certificateholders of the related trust and which continues
unremedied for 90 days after the giving of written notice of such
failure (A) to the servicer or the seller, as the case may be, by
the trustee or the indenture trustee or (B) to the servicer, the
seller and the trustee or the indenture trustee by holders of notes
or certificates of such trust, as applicable, of not less than 25%
in principal amount of the Controlling Class (or, if the trust has
issued notes and its notes are no longer outstanding, 25% by
aggregate certificate balance of the certificates);
o the occurrence of certain insolvency events specified in the
sale and servicing agreement or pooling and servicing agreement with
respect to the servicer; and
o such other events, if any, set forth in the related prospectus
supplement.
Rights Upon Event of Servicing Termination
As long as an Event of Servicing Termination under a sale and servicing
agreement or pooling and servicing agreement remains unremedied, the related
indenture trustee or holders of not less than a majority of the Controlling
Class or the class of notes specified in the prospectus supplement (and after
the notes have been paid in full or if the trust has not issued notes, the
trustee or the holders of not less than a majority of the certificate balance)
may terminate all the rights and obligations of the servicer under such sale
and servicing agreement or pooling and servicing agreement, whereupon such
indenture trustee or trustee or a successor servicer appointed by such
indenture trustee or trustee will succeed to all the responsibilities, duties
and liabilities of the servicer under such sale and servicing agreement or
pooling and servicing agreement and will be entitled to similar compensation
arrangements.
If, however, a receiver, bankruptcy trustee or similar official has been
appointed for the servicer, and no Event of Servicing Termination other than
such appointment has occurred, such receiver, bankruptcy trustee or official
may have the power to prevent such indenture trustee, such noteholders, the
trustee or such certificateholders from effecting a transfer of servicing. In
the event that such indenture trustee or trustee of the trust is legally
unable to act as servicer, it may appoint, or petition a court of competent
jurisdiction for the appointment of, a successor servicer. Such indenture
trustee or trustee may make such arrangements for compensation to be paid,
which in no event may be greater than the servicing compensation to the
servicer under such sale and servicing agreement or pooling and servicing
agreement.
Waiver of Past Events of Servicing Termination
The holders of not less than a majority of the Controlling Class or the
class of notes specified in the prospectus supplement (and after the notes
have been paid in full or if the trust has not issued notes, the trustee or
the holders of not less than a majority of the certificate balance) may, on
behalf of all such securityholders, waive any Event of Servicing Termination
under the related sale and servicing agreement or pooling and servicing
agreement and its consequences, except an Event of Servicing Termination
consisting of a failure to make any required deposits to or payments from any
of the trust accounts in accordance with such sale and servicing agreement or
pooling and servicing agreement.
Amendment
The parties to each of the Receivables Transfer and Servicing Agreements
may amend any of such agreements, without the consent of the related
securityholders, to add any provisions to or change or eliminate any of the
provisions of such Receivables Transfer and Servicing Agreements or modify the
rights of such securityholders; provided that such action will not materially
and adversely affect the interest of any such securityholder as evidenced by
either (i) an opinion of counsel or an officer's certificate to that effect
and (ii) notification by each Rating Agency then rating any of the related
securities that the rating then assigned to the securities will not be reduced
or withdrawn by such Rating Agency. The Receivables Transfer and Servicing
Agreements may also be amended by the seller, the servicer, the related
trustee and any related indenture trustee with the consent of the holders of
any notes of such trust evidencing not less than a majority in principal
amount of the notes, and the holders of the certificates of such trust
evidencing not less than a majority of the certificate balance of the
certificates then outstanding, to add any provisions to or change or eliminate
any of the provisions of such Receivables Transfer and Servicing Agreements or
modify the rights of the securityholders; provided, however, that no such
amendment may (1) increase or reduce in any manner the amount of, or
accelerate or delay the timing of, collections of payments on the related
receivables or distributions that are required to be made for the benefit of
such securityholders or change any interest rate on the securities or the
amount required to be on deposit in the reserve account, if any, or (2) reduce
the percentage of the notes or certificates of such trust the holders of which
are required to consent to any such amendment, without the consent of the
holders of all the outstanding notes and certificates of such trust.
Payment of Notes
The indenture trustee will agree in the related indenture that, upon the
payment in full of all outstanding notes of a given trust and the satisfaction
and discharge of the related indenture, to continue to carry out its
obligations under the sale and servicing agreement as agent for the trustee of
the trust.
Termination
With respect to each trust, the obligations of the servicer, the seller,
the related trustee and the related indenture trustee under the Receivables
Transfer and Servicing Agreements will terminate upon the earlier of (1) the
maturity or other liquidation of the last related receivable and the
disposition of any amounts received upon liquidation of any such remaining
receivables and (2) the payment to noteholders and certificateholders of the
related trust of all amounts required to be paid to them under the Receivables
Transfer and Servicing Agreements.
In order to avoid excessive administrative expense, the servicer will be
permitted at its option to purchase from each trust as of the end of any
applicable Collection Period, if the aggregate principal balance of the
receivables held by the trust is 10% (or such other percentage specified in
the prospectus supplement) or less of the aggregate principal balance of the
receivables as of the cut-off date, all remaining related receivables at a
price equal to the aggregate of the Purchase Amounts thereof as of the end of
such Collection Period, after giving effect to the receipt of any monies
collected on the receivable.
If and to the extent provided in the related prospectus supplement with
respect to the trust, the applicable trustee will, within ten days following a
payment date as of which the aggregate principal balance of the receivables is
equal to or less than the percentage of the initial aggregate principal
balance of the receivables as of the cut-off date specified in the related
prospectus supplement, solicit bids for the purchase of the receivables
remaining in the trust in the manner and subject to the terms and conditions
set forth in such prospectus supplement. If the applicable trustee receives
satisfactory bids as described in such prospectus supplement, then the
receivables remaining in the trust will be sold to the highest bidder.
As more fully described in the related prospectus supplement, any
outstanding notes of the related trust will be paid in full concurrently with
either of the events specified above and the subsequent distribution to the
related certificateholders of all amounts required to be distributed to them
under the applicable trust agreement will effect early retirement of the
certificates of such trust.
List of Certificateholders
With respect to the certificates of any trust, three or more holders of
the certificates of such trust or one or more holders of such certificates
evidencing not less than 25% of the certificate balance of such certificates
may, by written request to the related trustee accompanied by a copy of the
communication that the applicant proposes to send, obtain access to the list
of all certificateholders maintained by the trustee for the purpose of
communicating with other certificateholders with respect to their rights under
the related trust agreement or pooling and servicing agreement or under such
certificates.
Administration Agreement
The Bank will be the administrator of each trust that is not a grantor
trust and will agree, to the extent provided in an administration agreement,
to provide the notices and certain reports and to perform other administrative
obligations of the trust and the trustee required by the related indenture.
The administrator will be entitled to a periodic administration fee which will
be paid by the seller as compensation for the performance of the
administrator's obligations under the applicable administration agreement and
as reimbursement for its expenses related thereto.
The administrator may resign its duties under the administration
agreement upon at least 60 days' prior written notice. The trust may remove
the administrator without cause upon at least 60 days' prior written notice.
The trust may also remove the administrator upon (i) its default in any
material respect in its duties under the administration agreement that remains
uncured for ten days (or such longer period acceptable to the trust) or (ii)
certain insolvency events in respect of the administrator. No such resignation
or removal will be effective until a successor has agreed to be the
administrator and the applicable rating agencies have confirmed the ratings of
the securities of that trust.
Duties of Trustee
The trustee will not make any representations as to the validity or
sufficiency of any agreements, the securities (other than its execution and
authentication of the securities), or the receivables or any related
documents, and will not be accountable for the use or application by the
seller or the servicer of any funds paid to the seller or the servicer in
respect of the securities or the receivables, or any monies prior to the time
such monies are deposited into any account in its name. The trustee will not
independently verify any receivables. The trustee will be required to perform
only those duties specifically required of it under the trust agreement or the
pooling and servicing agreement. Generally, those duties will be limited to
the receipt of the various certificates, reports, or other instruments
required to be furnished to the trustee under the applicable agreement, in
which case it will only be required to examine them to determine whether they
conform to the requirements of the agreement.
The trustee will not be under any obligation to exercise any of the
rights or powers vested in it by the trust agreement or the pooling and
servicing 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 the certificateholders have offered to the trustee reasonable security
or indemnity against the costs, expenses, and liabilities which the trustee
may incur. No certificateholder will have any right under the trust agreement
or the pooling and servicing agreement to institute any proceeding with
respect to that agreement, unless such holder previously has given to the
trustee written notice of default and unless, with respect to a class of
certificates, the holders of certificates evidencing not less than a majority
of the certificate balance of that class of 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 trustee will be named in the prospectus supplement. The trustee may
resign at any time by giving written notice to the seller or the servicer, in
which event the trustee, in the case of a pooling and servicing agreement, or
the seller or the administrator, in the case of a trust agreement, will be
obligated 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
trust agreement or the pooling and servicing agreement, becomes legally unable
to act, or becomes insolvent. In such circumstances, the trustee, in the case
of a pooling and servicing agreement, or the seller or the administrator, in
the case of a trust agreement, will be obligated to appoint a successor
trustee. Any resignation or removal of the trustee and appointment of a
successor trustee will not become effective until acceptance of the
appointment by the successor trustee.
The trust agreement or the pooling and servicing agreement will provide
that the servicer will pay the trustee's fees. That agreement will further
provide that the trustee will be entitled to indemnification by the servicer
for, and will be held harmless against, any loss, liability, or expense
incurred by the trustee not resulting from the trustee's 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). If the
servicer fails to indemnify the trustee, the trustee will be entitled to be
indemnified by the trust. Any such indemnification will be paid on a payment
date only after all amounts required to be paid to the securityholders 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 seller, the servicer and their respective affiliates may have normal
banking relationships with the trustee and its affiliates.
SOME IMPORTANT LEGAL ISSUES RELATING TO THE RECEIVABLES
Security Interest in the Receivables
The receivables are "chattel paper" as defined in the Uniform Commercial
Code (the "UCC") in effect in the States of Texas and New York. 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 a
trust's ownership interest in its receivables, the seller 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 its receivables and
their proceeds. Under the sale and servicing agreement or the pooling and
servicing agreement, the seller will be obligated to maintain the perfection
of the trust's ownership interest in the receivables. However, 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 documents evidencing the receivables since
they would not be marked to show such sale, although the seller's master
computer records will indicate 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 seller 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 seller is registered. The
receivables prohibit the sale or transfer of the financed vehicle without the
seller's consent.
The seller will assign its security interest in the individual financed
vehicles to the trust purchasing the related receivables. However, because of
the administrative burden and expense and since the seller remains as servicer
of the receivables, neither the seller nor any other person will amend the
certificates of title to identify the trust as the new secured party and,
accordingly, the seller 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 seller's rights as the secured party as against
creditors of the obligor. In some states, in the absence of such endorsement
and delivery, neither the indenture trustee, the trust nor the trustee may
have a perfected security interest in the financed vehicle. In such event or
in the event that the seller 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, if the
seller did not have a perfected security interest, against the seller pursuant
to the seller's repurchase obligation. See"Description of Transfer and
Servicing Agreements--Sale and Assignment of Receivables." If there are any
financed vehicles as to which the seller has failed to perfect the security
interest assigned to the trust, (a) that 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 that security interest.
Except as described above, 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 seller 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. There also exists a risk in not identifying the trust as the
new secured party on the certificate of title that, through fraud or
negligence, the security interest of the trust could be released.
If 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 seller 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 seller would receive notice of
surrender if the security interest in the financed vehicle is noted on the
certificate of title. Accordingly, the seller 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 seller 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
seller must surrender possession of the certificate of title or will receive
notice as a result of its lien note thereon and accordingly will have an
opportunity to require satisfaction of the related receivable before release
of the lien. Under the sale and servicing agreement or the pooling and
servicing agreement, the servicer will be 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 seller will
represent in the sale and servicing agreement or the pooling and servicing
agreement that as of the cut-off date 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 indenture
trustee or the trustee if such a lien arises.
Enforcement of Security Interests in Financed Vehicles
The servicer on behalf of each trust may take action to enforce its
security interest by repossession and resale of the financed vehicles securing
the trust's 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.
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 sale and servicing agreement or the pooling and servicing 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 a 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 sale and servicing
agreement or the pooling and servicing agreement and would create an
obligation of the seller to repurchase the receivable unless such failed
criterion is cured.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a general summary of certain federal income tax
consequences of the purchase, ownership and disposition of the notes and the
certificates. The summary does not purport to deal with federal income tax
consequences applicable to all categories of holders, some of which may be
subject to special rules. For example, it does not discuss the tax treatment
of noteholders or certificateholders that are insurance companies, regulated
investment companies or dealers in securities. Moreover, there are no cases or
Internal Revenue Service ("IRS") rulings on similar transactions involving
both debt and equity interests issued by a trust with terms similar to those
of the notes and the certificates. As a result, the IRS may disagree with all
or a part of the discussion below. Prospective investors are urged to consult
their own tax advisors in determining the federal, state, local, foreign and
any other tax consequences to them of the purchase, ownership and disposition
of the notes and the certificates.
The following summary is based upon current provisions of the Internal
Revenue Code of 1986, as amended (the"Code"), the Treasury regulations
promulgated thereunder and judicial or ruling authority, all of which are
subject to change, which change may be retroactive. Each trust will be
provided with an opinion of special federal tax counsel to each trust
specified in the related prospectus supplement ("Federal Tax Counsel"),
regarding certain federal income tax matters discussed below. An opinion of
Federal Tax Counsel, however, is not binding on the IRS or the courts. No
ruling on any of the issues discussed below will be sought from the IRS. For
purposes of the following summary, references to the trust, the notes, the
certificates and related terms, parties and documents shall be deemed to
refer, unless otherwise specified herein, to each trust and the notes,
certificates and related terms, parties and documents applicable to such
trust.
The federal income tax consequences to certificateholders will vary
depending on whether (i) an election is made to treat the trust as a
partnership under the Code, (ii) all the certificates are retained by the
seller or an affiliate thereof, or (iii) whether the trust will be treated as
a grantor trust. The prospectus supplement for each series of certificates
will specify whether a partnership election will be made or the trust will be
treated as a grantor trust.
TRUSTS FOR WHICH A PARTNERSHIP ELECTION IS MADE
Tax Characterization of the Trust as a Partnership
Federal Tax Counsel will deliver its opinion that a trust for which a
partnership election is made will not be an association (or publicly traded
partnership) taxable as a corporation for federal income tax purposes. This
opinion will be based on the assumption that the terms of the trust agreement
and related documents will be complied with, and on counsel's conclusions that
the nature of the income of the trust will exempt it from the rule that
certain publicly traded partnerships are taxable as corporations.
Tax Consequences to Holders of the Notes
Treatment of the Notes as Indebtedness. The seller will agree, and the
noteholders will agree by their purchase of notes, to treat the notes as debt
for federal income tax purposes. Federal Tax Counsel will, except as otherwise
provided in the related prospectus supplement, advise the trust that the notes
will be classified as debt for federal income tax purposes. The discussion
below assumes this characterization of the notes is correct.
OID, Indexed Securities, etc. The discussion below assumes that all
payments on the notes are denominated in U.S. dollars, that the notes are not
indexed securities or strip notes, and that principal and interest is payable
on the notes. Moreover, the discussion assumes that the interest formula for
the notes meets the requirements for "qualified stated interest" under
Treasury regulations (the "OID regulations") relating to original issue
discount ("OID"), and that any OID on the notes (i.e., any excess of the
principal amount of the notes over their issue price) does not exceed a de
minimis amount (i.e., 1/4% of their principal amount multiplied by the number
of full years included in their term), all within the meaning of the OID
regulations. If these conditions are not satisfied with respect to a series of
notes, additional tax considerations with respect to such notes will be
disclosed in the applicable prospectus supplement.
Interest Income on the Notes. Based on the above assumptions, except as
discussed in the following paragraph, the notes will not be considered issued
with OID. The stated interest thereon will be taxable to a noteholder as
ordinary interest income when received or accrued in accordance with such
noteholder's method of tax accounting. Under the OID regulations, a holder of
a note issued with a de minimis amount of OID must include such OID in income,
on a pro rata basis, as principal payments are made on the note. It is
believed that any prepayment premium paid as a result of a mandatory
redemption will be taxable as contingent interest when it becomes fixed and
unconditionally payable. A purchaser who buys a note for more or less than its
principal amount will generally be subject, respectively, to the premium
amortization or market discount rules of the Code.
A holder of a note that has a fixed maturity date of not more than one
year from the issue date of such note (a "Short-Term Note") may be subject to
special rules. An accrual basis holder of a Short-Term Note (and certain cash
method holders, including regulated investment companies, as set forth in
Section 1281 of the Code) generally would be required to report interest
income as interest accrues on a straight-line basis over the term of each
interest period. Other cash basis holders of a Short-Term Note would, in
general, be required to report interest income as interest is paid (or, if
earlier, upon the taxable disposition of the Short-Term Note). However, a cash
basis holder of a Short-Term Note reporting interest income as it is paid may
be required to defer a portion of any interest expense otherwise deductible on
indebtedness incurred to purchase or carry the Short-Term Note until the
taxable disposition of the Short-Term Note. A cash basis taxpayer may elect
under Section 1281 of the Code to accrue interest income on all nongovernment
debt obligations with a term of one year or less, in which case the taxpayer
would include interest on the Short-Term Note in income as it accrues, but
would not be subject to the interest expense deferral rule referred to in the
preceding sentence. Certain special rules apply if a Short-Term Note is
purchased for more or less than its principal amount.
Sale or Other Disposition. If a noteholder sells a note, the holder will
recognize gain or loss in an amount equal to the difference between the amount
realized on the sale and the holder's adjusted tax basis in the note. The
adjusted tax basis of a note to a particular noteholder will equal the
holder's cost for the note, increased by any market discount, acquisition
discount, OID (including de minimis OID) and gain previously included by such
noteholder in income with respect to the note and decreased by the amount of
bond premium (if any) previously amortized and by the amount of principal
payments previously received by such noteholder with respect to such note. Any
such gain or loss will be capital gain or loss if the note was held as a
capital asset, except for gain representing accrued interest and accrued
market discount not previously included in income. Any capital gain recognized
upon a sale, exchange or other disposition of a note will be long-term capital
gain if the seller's holding period is more than one year and will be
short-term capital gain if the seller's holding period is one year or less.
The deductibility of capital losses is subject to certain limitations.
Prospective investors should consult with their own tax advisors concerning
the U.S. federal tax consequences of the sale, exchange or other disposition
of a note.
Foreign Holders. Interest payments made (or accrued) to a noteholder who
is a nonresident alien, foreign corporation or other non-U.S. person (a
"foreign person") generally will be considered "portfolio interest", and
generally will not be subject to United States federal income tax and
withholding tax, if the interest is not effectively connected with the conduct
of a trade or business within the United States by the foreign person and the
foreign person (i) is not actually or constructively a "10 percent
shareholder" of the trust or the seller (including a holder of 10% of the
outstanding certificates) or a "controlled foreign corporation" with respect
to which the trust or the seller is a "related person" within the meaning of
the Code and (ii) provides the indenture trustee or other person who is
otherwise required to withhold U.S. tax with respect to the notes with an
appropriate statement (on Form W-8 BEN or a similar form), signed under
penalties of perjury, certifying that the beneficial owner of the note is a
foreign person and providing the foreign person's name and address. If a note
is held through a securities clearing organization or certain other financial
institutions, the organization or institution may provide the relevant signed
statement to the withholding agent; in that case, however, the signed
statement must be accompanied by a Form W-8 BEN or substitute form provided by
the foreign person that owns the note. If such interest is not portfolio
interest, then it will be subject to withholding tax at a rate of 30 percent,
unless the foreign person provides a properly executed (1) IRS Form W-8 BEN
(or successor form) claiming an exemption from or reduction in withholding
under the benefit of a tax treaty or (2) IRS Form W-8 ECI (or successor form)
stating that interest paid is not subject to withholding tax because it is
effectively connected with the foreign person's conduct of a trade or business
in the United States. If the interest is effectively connected income, the
foreign person, although exempt from the withholding tax discussed above, will
be subject to United States federal income tax on such interest at graduated
rates.
Any capital gain realized on the sale, redemption, retirement or other
taxable disposition of a note by a foreign person will be exempt from United
States federal income and withholding tax, provided that (i) such gain is not
effectively connected with the conduct of a trade or business in the United
States by the foreign person and (ii) in the case of an individual foreign
person, the foreign person is not present in the United States for 183 days or
more in the taxable year and does not otherwise have a "tax home" within the
United States.
Backup Withholding. Each holder of a note (other than an exempt holder
such as a corporation, tax-exempt organization, qualified pension and
profit-sharing trust, individual retirement account or nonresident alien who
provides certification as to status as a nonresident) will be required to
provide, under penalties of perjury, a certificate containing the holder's
name, address, correct federal taxpayer identification number and a statement
that the holder is not subject to backup withholding. Should a nonexempt
noteholder fail to provide the required certification, the trust will be
required to withhold 31 percent of the amount otherwise payable to the holder,
and remit the withheld amount to the IRS as a credit against the holder's
federal income tax liability.
New Withholding Regulations. Recently, the Treasury Department issued new
regulations (the "New Regulations") which make certain modifications to
withholding, backup withholding and information reporting rules. The New
Regulations attempt to unify certification requirements and modify reliance
standards. The New Regulations will generally be effective for payments made
after December 31, 2000, subject to certain transition rules. Prospective
investors are urged to consult their own tax advisors regarding the New
Regulations.
Possible Alternative Treatments of the Notes. If, contrary to the opinion
of Federal Tax Counsel, the IRS successfully asserted that one or more of the
notes did not represent debt for federal income tax purposes, the notes might
be treated as equity interests in the trust. If so treated, the trust might be
treated as a publicly traded partnership taxable as a corporation with
potentially adverse tax consequences (and the publicly traded partnership
taxable as a corporation would not be able to reduce its taxable income by
deductions for interest expense on notes recharacterized as equity).
Alternatively, and most likely in the view of Federal Tax Counsel, the trust
would be treated as a publicly traded partnership that would not be taxable as
a corporation because it would meet certain qualifying income tests.
Nonetheless, treatment of the notes as equity interests in such a partnership
could have adverse tax consequences to certain holders. For example, income to
certain tax-exempt entities (including pension funds) would be "unrelated
business taxable income", income to foreign holders generally would be subject
to U.S. tax and U.S. tax return filing and withholding requirements, and
individual holders might be subject to certain limitations on their ability to
deduct their share of trust expenses.
Tax Consequences to Holders of the Certificates
Treatment of the Trust as a Partnership. The seller and the servicer will
agree, and the certificateholders will agree by their purchase of
certificates, to treat the trust as a partnership for purposes of federal and
state income tax, franchise tax and any other tax measured in whole or in part
by income, with the assets of the partnership being the assets held by the
trust, the partners of the partnership being the certificateholders (including
the seller in its capacity as recipient of distributions from the reserve
account), and the notes being debt of the related partnership. However, the
proper characterization of the arrangement involving the trust, the
certificates, the notes, the seller and the servicer is not clear because
there is no authority on transactions closely comparable to that contemplated
herein.
A variety of alternative characterizations are possible. For example,
because the certificates have certain features characteristic of debt, the
certificates might be considered debt of the seller or the trust. Any such
characterization would not result in materially adverse tax consequences to
certificateholders as compared to the consequences from treatment of the
certificates as equity in a partnership, described below. The following
discussion assumes that the certificates represent equity interests in a
partnership.
Indexed Securities, etc. The following discussion assumes that all
payments on the certificates are denominated in U.S. dollars, that principal
and interest are distributed on the certificates, and that a series of
securities includes a single class of certificates. If these conditions are
not satisfied with respect to any given series of certificates, additional tax
considerations with respect to such certificates will be disclosed in the
applicable prospectus supplement.
Partnership Taxation. As a partnership, the trust will not be subject to
federal income tax. Rather, each certificateholder will be required to
separately take into account such holder's allocated share of income, gains,
losses, deductions and credits of the trust. The trust's income will consist
primarily of interest and finance charges earned on the receivables (including
appropriate adjustments for market discount, OID and bond premium) and any
gain upon collection or disposition of receivables. The trust's deductions
will consist primarily of interest accruing with respect to the notes,
servicing and other fees, and losses or deductions upon collection or
disposition of receivables.
The tax items of a partnership are allocable to the partners in
accordance with the Code, Treasury regulations and the partnership agreement
(here, the trust agreement and related documents). The trust agreement will
provide, in general, that the certificateholders will be allocated taxable
income of the trust for each month equal to the sum of
(i) the interest that accrues on the certificates in
accordance with their terms for such month, including
interest accruing at the applicable pass through rate for
such month and interest on amounts previously due on the
certificates but not yet distributed;
(ii) any trust income attributable to discount on the
receivables that corresponds to any excess of the principal
amount of the certificates over their initial issue price;
(iii) prepayment premium payable to the certificateholders for
such month; and
(iv) any other amounts of income payable to the
certificateholders for such month.
Such allocation will be reduced by any amortization by the trust of premium on
receivables that corresponds to any excess of the issue price of certificates
over their principal amount. All remaining taxable income of the trust will be
allocated to the seller. Based on the economic arrangement of the parties,
this approach for allocating trust income should be permissible under
applicable Treasury regulations, although no assurance can be given that the
IRS would not require a greater amount of income to be allocated to
certificateholders. Moreover, even under the foregoing method of allocation,
certificateholders may be allocated income equal to the entire pass through
rate plus the other items described above even though the trust might not have
sufficient cash to make current cash distributions of such amount. Thus, cash
basis holders will in effect be required to report income from the
certificates on the accrual basis and certificateholders may become liable for
taxes on trust income even if they have not received cash from the trust to
pay such taxes. In addition, because tax allocations and tax reporting will be
done on a uniform basis for all certificateholders but certificateholders may
be purchasing certificates at different times and at different prices,
certificateholders may be required to report on their tax returns taxable
income that is greater or less than the amount reported to them by the trust.
See "--Allocations Between Transferors and Transferees" below.
All of the taxable income allocated to a certificateholder that is a
pension, profit sharing or employee benefit plan or other tax-exempt entity
(including an individual retirement account) will constitute "unrelated
business taxable income" generally taxable to such a holder under the Code.
An individual taxpayer's share of expenses of the trust (including fees
to the servicer but not interest expense) would be miscellaneous itemized
deductions. Such deductions might be disallowed to the individual in whole or
in part and might result in such holder being taxed on an amount of income
that exceeds the amount of cash actually distributed to such holder over the
life of the trust.
The trust intends to make all tax calculations relating to income and
allocations to certificateholders on an aggregate basis. If the IRS were to
require that such calculations be made separately for each receivable, the
trust might be required to incur additional expense but it is believed that
there would not be a material adverse effect on certificateholders.
Discount and Premium. It is believed that the receivables were not issued
with OID, and, therefore, the trust should not have OID income. However, the
purchase price paid by the trust for the receivables may be greater or less
than the remaining principal balance of the receivables at the time of
purchase. If so, the receivables will have been acquired at a premium or
discount, as the case may be. (As indicated above, the trust will make this
calculation on an aggregate basis, but might be required to recompute it on a
receivable-by-receivable basis.)
If the trust acquires the receivables at a market discount or premium,
the trust will elect to include any such discount in income currently as it
accrues over the life of the receivables or to offset any such premium against
interest income on the receivables. As indicated above, a portion of such
market discount income or premium deduction may be allocated to
certificateholders.
Section 708 Termination. Under Section 708 of the Code, the trust will be
deemed to terminate for federal income tax purposes if 50% or more of the
capital and profits interests in the trust are sold or exchanged within a
12-month period. Pursuant to final Treasury regulations issued on May 9, 1997,
if such a termination occurs, the trust will be considered to have contributed
the assets of the trust (the "old partnership") to a new partnership in
exchange for interests in the partnership. Such interests would be deemed
distributed to the partners of the old partnership in liquidation thereof,
which would not constitute a sale or exchange.
Disposition of Certificates. Generally, capital gain or loss will be
recognized on a sale of certificates in an amount equal to the difference
between the amount realized and the seller's tax basis in the certificates
sold. A certificateholder's tax basis in a certificate will generally equal
the holder's cost increased by the holder's share of trust income (includible
in income) and decreased by any distributions received with respect to such
certificate. In addition, both the tax basis in the certificates and the
amount realized on a sale of a certificate would include the holder's share of
the notes and other liabilities of the trust. A holder acquiring certificates
at different prices may be required to maintain a single aggregate adjusted
tax basis in such certificates, and, upon sale or other disposition of some of
the certificates, allocate a portion of such aggregate tax basis to the
certificates sold (rather than maintaining a separate tax basis in each
certificate for purposes of computing gain or loss on a sale of that
certificate).
Any gain on the sale of a certificate attributable to the holder's share
of unrecognized accrued market discount on the receivables would generally be
treated as ordinary income to the holder and would give rise to special tax
reporting requirements. The trust does not expect to have any other assets
that would give rise to such special reporting requirements. Thus, to avoid
those special reporting requirements, the trust will elect to include market
discount in income as it accrues.
If a certificateholder is required to recognize an aggregate amount of
income (not including income attributable to disallowed itemized deductions
described above) over the life of the certificates that exceeds the aggregate
cash distributions with respect thereto, such excess will generally give rise
to a capital loss upon the retirement of the certificates.
Allocations Between Transferors and Transferees. In general, the trust's
taxable income and losses will be determined monthly and the tax items for a
particular calendar month will be apportioned among the certificateholders in
proportion to the principal amount of certificates owned by them as of the
close of the last day of such month. As a result, a holder purchasing
certificates may be allocated tax items (which will affect its tax liability
and tax basis) attributable to periods before the actual transaction.
The use of such a monthly convention may not be permitted by existing
regulations. If a monthly convention is not allowed (or only applies to
transfers of less than all of the partner's interest), taxable income or
losses of the trust might be reallocated among the certificateholders. The
Bank will be authorized to revise the trust's method of allocation between
transferors and transferees to conform to a method permitted by future
regulations.
Section 754 Election. In the event that a certificateholder sells its
certificates at a profit (or loss), the purchasing certificateholder will have
a higher (or lower) basis in the certificates than the selling
certificateholder had. The tax basis of the trust's assets will not be
adjusted to reflect that higher (or lower) basis unless the trust were to file
an election under Section 754 of the Code. In order to avoid the
administrative complexities that would be involved in keeping accurate
accounting records, as well as potentially onerous information reporting
requirements, the trust will not make such an election. As a result,
certificateholders might be allocated a greater or lesser amount of trust
income than would be appropriate based on their own purchase price for the
certificates.
Administrative Matters. The trustee is required to keep or have kept
complete and accurate books of the trust. Such books will be maintained for
financial reporting and tax purposes on an accrual basis and the fiscal year
of the trust will be the calendar year. The trustee will file a partnership
information return (IRS Form 1065) with the IRS for each taxable year of the
trust and will report each certificateholder's allocable share of items of
trust income and expense to holders and the IRS on Schedule K-1. The trust
will provide the Schedule K-1 information to nominees that fail to provide the
trust with the information statement described below and such nominees will be
required to forward such information to the beneficial owners of the
certificates. Generally, holders must file tax returns that are consistent
with the information return filed by the trust or be subject to penalties
unless the holder notifies the IRS of all such inconsistencies.
Under Section 6031 of the code, any person that holds certificates as a
nominee at any time during a calendar year is required to furnish the trust
with a statement containing certain information on the nominee, the beneficial
owners and the certificates so held. Such information includes (i) the name,
address and taxpayer identification number of the nominee and (ii) as to each
beneficial owner (x) the name, address and identification number of such
person, (y) whether such person is a United States person, a tax-exempt entity
or a foreign government, an international organization, or any wholly owned
agency or instrumentality of either of the foregoing, and (z) certain
information on certificates that were held, bought or sold on behalf of such
person throughout the year. In addition, brokers and financial institutions
that hold certificates through a nominee are required to furnish directly to
the trust information as to themselves and their ownership of certificates. A
clearing agency registered under Section 17A of the Exchange Act is not
required to furnish any such information statement to the trust. The
information referred to above for any calendar year must be furnished to the
trust on or before the following January 31. Nominees, brokers and financial
institutions that fail to provide the trust with the information described
above may be subject to penalties.
The seller will be designated as the tax matters partner in the related
trust agreement and, as such, will be responsible for representing the
certificateholders in any dispute with the IRS. The Code provides for
administrative examination of a partnership as if the partnership were a
separate and distinct taxpayer. Generally, the statute of limitations for
partnership items does not expire before three years after the date on which
the partnership information return is filed. Any adverse determination
following an audit of the return of the trust by the appropriate taxing
authorities could result in an adjustment of the returns of the
certificateholders, and, under certain circumstances, a certificateholder may
be precluded from separately litigating a proposed adjustment to the items of
the trust. An adjustment could also result in an audit of a
certificateholder's returns and adjustments of items not related to the income
and losses of the trust.
Tax Consequences to Foreign Certificateholders. It is not clear whether
the trust would be considered to be engaged in a trade or business in the
United States for purposes of federal withholding taxes with respect to
non-U.S. persons because there is no clear authority dealing with that issue
under facts substantially similar to those described herein. Although it is
not expected that the trust would be engaged in a trade or business in the
United States for such purposes, the trust will withhold as if it were so
engaged in order to protect the trust from possible adverse consequences of a
failure to withhold. The trust expects to withhold on the portion of its
taxable income that is allocable to foreign certificateholders pursuant to
Section 1446 of the Code, as if such income were effectively connected to a
U.S. trade or business, at a rate of 35% for foreign holders that are taxable
as corporations and 39.6% for all other foreign holders. Subsequent adoption
of Treasury regulations or the issuance of other administrative pronouncements
may require the trust to change its withholding procedures. In determining a
holder's withholding status, the trust may rely on IRS Form W-8 BEN, IRS Form
W-9 or the holder's certification of nonforeign status signed under penalties
of perjury.
Each foreign holder might be required to file a U.S. individual or
corporate income tax return (including, in the case of a corporation, the
branch profits tax) on its share of the trust's income. Each foreign holder
must obtain a taxpayer identification number from the IRS and submit that
number to the trust on Form W-8 BEN (or substantially identical form) in order
to assure appropriate crediting of the taxes withheld. A foreign holder
generally would be entitled to file with the IRS a claim for refund with
respect to taxes withheld by the trust, taking the position that no taxes were
due because the trust was not engaged in a U.S. trade or business. However,
interest payments made (or accrued) to a certificateholder who is a foreign
person generally will be considered guaranteed payments to the extent such
payments are determined without regard to the income of the trust. If these
interest payments are properly characterized as guaranteed payments, then the
interest will not be considered "portfolio interest." As a result,
certificateholders will be subject to United States federal income tax and
withholding tax at a rate of 30%, unless reduced or eliminated pursuant to an
applicable treaty. In such case, a foreign holder would only be entitled to
claim a refund for that portion of the taxes in excess of the taxes that
should be withheld with respect to the guaranteed payments.
Backup Withholding. Distributions made on the certificates and proceeds
from the sale of the certificates will be subject to a "backup" withholding
tax of 31% if, in general, the certificateholder fails to comply with certain
identification procedures, unless the holder is an exempt recipient under
applicable provisions of the Code.
New Withholding Regulations. Recently, the Treasury Department issued the
New Regulations which attempt to unify certification requirements and modify
reliance standards. The New Regulations will generally be effective for
payments made after December 31, 2000, subject to certain transition rules.
Prospective investors are urged to consult their own tax advisors regarding
the New Regulations.
TRUSTS IN WHICH ALL CERTIFICATES ARE RETAINED BY
THE SELLER OR AN AFFILIATE OF THE SELLER
Tax Characterization of the Trust
Federal Tax Counsel will deliver its opinion that a trust which issues
one or more classes of notes to investors and all the certificates of which
are retained by seller or an affiliate thereof will not be an association (or
publicly traded partnership) taxable as a corporation for federal income tax
purposes. This opinion will be based on the assumption that the terms of the
trust agreement and related documents will be complied with, and on counsel's
conclusions that the trust will constitute a mere security arrangement for the
issuance of debt by the single certificateholder.
Treatment of the Notes as Indebtedness. The seller will agree, and the
noteholders will agree by their purchase of notes, to treat the notes as debt
for federal income tax purposes. Federal Tax Counsel will, except as otherwise
provided in the related prospectus supplement, advise the trust that the notes
will be classified as debt for federal income tax purposes. Assuming such
characterization of the notes is correct, the federal income tax consequences
to noteholders described above under the heading "TRUSTS FOR WHICH A
PARTNERSHIP ELECTION IS MADE -- Tax Consequences to Holders of the Notes"
would apply to the noteholders.
If, contrary to the opinion of Federal Tax Counsel, the IRS successfully
asserted that one or more classes of notes did not represent debt for federal
income tax purposes, such class or classes of notes might be treated as equity
interests in the trust. If so treated, the trust might be treated as a
publicly traded partnership taxable as a corporation with potentially adverse
tax consequences (and the publicly traded partnership taxable as a corporation
would not be able to reduce its taxable income by deductions for interest
expense on notes recharacterized as equity). Alternatively, and more likely in
the view of Federal Tax Counsel, the trust would most likely be treated as a
publicly traded partnership that would not be taxable as a corporation because
it would meet certain qualifying income tests. Nonetheless, treatment of notes
as equity interests in such a partnership could have adverse tax consequences
to certain holders of such notes. For example, income to certain tax-exempt
entities (including pension funds) would be "unrelated business taxable
income", income to foreign holders may be subject to U.S. withholding tax and
U.S. tax return filing requirements, and individual holders might be subject
to certain limitations on their ability to deduct their share of trust
expenses. In the event one or more classes of notes were treated as interests
in a partnership, the consequences governing the certificates as equity
interests in a partnership described above under "TRUSTS FOR WHICH A
PARTNERSHIP ELECTION IS MADE -- Tax Consequences to Holders of the
Certificates" would apply to the holders of such notes.
TRUSTS TREATED AS GRANTOR TRUSTS
Tax Characterization of the Trust as a Grantor Trust
If a partnership election is not made, Federal Tax Counsel will deliver
its opinion that the trust will not be classified as an association taxable as
a corporation and that such trust will be classified as a grantor trust under
subpart E, part 1, subchapter J, chapter 1 of subtitle A of the Code. In this
case, owners of certificates (referred to herein as "Grantor Trust
Certificateholders") will be treated for federal income tax purposes as owners
of a portion of the trust's assets as described below. The certificates issued
by a trust that is treated as a grantor trust are referred to herein as
"Grantor Trust Certificates."
Characterization. Each Grantor Trust Certificateholder will be treated as
the owner of a pro rata undivided interest in the interest and principal
portions of the trust represented by the Grantor Trust Certificates and will
be considered the equitable owner of a pro rata undivided interest in each of
the receivables in the trust. Any amounts received by a Grantor Trust
Certificateholder in lieu of amounts due with respect to any receivable
because of a default or delinquency in payment will be treated for federal
income tax purposes as having the same character as the payments they replace.
Each Grantor Trust Certificateholder will be required to report on its
federal income tax return in accordance with such Grantor Trust
Certificateholder's method of accounting its pro rata share of the entire
income from the receivables in the trust represented by Grantor Trust
Certificates, including interest, OID, if any, prepayment fees, assumption
fees, any gain recognized upon an assumption and late payment charges received
by the servicer. Under Sections 162 or 212 each Grantor Trust
Certificateholder will be entitled to deduct its pro rata share of servicing
fees, prepayment fees, assumption fees, any loss recognized upon an assumption
and late payment charges retained by the servicer, provided that such amounts
are reasonable compensation for services rendered to the trust. Grantor Trust
Certificateholders that are individuals, estates or trusts will be entitled to
deduct their share of expenses only to the extent such expenses plus all other
Section 212 expenses exceed two percent of its adjusted gross income. In
addition, Section 68 of the Code provides that the amount of itemized
deductions otherwise allowable for an individual whose adjusted gross income
exceeds a specified amount will be reduced by the lesser of (i) 3% of the
excess of the individual's adjusted gross income over such amount or (ii) 80%
of the amount of itemized deductions otherwise allowable for the taxable year.
Further, Certificateholders (other than corporations) subject to the
alternative minimum tax may not deduct miscellaneous itemized deductions in
determining such holder's alternative minimum taxable income. A Grantor Trust
Certificateholder using the cash method of accounting must take into account
its pro rata share of income and deductions as and when collected by or paid
to the servicer. A Grantor Trust Certificateholder using an accrual method of
accounting must take into account its pro rata share of income and deductions
as they become due or are paid to the servicer, whichever is earlier. If the
servicing fees paid to the servicer are deemed to exceed reasonable servicing
compensation, the amount of such excess could be considered as an ownership
interest retained by the servicer (or any person to whom the servicer assigned
for value all or a portion of the servicing fees) in a portion of the interest
payments on the receivables. The receivables would then be subject to the
"stripped bond" rules of the Code discussed below.
Stripped Bonds. If the servicing fees on the receivables are deemed to
exceed reasonable servicing compensation, based on recent guidance by the IRS,
each purchaser of a Grantor Trust Certificate will be treated as the purchaser
of a stripped bond which generally should be treated as a single debt
instrument issued on the day it is purchased for purposes of calculating any
original issue discount. Generally, under recently issued Treasury regulations
(the "Section 1286 Treasury Regulations"), if the discount on a stripped bond
is larger than a de minimis amount (as calculated for purposes of the OID
rules of the Code) such stripped bond will be considered to have been issued
with OID. See "Original Issue Discount." The original issue discount on a
Grantor Trust Certificate will be the excess of such certificate's stated
redemption price over its issue price. The issue price of a Grantor Trust
Certificate as to any purchaser will be equal to the price paid by such
purchaser of the Grantor Trust Certificate. The stated redemption price of a
Grantor Trust Certificate will be the sum of all payments to be made on such
certificate other than "qualified stated interest", if any. Based on the
preamble to the Section 1286 Treasury Regulations, Federal Tax Counsel is of
the opinion that, although the matter is not entirely clear, the interest
income on the certificates at the sum of the pass through rate and the portion
of the servicing fee rate that does not constitute excess servicing will be
treated as "qualified stated interest" within the meaning of the Section 1286
Treasury Regulations and such income will be so treated in the trustee's tax
information reporting. Notice will be given in the applicable prospectus
supplement when it is determined that Grantor Trust Certificates will be
issued with greater than de minimis OID.
Original Issue Discount on Stripped Bonds. If the stripped bonds have
more than a de minimis amount of OID, the special rules of the Code relating
to "original issue discount" (currently Sections 1271 through 1273 and 1275)
will be applicable to a Grantor Trust Certificateholder's interest in those
receivables treated as stripped bonds (the "Stripped Bonds"). Generally, a
Grantor Trust Certificateholder that acquires an interest in a stripped bond
issued or acquired with OID must include in gross income the sum of the "daily
portions," as defined below, of the OID on such stripped bond for each day on
which it owns a certificate, including the date of purchase but excluding the
date of disposition. In the case of an original Grantor Trust
Certificateholder, the daily portions of OID with respect to a stripped bond
generally would be determined as follows. A calculation will be made of the
portion of OID that accrues on the stripped bond during each successive
monthly accrual period (or shorter period in respect of the date of original
issue or the final payment date). This will be done, in the case of each full
monthly accrual period, by adding (i) the present value of all remaining
payments to be received on the stripped bond under the prepayment assumption
used in respect of the stripped bonds and (ii) any payments received during
such accrual period, and subtracting from that total the "adjusted issue
price" of the stripped bond at the beginning of such accrual period. No
representation is made that the stripped bonds will prepay at any prepayment
assumption. The "adjusted issue price" of a stripped bond at the beginning of
the first accrual period is its issue price (as determined for purposes of the
OID rules of the Code) and the "adjusted issue price" of a stripped bond at
the beginning of a subsequent accrual period is the "adjusted issue price" at
the beginning of the immediately preceding accrual period plus the amount of
OID allocable to that accrual period and reduced by the amount of any payment
(other than "qualified stated interest") made at the end of or during that
accrual period. The OID accruing during such accrual period will then be
divided by the number of days in the period to determine the daily portion of
OID for each day in the period. With respect to an initial accrual period
shorter than a full monthly accrual period, the daily portions of OID must be
determined according to an appropriate allocation under either an exact or
approximate method set forth in the OID Regulations, or some other reasonable
method, provided that such method is consistent with the method used to
determine the yield to maturity of the stripped bonds.
With respect to the stripped bonds, the method of calculating OID as
described above will cause the accrual of OID to either increase or decrease
(but never below zero) in any given accrual period to reflect the fact that
prepayments are occurring at a faster or slower rate than the prepayment
assumption used in respect of the stripped bonds. Subsequent purchasers that
purchase stripped bonds at more than a de minimis discount should consult
their tax advisors with respect to the proper method to accrue such OID.
Market Discount if Stripped Bond Rules Do Not Apply. A Grantor Trust
Certificateholder that acquires an undivided interest in receivables may be
subject to the market discount rules of Sections 1276 through 1278 to the
extent an undivided interest in a receivable is considered to have been
purchased at a "market discount." Generally, the amount of market discount is
equal to the excess of the portion of the principal amount of such receivable
allocable to such holder's undivided interest over such holder's tax basis in
such interest. Market discount with respect to a Grantor Trust Certificate
will be considered to be zero if the amount allocable to the Grantor Trust
Certificate is less than 0.25% of the Grantor Trust Certificate's stated
redemption price at maturity multiplied by the weighted average maturity
remaining after the date of purchase. Treasury regulations implementing the
market discount rules have not yet been issued; therefore, investors should
consult their own tax advisors regarding the application of these rules and
the advisability of making any of the elections allowed under Code Sections
1276 through 1278.
The Code provides that any principal payment (whether a scheduled payment
or a prepayment) or any gain on disposition of a market discount bond shall be
treated as ordinary income to the extent that it does not exceed the accrued
market discount at the time of such payment. The amount of accrued market
discount for purposes of determining the tax treatment of subsequent principal
payments or dispositions of the market discount bond is to be reduced by the
amount so treated as ordinary income.
The Code also grants the Treasury Department authority to issue
regulations providing for the computation of accrued market discount on debt
instruments, the principal of which is payable in more than one installment.
While the Treasury Department has not yet issued regulations, rules described
in the relevant legislative history will apply. Under those rules, the holder
of a market discount bond may elect to accrue market discount either on the
basis of a constant interest rate or according to one of the following
methods. If a Grantor Trust Certificate is issued with OID, the amount of
market discount that accrues during any accrual period would be equal to the
product of (i) the total remaining market discount and (ii) a fraction, the
numerator of which is the OID accruing during the period and the denominator
of which is the total remaining OID at the beginning of the accrual period.
For Grantor Trust certificates issued without OID, the amount of market
discount that accrues during a period is equal to the product of (i) the total
remaining market discount and (ii) a fraction, the numerator of which is the
amount of stated interest paid during the accrual period and the denominator
of which is the total amount of stated interest remaining to be paid at the
beginning of the accrual period. For purposes of calculating market discount
under any of the above methods in the case of instruments (such as the Grantor
Trust certificates) that provide for payments that may be accelerated by
reason of prepayments of other obligations securing such instruments, the same
prepayment assumption applicable to calculating the accrual of OID will apply.
Because the regulations described above have not been issued, it is impossible
to predict what effect those regulations might have on the tax treatment of a
Grantor Trust Certificate purchased at a discount or premium in the secondary
market.
A holder who acquired a Grantor Trust Certificate at a market discount
also may be required to defer a portion of its interest deductions for the
taxable year attributable to any indebtedness incurred or continued to
purchase or carry such Grantor Trust Certificate purchased with market
discount. For these purposes, the de minimis rule referred above applies. Any
such deferred interest expense would not exceed the market discount that
accrues during such taxable year and is, in general, allowed as a deduction
not later than the year in which such market discount is includible in income.
If such holder elects to include market discount in income currently as it
accrues on all market discount instruments acquired by such holder in that
taxable year or thereafter, the interest deferral rule described above will
not apply.
Premium. The price paid for a Grantor Trust Certificate by a holder will
be allocated to such holder's undivided interest in each receivable based on
each receivable's relative fair market value, so that such holder's undivided
interest in each receivable will have its own tax basis. A Grantor Trust
Certificateholder that acquires an interest in receivables at a premium may
elect to amortize such premium under a constant interest method. Amortizable
bond premium will be treated as an offset to interest income on such Grantor
Trust Certificate. The basis for such Grantor Trust Certificate will be
reduced to the extent that amortizable premium is applied to offset interest
payments. It is not clear whether a reasonable prepayment assumption should be
used in computing amortization of premium allowable under Section 171. A
Grantor Trust Certificateholder that makes this election for a Grantor Trust
Certificate that is acquired at a premium will be deemed to have made an
election to amortize bond premium with respect to all debt instruments having
amortizable bond premium that such Grantor Trust Certificateholder acquires
during the year of the election or thereafter.
If a premium is not subject to amortization using a reasonable prepayment
assumption, the holder of a Grantor Trust Certificate acquired at a premium
should recognize a loss if a receivable prepays in full, equal to the
difference between the portion of the prepaid principal amount of such
receivable that is allocable to the Grantor Trust Certificate and the portion
of the adjusted basis of the Grantor Trust Certificate that is allocable to
such receivable. If a reasonable prepayment assumption is used to amortize
such premium, it appears that such a loss would be available, if at all, only
if prepayments have occurred at a rate faster than the reasonable assumed
prepayment rate. It is not clear whether any other adjustments would be
required to reflect differences between an assumed prepayment rate and the
actual rate of prepayments.
On December 30, 1997 the IRS issued final regulations (the "Amortizable
Bond Premium Regulations") dealing with amortizable bond premium. These
regulations specifically do not apply to prepayable debt instruments subject
to Code section 1272(a)(6). Absent further guidance from the IRS, the trustee
intends to account for amortizable bond premium in the manner described above.
It is recommended that prospective purchasers of the certificates consult
their tax advisors regarding the possible application of the Amortizable Bond
Premium Regulations.
Election to Treat All Interest as OID. The OID regulations permit a
Grantor Trust Certificateholder to elect to accrue all interest, discount
(including de minimis market or original issue discount) and premium in income
as interest, based on a constant yield method. If such an election were to be
made with respect to a Grantor Trust Certificate with market discount, the
Grantor Trust Certificateholder would be deemed to have made an election to
include in income currently market discount with respect to all other debt
instruments having market discount that such Grantor Trust Certificateholder
acquires during the year of the election or thereafter. Similarly, a Grantor
Trust Certificateholder that makes this election for a Grantor Trust
Certificate that is acquired at a premium will be deemed to have made an
election to amortize bond premium with respect to all debt instruments having
amortizable bond premium that such Grantor Trust Certificateholder owns or
acquires. See "-- Premium" above. The election to accrue interest, discount
and premium on a constant yield method with respect to a Grantor Trust
Certificate is irrevocable.
Sale or Exchange of a Grantor Trust Certificate. Sale or exchange of a
Grantor Trust Certificate prior to its maturity will result in gain or loss
equal to the difference, if any, between the amount received and the owner's
adjusted basis in the Grantor Trust Certificate. Such adjusted basis generally
will equal the seller's purchase price for the Grantor Trust Certificate,
increased by the OID included in the seller's gross income with respect to the
Grantor Trust Certificate, and reduced by principal payments on the Grantor
Trust Certificate previously received by the seller. Such gain or loss will be
capital gain or loss to an owner for which a Grantor Trust Certificate is a
"capital asset" within the meaning of Section 1221, and will be long-term or
short-term depending on whether the Grantor Trust Certificate has been owned
for the long-term capital gain holding period (currently more than twelve
months).
Grantor Trust Certificates will be "evidences of indebtedness" within the
meaning of Section 582(c) (1), so that gain or loss recognized from the sale
of a Grantor Trust Certificate by a bank or a thrift institution to which such
section applies will be treated as ordinary income or loss.
Non-U.S. Persons. Generally, to the extent that a Grantor Trust
Certificate evidences ownership in underlying receivables that were issued on
or before July 18, 1984, interest or OID paid by the person required to
withhold tax under Section 1441 or 1442 to (i) an owner that is not a U.S.
Person (as defined below) or (ii) a Grantor Trust Certificateholder holding on
behalf of an owner that is not a U.S. Person will be subject to federal income
tax, collected by withholding, at a rate of 30% or such lower rate as may be
provided for interest by an applicable tax treaty. Accrued OID recognized by
the owner on the sale or exchange of such a Grantor Trust Certificate also
will be subject to federal income tax at the same rate. Generally, such
payments would not be subject to withholding to the extent that a Grantor
Trust Certificate evidences ownership in receivables issued after July 18,
1984, by natural persons if such Grantor Trust Certificateholder complies with
certain identification requirements (including delivery of a statement, signed
by the Grantor Trust Certificateholder under penalties of perjury, certifying
that such Grantor Trust Certificateholder is not a U.S. Person and providing
the name and address of such Grantor Trust Certificateholder). Additional
restrictions apply to receivables of where the obligor is not a natural person
in order to qualify for the exemption from withholding.
As used herein, a "U.S. Person" means a citizen or resident of the United
States, a corporation or a partnership organized in or under the laws of the
United States, any state thereof or the District of Columbia, an estate, the
income of which from sources outside the United States is includible in gross
income for federal income tax purposes regardless of its connection with the
conduct of a trade or business within the United States, or a trust if a court
within the United States is able to exercise primary supervision of the
administration of the trust and one or more United States persons have the
authority to control all substantial decisions of the trust.
Information Reporting and Backup Withholding. The servicer will furnish
or make available, within a reasonable time after the end of each calendar
year, to each person who was a Grantor Trust Certificateholder at any time
during such year, such information as may be deemed necessary or desirable to
assist Grantor Trust Certificateholders in preparing their federal income tax
returns, or to enable holders to make such information available to beneficial
owners or financial intermediaries that hold Grantor Trust Certificates as
nominees on behalf of beneficial owners. If a holder, beneficial owner,
financial intermediary or other recipient of a payment on behalf of a
beneficial owner fails to supply a certified taxpayer identification number or
if the Secretary of the Treasury determines that such person has not reported
all interest and dividend income required to be shown on its federal income
tax return, 31% backup withholding may be required with respect to any
payments. Any amounts deducted and withheld from a distribution to a recipient
would be allowed as a credit against such recipient's federal income tax
liability.
New Withholding Regulations. Recently, the Treasury Department issued the
New Regulations which attempt to unify certification requirements and modify
reliance standards. The New Regulations will generally be effective for
payments made after December 31, 2000, subject to certain transition rules.
Prospective investors are urged to consult their own tax advisors regarding
the New Regulations.
FASIT PROVISIONS
The Small Business and Job Protection Act of 1996 added sections 860H
through 860L to the Code (the "FASIT provisions"), which provide for a new
type of entity for United States federal income tax purposes known as a
"financial asset securitization investment trust" (a "FASIT"). Federal Tax
Counsel will deliver its opinion that a trust for which a FASIT election is
made will be treated as a FASIT for federal income tax purposes assuming
compliance with the terms of the trust agreement (including the making of a
timely FASIT election) and related documents. The FASIT provisions of the Code
became effective on September 1, 1997. On February 4, 2000, the IRS and
Treasury issued proposed Treasury regulations on FASITs. The regulations
generally would not be effective until final regulations are filed with the
federal register. However, it appears that certain anti-abuse rules would
apply as of February 4, 2000. Accordingly, definitive guidance cannot be
provided with respect to many aspects of the tax treatment of the trust or the
holders of FASIT regular interests (such holders, "FASIT Regular
Noteholders"). Moreover, the qualification as a FASIT of any trust for which a
FASIT election is made (a "FASIT Trust") depends on the trust's ability to
satisfy the requirements of the FASIT provisions on an ongoing basis,
including, without limitation, the requirements of any final Treasury
regulations that may be promulgated in the future under the FASIT provisions
or as a result of any change in applicable law. Thus, no assurances can be
made regarding the continuing qualification as a FASIT of any FASIT Trust for
which a FASIT election is made at any particular time after the issuance of
securities by the FASIT Trust. In general, the FASIT legislation will enable a
trust to be treated as a pass through entity not subject to United States
federal entity-level income tax (except with respect to certain prohibited
transactions) and to issue securities that would be treated as debt for United
States federal income tax purposes. While the FASIT provisions of the Code
permit the addition of assets to a FASIT Trust during the life of the FASIT
Trust, no assets other than Subsequent Receivables will be added to the trust
after the initial issuance of the trust's securities and such Subsequent
Receivables will be added only during the Funding Period, if any. A receivable
may be removed from the trust solely for a breach of a representation or
warranty relating to such receivable as set forth in the related sale and
servicing agreement.
Qualification as a FASIT. A trust will qualify under the Code as a FASIT
in which FASIT Regular Notes will constitute the "regular interests" and the
certificate issued by the trust (the "FASIT Ownership Security") will
constitute the "ownership interest", respectively, if (i) a FASIT election is
in effect, (ii) certain tests concerning (A) the composition of the FASIT's
assets and (B) the nature of the noteholders' interests in the FASIT are met
on a continuing basis, and (iii) the trust is not a regulated investment
company as defined in section 851(a) of the Code.
Asset Composition. In order for the trust to be eligible for FASIT
status, substantially all of the assets of the trust must consist of
"permitted assets" as of the close of the third month beginning after the
closing date and at all times thereafter (the "FASIT Qualification Test").
Permitted assets include (i) cash or cash equivalents, (ii) debt instruments
with fixed terms that would qualify as regular interests if issued by a Real
Estate Mortgage Investment Conduit as defined in section 860D of the Code
("REMIC") (generally, instruments that provide for interest at a fixed rate, a
qualifying variable rate, or a qualifying interest-only ("IO") type rate),
(iii) foreclosure property, (iv) certain hedging instruments (generally,
interest and currency rate swaps and credit enhancement contracts) that are
reasonably required to guarantee or hedge against the FASIT's risks associated
with being the obligor on FASIT interests, (v) contract rights to acquire
qualifying debt instruments or qualifying hedging instruments, (vi) FASIT
regular interests, and (vii) REMIC regular interests. Permitted assets do not
include any debt instruments issued by the holder of the FASIT's ownership
interest or by any person related to such holder.
Interests in a FASIT. In addition to the foregoing asset qualification
requirements, the interests in a FASIT also must meet certain requirements.
All of the interests in a FASIT must belong to either of the following: (i)
one or more classes of regular interests or (ii) a single class of ownership
interest that is held by a fully taxable domestic C Corporation.
A FASIT interest generally qualifies as a FASIT regular interest if (i)
it is designated as a regular interest, (ii) it has a stated maturity no
greater than thirty years, (iii) it entitles its holder to a specified
principal amount, (iv) the issue price of the interest does not exceed 125% of
its stated principal amount, (v) the yield to maturity of the interest is less
than the applicable Treasury rate published by the IRS plus 5%, and (vi) if it
pays interest, such interest is payable at either (a) a fixed rate with
respect to the principal amount of the regular interest or (b) a permissible
variable rate with respect to such principal amount.
If an interest in a FASIT fails to meet one or more of the requirements
set out in clauses (iii), (iv), or (v) in the immediately preceding paragraph,
but otherwise meets all requirements to be treated as a FASIT, it may still
qualify as a type of regular interest known as a "High-Yield Interest." In
addition, if an interest in a FASIT fails to meet the requirement of clause
(vi), but the interest payable on the interest consists of a specified portion
of the interest payments on permitted assets and that portion does not vary
over the life of the security, the interest will also qualify as a High-Yield
Interest. A High-Yield Interest may be held only by domestic C corporations
that are fully subject to corporate income tax ("Eligible Corporations"),
other FASITs, and dealers in securities who acquire such interests as
inventory, rather than for investment. In addition, holders of High-Yield
Interests are subject to limitations on offset of income derived from such
interest. In addition, the FASIT provisions contain an anti-abuse rule that
imposes corporate income tax on income derived from a FASIT Regular Note that
is held by a pass-through entity (other than another FASIT) that issues debt
or equity securities backed by the FASIT Regular Note and that have the same
features as High-Yield Interests.
Anti-Abuse Rule. Under proposed Treasury regulations, the Commissioner of
Internal Revenue (the "Commissioner") may make appropriate adjustments with
regard to the FASIT and any arrangement or transaction involving the FASIT if
a principal purpose of forming or using the FASIT is to achieve results
inconsistent with the intent of the FASIT provisions and the FASIT
regulations. This determination would be based on all of the facts and
circumstances, including a comparison of the purported business purpose for a
transaction and the claimed tax benefits resulting from the transaction.
Consequences of the Failure of the Issuer to Qualify as a FASIT. If a
FASIT Trust fails to comply with one or more of the Code's ongoing
requirements for FASIT status during any taxable year, the proposed Treasury
regulations provide that its FASIT status would be lost for that year and the
Issuer will be unable to elect FASIT status in future years without the
approval of the Commissioner. If FASIT status is lost, under proposed Treasury
regulations the entity classification of the former FASIT (the "New
Arrangement") is determined under general federal income tax principles. The
holder of the FASIT Ownership Security is treated as exchanging the New
Arrangement's assets for an amount equal to their value and gain recognized is
treated as gain from a prohibited transaction that is subject to the 100
percent tax, without exception. Loss, if any, is disallowed. In addition, the
holder of the FASIT Ownership Security must recognize cancellation of
indebtedness income, on a regular interest by regular interest basis, in an
amount equal to the adjusted issue price of each regular interest outstanding
immediately before the cessation of FASIT status over its fair market value.
If the holder of the FASIT Ownership Security has a continuing economic
interest in the New Arrangement, the characterization of this interest is
determined under general federal income tax principles. Holders of regular
interests are treated as exchanging their regular interest for interest in the
New Arrangement, the classification of which is determined under general
federal income tax principles. Gain is recognized to the extent the new
interest either does not qualify as debt or differs from the regular interest
either in kind or extent. The basis of the interest in the New Arrangement
equals the basis in the regular interest increased by any gain recognized on
the exchange.
Tax Treatment of FASIT Regular Notes. Payments received by Holders of
FASIT Regular Notes generally should be accorded the same tax treatment under
the Code as payments received on other taxable corporate debt instruments.
Holders of FASIT Regular Notes must report income from such Notes under an
accrual method of accounting, even if they otherwise would have used the cash
receipts and disbursements method. Except in the case of FASIT Regular Notes
issued with original issue discount or acquired with market discount or
premium, interest paid or accrued on a FASIT Regular Note generally will be
treated as ordinary income to the Holder and a principal payment on such Note
will be treated as a return of capital to the extent that the Holder's basis
is allocable to that payment. FASIT Regular Notes issued with original issue
discount or acquired with market discount or premium generally will treat
interest and principal payments on such securities in the same manner
described for notes. See "Certain Federal Income Tax Consequences--Trusts for
which a Partnership Election is Made--Tax Consequences to Holders of the
Notes," above.
Under proposed Treasury regulations, if a non-U.S. person holds (either
directly or through a vehicle which itself is not subject to U.S. federal
income tax such as a partnership or a trust) a FASIT Regular Note and a
"conduit debtor" pays or accrues interest on a debt instrument held by such
FASIT, any interest received or accrued by the non-U.S. FASIT Regular Note
holder is treated as received or accrued from the conduit debtor. The proposed
Treasury regulations state that a debtor is a conduit debtor if the debtor is
a U.S. person or the United States branch of a non-U.S. person and the
non-U.S. regular interest holder is (1) a "10 percent shareholder" of the
debtor, (2) a "controlled foreign corporation" and the debtor is a related
person with respect to the controlled foreign corporation or (3) related to
the debtor. As set forth above, the proposed Treasury regulations would not be
effective until final regulations are filed with the federal register.
If a FASIT Regular Note is sold or exchanged, the holder thereof
generally will recognize gain or loss upon the sale in the manner described
above for notes. See "Certain Federal Income Tax Consequences--Trusts for
which a Partnership Election is Made--Tax Consequences to Holders of the
Notes--Sale or Other Disposition." In addition, if a FASIT Regular Note
becomes wholly or partially worthless as a result of default and delinquencies
of the underlying assets, the holder of such note should be allowed to deduct
the loss sustained (or alternatively be able to report a lesser amount of
income).
Tax Treatment of FASIT Ownership Securities. A FASIT Ownership Security
represents the residual equity interest in a FASIT. As such, the holder of a
FASIT Ownership Security determines its taxable income by taking into account
all assets, liabilities and items of income, gain, deduction, loss and credit
of a FASIT. In general, the character of the income to the holder of a FASIT
Ownership Security will be the same as the character of such income of the
FASIT, except that any tax-exempt interest income taken into account by the
holder of a FASIT Ownership Security is treated as ordinary income. In
determining that taxable income, the holder of a FASIT Ownership Security must
determine the amount of interest, original issue discount, market discount and
premium recognized with respect to the FASIT's assets and the FASIT Regular
Notes issued by the FASIT according to a constant yield methodology and under
an accrual method of accounting. In addition, holders of FASIT Ownership
Securities are subject to the same limitations on their ability to use losses
to offset income from their FASIT Security as are the holders of High-Yield
Interests. See "Certain Federal Income Tax Consequences--FASIT
Provisions--Interests in a FASIT."
Losses on dispositions of a FASIT Ownership Security generally will be
disallowed where, within six months before or after the disposition, the
seller of such security acquires any other FASIT Ownership Security. In
addition, if any security that is sold or contributed to a FASIT by the holder
of the related FASIT Ownership Security was required to be marked-to-market
under Code section 475 by such holder, then section 475 will continue to apply
to such securities, except that the amount realized under the mark-to-market
rules will be a greater of the securities' value under present law or the
securities' value after applying special valuation rules contained in the
FASIT provisions. Those special valuation rules generally require that the
value of debt instruments that are not traded on an established securities
market be determined by calculating the present value of the reasonably
expected payments under the instrument using a discount rate of 120% of the
applicable federal rate, compounded semiannually.
The Holder of a FASIT Ownership Security will be subject to a tax equal
to 100% of the net income derived by the FASIT from any "prohibited
transactions." Prohibited transactions include (i) the receipt of income
derived from assets that are not permitted assets, (ii) certain dispositions
of permitted assets, (iii) the receipt of any income derived from any loan
originated by a FASIT and (iv) in certain cases, the receipt of income
representing a servicing fee or other compensation. Any offering for which a
FASIT election is made generally will be structured to avoid application of
the prohibited transaction tax.
Backup Withholding, Reporting and Tax Administration. Holders of FASIT
Notes and Ownership Securities will be subject to backup withholding to the
same extent holders of notes would be subject. See "Certain Federal Income Tax
Consequences--Trusts for which a Partnership Election is Made--Foreign
Holders" and "--Backup Withholding." For purposes of reporting and tax
administration, holders of record of FASIT Notes and Ownership Securities
generally will be treated in the same manner as holders of notes.
CERTAIN STATE TAX CONSEQUENCES
The activities of servicing and collecting the receivables will be
undertaken by the servicer. Because of the variation in each state's tax laws
based in whole or in part upon income, it is impossible to predict tax
consequences to holders of notes and certificates in all of the state taxing
jurisdictions in which they are already subject to tax. Noteholders and
certificateholders are urged to consult their own tax advisors with respect to
state tax consequences arising out of the purchase, ownership and disposition
of notes and certificates.
* * *
The federal and state tax discussions set forth above are included for
general information only and may not be applicable depending upon a
noteholder's or certificateholder's particular tax situation. Prospective
purchasers should consult their tax advisors with respect to the tax
consequences to them of the purchase, ownership and disposition of notes and
certificates, including the tax consequences under state, local, foreign and
other tax laws and the possible effects of changes in federal or other tax
laws.
ERISA CONSIDERATIONS
Section 406 of ERISA and Section 4975 of the Code prohibit a pension,
profit sharing or other employee benefit or other plan (such as an individual
retirement account and certain types of Keogh Plans) that is subject to Title
I of ERISA or to Section 4975 of the Code from engaging in certain
transactions involving "plan assets" with persons that are "parties in
interest" under ERISA or "disqualified person" under the Code with respect to
the plan. Certain governmental plans, although not subject to ERISA or the
Code, are subject to federal, state or local laws ("Similar Law") that impose
similar requirements (such plans subject to ERISA, Section 4975, or Similar
Law referred to herein as "Plans"). A violation of these "prohibited
transaction" rules may generate excise tax and other liabilities under ERISA
and the Code or under Similar Law for such persons.
Depending on the relevant facts and circumstances, certain prohibited
transaction exemptions may apply to the purchase or holding of the securities
-- for example:
o Prohibited Transaction Class Exemption ("PTE") 96-23, which
exempts certain transactions effected on behalf of a Plan by an
"in-house asset manager";
o PTE 95-60, which exempts certain transactions between insurance
company general accounts and parties in interest;
o PTE 91-38, which exempts certain transactions between bank
collective investment funds and parties in interest;
o PTE 90-1, which exempts certain transactions between insurance
company pooled separate accounts and parties in interest; or
o PTE 84-14, which exempts certain transactions effected on
behalf of a Plan by a "qualified professional asset manager."
There can be no assurance that any of these exemptions will apply with respect
to any Plan's investment in the securities, or that such an exemption, if it
did apply, would apply to all prohibited transactions that may occur in
connection with such investment. Furthermore, these exemptions would not apply
to transactions involved in operation of a Trust if, as described below, the
assets of the trust were considered to include Plan assets.
ERISA also imposes certain duties on persons who are fiduciaries of Plans
subject to ERISA, including the requirements of investment prudence and
diversification, and the requirement that such a Plan's investments be made in
accordance with the documents governing the Plan. Under ERISA, any person who
exercises any authority or control respecting the management or disposition of
the assets of a Plan is considered to be a fiduciary of such Plan. Plan
fiduciaries must determine whether the acquisition and holding of securities
and the operations of the trust would result in prohibited transactions if
Plans that purchase the securities were deemed to own an interest in the
underlying assets of the trust under the rules discussed below. There may also
be an improper delegation of the responsibility to manage Plan assets if Plans
that purchase the securities are deemed to own an interest in the underlying
assets of the trust.
Pursuant to Department of Labor Regulation Section 2510.3-101 (the "Plan
Assets Regulation"), in general when a Plan acquires an equity interest in an
entity such as the trust and such interest does not represent a "publicly
offered security" or a security issued by an investment company registered
under the Investment Company Act of 1940, as amended, the Plan's assets
include both the equity interest and an undivided interest in each of the
underlying assets of the entity, unless it is established either that the
entity is an "operating company" or that equity participation in the entity by
"benefit plan investors" is not "significant." In general, an "equity
interest" is defined under the Plan Assets Regulation as any interest in an
entity other than an instrument which is treated as indebtedness under
applicable local law and which has no substantial equity features. The
treatment in this context of notes and certificates of a trust will be
discussed in the related prospectus supplement. However, it is anticipated
that the certificates will be considered equity interests in the trust for
purposes of the Plan Assets Regulation, and that the assets of the trust may
therefore constitute plan assets if certificates are acquired by Plans. In
such event, the fiduciary and prohibited transaction restrictions of ERISA and
section 4975 of the Code would apply to transactions involving the assets of
the trust.
As a result, except in the case of unsubordinated certificates with
respect to which the Exemption is available (as described below), certificates
generally shall not be transferred to a Plan or a person using Plan assets to
acquire the certificates. Each transferee of certificates to which the
Exemption is not applicable will be deemed to represent that the proposed
transferee is not a Plan and is not acquiring the certificates on behalf of or
with the assets of a Plan (including assets that may be held in an insurance
company's separate or general accounts where assets in such accounts may be
deemed "plan assets" for purposes of ERISA.
Unless otherwise specified in the related prospectus supplement, the
notes may be purchased by a Plan. A fiduciary of a Plan must determine that
the purchase of a note is consistent with its fiduciary duties under ERISA and
does not result in a nonexempt prohibited transaction as defined in Section
406 of ERISA or Section 4975 of the Code. However, the notes may not be
purchased with the assets of a Plan if the seller, an underwriter, the
indenture trustee, the trustee or any of their affiliates
o has investment or administrative discretion with respect to that
Plan assets;
o has authority or responsibility to give, or regularly
gives, investment advice with respect to that Plan assets for a
fee and pursuant to an agreement or understanding that such
advice
-- will serve as a primary basis for investment decisions with
respect to that Plan assets and
-- will be based on the particular investment needs for that Plan;
or
o is an employer maintaining or contributing to that Plan.
Employee benefit plans that are governmental plans (as defined in Section
3(32) of ERISA) and certain church plans (as defined in Section 3(33) of
ERISA) are not subject to ERISA requirements. However, any such governmental
or church plan which is qualified under section 401 (a) of the Code and exempt
from taxation under Section 501 (a) of the Code is subject to the prohibited
transaction rules in Section 503 of the Code.
A fiduciary of a Plan considering the purchase of securities of a given
series should consult its tax and/or legal advisors regarding whether the
assets of the related trust would be considered plan assets, the possibility
of exemptive relief from the prohibited transaction rules and other issues and
their potential consequences.
Senior Certificates Issued by Trusts
Unless otherwise specified in the related prospectus supplement, the
following discussion applies only to nonsubordinated certificates (referred to
herein as "Senior Certificates") issued by a Trust.
The U.S. Department of Labor (the "DOL") has granted to the lead
underwriter named in the prospectus supplement an exemption (the "Exemption")
from certain of the prohibited transaction rules of ERISA with respect to the
initial purchase, the holding and the subsequent resale by Plans of
certificates representing interests in asset-backed pass-through trusts that
consist of certain receivables, loans and other obligations that meet the
conditions and requirements of the Exemption. The receivables covered by the
Exemption include motor vehicle installment loans such as the receivables. The
Exemption will apply to the acquisition, holding and resale of the Senior
Certificates by a Plan, provided that certain conditions (certain of which are
described below) are met.
Among the conditions which must be satisfied for the Exemption to apply
to the Senior Certificates are the following:
(1) The acquisition of the Senior Certificates by a Plan is on terms
(including the price for the Senior 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 Senior Certificates
acquired by the Plan are not subordinated to the rights and interests
evidenced by other certificates of the trust;
(3) The Senior 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 from either Standard & Poor's Corporation, Moody's Investors
Service, Inc., Duff & Phelps Inc. or Fitch IBCA, Inc.;
(4) The trustee is not an affiliate of any other member of the Restricted
Group (as defined below);
(5) The sum of all payments made to the underwriters in connection with
the distribution of the Senior Certificates represents not more than
reasonable compensation for underwriting the Senior 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; and 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 applicable agreement and reimbursement of the servicer's
reasonable expenses in connection therewith; and
(6) The Plan investing in the Senior Certificates is an "accredited
investor" as defined in Rule 501 (a) (1) of Regulation D of the Securities and
Exchange Commission under the Securities Act of 1933.
On July 21, 1997, the DOL published in the Federal Register an amendment
to the Exemption, which extends exemptive relief to certain mortgage-backed
and asset-backed securities transactions using pre-funding accounts for trusts
issuing pass-through certificates. The amendment generally allows mortgage
loans or other secured receivables (the "Obligations") supporting payments to
certificateholders, and having a value equal to no more than twenty-five
percent (25%) of the total principal amount of the certificates being offered
by the trust, to be transferred to the trust within a 90-day or three-month
period following the closing date (the "Pre-Funding Period"), instead of
requiring that all such Obligations be either identified or transferred on or
before the closing date. The relief is available when the following conditions
are met:
(1) The ratio of the amount allocated to the pre-funding account to the
total principal amount of the certificates being offered (the "Pre-Funding
Limit") must not exceed twenty-five percent (25%).
(2) All Obligations transferred after the closing date (the "Additional
Obligations") must meet the same terms and conditions for eligibility as the
original Obligations used to create the trust, which terms and conditions have
been approved by a rating agency.
(3) The transfer of such Additional Obligations to the trust during the
Pre-Funding Period must not result in the certificates to be covered by the
Exemption receiving a lower credit rating from a rating agency upon
termination of the Pre-Funding Period than the rating that was obtained at the
time of the initial issuance of the certificates by the trust.
(4) Solely as a result of the use of pre-funding, the weighted average
annual percentage interest rate for all of the Obligations in the trust at the
end of the Pre-Funding Period must not be more than 100 basis points lower
than the average interest rate for the Obligations transferred to the trust on
the closing date.
(5) In order to insure that the characteristics of the Additional
Obligations are substantially similar to the original Obligations which were
transferred to the trust:
(i) the characteristics of the Additional Obligations must be
monitored by an insurer or other credit support provider that is
independent of the depositor; or
(ii) an independent accountant retained by the depositor must
provide the depositor with a letter (with copies provided to each rating
agency rating the certificates, the related underwriter and the related
trustee) stating whether or not the characteristics of the Additional
Obligations conform to the characteristics described in the related
prospectus or prospectus supplement and/or pooling and servicing
agreement. In preparing such letter, the independent accountant must use
the same type of procedures as were applicable to the Obligations
transferred to the trust as of the closing date.
(6) The Pre-Funding Period must end no later than three months or 90 days
after the closing date or earlier in certain circumstances if the pre-funding
account falls below the minimum level specified in the pooling and servicing
agreement or an event of default occurs.
(7) Amounts transferred to any pre-funding account and/or capitalized
interest account used in connection with the pre-funding may be invested only
in certain permitted investments.
(8) The related prospectus or prospectus supplement must describe:
(i) any pre-funding account and/or capitalized interest account
used in connection with a pre-funding account;
(ii) the duration of the Pre-Funding Period;
(iii) the percentage and/or dollar amount of the Pre-Funding Limit
for the trust; and
(iv) that the amounts remaining in the pre-funding account
at the end of the Pre-Funding Period will be remitted to
certificateholders as repayments of principal.
(9) The related pooling and servicing agreement must describe the
permitted investments for the pre-funding account and/or capitalized interest
account and, if not disclosed in the related prospectus supplement, the terms
and conditions for eligibility of Additional Obligations.
The Exemption would also provide relief from certain
self-dealing/conflict of interest or prohibited transactions that may occur
when the Plan fiduciary causes a Plan to acquire certificates in a trust when
the fiduciary (or its affiliate) is an obligor on receivables held in the
trust only if, among other requirements,
(i) in the case of the acquisition of Senior Certificates in
connection with the initial issuance, at least fifty (50)
percent of the Senior Certificates are acquired by persons
independent of the Restricted Group (as defined below),
(ii) such fiduciary (or its affiliate) is an obligor with
respect to five percent (5%) or less of the fair market
value of the obligations contained in the trust,
(iii) the Plan's investment in Senior Certificates does not
exceed twenty-five (25) percent of all of the Senior
Certificates outstanding at the time of the acquisition,
and
(iv) immediately after the acquisition, no more than twenty-five
(25) percent of the assets of any Plan with respect to
which the fiduciary has discretionary authority or renders
investment advice are invested in certificates representing
an interest in one or more trusts containing assets sold or
serviced by the same entity. The Exemption does not apply
to Plans sponsored by the seller, any underwriter, the
trustee, the servicer, any obligor with respect to
receivables included in the trust constituting more than
five percent of the aggregate unamortized principal balance
of the assets in the trust, or any affiliate of such
parties (the "Restricted Group").
Any Plan fiduciary which proposes to cause a Plan to purchase securities
should consult with counsel concerning the impact of ERISA and the Code, the
applicability of the Exemption (as amended) and the potential consequences in
their specific circumstances, prior to making such investment. Moreover, each
Plan fiduciary should determine whether, under the general fiduciary standards
of investment prudence and diversification, an investment in the securities is
appropriate for the Plan, taking into account the overall investment policy of
the Plan and the composition of the Plan's investment portfolio.
Special Considerations Applicable to Insurance Company General Accounts
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 tax code. Under Section 401 (c),
the Department of Labor is required to issue 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 tax 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 tax 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 plan assets of any Plan invested
in a separate account. Plan investors considering the purchase of securities
on behalf of an insurance company general account should consult their legal
advisors regarding the effect of the general account regulations on such
purchase.
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 general account
regulations should not, however, adversely affect the applicability of PTCE
95-60.
PLAN OF DISTRIBUTION
The seller will agree to sell, or cause the related trust to sell, to the
underwriters named in the related prospectus supplement the notes and/or
certificates of the trust specified in an underwriting agreement. Each of the
underwriters will severally agree to purchase the principal amount of each
class of notes and/or certificates of the related trust set forth in the
related prospectus supplement and the underwriting agreement.
Each prospectus supplement will either --
o set forth the price at which each class of notes and/or
certificates, as the case may be, being offered thereby will be
offered to the public and any concessions that may be offered to
certain dealers participating in the offering of such notes and/or
certificates; or
o specify that the related notes and/or certificates, as the
case may be, are to be resold by the underwriters in negotiated
transactions at varying prices to be determined at the time of such
sale.
After the initial public offering of any such notes and/or certificates,
such public offering prices and such concessions may be changed.
The seller will indemnify the underwriters of securities against certain
civil liabilities, including liabilities under the Securities Act, or
contribute to payments the several underwriters may be required to make in
respect thereof.
Each trust may, from time to time, invest the funds in its trust accounts
in investments acquired from such underwriters or from the seller.
Under each underwriting agreement with respect to a given trust, the
closing of the sale of any class of securities subject to such underwriting
agreement will be conditioned on the closing of the sale of all other such
classes of securities of that trust (some of which may not be registered or
may not be publicly offered).
The place and time of delivery for the securities in respect of which
this prospectus is delivered will be set forth in the related prospectus
supplement.
LEGAL OPINIONS
Certain legal matters relating to the securities of any trust will be
passed upon for the trust, the seller and the servicer by Brown & Wood, llp,
New York, New York. Certain other legal matters will be passed upon for the
seller by Michael J. Broker, Esq., Vice-President and Banking Counsel for the
Bank.
GLOSSARY OF TERMS FOR THE PROSPECTUS
Set forth below is a list of the defined terms used in this prospectus,
which are also used in the prospectus supplement.
"Additional Obligations" means, with respect to the Exemption, all
Obligations transferred to a trust after its closing date.
"Advances" means, with respect to a delinquent receivable and a payment
date, the excess of (a) the product of the principal balance of that
receivable as of the first day of the related Collection Period and
one-twelfth of its contract rate of interest, over (b) the interest actually
received by the servicer with respect to that receivable from the obligor or
from the payment of the Purchase Amount during or with respect to such
Collection Period.
"administrator" means the Bank, in its capacity as administrator of the
trust under an administration agreement.
"Amortizable Bond Premium Regulations" means the final regulations issued
on December 30, 1997 by the IRS dealing with amortizable bond premium.
"Bank" means USAA Federal Savings Bank and its successors.
"Benefit Plan Investor" means any:
o "employee benefit plans" (as defined in Section 3(3) of
ERISA, including without limitation governmental plans, foreign
pension plans and church plans;
o "plans" described in Section 4975(e) (1) of the Code,
including individual retirement accounts and Keogh plans; or
o entities whose underlying assets include plan assets by
reason of a plan's investment in such entity, including without
limitation, as applicable, an insurance company general account.
"Book-Entry Securities" means the notes and certificates that are held in
the U.S. through DTC and in Europe through Clearstream or Euroclear.
"certificate balance" means with respect to each class of certificates
and as the context so requires, (i) with respect to all certificates of such
class, an amount equal to, initially, the initial certificate balance of such
class of certificates and, thereafter, an amount equal to the initial
certificate balance of such class of certificates, reduced by all amounts
distributed to certificateholders of such class of certificates and allocable
to principal or (ii) with respect to any certificate of such class, an amount
equal to, initially, the initial denomination of such certificate and,
thereafter, an amount equal to such initial denomination, reduced by all
amounts distributed in respect of such certificate and allocable to principal.
"Clearstream" means Clearstream Banking, societe anonyme, a professional
depository under the laws of Luxembourg.
"closing date" means that date specified as such in the prospectus
supplement on which the trust issues its securities.
"Code" means the Internal Revenue Code of 1986, as amended.
"Collection Period" means with respect to securities of each trust, the
period specified in the related prospectus supplement with respect to
calculating payments and proceeds of the related receivables.
"Controlling Class" means, with respect to any trust, the Class A Notes
described in the prospectus supplement as long as any Class A Notes are
outstanding, and thereafter, in order of seniority, each other class of notes,
if any, described in the prospectus supplement as long as they are
outstanding.
"cut-off date" means the date specified as such in the applicable
prospectus supplement.
"daily portion" is computed as specified under "Certain Federal Income
Tax Consequences--Trusts Treated as a Grantor Trust--Stripped Bonds and
Stripped Coupons--Original Issue Discount."
"defaulted receivable" means a receivable (i) that the servicer
determines is unlikely to be paid in full or (ii) with respect to which at
least 5% of a scheduled payment is 120 or more days delinquent as of the end
of a calendar month.
"Definitive Certificates" means with respect to any class of certificates
issued in book-entry form, such certificates issued in fully registered,
certificated form to certificateholders or their respective nominees, rather
than to DTC or its nominee.
"Definitive Notes" means with respect to any class of notes issued in
book-entry form, such notes issued in fully registered, certificated form to
noteholders or their respective nominees, rather than to DTC or its nominee.
"Definitive Securities" means collectively, the Definitive Notes and the
Definitive Certificates.
"DOL" means the United States Department of Labor.
"DTC" means The Depository Trust Company and any successor depository
selected by the trust.
"Eligible Corporation" means, with respect to FASITs, a domestic C
corporation that is fully subject to corporate income tax.
"Eligible Deposit Account" means either--
o a segregated account with an Eligible Institution; or
o a segregated trust account with the corporate trust
department of a depository institution organized under the laws of
the U.S. or any one of the states thereof or the District of
Columbia (or any domestic branch of a foreign bank), having
corporate trust powers and acting as trustee for funds deposited in
such account, so long as any of the securities of such depository
institution have a credit rating from each Rating Agency in one of
its generic rating categories which signifies investment grade.
"Eligible Institution" means--
o the corporate trust department of the indenture trustee or
the related trustee, as applicable; or
o a depository institution organized under the laws of the U.S.
or any one of the states thereof or the District of Columbia (or any
domestic branch of a foreign bank), (1) which has either (A) a
long-term unsecured debt rating acceptable to the Rating Agencies or
(B) a short-term unsecured debt rating or certificate of deposit
rating acceptable to the Rating Agencies and (2) whose deposits are
insured by the FDIC.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Euroclear" means a professional depository operated by the Brussels,
Belgium office of Morgan Guaranty Trust Company of New York under contract
with Euroclear Clearance System, S.C., a Belgian cooperative corporation.
"Events of Default" under the related indenture will consist of the
events specified under "Description of the Notes -- The Indenture" in this
prospectus.
"Events of Servicing Termination" under each sale and servicing agreement
or pooling and servicing agreement will consist of the events specified under
"Description of the Transfer and Servicing Agreements -- Events of Servicing
Termination" in this prospectus.
"Exemption" means the exemption granted to the lead underwriter named in
the prospectus supplement by the DOL and described under "ERISA
Considerations'"
"FASIT" means a financial asset securitization investment trust.
"FASIT provisions" means sections 860H through 860L of the Code.
"FASIT Qualification Test" is the requirement for FASIT status
eligibility that substantially all of the assets of the trust must consist of
"permitted assets" as of the close of the third month beginning after the
closing date and at all times thereafter.
"FASIT Regular Noteholders" means holders of FASIT regular interests.
"Federal Tax Counsel" means the special federal tax counsel to each trust
specified in the related prospectus supplement.
"Foreign Person" means a nonresident alien, foreign corporation or other
non-U.S. person.
"Funding Period" the period specified in the related prospectus
supplement during which the seller will sell any Subsequent Receivables to the
trust, which period may be as frequently as daily.
"Grantor Trust Certificateholders" means owners of certificates issued by
a trust that is treated as a grantor trust.
"Grantor Trust Certificates" means certificates issued by a trust that is
treated as a grantor trust.
"indenture" means the indenture by and between the Trust, as issuer of
the notes, and the indenture trustee, identified in the prospectus supplement.
"IO" means interest-only.
"IRS" means the Internal Revenue Service.
"Motor Vehicle Loans" means motor vehicle installment loans secured by
new and used automobiles and light-duty trucks.
"New Regulations" means the regulations recently issued by the Treasury
Department which make certain modifications to withholding, backup withholding
and information reporting rules.
"Obligations" means, with respect to the Exemption, mortgage loans or
other secured receivables.
"OID" means original issue discount.
"OID regulations" means those Treasury regulations relating to OID.
"payment date" means the date specified in each related prospectus
supplement for the payment of principal of and interest on the securities.
"Permitted Investments" means:
o direct obligations of, and obligations fully guaranteed as to
timely payment by, the United States of America or its agencies;
o demand deposits, time deposits, certificates of deposit or
bankers' acceptances of certain depository institutions or trust
companies having the highest rating from the applicable Rating
Agency rating the notes or certificates;
o commercial paper having, at the time of such investment, a
rating in the highest rating category from the applicable Rating
Agency rating the notes or certificates;
o investments in money market funds having the highest rating
from the applicable Rating Agency rating the notes or certificates;
o repurchase obligations with respect to any security that is a
direct obligation of, or fully guaranteed by, the United States of
America or its agencies, in either case entered into with a
depository institution or trust company having the highest rating
from the applicable Rating Agency rating the notes or certificates;
and
o any other investment acceptable to the applicable Rating
Agencies.
Permitted Investments are generally limited to obligations
or securities which mature on or before the next payment date.
"Plan Assets Regulation" means a regulation, 29 C.F.R. Section
2510.3-101, issued by the DOL.
"pooling and servicing agreement" means the pooling and servicing
agreement between the trustee and the Bank, as seller and servicer, and the
trustee identified in the prospectus supplement.
"Pre-Funding Limit" means, with respect to the Exemption, the ratio of
the amount allocated to the pre-funding account to the total principal amount
of the certificates being offered.
"Pre-Funding Period" means, with respect to the Exemption, a 90-day or
three-month period following the closing date during which, subject to certain
conditions, Additional Obligations may be transferred to the trust.
"PTCE" means a Prohibited Transaction Class Exemption under ERISA.
"Purchase Amount" means a price at which the seller or the servicer must
purchase a receivable from a trust, equal to the unpaid principal balance of
the receivable plus accrued and unpaid interest thereon to the date of
purchase at the weighted average interest rate borne by the trust's
securities.
"Rating Agency" means a nationally recognized rating agency providing, at
the request of the seller, a rating on the securities issued by the applicable
trust.
"Receivables Transfer and Servicing Agreements" means, collectively, (i)
each sale and servicing agreement under which the trust will purchase
receivables from the seller and the servicer will agree to service such
receivables, each trust agreement under which the trust will be created and
certificates will be issued and each administration agreement under which the
Bank will undertake certain administrative duties or, (ii) in the case of a
trust that is a grantor trust, the pooling and servicing agreement.
"Record Date" means the business day immediately preceding the payment
date or, if definitive securities are issued, the last day of the preceding
calendar month.
"REMIC" means a Real Estate Mortgage Investment Conduit as defined in
section 860D of the Code.
"Restricted Group" means, with respect to the Exemption, Plans sponsored
by the seller, any underwriter, the trustee, the servicer, any obligor with
respect to receivables included in the trust constituting more than five
percent of the aggregate unamortized principal balance of the assets in the
trust, or any affiliate of such parties.
"sale and servicing agreement" means the sale and servicing agreement by
and between the Bank, as seller and servicer, and the trust, as purchaser,
identified in the related prospectus supplement.
"SEC" means the Securities and Exchange Commission.
"Section 1286 Treasury Regulations" means recently issued Treasury
regulations under which, if the discount on a stripped bond is larger than a
de minimis amount (as calculated for purposes of the OID rules of the Code),
such stripped bond will be considered to have been issued with OID.
"seller" means the Bank as seller of receivables to a trust.
"Senior Certificates" means the nonsubordinated certificates issued by a
trust.
"servicer" means the Bank acting in its capacity as servicer of the
receivables under the applicable sale and servicing agreement or pooling and
servicing agreement.
"Similar Law" means federal, state or local laws that impose requirements
similar to ERISA or the Code.
"Short-Term Note" means a note that has a fixed maturity date of not more
than one year from the issue date of such note.
"Subsequent Receivables" means additional receivables sold by the seller
to the applicable trust during a Funding Period after the closing date.
"Subsequent Transfer Date" means each date specified as a transfer date
in the related prospectus supplement on which Subsequent Receivables will be
sold by the seller to the applicable trust.
"tax code" means the Internal Revenue Code of 1986, as amended.
"trustee" means the trustee of the trust identified in the related
prospectus supplement.
"trust agreement" means the trust agreement by and between the trustee
and the Bank, as depositor, identified in the related prospectus supplement.
"U.S. Person" means a citizen or resident of the United States, a
corporation or a partnership organized in or under the laws of the United
States or any political subdivision thereof, an estate or trust, the income of
which from sources outside the United States is includible in gross income for
federal income tax purposes regardless of its connection with the conduct of a
trade or business within the United States, or a trust if a court within the
United States is able to exercise primary supervision of the administration of
the trust and one or more United States persons have the authority to control
all substantial decisions of the trust.
"USAA" means United Services Automobile Association.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution*
Expenses in connection with the offering of the securities being
registered herein are estimated as follows:
Registration Fee .......................$528,000
Legal Fees and Expenses ................$325,000
Accounting Fees and Expenses ...........$110,000
Blue Sky Fees and Expenses .............$ 20,000
Rating Agency Fees .....................$950,000
Trustee's Fees and Expenses ............$ 50,000
Printing ...............................$125,000
Miscellaneous ..........................$ 12,000
__________
Total............................$2,120,000
___________________
All amounts except for the SEC Registration Fee are estimates of expenses
in connection with the issuance and distribution of three Series of Securities
in an aggregate principal amount assumed for these purposes to equal to
$2,000,000,000.
Item 15. Indemnification of Directors and Officers
Reference is made to each of following documents 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)
Exhibits Description
-------- ----------
1.1 Form of Underwriting Agreement (Owner Trust)
1.2 Form of Underwriting Agreement (Grantor Trust)
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 (including forms of
certificates).
4.2 Form of Indenture between the trust and the indenture
trustee (including forms of notes).
4.3 Form of Trust Agreement between the Trustee and the
Registrant (including form of certificates).
4.4 Form of Certificate of Trust (included in Exhibit 4.3).
5.1 Opinion of Brown & Wood LLP with respect to legality.
5.2 Opinion of Richards, Layton & Finger with respect to
legality.
8.1 Opinion of Brown & Wood LLP with respect to federal
income tax matters.
23.1 Consent of Brown & Wood LLP (included as part of
Exhibits 5.1 and 8.1).
23.2 Consent of Richards, Layton & Finger (included as part
of Exhibit 5.2).
24.1 Power of Attorney.*
25. Form of Statement of Eligibility under the Trust
Indenture Act of 1939 of The Chase Manhattan Bank.
99.1 Form of Sale and Servicing Agreement between the
Registrant and the trust.
99.2 Form of Administration Agreement among the trust, the
Administrator and the Indenture Trustee.
*Previously filed.
(b) Financial Statements:
Not applicable.
Item 17. Undertakings
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration
statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or
the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that
which was registered) and any deviation from the low
or high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate,
the changes in volume and price represent no more than 20
percent change in the maximum aggregate offering price set
forth in the "Calculation of Registration Fee" table in
the effective registration statement.
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the
registration statement.
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if
the registration statement is on Form S-3, Form S-8 or Form F-3, and the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the registrant pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in the registration
statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, as amended, each such post-effective
amendment 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.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
(b) 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.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the 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 the payment by
the registrant of expenses incurred or paid by a director, officer
or controlling person of the registrant in the successful defense of
any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit
to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the
Act and will by governed by the final adjudication of such issue.
(d) The undersigned registrant hereby undertakes to file an application
for the purpose of determining the eligibility of the trustee to act
under subsection (a) of Section 310 of the Trust Indenture Act in
accordance with the rules and regulations prescribed by the
Commission.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Pre-effective Amendment No. 2 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 the 3rd day of August, 2000.
USAA FEDERAL SAVINGS BANK
By /s/ Mark H. Wright
--------------------------------
Mark H. Wright
President and Chief Executive Officer
(Principal Executive Officer)
By /s/ Rosemary M. Elizalde
--------------------------------
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, this
Pre-effective Amendment No. 2 to the Registrant Statement has been signed by
the following persons in the capacities and on the dates indicated.
Signature Capacity Date
/s/ Robert G. Davis* Chairman August 3, 2000
------------------------
Robert G. Davis
/s/ Arthur R. Emerson* Director August 3, 2000
------------------------
Arthur R. Emerson
------------------------ Director
Carlos R. Montemayor
/s/ James E. Olson* Director August 3, 2000
------------------------
James E. Olson
/s/ Jane B. Phipps* Director August 3, 2000
------------------------
Jane B. Phipps
------------------------ Director
David M. Robinson
/s/ Mark H. Wright Director August 3, 2000
-----------------------
Mark H. Wright
*By: /s/ Mark H. Wright
-------------------
Mark H. Wright
Attorney-in-Fact
August 3, 2000
<PAGE>
Exhibit 1.1
USAA AUTO OWNER TRUST ____-__
Asset Backed Notes
Asset Backed Certificates
USAA FEDERAL SAVINGS BANK
(SELLER AND SERVICER)
UNDERWRITING AGREEMENT
_________, ____
[Name of Representative],
as Representative of the
Several Underwriters named
on Schedule I hereto
______________
______________
Dear Sirs:
USAA Federal Savings Bank, a federally chartered savings association (the
"Bank"), proposes to form an owner trust, USAA Auto Owner Trust ____-__ (the
"Issuer"), pursuant to a Trust Agreement (the "Trust Agreement") to be dated
as of _________, ___ between the Bank and ___________, as owner trustee (the
"Owner Trustee"), which will issue (i) $_____________ principal amount of its
Class A-1 ___% Asset Backed Notes (the "Class A-1 Notes"), (ii)
$______________ principal amount of its Class A-2 ___% Asset Backed Notes (the
"Class A-2 Notes"), (iii) $____________ principal amount of its Class A-3 ___%
Asset Backed Notes (the "Class A-3 Notes", and together with the Class A-1
Notes and the Class A-2 Notes, the "Notes") pursuant to an indenture to be
dated as of _______, ___ (the "Indenture"), between the Issuer and _________,
as indenture trustee (the "Indenture Trustee"); and (v) $___________ principal
amount of its Class B ___% Asset Backed Certificates, representing fractional
undivided interests in the Issuer (the "Certificates"; and together with the
Notes, the "Securities"). The assets of the Issuer will include, among other
things, a pool of motor vehicle installment loans made by the Bank and secured
by new and used cars and light duty trucks (the "Receivables"), certain monies
due or received thereunder on or after _________, ___ (the "Cutoff Date"),
security interests in the vehicles financed thereby, certain accounts, and the
proceeds thereof, and the proceeds from claims on certain insurance policies.
The Receivables will be transferred to the Issuer by the Bank, as seller (in
such capacity, the "Seller"), in exchange for the Securities, pursuant to a
Sale and Servicing Agreement (the "Sale and Servicing Agreement") to be dated
as of _________, ___, among the Bank, as Seller and as servicer (in such
capacity, the "Servicer"), the Indenture Trustee and the Issuer. The Servicer
will service the Receivables pursuant to the Sale and Servicing Agreement.
Capitalized terms used and not otherwise defined herein shall have the
meanings given them in the Sale and Servicing Agreement.
This is to confirm the agreement concerning the purchase of the
Securities from the Bank by the several Underwriters named in Schedule I
hereto (the "Underwriters").
1. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE BANK. The Bank
represents and warrants to and agrees with the several Underwriters that:
(a) A registration statement on Form S-3 (No. 333-30840) has been
filed by the Bank with the Securities and Exchange Commission (the
"Commission") and has become effective under the Securities Act of 1933,
as amended (the "Securities Act"). Such registration statement may have
been amended or supplemented from time to time prior to the date hereof.
Any such amendment or supplement was filed with the Commission in
accordance with the Securities Act and the rules and regulations of the
Commission thereunder (the "Rules and Regulations") and any such
amendment has become effective under the Securities Act. The Bank
proposes to file with the Commission pursuant to Rule 424(b) of the Rules
and Regulations a prospectus supplement (the "Prospectus Supplement") to
the prospectus dated ___________, ___, relating to the Securities and the
method of distribution thereof. Copies of such registration statement,
any amendment or supplement thereto, such prospectus and the Prospectus
Supplement have been delivered to you. Such registration statement,
including exhibits thereto and such prospectus, as amended or
supplemented to the date hereof, and as further supplemented by the
Prospectus Supplement, are hereinafter referred to as the "Registration
Statement" and the "Prospectus," respectively. The conditions to the use
of a registration statement on Form S-3 under the Securities Act have
been satisfied.
(b) The Registration Statement, at the time it became effective, any
post-effective amendment thereto, at the time it became effective, and
the Prospectus, as of the date of the Prospectus Supplement, complied in
all material respects with the applicable requirements of the Securities
Act and the Rules and Regulations and the Trust Indenture Act of 1939, as
amended (the "Trust Indenture Act"), and the rules and regulations of the
Commission thereunder and did not include any untrue statement of a
material fact and, in the case of the Registration Statement and any
post-effective amendment thereto, did not omit to state any material fact
required to be stated therein or necessary to make the statements therein
not misleading and, in the case of the Prospectus, did not omit to state
any material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not
misleading; on the Closing Date (as hereinafter defined), the
Registration Statement and the Prospectus, as amended or supplemented as
of the Closing Date, will comply in all material respects with the
applicable requirements of the Securities Act and the Rules and
Regulations and the Trust Indenture Act and the rules and regulations of
the Commission thereunder and neither the Prospectus nor any amendment or
supplement thereto will include any untrue statement of a material fact
or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading. The representation and warranty in the
preceding sentence does not apply to (i) that part of the Registration
Statement which shall constitute the Statement of Eligibility and
Qualification (Form T-1) of the Indenture Trustee under the Trust
Indenture Act or (ii) that information contained in or omitted from the
Registration Statement or the Prospectus (or any amendment or supplement
thereto) in reliance upon and in conformity with the Underwriters'
Information (as defined herein). The Indenture has been qualified under
the Trust Indenture Act.
(c) 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 the power and authority (corporate and other)
to own, lease and operate its properties and to conduct its business as
such properties are presently owned, leased and operated and as such
business is presently conducted, and had at all relevant times, and now
has, the power, authority and legal right to own and sell the
Receivables.
(d) The representations and warranties of the Bank in Section 5.1 of
the Sale and Servicing Agreement will be true and correct as of the
Closing Date.
(e) The representations and warranties of the Servicer in Section
6.1 of the Sale and Servicing Agreement will be true and correct as of
the Closing Date.
(f) The Bank has the power and authority to execute and deliver this
Agreement and to carry out the terms of this Agreement and the execution,
delivery and performance by the Bank of this Agreement has been duly
authorized by the Bank.
(g) This Agreement has been duly executed and delivered by the Bank.
(h) When authenticated by the Owner Trustee in accordance with the
Trust Agreement and delivered and paid for pursuant to this Agreement,
the Certificates will be duly issued and entitled to the benefits and
security afforded by the Trust Agreement and the Sale and Servicing
Agreement.
(i) When authenticated by the Indenture Trustee in accordance with
the Indenture and delivered and paid for pursuant to this Agreement, the
Notes will be duly issued and constitute legal, valid and binding
obligations of the Issuer enforceable against the Issuer in accordance
with their terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, or other similar laws affecting
the enforcement of creditors' rights in general or the rights of
creditors of federal savings associations and by general principles of
equity, regardless of whether such enforcement is considered in a
proceeding in equity or at law.
(j) The execution, delivery and performance of this Agreement and
the consummation by the Bank of the transactions contemplated hereby
shall not 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 by-laws of the Bank, or any indenture,
agreement or other instrument to which the Bank is a party or by which
the Bank is bound, or violate any law or any order, rule or regulation
applicable to the Bank of any court or of any federal or state regulatory
body, administrative agency or other governmental instrumentality having
jurisdiction over the Bank or any of its properties; and, except for the
registration of the Securities under the Securities Act, the
qualification of the Indenture under the Trust Indenture Act and such
consents, approvals, authorizations, registrations or qualifications as
may be required under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and applicable state securities laws in connection
with the purchase and distribution of the Securities by the Underwriters,
no permit, consent, approval of, or declaration to or filing with, any
governmental authority is required in connection with the execution,
delivery and performance of this Agreement or the consummation of the
transactions contemplated hereby.
(k) There are no proceedings or investigations pending or, to the
knowledge of the Bank, threatened before any court, regulatory body,
administrative agency or other tribunal or governmental instrumentality
having jurisdiction over the Bank or its properties (i) asserting the
invalidity of this Agreement or any of the Securities, (ii) seeking to
prevent the issuance of any of the Securities or the consummation of any
of the transactions contemplated by this Agreement, (iii) seeking any
determination or ruling that, if determined adversely to the Bank, is
reasonably likely to materially and adversely affect the performance by
the Bank of its obligations under, or the validity or enforceability of,
the Securities or this Agreement, or (iv) that may adversely affect the
federal or state income, excise, franchise or similar tax attributes of
the Securities.
(l) The Bank (i) is not in violation of its charter or by-laws, (ii)
is not in default and no event has occurred which, with notice or lapse
of time or both, would constitute such a default, in the due performance
or observance of any term, covenant or condition contained in any
indenture, agreement, mortgage, deed of trust or other instrument to
which the Bank is a party or by which the Bank is bound or to which any
of the Bank's property or assets is subject or (iii) is not in violation
in any respect of any law, order, rule or regulation applicable to the
Bank or any of the Bank's property of any court or of any federal or
state regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over it or any of its property,
except, in the case of clauses (ii) and (iii), for any defaults or
violations that would not, individually or in the aggregate, have a
material adverse effect on (A) the performance by the Bank of its
obligations under, or the validity or enforceability of, the Securities,
the Basic Documents or this Agreement or (B) the condition (financial or
otherwise), results of operations, business or prospects of the Bank.
(m) Neither the Issuer nor the Bank is an "investment company" or
under the "control" of an "investment company" within the meaning thereof
as defined in the Investment Company Act of 1940, as amended.
(n) None of the Bank or anyone acting on its behalf has taken any
action that would require qualification of the Trust Agreement under the
Trust Indenture Act.
2. PURCHASE BY THE UNDERWRITERS. On the basis of the representations,
warranties and agreements contained herein, and subject to the terms and
conditions set forth herein, the Bank agrees to cause to be issued by the
Issuer and the Bank agrees to sell to each of the Underwriters, severally and
not jointly, and each of the Underwriters, severally and not jointly, agrees
to purchase from the Bank, the respective principal amount of Securities set
forth opposite the name of such Underwriter in Schedule 1 hereto at a purchase
price equal to (i) with respect to the Class A-1 Notes, ____% of the principal
amount thereof, (ii) with respect to the Class A-2 Notes, ____% of the
principal amount thereof, (iii) with respect to the Class A-3 Notes, _____ %
of the principal amount thereof and (iv) with respect to the Certificates,
_____% of the principal amount thereof.
The Bank shall not be obligated to deliver any of the Securities except
upon payment in full for all the Securities to be purchased as provided
herein.
3. DELIVERY OF AND PAYMENT FOR THE SECURITIES. Delivery of and payment
for the Securities shall be made at the office of __________, or at such other
place as shall be agreed upon by [Name of Representative], as representative
of the Underwriters (the "Representative") and the Bank, at 9:00 A.M., ______
time, on ________, ___, or at such other date or time, not later than five
full business days thereafter, as shall be agreed upon by the Representative
and the Bank (such date and time being referred to herein as the "Closing
Date"). On the Closing Date, the Bank shall deliver or cause to be delivered
to the Representative for the account of each Underwriter the Securities
against payment to or upon the order of the Bank of the purchase price in
immediately available funds. Time shall be of the essence, and delivery at the
time and place specified pursuant to this Agreement is a further condition of
the obligation of each Underwriter hereunder. Upon delivery, each class of the
Securities shall be represented by one or more global certificates registered
in the name of Cede & Co., as nominee of The Depository Trust Company ("DTC").
The interest of the beneficial owners of the Securities will be represented by
book-entries on the records of DTC and participating members thereof.
Definitive certificates representing the Securities will be available only
under limited circumstances.
4. FURTHER AGREEMENTS OF THE BANK. The Bank agrees with each of the
several Underwriters:
(a) To file the Prospectus Supplement with the Commission pursuant
to and in accordance with Rule 424(b) of the Rules and Regulations within
the time period prescribed by such rule and provide evidence satisfactory
to the Representative of such timely filing.
(b) During any period in which a prospectus relating to the
Securities is required to be delivered under the Securities Act: to
advise the Representative promptly of any proposal to amend the
Registration Statement or amend or supplement the Prospectus and not to
effect any such amendment or supplementation without the consent of the
Representative; to advise the Representative promptly of (i) the
effectiveness of any post-effective amendment to the Registration
Statement, (ii) any request by the Commission for any amendment of the
Registration Statement or the Prospectus or for any additional
information, (iii) the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or the
initiation or threatening of any proceedings for that purpose, (iv) the
issuance by the Commission of any order preventing or suspending the use
of any prospectus relating to the Securities or the initiation or
threatening of any proceedings for that purpose and (v) the receipt by
the Bank of any notification with respect to the suspension of the
qualification of the Securities for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose; and to use
its reasonable best efforts to prevent the issuance of any such stop
order or of any order preventing or suspending the use of any prospectus
relating to the Securities or suspending any such qualification and, if
any such stop order or order of suspension is issued, to obtain the
lifting thereof at the earliest possible time.
(c) If, during any period in which a prospectus relating to the
Securities is required to be delivered under the Securities Act, any
event shall have occurred as a result of which the Prospectus, as then
amended or supplemented, would include an untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements therein, in the light of the circumstances when such
Prospectus is delivered to a purchaser, not misleading, or if for any
other reason it shall be necessary at such time to amend or supplement
the Prospectus in order to comply with the Securities Act, to notify the
Representative immediately thereof, and to promptly prepare and file with
the Commission, subject to paragraph (b) of this Section 4, an amendment
or a supplement to the Prospectus such 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 such that the Prospectus will comply with the Securities
Act.
(d) To furnish promptly to each of the Representative and counsel
for the Underwriters a signed copy of the Registration Statement as
originally filed with the Commission, and each amendment thereto filed
with the Commission, including all consents and exhibits filed therewith;
and during the period described in paragraph (c) of this Section 4, to
deliver promptly without charge to the Representative such number of the
following documents as the Representative may from time to time
reasonably request: (i) conformed copies of the Registration Statement as
originally filed with the Commission and each amendment thereto (in each
case excluding exhibits other than this Agreement and each of the Basic
Documents) and (ii) any preliminary prospectus supplement, the Prospectus
and any amendment or supplement thereto.
(e) During any period in which a prospectus relating to the
Securities is required to be delivered under the Securities Act, to file
promptly with the Commission any amendment to the Registration Statement
or the Prospectus or any supplement to the Prospectus that may, in the
judgment of the Bank or the Representative, be required by the Securities
Act or requested by the Commission.
(f) For so long as any of the Securities are outstanding or until
such time as the Underwriters shall cease to maintain a secondary market
in the Securities, to furnish to the Underwriters (i) copies of all
materials furnished by the Issuer to the holders of the Securities and
all reports and financial statements furnished by the Issuer to the
Commission pursuant to the Exchange Act or any rule or regulation of the
Commission thereunder and (ii) from time to time, such 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 such other information
concerning the Issuer as the Representative may reasonably request.
(g) Promptly from time to time to take such action as the
Representative may reasonably request to qualify the Securities for
offering and sale under the securities laws of such jurisdictions as the
Representative may request and to comply with such laws so as to permit
the continuance of sales and dealings therein in such jurisdictions for
as long as may be necessary to complete the distribution of the
Securities; provided that in connection therewith the Bank shall not be
required to qualify to do business or to file a general consent to
service of process in any jurisdiction.
(h) During the period from the date of the Prospectus to and
including the business day after the Closing Date, to not offer for sale,
sell, contract to sell or otherwise dispose of, directly or indirectly,
or file a registration statement for, or announce any offering of, any
securities collateralized by, or evidencing an ownership interest in, a
pool of installment loans for new and used cars and light duty trucks
without the prior written consent of the Representative.
(i) For a period from the date of this Agreement until the
retirement of the Securities, to deliver to you the annual statement of
compliance and the annual independent certified public accountants'
report furnished to the Owner Trustee and the Indenture Trustee, pursuant
to the Sale and Servicing Agreement, as soon as such statements and
reports are furnished to the Owner Trustee and the Indenture Trustee,
respectively.
(j) To the extent, if any, that the ratings provided with respect to
the Securities by _________ ("____") and _________ ("____") are
conditional upon the furnishing of documents or the taking of any other
actions by the Bank, to furnish such documents and take any such other
actions.
5. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The respective obligations of
the several Underwriters hereunder are subject to the accuracy, when made and
on the Closing Date, of the representations and warranties of the Bank
contained herein, to the accuracy of the statements of the Bank made in any
certificates pursuant to the provisions hereof, to the performance by the Bank
of its obligations hereunder, and to each of the following additional terms
and conditions:
(a) Prior to the Closing Date, no stop order suspending the
effectiveness of the Registration Statement or any part thereof shall
have been issued and no proceeding for that purpose shall have been
initiated or threatened by the Commission; and any request of the
Commission for inclusion of additional information in the Registration
Statement or the Prospectus or otherwise shall have been complied with to
the reasonable satisfaction of the Representative; and the Bank shall
have filed the Prospectus Supplement with the Commission pursuant to Rule
424(b) of the Rules and Regulations within the time period prescribed by
such rule.
(b) All corporate proceedings and other legal matters incident to
the authorization, form and validity of this Agreement, the Securities,
each of the Basic Documents, the Registration Statement and the
Prospectus, and all other legal matters relating to such agreements and
the transactions contemplated hereby and thereby shall be satisfactory in
all material respects to counsel for the Underwriters, and the Bank shall
have furnished to such counsel all documents and information that they
may reasonably request to enable them to pass upon such matters.
(c) The Trust Agreement shall have been duly executed and delivered
by the Bank and the Owner Trustee and the Certificates shall have been
duly executed and delivered by the Owner Trustee on behalf of the Issuer
and duly authenticated by the Owner Trustee.
(d) The Sale and Servicing Agreement shall have been duly executed
and delivered by the Servicer, the Seller, the Issuer and the Indenture
Trustee.
(e) The Indenture shall have been duly executed and delivered by the
Issuer and the Indenture Trustee and the Notes shall have been duly
executed and delivered by the Issuer and duly authenticated by the
Indenture Trustee.
(f) The Representative shall have received evidence satisfactory to
it and its counsel that on or before the Closing Date, UCC-1 financing
statements required to be filed on or prior to the Closing Date pursuant
to the Basic Documents have been filed.
(g) Michael J. Broker, ______ of the Bank, shall have furnished to
the Representative his written opinion, addressed to the Underwriters and
dated the Closing Date, regarding the due organization and power and
authority of the Seller, the due authorization, execution and delivery by
the Seller of the Basic Documents to which it is a party, no conflicts or
violations of its charter or by-laws, contracts or law and other related
matters, in form and substance reasonably satisfactory to the
Representative and its counsel.
(h) _____________, special Delaware counsel to the Issuer, shall
have furnished to the Representative their written opinion, as counsel to
the Issuer, addressed to the Underwriters and dated the Closing Date,
regarding (i) the due organization of the Issuer, (ii) the enforceability
of the Trust Agreement, (iii) other general Delaware law matters with
respect to the Issuer, including, without limitation, the due
authorization, execution and delivery of the Basic Documents by the
Issuer and the due authorization and issuance of the Certificates, and
(iv) the perfection and priority of the security interests created by the
Indenture, in each case, in form and substance reasonably satisfactory to
the Representative and its counsel.
(i) Brown & Wood LLP shall have furnished to the Representative
their written opinion, addressed to the Underwriters and dated the
Closing Date, regarding (i) the enforceability of the Basic Documents
(other than the Trust Agreement and the Note Depository Agreement), (ii)
the validity of the security interests created thereby, (iii) the due
issuance and enforceability of the Notes, (iv) the qualification of the
Indenture under the Trust Indenture Act, (v) no violations of law, (vi)
compliance with applicable federal securities laws, (vii) exemption of
the Bank and the Issuer from registration as an investment company under
the Investment Company Act of 1940, (viii) the conformity in all material
respects of each of the Basic Documents to the description thereof
contained in the Registration Statement and the Prospectus and (ix)
negative assurances concerning the Prospectus, in each case in form and
substance reasonably satisfactory to the Representative and its counsel.
(j) _____________, special Texas counsel to the Bank, shall have
furnished to the Representative their written opinion, addressed to the
Underwriters and dated the Closing Date, regarding the perfection and
priority of the security interests created by the Sale and Servicing
Agreement.
(k) Brown & Wood LLP shall have furnished to the Representative
their written opinion, addressed to the Underwriters and dated the
Closing Date, with respect to certain matters relating to the transfer of
the Receivables to the Issuer, in form and substance reasonably
satisfactory to the Representative and its counsel.
(l) Brown & Wood LLP shall have furnished to the Representative
their written opinion, addressed to the Underwriters and dated the
Closing Date, to the effect that (i) the Issuer will not be an
association (or a publicly traded partnership) taxable as a corporation
for federal income tax purposes, (ii) the Notes will be characterized as
indebtedness for federal income tax purposes and (iii) the statements set
forth in the Prospectus under the heading "Certain Federal Income Tax
Consequences", to the extent that they are statements of law are true and
correct in all material respects, in form and substance reasonably
satisfactory to the Representative and its counsel.
(m) The Representative shall have received from Simpson Thacher &
Bartlett, counsel for the Underwriters, such opinion or opinions, dated
the Closing Date, with respect to such matters as the Representative may
require, and the Bank shall have furnished to such counsel such documents
as they reasonably request for enabling them to pass upon such matters.
(n) ____________, counsel to the Owner Trustee, shall have furnished
to the Representative their written opinion, as counsel to the Owner
Trustee, addressed to the Underwriters and dated the Closing Date,
regarding the due organization of the Owner Trustee, the due
authorization, execution and delivery by the Owner Trustee of the Trust
Agreement, no conflicts or violations of organizational documents,
contracts or law and other related matters, in form and substance
reasonably satisfactory to the Representative and its counsel.
(o) ____________, counsel to the Indenture Trustee, shall have
furnished to the Representative their written opinion, as counsel to the
Indenture Trustee, addressed to the Underwriters and dated the Closing
Date, regarding the due organization of the Indenture Trustee, the due
authorization, execution and delivery by the Indenture Trustee of the
Basic Documents to which it is a party, no conflicts or violations of
organizational documents, contracts or law and other related matters, in
form and substance reasonably satisfactory to the Representative and its
counsel.
(p) The Representative shall have received a letter dated the date
hereof (the "Procedures Letter") from a firm of independent nationally
recognized certified public accountants acceptable to the Representative
verifying the accuracy of such financial and statistical data contained
in the Prospectus as the Representative shall deem advisable. In
addition, if any amendment or supplement to the Prospectus made after the
date hereof contains financial or statistical data, the Representative
shall have received a letter dated the Closing Date confirming the
Procedures Letter and providing additional comfort on such new data.
(q) Representative shall have received a certificate, dated the
Closing Date, of any of the Chairman of the Board, the President, any
Senior Vice President or the chief financial officer of the Bank stating
that (A) the representations and warranties of the Bank contained in this
Agreement and the Basic Documents to which it is a party are true and
correct on and as of the Closing Date, (B) the Bank has complied with all
agreements and satisfied all conditions on its part to be performed or
satisfied hereunder and under such agreements at or prior to the Closing
Date, (C) no stop order suspending the effectiveness of the Registration
Statement has been issued and no proceedings for that purpose have been
instituted or, to the best of his or her knowledge, are contemplated by
the Commission, and (D) since ______, ____, there has been no material
adverse change in the financial position or results of operations of the
Bank or the Issuer or any change, or any development including a
prospective change, in or affecting the condition (financial or
otherwise), results of operations, business or prospects of the Bank or
the Issuer except as set forth in or contemplated by the Registration
Statement and the Prospectus.
(r) The Representative shall have received a letter from ____
stating that the Notes have received a rating of "___" from _____ and a
letter from ____ stating that the Notes have received a rating of "___"
from _____.
(s) The Representative shall have received a letter from ____
stating that the Certificates have received a rating of "___" from _____
and a letter from ____ stating that the Certificates have received a
rating of "___" from ____.
(t) Subsequent to the execution and delivery of this Agreement there
shall not have occurred any of the following: (i) trading in securities
generally on the New York Stock Exchange, the American Stock Exchange or
the over-the-counter market shall have been suspended or limited, or
minimum prices shall have been established on either of such exchanges or
such market by the Commission, by such exchange or by any other
regulatory body or governmental authority having jurisdiction or (ii) a
general moratorium on commercial banking activities shall have been
declared by Federal or New York State authorities or (iii) an outbreak or
escalation of hostilities or a declaration by the United States of a
national emergency or war or any other substantial national or
international calamity or emergency as to make it, in the reasonable
judgment of a majority in interest of the several Underwriters,
impracticable or inadvisable to proceed with the public offering or the
delivery of the Securities on the terms and in the manner contemplated in
the Prospectus.
All opinions, letters, evidence and certificates mentioned above or
elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if they are in form and substance reasonably
satisfactory to counsel for the Underwriters.
6. TERMINATION. The obligations of the Underwriters hereunder may be
terminated by the Representative, in its absolute discretion, by notice given
to and received by the Bank prior to delivery of and payment for the
Securities if, prior to that time, any of the events described in Section 5(t)
shall have occurred or any of the conditions described in Section 5(q), 5(r)
or 5(s) shall not be satisfied.
7. DEFAULTING UNDERWRITERS.
(a) If, any one or more of the Underwriters shall fail to purchase
and pay for any of the Securities agreed to be purchased by such
Underwriter hereunder on the Closing Date, and such failure constitutes a
default in the performance of its or their obligations under this
Agreement, the Representative may make arrangements for the purchase of
such Securities by other persons satisfactory to the Bank and the
Representative, including any of the Underwriters, but if no such
arrangements are made by the Closing Date, then each remaining
non-defaulting Underwriter shall be severally obligated to purchase the
Securities which the defaulting Underwriter or Underwriters agreed but
failed to purchase on the Closing Date in the respective proportions
which the principal amount of Securities set forth opposite the name of
each remaining non-defaulting Underwriter in Schedule 1 hereto bears to
the aggregate principal amount of Securities set forth opposite the names
of all the remaining non-defaulting Underwriters in Schedule 1 hereto;
provided, however, that the remaining non-defaulting Underwriters shall
not be obligated to purchase any of the Securities on the Closing Date if
the aggregate principal amount of Securities which the defaulting
Underwriter or Underwriters agreed but failed to purchase on such date
exceeds one-eleventh of the aggregate principal amount of the Securities
to be purchased on the Closing Date, and any remaining non-defaulting
Underwriter shall not be obligated to purchase in total more than 110% of
the principal amount of the Securities which it agreed to purchase on the
Closing Date pursuant to the terms of Section 2. If the foregoing
maximums are exceeded and the remaining Underwriters or other
underwriters satisfactory to the Representative and the Bank do not elect
to purchase the Securities which the defaulting Underwriter or
Underwriters agreed but failed to purchase, this Agreement shall
terminate without liability on the part of any non-defaulting Underwriter
or the Bank, except that the Bank will continue to be liable for the
payment of expenses to the extent set forth in Sections 8 and 12 and
except that the provisions of Sections 9 and 10 shall not terminate and
shall remain in effect. As used in this Agreement, the term "Underwriter"
includes, for all purposes of this Agreement unless the context otherwise
requires, any party not listed in Schedule 1 hereto who, pursuant to this
Section 7, purchases Securities which a defaulting Underwriter agreed but
failed to purchase.
(b) Nothing contained herein shall relieve a defaulting Underwriter
of any liability it may have for damages caused by its default. If other
underwriters are obligated or agree to purchase the Securities of a
defaulting Underwriter, either the Representative or the Bank may
postpone the Closing Date for up to seven full business days in order to
effect any changes that in the opinion of counsel for the Bank or counsel
for the Underwriters may be necessary in the Registration Statement, the
Prospectus or in any other document or arrangement, and the Bank agrees
to file promptly any amendment or supplement to the Registration
Statement or the Prospectus that effects any such changes.
8. REIMBURSEMENT OF UNDERWRITERS' EXPENSES. If (a) notice shall have been
given pursuant to Section 6 terminating the obligations of the Underwriters
hereunder, (b) the Bank shall fail to tender the Securities for delivery to
the Underwriters for any reason permitted under this Agreement or (c) the
Underwriters shall decline to purchase the Securities for any reason permitted
under this Agreement, the Bank shall reimburse the Underwriters for the fees
and expenses of their counsel and for such other out-of-pocket expenses as
shall have been reasonably incurred by them in connection with this Agreement
and the proposed purchase of the Securities, and upon demand the Bank shall
pay the full amount thereof to the Representative. If this Agreement is
terminated pursuant to Section 7 by reason of the default of one or more
Underwriters, the Bank shall not be obligated to reimburse any defaulting
Underwriter on account of those expenses.
9. INDEMNIFICATION.
(a) The Bank shall indemnify and hold harmless each Underwriter and
each person, if any, who controls any Underwriter within the meaning of
Section 15 of the Securities Act (collectively referred to for the
purposes of this Section 9 and Section 10 as the Underwriter) against any
loss, claim, damage or liability, joint or several, to which that
Underwriter may become subject, under the Securities Act or otherwise,
insofar as such loss, claim, damage or liability (or any action in
respect thereof) arises out of or is based upon (i) any untrue statement
or alleged untrue statement of a material fact contained in any
preliminary prospectus supplement, the Registration Statement or the
Prospectus or in any amendment or supplement thereto or (ii) the omission
or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in light of
the circumstances under which they are made, not misleading, and shall
reimburse each Underwriter for any legal or other expenses reasonably
incurred by that Underwriter directly in connection with investigating or
preparing to defend or defending against or appearing as a third party
witness in connection with any such loss, claim, damage or liability (or
any action in respect thereof) as such expenses are incurred; provided,
however, that the Bank shall not be liable in any such case to the extent
that any such loss, claim, damage or liability (or any action in respect
thereof) arises out of or is based upon an untrue statement or alleged
untrue statement in or omission or alleged omission from (i) any
preliminary prospectus supplement, the Registration Statement or the
Prospectus or any such amendment or supplement in reliance upon and in
conformity with the Underwriters' Information or (ii) any Statement of
Eligibility and Qualification (Form T-1) filed with the Registration
Statement; provided, further that such indemnity with respect to any
preliminary prospectus supplement or any amendment or supplement thereto
shall not inure to the benefit of any Underwriter from whom the person
asserting any such loss, claim, damage or liability purchased the
Securities which are the subject thereof (or to the benefit of any person
controlling such Underwriter) if at or prior to the written confirmation
of the sale of such Securities a copy of the Prospectus (or the
Prospectus as amended or supplemented) was not sent or delivered to such
person and the untrue statement or omission of a material fact contained
in such preliminary prospectus supplement was corrected in the Prospectus
(or the Prospectus as amended or supplemented) unless the failure is the
result of noncompliance by the Bank with Section 4(d).
(b) Each Underwriter, severally and not jointly, shall indemnify and
hold harmless the Bank, each of its directors, each officer of the Bank
who signed the Registration Statement and each person, if any, who
controls the Bank within the meaning of Section 15 of the Securities Act
(collectively referred to solely for the purposes of this Section 9 and
Section 10 as the "Bank"), against any loss, claim, damage or liability,
joint or several, to which the Bank may become subject, under the
Securities Act or otherwise, insofar as such loss, claim, damage or
liability (or any action in respect thereof) arises out of or is based
upon (i) any untrue statement or alleged untrue statement of a material
fact contained in any preliminary prospectus supplement, the Registration
Statement or the Prospectus or in any amendment or supplement thereto or
(ii) the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they are made, not
misleading, but in each case only to the extent that the untrue statement
or alleged untrue statement or omission or alleged omission was made in
reliance upon and in conformity with the written information furnished to
the Bank by or on behalf of such Underwriter specifically for use
therein, and shall reimburse the Bank for any legal or other expenses
reasonably incurred by the Bank in connection with investigating or
preparing to defend or defending against or appearing as third party
witness in connection with any such loss, claim, damage or liability (or
any action in respect thereof) as such expenses are incurred. The parties
acknowledge and agree that the written information furnished to the Bank
through the Representative by or on behalf of the Underwriters (the
"Underwriters' Information") consists solely of the ________ paragraphs
of text and the following table under the caption "Underwriting" in the
Prospectus Supplement.
(c) Promptly after receipt by an indemnified party under this
Section 9 of notice of any claim or the commencement of any action, the
indemnified party shall, if a claim in respect thereof is to be made
against the indemnifying party under this Section 9, notify the
indemnifying party in writing of the claim or the commencement of that
action; provided, however, that the failure to notify the indemnifying
party shall not relieve it from any liability which it may have under
this Section 9 except to the extent it has been materially prejudiced
(through the forfeiture of substantive rights or defenses) by such
failure; and, provided, further, that the failure to notify the
indemnifying party shall not relieve it from any liability which it may
have to an indemnified party otherwise than under this Section 9. If any
such claim or action shall be brought against an indemnified party, and
it shall notify the indemnifying party thereof, the indemnifying party
shall be entitled to participate therein and, to the extent that it
wishes, jointly with any other similarly notified indemnifying party, to
assume the defense thereof with counsel reasonably satisfactory to the
indemnified party. After notice from the indemnifying party to the
indemnified party of its election to assume the defense of such claim or
action, the indemnifying party shall not be liable to the indemnified
party under this Section 9 for any legal or other expenses subsequently
incurred by the indemnified party in connection with the defense thereof
other than reasonable costs of investigation; provided, however, an
indemnified party shall have the right to employ its own counsel in any
such action, but the fees, expenses and other charges of such counsel for
the indemnified party will be at the expense of such indemnified party
unless (1) the employment of counsel by the indemnified party has been
authorized in writing by the indemnifying party, (2) the indemnified
party has reasonably concluded (based upon advice of counsel to the
indemnified party) that there may be legal defenses available to it or
other indemnified parties that are different from or in addition to those
available to the indemnifying party, (3) a conflict or potential conflict
exists (based upon advice of counsel to the indemnified party) between
the indemnified party and the indemnifying party (in which case the
indemnifying party will not have the right to direct the defense of such
action on behalf of the indemnified party) or (4) the indemnifying party
has not in fact employed counsel reasonably satisfactory to the
indemnified party to assume the defense of such action within a
reasonable time after receiving notice of the commencement of the action,
in each of which cases the reasonable fees, disbursements and other
charges of counsel will be at the expense of the indemnifying party or
parties. It is understood that the indemnifying party or parties shall
not, in connection with any proceeding or related proceedings in the same
jurisdiction, be liable for the reasonable fees, disbursements and other
charges of more than one separate firm of attorneys (in addition to any
local counsel) at any one time for all such indemnified party or parties.
Each indemnified party, as a condition of the indemnity agreements
contained in Sections 9(a) and 9(b), shall use all reasonable efforts to
cooperate with the indemnifying party in the defense of any such action
or claim. No indemnifying party shall be liable for any settlement of any
such action effected without its written consent, but if settled with its
written consent or if there be a final judgment of the plaintiff in any
such action, the indemnifying party agrees to indemnify and hold harmless
any indemnified party from and against any loss or liability by reason of
such settlement or judgment. No indemnifying party shall, without the
prior written consent of the indemnified party, effect any settlement of
any pending or threatened proceeding in respect of which any indemnified
party is or could have been a party and indemnity could have been sought
hereunder by such indemnified party unless such settlement includes an
unconditional release of such indemnified party from all liability on
claims that are the subject matter of such proceedings.
The obligations of the Bank and the Underwriters in this Section 9 and in
Section 10 are in addition to any other liability which the Bank or the
Underwriters, as the case may be, may otherwise have.
10. CONTRIBUTION. If the indemnification provided for in Section 9 is
unavailable or insufficient to hold harmless an indemnified party under
Section 9(a) or (b), then each indemnifying party shall, in lieu of
indemnifying such indemnified party, contribute to the amount paid or payable
by such indemnified party as a result of such loss, claim, damage or liability
(i) in such proportion as shall be appropriate to reflect the relative
benefits received by the Bank on the one hand and the Underwriters on the
other from the offering of the Securities 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 with respect to the statements or omissions which
resulted in such loss, claim, damage or liability, as well as any other
relevant equitable considerations. The relative benefits received by the Bank
on the one hand and the Underwriters on the other with respect to such
offering shall be deemed to be in the same proportion as the total net
proceeds from the offering of the Securities purchased under this Agreement
(before deducting expenses) received by the Bank bear to the total
underwriting discounts and commissions received by the Underwriters with
respect to the Securities purchased under this Agreement, in each case as set
forth in the table on the cover page of the Prospectus Supplement. The
relative fault shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Bank on the one hand or the Underwriters on the other, the
intent of the parties and their relative knowledge, access to information and
opportunity to correct or prevent such untrue statement or omission.
The Bank and the Underwriters agree that it would not be just and
equitable if contributions pursuant to this Section 10 were to be determined
by pro rata allocation (even if the Underwriters were treated as one entity
for such purpose) or by any other method of allocation which does not take
into account the equitable considerations referred to herein. The amount paid
or payable by an indemnified party as a result of the loss, claim, damage or
liability referred to above in this Section 10 shall be deemed to include,
subject to the limitations on the fees and expenses of separate counsel set
forth in Section 9, for purposes of this Section 10, any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such claim or any action in respect thereof.
Notwithstanding the provisions of this Section 10, no Underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Securities underwritten by it and distributed to the public
were offered to the public less the amount of any damages which such
Underwriter has otherwise paid or become liable to pay by reason of any 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
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The Underwriters' obligations to
indemnify as provided in Section 9 and contribute as provided in this Section
10 are several in proportion to their respective underwriting obligations and
not joint.
11. PERSONS ENTITLED TO BENEFIT OF AGREEMENT. This Agreement shall inure
to the benefit of and be binding upon the Underwriters and the Bank and their
respective successors. Nothing expressed or mentioned in this Agreement is
intended or shall be construed to give any person, firm or corporation, other
than the Underwriters and the Bank and their respective successors and the
controlling persons and officers and directors referred to in Sections 9 and
10 and their heirs and legal representatives, any legal or equitable right,
remedy or claim under or in respect of this Agreement or any provision
contained herein.
12. EXPENSES. The Bank agrees with the Underwriters to pay (a) the costs
incident to the authorization, issuance, sale, preparation and delivery of the
Securities and any taxes payable in that connection; (b) the costs incident to
the preparation, printing and filing under the Securities Act of the
Registration Statement and any amendments and exhibits thereto; (c) the costs
of distributing the Registration Statement as originally filed and each
amendment thereto and any post-effective amendments thereof (including, in
each case, exhibits), any preliminary prospectus supplement, the Prospectus
and any amendment or supplement to the Prospectus, including, without
limitation, the Prospectus Supplement, all as provided in this Agreement; (d)
the costs of printing, reproducing and distributing this Agreement and any
other underwriting and selling group documents by mail, telex or other means
of communications; (e) the fees and expenses of qualifying the Securities
under the securities laws of the several jurisdictions as provided in Section
4(g) and of preparing, printing and distributing Blue Sky Memoranda (including
related fees and expenses of counsel to the Underwriters); (f) any fees
charged by _____ and _____ for rating the Securities; (g) all fees and
expenses of the Owner Trustee and the Indenture Trustee and their respective
counsel; and (h) all other costs and expenses incident to the performance of
the obligations of the Bank under this Agreement; provided that, except as
otherwise provided in this Section 12 and in Section 8, the Underwriters shall
pay their own costs and expenses, including the costs and expenses of their
counsel, any transfer taxes on the Securities which they may sell and the
expenses of advertising any offering of the Securities made by the
Underwriters.
13. SURVIVAL. The respective indemnities, rights of contribution,
representations, warranties and agreements of the Bank and the Underwriters
contained in this Agreement or made by or on behalf on them, respectively,
pursuant to this Agreement, shall survive the delivery of and payment for the
Securities and shall remain in full force and effect, regardless of any (i)
termination or cancellation of this Agreement, (ii) any investigation made by
or on behalf of any of them or any person controlling any of them or (iii)
acceptance of and payment for the Securities.
14. NOTICES, ETC. All statements, requests, notices and agreements
hereunder shall be in writing, and:
(a) if to the Underwriters, shall be delivered or sent by mail or
facsimile transmission and confirmed to c/o the Representative at
___________________________________, Attention: ___________, with a copy
to the Legal Department; and
(b) if to the Bank, shall be delivered or sent by mail or facsimile
transmission and confirmed to the address of the Bank set forth in the
Registration Statement, Attention: General Counsel;
provided, however, that any notice to an Underwriter pursuant to Section 9(c)
shall be delivered or sent by mail, telex or facsimile transmission to such
Underwriter at its address set forth in its acceptance telex to the
Representative, which address will be supplied to any other party hereto by
the Representative upon request. Any such statements, requests, notices or
agreements shall take effect at the time of receipt thereof. The Bank shall be
entitled to act and rely upon any request, consent, notice or agreement given
or made on behalf of the Underwriters by the Representative.
15. DEFINITIONS OF CERTAIN TERMS. For purposes of this Agreement,
"business day" means any day on which the New York Stock Exchange, Inc. is
open for trading.
16. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
17. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all such
counterparts shall together constitute one and the same instrument.
18. HEADINGS. The headings herein are inserted for convenience of
reference only and are not intended to be part of, or to affect the meaning or
interpretation of, this Agreement.
<PAGE>
If the foregoing is in accordance with your understanding of the
agreement between the Bank and the several Underwriters, kindly indicate your
acceptance in the space provided for that purpose below.
Very truly yours,
USAA FEDERAL SAVINGS BANK
By________________________________
Name:
Title:
Accepted:
[Name of Representative]
For Itself and as Representative
of the Several Underwriters
By___________________________________
Authorized Signatory
<PAGE>
SCHEDULE 1
<TABLE>
<CAPTION>
Principal Principal
Principal Amount of Principal Amount of Amount of Amount of
Class A-1 Class A-2 Class A-3 Class B
Underwriters Notes Notes Notes Certificates
------------ ----- ----- ----- ------------
<S> <C> <C> <C>
[Name of Representative] $ $ $ $
______________________
</TABLE>
<PAGE>
Exhibit 1.2
USAA AUTO GRANTOR TRUST ____-__
Asset Backed Certificates
USAA FEDERAL SAVINGS BANK
(SELLER AND SERVICER)
UNDERWRITING AGREEMENT
---------, ----
[Name of Representative],
as Representative of the
Several Underwriters named
on Schedule I hereto,
___________________________
___________________________
Dear Sirs:
USAA Federal Savings Bank, a federally chartered savings association (the
"Bank"), proposes to form a trust, USAA Auto Grantor Trust ____-__ (the
"Issuer"), pursuant to a Pooling and Servicing Agreement (the "Pooling
Agreement") to be dated as of _________, ___ between the Bank, as seller and
servicer (in such capacities, the "Seller" and the "Servicer", respectively),
and ___________, as trustee and collateral agent (the "Trustee"), which will
issue (i) $_________ principal amount of its Class A ___% Asset Backed
Certificates (the "Class A Certificates"), and (ii) $_________ principal
amount of its Class B ___% Asset Backed Certificates (the "Class B
Certificates", and together with the Class A Certificates, the
"Certificates"). The assets of the Issuer will include, among other things, a
pool of motor vehicle installment loans made by the Bank and secured by new
and used cars and light duty trucks (the "Receivables"), certain monies due or
received thereunder on or after _________, ___ (the "Cutoff Date"), security
interests in the vehicles financed thereby, certain accounts, and the proceeds
thereof, and the proceeds from claims on certain insurance policies. Pursuant
to the Pooling Agreement, the Receivables will be transferred to the Issuer by
the Seller in exchange for the Certificates. The Servicer will service the
Receivables pursuant to the Pooling Agreement. Capitalized terms used and not
otherwise defined herein shall have the meanings given them in the Pooling
Agreement.
This is to confirm the agreement concerning the purchase of the Certificates
from the Bank by the several Underwriters named in Schedule I hereto (the
"Underwriters").
1. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE BANK. The Bank
represents and warrants to and agrees with the several Underwriters that:
(a) A registration statement on Form S-3 (No. 333-30840) has been
filed by the Bank with the Securities and Exchange Commission (the
"Commission") and has become effective under the Securities Act of 1933,
as amended (the "Securities Act"). Such registration statement may have
been amended or supplemented from time to time prior to the date hereof.
Any such amendment or supplement was filed with the Commission in
accordance with the Securities Act and the rules and regulations of the
Commission thereunder (the "Rules and Regulations") and any such
amendment has become effective under the Securities Act. The Bank
proposes to file with the Commission pursuant to Rule 424(b) of the Rules
and Regulations a prospectus supplement (the "Prospectus Supplement") to
the prospectus dated ___________, ___, relating to the Certificates and
the method of distribution thereof. Copies of such registration
statement, any amendment or supplement thereto, such prospectus and the
Prospectus Supplement have been delivered to you. Such registration
statement, including exhibits thereto and such prospectus, as amended or
supplemented to the date hereof, and as further supplemented by the
Prospectus Supplement, are hereinafter referred to as the "Registration
Statement" and the "Prospectus," respectively. The conditions to the use
of a registration statement on Form S-3 under the Securities Act have
been satisfied.
(b) The Registration Statement, at the time it became effective, any
post-effective amendment thereto, at the time it became effective, and
the Prospectus, as of the date of the Prospectus Supplement, complied in
all material respects with the applicable requirements of the Securities
Act and the Rules and Regulations and the Trust Indenture Act of 1939, as
amended (the "Trust Indenture Act"), and the rules and regulations of the
Commission thereunder and did not include any untrue statement of a
material fact and, in the case of the Registration Statement and any
post-effective amendment thereto, did not omit to state any material fact
required to be stated therein or necessary to make the statements therein
not misleading and, in the case of the Prospectus, did not omit to state
any material fact necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading; on
the Closing Date (as hereinafter defined), the Registration Statement and
the Prospectus, as amended or supplemented as of the Closing Date, will
comply in all material respects with the applicable requirements of the
Securities Act and the Rules and Regulations and the Trust Indenture Act
and the rules and regulations of the Commission thereunder and neither
the Prospectus nor any amendment or supplement thereto will include any
untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. The
representation and warranty in the preceding sentence does not apply to
that information contained in or omitted from the Registration Statement
or the Prospectus (or any amendment or supplement thereto) in reliance
upon and in conformity with the Underwriters' Information (as defined
herein).
(c) 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 the power and authority (corporate and other)
to own, lease and operate its properties and to conduct its business as
such properties are presently owned, leased and operated and as such
business is presently conducted, and had at all relevant times, and now
has, the power, authority and legal right to own and sell the
Receivables.
(d) The representations and warranties of the Seller in Section 10.1
of the Pooling Agreement will be true and correct as of the Closing Date.
(e) The representations and warranties of the Servicer in Section
11.1 of the Pooling Agreement will be true and correct as of the Closing
Date.
(f) The Bank has the power and authority to execute and deliver this
Agreement and to carry out the terms of this Agreement and the execution,
delivery and performance by the Bank of this Agreement has been duly
authorized by the Bank.
(g) This Agreement has been duly executed and delivered by the Bank.
(h) When authenticated by the Trustee in accordance with the Pooling
Agreement and delivered and paid for pursuant to this Agreement, the
Certificates will be duly issued and entitled to the benefits and
security afforded by the Pooling Agreement.
(i) The execution, delivery and performance of this Agreement and
the consummation by the Bank of the transactions contemplated hereby
shall not 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 by-laws of the Bank, or any indenture,
agreement or other instrument to which the Bank is a party or by which
the Bank is bound, or violate any law or any order, rule or regulation
applicable to the Bank of any court or of any federal or state regulatory
body, administrative agency or other governmental instrumentality having
jurisdiction over the Bank or any of its properties; and, except for the
registration of the Certificates under the Securities Act and such
consents, approvals, authorizations, registrations or qualifications as
may be required under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and applicable state securities laws in connection
with the purchase and distribution of the Certificates by the
Underwriters, no permit, consent, approval of, or declaration to or
filing with, any governmental authority is required in connection with
the execution, delivery and performance of this Agreement or the
consummation of the transactions contemplated hereby.
(j) There are no proceedings or investigations pending or, to the
knowledge of the Bank, threatened before any court, regulatory body,
administrative agency or other tribunal or governmental instrumentality
having jurisdiction over the Bank or its properties (i) asserting the
invalidity of this Agreement or any of the Certificates, (ii) seeking to
prevent the issuance of any of the Certificates or the consummation of
any of the transactions contemplated by this Agreement, (iii) seeking any
determination or ruling that, if determined adversely to the Bank, is
reasonably likely to materially and adversely affect the performance by
the Bank of its obligations under this Agreement, the validity of the
Certificates or the validity or enforceability of this Agreement, or (iv)
that may adversely affect the federal or state income, excise, franchise
or similar tax attributes of the Certificates.
(k) The Bank (i) is not in violation of its charter or by-laws, (ii)
is not in default and no event has occurred which, with notice or lapse
of time or both, would constitute such a default, in the due performance
or observance of any term, covenant or condition contained in any
indenture, agreement, mortgage, deed of trust or other instrument to
which the Bank is a party or by which the Bank is bound or to which any
of the Bank's property or assets is subject or (iii) is not in violation
in any respect of any law, order, rule or regulation applicable to the
Bank or any of the Bank's property of any court or of any federal or
state regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over it or any of its property,
except, in the case of clauses (ii) and (iii), for any defaults or
violations that would not, individually or in the aggregate, have a
material adverse effect on (A) the performance by the Bank of its
obligations under, or the validity or enforceability of, the
Certificates, the Basic Documents or this Agreement or (B) the condition
(financial or otherwise), results of operations, business or prospects of
the Bank.
(l) Neither the Issuer nor the Bank is an "investment company" or
under the "control" of an "investment company" within the meaning thereof
as defined in the Investment Company Act of 1940, as amended.
(m) None of the Bank or anyone acting on its behalf has taken any
action that would require qualification of the Pooling Agreement under
the Trust Indenture Act.
2. PURCHASE BY THE UNDERWRITERS. On the basis of the representations,
warranties and agreements contained herein, and subject to the terms and
conditions set forth herein, the Bank agrees to cause to be issued by the
Issuer and the Bank agrees to sell to each of the Underwriters, severally and
not jointly, and each of the Underwriters, severally and not jointly, agrees
to purchase from the Bank, the respective principal amount of Certificates set
forth opposite the name of such Underwriter in Schedule 1 hereto at a purchase
price equal to (i) with respect to the Class A Certificates, ____% of the
principal amount thereof, and (ii) with respect to the Class B Certificates,
____% of the principal amount thereof.
The Bank shall not be obligated to deliver any of the Certificates except
upon payment in full for all the Certificates to be purchased as provided
herein.
3. DELIVERY OF AND PAYMENT FOR THE CERTIFICATES. Delivery of and payment
for the Certificates shall be made at the office of __________, or at such
other place as shall be agreed upon by [Name of Representative], as
representative of the Underwriters (the "Representative") and the Bank, at
9:00 A.M., ______ time, on ________, ___, or at such other date or time, not
later than five full business days thereafter, as shall be agreed upon by the
Representative and the Bank (such date and time being referred to herein as
the "Closing Date"). On the Closing Date, the Bank shall deliver or cause to
be delivered to the Representative for the account of each Underwriter the
Certificates against payment to or upon the order of the Bank of the purchase
price in immediately available funds. Time shall be of the essence, and
delivery at the time and place specified pursuant to this Agreement is a
further condition of the obligation of each Underwriter hereunder. Upon
delivery, each class of the Certificates shall be represented by one or more
global certificates registered in the name of Cede & Co., as nominee of The
Depository Trust Company ("DTC"). The interest of the beneficial owners of the
Certificates will be represented by book-entries on the records of DTC and
participating members thereof. Definitive certificates representing the
Certificates will be available only under limited circumstances set forth in
the Pooling Agreement.
4. FURTHER AGREEMENTS OF THE BANK. The Bank agrees with each of the
several Underwriters:
(a) To file the Prospectus Supplement with the Commission pursuant
to and in accordance with Rule 424(b) of the Rules and Regulations within
the time period prescribed by such rule and provide evidence satisfactory
to the Representative of such timely filing.
(b) During any period in which a prospectus relating to the
Certificates is required to be delivered under the Securities Act: to
advise the Representative promptly of any proposal to amend the
Registration Statement or amend or supplement the Prospectus and not to
effect any such amendment or supplementation without the consent of the
Representative; to advise the Representative promptly of (i) the
effectiveness of any post-effective amendment to the Registration
Statement, (ii) any request by the Commission for any amendment of the
Registration Statement or the Prospectus or for any additional
information, (iii) the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or the
initiation or threatening of any proceedings for that purpose, (iv) the
issuance by the Commission of any order preventing or suspending the use
of any prospectus relating to the Certificates or the initiation or
threatening of any proceedings for that purpose and (v) the receipt by
the Bank of any notification with respect to the suspension of the
qualification of the Certificates for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose; and to use
its reasonable best efforts to prevent the issuance of any such stop
order or of any order preventing or suspending the use of any prospectus
relating to the Certificates or suspending any such qualification and, if
any such stop order or order of suspension is issued, to obtain the
lifting thereof at the earliest possible time.
(c) If, during any period in which a prospectus relating to the
Certificates is required to be delivered under the Securities Act, any
event shall have occurred as a result of which the Prospectus, as then
amended or supplemented, would include an untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements therein, in the light of the circumstances when such
Prospectus is delivered to a purchaser, not misleading, or if for any
other reason it shall be necessary at such time to amend or supplement
the Prospectus in order to comply with the Securities Act, to notify the
Representative immediately thereof, and to promptly prepare and file with
the Commission, subject to paragraph (b) of this Section 4, an amendment
or a supplement to the Prospectus such 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 such that the Prospectus will comply with the Securities
Act.
(d) To furnish promptly to each of the Representative and counsel
for the Underwriters a signed copy of the Registration Statement as
originally filed with the Commission, and each amendment thereto filed
with the Commission, including all consents and exhibits filed therewith;
and during the period described in paragraph (c) of this Section 4, to
deliver promptly without charge to the Representative such number of the
following documents as the Representative may from time to time
reasonably request: (i) conformed copies of the Registration Statement as
originally filed with the Commission and each amendment thereto (in each
case excluding exhibits other than this Agreement and the Pooling
Agreement) and (ii) any preliminary prospectus supplement, the Prospectus
and any amendment or supplement thereto.
(e) During any period in which a prospectus relating to the
Certificates is required to be delivered under the Securities Act, to
file promptly with the Commission any amendment to the Registration
Statement or the Prospectus or any supplement to the Prospectus that may,
in the judgment of the Bank or the Representative, be required by the
Securities Act or requested by the Commission.
(f) For so long as any of the Certificates are outstanding or until
such time as the Underwriters shall cease to maintain a secondary market
in the Certificates, to furnish to the Underwriters (i) copies of all
materials furnished by the Issuer to the holders of the Certificates and
all reports and financial statements furnished by the Issuer to the
Commission pursuant to the Exchange Act or any rule or regulation of the
Commission thereunder and (ii) from time to time, such 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 such other information
concerning the Issuer as the Representative may reasonably request.
(g) Promptly from time to time to take such action as the
Representative may reasonably request to qualify the Certificates for
offering and sale under the securities laws of such jurisdictions as the
Representative may request and to comply with such laws so as to permit
the continuance of sales and dealings therein in such jurisdictions for
as long as may be necessary to complete the distribution of the
Certificates; provided that in connection therewith the Bank shall not be
required to qualify to do business or to file a general consent to
service of process in any jurisdiction.
(h) During the period from the date of the Prospectus to and
including the business day after the Closing Date, to not offer for sale,
sell, contract to sell or otherwise dispose of, directly or indirectly,
or file a registration statement for, or announce any offering of, any
securities collateralized by, or evidencing an ownership interest in, a
pool of retail installment loans for new and used cars and light duty
trucks without the prior written consent of the Representative.
(i) For a period from the date of this Agreement until the
retirement of the Certificates, to deliver to you the annual statement of
compliance and the annual independent certified public accountants'
report furnished to the Trustee, pursuant to the Pooling Agreement, as
soon as such statements and reports are furnished to the Trustee.
(j) To the extent, if any, that the ratings provided with respect to
the Certificates by _________ ("____") and _________ ("____") are
conditional upon the furnishing of documents or the taking of any other
actions by the Bank, to furnish such documents and take any such other
actions.
5. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The respective obligations of
the several Underwriters hereunder are subject to the accuracy, when made and
on the Closing Date, of the representations and warranties of the Bank
contained herein, to the accuracy of the statements of the Bank made in any
certificates pursuant to the provisions hereof, to the performance by the Bank
of its obligations hereunder, and to each of the following additional terms
and conditions:
(a) Prior to the Closing Date, no stop order suspending the
effectiveness of the Registration Statement or any part thereof shall
have been issued and no proceeding for that purpose shall have been
initiated or threatened by the Commission; and any request of the
Commission for inclusion of additional information in the Registration
Statement or the Prospectus or otherwise shall have been complied with to
the reasonable satisfaction of the Representative; and the Bank shall
have filed the Prospectus Supplement with the Commission pursuant to Rule
424(b) of the Rules and Regulations within the time period prescribed by
such rule.
(b) All corporate proceedings and other legal matters incident to
the authorization, form and validity of this Agreement, the Certificates,
the Pooling Agreement, the Registration Statement and the Prospectus, and
all other legal matters relating to such agreements and the transactions
contemplated hereby and thereby shall be satisfactory in all material
respects to counsel for the Underwriters, and the Bank shall have
furnished to such counsel all documents and information that they may
reasonably request to enable them to pass upon such matters.
(c) The Pooling Agreement shall have been duly executed and
delivered by the Bank and the Trustee and the Certificates shall have
been duly executed and delivered by the Trustee and duly authenticated by
the Trustee.
(d) The Representative shall have received evidence satisfactory to
it and its counsel that on or before the Closing Date, UCC-1 financing
statements required to be filed on or prior to the Closing Date pursuant
to the Pooling Agreement have been filed.
(e) Michael J. Broker, ______ of the Bank, shall have furnished to
the Representative his written opinion, addressed to the Underwriters and
dated the Closing Date, regarding the due organization and power and
authority of the Bank, the due authorization, execution and delivery by
the Bank of the Pooling Agreement, no conflicts or violations of its
charter or by-laws, contracts or law and other related matters, in form
and substance reasonably satisfactory to the Representative and its
counsel.
(f) Brown & Wood LLP shall have furnished to the Representative
their written opinion, addressed to the Underwriters and dated the
Closing Date, regarding (i) the enforceability of the Pooling Agreement,
(ii) the validity of the security interests created thereby, (iii) the
due authorization and issuance of the Certificates, (iv) no violations of
law, (v) compliance with applicable federal securities laws, (vi)
exemption of the Bank and the Issuer from registration as an investment
company under the Investment Company Act of 1940, (vii) the conformity in
all material respects of the Pooling Agreement to the description thereof
contained in the Registration Statement and the Prospectus, (viii)
negative assurances concerning the Prospectus and (ix) the lack of
qualification of the Pooling Agreement under the Trust Indenture Act, in
each case in form and substance reasonably satisfactory to the
Representative and its counsel.
(g) _____________, special Texas counsel to the Bank, shall have
furnished to the Representative their written opinion, addressed to the
Underwriters and dated the Closing Date, regarding the perfection and
priority of the security interests created by the Pooling Agreement.
(h) Brown & Wood LLP shall have furnished to the Representative
their written opinion, addressed to the Underwriters and dated the
Closing Date with respect to certain matters relating to the transfer of
the Receivables by the Seller to the Issuer, in form and substance
reasonably satisfactory to the Representative and its counsel.
(i) Brown & Wood LLP shall have furnished to the Representative
their written opinion, addressed to the Underwriters and dated the
Closing Date, to the effect that (i) the Issuer will not be an
association taxable as a corporation for federal income tax purposes and
that the Issuer will be classified as a grantor trust under subpart E,
part 1, subchapter J, chapter 1 of subtitle A of the Code, (ii) the
holders of the Certificates will be treated as the owners of undivided
interests in the interest and principal portions of the Issuer
represented by the Certificates for federal income tax purposes and (iii)
the statements set forth in the Prospectus under the heading "Certain
Federal Income Tax Consequences", to the extent that they are statements
of law are true and correct in all material respects, in form and
substance reasonably satisfactory to the Representative and its counsel.
(j) The Representative shall have received from Simpson Thacher &
Bartlett, counsel for the Underwriters, such opinion or opinions, dated
the Closing Date, with respect to such matters as the Representative may
require, and the Bank shall have furnished to such counsel such documents
as they reasonably request for enabling them to pass upon such matters.
(k) ____________, counsel to the Trustee, shall have furnished to
the Representative their written opinion, as counsel to the Trustee,
addressed to the Underwriters and dated the Closing Date, regarding the
due organization of the Trustee, the due authorization, execution and
delivery by the Trustee of the Pooling Agreement, no conflicts or
violations of organizational documents, contracts or law and other
related matters, in form and substance reasonably satisfactory to the
Representative and its counsel.
(l) The Representative shall have received a letter dated the date
hereof (the "Procedures Letter") from a firm of independent nationally
recognized certified public accountants acceptable to the Representative
verifying the accuracy of such financial and statistical data contained
in the Prospectus as the Representative shall deem advisable. In
addition, if any amendment or supplement to the Prospectus made after the
date hereof contains financial or statistical data, the Representative
shall have received a letter dated the Closing Date confirming the
Procedures Letter and providing additional comfort on such new data.
(m) Representative shall have received a certificate, dated the
Closing Date, of any of the Chairman of the Board, the President, any
Senior Vice President or the chief financial officer of the Bank stating
that (A) the representations and warranties of the Bank contained in this
Agreement and the Pooling Agreement are true and correct on and as of the
Closing Date, (B) the Bank has complied with all agreements and satisfied
all conditions on its part to be performed or satisfied hereunder and
under the Pooling Agreement at or prior to the Closing Date, (C) no stop
order suspending the effectiveness of the Registration Statement has been
issued and no proceedings for that purpose have been instituted or, to
the best of his or her knowledge, are contemplated by the Commission, and
(D) since ______, ____, there has been no material adverse change in the
financial position or results of operations of the Bank or the Issuer or
any change, or any development including a prospective change, in or
affecting the condition (financial or otherwise), results of operations,
business or prospects of the Bank or the Issuer except as set forth in or
contemplated by the Registration Statement and the Prospectus.
(n) The Representative shall have received a letter from ____
stating that the Class A Certificates have received a rating of "___"
from _____ and a letter from ____ stating that the Class A Certificates
have received a rating of "___" from _____. ______ (o) The Representative
shall have received a letter from ____ stating that the Class B
Certificates have received a rating of "___" from _____ and a letter from
____ stating that the Class B Certificates have received a rating of
"___" from _____.
(o) Subsequent to the execution and delivery of this Agreement there
shall not have occurred any of the following: (i) trading in securities
generally on the New York Stock Exchange, the American Stock Exchange or
the over-the-counter market shall have been suspended or limited, or
minimum prices shall have been established on either of such exchanges or
such market by the Commission, by such exchange or by any other
regulatory body or governmental authority having jurisdiction or (ii) a
general moratorium on commercial banking activities shall have been
declared by Federal or New York State authorities or (iii) an outbreak or
escalation of hostilities or a declaration by the United States of a
national emergency or war or any other substantial national or
international calamity or emergency as to make it, in the reasonable
judgment of a majority in interest of the several Underwriters,
impracticable or inadvisable to proceed with the public offering or the
delivery of the Certificates on the terms and in the manner contemplated
in the Prospectus.
All opinions, letters, evidence and certificates mentioned above or
elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if they are in form and substance reasonably
satisfactory to counsel for the Underwriters.
6. TERMINATION. The obligations of the Underwriters hereunder may be
terminated by the Representative, in its absolute discretion, by notice given
to and received by the Bank prior to delivery of and payment for the
Certificates if, prior to that time, any of the events described in Section
5(p) shall have occurred or any of the conditions described in Section 5(m),
5(n) or 5(o) shall not be satisfied.
7. DEFAULTING UNDERWRITERS.
(a) If, any one or more of the Underwriters shall fail to
purchase and pay for any of the Certificates agreed to be purchased
by such Underwriter hereunder on the Closing Date, and such failure
constitutes a default in the performance of its or their obligations
under this Agreement, the Representative may make arrangements for
the purchase of such Certificates by other persons satisfactory to
the Bank and the Representative, including any of the Underwriters,
but if no such arrangements are made by the Closing Date, then each
remaining non-defaulting Underwriter shall be severally obligated to
purchase the Certificates which the defaulting Underwriter or
Underwriters agreed but failed to purchase on the Closing Date in
the respective proportions which the principal amount of
Certificates set forth opposite the name of each remaining
non-defaulting Underwriter in Schedule 1 hereto bears to the
aggregate principal amount of Certificates set forth opposite the
names of all the remaining non-defaulting Underwriters in Schedule 1
hereto; provided, however, that the remaining non-defaulting
Underwriters shall not be obligated to purchase any of the
Certificates on the Closing Date if the aggregate principal amount
of Certificates which the defaulting Underwriter or Underwriters
agreed but failed to purchase on such date exceeds one-eleventh of
the aggregate principal amount of the Certificates to be purchased
on the Closing Date, and any remaining non-defaulting Underwriter
shall not be obligated to purchase in total more than 110% of the
principal amount of the Certificates which it agreed to purchase on
the Closing Date pursuant to the terms of Section 2. If the
foregoing maximums are exceeded and the remaining Underwriters or
other underwriters satisfactory to the Representative and the Bank
do not elect to purchase the Certificates which the defaulting
Underwriter or Underwriters agreed but failed to purchase, this
Agreement shall terminate without liability on the part of any
non-defaulting Underwriter or the Bank, except that the Bank will
continue to be liable for the payment of expenses to the extent set
forth in Sections 8 and 12 and except that the provisions of
Sections 9 and 10 shall not terminate and shall remain in effect. As
used in this Agreement, the term "Underwriter" includes, for all
purposes of this Agreement unless the context otherwise requires,
any party not listed in Schedule 1 hereto who, pursuant to this
Section 7, purchases Certificates which a defaulting Underwriter
agreed but failed to purchase.
(b) Nothing contained herein shall relieve a defaulting Underwriter
of any liability it may have for damages caused by its default. If other
underwriters are obligated or agree to purchase the Certificates of a
defaulting Underwriter, either the Representative or the Bank may
postpone the Closing Date for up to seven full business days in order to
effect any changes that in the opinion of counsel for the Bank or counsel
for the Underwriters may be necessary in the Registration Statement, the
Prospectus or in any other document or arrangement, and the Bank agrees
to file promptly any amendment or supplement to the Registration
Statement or the Prospectus that effects any such changes.
8. REIMBURSEMENT OF UNDERWRITERS' EXPENSES.
(a) If (a) notice shall have been given pursuant to Section 6
terminating the obligations of the Underwriters hereunder, (b) the Bank
shall fail to tender the Certificates for delivery to the Underwriters
for any reason permitted under this Agreement or (c) the Underwriters
shall decline to purchase the Certificates for any reason permitted under
this Agreement, the Bank shall reimburse the Underwriters for the fees
and expenses of their counsel and for such other out-of-pocket expenses
as shall have been reasonably incurred by them in connection with this
Agreement and the proposed purchase of the Certificates, and upon demand
the Bank shall pay the full amount thereof to the Representative. If this
Agreement is terminated pursuant to Section 7 by reason of the default of
one or more Underwriters, the Bank shall not be obligated to reimburse
any defaulting Underwriter on account of those expenses.
9. INDEMNIFICATION.
(a) The Bank shall indemnify and hold harmless each Underwriter and
each person, if any, who controls any Underwriter within the meaning of
Section 15 of the Securities Act (collectively referred to for the
purposes of this Section 9 and Section 10 as the Underwriter) against any
loss, claim, damage or liability, joint or several, to which that
Underwriter may become subject, under the Securities Act or otherwise,
insofar as such loss, claim, damage or liability (or any action in
respect thereof) arises out of or is based upon (i) any untrue statement
or alleged untrue statement of a material fact contained in any
preliminary prospectus supplement, the Registration Statement or the
Prospectus or in any amendment or supplement thereto or (ii) the omission
or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in light of
the circumstances under which they are made, not misleading, and shall
reimburse each Underwriter for any legal or other expenses reasonably
incurred by that Underwriter directly in connection with investigating or
preparing to defend or defending against or appearing as a third party
witness in connection with any such loss, claim, damage or liability (or
any action in respect thereof) as such expenses are incurred; provided,
however, that the Bank shall not be liable in any such case to the extent
that any such loss, claim, damage or liability (or any action in respect
thereof) arises out of or is based upon an untrue statement or alleged
untrue statement in or omission or alleged omission from any preliminary
prospectus supplement, the Registration Statement or the Prospectus or
any such amendment or supplement in reliance upon and in conformity with
the Underwriters' Information; provided, further that such indemnity with
respect to any preliminary prospectus supplement or any amendment or
supplement thereto shall not inure to the benefit of any Underwriter from
whom the person asserting any such loss, claim, damage or liability
purchased the Certificates which are the subject thereof (or to the
benefit of any person controlling such Underwriter) if at or prior to the
written confirmation of the sale of such Certificates a copy of the
Prospectus (or the Prospectus as amended or supplemented) was not sent or
delivered to such person and the untrue statement or omission of a
material fact contained in such preliminary prospectus supplement was
corrected in the Prospectus (or the Prospectus as amended or
supplemented) unless the failure is the result of noncompliance by the
Bank with Section 4(d).
(b) Each Underwriter, severally and not jointly, shall indemnify and
hold harmless the Bank, each of its directors, each officer of the Bank
who signed the Registration Statement and each person, if any, who
controls the Bank within the meaning of Section 15 of the Securities Act
(collectively referred to solely for the purposes of this Section 9 and
Section 10 as the "Bank"), against any loss, claim, damage or liability,
joint or several, to which the Bank may become subject, under the
Securities Act or otherwise, insofar as such loss, claim, damage or
liability (or any action in respect thereof) arises out of or is based
upon (i) any untrue statement or alleged untrue statement of a material
fact contained in any preliminary prospectus supplement, the Registration
Statement or the Prospectus or in any amendment or supplement thereto or
(ii) the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they are made, not
misleading, but in each case only to the extent that the untrue statement
or alleged untrue statement or omission or alleged omission was made in
reliance upon and in conformity with the written information furnished to
the Bank by or on behalf of such Underwriter specifically for use
therein, and shall reimburse the Bank for any legal or other expenses
reasonably incurred by the Bank in connection with investigating or
preparing to defend or defending against or appearing as third party
witness in connection with any such loss, claim, damage or liability (or
any action in respect thereof) as such expenses are incurred. The parties
acknowledge and agree that the written information furnished to the Bank
through the Representative by or on behalf of the Underwriters (the
"Underwriters' Information") consists solely of the ______ paragraphs of
text and the following table under the caption "Underwriting" in the
Prospectus Supplement.
(c) Promptly after receipt by an indemnified party under this
Section 9 of notice of any claim or the commencement of any action, the
indemnified party shall, if a claim in respect thereof is to be made
against the indemnifying party under this Section 9, notify the
indemnifying party in writing of the claim or the commencement of that
action; provided, however, that the failure to notify the indemnifying
party shall not relieve it from any liability which it may have under
this Section 9 except to the extent it has been materially prejudiced
(through the forfeiture of substantive rights or defenses) by such
failure; and, provided, further, that the failure to notify the
indemnifying party shall not relieve it from any liability which it may
have to an indemnified party otherwise than under this Section 9. If any
such claim or action shall be brought against an indemnified party, and
it shall notify the indemnifying party thereof, the indemnifying party
shall be entitled to participate therein and, to the extent that it
wishes, jointly with any other similarly notified indemnifying party, to
assume the defense thereof with counsel reasonably satisfactory to the
indemnified party. After notice from the indemnifying party to the
indemnified party of its election to assume the defense of such claim or
action, the indemnifying party shall not be liable to the indemnified
party under this Section 9 for any legal or other expenses subsequently
incurred by the indemnified party in connection with the defense thereof
other than reasonable costs of investigation; provided, however, an
indemnified party shall have the right to employ its own counsel in any
such action, but the fees, expenses and other charges of such counsel for
the indemnified party will be at the expense of such indemnified party
unless (1) the employment of counsel by the indemnified party has been
authorized in writing by the indemnifying party, (2) the indemnified
party has reasonably concluded (based upon advice of counsel to the
indemnified party) that there may be legal defenses available to it or
other indemnified parties that are different from or in addition to those
available to the indemnifying party, (3) a conflict or potential conflict
exists (based upon advice of counsel to the indemnified party) between
the indemnified party and the indemnifying party (in which case the
indemnifying party will not have the right to direct the defense of such
action on behalf of the indemnified party) or (4) the indemnifying party
has not in fact employed counsel reasonably satisfactory to the
indemnified party to assume the defense of such action within a
reasonable time after receiving notice of the commencement of the action,
in each of which cases the reasonable fees, disbursements and other
charges of counsel will be at the expense of the indemnifying party or
parties. It is understood that the indemnifying party or parties shall
not, in connection with any proceeding or related proceedings in the same
jurisdiction, be liable for the reasonable fees, disbursements and other
charges of more than one separate firm of attorneys (in addition to any
local counsel) at any one time for all such indemnified party or parties.
Each indemnified party, as a condition of the indemnity agreements
contained in Sections 9(a) and 9(b), shall use all reasonable efforts to
cooperate with the indemnifying party in the defense of any such action
or claim. No indemnifying party shall be liable for any settlement of any
such action effected without its written consent, but if settled with its
written consent or if there be a final judgment of the plaintiff in any
such action, the indemnifying party agrees to indemnify and hold harmless
any indemnified party from and against any loss or liability by reason of
such settlement or judgment. No indemnifying party shall, without the
prior written consent of the indemnified party, effect any settlement of
any pending or threatened proceeding in respect of which any indemnified
party is or could have been a party and indemnity could have been sought
hereunder by such indemnified party unless such settlement includes an
unconditional release of such indemnified party from all liability on
claims that are the subject matter of such proceedings.
The obligations of the Bank and the Underwriters in this Section 9
and in Section 10 are in addition to any other liability which the Bank or the
Underwriters, as the case may be, may otherwise have.
10. CONTRIBUTION. If the indemnification provided for in Section 9 is
unavailable or insufficient to hold harmless an indemnified party under
Section 9(a) or (b), then each indemnifying party shall, in lieu of
indemnifying such indemnified party, contribute to the amount paid or payable
by such indemnified party as a result of such loss, claim, damage or liability
(i) in such proportion as shall be appropriate to reflect the relative
benefits received by the Bank on the one hand and the Underwriters on the
other from the offering of the Certificates or (ii) if the allocation provided
by clause (i) above is not permitted by applicable law, in such proportion as
is appropriate to reflect not only the relative benefits referred to in clause
(i) above but also the relative fault of the Bank on the one hand and the
Underwriters on the other with respect to the statements or omissions which
resulted in such loss, claim, damage or liability, as well as any other
relevant equitable considerations. The relative benefits received by the Bank
on the one hand and the Underwriters on the other with respect to such
offering shall be deemed to be in the same proportion as the total net
proceeds from the offering of the Certificates purchased under this Agreement
(before deducting expenses) received by the Bank bear to the total
underwriting discounts and commissions received by the Underwriters with
respect to the Certificates purchased under this Agreement, in each case as
set forth in the table on the cover page of the Prospectus Supplement. The
relative fault shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Bank on the one hand or the Underwriters on the other, the
intent of the parties and their relative knowledge, access to information and
opportunity to correct or prevent such untrue statement or omission.
The Bank and the Underwriters agree that it would not be just and
equitable if contributions pursuant to this Section 10 were to be determined
by pro rata allocation (even if the Underwriters were treated as one entity
for such purpose) or by any other method of allocation which does not take
into account the equitable considerations referred to herein. The amount paid
or payable by an indemnified party as a result of the loss, claim, damage or
liability referred to above in this Section 10 shall be deemed to include,
subject to the limitations on the fees and expenses of separate counsel set
forth in Section 9, for purposes of this Section 10, any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such claim or any action in respect thereof.
Notwithstanding the provisions of this Section 10, no Underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Certificates underwritten by it and distributed to the
public were offered to the public less the amount of any damages which such
Underwriter has otherwise paid or become liable to pay by reason of any 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
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The Underwriters' obligations to
indemnify as provided in Section 9 and contribute as provided in this Section
10 are several in proportion to their respective underwriting obligations and
not joint.
11. PERSONS ENTITLED TO BENEFIT OF AGREEMENT. This Agreement shall inure
to the benefit of and be binding upon the Underwriters and the Bank and their
respective successors. Nothing expressed or mentioned in this Agreement is
intended or shall be construed to give any person, firm or corporation, other
than the Underwriters and the Bank and their respective successors and the
controlling persons and officers and directors referred to in Sections 9 and
10 and their heirs and legal representatives, any legal or equitable right,
remedy or claim under or in respect of this Agreement or any provision
contained herein.
12. EXPENSES. The Bank agrees with the Underwriters to pay (a) the costs
incident to the authorization, issuance, sale, preparation and delivery of the
Certificates and any taxes payable in that connection; (b) the costs incident
to the preparation, printing and filing under the Securities Act of the
Registration Statement and any amendments and exhibits thereto; (c) the costs
of distributing the Registration Statement as originally filed and each
amendment thereto and any post-effective amendments thereof (including, in
each case, exhibits), any preliminary prospectus supplement, the Prospectus
and any amendment or supplement to the Prospectus, including, without
limitation, the Prospectus Supplement, all as provided in this Agreement; (d)
the costs of printing, reproducing and distributing this Agreement and any
other underwriting and selling group documents by mail, telex or other means
of communications; (e) the fees and expenses of qualifying the Certificates
under the securities laws of the several jurisdictions as provided in Section
4(g) and of preparing, printing and distributing Blue Sky Memoranda (including
related fees and expenses of counsel to the Underwriters); (f) any fees
charged by _____ and _____ for rating the Certificates; (g) all fees and
expenses of the Trustee and its counsel; and (h) all other costs and expenses
incident to the performance of the obligations of the Bank under this
Agreement; provided that, except as otherwise provided in this Section 12 and
in Section 8, the Underwriters shall pay their own costs and expenses,
including the costs and expenses of their counsel, any transfer taxes on the
Certificates which they may sell and the expenses of advertising any offering
of the Certificates made by the Underwriters.
13. SURVIVAL. The respective indemnities, rights of contribution,
representations, warranties and agreements of the Bank and the Underwriters
contained in this Agreement or made by or on behalf on them, respectively,
pursuant to this Agreement, shall survive the delivery of and payment for the
Certificates and shall remain in full force and effect, regardless of any (i)
termination or cancellation of this Agreement, (ii) any investigation made by
or on behalf of any of them or any person controlling any of them or (iii)
acceptance of and payment for the Certificates.
14. NOTICES, ETC. All statements, requests, notices and agreements
hereunder shall be in writing, and:
(a) if to the Underwriters, shall be delivered or sent by mail or
facsimile transmission and confirmed to c/o the Representative at ,
Attention: ___________, with a copy to the Legal Department;
(b) if to the Bank, shall be delivered or sent by mail or facsimile
transmission and confirmed to the address of the Bank set forth in the
Registration Statement, Attention: General Counsel;
provided, however, that any notice to an Underwriter pursuant to Section 9(c)
shall be delivered or sent by mail, telex or facsimile transmission to such
Underwriter at its address set forth in its acceptance telex to the
Representative, which address will be supplied to any other party hereto by
the Representative upon request. Any such statements, requests, notices or
agreements shall take effect at the time of receipt thereof. The Bank shall be
entitled to act and rely upon any request, consent, notice or agreement given
or made on behalf of the Underwriters by the Representative.
15. DEFINITIONS OF CERTAIN TERMS. For purposes of this Agreement,
"business day" means any day on which the New York Stock Exchange, Inc. is
open for trading.
16. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
17. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all such
counterparts shall together constitute one and the same instrument.
18. HEADINGS. The headings herein are inserted for convenience of
reference only and are not intended to be part of, or to affect the meaning or
interpretation of, this Agreement.
If the foregoing is in accordance with your understanding of the
agreement between the Bank and the several Underwriters, kindly indicate your
acceptance in the space provided for that purpose below.
Very truly yours,
USAA FEDERAL SAVINGS BANK
By _______________________________________
Name:
Title:
Accepted:
[Name of Representative],
for Itself and as Representative
of the Several Underwriters
By______________________________________
Authorized Signatory
SCHEDULE 1
Principal Principal
Amount of Amount of
Class A Class B
Underwriters Certificates Certificates
------------------------------------------------------------------------------
[Name of Representative] $ $
----------------
<PAGE>
Exhibit 4.1
=============================================================================
USAA FEDERAL SAVINGS BANK
Seller and Servicer
and
--------------------
Trustee and Collateral Agent
on behalf of the Certificateholders
--------------------
POOLING AND SERVICING AGREEMENT
Dated as of ________ __, ______
$----------
USAA Auto Loan Grantor Trust ______
_____% Automobile Loan Pass-Through Certificates, Class A
_____% Automobile Loan Pass-Through Certificates, Class B
=============================================================================
Table of Contents
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Page
Article I
Definitions
Section 1.1 Definitions.........................................................................1
Section 1.2 Usage of Terms.....................................................................14
Section 1.3 Simple Interest Method; Allocations................................................14
Section 1.4 References.........................................................................14
Section 1.5 Section References.................................................................14
Article II
Section 2.1 Creation of Trust..................................................................14
Article III
Section 3.1 Conveyance of Receivables..........................................................15
Article IV
Section 4.1 Acceptance by Trustee..............................................................15
Article V
The Receivables
Section 5.1 Representations and Warranties of Seller; Conditions Relating to
Receivables........................................................................16
Section 5.2 Repurchase Upon Breach or Failure of a Condition...................................19
Section 5.3 Custody of Receivable Files........................................................19
Section 5.4 Duties of Servicer as Custodian....................................................20
Section 5.5 Instructions; Authority to Act.....................................................21
Section 5.6 Custodian's Indemnification........................................................21
Section 5.7 Effective Period and Termination...................................................21
Article VI
Administration and Servicing of Receivables
Section 6.1 Duties of Servicer.................................................................22
Section 6.2 Collection of Receivable Payments..................................................22
Section 6.3 Realization Upon Receivables.......................................................23
Section 6.4 Maintenance of Security Interests in Financed Vehicles.............................23
Section 6.5 Covenants of Servicer..............................................................24
Section 6.6 Purchase of Receivables Upon Breach................................................24
Section 6.7 Servicing Fee......................................................................25
Section 6.8 Servicer's Certificate.............................................................25
Section 6.9 Annual Statement as to Compliance..................................................25
Section 6.10 Annual Audit Report................................................................26
Section 6.11 Reports to Certificateholders and the Rating Agencies..............................26
Section 6.12 Insurance..........................................................................27
Article VII
Distributions; Statements to Certificateholders
Section 7.1 Accounts...........................................................................27
Section 7.2 Collections........................................................................29
Section 7.3 Advances...........................................................................29
Section 7.4 Additional Deposits................................................................30
Section 7.5 Distributions......................................................................30
Section 7.6 Reserve Account....................................................................32
Section 7.7 Net Deposits.......................................................................32
Section 7.8 Statements to Certificateholders...................................................32
Article VIII
[Yield Supplement Agreement
Section 8.1 Yield Supplement Agreement.........................................................33
Section 8.2 Yield Supplement Account...........................................................34
Article IX
The Certificates
Section 9.1 The Certificates...................................................................36
Section 9.2 Execution, Authentication and Delivery of Certificates.............................36
Section 9.3 Registration of Transfer and Exchange of Certificates..............................36
Section 9.4 Mutilated, Destroyed, Lost, or Stolen Certificates.................................38
Section 9.5 Persons Deemed Owners..............................................................38
Section 9.6 Access to List of Certificateholders' Names and Addresses..........................38
Section 9.7 Maintenance of Office or Agency....................................................39
Section 9.8 Book-Entry Certificates............................................................39
Section 9.9 Notices to Clearing Agency.........................................................40
Section 9.10 Definitive Certificates............................................................40
Section 9.11 Appointment of Paying Agent........................................................41
Section 9.12 Authenticating Agent...............................................................41
Section 9.13 Actions of Certificateholders......................................................43
Article X
The Seller
Section 10.1 Representations of Seller..........................................................44
Section 10.2 Liability of Seller; Indemnities...................................................45
Section 10.3 Merger or Consolidation of Seller..................................................45
Section 10.4 Limitation on Liability of Seller and Others.......................................45
Section 10.5 Seller May Own Certificates........................................................46
Article XI
The Servicer
Section 11.1 Representations of Servicer........................................................46
Section 11.2 Liability of Servicer; Indemnities.................................................47
Section 11.3 Merger or Consolidation of Servicer................................................48
Section 11.4 Limitation on Liability of Servicer and Others.....................................48
Section 11.5 Servicer Not To Resign.............................................................50
Section 11.6 Delegation of Duties...............................................................50
Article XII
Events of Servicing Termination
Section 12.1 Events of Servicing Termination....................................................50
Section 12.2 Trustee to Act; Appointment of Successor...........................................52
Section 12.3 Notification to Certificateholders.................................................52
Section 12.4 Waiver of Past Defaults............................................................52
Article XIII
The Trustee
Section 13.1 No Power to Engage in Business or to Vary Investments..............................53
Section 13.2 Duties of Trustee..................................................................53
Section 13.3 Trustee's Assignment of Repurchased Receivables and Trustee's Certificate..........55
Section 13.4 Certain Matters Affecting the Trustee..............................................55
Section 13.5 Trustee Not Liable for Certificates or Receivables.................................57
Section 13.6 Trustee May Own Certificates.......................................................58
Section 13.7 Trustee's Fees and Expenses........................................................58
Section 13.8 Indemnity..........................................................................59
Section 13.9 Eligibility Requirements for Trustee...............................................59
Section 13.10 Resignation or Removal of Trustee..................................................59
Section 13.11 Successor Trustee..................................................................60
Section 13.12 Merger or Consolidation of Trustee.................................................60
Section 13.13 Appointment of Co-Trustee or Separate Trustee......................................61
Section 13.14 Representations and Warranties of Trustee..........................................62
Section 13.15 Tax Returns........................................................................63
Section 13.16 Trustee May Enforce Claims Without Possession of Certificates......................63
Section 13.17 Suits for Enforcement..............................................................63
Section 13.18 Maintenance of Office or Agency....................................................63
Article XIV
Termination
Section 14.1 Termination of the Trust...........................................................64
Section 14.2 Optional Purchase of All Receivables...............................................65
Article XV
Miscellaneous Provisions
Section 15.1 Amendment..........................................................................65
Section 15.2 Protection of Title to Trust.......................................................66
Section 15.3 Limitation on Rights of Certificateholders.........................................68
Section 15.4 Governing Law......................................................................69
Section 15.5 Notices............................................................................69
Section 15.6 Severability of Provisions.........................................................69
Section 15.7 Assignment.........................................................................69
Section 15.8 Certificates Nonassessable and Fully Paid..........................................70
Section 15.9 Third-Party Beneficiaries..........................................................70
</TABLE>
Schedule A:.......List of Receivables
Schedule B:.......Location of Receivables Files
Exhibit A:........Form of Class A Certificate
Exhibit B:........Form of Class B Certificate
Exhibit C-1:......Trustee's Certificate
Exhibit C-2:......Trustee's Certificate
Exhibit D:........Servicer's Report
Exhibit E:........Form of Certificateholder Report
Exhibit F:........Form of Yield Supplement Agreement
Exhibit 4.1
This Pooling and Servicing Agreement, dated as of _____ __, ______,
is made with respect to the formation of the USAA Auto Loan Grantor Trust
______ (the "Trust"), between USAA Federal Savings Bank, a federally chartered
savings association (the "Seller" and the "Servicer" in its respective
capacities as such), and _________________, a banking corporation organized
under the laws of the State of _____________, 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
Definitions
Section 1.1 Definitions. Whenever used in this 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 and 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 7.3.
"Agent" means any of the Paying Agent, the Collateral Agent, the
Authenticating Agent and the Transfer Agent.
"Agreement" means this Pooling and Servicing Agreement and all
amendments and supplements hereto.
"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
9.12.
"Authorized Officer" means any officer in the Corporate Trust
Department of the Trustee with direct responsibility for the administration of
this Agreement.
"Available Interest" means, with respect to any Payment Date, the
excess of (a) the sum of (i) Interest Collections for such Payment Date, [(ii)
the Yield Supplement Amount for such Payment Date] and (iii) all Advances made
by the Servicer with respect to such Payment Date pursuant to Section 7.3(a),
over (b) the amount of Outstanding Advances to be reimbursed on or with
respect to such Payment Date pursuant to Section 7.3(a).
"Available Principal" means, with respect to any Payment Date, the
sum of the following amounts with respect to the preceding Collection Period:
(i) that portion of all Collections on the Receivables received during such
Collection Period and allocable to principal in accordance with the terms of
the Receivables and the Servicer's customary servicing procedures, (ii) to the
extent attributable to principal, the Purchase Amount received with respect to
each Receivable repurchased by the Seller or purchased by the Servicer under
an obligation which arose during the related Collection Period and (iii)
Liquidation Proceeds, to the extent allocable to principal, received during
such Collection Period. Available Principal on any Payment Date shall exclude
all payments and proceeds of any Receivables the Purchase Amount of which has
been distributed on a prior Payment Date.
"Available Reserve Amount" means, as of any Payment 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.
"Book-Entry Certificates" means beneficial interests in the
Certificates described in Section 9.8, the ownership and transfers of which
shall be made through book entries by a Clearing Agency as described in
Section 9.8.
"Business Day" means a day, other than a Saturday or a Sunday, on
which banking institutions or trust companies located in the State of New York
and the State of Texas are open for the purpose of conducting a commercial
banking business.
"Certificate" means any Class A Certificate or Class B Certificate.
"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 this
Agreement, the interest evidenced by any Certificate registered in the name of
the Seller, the Servicer or any Person controlling, controlled by, or under
common control with the Seller or the Servicer shall not be taken into account
in determining whether the requisite percentage necessary to effect any such
consent, request or waiver shall have been obtained; provided, however, that
in determining whether the Trustee shall be protected in relying upon any such
consent, request, waiver or demand, only Certificates that an Authorized
Officer of the Trustee knows to be so owned shall be so disregarded.
"Certificate Owner" means, with respect to a Book-Entry Certificate,
the Person who is the owner of such Book-Entry Certificate, as reflected on
the books of the Clearing Agency, or on the books of a direct or indirect
Clearing Agency Participant.
"Certificate Register" means the register maintained pursuant to
Section 9.3.
"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 7.1.
"Class A Interest Carryover Shortfall" means, (i) with respect to the
initial Payment Date, zero and (ii) with respect to any other Payment Date,
the excess of Class A Monthly Interest for the preceding Payment Date, and any
outstanding Class A Interest Carryover Shortfall on such preceding Payment
Date, over the amount in respect of interest that is actually deposited in the
Class A Distribution Account on such preceding Payment 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 Payment
Date, the sum of Class A Monthly Interest for such Payment Date and the Class
A Interest Carryover Shortfall for such Payment Date.
"Class A Monthly Interest" means, with respect to any Payment Date,
one-twelfth (or in the case of the first Payment Date, ____) of the Class A
Pass-Through Rate multiplied by the Class A Certificate Balance as of the
preceding Payment Date (after giving effect to all payments of principal made
on such Payment Date) or, in the case of the first Payment Date, as of the
Closing Date.
"Class A Monthly Principal" means, with respect to any Payment Date,
the Class A Percentage of Available Principal for such Payment Date plus the
Class A Percentage of Realized Losses with respect to the related Collection
Period.
"Class A Pass-Through Rate" means ____% per annum, calculated on the
basis of a 360-day year comprised of twelve 30-day months.
"Class A Percentage" means ____%.
"Class A Pool Factor" means, with respect to any Payment Date, the
Class A Certificate Balance as of such Payment Date (after giving effect to
all payments of principal to be made on such Payment 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 Payment Date, zero and (ii) with respect to any other Payment
Date, the excess of (x) Class A Monthly Principal for such Payment Date and
(y) any outstanding Class A Principal Carryover Shortfall from the preceding
Payment Date over the amount in respect of principal that is actually
deposited in the Class A Distribution Account on such Payment Date.
"Class A Principal Distribution" means, (i) with respect to the
initial Payment Date, the Class A Monthly Principal for such Payment Date and
(ii) with respect to any other Payment Date, the sum of Class A Monthly
Principal for such Payment Date and the Class A Principal Carryover Shortfall
as of the preceding Payment Date. In addition, on the Final Scheduled Payment
Date, the Class A Principal Distribution shall include any additional amount
required to reduce the outstanding principal balance of the Class A
Certificates to zero.
"Class B Certificate" means a certificate executed by the Trustee on
behalf of the Trust and authenticated by the Trustee, substantially in the
form of Exhibit B hereto.
"Class B Certificateholder" or "Class B Holder" means the Person in
whose name a Class B Certificate shall be registered in the Certificate
Register, except that, solely for the purpose of giving any consent, request
or waiver pursuant to this Agreement, the interest evidenced by any Class B
Certificate registered in the name of the Seller, the Servicer or any Person
actually known to an Authorized Officer of the Trustee to be an Affiliate of
the Seller or the Servicer shall not be taken into account in determining
whether the requisite percentage necessary to effect any such consent, request
or waiver shall have been obtained.
"Class B Certificate Balance", at any time, equals the Original Class
B Certificate Balance, as reduced by all principal amounts distributed to
Class B Certificateholders prior to such time.
"Class B Certificate Owner" means, with respect to a Book-Entry
Certificate representing a beneficial interest in the Class B Certificates,
the Person who is the owner of such Book-Entry Certificate, as reflected on
the books of the Clearing Agency, or on the books of a Person maintaining an
account with such Clearing Agency (directly or as an indirect participant in
accordance with the rules, regulations and procedures of such Clearing
Agency).
"Class B Distribution Account" means the account established and
maintained as such pursuant to Section 7.1.
"Class B Interest Carryover Shortfall" means, (i) with respect to the
initial Payment Date, zero and (ii) with respect to any other Payment Date,
the excess of Class B Monthly Interest for the preceding Payment Date, and any
outstanding Class B Interest Carryover Shortfall on such preceding Payment
Date, over the amount in respect of interest that is actually deposited in the
Class B Distribution Account on such preceding Payment 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 Payment
Date, the sum of Class B Monthly Interest for such Payment Date and the Class
B Interest Carryover Shortfall for such Payment Date.
"Class B Monthly Interest" means, with respect to any Payment Date,
one-twelfth (or in the case of the first Payment Date, ____) of the Class B
Pass-Through Rate multiplied by the Class B Certificate Balance as of the
preceding Payment Date (after giving effect to all payments of principal made
on such Payment Date) or, in the case of the first Payment Date, as of the
Closing Date.
"Class B Monthly Principal" means, with respect to any Payment Date,
the Class B Percentage of Available Principal for such Payment Date plus the
Class B Percentage of Realized Losses with respect to the related Collection
Period.
"Class B Pass-Through Rate" means ___% per annum, calculated on the
basis of a year of twelve 30-day months.
"Class B Percentage" means ____%.
"Class B Pool Factor" means, with respect to any Payment Date, the
Class B Principal Balance as of such Payment Date (after giving effect to all
payments of principal to be made on such Payment 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 Payment Date, zero and (ii) with respect to any other Payment
Date, the excess of the sum of (x) Class B Monthly Principal for such Payment
Date (y) and any outstanding Class B Principal Carryover Shortfall from the
preceding Payment Date over the amount in respect of principal that is
actually deposited in the Class B Distribution Account on such Payment Date.
"Class B Principal Distribution" means, (i) with respect to the
initial Payment Date, the Class B Monthly Principal for such Payment Date and
(ii) with respect to any other Payment Date, the sum of Class B Monthly
Principal for such Payment Date and the Class B Principal Carryover Shortfall
as of the preceding Payment Date. In addition, on the Final Scheduled Payment
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 _______.
"Code" means the Internal Revenue Code of 1986, as amended.
"Collateral Agent" means _________________, a ________________, in
its capacity as collateral agent for the benefit of the Certificateholders
with respect to the Reserve Account and the Yield Supplement Account.
"Collection Account" means the account established and maintained
pursuant to Section 7.1.
"Collection Period" means, during the term of this Agreement, the
calendar month preceding each Payment Date, or in the case of the initial
Collection Period, the period from the Cut-off Date to __________. With
respect to any Determination Date, Deposit Date or Payment Date, the "related
Collection Period" shall mean the Collection Period preceding the month in
which such Determination Date, Deposit Date or Payment 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 _______
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, the Transfer Agent and Certificate Registrar.
"Cut-off Date" means _______.
"Cut-off 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 prior to the close of business by the Servicer on the
day prior to the Cut-off 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 5% 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
9.8.
"Deposit Date" means the Business Day immediately preceding each
Payment Date.
"Depository Agreement" shall mean the agreement among the Seller, the
Trustee and the initial Clearing Agency, substantially in the form attached
hereto as Exhibit F.
"Determination Date" means the __th calendar day of the month (or, if
such 10th calendar day is not a Business Day, the Business Day preceding such
__th calendar day) immediately succeeding the related Collection Period.
"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
12.1.
"Excess Funds" shall have the meaning specified in Section 7.5(d).
"Fannie Mae" means Fannie Mae or any successor thereto.
"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 Payment Date" means _______.
"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.
"Interest Collections" mean, with respect to any Payment Date, the
sum of the following amounts for the preceding Collection Period: (i) that
portion of the Collections on the Receivables received during such Collection
Period that is allocable to interest in accordance with the terms of the
Receivables and the Servicer's customary servicing procedures, (ii)
Liquidation Proceeds, to the extent allocable to interest, received during
such Collection Period, (iii) all Recoveries and (iv) to the extent
attributable to interest, the Purchase Amount received with respect to each
Receivable repurchased by the Seller or purchased by the Servicer under an
obligation which arose during the related Collection Period. "Interest
Collections" for any Payment Date shall exclude all payments and proceeds of
any Receivables the Purchase Amount of which has been distributed on a prior
Payment Date.
"Lien" means a security interest, lien, charge, pledge or encumbrance
of any kind other than tax liens, mechanics' liens or any other liens that
attach to a Receivable by operation of law.
"Liquidation Proceeds" means (i) insurance proceeds received by the
Servicer and (ii) the monies collected by the Servicer (from whatever source,
including but not limited to proceeds of a Financed Vehicle which is sold
after repossession) during a Collection Period on a Defaulted Receivable net
of any payments required by law to be remitted to the Obligor.
"Moody's" means Moody's Investors Service, Inc. and any successor
thereto.
"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 _____________%.
"Original Pool Balance" means $_____________.
"Original Pool Balance" means the Pool Balance as of the Cut-off
Date, as specified in this Agreement.
"Outstanding Advances" means, as of any date, the aggregate of all
Advances made by the Servicer with respect to prior Payment Dates which have
not been reimbursed pursuant to Section 7.3.
"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 9.11 and
shall initially be _________________.
"Payment Date" means, for each Collection Period, the __th day of the
following month, or if the __th day is not a Business Day, the next following
Business Day, commencing on _________, ___.
"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;
(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, Fannie Mae or any agency or
instrumentality of the United States of America which is backed by
the full faith and credit of the United States of America, in either
case entered into with a federal agency or a depository institution
or trust company (acting as principal) described in (iv) above or a
corporation (acting as principal) described in (vi) above.
(viii) investments in money market funds, which funds (A) are
not subject to any sales, load or other similar charge; (B) are rated
at least AAAm or AAAm-G by Standard & Poor's and Aaa by Moody's and
(C) are invested solely in obligations described in clauses (i)
through (vii) above;
(ix) interests in any open-end or closed-end management type
investment company or investment trust (a) registered under the
Investment Company Act of 1940, as from time to time amended, the
portfolio of which is limited to obligations of the United States or
obligations guaranteed by the United States and to agreements to
repurchase such obligations, which agreements, with respect to
principal and interest, are at least 100% collateralized by such
obligations marked to market on a daily basis and pursuant to which
the investment 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
Certificates by the Rating Agencies.
"Person" means a legal person, including any individual, corporation,
estate, partnership, joint venture, association, joint stock company, trust,
limited liability company, 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 any date of determination,
means the Amount Financed minus that portion of all payments received on or
prior to such date allocable to principal.
"Purchase Amount" with respect to a Repurchased Receivable or any
Receivable purchased by the Servicer pursuant to Section 14.2 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 accrued interest thereon
at the weighted average of the Class A Pass-Through Rate and the Class B
Pass-Through Rate.
"Purchased Receivable" means, on any date of determination, a
Receivable as to which payment of the Purchase Amount has been made by the
Seller or the Servicer pursuant to this 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.
"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 Cut-off Date)], which Receivable shall appear on Schedule A
to this Agreement.
"Receivable Files" means the documents specified in Section 5.3.
"Receivables Pool" means the pool of Receivables included in the
Trust.
"Record Date" means, with respect to any Payment Date, the Business
Day prior to such Payment Date unless Definitive Certificates are issued, in
which case Record Date shall mean the last day of the immediately preceding
calendar month.
"Recoveries" means, with respect to any Defaulted Receivable and any
Collection Period after the Collection Period in which such Receivable became
a Defaulted Receivable, all monies received by the Servicer with respect to
any Defaulted Receivable during such Collection Period net of the sum of (i)
any fees, costs or expenses incurred by the Servicer in connection with the
collection of such Defaulted Receivable and the disposition of the Financed
Vehicle as permitted by Section 6.3 (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 Date" shall have the meaning set forth in Section 5.2.
"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 5.2 or purchased as of such date by the Servicer pursuant to Section
6.6.
"Reserve Account Initial Deposit" means $_____________.
"Required Deposit Rating" means 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].
"Reserve Account" shall mean the Reserve Account established and
maintained as such pursuant to Section 7.6.
"Reserve Account Securities Intermediary" shall have the meaning
specified in Section 7.1(c).
"Securities Act" means the Securities Act of 1933, as amended.
"Security Entitlement" has the meaning specified in Section
8-102(a)(17) of the UCC.
"Seller" means USAA Federal Savings Bank in its capacity as the
seller of the Receivables under this Agreement, and each successor to USAA
Federal Savings Bank (in the same capacity) pursuant to Section 10.3.
"Servicer" means USAA Federal Savings Bank in its capacity as the
servicer of the Receivables under this Agreement, each successor to USAA
Federal Savings Bank (in the same capacity) pursuant to Section 11.3, and each
successor Servicer pursuant to Section 12.2.
"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 6.8.
"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 6.7.
"Servicing Fee Rate" means ______% per annum.
"Specified Reserve Account Balance" means, with respect to any
Payment Date, the lesser of (i) _____% of the Pool Balance as of the last day
of the preceding Collection Period and (ii) _____% of the Original Pool
Balance. Notwithstanding the foregoing, the Specified Reserve Account Balance
may be reduced to a lesser amount as determined by the Seller upon
satisfaction of the Rating Agency Condition.
"Specified Yield Supplement Balance" means with respect to any
Payment Date, an amount equal to [at least the sum of all projected Yield
Supplement Amounts for all future Payment 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].
"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 Collection Account relating to such Collection Period
pursuant to Sections 7.2, 7.3 and 7.4.
"Transfer Agent and Certificate Registrar" shall have the meaning
specified in Section 9.3 and shall initially be _________________.
"Trust" means the trust created by this Agreement, the estate of
which shall consist of the property transferred thereto pursuant to this
Agreement; funds deposited in the Collection 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 this Agreement as Trustee, its
successor in interest pursuant to Section 13.12, and any successor Trustee
pursuant to Section 13.11.
"Trustee's Certificate" means a certificate completed and executed by
an Authorized Officer pursuant to Section 13.3 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 8.2.
"Yield Supplement Account Property" has the meaning specified in
Section 8.2(b).
"Yield Supplemental Account Securities Intermediary" shall have the
meaning specified in Section 8.2(c).
"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
8.1.
"Yield Supplement Initial Deposit" means cash or Permitted
Investments having a value of at least $____.]
Section 1.2 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 this Agreement;
references to Persons include their permitted successors and assigns; and the
term "including" and its variations means "including without limitation."
Section 1.3 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 1.4 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 Cut-off 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 1.5 Section References. All section references shall be to
Sections in this Agreement unless otherwise specified.
Article II
Section 2.1 Creation of Trust. Upon the execution of this Agreement
by the parties hereto, there is hereby created the USAA Auto Loan Grantor
Trust ______.
Article III
Section 3.1 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 Cut-off Date (including proceeds
of the repurchase of Receivables by the Seller pursuant to Section
5.2 or the purchase of Receivables by the Servicer pursuant to
Section 6.6 or 14.2), 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 in clauses (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 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 IV
Section 4.1 Acceptance by Trustee. The Trustee does hereby accept all
consideration conveyed by the Seller pursuant to Section 3.1 and declares that
the Trustee shall hold such consideration upon the trusts herein set forth for
the benefit of the Certificateholders, subject to the terms and provisions of
this Agreement.
Article V
The Receivables
Section 5.1 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 Cut-off 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 this 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 this 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 herein contemplated, the
Seller had good and marketable title to each Receivable free and
clear of all Liens 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 and rights of others, and the
transfer has been perfected under applicable law or (ii) a first
priority perfected security interest in each Receivable.
(iv) Receivable Files. The Receivable Files shall be kept at one
or more of the locations specified in Schedule B hereto.
(b) Each Receivable satisfies the following conditions as of the
Cut-off Date unless otherwise specified, but such conditions shall survive the
sale, transfer and assignment of the Receivables to the Trustee.
(i) Characteristics of Receivables. Each Receivable (a) has been
originated for the retail financing of a Financed Vehicle by an
Obligor located in one of the States of the United States or the
District of Columbia; (b) contains customary and enforceable
provisions such that the rights and remedies of the holder thereof
are adequate for realization against the collateral of the benefits
of the security; and (c) provides for fully amortizing level
scheduled monthly payments (provided that the payment in the last
month in the life of the Receivable may be different from the level
scheduled payment) and for accrual of interest at a fixed rate
according to the simple interest method.
(ii) Compliance with Law. Each Receivable and each sale of the
related Financed Vehicle complied at the time it was originated or
made, and complies on and after the Cut-off Date, in all material
respects with all requirements of applicable federal, state, and
local laws, and regulations thereunder, including usury laws, the
Federal Truth-in-Lending Act, the Equal Credit Opportunity Act, the
Fair Credit Reporting Act, the Federal Trade Commission Act, the
Magnuson-Moss Warranty Act, Federal Reserve Board Regulations B and
Z, state adaptations of the National Consumer Act and of the Uniform
Consumer Credit Code, and any other consumer credit, equal
opportunity, and disclosure laws applicable to such Receivable and
sale.
(iii) Binding Obligation. Each Receivable constitutes the legal,
valid, and binding payment obligation in writing of the Obligor,
enforceable by the holder thereof in all material respects in
accordance with its terms, subject, as to enforcement, to applicable
bankruptcy, insolvency, reorganization, liquidation and other similar
laws and equitable principles relating to or affecting the
enforcement of creditors' rights.
(iv) No Government Obligor. No Receivable is due from the United
States of America or any state or from any agency, department,
instrumentality or political subdivision of the United States of
America or any state or local municipality and no Receivable is due
from a business except to the extent that such receivable has a
personal guaranty.
(v) Security Interest in Financed Vehicle. Immediately prior to
the sale and assignment thereof to the Trust as herein contemplated,
each Receivable was secured by a validly perfected first priority
security interest in the Financed Vehicle in favor of the Seller as
secured party or all necessary and appropriate action with respect to
such Receivable had been taken to perfect a first priority security
interest in the related Financed Vehicle in favor of the Seller as
secured party, which security interest is assignable and has been so
assigned by the Seller to the Trust.
(vi) Receivables in Force. No Receivable has been satisfied,
subordinated, or rescinded, nor has any Financed Vehicle been
released from the Lien granted by the related Receivable in whole or
in part.
(vii) No Waiver. No provision of a Receivable has been waived in
such a manner that such Receivable fails either to meet all of the
representations and warranties made by the Seller herein with respect
thereto or to meet all of the conditions with respect thereto
pursuant to this subsection 5.1(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 6.2 and no such amendment has caused such Receivable either
to fail to meet all of the representations and warranties made by the
Seller herein with respect thereto or to fail to meet all of the
conditions with respect thereto pursuant to this subsection 5.1(b).
(ix) No Defenses. As of the Cut-off 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 Cut-off Date, the Seller has no
knowledge of any Liens or claims that have been filed, including
Liens for work, labor, materials or unpaid taxes relating to a
Financed Vehicle, that would be Liens prior to, or equal or
coordinate with, the Lien granted by the Receivable.
(xi) No Default. Except for payment defaults continuing for a
period of not more than [30] days as of the Cut-off 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 this 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) Security. Each Receivable is secured by a new or used
automobile or light-duty truck.
(xvii) Maturity of Receivables. Each Receivable has a remaining
maturity, as of the Cut-off 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
___ months and not more than ___ months.
(xviii) Annual Percentage Rate. Each Receivable is a
[fully-amortizing fixed rate simple interest contract that provides
for level scheduled monthly payments (except for the last payment,
which may be minimally different from the level payments) over its
respective remaining term, and has an Annual Percentage Rate that
equals or exceeds _____%, is not secured by any interest in real
estate, and has not been identified on the computer files of the
Seller as relating to Obligors who have requested a reduction in the
periodic finance charges, as of the Cut-off Date, by application of
the Soldiers' and Sailors' Civil Relief Act of 1940, as amended].
(xix) No Repossessions. Each Receivable is secured by a Financed
Vehicle that, as of the Cut-off Date, has not been repossessed
without reinstatement of such Receivable.
(xx) 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 Cut-off Date.
(xxi) Remaining Principal Balance. Each Receivable had a
remaining Principal Balance, as of the Cut-off Date, of at least
$_____.
Section 5.2 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 5.1(a) or the
failure of any Receivable to satisfy any of the conditions set forth in
subsection 5.1(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 Purchase Amount of such Receivable as
of the Repurchase Date (less any Liquidation Proceeds deposited, or to be
deposited, by the Servicer in the Collection Account with respect to such
Receivable pursuant to Section 6.3) in the manner specified in Section 7.4.
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 5.1(a) or to a failure of any of the conditions set forth
in subsection 5.1(b) shall be to require the Seller to repurchase Receivables
pursuant to this Section 5.2. The obligation of the Seller to repurchase under
this Section 5.2 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
5.2 or the eligibility of any Receivable for purposes of this Agreement.
Section 5.3 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 this 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 5.4 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 this Agreement and the related accounts, records, and
computer systems, in such a manner as shall enable the Trustee to identify all
Receivable Files and such related accounts, records and computer systems and
to verify, if the Trustee so elects, the accuracy of the Servicer's
record-keeping. The Servicer shall promptly report to the Trustee any failure
on its part to hold the Receivable Files and maintain its accounts, records,
and computer 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 this
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 5.5 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 5.6 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 5.7 Effective Period and Termination. The Servicer's
appointment as custodian shall become effective as of the Cut-off Date and
shall continue in full force and effect until terminated pursuant to this
Section 5.7 or until this Agreement shall be terminated. If the Servicer shall
resign as Servicer under Section 11.5 or if all of the rights and obligations
of the Servicer shall have been terminated under Section 12.1, 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 12.1. 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.
Article VI
Administration and Servicing of Receivables
Section 6.1 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 7.3. 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 3.1 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 6.2 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 this 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. 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 this
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 Payment 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 6.6. For the purpose of such purchases pursuant
to Section 6.6, notice shall be deemed to have been received by the Servicer
at such time as shall make purchase mandatory as of the last day of the
Collection Period during which the discovery of such breach occurred.
Section 6.3 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 Receivable shall be deposited by the Servicer in the Collection
Account in the manner specified in Section 7.2 and shall be applied to reduce
(or to satisfy, as the case may be) the Purchase Amount of the Receivable, if
such Receivable is to be repurchased by the Seller pursuant to Section 5.2, or
is to be purchased by the Servicer pursuant to Section 6.6. 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 6.4 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 6.5 Covenants of Servicer. The Servicer hereby makes the
following covenants on which the Trustee shall rely in accepting the
Receivables in trust and authenticating the Certificates:
(i) Security Interest to Remain in Force. The Financed Vehicle
securing each Receivable shall not be released from the security
interest granted by the Receivable in whole or in part except as
contemplated herein;
(ii) No Impairment. The Servicer shall not impair the rights of
the Trust in the Receivables; and
(iii) Extensions, Defaulted Receivables. The Servicer shall not
increase the number of payments under a Receivable, nor increase the
Amount Financed under a Receivable, nor extend or forgive payments on
a Receivable, except as provided in Section 6.2. 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 Payment Date.
Section 6.6 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 6.5. Except as otherwise specified in Section 6.2, 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 6.5(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 Purchase Amount (less any Liquidation Proceeds deposited, or
to be deposited, by the Servicer in the Collection Account with respect to
such Receivable pursuant to Section 6.3) in the manner specified in Section
7.4. The sole remedy of the Trust, the Trustee, or the Certificateholders
against the Servicer with respect to a breach of its covenants in Section 6.5
shall be to require the Servicer to purchase Receivables pursuant to this
Section 6.6. 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 6.6 or the eligibility of any
Receivable for purposes of this Agreement.
Section 6.7 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 Collection Account or earned
on collections pending deposit in the Collection 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 Payment Date, such
investment earnings shall not be paid to the Servicer, but shall be treated as
Available Interest]. The Servicer shall be required to pay from its own
account all expenses incurred by it in connection with its activities
hereunder (including fees and disbursements of the Trustee, Trustee's counsel,
the Paying Agent, the Transfer Agent and Certificate Registrar and independent
accountants, taxes imposed on the Servicer, and expenses incurred in
connection with distributions and reports to Certificateholders) except
expenses in connection with realizing upon a Receivable under Section 6.3
which may be paid from Liquidation Proceeds from such Receivable.
Section 6.8 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 7.5 and all information necessary for the Paying Agent to send
statements to Certificateholders pursuant to Section 7.8. 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 7.3 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 this Agreement; provided,
however, that no material information shall be deleted from the form of
Servicer's Certificate. In the event that the form of Servicer's Certificate
is revised or modified in accordance with the preceding sentence, a form
thereof, as so revised or modified, shall be provided to the Trustee and each
Rating Agency.
Section 6.9 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, _____, 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 this 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 this 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 12.1. 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 12.1.
Section 6.10 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, _____,
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 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 6.8 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 6.8 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 6.11 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 6.8, the annual audit statement described in
Section 6.9, or the annual audit report described in Section 6.10. 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 7.8 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 6.12 Insurance. The Servicer, in accordance with its
customary servicing procedures and underwriting standards, shall require that
each Obligor shall have obtained and shall maintain comprehensive and
collision insurance covering the Financed Vehicle as of the execution of the
Receivable. The Servicer shall enforce its rights under the Receivables to
require the Obligors to maintain comprehensive and collision insurance, in
accordance with the Servicer's customary practices and procedures with respect
to comparable new or used automobile and light-duty truck receivables that it
services for itself or others.
Article VII
Distributions; Statements to Certificateholders
Section 7.1 Accounts. (a) The Servicer shall establish the (i)
Collection 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 Collection 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 Collection Account, the
Class A Distribution Account or the Class B Distribution Account cease to be,
as applicable, 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 Collection 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 not later than the
Deposit Date next succeeding the date of investment; provided, that if the
Collection Account is maintained with the Trustee, such Permitted Investments
may mature on the Payment 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
7.5(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 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 Payment 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 Reserve 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 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
security interests created by this Section 7.1 and otherwise effectuate the
purposes, terms and conditions of this Section 7.1.
(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 (vi) such Qualified Trust Institution has agreed that it will waive any
right of set-off unrelated to its fees for such Account.
Section 7.2 Collections. The Servicer shall remit daily within two
Business Days of receipt to the Collection 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. Notwithstanding the
provisions of the first sentence of this Section 7.2, so long as the Servicer
is USAA Federal Savings Bank, the Servicer 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 at least A-1+ and P-1, respectively, or (b) the Servicer
provides the Trustee with (1) a letter from each Rating Agency to the effect
that the current ratings assigned to the Certificates by the Rating Agency
will not be adversely affected by the remittance of Collections on a monthly,
rather than a daily, basis. Any such collections remitted to the Collection
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 7.2 the phrase "payments made on
behalf of the Obligors" shall mean payments made by Persons other than the
Seller or the Servicer.
Section 7.3 Advances.
(a) As of each Deposit Date, the Servicer shall 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 Purchase Amount during or with respect to such Collection
Period. The Servicer shall deposit all such Advances into the Collection
Account in immediately available funds no later than, 11:00 a.m. New York City
time, on the Deposit Date. Notwithstanding the foregoing, 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 7.5(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 in
respect of that Receivable 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, and if such
amounts are not sufficient, from amounts on deposit in the Collection Account.
The Servicer shall not make any advance with respect to principal of
Receivables.
(b) The Servicer shall deposit in the Collection Account the
aggregate Advances on the Receivables pursuant to Section 7.3(a). To the
extent that the Servicer fails to make an Advance pursuant to Section 7.3(a)
on the date required, the Servicer shall so notify the Trustee in writing
specifying the amount of the Advance and the Receivable to which such Advance
relates, and the Trustee shall withdraw such amount (or, if determinable, such
portion of such amount as does not represent advances for delinquent interest)
from the Reserve Account and deposit such amount in the Collection Account.
[The Trustee shall deposit in the Collection Account the aggregate of any
amounts received pursuant to the Yield Supplement Agreement on the date of
receipt thereof.]
Section 7.4 Additional Deposits. The Servicer, or the Seller, as the
case may be, shall deposit into the Collection Account the aggregate Purchase
Amount pursuant to Sections 5.2, 6.6 and 14.2, as applicable. All remittances
shall be made to the Collection Account, in immediately available funds, no
later than 11:00 a.m., on the Deposit Date.
Section 7.5 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 Payment Date, after making the reimbursements to the
Servicer from amounts on deposit in the Collection Account of Outstanding
Advances pursuant to Section 7.3, the Trustee shall withdraw from the
Collection Account, the Available Interest and Available Principal for such
Payment Date, withdraw from the Reserve Account such amounts as may be
required to satisfy amounts requested by the Servicer for such Payment 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 13.7 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 Payment 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 Payment Date.
On each Payment 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:
(iv) to the Class A Distribution Account, the Class A Principal
Distribution for such Payment Date;
(v) to the Class B Distribution Account, the Class B Principal
Distribution for such Payment 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 Payment 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 14.1,
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 to confirm such wire transfer.
Section 7.6 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, any and
all Financial Assets or other property credited thereto from time to time,
including Permitted Investments, and the related Security Entitlements to
secure payment of the Certificates according to their terms. Amounts held from
time to time in the Reserve Account will continue to be held by the Collateral
Agent for the benefit of Class A Certificateholders and the Class B
Certificateholders, but the Reserve Account shall not be an asset of the
Trust. By acceptance of their Certificates or interest therein,
Certificateholders and Certificate Owners shall be deemed to have appointed
_________________, as Collateral Agent. _________________ hereby accepts such
appointment as Collateral Agent. The Collateral Agent accepts such appointment
and agrees to establish the Reserve Account at the Corporate Trust Office and
to comply with Section 7.1(f).
Section 7.7 Net Deposits. USAA Federal Savings Bank (in whatever
capacity) may make the remittances pursuant to Section 7.2 and Section 7.4
above, net of amounts to be retained by it or distributed to it (also in
whatever capacity) pursuant to Section 7.5, if (a) it shall be the Servicer
and (b) it is entitled, pursuant to Section 7.2, to make deposits on a monthly
basis, rather than a daily basis. The Servicer may remit amounts to the
Collection Account net of investment earnings accrued on such amounts pending
deposit into the Collection 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 7.8 Statements to Certificateholders. On each Payment 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 6.8, 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 Payment 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 Purchase Amount of Receivables repurchased
by the Seller or purchased by the Servicer;
(ix) the balance of the Reserve Account on such Payment Date,
after giving effect to changes therein on such Payment Date; and
(x) the Specified Reserve Account Balance as of the close of
business on such Payment Date.
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 VIII
[Yield Supplement Agreement
Section 8.1 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
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 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 Payment Date, the "Yield
Supplement Amount").
Section 8.2 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 successors 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 Account, and all proceeds of the foregoing, including all other
amounts and investments held from time to time in the Yield Supplement Account
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 Collateral Agent;
provided, however, 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 Permitted 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) Each Permitted Investment made with funds from the Yield
Supplement Account shall be delivered to the Collateral Agent by causing the
financial institution then maintaining the Yield Supplement Account (such
institution being referred to as the "Yield Supplement Account Securities
Intermediary") to create a Security Entitlement in the Yield Supplement
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 Yield Supplement Account. The Servicer shall only invest in Permitted
Investments which the Yield Supplement Account Securities Intermediary agrees
to credit to the Yield Supplement Account.
(e) Each of 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 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
security interests created by this Section 8.2 and otherwise effectuate the
purposes, terms and conditions of this Section 8.2.
(f) Notwithstanding anything else contained herein, the Yield
Supplement 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
Yield Supplement Account) relating to the Yield Supplement Account issued by
the Collateral Agent without further consent by the Seller; (ii) credit all
Permitted Investments to the Yield Supplement Account; (iii) treat each item
of property (including, without limitation, investment property, securities,
instruments and cash) credited to the Yield Supplement Account as a Financial
Asset; (iv) not enter into any agreement with any other person relating to the
Yield Supplement Account pursuant to which agreement it has agreed to comply
with Entitlement Orders made by such person; (v) not accept for credit to the
Yield Supplement Account any Permitted Investment which is registered in the
name of, or payable to the order of, or specially indorsed to, any person
other than such Qualified Trust Institution unless it has been indorsed to
such Qualified Trust Institution or is indorsed in blank and (vi) such
Qualified Trust Institution has agreed that it will waive any right of set-off
unrelated to its fees for such Account.
(g) No later than 11:00 A.M. (New York time) on each Deposit Date,
the Servicer shall deposit to the Collection Account an amount equal to the
Yield Supplement Amount for the related Collection Period; provided that if,
on any Payment 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 Supplement Account an amount equal to such deficiency and
deposit such amount to the Collection Account.
(h) 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.
(i) Amounts on deposit in the Yield Supplement Account will be
released to the Seller on each Payment Date to the extent that the amount on
deposit in the Yield Supplement Account exceeds the Specified Yield Supplement
Balance. Upon a distribution to the Seller of amounts from the Yield
Supplement Account, the Certificateholders 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.
(j) Investment earnings attributable to the Yield Supplement 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 Payment Date to the Seller.]
Article IX
The Certificates
Section 9.1 The Certificates. Unless otherwise specified in this
Agreement, the Certificates shall be issued in denominations of $1,000 and
integral multiples thereof; provided 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 this Agreement, or shall be valid for any purpose, unless there
shall appear on such Certificate an authentication substantially in the form
set forth in Exhibit A and Exhibit B hereto, as applicable, 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 9.2 Execution, Authentication and Delivery of Certificates.
In exchange for the Receivables and the other assets of the Trust,
simultaneously with the sale, assignment and transfer to the Trustee of the
Receivables, the constructive delivery to the Trustee of the Receivable Files
and the delivery to the Trustee of the other components of the Trust, the
Trustee shall deliver to, or upon the order of, the Seller, Certificates duly
executed by the Trustee, on behalf of the Trust, and authenticated by the
Trustee in authorized denominations equaling in the aggregate the Original
Pool Balance and evidencing the entire ownership of the Trust.
Section 9.3 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 9.7,
a register (the "Certificate Register") in which, subject to such reasonable
regulations as it may prescribe, the Transfer Agent and Certificate Registrar
shall provide for the registration of Certificates and of transfers and
exchanges of Certificates as herein provided. The Certificate Register shall
list the names of the Certificateholders and their respective ownership
interests in the Trust, and shall be treated as definitive and binding for all
purposes hereunder. Only those persons registered as Certificateholders in the
Certificate Register shall be recognized as having any interest in the Trust
or Trust estate or as possessing the rights of a Certificateholder hereunder.
A transfer of ownership of a Certificate shall be effectuated only by an
appropriate entry in the Certificate Register. _________________ is hereby
initially appointed Transfer Agent and Certificate Registrar for the purpose
of registering Certificates and transfers and exchanges of Certificates as
herein provided. In the event that, subsequent to the date of issuance of the
Certificates, the Trustee is unable to act as Transfer Agent and Certificate
Registrar, the Trustee shall, with the consent of the Seller, appoint another
bank or trust company, having an office or agency located in New York City and
which agrees to act in accordance with the provisions of this Agreement
applicable to it, to act, as successor Transfer Agent and Certificate
Registrar under this Agreement.
_________________ shall be permitted to resign as Transfer Agent and
Certificate Registrar upon 30 days' written notice to the Seller and the
Servicer; provided, however, that such resignation shall not be effective and
_________________ shall continue to perform its duties as Transfer Agent and
Certificate Registrar until the Trustee has appointed a successor Transfer
Agent and Certificate Registrar with the consent of the Seller.
Upon surrender for registration of transfer of any Class A
Certificate or Class B Certificate at the office or agency of the Transfer
Agent and Certificate Registrar maintained pursuant to Section 9.7, the
Transfer Agent and Certificate Registrar shall make an appropriate entry in
the Certificate Register to reflect such transfer, and the Trustee shall
execute, authenticate and (if the Transfer Agent and Certificate Registrar is
different than the Trustee, then the Transfer Agent and Certificate Registrar
shall) deliver, in the name of the designated transferee or transferees, one
or more new Certificates in authorized denominations of a like aggregate
amount. At the option of a Certificateholder, Class A Certificates or Class B
Certificates may be exchanged for other Class A Certificates or Class B
Certificates, as the case may be, in authorized denominations of a like
aggregate amount at such office or agency.
Whenever any Class A Certificate or Class B Certificate is
surrendered for exchange, the Trustee shall execute, authenticate and (if the
Transfer Agent and Certificate Registrar is different than the Trustee, then
the Transfer Agent and Certificate Registrar shall) deliver the Certificates
which the Certificateholder making the exchange is entitled to receive. Every
Certificate presented or surrendered for registration of transfer or exchange
shall be accompanied by a written instrument of transfer in form satisfactory
to the Trustee and the Transfer Agent and Certificate Registrar duly executed
by the Holder, which signature on such assignment must be guaranteed by a
member of the New York Stock Exchange or a commercial bank or trust company.
Each Certificate surrendered for registration of transfer or exchange
shall be cancelled by the Transfer Agent and Certificate Registrar or retained
in accordance with its standard retention policy and disposed of or retained
in a manner satisfactory to the Trustee and the Seller.
No service charge shall be made for any registration of transfer or
exchange of Certificates, but the Transfer Agent and Certificate Registrar may
require payment of a sum sufficient to cover any tax or governmental charge
that may be imposed in connection with any transfer or exchange of
Certificates.
Section 9.4 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 9.4, 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 9.4 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 9.5 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 7.5(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 9.6 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 this Agreement or under the Certificates, and
such application is accompanied by a copy of the communication that such
applicants propose to transmit, then the Transfer Agent and Certificate
Registrar shall, within five Business Days after the receipt of such
application, afford such applicants access during normal business hours to the
current list of Certificateholders. Each Certificateholder, by receiving and
holding a Certificate, shall be deemed to have agreed not to hold any of the
Servicer, the Trustee, the Transfer Agent and Certificate Registrar or any of
their respective agents accountable by reason of the disclosure of its name
and address, regardless of the source from which such information was derived.
Section 9.7 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 ___________________,
Attention: ____________________, 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 9.8 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 or to the order
of 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 9.10. Unless
and until definitive, fully registered Certificates ("Definitive
Certificates") have been issued to Class A Certificateholders or the Class B
Certificateholders pursuant to Section 9.10:
(i) the provisions of this Section 9.8 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 9.8
conflict with any other provisions of this Agreement, the provisions
of this Section 9.8 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 this
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 this Agreement to
distributions, notices, reports and statements to Certificateholders
shall refer to distributions, notices, reports and statements to the
Clearing Agency or its nominee, as registered holder of the
Certificates, as the case may be, for distribution to Certificate
Owners in accordance with the procedures of the Clearing Agency; and
(v) pursuant to the Depository Agreement, the initial Clearing
Agency will make book-entry transfers among the Clearing Agency
Participants and receive and transmit distributions of principal and
interest on the Certificates to the Clearing Agency Participants, for
distribution by such Clearing Agency Participants to the Certificate
Owners or their nominees.
Section 9.9 Notices to Clearing Agency. Whenever notice or other
communication to the Certificateholders is required under this Agreement,
unless and until Definitive Certificates shall have been issued to Certificate
Owners pursuant to Section 9.10, 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 9.10 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.
Section 9.11 Appointment of Paying Agent.
(a) The Paying Agent shall have the revocable power to withdraw funds
from the Collection Account and make distributions to the Certificateholders
pursuant to Section 7.5 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 this Agreement
in any material respect or for other good cause. The Paying Agent shall
initially be _________________. _________________ shall be permitted to resign
as Paying Agent upon 30 days' written notice to the Servicer, the Trustee and
the Collateral Agent. In the event that _________________ shall no longer be
the Paying Agent, the Trustee shall appoint a successor to act as Paying
Agent, which shall be a bank or trust company. If at any time the Trustee
shall be acting as the Paying Agent, the provisions of Sections 13.2, 13.4 and
13.5 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) _________________ 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 9.12 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 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 9.12.
(e) The provisions of Sections 13.2, 13.4 and 13.5 shall be
applicable to any authenticating agent.
(f) Pursuant to an appointment made under this Section 9.12, 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 9.13 Actions of Certificateholders.
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this 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 this
Agreement and conclusive in favor of the Trustee, the Seller and the Servicer,
if made in the manner provided in this Section 9.13.
(b) The fact and date of the execution by any Certificateholder of
any such instrument or writing may be proved in any reasonable manner which
the Trustee deems sufficient.
(c) Any request, demand, authorization, direction, notice, consent,
waiver or other act by a Certificateholder shall bind every Holder of every
Certificate issued upon the registration of transfer thereof or in exchange
therefor or in lieu thereof, in respect of 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 9.13 as it shall deem necessary.
Article X
The Seller
Section 10.1 Representations of Seller. The Seller makes the
following representations on which the Trustee shall rely in accepting the
Receivables in trust and authenticating the Certificates. The representations
shall speak as of the execution and delivery of this 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 this Agreement and to carry out its terms; the
Seller has full power and authority to sell and assign the property
to be sold and assigned to the Trustee as part of the Trust and has
duly authorized such sale and assignment to the Trustee by all
necessary corporate action; and the execution, delivery, and
performance of this Agreement has been duly authorized by the Seller
by all necessary corporate action.
(iii) Binding Obligations. This Agreement constitutes a legal,
valid, and binding obligation of the Seller enforceable in accordance
with its terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, or other similar laws
affecting the enforcement of creditors' rights in general (including
creditors of federally chartered savings associations) and by general
principles of equity, regardless of whether such enforceability is
considered in a proceeding in equity or at law.
(iv) No Violation. The consummation of the transactions
contemplated by this Agreement and the fulfillment of the terms
hereof do not (a) conflict with, result in any breach of any of the
terms and provisions of, or constitute (with or without notice or
lapse of time) a default under, the charter or bylaws of the Seller,
or conflict with or breach any of the material terms or provisions
of, or constitute (with or without notice or lapse of time) a default
under, any indenture, agreement, or other instrument to which the
Seller is a party or by which it is bound, (b) result in the creation
or imposition of any lien upon any of its properties pursuant to the
terms of any such indenture, agreement, or other instrument, or (c)
violate any law or, to the best of the Seller's knowledge, any order,
rule, or regulation applicable to the Seller of any court or of any
federal or state regulatory body, administrative agency, or other
governmental instrumentality having jurisdiction over the Seller or
its properties.
(v) No Proceedings. There are no proceedings or investigations
pending, or, to the best of the Seller's knowledge, threatened,
before any court, regulatory body, administrative agency, or other
governmental instrumentality having jurisdiction over the Seller or
its properties (a) asserting the invalidity of this Agreement or the
Certificates, (b) seeking to prevent the issuance of the Certificates
or the consummation of any of the transactions contemplated by this
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, this
Agreement or the Certificates or (d) relating to the Seller and which
might adversely affect the federal income tax attributes of the
Certificates.
Section 10.2 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 this 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 this 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 10.2 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 10.2 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 10.3 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
this 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 this Agreement. The Seller shall give prompt written notice of any merger
or consolidation to the Trustee, the Servicer and the Rating Agencies.
Section 10.4 Limitation on Liability of Seller and Others. The Seller
and any director, officer, employee or agent of the Seller may rely in good
faith on the advice of counsel or on any document of any kind, prima facie
properly executed and submitted by any Person respecting any matters arising
hereunder. The Seller shall not be under any obligation under this Agreement
to appear in, prosecute, or defend any legal action that shall be unrelated to
its obligations under this Agreement, and that in its opinion may involve it
in any expense or liability.
Section 10.5 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 1.1. 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 this
Agreement, without preference, priority, or distinction as among all of the
Certificates.
Article XI
The Servicer
Section 11.1 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 this 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 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, own, sell, and
service the Receivables and to hold the Receivable Files as custodian
on behalf of the Trustee.
(ii) Power and Authority. The Servicer has the power and
authority to execute and deliver this Agreement and to carry out its
terms; and the execution, delivery, and performance of this Agreement
has been duly authorized by the Servicer by all necessary corporate
action.
(iii) Binding Obligations. This 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 (including creditors of
federally chartered savings associations) 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
contemplated by this Agreement and the fulfillment of the terms
hereof do not conflict with, result in any breach of any of the terms
and provisions of, nor constitute (a) (with or without notice or
lapse of time) a default under, the articles of association or bylaws
of the Servicer, or conflict with or breach any of the material terms
or provisions of, or constitute (with or without notice or lapse of
time) a default under, any indenture, agreement, or other instrument
to which the Servicer is a party or by which it shall be bound, (b)
result in the creation or imposition of any lien upon any of its
properties pursuant to the terms of any such indenture, agreement, or
other instrument or (c) violate any law or, to the best of the
Servicer's knowledge, any order, rule, or regulation applicable to
the Servicer of any court or of any federal or state regulatory body,
administrative agency, or other governmental instrumentality having
jurisdiction over the Servicer or its properties.
(v) No Proceedings. There are no proceedings or investigations
pending, or to the best of the Servicer's knowledge, threatened,
before any court, regulatory body, administrative agency, or other
governmental instrumentality having jurisdiction over the Servicer or
its properties (a) asserting the invalidity of this Agreement or the
Certificates, (b) seeking to prevent the issuance of the Certificates
or the consummation of any of the transactions contemplated by this
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, this
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 11.2 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 this 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
this 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 misfeasance, negligence, or
bad faith of the Servicer in the performance of its duties under this
Agreement or by reason of reckless disregard of its obligations and
duties under this 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 13.14; or (3) shall be one as to which the Seller is required
to indemnify the Trustee.
Indemnification under this Section 11.2 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 11.2 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 11.2
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 11.3 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 this
Agreement without the execution or filing of any document or any further act
on the part of any of the parties to this Agreement. The Servicer shall
promptly inform the Trustee, the Seller and the Rating Agencies in writing of
any such merger or consolidation.
Section 11.4 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 this
Agreement, for any action taken or for refraining from the taking of any
action pursuant to this 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 this 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 this 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 this Agreement, other than (i) any loss or
liability otherwise reimbursable pursuant to this Agreement; (ii) any loss,
liability, or expense incurred solely by reason of the Servicer's willful
misfeasance, negligence, or bad faith in the performance of its duties
hereunder or by reason of reckless disregard of its obligations and duties
under this Agreement; and (iii) any loss, liability, or expense for which the
Trust is to be indemnified by the Servicer under this Agreement. Any amounts
due the Servicer pursuant to this subsection shall be payable on a Payment
Date from the Total Collections on deposit in the Collection 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 13.8 have been made, and deposits of any
amount required to be deposited into the Reserve Account pursuant to Section
7.5(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 this 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 this 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 this Agreement and the rights and duties
of the parties to this Agreement and the interests of the Certificateholders
under this 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 Payment Date from the Total Collections on deposit in the
Collection 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 13.8 have been made
and deposits of any amount required to be deposited into the Reserve Account
pursuant to Section 7.5(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 11.5 Servicer Not To Resign. The Servicer shall not resign
from its obligations and duties under this 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 12.2, 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
12.2.
Section 11.6 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 11.6, the Servicer shall not be relieved of its liability and
responsibility with respect to such duties, and any such delegation shall not
constitute a resignation within the meaning of Section 11.5 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 XII
Events of Servicing Termination
Section 12.1 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 (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 this 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 Payment 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 this 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
90 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 11.6 or to meet the eligibility
criteria set forth in Section 12.2 shall constitute an Event of
Servicing Termination without regard to (a) and (b) above; or
(iii) the entry of a decree or order by a court or agency or
supervisory authority having jurisdiction in the premises for the
appointment of a conservator, receiver, or liquidator for the
Servicer in any insolvency, readjustment of debt, marshalling of
assets and liabilities, or similar proceedings, or for the winding up
or liquidation of their respective affairs, and the continuance of
any such decree or order unstayed and in effect for a period of 60
consecutive days; or
(iv) the consent by the Servicer to the appointment of a
conservator or receiver or liquidator in any insolvency, readjustment
of debt, marshalling of assets and liabilities, or similar
proceedings of or relating to the Servicer or of or relating to
substantially all of their property; or the Servicer shall admit in
writing its inability to pay its debts generally as they become due,
file a petition to take advantage of any applicable insolvency or
reorganization statute, make an assignment for the benefit of its
creditors, or voluntarily suspend payment of its obligations;
then, and in each and every case and so long as an Event of Servicing
Termination shall not have been remedied, either the Trustee, or the Holders
of Certificates evidencing not less than a majority 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 this Agreement. On or after the receipt by the Servicer of such
written notice, all authority and power of the Servicer under this 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 12.1; 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 this 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 Collection 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 this
Agreement to reflect such succession as Servicer pursuant to this Section 12.1
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 12.2 Trustee to Act; Appointment of Successor. Upon the
Servicer's receipt of notice of termination pursuant to Section 12.1 the
Trustee shall, and upon the Servicer's resignation pursuant to Section 11.5
the Trustee may, be the successor in all respects to the Servicer in its
capacity as Servicer under this 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 this
Agreement. As compensation therefor, the Trustee shall be entitled to such
compensation (whether payable out of the Collection Account or otherwise) as
the Servicer would have been entitled to under this 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 this
Agreement; provided, that the Rating Agency Condition shall be satisfied in
connection with such appointment. 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 this Agreement. The Trustee and such
successor Servicer shall take such action, consistent with this 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 12.2 until the newly appointed
successor Servicer shall have assumed the responsibilities and obligations of
the Servicer under this Agreement.
Section 12.3 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
XII, 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 12.4 ______ Waiver of Past Defaults. The Holders of
Certificates evidencing not less than a majority 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 Collection
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 XIII
The Trustee
Section 13.1 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 13.2 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 this
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 this 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 12.2, the Trustee in performing such duties shall
use the degree of skill and attention customarily exercised by a servicer with
respect to automobile and light-duty truck receivables that it services for
itself.
The Trustee, upon receipt of any resolutions, certificates,
statements, opinions, reports, documents, orders, or other instruments
furnished to the Trustee that shall be specifically required to be furnished
pursuant to any provision of this Agreement, shall examine them to determine
whether they conform to the requirements of this 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 this 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 this
Agreement, the Trustee shall not be liable except for the performance
of such duties and obligations as shall be specifically set forth in
this Agreement, no implied covenants or obligations shall be read
into this Agreement against the Trustee, the permissible right of the
Trustee to do things enumerated in this 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 this 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 this 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 this 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 this 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 this 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
this Agreement.
The Trustee shall not be charged with knowledge of an Event of
Servicing Termination until such time as an Authorized Officer shall have
actual knowledge or have received written notice thereof.
Except for actions expressly authorized by this 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 this 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 this 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 this
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 13.3 Trustee's Assignment of Repurchased Receivables and
Trustee's Certificate. With respect to any Receivable repurchased by the
Seller pursuant to Section 5.2 or purchased by the Servicer pursuant to
Section 6.7 or 14.2, 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 3.1 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 this
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 13.3
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 13.4 Certain Matters Affecting the Trustee. Except as
otherwise provided in Section 13.2:
(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
letter of independent certified public accountants described in
Section 6.10, the Servicer's Certificate described in Section 6.8,
and the annual compliance statement described in Section 6.9)
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 this 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 this Agreement, or to
institute, conduct or defend any litigation under this Agreement or
in relation to this Agreement, at the request, order or direction of
any of the Certificateholders pursuant to the provisions of this
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 this 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 this
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 this 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 this Agreement, the Trustee may require reasonable
indemnity against such cost, expense, or liability or payment of such
expenses as a condition precedent to so proceeding. The reasonable
expense of every such examination shall be paid by the Servicer or,
if paid by the Trustee, shall be reimbursed by the Servicer upon
demand. Nothing in this clause (v) shall affect the obligation of the
Servicer to observe any applicable law prohibiting disclosure of
information regarding the Obligors.
(vi) The Trustee may execute any of the trusts or powers
hereunder or perform any duties under this 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.
(vii) 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 XIII shall also be afforded to each
Paying Agent, Collateral Agent, Authenticating Agent or Transfer
Agent and Registrar.
Section 13.5 Trustee Not Liable for Certificates or Receivables. The
recitals contained in this 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 accuracy thereof. The Trustee shall
make no representations as to the validity or sufficiency of this 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 this
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
this 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; 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 this 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 this Agreement. Except with
respect to a claim based on the failure of the Trustee to perform its duties
under this 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 13.14, no recourse shall be had for any claim or
defense based on any provision of this 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 this Agreement. The Trustee shall not be accountable for the use
or application by the Seller of any of the Certificates or of the proceeds of
such Certificates, or for the use or application of any funds paid to the
Servicer in respect of the Receivables.
Section 13.6 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 13.7 Trustee's Fees and Expenses. By execution and delivery
of this 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 this Agreement and in the exercise and performance of any of the powers and
duties under this 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 this Agreement (including
expenses, disbursements, and advances incurred in defense of any action
brought against it in connection with this 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 this 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 7.5(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 13.8, shall indemnify the
Trustee with respect to certain matters, and Certificateholders, pursuant to
Section 15.3, shall upon the circumstances therein set forth, indemnify the
Trustee under certain circumstances. The provisions of this Section 13.7 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 7.5
of this Agreement. The covenants and agreements contained in this Section 13.7
shall survive the termination of this Agreement and shall be binding, as
applicable, on the Servicer, and any successor Servicer and the Seller.
Section 13.8 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 this 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 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 13.14; provided,
however, that the obligations of the Servicer in this Section 13.8 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 13.8, 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 13.8 shall be payable
on a Payment 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 13.8 shall survive the termination of this Agreement and the
resignation or removal of the Trustee.
Section 13.9 Eligibility Requirements for Trustee. The Trustee under
this 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 13.9, 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 Baa3 by Moody's or such other ratings as
are acceptable to Moody's. In case at any time the Trustee shall cease to be
eligible in accordance with the provisions of this Section 13.9, the Trustee
shall resign immediately in the manner and with the effect specified in
Section 13.10.
Section 13.10 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 13.9 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 13.10
shall not become effective until acceptance of appointment by the successor
Trustee pursuant to Section 13.11.
Section 13.11 Successor Trustee. Any successor Trustee appointed
pursuant to Section 13.10 shall execute, acknowledge, and deliver to the
Servicer and to its predecessor Trustee an instrument accepting such
appointment under this 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 this
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 this 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 13.11 unless at the time of such acceptance such successor Trustee
shall be eligible pursuant to Section 13.9.
Upon acceptance of appointment by a successor Trustee pursuant to
this Section 13.11, the Servicer shall mail notice of the successor of such
Trustee under this 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 13.12 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 this Agreement, shall be the successor of the Trustee hereunder,
provided such corporation or other entity shall be eligible pursuant to
Section 13.9, 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 13.13 Appointment of Co-Trustee or Separate Trustee.
Notwithstanding any other provisions of this 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 13.13, 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 this Agreement shall be required to meet
the terms of eligibility as a successor trustee pursuant to Section 13.9 and
no notice to Certificateholders of the appointment of any co-trustee or
separate trustee or separate trustees shall be required pursuant to Section
13.11.
Each separate trustee and co-trustee shall, to the extent permitted
by law, be appointed and act subject to the following provisions and
conditions:
(i) All rights, powers, duties, and obligations conferred or
imposed upon the Trustee shall be conferred upon and exercised or
performed by the Trustee and such separate trustee or co-trustee
jointly (it being understood that such separate trustee or co-trustee
is not authorized to act separately without the Trustee joining in
such act), except to the extent that under any law of any
jurisdiction in which any particular act or acts are to be performed
(whether as Trustee under this Agreement or as successor to the
Servicer under this 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 this Agreement shall be personally liable
by reason of any act or omission of any other trustee under this
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 this Agreement
and the conditions of this Article XIII. 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 this Agreement, specifically including every provision of this
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 this
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 13.14 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
_______________ duly organized, validly existing, and in good
standing under the laws of the State of _______________.
(ii) Power and Authority. The Trustee has full power, authority
and legal right to execute, deliver, and perform this Agreement, and
has taken all necessary action to authorize the execution, delivery,
and performance by it of this Agreement.
(iii) No Violation. The execution and delivery of this Agreement
and the performance by the Trustee of its obligations under this
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 this 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. This 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 13.15 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 13.16 Trustee May Enforce Claims Without Possession of
Certificates. All rights of action and claims under this 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 13.17 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
this 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 this Agreement or in aid of the execution of any power granted in
this 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 13.18 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 XIV
Termination
Section 14.1 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 Payment 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 this Agreement; provided, however, that in no event
shall the Trust created by this 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
this Agreement. The Servicer shall promptly (but in any event not later than
the first day of the month of the specified Payment 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
14.1.
Notice of any termination, specifying the Payment 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 Payment Date stating the amount of any such final
payment, and that the Record Date otherwise applicable to such Payment 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 Payment Date pursuant to
Section 7.5.
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 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 this 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 14.2 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 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 Purchase 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 7.4, and shall be
distributed pursuant to Section 7.5. 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 Baa3 by Moody's 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 Moody's to the effect that such purchase will not
constitute a fraudulent transfer of assets of the Servicer under applicable
state and federal law.
Article XV
Miscellaneous Provisions
Section 15.1 Amendment. This 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 this Agreement which may be inconsistent with any other
provision herein, to evidence a succession to the Servicer or the Seller
pursuant to this Agreement or to add any other provisions with respect to
matters or questions arising under this Agreement that shall not be
inconsistent with the provisions of this 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 15.7(i) of this Agreement.
This 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 this Agreement, or of modifying in any manner the rights of the
Certificateholders (including effecting a transfer or assignment in compliance
with Section 15.7(ii) of this Agreement); provided, however, that no such
amendment, except with the consent of the Holders of all Certificates then
outstanding, shall (a) increase or reduce in any manner the amount of, or
accelerate or delay the timing of, collections of payments of Receivables, or
distributions that shall be required to be made on any Certificate, (b) reduce
the aforesaid percentage of the Pool Balance required to consent to any such
amendment or (c) reduce in any way the shortfalls for which the Trustee may
draw under the Reserve Account pursuant to Article VII hereof. Notwithstanding
anything herein to the contrary, the Specified Reserve Account Balance may be
reduced to a lesser amount as determined by the Seller upon satisfaction of
the Rating Agency Condition.
Promptly after the execution of any amendment or consent referred to
in this Section 15.1, 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 15.1 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 this 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
this Agreement. The Trustee shall not be obligated to enter into any such
amendment which affects the Trustee's own rights, duties or immunities under
this 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 15.1, the Servicer shall have received written notice from each of the
Rating Agencies that its rating of the Certificates will not be reduced or
withdrawn as a result of such amendment.
Section 15.2 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 this 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 make any financing
statement or continuation statement filed by the Servicer in accordance with
paragraph (a) above seriously misleading within the meaning of Section
9-402(7) of the UCC (or any successor provision to such Section), unless it
shall have given the Trustee at least 10 days prior written notice thereof.
(c) The Seller and the Servicer shall give the Trustee at least 10
days prior written notice of any relocation of its principal executive office
if, as a result of such relocation, the applicable provisions of the UCC would
require the filing of any amendment of any previously filed financing or
continuation statement or of any new financing statement. The Servicer shall
at all times maintain each office from which it shall service Receivables, and
its principal executive office, within the United States of America.
(d) The Servicer shall maintain accounts and records as to each
Receivable accurately and in sufficient detail to permit (i) the reader
thereof to know at any time the status of such Receivable, including payments
and recoveries made and payments owing (and the nature of each) and (ii)
reconciliation between payments or recoveries on (or with respect to) each
Receivable and the amounts from time to time deposited in the Collection
Account in respect of such Receivable.
(e) The Servicer shall maintain its computer systems so that, from
and after the time of sale under this 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 this 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 this
Agreement, an Opinion of Counsel either (a) stating that,
in the opinion of such counsel and subject to customary
qualifications and assumptions, 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; and
(2) on March 31 of each year, commencing with March
31, _____, an Opinion of Counsel, dated as of such date,
either (a) stating that, in the opinion of such counsel
and subject to customary qualifications and assumptions,
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.
(j) For the purpose of facilitating the execution of this Agreement
and for other purposes, this 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 15.3 Limitation on Rights of Certificateholders. The death or
incapacity of any Certificateholder shall not operate to terminate this
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 this Agreement or any of them.
No Certificateholder shall have any right to vote (except as provided
in Section 12.1, Section 12.4, Section 15.1 and this Section 15.3) or in any
manner otherwise control the operation and management of the Trust, or the
obligations of the parties to this Agreement, nor shall anything set forth in
this 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 this Agreement.
No Certificateholder shall have any right by virtue or by availing
itself of any provision of this Agreement to institute any suit, action, or
proceeding in equity or at law upon or with respect to a default under this
Agreement, unless such Holder previously shall have given to the Trustee a
written notice of default and of the continuance thereof 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 this 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 this 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 this Agreement, except in the manner provided in this
Agreement and for the equal, ratable, and common benefit of all
Certificateholders. For the protection and enforcement of the provisions of
this Section 15.3, each Certificateholder and the Trustee shall be entitled to
such relief as can be given either at law or in equity.
Section 15.4 Governing Law. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AND THE OBLIGATIONS,
RIGHTS, AND REMEDIES OF THE PARTIES UNDER THIS AGREEMENT SHALL BE DETERMINED
IN ACCORDANCE WITH SUCH LAWS, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF
LAWS.
Section 15.5 Notices. All demands, notices, and communications under
this Agreement shall be in writing, personally delivered or mailed by
certified mail, return receipt requested, or sent by telecopy or other similar
form of rapid transmission and shall be deemed to have been duly given upon
receipt (a) in the case of the Seller, at USAA Federal Savings Bank, McDermott
Freeway, San Antonio, Texas 78288 Attention: Vice President and Banking
Counsel, Telecopy Number: (210) 498-7210, or at such other address as shall be
designated by the Seller in a written notice to the Trustee, (b) in the case
of the Servicer, at USAA Federal Savings Bank, McDermott Freeway, San Antonio,
Texas 78288, Attention: Vice President and Banking Counsel, Telecopy Number:
(210) 498-7210, or at such other address as shall be designated by the
Servicer in a written notice to the Trustee, and (c) in the case of the
Trustee and the Collateral Agent, at ________________________________________,
Attention: _______________, Telecopy Number: _______________ or at such other
address as shall be designated in a written notice to the Trustee. Any notice
required 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 this
Agreement shall be conclusively presumed to have been duly given, whether or
not the Certificateholder shall receive such notice.
Section 15.6 Severability of Provisions. If any one or more of the
covenants, agreements, provisions, or terms of this 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 this Agreement and shall in no way affect the validity
or enforceability of the other provisions of this Agreement or of the
Certificates or the rights of the Holders thereof.
Section 15.7 Assignment. Notwithstanding anything to the contrary
contained herein, except as provided in Sections 10.3 and 11.3, neither the
Seller nor the Servicer may transfer or assign all, or a portion of, its
rights, obligations and duties under this Agreement unless such transfer or
assignment (i) (A) will not result in a reduction or withdrawal by Standard &
Poor's or Moody's of its rating then assigned to the Certificates and (B) the
Trustee has consented to such transfer or assignment, which consent shall not
be unreasonably withheld or (ii) the Trustee and Holders of Certificates
evidencing not less than 51% of the Pool Balance consent thereto. Any transfer
or assignment with respect to the Servicer of all of its rights, obligations
and duties will not become effective until a successor Service has assumed the
Servicer's rights, duties and obligations under this 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 15.8 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 9.2, each Certificate shall be
deemed fully paid.
Section 15.9 Third-Party Beneficiaries. This Agreement will inure to
the benefit of and be binding upon the parties hereto, the Certificateholders
and their respective successors and permitted assigns. Except as otherwise
provided in this Agreement, no other person will have any right or obligation
hereunder.
IN WITNESS WHEREOF, the parties have caused this Pooling and
Servicing Agreement to be duly executed by their respective officers as of the
day and year first above written.
USAA FEDERAL SAVINGS BANK,
as Seller and Servicer
By: ______________________
Name: _______________
Title: _______________
_____________,
as Trustee
By: ______________________
Name: _______________
Title: _______________
SCHEDULE A
Schedule A shall be the computer data disk or printout relating to the
Receivables delivered by the Seller to the Trustee on the Closing Date.
SCHEDULE B
Location of Receivable Files
----------------------------
USAA Federal Savings Bank
10750 McDermott Freeway
San Antonio, TX 78288
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 ______
___% 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 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 is not a deposit account, does not represent an
interest in or obligation of USAA Federal Savings Bank or any of its
affiliates and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other person or governmental authority.)
NUMBER CUSIP ______
R- [ ]
$[ ]
Final Payment Date:
_____________, _____
THIS CERTIFIES THAT __________. 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 ______ (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 ___________ __, ______ (the "Agreement") between the Seller,
acting as Seller and Servicer, and _________________, as trustee (the trustee
and any successor in interest under the Agreement, the "Trustee"), a summary
of certain of the pertinent provisions of which is set forth below. This 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 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 Cut-off
Date, security interests in the vehicles securing the Receivables (the
"Financed Vehicles"); such amounts as from time to time may be held in the
Collection Account established and maintained by the Servicer in the name of
the Trustee; benefits under the Reserve Account (described below); an
assignment of the rights of the Seller to receive proceeds from any claims on
comprehensive and collision, credit life and credit disability insurance
policies covering the Financed Vehicles or the Obligors, as the case may be,
to the extent that such insurance policies relate to the Receivables; and the
rights with respect to any Financed Vehicle that has been repossessed by the
Servicer, on behalf of the Trustee.
Under the Agreement, there will be distributed on the ___th day of
each month or, if such __th day is not a Business Day, the next succeeding
Business Day (a "Payment Date"), commencing on ____________ __, ______, 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 the aggregate amounts allocable to interest and principal that are
distributable to the Class A Certificateholders on such Payment Date, 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.
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 ______
_________________, as Trustee
By:________________________________
Authorized Signatory
Dated: __________ __, ______
This is one of the Class A Certificates referred to in the
within-mentioned Agreement.
__________________,
as Trustee
By:________________________________
Authorized Signatory
USAA AUTO LOAN GRANTOR TRUST ______
____% 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 Payment 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 Payment 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 Payment 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.
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 Payment 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 Payment Date as of which the Pool Balance is
equal to or less than [ ]% of the Original Pool Balance.
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.
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 ______
___% 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 is not a deposit account, does not represent an
interest in or obligation of USAA Federal Savings Bank or any of its
respective affiliates and is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other person or governmental
authority.)
NUMBER CUSIP _______
R-[ ]
$[ ]
Final Payment Date:
_____________ __, 20__
THIS CERTIFIES THAT __________ 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 ______ (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 __ __, ______ (the "Agreement") between the Seller, acting as
Seller and Servicer, and _________________, as trustee (the trustee and any
successor in interest under the Agreement, the "Trustee"), a summary of
certain of the pertinent provisions of which is set forth below. This 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 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 Cut-off
Date, security interests in the vehicles securing the Receivables (the
"Financed Vehicles"); such amounts as from time to time may be held in the
Collection Account established and maintained by the Servicer in the name of
the Trustee; benefits under the Reserve Account (described below); an
assignment of the rights of the Seller to receive proceeds from any claims on
comprehensive and collision, credit life and credit disability insurance
policies covering the Financed Vehicles or the Obligors, as the case may be,
to the extent that such insurance policies relate to the Receivables; and the
rights with respect to any Financed Vehicle that has been repossessed by the
Servicer, on behalf of the Trustee.
Under the Agreement, there will be distributed on the ___th day of
each month or, if such ___th day is not a Business Day, the next succeeding
Business Day (each, a "Payment Date"), commencing on ____________ __, ______,
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 the aggregate amounts allocable to interest principal
that are distributable to the Class B Certificateholders on such Payment Date,
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.
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 ______
_________________,
as Trustee
By:________________________________
Dated: __ __, ______
This is one of the Class B Certificates referred to in the
within-mentioned Agreement.
_________________,
as Trustee
By: _______________________________
Authorized Signatory
USAA AUTO LOAN GRANTOR TRUST ______
___% 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 Payment 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 Payment 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 Cut-off 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 Payment 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 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 Payment 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 Payment Date as of which the Pool Balance is
equal to or less than [ ]% of the Original Pool Balance.
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:
___________________________________*
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.
EXHIBIT C-1
Trustee's Certificate
pursuant to Section 13.3
of the Pooling and Servicing Agreement
_____________________________________________(the "Trustee") of the
USAA Auto Loan Grantor Trust ______ created pursuant to the Pooling and
Servicing Agreement (the "Pooling and Servicing Agreement"), dated as of
___________ __, ______, 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 5.2 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
__________, 20__.
________________________
EXHIBIT C-2
Trustee's Certificate
pursuant to Section 13.3
of the Pooling and Servicing Agreement
_____________________________________ (the "Trustee") of the USAA
Federal Savings Grantor Trust ______ created pursuant to the Pooling and
Servicing Agreement (the "Pooling and Servicing Agreement"), dated as of
__________ __, ______ 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
6.6 or 14.2 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
____________, 20__.
________________________
EXHIBIT D
USAA Auto Loan Grantor Trust ______
___% Automobile Loan Pass-Through Certificates, Class A
____% Automobile Loan Pass-Through Certificates, Class B
SERVICER'S REPORT
EXHIBIT E
FORM OF CERTIFICATEHOLDER REPORT
USAA Auto Loan Grantor Trust ______
___% Automobile Loan Pass-Through Certificates, Class A
___% Automobile Loan Pass-Through Certificates, Class B
On ________, ____, interest earned and principal paid on the underlying assets
for the month of ____________, ____ were paid to you in connection with the
above referenced issue. The following information is being provided pursuant
to Section 7.8 of the Pooling and Servicing Agreement, dated as of __ __,
______. This payment per $1000 of original issuance of your holdings is
allocated as follows:
1) Principal ________
2) Interest ________
Total per each individual certificate ________
3) Yield Supplement Amount ________
4) Fees and compensation paid to Servicer ________
(a) Total ________
(b) Per individual certificate ________
5) The amount deposited into the
Reserve Account ________
6) Aggregate Unreimbursed Advances in
prior month ________
Change From prior month ________
This month ________
7) (a) Pool Balance before this payment ________
(b) Pool Factor before this payment ________
(c) Pool Factor after this payment ________
8) (a) Available Reserve Amount ________
(b) % of Pool Balance ________
9) Specified Reserve Account Balance ________
10) Aggregate Realized Losses in prior month ________
EXHIBIT F
FORM OF YIELD SUPPLEMENT AGREEMENT
USAA Auto Loan Grantor Trust ______
c/o _________________, as Trustee
and as Collateral Agent
___________________________________
_______, ______
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 Payment Date,
the Servicer shall notify the Trust and the Seller of the Yield Supplement
Amount for such Payment Date.
2. The Seller agrees to establish a Yield Supplement Account pursuant
to Article VIII of the Pooling and Servicing Agreement, dated as of _____,
______ (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
_________________, 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 8.1 hereof, prior to 11:00 A.M. on each Payment
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 Section 8.2(g) 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
Collection 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 Payment 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 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 ______
c/o _________________,
as Trustee
__________________________________________
__________________________________________
Attention: Corporate Trust Department
Telecopy: ( )
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]
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:
_________________, as
Trustee and as Collateral Agent
By: ___________________________
Authorized Signatory
<PAGE>
Exhibit 4.2
===============================================================================
INDENTURE
between
USAA AUTO OWNER TRUST ______,
as Issuer
and
---------------------,
as Indenture Trustee
Dated as of _________________
===============================================================================
Table of Contents
Page
ARTICLE I
DEFINITIONS, USAGE AND INCORPORATION BY REFERENCE
SECTION 1.1 Definitions and Usage. 2
SECTION 1.2 Incorporation by Reference of Trust Indenture Act. 2
ARTICLE II
THE NOTES
SECTION 2.1 Form. 2
SECTION 2.2 Execution, Authentication and Delivery. 3
SECTION 2.3 Temporary Notes. 3
SECTION 2.4 Tax Treatment. 4
SECTION 2.5 Registration; Registration of Transfer and Exchange. 4
SECTION 2.6 Mutilated, Destroyed, Lost or Stolen Notes. 5
SECTION 2.7 Persons Deemed Owners. 6
SECTION 2.8 Payment of Principal and Interest; Defaulted Interest. 6
SECTION 2.9 Cancellation. 7
SECTION 2.10 Release of Collateral. 8
SECTION 2.11 Book-Entry Notes. 8
SECTION 2.12 Notices to Clearing Agency. 9
SECTION 2.13 Definitive Notes. 9
SECTION 2.14 Authenticating Agents. 9
ARTICLE III
COVENANTS
SECTION 3.1 Payment of Principal and Interest. 10
SECTION 3.2 Maintenance of Office or Agency. 10
SECTION 3.3 Money for Payments To Be Held in Trust. 11
SECTION 3.4 Existence. 12
SECTION 3.5 Protection of Indenture Trust Estate. 12
SECTION 3.6 Opinions as to Indenture Trust Estate. 13
SECTION 3.7 Performance of Obligations; Servicing of Receivables. 13
SECTION 3.8 Negative Covenants. 15
SECTION 3.9 Annual Statement as to Compliance. 16
SECTION 3.10 Issuer May Consolidate, etc., Only on Certain Terms. 16
SECTION 3.11 Successor or Transferee. 18
SECTION 3.12 No Other Business. 18
SECTION 3.13 No Borrowing. 18
SECTION 3.14 Servicer's Obligations. 18
SECTION 3.15 Guarantees, Loans, Advances and Other Liabilities. 18
SECTION 3.16 Capital Expenditures. 19
SECTION 3.17 Further Instruments and Acts. 19
SECTION 3.18 Restricted Payments. 19
SECTION 3.19 Notice of Events of Default. 19
SECTION 3.20 Removal of Administrator. 19
ARTICLE IV
SATISFACTION AND DISCHARGE
SECTION 4.1 Satisfaction and Discharge of Indenture. 19
SECTION 4.2 Application of Trust Money. 21
SECTION 4.3 Repayment of Monies Held by Note Paying Agent. 21
ARTICLE V
REMEDIES
SECTION 5.1 Events of Default. 21
SECTION 5.2 Acceleration of Maturity; Rescission and Annulment. 22
SECTION 5.3 Collection of Indebtedness and Suits for Enforcement
by Indenture Trustee. 23
SECTION 5.4 Remedies; Priorities. 25
SECTION 5.5 Optional Preservation of the Receivables. 28
SECTION 5.6 Limitation of Suits. 28
SECTION 5.7 Unconditional Rights of Noteholders To Receive Principal
and Interest. 29
SECTION 5.8 Restoration of Rights and Remedies. 29
SECTION 5.9 Rights and Remedies Cumulative. 29
SECTION 5.10 Delay or Omission Not a Waiver. 29
SECTION 5.11 Control by Noteholders. 29
SECTION 5.12 Waiver of Past Defaults. 30
SECTION 5.13 Undertaking for Costs. 30
SECTION 5.14 Waiver of Stay or Extension Laws. 31
SECTION 5.15 Action on Notes. 31
SECTION 5.16 Performance and Enforcement of Certain Obligations. 31
ARTICLE VI
THE INDENTURE TRUSTEE
SECTION 6.1 Duties of Indenture Trustee. 32
SECTION 6.2 Rights of Indenture Trustee. 33
SECTION 6.3 Individual Rights of Indenture Trustee. 34
SECTION 6.4 Indenture Trustee's Disclaimer. 35
SECTION 6.5 Notice of Defaults; Insolvency or Dissolution of
Depositor or the Seller. 35
SECTION 6.6 Reports by Indenture Trustee to Noteholders. 35
SECTION 6.7 Compensation and Indemnity. 35
SECTION 6.8 Replacement of Indenture Trustee. 36
SECTION 6.9 Successor Indenture Trustee by Merger. 37
SECTION 6.10 Appointment of Co-Indenture Trustee or Separate Indenture
Trustee. 37
SECTION 6.11 Eligibility; Disqualification. 38
SECTION 6.12 Preferential Collection of Claims Against Issuer. 38
ARTICLE VII
NOTEHOLDERS' LISTS AND REPORTS
SECTION 7.1 Issuer To Furnish Indenture Trustee Names and Addresses
of Noteholders. 39
SECTION 7.2 Preservation of Information; Communications to
Noteholders. 39
SECTION 7.3 Reports by Issuer. 39
SECTION 7.4 Reports by Indenture Trustee. 40
ARTICLE VIII
ACCOUNTS, DISBURSEMENTS AND RELEASES
SECTION 8.1 Collection of Money. 40
SECTION 8.2 Trust Accounts. 41
SECTION 8.3 General Provisions Regarding Accounts. 42
SECTION 8.4 Release of Indenture Trust Estate. 43
SECTION 8.5 Opinion of Counsel. 44
ARTICLE IX
SUPPLEMENTAL INDENTURES
SECTION 9.1 Supplemental Indentures Without Consent of Noteholders. 44
SECTION 9.2 Supplemental Indentures with Consent of Noteholders. 46
SECTION 9.3 Execution of Supplemental Indentures. 47
SECTION 9.4 Effect of Supplemental Indenture. 48
SECTION 9.5 Conformity with Trust Indenture Act. 48
SECTION 9.6 Reference in Notes to Supplemental Indentures. 48
ARTICLE X
PREPAYMENT
SECTION 10.1 Prepayment. 48
SECTION 10.2 Form of Prepayment Notice. 48
SECTION 10.3 Notes Payable on Prepayment Date. 49
ARTICLE XI
MISCELLANEOUS
SECTION 11.1 Compliance Certificates and Opinions, etc. 49
SECTION 11.2 Form of Documents Delivered to Indenture Trustee. 51
SECTION 11.3 Acts of Noteholders. 52
SECTION 11.4 Notices, etc., to Indenture Trustee, Issuer and
Rating Agencies. 52
SECTION 11.5 Notices to Noteholders; Waiver. 53
SECTION 11.6 Alternate Payment and Notice Provisions. 54
SECTION 11.7 Conflict with Trust Indenture Act. 54
SECTION 11.8 Effect of Headings and Table of Contents. 54
SECTION 11.9 Successors and Assigns. 54
SECTION 11.10 Separability. 54
SECTION 11.11 Benefits of Indenture. 54
SECTION 11.12 Legal Holidays. 54
SECTION 11.13 Governing Law. 55
SECTION 11.14 Counterparts. 55
SECTION 11.15 Recording of Indenture. 55
SECTION 11.16 Trust Obligation. 55
SECTION 11.17 No Petition. 55
SECTION 11.18 Inspection. 55
EXHIBIT A-1 [FORM OF CLASS A-1 NOTE].................................. A-1-1
EXHIBIT A-2 [FORM OF CLASS A-2 NOTE].................................. A-2-1
EXHIBIT A-3 [FORM OF CLASS A-3 NOTE].................................. A-3-1
SCHEDULE A Schedule of Receivables.....................................SA-1
APPENDIX A Definitions and Usage.......................................AA-1
INDENTURE, dated as of _________________, (as from time to time
amended, supplemented or otherwise modified and in effect, this "Indenture")
between USAA AUTO OWNER TRUST ______, a Delaware business trust, as Issuer,
and _____________________, a ________, as trustee and not in its individual
capacity (in such capacity, the "Indenture Trustee").
Each party agrees as follows for the benefit of the other party and
for the equal and ratable benefit of the holders of the Issuer's Class A-1
[_____%] [Floating Rate] Asset Backed Notes (the "Class A-1 Notes"), Class A-2
[_____%] [Floating Rate] Asset Backed Notes (the "Class A-2 Notes") and Class
A-3 [_____%] [Floating Rate] Asset Backed Notes (the "Class A-3 Notes") and,
together with the Class A-1 Notes and the Class A-2 Notes, the "Notes"):
GRANTING CLAUSE
The Issuer hereby Grants to the Indenture Trustee at the Closing
Date, as Indenture Trustee for the benefit of the Noteholders, all of the
Issuer's right, title and interest in, to and under, whether now owned or
existing or hereafter acquired or arising, (a) the Receivables; (b) monies due
or received thereunder on or after the Cut-Off Date; (c) the security
interests in the Financed Vehicles granted by Obligors pursuant to the
Receivables and any other interest of the Issuer in the Financed Vehicles; (d)
rights to receive proceeds with respect to the Receivables from claims on any
physical damage, credit life, credit disability, or other insurance policies
covering Financed Vehicles or Obligors; (e) all of the rights to the
Receivable Files; (f) the Trust Accounts and all amounts, securities,
investments and other property deposited in or credited to any of the
foregoing, all securities entitlements related to the foregoing and all
proceeds thereof; (g) the Sale and Servicing Agreement; (h) payments and
proceeds with respect to the Receivables held by the Servicer; (i) all
property (including the right to receive Liquidation Proceeds) securing a
Receivable (other than a Receivable purchased by the Servicer or repurchased
by the Seller); (j) rebates of premiums and other amounts relating to
insurance policies and other items financed under the Receivables in effect as
of the Cut-Off Date; and (k) all present and future claims, demands, causes of
action and choses in action in respect of any or all of the foregoing and all
payments on or under and all proceeds of every kind and nature whatsoever in
respect of any or all of the foregoing, including all proceeds of the
conversion thereof, voluntary or involuntary, into cash or other liquid
property, all cash proceeds, accounts, accounts receivable, notes, drafts,
acceptances, chattel paper, checks, deposit accounts, insurance proceeds,
condemnation awards, rights to payment of any and every kind and other forms
of obligations and receivables, instruments and other property which at any
time constitute all or part of or are included in the proceeds of any of the
foregoing (collectively, the "Collateral").
The foregoing Grant is made in trust to secure the payment of
principal of and interest on, and any other amounts owing in respect of, the
Notes, equally and ratably without prejudice, priority or distinction, and to
secure compliance with the provisions of this Indenture, all as provided in
this Indenture.
The Indenture Trustee, as Indenture Trustee on behalf of the
Noteholders, acknowledges such Grant, accepts the trusts under this Indenture
in accordance with the provisions of this Indenture and agrees to perform its
duties required in this Indenture to the best of its ability to the end that
the interests of the Noteholders may be adequately and effectively protected.
ARTICLE I
DEFINITIONS, USAGE AND INCORPORATION BY REFERENCE
SECTION 1.1 Definitions and Usage. Except as otherwise specified
herein or as the context may otherwise require, capitalized terms used but not
otherwise defined herein are defined in Appendix A hereto, which also contains
rules as to usage that shall be applicable herein.
SECTION 1.2 Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture. The following
TIA terms used in this Indenture have the following meanings:
"indenture securities" shall mean the Notes.
"indenture security holder" shall mean a Noteholder.
"indenture to be qualified" shall mean this Indenture.
"indenture trustee" or "institutional trustee" shall mean the
Indenture
Trustee.
"obligor" on the indenture securities shall mean the Issuer and any
other obligor on the indenture securities.
All other TIA terms used in this Indenture that are defined in the
TIA, defined by TIA reference to another statute or defined by Commission rule
have the meaning assigned to them by such definitions.
ARTICLE II
THE NOTES
SECTION 2.1 Form. (a) The Class A-1 Notes, the Class A-2 Notes and
the Class A-3 Notes, together with the Indenture Trustee's certificates of
authentication, shall be in substantially the form set forth in Exhibit A-1,
Exhibit A-2 and Exhibit A-3, respectively, with such appropriate insertions,
omissions, substitutions and other variations as are required or permitted by
this Indenture, and may have such letters, numbers or other marks of
identification and such legends or endorsements placed thereon as may,
consistently herewith, be determined by the officers executing such Notes, as
evidenced by their execution thereof. Any portion of the text of any Note may
be set forth on the reverse thereof, with an appropriate reference thereto on
the face of the Note.
(b) The definitive Notes shall be typewritten, printed, lithographed
or engraved or produced by any combination of these methods (with or without
steel engraved borders), all as determined by the officers executing such
Notes, as evidenced by their execution of such Notes.
(c) Each Note shall be dated the date of its authentication. The
terms of the Notes set forth in Exhibit A-1, Exhibit A-2 and Exhibit A-3 are
part of the terms of this Indenture and are incorporated herein by reference.
SECTION 2.2 Execution, Authentication and Delivery. (a) The Notes
shall be executed on behalf of the Issuer by any of its Authorized Officers.
The signature of any such Authorized Officer on the Notes may be manual or
facsimile.
(b) Notes bearing the manual or facsimile signature of individuals
who were at any time Authorized Officers of the Issuer shall bind the Issuer,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Notes or did not hold
such offices at the date of such Notes.
(c) The Indenture Trustee shall, upon Issuer Order, authenticate and
deliver the Notes for original issue in the Classes and initial aggregate
principal amounts as set in the table below.
<TABLE>
<CAPTION>
Initial Aggregate
Class Principal Amount
----- ----------------
<S> <C>
Class A-1 Notes $
Class A-2 Notes $
Class A-3 Notes $
</TABLE>
The aggregate principal amount of Class A-1 Notes, Class A-2 Notes
and Class A-3 Notes, Outstanding at any time may not exceed those respective
amounts except as provided in Section 2.6.
(d) The Class A-1, Class A-2 and Class A-3 Notes shall be issuable as
Book-Entry Notes in minimum denominations of $1,000 and in integral multiples
of $1,000 in excess thereof.
(e) No Note shall be entitled to any benefit under this Indenture or
be valid or obligatory for any purpose, unless there appears on such Note a
certificate of authentication substantially in the form provided for herein
executed by the Indenture Trustee by the manual signature of one of its
authorized signatories, and such certificate upon any Note shall be conclusive
evidence, and the only evidence, that such Note has been duly authenticated
and delivered hereunder.
SECTION 2.3 Temporary Notes. (a) Pending the preparation of
definitive Notes, the Issuer may execute, and upon receipt of an Issuer Order
the Indenture Trustee shall authenticate and deliver, temporary Notes that are
printed, lithographed, typewritten, mimeographed or otherwise produced,
substantially of the tenor of the definitive Notes in lieu of which they are
issued and with such variations not inconsistent with the terms of this
Indenture as the officers executing the temporary Notes may determine, as
evidenced by their execution of such temporary Notes.
If temporary Notes are issued, the Issuer shall cause definitive
Notes to be prepared without unreasonable delay. After the preparation of
definitive Notes, the temporary Notes shall be exchangeable for definitive
Notes upon surrender of the temporary Notes at the office or agency of the
Issuer to be maintained as provided in Section 3.2, without charge to the
Noteholder. Upon surrender for cancellation of any one or more temporary
Notes, the Issuer shall execute, and the Indenture Trustee shall authenticate
and deliver in exchange therefor, a like principal amount of definitive Notes
of authorized denominations. Until so exchanged, the temporary Notes shall in
all respects be entitled to the same benefits under this Indenture as
definitive Notes.
SECTION 2.4 Tax Treatment. The Issuer has entered into this
Indenture, and the Notes shall be issued, with the intention that, for
federal, State and local income and franchise tax purposes, the Notes shall
qualify as indebtedness of the Issuer secured by the Indenture Trust Estate.
The Issuer, by entering into this Indenture, and each Noteholder, by its
acceptance of a Note (and each Note Owner by its acceptance of an interest in
the applicable Book-Entry Note), agree to treat the Notes for federal, State
and local income and franchise tax purposes as indebtedness of the Issuer.
SECTION 2.5 Registration; Registration of Transfer and
Exchange. (a) The Issuer shall cause to be kept a register (the "Note
Register") in which, subject to such reasonable regulations as it may
prescribe, the Issuer shall provide for the registration of Notes and the
registration of transfers of Notes. The Indenture Trustee initially shall be
the "Note Registrar" for the purpose of registering Notes and transfers of
Notes as herein provided. Upon any resignation of any Note Registrar, the
Issuer shall promptly appoint a successor or, if it elects not to make such an
appointment, assume the duties of Note Registrar. If a Person other than the
Indenture Trustee is appointed by the Issuer as Note Registrar, (i) the Issuer
shall give the Indenture Trustee prompt written notice of the appointment of
such Note Registrar and of the location, and any change in the location, of
the Note Register, (ii) the Indenture Trustee shall have the right to inspect
the Note Register at all reasonable times and to obtain copies thereof, and
(iii) the Indenture Trustee shall have the right to rely upon a certificate
executed on behalf of the Note Registrar by an Executive Officer thereof as to
the names and addresses of the Noteholders and the principal amounts and
number of such Notes.
(b) Upon surrender for registration of transfer of any Note at the
office or agency of the Issuer to be maintained as provided in Section 3.2, if
the requirements of Section 8-401(1) of the UCC are met, an Authorized Officer
of the Issuer shall execute, and the Indenture Trustee shall authenticate and
the Noteholder shall obtain from the Indenture Trustee, in the name of the
designated transferee or transferees, one or more new Notes of the same Class
in any authorized denomination, of a like aggregate principal amount.
(c) At the option of the Noteholder, Notes may be exchanged for other
Notes of the same Class in any authorized denominations, of a like aggregate
principal amount, upon surrender of the Notes to be exchanged at such office
or agency. Whenever any Notes are so surrendered for exchange, if the
requirements of Section 8-401(1) of the UCC are met, the Issuer shall execute,
the Indenture Trustee shall authenticate, and the Noteholder shall obtain from
the Indenture Trustee, the Notes which the Noteholder making such exchange is
entitled to receive.
(d) All Notes issued upon any registration of transfer or exchange of
Notes shall be the valid obligations of the Issuer, evidencing the same debt,
and entitled to the same benefits under this Indenture as the Notes
surrendered upon such registration of transfer or exchange.
(e) Every Note presented or surrendered for registration of transfer
or exchange shall be (i) duly endorsed by, or be accompanied by a written
instrument of transfer in form satisfactory to the Indenture Trustee duly
executed by, the Noteholder thereof or such Noteholder's attorney duly
authorized in writing, with such signature guaranteed by an "eligible
guarantor institution" meeting the requirements of the Note Registrar and (ii)
accompanied by such other documents or evidence as the Indenture Trustee may
require.
(f) No service charge shall be made to a Noteholder for any
registration of transfer or exchange of Notes, but the Note Registrar may
require payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in connection with any registration of transfer or
exchange of Notes, other than exchanges pursuant to Section 2.3 or 9.6 not
involving any transfer.
(g) The preceding provisions of this Section 2.5 notwithstanding, the
Issuer shall not be required to make and the Note Registrar need not register
transfers or exchanges of Notes selected for redemption or of any Note for a
period of fifteen (15) days preceding the Payment Date for any payment with
respect to such Note.
SECTION 2.6 Mutilated, Destroyed, Lost or Stolen Notes. (a) If
(i) any mutilated Note is surrendered to the Indenture Trustee or the Note
Registrar, or the Indenture Trustee receives evidence to its satisfaction of
the destruction, loss or theft of any Note, and (ii) there is delivered to the
Indenture Trustee such security or indemnity as may be required by it to hold
the Issuer and the Indenture Trustee harmless, then, in the absence of notice
to the Issuer, the Note Registrar or the Indenture Trustee that such Note has
been acquired by a protected purchaser, as defined in Section 8-303 of the
UCC, and provided that the requirements of Section 8-405 of the UCC are met,
the Issuer shall execute, and upon Issuer Request the Indenture Trustee shall
authenticate and deliver, in exchange for or in lieu of any such mutilated,
destroyed, lost or stolen Note, a replacement Note of the same Class;
provided, however, that if any such destroyed, lost or stolen Note, but not a
mutilated Note, shall have become or within seven (7) days shall be due and
payable, or shall have been called for redemption, instead of issuing a
replacement Note, the Issuer may pay such destroyed, lost or stolen Note when
so due or payable or upon the Prepayment Date without surrender thereof. If,
after the delivery of such replacement Note or payment of a destroyed, lost or
stolen Note pursuant to the proviso to the preceding sentence, a protected
purchaser of the original Note in lieu of which such replacement Note was
issued presents for payment such original Note, the Issuer and the Indenture
Trustee shall be entitled to recover such replacement Note (or such payment)
from the Person to whom it was delivered or any Person taking such replacement
Note from such Person to whom such replacement Note was delivered or any
assignee of such Person, except a protected purchaser, and shall be entitled
to recover upon the security or indemnity provided therefor to the extent of
any loss, damage, cost or expense incurred by the Issuer or the Indenture
Trustee in connection therewith.
(b) Upon the issuance of any replacement Note under this Section 2.6,
the Issuer may require the payment by the Noteholder of such Note of a sum
sufficient to cover any tax or other governmental charge that may be imposed
in relation thereto and any other reasonable expenses (including the fees and
expenses of the Indenture Trustee) connected therewith.
(c) Every replacement Note issued pursuant to this Section 2.6 in
replacement of any mutilated, destroyed, lost or stolen Note shall constitute
an original additional contractual obligation of the Issuer, whether or not
the mutilated, destroyed, lost or stolen Note shall be at any time enforceable
by anyone, and shall be entitled to all the benefits of this Indenture equally
and proportionately with any and all other Notes duly issued hereunder.
(d) The provisions of this Section 2.6 are exclusive and shall
preclude (to the extent lawful) all other rights and remedies with respect to
the replacement or payment of mutilated, destroyed, lost or stolen Notes.
SECTION 2.7 Persons Deemed Owners. Prior to due presentment
for registration of transfer of any Note, the Issuer, the Indenture Trustee
and any agent of the Issuer or the Indenture Trustee may treat the Person in
whose name any Note is registered (as of the day of determination) as the
owner of such Note for the purpose of receiving payments of principal of and
interest, if any, on such Note and for all other purposes whatsoever, whether
or not such Note be overdue, and none of the Issuer, the Indenture Trustee or
any agent of the Issuer or the Indenture Trustee shall be affected by notice
to the contrary.
SECTION 2.8 Payment of Principal and Interest; Defaulted
Interest. (a) The Class A-1 Notes, the Class A-2 Notes and the Class A-3 Notes
shall accrue interest at the Class A-1 Rate, the Class A-2 Rate and the Class
A-3 Rate, respectively, as set forth in Exhibit A-1, Exhibit A-2 and Exhibit
A-3, respectively, and such interest shall be due and payable on each Payment
Date as specified therein, subject to Section 3.1. Any installment of interest
or principal, if any, payable on any Note that is punctually paid or duly
provided for by the Issuer on the applicable Payment Date shall be paid to the
Person in whose name such Note (or one or more Predecessor Notes) is
registered on the Record Date either by wire transfer in immediately available
funds, to the account of such Noteholder at a bank or other entity having
appropriate facilities therefor, if such Noteholder shall have provided to the
Note Registrar appropriate written instructions at least five (5) Business
Days prior to such Payment Date and such Noteholder's Notes in the aggregate
evidence a denomination of not less than $1,000,000, or, if not, by check
mailed first-class postage prepaid to such Person's address as it appears on
the Note Register on such Record Date; provided that, unless Definitive Notes
have been issued to Note Owners pursuant to Section 2.13, with respect to
Notes registered on the Record Date in the name of the nominee of the Clearing
Agency (initially, such nominee to be Cede & Co.), payment shall be made by
wire transfer in immediately available funds to the account designated by such
nominee, and except for the final installment of principal payable with
respect to such Note on a Payment Date, Prepayment Date or the applicable
Final Scheduled Payment Date, which shall be payable as provided below. The
funds represented by any such checks returned undelivered shall be held in
accordance with Section 3.3.
(b) The principal of each Note shall be payable in installments on
each Payment Date as provided in the forms of Notes set forth in Exhibit A-1,
Exhibit A-2 and Exhibit A-3 hereto. Notwithstanding the foregoing, the entire
unpaid principal amount of each Class of Notes shall be due and payable, if
not previously paid, on the date on which an Event of Default shall have
occurred and be continuing, if the Indenture Trustee or the Noteholders of
Notes evidencing not less than a majority of the principal amount of the Notes
have declared the Notes to be immediately due and payable in the manner
provided in Section 5.2. All principal payments on each Class of Notes shall
be made pro rata to the Noteholders of such Class entitled thereto. The
Indenture Trustee shall notify the Person in whose name a Note is registered
at the close of business on the Record Date preceding the Payment Date on
which the Issuer expects that the final installment of principal of and
interest on such Note shall be paid. Such notice shall be mailed or
transmitted by facsimile prior to such final Payment Date and shall specify
that such final installment shall be payable only upon presentation and
surrender of such Note and shall specify the place where such Note may be
presented and surrendered for payment of such installment. Notices in
connection with redemption of Notes shall be mailed to Noteholders as provided
in Section 10.2.
(c) If the Issuer defaults in a payment of interest on the Notes, the
Issuer shall pay defaulted interest (plus interest on such defaulted interest
to the extent lawful) at the applicable Note Interest Rate on the Payment Date
following such default. The Issuer shall pay such defaulted interest to the
Persons who are Noteholders on the Record Date for such following Payment
Date.
SECTION 2.9 Cancellation. All Notes surrendered for payment,
registration of transfer or exchange shall, if surrendered to any Person other
than the Indenture Trustee, be delivered to the Indenture Trustee and shall be
promptly cancelled by the Indenture Trustee. The Issuer may at any time
deliver to the Indenture Trustee for cancellation any Notes previously
authenticated and delivered hereunder which the Issuer may have acquired in
any manner whatsoever, and all Notes so delivered shall be promptly cancelled
by the Indenture Trustee. No Notes shall be authenticated in lieu of or in
exchange for any Notes cancelled as provided in this Section 2.9, except as
expressly permitted by this Indenture. All cancelled Notes may be held or
disposed of by the Indenture Trustee in accordance with its standard retention
or disposal policy as in effect at the time unless the Issuer shall direct by
an Issuer Order that they be destroyed or returned to it and so long as such
Issuer Order is timely and the Notes have not been previously disposed of by
the Indenture Trustee.
SECTION 2.10 Release of Collateral. Subject to Section 11.1 and
the terms of the Basic Documents, the Indenture Trustee shall release property
from the lien of this Indenture only upon receipt of an Issuer Request
accompanied by an Officer's Certificate, an Opinion of Counsel and Independent
Certificates in accordance with TIA Sections 314(c) and 314(d)(1) or an
Opinion of Counsel in lieu of such Independent Certificates to the effect that
the TIA does not require any such Independent Certificates. If the Commission
shall issue an exemptive order under TIA Section 304(d) modifying the Issuer's
obligations under TIA Sections 314(c) and 314(d)(1), subject to Section 11.1
and the terms of the Basic Documents, the Indenture Trustee shall release
property from the lien of this Indenture in accordance with the conditions and
procedures set forth in such exemptive order.
SECTION 2.11 Book-Entry Notes. The Notes, upon original
issuance, shall be issued in the form of typewritten Notes representing the
Book-Entry Notes, to be delivered to The Depository Trust Company, the initial
Clearing Agency, by, or on behalf of, the Issuer. The Book-Entry Notes shall
be registered initially on the Note Register in the name of Cede & Co., the
nominee of the initial Clearing Agency, and no Note Owner thereof shall
receive a Definitive Note (as defined below) representing such Note Owner's
interest in such Note, except as provided in Section 2.13. Unless and until
definitive, fully registered Notes (the "Definitive Notes") have been issued
to such Note Owners pursuant to Section 2.13:
(i) the provisions of this Section 2.11 shall be in full
force and effect;
(ii) the Note Registrar and the Indenture Trustee shall be
entitled to deal with the Clearing Agency for all purposes of this
Indenture (including the payment of principal of and interest on the
Book-Entry Notes and the giving of instructions or directions
hereunder) as the sole Noteholder, and shall have no obligation to
the Note Owners;
(iii) to the extent that the provisions of this Section 2.11
conflict with any other provisions of this Indenture, the provisions
of this Section 2.11 shall control;
(iv) the rights of Note Owners shall be exercised only
through the Clearing Agency and shall be limited to those established
by law and agreements between such Note Owners and the Clearing
Agency and/or the Clearing Agency Participants pursuant to the
Security Depository Agreement. Unless and until Definitive Notes are
issued to Note Owners pursuant to Section 2.13, the initial Clearing
Agency shall make book-entry transfers among the Clearing Agency
Participants and receive and transmit payments of principal of and
interest on the Book-Entry Notes to such Clearing Agency
Participants; and
(v) whenever this Indenture requires or permits actions to
be taken based upon instructions or directions of Noteholders of
Notes evidencing a specified percentage of the principal amount of
the Notes Outstanding (or any Class thereof) the Clearing Agency
shall be deemed to represent such percentage only to the extent that
it has received instructions to such effect from Note Owners and/or
Clearing Agency Participants owning or representing, respectively,
such required percentage of the beneficial interest of the Notes
Outstanding (or Class thereof) and has delivered such instructions to
the Indenture Trustee.
SECTION 2.12 Notices to Clearing Agency. Whenever a notice or
other communication to the Noteholders of Book-Entry Notes is required under
this Indenture, unless and until Definitive Notes shall have been issued to
the Note Owners pursuant to Section 2.13, the Indenture Trustee shall give all
such notices and communications specified herein to be given to Noteholders of
Book-Entry Notes to the Clearing Agency, and shall have no obligation to such
Note Owners.
SECTION 2.13 Definitive Notes. With respect to any Class or
Classes of Book-Entry Notes, if (i) the Administrator advises the Indenture
Trustee in writing that the Clearing Agency is no longer willing or able to
properly discharge its responsibilities with respect to such Class of
Book-Entry Notes and the Administrator is unable to locate a qualified
successor, (ii) the Administrator, at its option, advises the Indenture
Trustee in writing that it elects to terminate the book-entry system through
the Clearing Agency or (iii) after the occurrence of an Event of Default or an
Event of Servicing Termination, Note Owners of such Class of Book- Entry Notes
evidencing beneficial interests aggregating not less than a majority of the
principal amount of such Class advise the Indenture Trustee and the Clearing
Agency in writing that the continuation of a book-entry system through the
Clearing Agency is no longer in the best interests of such Class of Note
Owners, then the Clearing Agency shall notify all Note Owners of such Class
and the Indenture Trustee of the occurrence of such event and of the
availability of Definitive Notes to the Note Owners of the applicable Class
requesting the same. Upon surrender to the Indenture Trustee of the
typewritten Notes representing the Book-Entry Notes by the Clearing Agency,
accompanied by registration instructions, the Issuer shall execute and the
Indenture Trustee shall authenticate the Definitive Notes in accordance with
the instructions of the Clearing Agency. None of the Issuer, the Note
Registrar or the Indenture 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 Notes to Note
Owners, the Indenture Trustee shall recognize the holders of such Definitive
Notes as Noteholders.
SECTION 2.14 Authenticating Agents. (a) The Indenture Trustee
may appoint one or more Persons (each, an "Authenticating Agent") with power
to act on its behalf and subject to its direction in the authentication of
Notes in connection with issuance, transfers and exchanges under Sections 2.2,
2.3, 2.5, 2.6 and 9.6, as fully to all intents and purposes as though each
such Authenticating Agent had been expressly authorized by those Sections to
authenticate such Notes. For all purposes of this Indenture, the
authentication of Notes by an Authenticating Agent pursuant to this Section
2.14 shall be deemed to be the authentication of Notes "by the Indenture
Trustee."
(b) Any corporation into which any Authenticating Agent may be merged
or converted or with which it may be consolidated, or any corporation
resulting from any merger, consolidation or conversion to which any
Authenticating Agent shall be a party, or any corporation succeeding to all or
substantially all of the corporate trust business of any Authenticating Agent,
shall be the successor of such Authenticating Agent hereunder, without the
execution or filing of any further act on the part of the parties hereto or
such Authenticating Agent or such successor corporation.
(c) Any Authenticating Agent may at any time resign by giving written
notice of resignation to the Indenture Trustee and the Owner Trustee. The
Indenture Trustee may at any time terminate the agency of any Authenticating
Agent by giving written notice of termination to such Authenticating Agent and
the Owner Trustee. Upon receiving such notice of resignation or upon such a
termination, the Indenture Trustee may appoint a successor Authenticating
Agent and shall give written notice of any such appointment to the Owner
Trustee.
(d) The Administrator agrees to pay to each Authenticating Agent from
time to time reasonable compensation for its services. The provisions of
Sections 2.9 and 6.4 shall be applicable to any Authenticating Agent.
ARTICLE III
COVENANTS
SECTION 3.1 Payment of Principal and Interest. The Issuer
shall duly and punctually pay the principal of and interest, if any, on the
Notes in accordance with the terms of the Notes and this Indenture. Without
limiting the foregoing on each Payment Date the Issuer shall cause to be paid
pursuant to Section 8.2(c) all amounts on deposit in the Collection Account
and the Principal Distribution Account with respect to the Collection Period
preceding such Payment Date and deposited therein pursuant to the Sale and
Servicing Agreement. Amounts properly withheld under the Code by any Person
from a payment to any Noteholder of interest and/or principal shall be
considered as having been paid by the Issuer to such Noteholder for all
purposes of this Indenture.
SECTION 3.2 Maintenance of Office or Agency. The Issuer shall
maintain in the Borough of Manhattan, The City of New York, an office or
agency where Notes may be surrendered for registration of transfer or
exchange, and where notices and demands to or upon the Issuer in respect of
the Notes and this Indenture may be served. The Issuer hereby initially
appoints the Indenture Trustee to serve as its agent for the foregoing
purposes. The Issuer shall give prompt written notice to the Indenture Trustee
of the location, and of any change in the location, of any such office or
agency. If, at any time, the Issuer shall fail to maintain any such office or
agency or shall fail to furnish the Indenture Trustee with the address
thereof, such surrenders, notices and demands may be made or served at the
Corporate Trust Office, and the Issuer hereby appoints the Indenture Trustee
as its agent to receive all such surrenders, notices and demands.
SECTION 3.3 Money for Payments To Be Held in Trust. (a) As
provided in Sections 8.2 and 5.4(b), all payments of amounts due and payable
with respect to any Notes that are to be made from amounts withdrawn from the
Trust Accounts shall be made on behalf of the Issuer by the Indenture Trustee
or by another Note Paying Agent, and no amounts so withdrawn from the Trust
Accounts for payments of Notes shall be paid over to the Issuer, except as
provided in this Section 3.3.
(b) On or before the Business Day preceding each Payment Date and
Prepayment Date, the Issuer shall deposit or cause to be deposited in the
Collection Account an aggregate sum sufficient to pay the amounts then
becoming due under the Notes, such sum to be held in trust for the benefit of
the Persons entitled thereto, and (unless the Note Paying Agent is the
Indenture Trustee) shall promptly notify the Indenture Trustee of its action
or failure so to act.
(c) The Issuer shall cause each Note Paying Agent other than the
Indenture Trustee to execute and deliver to the Indenture Trustee an
instrument in which such Note Paying Agent shall agree with the Indenture
Trustee (and if the Indenture Trustee acts as Note Paying Agent, it hereby so
agrees), subject to the provisions of this Section 3.3, that such Note Paying
Agent shall:
(i) hold all sums held by it for the payment of amounts
due with respect to the Notes in trust for the benefit of the
Persons entitled thereto until such sums shall be paid to such
Persons or otherwise disposed of as herein provided and pay such
sums to such Persons as herein provided;
(ii) give the Indenture Trustee notice of any default by
the Issuer (or any other obligor upon the Notes) of which it has
actual knowledge in the making of any payment required to be made
with respect to the Notes;
(iii) at any time during the continuance of any such
default, upon the written request of the Indenture Trustee,
forthwith pay to the Indenture Trustee all sums so held in trust by
such Note Paying Agent;
(iv) immediately resign as a Note Paying Agent and
forthwith pay to the Indenture Trustee all sums held by it in trust
for the payment of Notes if at any time it ceases to meet the
standards required to be met by a Note Paying Agent at the time of
its appointment; and
(v) comply with all requirements of the Code and any State
or local tax law with respect to the withholding from any payments
made by it on any Notes of any applicable withholding taxes imposed
thereon and with respect to any applicable reporting requirements in
connection therewith.
(d) The Issuer may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, by
Issuer Order direct any Note Paying Agent to pay to the Indenture Trustee all
sums held in trust by such Note Paying Agent, such sums to be held by the
Indenture Trustee upon the same trusts as those upon which the sums were held
by such Note Paying Agent; and upon such payment by any Note Paying Agent to
the Indenture Trustee, such Note Paying Agent shall be released from all
further liability with respect to such money.
(e) Subject to applicable laws with respect to escheat of funds, any
money held by the Indenture Trustee or any Note Paying Agent in trust for the
payment of any amount due with respect to any Note and remaining unclaimed for
two (2) years after such amount has become due and payable shall be discharged
from such trust and be paid to the Issuer on Issuer Request; and the
Noteholder of such Note shall thereafter, as an unsecured general creditor,
look only to the Issuer for payment thereof (but only to the extent of the
amounts so paid to the Issuer), and all liability of the Indenture Trustee or
such Note Paying Agent with respect to such trust money shall thereupon cease;
provided, however, that the Indenture Trustee or such Note Paying Agent,
before being required to make any such repayment, shall at the expense and
direction of the Issuer cause to be published once, in a newspaper published
in the English language, customarily published on each Business Day and of
general circulation in The City of New York, notice that such money remains
unclaimed and that, after a date specified therein, which shall not be less
than thirty (30) days from the date of such publication, any unclaimed balance
of such money then remaining shall be repaid to the Issuer. The Indenture
Trustee shall also adopt and employ, at the expense and direction of the
Issuer, any other reasonable means of notification of such repayment
(including, but not limited to, mailing notice of such repayment to
Noteholders whose Notes have been called but have not been surrendered for
redemption or whose right to or interest in monies due and payable but not
claimed is determinable from the records of the Indenture Trustee or of any
Note Paying Agent, at the last address of record for each such Noteholder).
SECTION 3.4 Existence. The Issuer shall keep in full effect
its existence, rights and franchises as a business trust under the laws of the
State of Delaware (unless it becomes, or any successor Issuer hereunder is or
becomes, organized under the laws of any other State or of the United States
of America, in which case the Issuer shall keep in full effect its existence,
rights and franchises under the laws of such other jurisdiction) and shall
obtain and preserve its qualification to do business in each jurisdiction in
which such qualification is or shall be necessary to protect the validity and
enforceability of this Indenture, the Notes, the Collateral and each other
instrument or agreement included in the Indenture Trust Estate.
SECTION 3.5 Protection of Indenture Trust Estate. The Issuer
shall from time to time execute and deliver all such supplements and
amendments hereto and all such financing statements, continuation statements,
instruments of further assurance and other instruments, and shall take such
other action necessary or advisable to:
(i) maintain or preserve the lien and security interest
(and the priority thereof) of this Indenture or carry out more
effectively the purposes hereof;
(ii) perfect, publish notice of or protect the validity of
any Grant made or to be made by this Indenture;
(iii) enforce any of the Collateral; or
(iv) preserve and defend title to the Indenture Trust
Estate and the rights of the Indenture Trustee and the Noteholders
in such Indenture Trust Estate against the claims of all Persons.
The Issuer hereby designates the Indenture Trustee its agent and
attorney-in-fact to execute any financing statement, continuation statement or
other instrument required to be executed pursuant to this Section 3.5 that has
been prepared by the Servicer and delivered to the Indenture Trustee for
execution; provided, however, that the Indenture Trustee shall be under no
obligation to file any such financing statement, continuation statement or
other instrument required to be executed pursuant to this Section 3.5.
SECTION 3.6 Opinions as to Indenture Trust Estate. (a) On the
Closing Date, the Issuer shall furnish to the Indenture Trustee an Opinion of
Counsel either stating that, in the opinion of such counsel, such action has
been taken with respect to the recording and filing of this Indenture, any
indentures supplemental hereto, and any other requisite documents, and with
respect to the execution and filing of any financing statements and
continuation statements, as are necessary to perfect and make effective the
lien and security interest of this Indenture and reciting the details of such
action, or stating that, in the opinion of such counsel, no such action is
necessary to make such lien and security interest effective.
(b) On or before April 30 in each calendar year, beginning in
_______, the Issuer shall furnish to the Indenture Trustee an Opinion of
Counsel either stating that, in the opinion of such counsel, such action has
been taken with respect to the recording, filing, rerecording and refiling of
this Indenture, any indentures supplemental hereto and any other requisite
documents and with respect to the execution and filing of any financing
statements and continuation statements and any other action that may be
required by law as is necessary to maintain the lien and security interest
created by this Indenture and reciting the details of such action or stating
that in the opinion of such counsel no such action is necessary to maintain
such lien and security interest. Such Opinion of Counsel shall also describe
the recording, filing, re-recording and refiling of this Indenture, any
indentures supplemental hereto and any other requisite documents and the
execution and filing of any financing statements and continuation statements
that shall, in the opinion of such counsel, be required to maintain the lien
and security interest of this Indenture until April 30 in the following
calendar year.
SECTION 3.7 Performance of Obligations; Servicing of
Receivables. (a) The Issuer shall not take any action and shall use its best
efforts not to permit any action to be taken by others that would release any
Person from any of such Person's material covenants or obligations under any
instrument or agreement included in the Indenture Trust Estate or that would
result in the amendment, hypothecation, subordination, termination or
discharge of, or impair the validity or effectiveness of, any such instrument
or agreement, except as expressly provided in this Indenture and the other
Basic Documents.
(b) The Issuer may contract with other Persons to assist it in
performing its duties under this Indenture, and any performance of such duties
by a Person identified to the Indenture Trustee in an Officer's Certificate of
the Issuer shall be deemed to be action taken by the Issuer. Initially, the
Issuer has contracted with the Servicer and the Administrator to assist the
Issuer in performing its duties under this Indenture.
(c) The Issuer shall punctually perform and observe all of its
obligations and agreements contained in this Indenture, the other Basic
Documents and in the instruments and agreements included in the Indenture
Trust Estate, including, but not limited to, filing or causing to be filed all
financing statements and continuation statements required to be filed under
the UCC by the terms of this Indenture and the Sale and Servicing Agreement in
accordance with and within the time periods provided for herein and therein.
Except as otherwise expressly provided therein, the Issuer shall not waive,
amend, modify, supplement or terminate any Basic Document or any provision
thereof without the consent of the Indenture Trustee and the Noteholders of
Notes evidencing not less than a majority of the principal amount of each
Class of Notes then Outstanding, voting separately.
(d) If the Issuer shall have knowledge of the occurrence of an Event
of Servicing Termination under the Sale and Servicing Agreement, the Issuer
shall promptly notify the Indenture Trustee and the Rating Agencies thereof
and shall specify in such notice the action, if any, the Issuer is taking in
respect of such default. If an Event of Servicing Termination shall arise from
the failure of the Servicer to perform any of its duties or obligations under
the Sale and Servicing Agreement with respect to the Receivables, the Issuer
shall take all reasonable steps available to it to remedy such failure.
(e) As promptly as possible after the giving of notice of termination
to the Servicer of the Servicer's rights and powers pursuant to Section 7.1 of
the Sale and Servicing Agreement or the Servicer's resignation in accordance
with the terms of the Sale and Servicing Agreement, the Issuer shall appoint a
Successor Servicer meeting the requirements of the Sale and Servicing
Agreement, and such Successor Servicer shall accept its appointment by a
written assumption in a form acceptable to the Indenture Trustee. In the event
that a Successor Servicer has not been appointed at the time when the Servicer
ceases to act as Servicer, the Indenture Trustee without further action shall
automatically be appointed the Successor Servicer. If the Indenture Trustee
shall be legally unable to act as Successor Servicer, it may appoint, or
petition a court of competent jurisdiction to appoint, a Successor Servicer.
The Indenture Trustee may resign as the Servicer by giving written notice of
such resignation to the Issuer and in such event shall be released from such
duties and obligations, such release not to be effective until the date a new
servicer enters into a servicing agreement with the Issuer as provided below.
Upon delivery of any such notice to the Issuer, the Issuer shall obtain a new
servicer as the Successor Servicer under the Sale and Servicing Agreement. Any
Successor Servicer (other than the Indenture Trustee) shall (i) be an
established institution having a net worth of not less than $100,000,000 and
whose regular business shall include the servicing of automotive receivables
and whose appointment as Successor Servicer satisfies the Rating Agency
Condition and (ii) enter into a servicing agreement with the Issuer having
substantially the same provisions as the provisions of the Sale and Servicing
Agreement applicable to the Servicer. If, within thirty (30) days after the
delivery of the notice referred to above, the Issuer shall not have obtained
such a new servicer, the Indenture Trustee may appoint, or may petition a
court of competent jurisdiction to appoint, a Successor Servicer. In
connection with any such appointment, the Indenture Trustee may make such
arrangements for the compensation of such successor as it and such successor
shall agree, subject to the limitations set forth below and in the Sale and
Servicing Agreement, and, in accordance with Section 7.2 of the Sale and
Servicing Agreement, the Issuer shall enter into an agreement with such
successor for the servicing of the Receivables (such agreement to be in form
and substance satisfactory to the Indenture Trustee). Notwithstanding anything
herein or in the Sale and Servicing Agreement to the contrary, in no event
shall the Indenture Trustee be liable for any Servicing Fee or for any
differential in the amount of the Servicing Fee paid hereunder and the amount
necessary to induce any Successor Servicer to act as Successor Servicer under
the Basic Documents and the transactions set forth or provided for therein. If
the Indenture Trustee shall succeed to the Servicer's duties as servicer of
the Receivables as provided herein, it shall do so in its individual capacity
and not in its capacity as Indenture Trustee and, accordingly, the provisions
of Article VI hereof shall be inapplicable to the Indenture Trustee in its
duties as the successor to the Servicer and the servicing of the Receivables.
In case the Indenture Trustee shall become successor to the Servicer under the
Sale and Servicing Agreement, the Indenture Trustee shall be entitled to
appoint as Servicer any one of its Affiliates; provided that the Indenture
Trustee, in its capacity as the Servicer, shall be fully liable for the
actions and omissions of such Affiliate in such capacity as Successor
Servicer.
(f) Upon any termination of the Servicer's rights and powers pursuant
to the Sale and Servicing Agreement, the Issuer shall promptly notify the
Indenture Trustee. As soon as a Successor Servicer is appointed by the Issuer,
the Issuer shall notify the Indenture Trustee of such appointment, specifying
in such notice the name and address of such Successor Servicer.
(g) Without derogating from the absolute nature of the assignment
granted to the Indenture Trustee under this Indenture or the rights of the
Indenture Trustee hereunder, the Issuer hereby agrees that it shall not,
without the prior written consent of the Indenture Trustee or the Noteholders
of Notes evidencing not less than a majority in principal amount of the Notes
Outstanding, amend, modify, waive, supplement, terminate or surrender, or
agree to any amendment, modification, supplement, termination, waiver or
surrender of, the terms of any Collateral (except to the extent otherwise
provided in the Sale and Servicing Agreement or the other Basic Documents).
SECTION 3.8 Negative Covenants. So long as any Notes are
Outstanding, the Issuer shall not:
(i) except as expressly permitted by this Indenture, the
Trust Agreement or the Sale and Servicing Agreement, sell, transfer,
exchange or otherwise dispose of any of the properties or assets of
the Issuer, including those included in the Indenture Trust Estate,
unless directed to do so by the Indenture Trustee;
(ii) claim any credit on, or make any deduction from the
principal or interest payable in respect of, the Notes (other than
amounts properly withheld from such payments under the Code) or
assert any claim against any present or former Noteholder by reason
of the payment of the taxes levied or assessed upon the Trust or the
Indenture Trust Estate;
(iii) dissolve or liquidate in whole or in part; or
(iv) (A) permit the validity or effectiveness of this
Indenture to be impaired, or permit the lien of this Indenture to be
amended, hypothecated, subordinated, terminated or discharged, or
permit any Person to be released from any covenants or obligations
with respect to the Notes under this Indenture except as may be
expressly permitted hereby, (B) permit any lien, charge, excise,
claim, security interest, mortgage or other encumbrance (other than
the lien of this Indenture) to be created on or extend to or
otherwise arise upon or burden the assets of the Issuer, including
those included in the Indenture Trust Estate, or any part thereof or
any interest therein or the proceeds thereof (other than tax liens,
mechanics' liens and other liens that arise by operation of law, in
each case on any of the Financed Vehicles and arising solely as a
result of an action or omission of the related Obligor) or (C) permit
the lien of this Indenture not to constitute a valid first priority
(other than with respect to any such tax, mechanics' or other lien)
security interest in the Indenture Trust Estate.
SECTION 3.9 Annual Statement as to Compliance. The Issuer
shall deliver to the Indenture Trustee, within 120 days after the end of each
calendar year, an Officer's Certificate stating, as to the Authorized Officer
signing such Officer's Certificate, that:
(i) a review of the activities of the Issuer during such
year and of its performance under this Indenture has been made under
such Authorized Officer's supervision; and
(ii) to the best of such Authorized Officer's knowledge,
based on such review, the Issuer has complied in all material
respects with all conditions and covenants under this Indenture
throughout such year, or, if there has been a default in any material
respect in its compliance with any such condition or covenant,
specifying each such default known to such Authorized Officer and the
nature and status thereof.
SECTION 3.10 Issuer May Consolidate, etc., Only on Certain
Terms. (a) The Issuer shall not consolidate or merge with or into any other
Person, unless:
(i) the Person (if other than the Issuer) formed by or
surviving such consolidation or merger shall be a Person organized
and existing under the laws of the United States of America or any
State and shall expressly assume, by an indenture supplemental
hereto, executed and delivered to the Indenture Trustee, in form
satisfactory to the Indenture Trustee, the due and punctual payment
of the principal of and interest on all Notes and the performance or
observance of every agreement and covenant of this Indenture on the
part of the Issuer to be performed or observed, all as provided
herein;
(ii) immediately after giving effect to such transaction, no
Default or Event of Default shall have occurred and be continuing;
(iii) the Rating Agency Condition shall have been
satisfied with respect to such transaction;
(iv) the Issuer shall have received an Opinion of Counsel
(and shall have delivered copies thereof to the Indenture Trustee) to
the effect that such transaction will not have any material adverse
tax consequence to the Issuer, any Noteholder or any
Certificateholder;
(v) any action that is necessary to maintain the lien and
security interest created by this Indenture shall have been taken;
and
(vi) the Issuer shall have delivered to the Indenture
Trustee an Officer's Certificate and an Opinion of Counsel each
stating that such consolidation or merger and such supplemental
indenture comply with this Article III and that all conditions
precedent herein provided for relating to such transaction have been
complied with (including any filing required by the Exchange Act).
(b) Other than as specifically contemplated by the Basic Documents,
the Issuer shall not convey or transfer any of its properties or assets,
including those included in the Indenture Trust Estate, to any Person, unless:
(i) the Person that acquires by conveyance or transfer the
properties and assets of the Issuer the conveyance or transfer of
which is hereby restricted shall (A) be a United States citizen or a
Person organized and existing under the laws of the United States of
America or any State, (B) expressly assumes, by an indenture
supplemental hereto, executed and delivered to the Indenture Trustee,
in form satisfactory to the Indenture Trustee, the due and punctual
payment of the principal of and interest on all Notes and the
performance or observance of every agreement and covenant of this
Indenture on the part of the Issuer to be performed or observed, all
as provided herein, (C) expressly agrees by means of such
supplemental indenture that all right, title and interest so conveyed
or transferred shall be subject and subordinate to the rights of
Noteholders, (D) unless otherwise provided in such supplemental
indenture, expressly agrees to indemnify, defend and hold harmless
the Issuer against and from any loss, liability or expense arising
under or related to this Indenture and the Notes, and (E) expressly
agrees by means of such supplemental indenture that such Person (or
if a group of Persons, then one specified Person) shall make all
filings, if any, with the Commission (and any other appropriate
Person) required by the Exchange Act in connection with the Notes;
(ii) immediately after giving effect to such transaction, no
Default or Event of Default shall have occurred and be continuing;
(iii) the Rating Agency Condition shall have been
satisfied with respect to such transaction;
(iv) the Issuer shall have received an Opinion of Counsel
(and shall have delivered copies thereof to the Indenture Trustee) to
the effect that such transaction will not have any material adverse
tax consequence to the Issuer, any Noteholder or any
Certificateholder;
(v) any action that is necessary to maintain the lien and
security interest created by this Indenture shall have been taken;
and
(vi) the Issuer shall have delivered to the Indenture
Trustee an Officer's Certificate and an Opinion of Counsel each
stating that such conveyance or transfer and such supplemental
indenture comply with this Article III and that all conditions
precedent herein provided for relating to such transaction have been
complied with (including any filing required by the Exchange Act).
SECTION 3.11 Successor or Transferee. (a) Upon any
consolidation or merger of the Issuer in accordance with Section 3.10(a), the
Person formed by or surviving such consolidation or merger (if other than the
Issuer) shall succeed to, and be substituted for, and may exercise every right
and power of, the Issuer under this Indenture with the same effect as if such
Person had been named as the Issuer herein.
(b) Upon a conveyance or transfer of all the assets and properties of
the Issuer pursuant to Section 3.10(b), the Issuer shall be released from
every covenant and agreement of this Indenture to be observed or performed on
the part of the Issuer with respect to the Notes immediately upon the delivery
of written notice to the Indenture Trustee stating that the Issuer is to be so
released.
SECTION 3.12 No Other Business. The Issuer shall not engage in
any business other than financing, acquiring, owning and pledging the
Receivables in the manner contemplated by this Indenture and the Basic
Documents and activities incidental thereto.
SECTION 3.13 No Borrowing. The Issuer shall not issue, incur,
assume, guarantee or otherwise become liable, directly or indirectly, for any
indebtedness except for the Notes and the Certificates.
SECTION 3.14 Servicer's Obligations. The Issuer shall cause the
Servicer to comply with the Sale and Servicing Agreement, including Sections
3.9, 3.10, 3.11, 3.12, 3.13 and 4.9 and Article VI thereof.
SECTION 3.15 Guarantees, Loans, Advances and Other Liabilities.
Except as contemplated by this Indenture and the other Basic Documents, the
Issuer shall not make any loan or advance or credit to, or guarantee (directly
or indirectly or by an instrument having the effect of assuring another's
payment or performance on any obligation or capability of so doing or
otherwise), endorse or otherwise become contingently liable, directly or
indirectly, in connection with the obligations, stocks or dividends of, or
own, purchase, repurchase or acquire (or agree contingently to do so) any
stock, obligations, assets or securities of, or any other interest in, or make
any capital contribution to, any other Person.
SECTION 3.16 Capital Expenditures. The Issuer shall not make
any expenditure (by long-term or operating lease or otherwise) for capital
assets (either realty or personalty).
SECTION 3.17 Further Instruments and Acts. Upon request of the
Indenture Trustee, the Issuer shall execute and deliver such further
instruments and do such further acts as may be reasonably necessary or proper
to carry out more effectively the purpose of this Indenture.
SECTION 3.18 Restricted Payments. The Issuer shall not,
directly or indirectly, (i) make any distribution (by reduction of capital or
otherwise), whether in cash, property, securities or a combination thereof, to
the Owner Trustee or any owner of a beneficial interest in the Issuer or
otherwise with respect to any ownership or equity interest or security in or
of the Issuer or to the Servicer or the Administrator, (ii) redeem, purchase,
retire or otherwise acquire for value any such ownership or equity interest or
security or (iii) set aside or otherwise segregate any amounts for any such
purpose; provided, however, that the Issuer may make, or cause to be made, (x)
payments to the Servicer, the Administrator, the Owner Trustee, the Indenture
Trustee, the Noteholders and the Certificateholders as contemplated by, and to
the extent funds are available for such purpose under, this Indenture and the
other Basic Documents and (y) payments to the Indenture Trustee pursuant to
Section 2(a)(ii) of the Administration Agreement. The Issuer shall not,
directly or indirectly, make payments to or distributions from the Collection
Account or the Principal Distribution Account except in accordance with this
Indenture and the other Basic Documents.
SECTION 3.19 Notice of Events of Default. The Issuer shall give
the Indenture Trustee and the Rating Agencies prompt written notice of each
Event of Default hereunder and of each default on the part of any party to the
Sale and Servicing Agreement with respect to any of the provisions thereof.
SECTION 3.20 Removal of Administrator. For so long as any Notes
are Outstanding, the Issuer shall not remove the Administrator without cause
unless the Rating Agency Condition shall have been satisfied in connection
therewith.
ARTICLE IV
SATISFACTION AND DISCHARGE
SECTION 4.1 Satisfaction and Discharge of Indenture. This
Indenture shall cease to be of further effect with respect to the Notes except
as to (i) rights of registration of transfer and exchange, (ii) substitution
of mutilated, destroyed, lost or stolen Notes, (iii) rights of Noteholders to
receive payments of principal thereof and interest thereon, (iv) Sections 3.3,
3.4, 3.5, 3.8, 3.10, 3.12 and 3.13, (v) the rights, obligations and immunities
of the Indenture Trustee hereunder (including the rights of the Indenture
Trustee under Section 6.7 and the obligations of the Indenture Trustee under
Section 4.3), and (vi) the rights of Noteholders as beneficiaries hereof with
respect to the property so deposited with the Indenture Trustee payable to all
or any of them, and the Indenture Trustee, on demand of and at the expense of
the Issuer, shall execute proper instruments acknowledging satisfaction and
discharge of this Indenture with respect to the Notes, when:
(A) either
(1) all Notes theretofore authenticated and
delivered (other than (i) Notes that have been destroyed,
lost or stolen and that have been replaced or paid as
provided in Section 2.6 and (ii) Notes for whose payment
money has theretofore been deposited in trust or segregated
and held in trust by the Issuer and thereafter repaid to the
Issuer or discharged from such trust, as provided in Section
3.3) have been delivered to the Indenture Trustee for
cancellation; or
(2) all Notes not theretofore delivered to the
Indenture Trustee for cancellation have become due and
payable and the Issuer has irrevocably deposited or caused
to be irrevocably deposited with the Indenture Trustee cash
or direct obligations of or obligations guaranteed by the
United States of America (which will mature prior to the
date such amounts are payable), in trust for such purpose,
in an amount sufficient without reinvestment to pay and
discharge the entire indebtedness on such Notes not
theretofore delivered to the Indenture Trustee for
cancellation when due to the applicable Final Scheduled
Payment Date or Prepayment Date (if Notes shall have been
called for prepayment pursuant to Section 10.1), as the case
may be, and all fees due and payable to the Indenture
Trustee;
(B) the Issuer has paid or caused to be paid all other sums
payable hereunder and under any of the other Basic Documents by the
Issuer;
(C) the Issuer has delivered to the Indenture Trustee an
Officer's Certificate, an Opinion of Counsel and (if required by the
TIA or the Indenture Trustee) an Independent Certificate from a firm
of certified public accountants, each meeting the applicable
requirements of Section 11.1(a) and, subject to Section 11.2, each
stating that all conditions precedent herein provided for relating to
the satisfaction and discharge of this Indenture have been complied
with; and
(D) the Issuer has delivered to the Indenture Trustee an
Opinion of Counsel to the effect that the satisfaction and discharge
of the Notes pursuant to this Section 4.1 will not cause any
Noteholder to be treated as having sold or exchanged any of its Notes
for purposes of Section 1001 of the Code.
Upon the satisfaction and discharge of the Indenture pursuant to this
Section 4.1, at the request of the Owner Trustee, the Indenture Trustee shall
deliver to the Owner Trustee a certificate of a Trustee Officer stating that
all Noteholders have been paid in full and stating whether, to the best
knowledge of such Trustee Officer, any claims remain against the Issuer in
respect of the Indenture and the Notes.
SECTION 4.2 Application of Trust Money. All monies deposited
with the Indenture Trustee pursuant to Section 4.1 shall be held in trust and
applied by it, in accordance with the provisions of the Notes and this
Indenture, to the payment, either directly or through any Note Paying Agent,
as the Indenture Trustee may determine, to the Noteholders of the particular
Notes for the payment or redemption of which such monies have been deposited
with the Indenture Trustee, of all sums due and to become due thereon for
principal and interest, but such monies need not be segregated from other
funds except to the extent required herein or in the Sale and Servicing
Agreement or required by law.
SECTION 4.3 Repayment of Monies Held by Note Paying Agent. In
connection with the satisfaction and discharge of this Indenture with respect
to the Notes, all monies then held by any Note Paying Agent other than the
Indenture Trustee under the provisions of this Indenture with respect to such
Notes shall, upon demand of the Issuer, be paid to the Indenture Trustee to be
held and applied according to Section 3.3 and thereupon such Note Paying Agent
shall be released from all further liability with respect to such monies.
ARTICLE V
REMEDIES
SECTION 5.1 Events of Default. "Event of Default," wherever
used herein, means the occurrence of any one of the following events (whatever
the reason for such Event of Default and whether it shall be voluntary or
involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(i) default in the payment of any interest on any Note when
the same becomes due and payable on a Payment Date, and such default
shall continue for a period of five (5) days or more; or
(ii) default in the payment of the principal of or any
installment of the principal of any Note when the same becomes due
and payable; or
(iii) default in the observance or performance of any
covenant or agreement of the Issuer made in this Indenture (other
than a covenant or agreement, a default in the observance or
performance of which is elsewhere in this Section 5.1 specifically
dealt with) that materially and adversely affects the Noteholders and
such default shall continue for a period of sixty (60) days, after
there shall have been given, by registered or certified mail, to the
Issuer by the Indenture Trustee or to the Issuer and the Indenture
Trustee by the holders of Notes evidencing not less than 25% of the
principal amount of the Notes, a written notice specifying such
default and requiring it to be remedied and stating that such notice
is a "Notice of Default" hereunder; or
(iv) the filing of a decree or order for relief by a court
having jurisdiction in the premises in respect of the Issuer or any
substantial part of the Indenture Trust Estate in an involuntary case
under any applicable federal or State bankruptcy, insolvency or other
similar law now or hereafter in effect, or appointing a receiver,
liquidator, assignee, custodian, trustee, sequestrator or similar
official of the Issuer or for any substantial part of the Indenture
Trust Estate, or ordering the winding-up or liquidation of the
Issuer's affairs, and such decree or order shall remain unstayed and
in effect for a period of sixty (60) consecutive days; or
(v) the commencement by the Issuer of a voluntary case under
any applicable federal or State bankruptcy, insolvency or other
similar law now or hereafter in effect, or the consent by the Issuer
to the entry of an order for relief in an involuntary case under any
such law, or the consent by the Issuer to the appointment or taking
possession by a receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official of the Issuer or for any substantial
part of the Indenture Trust Estate, or the making by the Issuer of
any general assignment for the benefit of creditors, or the failure
by the Issuer generally to pay its debts as such debts become due, or
the taking of any action by the Issuer in furtherance of any of the
foregoing.
The Issuer shall deliver to the Indenture Trustee, within five (5) days after
the occurrence thereof, written notice in the form of an Officer's Certificate
of any event which with the giving of notice and the lapse of time would
become an Event of Default under clause (iii) above, its status and what
action the Issuer is taking or proposes to take with respect thereto.
SECTION 5.2 Acceleration of Maturity; Rescission and
Annulment. (a) If an Event of Default should occur and be continuing, then and
in every such case the Indenture Trustee or the holders of Notes evidencing
not less than a majority of the principal amount of the Notes may declare all
the Notes to be immediately due and payable, by a notice in writing to the
Issuer (and to the Indenture Trustee if given by Noteholders), and upon any
such declaration the unpaid principal amount of such Notes, together with
accrued and unpaid interest thereon through the date of acceleration, shall
become immediately due and payable.
(b) At any time after a declaration of acceleration of maturity has
been made and before a judgment or decree for payment of the amount due has
been obtained by the Indenture Trustee as hereinafter provided in this Article
V, the holders of Notes evidencing not less than a majority of the principal
amount of the Notes, by written notice to the Issuer and the Indenture
Trustee, may rescind and annul such declaration and its consequences if:
(i) the Issuer has paid or deposited with the Indenture
Trustee a sum sufficient to pay:
(A) all payments of principal of and interest on
all Notes and all other amounts that would then be due
hereunder or upon such Notes if the Event of Default giving
rise to such acceleration had not occurred; and
(B) all sums paid or advanced by the Indenture
Trustee hereunder and the reasonable compensation, expenses,
disbursements and advances of the Indenture Trustee and its
agents and counsel; and
(ii) all Events of Default, other than the nonpayment of the
principal of the Notes that has become due solely by such
acceleration, have been cured or waived as provided in Section 5.12.
No such rescission shall affect any subsequent default or impair any
right consequent thereto.
SECTION 5.3 Collection of Indebtedness and Suits for
Enforcement by Indenture Trustee. (a) The Issuer covenants that if (i) there
is an Event of Default relating to the nonpayment of any interest on any Note
when the same becomes due and payable, and such Event of Default continues for
a period of five (5) days, or (ii) there is an Event of Default relating to
the nonpayment in the payment of the principal of or any installment of the
principal of any Note when the same becomes due and payable, the Issuer shall,
upon demand of the Indenture Trustee, pay to the Indenture Trustee, for the
benefit of the Noteholders, the whole amount then due and payable on such
Notes for principal and interest, with interest upon the overdue principal
and, to the extent payment at such rate of interest shall be legally
enforceable, upon overdue installments of interest at the applicable Note
Interest Rate borne by the Notes and in addition thereto such further amount
as shall be sufficient to cover the costs and expenses of collection,
including the reasonable compensation, expenses, disbursements and advances of
the Indenture Trustee and its agents, attorneys and counsel.
(b) In case the Issuer shall fail forthwith to pay such amounts upon
such demand, the Indenture Trustee, in its own name and as trustee of an
express trust, may institute a Proceeding for the collection of the sums so
due and unpaid, and may prosecute such Proceeding to judgment or final decree,
and may enforce the same against the Issuer or other obligor upon such Notes
and collect in the manner provided by law out of the property of the Issuer or
other obligor upon such Notes, wherever situated, the monies adjudged or
decreed to be payable.
(c) If an Event of Default occurs and is continuing, the Indenture
Trustee, as more particularly provided in Section 5.4, in its discretion, may
proceed to protect and enforce its rights and the rights of the Noteholders,
by such appropriate Proceedings as the Indenture Trustee shall deem most
effective to protect and enforce any such rights, whether for the specific
enforcement of any covenant or agreement in this Indenture or in aid of the
exercise of any power granted herein, or to enforce any other proper remedy or
legal or equitable right vested in the Indenture Trustee by this Indenture or
by law.
(d) In case there shall be pending, relative to the Issuer or any
other obligor upon the Notes or any Person having or claiming an ownership
interest in the Indenture Trust Estate, Proceedings under Title 11 of the
United States Code or any other applicable federal or State bankruptcy,
insolvency or other similar law, or in case a receiver, assignee or trustee in
bankruptcy or reorganization, liquidator, sequestrator or similar official
shall have been appointed for or taken possession of the Issuer or its
property or such other obligor or Person, or in case of any other comparable
judicial Proceedings relative to the Issuer or other obligor upon the Notes,
or to the creditors or property of the Issuer or such other obligor, the
Indenture Trustee, irrespective of whether the principal of any Notes shall
then be due and payable as therein expressed or by declaration or otherwise
and irrespective of whether the Indenture Trustee shall have made any demand
pursuant to the provisions of this Section 5.3, shall be entitled and
empowered, by intervention in such Proceedings or otherwise:
(i) to file and prove a claim or claims for the whole amount
of principal and interest owing and unpaid in respect of the Notes
and to file such other papers or documents as may be necessary or
advisable in order to have the claims of the Indenture Trustee
(including any claim for reasonable compensation to the Indenture
Trustee and each predecessor Indenture Trustee, and their respective
agents, attorneys and counsel, and for reimbursement of all expenses
and liabilities incurred, and all advances and disbursements made, by
the Indenture Trustee and each predecessor Indenture Trustee, except
as a result of negligence or bad faith) and of the Noteholders
allowed in such Proceedings;
(ii) unless prohibited by applicable law and regulations, to
vote on behalf of the Noteholders in any election of a trustee, a
standby trustee or Person performing similar functions in any such
Proceedings;
(iii) to collect and receive any monies or other property
payable or deliverable on any such claims and to pay all amounts
received with respect to the claims of the Noteholders and of the
Indenture Trustee on their behalf; and
(iv) to file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the
claims of the Indenture Trustee or the Noteholders allowed in any
judicial proceedings relative to the Issuer, its creditors and its
property;
and any trustee, receiver, liquidator, custodian or other similar official in
any such Proceeding is hereby authorized by each of such Noteholders to make
payments to the Indenture Trustee and, in the event that the Indenture Trustee
shall consent to the making of payments directly to such Noteholders, to pay
to the Indenture Trustee such amounts as shall be sufficient to cover
reasonable compensation to the Indenture Trustee, each predecessor Indenture
Trustee and their respective agents, attorneys and counsel, and all other
expenses and liabilities incurred, and all advances and disbursements made, by
the Indenture Trustee and each predecessor Indenture Trustee, except as a
result of negligence or bad faith, and any other amounts due the Indenture
Trustee pursuant to Section 6.7.
(e) Nothing herein contained shall be deemed to authorize the
Indenture Trustee to authorize or consent to or vote for or accept or adopt on
behalf of any Noteholder any plan of reorganization, arrangement, adjustment
or composition affecting the Notes or the rights of any Noteholder or to
authorize the Indenture Trustee to vote in respect of the claim of any
Noteholder in any such proceeding except, as aforesaid, to vote for the
election of a trustee in bankruptcy or similar Person.
(f) All rights of action and of asserting claims under this
Indenture, or under any of the Notes, may be enforced by the Indenture Trustee
without the possession of any of the Notes or the production thereof in any
trial or other Proceedings relative thereto, and any such action or
Proceedings instituted by the Indenture Trustee shall be brought in its own
name as trustee of an express trust, and any recovery of judgment, subject to
the payment of the expenses, disbursements and compensation of the Indenture
Trustee, each predecessor Indenture Trustee and their respective agents,
attorneys and counsel, shall be for the ratable benefit of the Noteholders in
respect of which such judgment has been recovered.
(g) In any Proceedings brought by the Indenture Trustee (and also any
Proceedings involving the interpretation of any provision of this Indenture to
which the Indenture Trustee shall be a party), the Indenture Trustee shall be
held to represent all the Noteholders, and it shall not be necessary to make
any Noteholder a party to any such Proceedings.
SECTION 5.4 Remedies; Priorities. (a) If an Event of Default
shall have occurred and be continuing, the Indenture Trustee may, or at the
direction of Noteholders of Notes evidencing not less than a majority of the
principal amount of the Notes shall, do one or more of the following (subject
to Section 5.5):
(i) institute Proceedings in its own name and as trustee of
an express trust for the collection of all amounts then payable on
the Notes or under this Indenture with respect thereto, whether by
declaration or otherwise, enforce any judgment obtained, and collect
from the Issuer and any other obligor upon such Notes monies adjudged
due;
(ii) institute Proceedings from time to time for the
complete or partial foreclosure of this Indenture with respect to the
Indenture Trust Estate;
(iii) exercise any remedies of a secured party under the UCC
and take any other appropriate action to protect and enforce the
rights and remedies of the Indenture Trustee and the Noteholders; and
(iv) sell the Indenture Trust Estate or any portion thereof
or rights or interest therein, at one or more public or private sales
called and conducted in any manner permitted by law;
provided, however, the Indenture Trustee may not sell or otherwise liquidate
the Indenture Trust Estate unless:
(A) ______ the holders of Notes evidencing 100% of
the principal amount of the Notes (excluding Notes held by
the Seller, the Servicer or any of their Affiliates) consent
thereto; or
(B) the proceeds of such sale or liquidation are
sufficient to pay in full the principal of and the accrued
interest on the Outstanding Notes; or
(C) if the Event of Default is of the type
described in Section 5.1(i) or (ii), the Indenture Trustee-
(1) _____ determines (but shall have no
obligation to make such determination) that the
Indenture Trust Estate will not continue to provide
sufficient funds for the payment of principal of
and interest on the Notes as they would have become
due if the Notes had not been declared due and
payable; and
(2) the Indenture Trustee obtains the
consent of holders of Notes evidencing not less than
66 2/3% of the principal amount of the Notes; or
(D) ______ with respect to an Event of Default
described in Section 5.1(iii):
(1) the holders of all Outstanding Notes
and the Certificateholders of all outstanding
Certificates consent thereto; or
(2) _____ the proceeds of such sale or
liquidation are sufficient to pay in full the
principal of and accrued interest on the
Outstanding Notes and outstanding Certificates.
In determining such sufficiency or insufficiency with respect to
clauses (C)(1) and (D)(2) above, the Indenture Trustee may, but need not,
obtain and rely upon an opinion of an Independent investment banking or
accounting firm of national reputation as to the feasibility of such proposed
action and as to the sufficiency of the Indenture Trust Estate for such
purpose.
(b) Notwithstanding the provisions of Section 8.2, if the Indenture
Trustee collects any money or property pursuant to this Article V, it shall
pay out the money or property in the following order:
(i) first, to the Indenture Trustee for amounts due under
Section 6.7;
(ii) second, to the Servicer for due and unpaid Servicing
Fees;
(iii) third, if an Event of Default specified in Section
5.1(i), (ii), (iv) or (v) has occurred, in the following order:
(A) ______ first, to Noteholders for amounts
due and unpaid on the Notes, ratably, without preference
or priority of any kind, according to the amounts due and
payable on the Class A Notes (including interest at the
applicable Note Interest Rate on any overdue interest, to
the extent lawful); and
(B) ______ second, to the Certificate Distribution
Account, the sum of (x) accrued and unpaid interest on the
Class B Certificates (together with interest at the Class B
Rate on any overdue interest, to the extent lawful) and
(y) the outstanding Certificate Balance;
(iv) fourth, if the only Event of Default that has occurred
is the Event of Default specified in Section 5.1(iii), in the
following order:
(A) ______ to the Class A Noteholders, accrued
and unpaid interest on the Class A Notes (together with
interest on overdue interest at the applicable Note
Interest Rate, to the extent lawful) provided that if
there are not sufficient funds available to pay the entire
amount of such interest, the amounts available shall be
applied to the payment of such interest on the Class A
Notes on a pro rata basis;
(B) ______ to the Certificate Distribution Account,
accrued and unpaid interest on the Class B Certificates
(together with interest at the Class B Rate on any overdue
interest, to the extent lawful);
(C) ______ to the Class A Noteholders on a pro rata
basis in reduction of principal until the principal amount of
all Class A Notes has been reduced to zero;
(D) ______ to the Certificate Distribution Account
for distribution to Class B Certificateholders in reduction
of the Certificate Balance until the Certificate Balance is
reduced to zero.
(v) fifth, to the Seller, any money or property remaining
after payment in full of the amounts described in clauses (i)-(iv) of
this Section 5.4(b).
The Indenture Trustee may fix a record date and payment date for any payment
to Noteholders pursuant to this Section 5.4. At least fifteen (15) days before
such record date, the Indenture Trustee shall mail to each Noteholder a notice
that states the record date, the payment date and the amount to be paid.
(c) Upon a sale or other liquidation of the Receivables in the manner
set forth in Section 5.4(a), the Indenture Trustee shall provide reasonable
prior notice of such sale or liquidation to each Noteholder and
Certificateholder. A Noteholder or Certificateholder may submit a bid with
respect to such sale.
SECTION 5.5 Optional Preservation of the Receivables. If the
Notes have been declared to be due and payable under Section 5.2 following an
Event of Default, and such declaration and its consequences have not been
rescinded and annulled, the Indenture Trustee may, but need not, elect to
maintain possession of the Indenture Trust Estate and apply proceeds as if
there had been no declaration of acceleration; provided, however, that funds
on deposit in the Collection Account at the time the Indenture Trustee makes
such election or deposited therein during the Collection Period in which such
election is made (including funds, if any, deposited therein from the Reserve
Account) shall be applied in accordance with such declaration of acceleration
in the manner specified in Section 4.6(c) of the Sale and Servicing Agreement.
It is the desire of the parties hereto and the Noteholders that there be at
all times sufficient funds for the payment of principal of and interest on the
Notes, and the Indenture Trustee shall take such desire into account when
determining whether or not to maintain possession of the Indenture Trust
Estate. In determining whether to maintain possession of the Indenture Trust
Estate, the Indenture Trustee may, but need not, obtain and rely upon an
opinion of an Independent investment banking or accounting firm of national
reputation as to the feasibility of such proposed action and as to the
sufficiency of the Indenture Trust Estate for such purpose.
SECTION 5.6 Limitation of Suits. No Noteholder shall have any
right to institute any Proceeding, judicial or otherwise, with respect to this
Indenture or for the appointment of a receiver or trustee, or for any other
remedy hereunder, unless:
(a) such Noteholder has previously given written notice to the
Indenture Trustee of a continuing Event of Default;
(b) the holders of Notes evidencing not less than 25% of the
principal amount of the Notes have made written request to the Indenture
Trustee to institute such Proceeding in respect of such Event of Default in
its own name as Indenture Trustee hereunder;
(c) such Noteholder or Noteholders have offered to the Indenture
Trustee reasonable indemnity against the costs, expenses and liabilities to be
incurred in complying with such request;
(d) the Indenture Trustee for sixty (60) days after its receipt of
such notice, request and offer of indemnity has failed to institute such
Proceedings; and
(e) no direction inconsistent with such written request has been
given to the Indenture Trustee during such sixty-day period by the Noteholders
of Notes evidencing not less than a majority of the principal amount of the
Notes.
It is understood and intended that no one or more Noteholders shall
have any right in any manner whatever by virtue of, or by availing of, any
provision of this Indenture to affect, disturb or prejudice the rights of any
other Noteholders or to obtain or to seek to obtain priority or preference
over any other Noteholders or to enforce any right under this Indenture,
except in the manner herein provided.
In the event the Indenture Trustee shall receive conflicting or
inconsistent requests and indemnity from two or more groups of Noteholders,
each evidencing less than a majority of the principal amount of the Notes, the
Indenture Trustee shall act at the direction of the group of Noteholders
representing the greater principal amount of the Notes. If the Indenture
Trustee receives conflicting or inconsistent requests and indemnity from two
or more groups of Noteholders representing an equal principal amount of the
Notes, the Indenture Trustee in its sole discretion may determine what action,
if any, shall be taken, notwithstanding any other provisions of this
Indenture.
SECTION 5.7 Unconditional Rights of Noteholders To Receive
Principal and Interest. Notwithstanding any other provisions in this
Indenture, any Noteholder shall have the right, which is absolute and
unconditional, to receive payment of the principal of and interest, if any, on
its Note on or after the respective due dates thereof expressed in such Note
or in this Indenture (or, in the case of prepayment pursuant to Article X, on
or after the Prepayment Date) and to institute suit for the enforcement of any
such payment, and such right shall not be impaired without the consent of such
Noteholder.
SECTION 5.8 Restoration of Rights and Remedies. If the
Indenture Trustee or any Noteholder has instituted any Proceeding to enforce
any right or remedy under this Indenture and such Proceeding has been
discontinued or abandoned for any reason or has been determined adversely to
the Indenture Trustee or to such Noteholder, then and in every such case the
Issuer, the Indenture Trustee and the Noteholders shall, subject to any
determination in such Proceeding, be restored severally and respectively to
their former positions hereunder, and thereafter all rights and remedies of
the Indenture Trustee and the Noteholders shall continue as though no such
Proceeding had been instituted.
SECTION 5.9 Rights and Remedies Cumulative. No right or remedy
herein conferred upon or reserved to the Indenture Trustee or to the
Noteholders is intended to be exclusive of any other right or remedy, and
every right and remedy shall, to the extent permitted by law, be cumulative
and in addition to every other right and remedy given hereunder or now or
hereafter existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or otherwise, shall not prevent
the concurrent assertion or employment of any other appropriate right or
remedy.
SECTION 5.10 Delay or Omission Not a Waiver. No delay or
omission of the Indenture Trustee or any Noteholder to exercise any right or
remedy accruing upon any Default or Event of Default shall impair any such
right or remedy or constitute a waiver of any such Default or Event of Default
or any acquiescence therein. Every right and remedy given by this Article V or
by law to the Indenture Trustee or to the Noteholders may be exercised from
time to time, and as often as may be deemed expedient, by the Indenture
Trustee or by the Noteholders, as the case may be.
SECTION 5.11 Control by Noteholders. The Noteholders of Notes
evidencing not less than a majority of the principal amount of the Notes
Outstanding shall have the right, subject to Section 6.2(f), to direct the
time, method and place of conducting any Proceeding for any remedy available
to the Indenture Trustee with respect to the Notes or exercising any trust or
power conferred on the Indenture Trustee; provided that:
(a) such direction shall not be in conflict with any rule of law or
with this Indenture;
(b) subject to the express terms of Section 5.4, any direction to the
Indenture Trustee to sell or liquidate the Indenture Trust Estate shall be by
holders of Notes evidencing not less than 100% of the principal amount of the
Notes Outstanding;
(c) if the conditions set forth in Section 5.5 have been satisfied
and the Indenture Trustee elects to retain the Indenture Trust Estate pursuant
to such Section 5.5, then any direction to the Indenture Trustee by
Noteholders of Notes evidencing less than 100% of the principal amount of the
Notes Outstanding to sell or liquidate the Indenture Trust Estate shall be of
no force and effect; and
(d) the Indenture Trustee may take any other action deemed proper by
the Indenture Trustee that is not inconsistent with such direction.
Notwithstanding the rights of Noteholders set forth in this Section 5.11,
subject to Section 6.1, the Indenture Trustee need not take any action that it
determines might involve it in costs or expenses for which it would not be
adequately indemnified or expose it to personal liability or might materially
adversely affect or unduly prejudice the rights of any Noteholders not
consenting to such action.
SECTION 5.12 Waiver of Past Defaults. Prior to the declaration
of the acceleration of the maturity of the Notes as provided in Section 5.2,
the holders of Notes evidencing not less than a majority of the principal
amount of the Notes Outstanding may waive any past Default or Event of Default
and its consequences except a Default (a) in the payment of principal of or
interest on any of the Notes or (b) in respect of a covenant or provision
hereof that cannot be amended, supplemented or modified without the consent of
each Noteholder. In the case of any such waiver, the Issuer, the Indenture
Trustee and the Noteholders shall be restored to their former positions and
rights hereunder, respectively; but no such waiver shall extend to any
subsequent or other Default or impair any right consequent thereto.
Upon any such waiver, such Default shall cease to exist and be deemed
to have been cured and not to have occurred, and any Event of Default arising
therefrom shall be deemed to have been cured and not to have occurred, for
every purpose of this Indenture; but no such waiver shall extend to any
subsequent or other Default or Event of Default or impair any right consequent
thereto.
SECTION 5.13 Undertaking for Costs. All parties to this
Indenture agree, and each Noteholder by such Noteholder's acceptance thereof
shall be deemed to have agreed, that any court may in its discretion require,
in any suit for the enforcement of any right or remedy under this Indenture,
or in any suit against the Indenture Trustee for any action taken, suffered or
omitted by it as Indenture Trustee, the filing by any party litigant in such
suit of an undertaking to pay the costs of such suit, and that such court may
in its discretion assess reasonable costs, including reasonable attorneys'
fees, against any party litigant in such suit, having due regard to the merits
and good faith of the claims or defenses made by such party litigant; but the
provisions of this Section 5.13 shall not apply to (a) any suit instituted by
the Indenture Trustee, (b) any suit instituted by any Noteholder or group of
Noteholders, in each case holding in the aggregate more than 10% of the
principal amount of the Notes Outstanding or (c) any suit instituted by any
Noteholder for the enforcement of the payment of principal of or interest on
any Note on or after the respective due dates expressed in such Note and in
this Indenture.
SECTION 5.14 Waiver of Stay or Extension Laws. The Issuer
covenants (to the extent that it may lawfully do so) that it shall not at any
time insist upon, or plead or in any manner whatsoever, claim or take the
benefit or advantage of, any stay or extension law wherever enacted, now or at
any time hereafter in force, that may affect the covenants or the performance
of this Indenture, and the Issuer (to the extent that it may lawfully do so)
hereby expressly waives all benefit or advantage of any such law, and
covenants that it shall not hinder, delay or impede the execution of any power
herein granted to the Indenture Trustee, but will suffer and permit the
execution of every such power as though no such law had been enacted.
SECTION 5.15 Action on Notes. The Indenture Trustee's right to
seek and recover judgment on the Notes or under this Indenture shall not be
affected by the seeking, obtaining or application of any other relief under or
with respect to this Indenture. Neither the lien of this Indenture nor any
rights or remedies of the Indenture Trustee or the Noteholders shall be
impaired by the recovery of any judgment by the Indenture Trustee against the
Issuer or by the levy of any execution under such judgment upon any portion of
the Indenture Trust Estate or upon any of the assets of the Issuer. Any money
or property collected by the Indenture Trustee shall be applied in accordance
with Section 5.4(b).
SECTION 5.16 Performance and Enforcement of Certain
Obligations. (a) Promptly following a request from the Indenture Trustee to do
so, and at the Administrator's expense, the Issuer shall take all such lawful
action as the Indenture Trustee may request to compel or secure the
performance and observance by the Seller and the Servicer, as applicable, of
each of their obligations to the Issuer under or in connection with the Sale
and Servicing Agreement and to exercise any and all rights, remedies, powers
and privileges lawfully available to the Issuer under or in connection with
the Sale and Servicing Agreement, to the extent and in the manner directed by
the Indenture Trustee, including the transmission of notices of default on the
part of the Seller or the Servicer thereunder and the institution of legal or
administrative actions or proceedings to compel or secure performance by the
Seller or the Servicer of each of their obligations under the Sale and
Servicing Agreement.
(b) If an Event of Default has occurred and is continuing, the
Indenture Trustee may, and at the direction (which direction shall be in
writing or by telephone, confirmed in writing promptly thereafter) of the
Noteholders of Notes evidencing not less than a majority of the principal
amount of the Notes shall, exercise all rights, remedies, powers, privileges
and claims of the Issuer against the Seller or the Servicer under or in
connection with the Sale and Servicing Agreement, including the right or power
to take any action to compel or secure performance or observance by the
Seller, the Servicer or USAA FSB, as the case may be, of each of their
obligations to the Issuer thereunder and to give any consent, request, notice,
direction, approval, extension, or waiver under the Sale and Servicing
Agreement and any right of the Issuer to take such action shall be suspended.
ARTICLE VI
THE INDENTURE TRUSTEE
SECTION 6.1 Duties of Indenture Trustee. (a) If an Event of
Default has occurred and is continuing, the Indenture Trustee shall exercise
the rights and powers vested in it by this Indenture and 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 such Person's own affairs.
(b) Except during the continuance of an Event of Default:
(i) the Indenture Trustee undertakes to perform such duties
and only such duties as are specifically set forth in this Indenture
and no implied covenants or obligations shall be read into this
Indenture against the Indenture Trustee; and
(ii) in the absence of bad faith on its part, the Indenture
Trustee may conclusively rely, as to the truth of the statements and
the correctness of the opinions expressed therein, upon certificates
or opinions furnished to the Indenture Trustee and, if required by
the terms of this Indenture, conforming to the requirements of this
Indenture; provided, however, that the Indenture Trustee shall
examine the certificates and opinions to determine whether or not
they conform to the requirements of this Indenture.
(c) The Indenture Trustee may not be relieved from liability for its
own negligent action, its own negligent failure to act or its own willful
misconduct, except that:
(i) this paragraph does not limit the effect of paragraph
(b) of this Section 6.1;
(ii) the Indenture Trustee shall not be liable for any error
of judgment made in good faith by a Trustee Officer unless it is
proved that the Indenture Trustee was negligent in ascertaining the
pertinent facts;
(iii) the Indenture Trustee shall not be liable with respect
to any action it takes or omits to take in good faith in accordance
with a direction received by it pursuant to Section 5.11; and
(iv) the Indenture Trustee shall have no duty (A) to see to
any recording, filing, or depositing of this Indenture or any
agreement referred to herein or any financing statement or
continuation statement evidencing a security interest, or to see to
the maintenance of any such recording or filing or depositing or to
any rerecording, refiling or redepositing of any thereof, (B) to see
to any insurance, (C) to see to the payment or discharge of any tax,
assessment, or other governmental charge or any lien or encumbrance
of any kind owing with respect to, assessed or levied against, any
part of the Trust Estate other than from funds available in the
Collection Account, (D) except as otherwise set forth in Section
6.1(b)(ii), to confirm or verify the contents of any reports or
certificates of the Servicer delivered to the Indenture Trustee
pursuant to this Indenture believed by the Indenture Trustee to be
genuine and to have been signed or presented by the proper party or
parties.
(d) The Indenture Trustee shall not be liable for interest on any
money received by it except as the Indenture Trustee may agree in writing with
the Issuer.
(e) Money held in trust by the Indenture Trustee need not be
segregated from other funds except to the extent required by law or the terms
of this Indenture or the Sale and Servicing Agreement.
(f) No provision of this Indenture shall require the Indenture
Trustee to expend or risk its own funds or otherwise incur financial liability
in the performance of any of its duties hereunder or in the exercise of any of
its rights or powers, if it shall have reasonable grounds to believe that
repayment of such funds or adequate indemnity against such risk or liability
is not reasonably assured to it, and none of the provisions contained in this
Indenture shall in any event require the Indenture Trustee to perform, or be
responsible for the manner of performance of, any of the obligations of the
Servicer under this Indenture except during such time, if any, as the
Indenture 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
this Indenture.
(g) Every provision of this Indenture relating to the conduct or
affecting the liability of or affording protection to the Indenture Trustee
shall be subject to the provisions of this Section 6.1 and to the provisions
of the TIA.
(h) The Indenture Trustee shall not be charged with knowledge of any
Event of Default unless either (1) a Trustee Officer shall have actual
knowledge of such Event of Default or (2) written notice of such Event of
Default shall have been given to the Indenture Trustee in accordance with the
provisions of this Indenture.
SECTION 6.2 Rights of Indenture Trustee. (a) The Indenture
Trustee may rely and shall be protected in acting or refraining from acting
upon any resolution, certificate, statement, instrument, opinion, report,
notice, request, direction, consent, order, bond, debenture or other paper or
document believed by it to be genuine and to have been signed or presented by
the proper Person. The Indenture Trustee need not investigate any fact or
matters stated in any such document.
(b) Before the Indenture Trustee acts or refrains from acting, it may
require an Officer's Certificate or an Opinion of Counsel. The Indenture
Trustee shall not be liable for any action it takes or omits to take in good
faith in reliance on an Officer's Certificate or Opinion of Counsel.
(c) The Indenture Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through
agents or attorneys or a custodian or nominee, and the Indenture Trustee shall
not be responsible for any misconduct or negligence on the part of, or for the
supervision of, any such agent, attorney, custodian or nominee appointed with
due care by it hereunder.
(d) The Indenture Trustee shall not be liable for any action it takes
or omits to take in good faith which it believes to be authorized or within
its rights or powers; provided, however, that such action or omission by the
Indenture Trustee does not constitute willful misconduct, negligence or bad
faith.
(e) The Indenture Trustee may consult with counsel, and the advice or
opinion of counsel with respect to legal matters relating to this Indenture
and the Notes shall be full and complete authorization and protection from
liability in respect to any action taken, omitted or suffered by it hereunder
in good faith and in accordance with the advice or opinion of such counsel.
(f) The Indenture Trustee shall be under no obligation to exercise
any of the rights or powers vested in it by this Indenture or to institute,
conduct or defend any litigation hereunder or in relation hereto or to honor
the request or direction of any of the Noteholders pursuant to this Indenture
unless such Noteholders shall have offered to the Indenture Trustee reasonable
security or indemnity against the reasonable costs, expenses, disbursements,
advances and liabilities which might be incurred by it, its agents and its
counsel in compliance with such request or direction.
(g) Any request or direction of the Issuer mentioned herein shall be
sufficiently evidenced by an Issuer Request.
(h) The right of the Indenture Trustee to perform any discretionary
act enumerated in this Indenture shall not be construed as a duty, and the
Indenture Trustee shall not be answerable for other than its negligence or
willful misconduct in the performance of such act.
(i) The Indenture Trustee shall not be required to give any bond or
surety in respect of the execution of the Trust Estate created hereby or the
powers granted hereunder.
SECTION 6.3 Individual Rights of Indenture Trustee. The
Indenture Trustee, in its individual or any other capacity, may become the
owner or pledgee of Notes and may otherwise deal with the Issuer or its
Affiliates with the same rights it would have if it were not Indenture
Trustee. Any Note Paying Agent, Note Registrar, co-registrar or co-paying
agent hereunder may do the same with like rights.
SECTION 6.4 Indenture Trustee's Disclaimer. The Indenture
Trustee (i) shall not be responsible for, and makes no representation as to,
the validity or adequacy of this Indenture or the Notes and (ii) shall not be
accountable for the Issuer's use of the proceeds from the Notes, or
responsible for any statement of the Issuer in this Indenture or in any
document issued in connection with the sale of the Notes or in the Notes (all
of which shall be taken as statements of the Issuer) other than the Indenture
Trustee's certificate of authentication.
SECTION 6.5 Notice of Defaults; Insolvency or Dissolution of
Depositor or the Seller. If a Default occurs and is continuing and if it is
known to a Trustee Officer of the Indenture Trustee, the Indenture Trustee
shall mail to each Noteholder notice of such Default within ninety (90) days
after it occurs. Except in the case of a Default in payment of principal of or
interest on any Note (including payments pursuant to the mandatory redemption
provisions of such Note), the Indenture Trustee may withhold the notice if and
so long as a committee of its Trustee Officers in good faith determines that
withholding the notice is in the interests of Noteholders.
SECTION 6.6 Reports by Indenture Trustee to Noteholders. Upon
delivery to the Indenture Trustee by the Servicer of such information prepared
by the Servicer pursuant to Section 3.9 of the Sale and Servicing Agreement as
may be required to enable each Noteholder to prepare its federal and State
income tax returns, the Indenture Trustee shall deliver such information to
the Noteholders.
SECTION 6.7 Compensation and Indemnity. (a) The Issuer shall
cause the Administrator to pay to the Indenture Trustee from time to time
reasonable compensation for its services. The Indenture Trustee's compensation
shall not be limited by any law on compensation of a trustee of an express
trust. The Issuer shall cause the Administrator to reimburse the Indenture
Trustee for all reasonable out-of-pocket expenses incurred or made by it,
including costs of collection, in addition to the compensation for its
services. Such expenses shall include the reasonable compensation and
expenses, disbursements and advances of the Indenture Trustee's agents,
counsel, accountants and experts. The Issuer shall cause the Administrator to
indemnify the Indenture Trustee for, and to hold it harmless against, any and
all loss, liability or expense (including attorneys' fees) incurred by it in
connection with the administration of this trust and the performance of its
duties hereunder, including the costs and expenses of defending itself against
any claim or liability in connection with the exercise or performance of any
of its powers or duties hereunder. The Indenture Trustee shall notify the
Issuer and the Administrator promptly of any claim for which it may seek
indemnity. Failure by the Indenture Trustee to so notify the Issuer and the
Administrator shall not relieve the Issuer or the Administrator of its
obligations hereunder. The Issuer shall cause the Administrator to defend any
such claim, and the Indenture Trustee may have separate counsel and the Issuer
shall cause the Administrator to pay the fees and expenses of such counsel.
Neither the Issuer nor the Administrator need reimburse any expense or
indemnity against any loss, liability or expense incurred by the Indenture
Trustee through the Indenture Trustee's own willful misconduct, negligence or
bad faith.
(b) The Issuer's payment obligations to the Indenture Trustee
pursuant to this Section 6.7 shall survive the resignation or removal of the
Indenture Trustee and the discharge of this Indenture. When the Indenture
Trustee incurs expenses after the occurrence of a Default specified in Section
5.1(iv) or (v) with respect to the Issuer, the expenses are intended to
constitute expenses of administration under Title 11 of the United States Code
or any other applicable federal or State bankruptcy, insolvency or similar
law.
SECTION 6.8 Replacement of Indenture Trustee. (a) No
resignation or removal of the Indenture Trustee, and no appointment of a
successor Indenture Trustee, shall become effective until the acceptance of
appointment by the successor Indenture Trustee pursuant to this Section 6.8
and payment in full of all sums due to the Indenture Trustee pursuant to
Section 6.7. The Indenture Trustee may resign at any time by so notifying the
Issuer. The holders of Notes evidencing not less than a majority in principal
amount of the Notes may remove the Indenture Trustee without cause by so
notifying the Indenture Trustee and the Issuer and may appoint a successor
Indenture Trustee. The Administrator shall remove the Indenture Trustee if:
(i) the Indenture Trustee fails to comply with Section 6.11;
(ii) an Insolvency Event occurs with respect to the Indenture
Trustee;
(iii) a receiver or other public officer takes charge of the
Indenture Trustee or its property; or
(iv) the Indenture Trustee otherwise becomes incapable of
acting.
If the Indenture Trustee resigns or is removed or if a vacancy exists in the
office of Indenture Trustee for any reason (the Indenture Trustee in such
event being referred to herein as the retiring Indenture Trustee), the
Administrator shall promptly appoint a successor Indenture Trustee.
(b) Any successor Indenture Trustee shall deliver a written
acceptance of its appointment to the retiring Indenture Trustee and to the
Issuer. Thereupon, if all sums due the retiring Indenture Trustee pursuant to
Section 6.7 have been paid in full, the resignation or removal of the retiring
Indenture Trustee shall become effective, and the successor Indenture Trustee
shall have all the rights, powers and duties of the Indenture Trustee under
this Indenture. The successor Indenture Trustee shall mail a notice of its
succession to Noteholders. If all sums due the retiring Indenture Trustee
pursuant to Section 6.7 have been paid in full, the retiring Indenture Trustee
shall promptly transfer all property held by it as Indenture Trustee to the
successor Indenture Trustee.
(c) If a successor Indenture Trustee does not take office within
sixty (60) days after the retiring Indenture Trustee resigns or is removed,
the retiring Indenture Trustee, the Issuer or the holders of Notes evidencing
not less than a majority in principal amount of the Notes may petition any
court of competent jurisdiction for the appointment of a successor Indenture
Trustee. If the Indenture Trustee fails to comply with Section 6.11, any
Noteholder who has been a bona fide Noteholder for at least six (6) months may
petition any court of competent jurisdiction for the removal of the Indenture
Trustee and the appointment of a successor Indenture Trustee.
(d) Notwithstanding the replacement of the Indenture Trustee pursuant
to this Section 6.8, the obligations of the Issuer and the Administrator under
Section 6.7 shall continue for the benefit of the retiring Indenture Trustee.
SECTION 6.9 Successor Indenture Trustee by Merger. (a) If the
Indenture Trustee consolidates with, merges or converts into, or transfers all
or substantially all its corporate trust business or assets to, another
corporation or banking association, the resulting, surviving or transferee
corporation or banking association without any further act shall be the
successor Indenture Trustee; provided that such corporation or banking
association shall be otherwise qualified and eligible under Section 6.11. The
Indenture Trustee shall provide the Rating Agencies with written notice of any
such transaction.
(b) In case at the time such successor or successors by merger,
conversion or consolidation to the Indenture Trustee shall succeed to the
trusts created by this Indenture any of the Notes shall have been
authenticated but not delivered, any such successor to the Indenture Trustee
may adopt the certificate of authentication of any predecessor trustee, and
deliver such Notes so authenticated; and in case at that time any of the Notes
shall not have been authenticated, any successor to the Indenture Trustee may
authenticate such Notes either in the name of any predecessor hereunder or in
the name of the successor to the Indenture Trustee. In all such cases such
certificates shall have the full force which it is provided anywhere in the
Notes or in this Indenture that the certificate of the Indenture Trustee shall
have.
SECTION 6.10 Appointment of Co-Indenture Trustee or Separate
Indenture Trustee. (a) Notwithstanding any other provisions of this Indenture,
at any time, for the purpose of meeting any legal requirement of any
jurisdiction in which any part of the Indenture Trust Estate may at the time
be located, the Indenture Trustee shall have the power and may execute and
deliver an instrument to appoint one or more Persons to act as a co-trustee or
co-trustees, or separate trustee or separate trustees, of all or any part of
the Trust, and to vest in such Person or Persons, in such capacity and for the
benefit of the Noteholders, such title to the Indenture Trust Estate, or any
part hereof, and, subject to the other provisions of this Section 6.10, such
powers, duties, obligations, rights and trusts as the Indenture Trustee may
consider necessary or desirable. No co-trustee or separate trustee hereunder
shall be required to meet the terms of eligibility as a successor trustee
under Section 6.11 and no notice to Noteholders of the appointment of any
co-trustee or separate trustee shall be required under Section 6.8.
(b) Every 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 Indenture Trustee shall be conferred or imposed upon
and exercised or performed by the Indenture Trustee and such separate
trustee or co-trustee jointly (it being understood that such separate
trustee or co-trustee shall not be authorized to act separately
without the Indenture 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 the Indenture 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 Indenture Trust Estate 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 Indenture Trustee;
(ii) no trustee hereunder shall be personally liable by
reason of any act or omission of any other trustee hereunder; and
(iii) the Indenture Trustee may at any time accept the
resignation of or remove any separate trustee or co-trustee.
(c) Any notice, request or other writing given to the Indenture
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 this
Indenture and the conditions of this Article VI. Each separate trustee and
co-trustee, upon its acceptance of the trusts conferred, shall be vested with
the estates or property specified in its instrument of appointment, either
jointly with the Indenture Trustee or separately, as may be provided therein,
subject to all the provisions of this Indenture, specifically including every
provision of this Indenture relating to the conduct of, affecting the
liability of, or affording protection to, the Indenture Trustee. Every such
instrument shall be filed with the Indenture Trustee.
(d) Any separate trustee or co-trustee may at any time constitute the
Indenture 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 this 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 Indenture Trustee, to the extent permitted by law, without
the appointment of a new or successor trustee.
SECTION 6.11 Eligibility; Disqualification. (a) The Indenture
Trustee shall at all times satisfy the requirements of TIA Section 310(a). The
Indenture Trustee or its parent shall have a combined capital and surplus of
at least $50,000,000 as set forth in its most recent published annual report
of condition and shall have a long-term debt rating of investment grade by
each of the Rating Agencies or shall otherwise be acceptable to each of the
Rating Agencies. The Indenture Trustee shall comply with TIA Section 310(b).
SECTION 6.12 Preferential Collection of Claims Against Issuer.
The Indenture Trustee shall comply with TIA Section 311(a), excluding any
creditor relationship listed in TIA Section 311(b). An Indenture Trustee who
has resigned or been removed shall be subject to TIA Section 311(a) to the
extent indicated.
ARTICLE VII
NOTEHOLDERS' LISTS AND REPORTS
SECTION 7.1 Issuer To Furnish Indenture Trustee Names and
Addresses of Noteholders. The Issuer shall furnish or cause to be furnished to
the Indenture Trustee (a) not more than five (5) days after each Record Date,
a list, in such form as the Indenture Trustee may reasonably require, of the
names and addresses of the Noteholders as of such Record Date and (b) at such
other times as the Indenture Trustee may request in writing, within thirty
(30) days after receipt by the Issuer of any such request, a list of similar
form and content as of a date not more than ten (10) days prior to the time
such list is furnished; provided, however, that (i) so long as the Indenture
Trustee is the Note Registrar, no such list shall be required to be furnished
and (ii) no such list shall be required to be furnished with respect to
Noteholders of Book-Entry Notes.
SECTION 7.2 Preservation of Information; Communications to
Noteholders. (a) The Indenture Trustee shall preserve, in as current a form as
is reasonably practicable, the names and addresses of the Noteholders
contained in the most recent list furnished to the Indenture Trustee as
provided in Section 7.1 and the names and addresses of Noteholders received by
the Indenture Trustee in its capacity as Note Registrar. The Indenture Trustee
may destroy any list furnished to it as provided in such Section 7.1 upon
receipt of a new list so furnished.
(b) Noteholders may communicate pursuant to TIA Section 312(b) with
other Noteholders with respect to their rights under this Indenture or under
the Notes. Upon receipt by the Indenture Trustee of any request by three or
more Noteholders or by one or more holders of Notes evidencing not less than
25% of the Notes Outstanding to receive a copy of the current list of
Noteholders (whether or not made pursuant to TIA Section 312(b)), the
Indenture Trustee shall promptly notify the Administrator thereof by providing
to the Administrator a copy of such request and a copy of the list of
Noteholders produced in response thereto.
(c) The Issuer, the Indenture Trustee and the Note Registrar shall
have the protection of TIA Section 312(c).
SECTION 7.3 Reports by Issuer. (a) The Issuer shall:
(i) file with the Indenture Trustee, within fifteen (15)
days after the Issuer is required to file the same with the
Commission, copies of the annual reports and of the information,
documents and other reports (or copies of such portions of any of the
foregoing as the Commission may from time to time by rules and
regulations prescribe) that the Issuer may be required to file with
the Commission pursuant to Section 13 or 15(d) of the Exchange Act;
(ii) file with the Indenture Trustee and the Commission in
accordance with the rules and regulations prescribed from time to
time by the Commission such additional information, documents and
reports with respect to compliance by the Issuer with the conditions
and covenants of this Indenture as may be required from time to time
by such rules and regulations; and
(iii) supply to the Indenture Trustee (and the Indenture
Trustee shall transmit by mail to all Noteholders described in TIA
Section 313(c)) such summaries of any information, documents and
reports required to be filed by the Issuer pursuant to clauses (i)
and (ii) of this Section 7.3(a) and by rules and regulations
prescribed from time to time by the Commission.
(b) Unless the Issuer otherwise determines, the fiscal year of the
Issuer shall correspond to the calendar year.
SECTION 7.4 Reports by Indenture Trustee. (a) If required by
TIA Section 313(a), within sixty (60) days after each May 15, beginning with
May 15, ______, the Indenture Trustee shall mail to each Noteholder as
required by TIA Section 313(c) a brief report dated as of such date that
complies with TIA Section 313(a). The Indenture Trustee also shall comply with
TIA Section 313(b).
(b) A copy of each report at the time of its mailing to Noteholders
shall be filed by the Indenture Trustee with the Commission and each stock
exchange, if any, on which the Notes are listed. The Issuer shall notify the
Indenture Trustee if and when the Notes are listed on any stock exchange.
ARTICLE VIII
ACCOUNTS, DISBURSEMENTS AND RELEASES
SECTION 8.1 Collection of Money. Except as otherwise expressly
provided herein, the Indenture Trustee may demand payment or delivery of, and
shall receive and collect, directly and without intervention or assistance of
any fiscal agent or other intermediary, all money and other property payable
to or receivable by the Indenture Trustee pursuant to this Indenture and the
Sale and Servicing Agreement. The Indenture Trustee shall apply all such money
received by it as provided in this Indenture and the Sale and Servicing
Agreement. Except as otherwise expressly provided in this Indenture, if any
default occurs in the making of any payment or performance under any agreement
or instrument that is part of the Indenture Trust Estate, the Indenture
Trustee may take such action as may be appropriate to enforce such payment or
performance, including the institution and prosecution of appropriate
Proceedings. Any such action shall be without prejudice to any right to claim
a Default or Event of Default under this Indenture and any right to proceed
thereafter as provided in Article V.
SECTION 8.2 Trust Accounts. (a) On or prior to the Closing
Date, the Issuer shall cause the Servicer to establish and maintain the Trust
Accounts as provided in Sections 4.1 and 4.7 of the Sale and Servicing
Agreement.
(b) On or before each Payment Date, the Servicer shall deposit all
Available Collections with respect to the Collection Period preceding such
Payment Date in the Collection Account as provided in Sections 4.2, 4.3, 4.4
and 4.5 of the Sale and Servicing Agreement. On or before each Payment Date,
all amounts required to be withdrawn from the Reserve Account and deposited in
the Collection Account pursuant to Section 4.5 of the Sale and Servicing
Agreement shall be withdrawn by the Indenture Trustee from the Reserve Account
and deposited to the Collection Account.
(c) On each Payment Date, the Indenture Trustee (based on the
information contained in the Servicer's Certificate delivered on or before the
related Determination Date pursuant to Section 3.9 of the Sale and Servicing
Agreement) shall make the following withdrawals from the Collection Account
and make deposits, distributions and payments, to the extent of Available
Funds for such Payment Date (plus funds, if any, deposited therein from the
Reserve Account), in the following order of priority:
(i) first, to the Servicer, the Servicing Fee and all
unpaid Servicing Fees from prior Collection Periods;
(ii) second, to the Noteholders, the Accrued Class A Note
Interest for such Payment Date; provided that if there are not
sufficient funds available to pay the entire amount of the Accrued
Class A Note Interest, the amounts available shall be applied to the
payment of such interest on the Class A Notes on a pro rata basis;
(iii) third, to the Certificate Distribution Account, the
Accrued Class B Certificate Interest for such Payment Date;
(iv) fourth, to the Principal Distribution Account, the
Regular Principal Distribution Amount, for such Payment Date;
(v) fifth, to the Principal Distribution Account, on any
Final Scheduled Payment Date for any Class of Notes, the amount
necessary to reduce the remaining principal amount of such Class of
Notes to zero after giving to the amount, if any, to be applied on
such Payment Date to the principal of such Class of Notes from funds
deposited pursuant to clause (iv) above;
(vi) sixth, to the Reserve Account, the amount, if any,
required to reinstate the amount in the Reserve Account up to the
Specified Reserve Balance for such Payment Date;
(vii) seventh, to the Indenture Trustee any amounts owed to
it pursuant to Section 6.7 of the Indenture and not previously paid;
and
(viii) eighth, to the Seller, any funds remaining on deposit
in the Collection Account with respect to the Collection Period
preceding such Payment Date.
Notwithstanding the foregoing in this Section 8.2(c),
(A) ______ if the Notes have been accelerated after an Event
of Default specified in Section 5.1(iii), then the Indenture Trustee
shall instead apply Available Funds remaining after clause
(iii) above in the following order of priority:
(1) to the Principal Distribution Account until the
principal amount of the Notes has been paid in full;
(2) to the Certificate Distribution Account, the
Certificate Balance of the Class B Certificates;
(3) to the Indenture Trustee, any amounts owed to it
pursuant to Section 6.7 and not previously paid;
and
(4) to the Seller, any remaining Available Funds for
such Payment Date; and
(B) ______ if the Notes have been accelerated after an
Event of Default specified in Section 5.1(i), (ii), (iv) or (v),
then the Indenture Trustee shall instead apply Available Funds
remaining after clause (ii) above in the following order of
priority:
(1) to the Principal Distribution Account until the
principal amount of the Notes has been paid in
full;
(2) ______ to the Certificate Distribution Account,
the sum of the Accrued Class B Certificate
Interest for such Payment Date and the
Certificate Balance of the Class B Certificates;
(3) to the Indenture Trustee, any amounts owed to it
pursuant to Section 6.7 and not previously paid;
and
(4) to the Seller, any remaining Available Funds for
such Payment Date.
(d) On each Payment Date, the Indenture Trustee (based on the
information contained in the Servicer's Certificate delivered on or before the
related Determination Date pursuant to Section 3.9 of the Sale and Servicing
Agreement) shall withdraw the funds deposited in the Principal Distribution
Account on such Payment Date and make distributions and payments in the
following order of priority:
(i) first, to the holders of the Class A-1 Notes in
reduction of principal until the principal amount of the Class A-1
Notes on a pro rata basis has been paid in full; provided that if
there are not sufficient funds available to pay the principal amount
of the Outstanding Class A-1 Notes in full, the amounts available
shall be applied to the payment of principal on the Class A-1 Notes
on a pro rata basis;
(ii) second, to the holders of the Class A-2 Notes on a pro
rata basis in reduction of principal until the principal amount of
the Class A-2 Notes has been paid in full; provided that if there are
not sufficient funds available to pay the principal amount of the
Outstanding Class A-2 Notes in full, the amounts available shall be
applied to the payment of principal on the Class A-2 Notes on a pro
rata basis;
(iii) third, to the holders of the Class A-3 Notes on a pro
rata basis in reduction of principal until the principal amount of
the Class A-3 Notes has been paid in full; provided that if there are
not sufficient funds available to pay the principal amount of the
Outstanding Class A-3 Notes in full, the amounts available shall be
applied to the payment of principal on the Class A-3 Notes on a pro
rata basis;
(iv) fourth, to the Certificate Distribution Account, in
reduction of the Certificate Balance of the Class B Certificates,
until the Certificate Balance of the Class B Certificates has been
reduced to zero; and
(v) fifth, to the Seller, any funds remaining on deposit
in the Principal Distribution Account.
Notwithstanding the foregoing in this Section 8.2(d), if the Notes
have been accelerated after an Event of Default then the Indenture Trustee
shall withdraw the funds deposited in the Principal Distribution Account on
each Payment Date and pay them to the holders of the Notes on a pro rata basis
in reduction of principal until the principal amount of the Notes has been
paid in full.
SECTION 8.3 General Provisions Regarding Accounts. Or the
Reserve Account to (a) So long as no Default or Event of Default shall have
occurred and be continuing, all or a portion of the funds in the Collection
Account and the Reserve Account shall be invested by the Indenture Trustee at
the written direction of the Servicer, in the case of the Collection Account,
and at the written direction of the Seller, in the case of the Reserve
Account, in Permitted Investments as provided in Sections 4.1 and 4.7 of the
Sale and Servicing Agreement. All income or other gain (net of losses and
investment expenses) from investments of monies deposited in the Collection
Account shall be withdrawn by the Indenture Trustee from such accounts and
distributed as provided in Section 4.1 of the Sale and Servicing Agreement.
Amounts in the Reserve Account (including net income and gain) shall be
applied as provided in Section 4.7 of the Sale and Servicing Agreement. The
Servicer or the Seller as applicable, shall not direct the Indenture Trustee
to make any investment of any funds or to sell any investment held in any of
the Trust Accounts unless the security interest Granted and perfected in such
account will continue to be perfected in such investment or the proceeds of
such sale, in either case without any further action by any Person, and, in
connection with any direction to the Indenture Trustee to make any such
investment or sale, if requested by the Indenture Trustee, the Issuer shall
deliver to the Indenture Trustee an Opinion of Counsel, acceptable to the
Indenture Trustee, to such effect.
(b) Subject to Section 6.1(c), the Indenture Trustee shall not in any
way be held liable by reason of any insufficiency in any of the Trust Accounts
resulting from any loss on any Permitted Investment included therein, except
for losses attributable to the Indenture Trustee's failure to make payments on
such Permitted Investments issued by the Indenture Trustee, in its commercial
capacity as principal obligor and not as trustee, in accordance with their
terms.
(c) If (i) the Servicer or the Seller, as applicable, shall have
failed to give investment directions for any funds on deposit in the
Collection Account to the Indenture Trustee or (ii) to the knowledge of a
Trustee Officer of the Indenture Trustee, a Default or Event of Default shall
have occurred and be continuing with respect to the Notes but the Notes shall
not have been declared due and payable pursuant to Section 5.2 or (iii) if
such Notes shall have been declared due and payable following an Event of
Default, amounts collected or receivable from the Indenture Trust Estate are
being applied in accordance with Section 5.4 as if there had not been such a
declaration, then the Indenture Trustee shall, to the fullest extent
practicable, invest and reinvest funds in the Collection Account or the
Reserve Account, as the case may be, in one or more specified Permitted
Investments described in clause (b) of the definition thereof.
SECTION 8.4.......Release of Indenture Trust Estate. (a) Subject to the
payment of its fees and expenses pursuant to Section 6.7, the Indenture
Trustee may, and when required by the provisions of this Indenture shall,
execute instruments to release property from the lien of this Indenture, or
convey the Indenture Trustee's interest in the same, in a manner and under
circumstances that are not inconsistent with the provisions of this Indenture.
No party relying upon an instrument executed by the Indenture Trustee as
provided in this Article VIII shall be bound to ascertain the Indenture
Trustee's authority, inquire into the satisfaction of any conditions precedent
or see to the application of any monies.
(b) The Indenture Trustee shall, at such time as there are no Notes
Outstanding and all sums due the Indenture Trustee pursuant to Section 6.7
have been paid in full, release any remaining portion of the Indenture Trust
Estate that secured the Notes from the lien of this Indenture and release to
the Issuer or any other Person entitled thereto any funds then on deposit in
the Trust Accounts. The Indenture Trustee shall release property from the lien
of this Indenture pursuant to this Section 8.4(b) only upon receipt of an
Issuer Request accompanied by an Officer's Certificate, an Opinion of Counsel
and (if required by the TIA) Independent Certificates in accordance with TIA
Sections 314(c) and 314(d)(1) meeting the applicable requirements of Section
11.1.
(c) Each Noteholder or Note Owner, by its acceptance of a Note or, in
the case of a Note Owner, a beneficial interest in a Note, acknowledges that
from time to time the Indenture Trustee shall release the lien of this
Indenture on any Receivable to be sold to (i) the Seller in accordance with
Section 2.3 of the Sale and Servicing Agreement and (ii) to the Servicer in
accordance with Section 3.7 of the Sale and Servicing Agreement.
SECTION 8.5 Opinion of Counsel. The Indenture Trustee shall
receive at least seven (7) days' notice when requested by the Issuer to take
any action pursuant to Section 8.4(a), accompanied by copies of any
instruments involved, and the Indenture Trustee shall also require, except in
connection with any action contemplated by Section 8.4(c), as a condition to
such action, an Opinion of Counsel, in form and substance satisfactory to the
Indenture Trustee, stating the legal effect of any such action, outlining the
steps required to complete the same, and concluding that all conditions
precedent to the taking of such action have been complied with and such action
will not materially and adversely impair the security for the Notes or the
rights of the Noteholders in contravention of the provisions of this
Indenture; provided, however, that such Opinion of Counsel shall not be
required to express an opinion as to the fair value of the Indenture Trust
Estate. Counsel rendering any such opinion may rely, without independent
investigation, on the accuracy and validity of any certificate or other
instrument delivered to the Indenture Trustee in connection with any such
action.
ARTICLE IX
SUPPLEMENTAL INDENTURES
SECTION 9.1 Supplemental Indentures Without Consent of
Noteholders. (a) Without the consent of the Noteholders but with prior notice
to the Rating Agencies, the Issuer and the Indenture Trustee, when authorized
by an Issuer Order, at any time and from time to time, may enter into one or
more indentures supplemental hereto (which shall conform to the provisions of
the Trust Indenture Act as in force at the date of the execution thereof), in
form satisfactory to the Indenture Trustee, for any of the following purposes:
(i) to correct or amplify the description of any property at
any time subject to the lien of this Indenture, or better to assure,
convey and confirm unto the Indenture Trustee any property subject or
required to be subjected to the lien of this Indenture, or to subject
to the lien of this Indenture additional property;
(ii) to evidence the succession, in compliance with the
applicable provisions hereof, of another Person to the Issuer, and
the assumption by any such successor of the covenants of the Issuer
herein and in the Notes contained;
(iii) to add to the covenants of the Issuer, for the benefit
of the Noteholders, or to surrender any right or power herein
conferred upon the Issuer;
(iv) to convey, transfer, assign, mortgage or pledge any
property to or with the Indenture Trustee;
(v) to cure any ambiguity, to correct or supplement any
provision herein or in any supplemental indenture that may be
inconsistent with any other provision herein or in any supplemental
indenture or to make any other provisions with respect to matters or
questions arising under this Indenture or under any supplemental
indenture which shall not be inconsistent with the provisions of the
Indenture; provided that such action shall not materially adversely
affect the interests of the Noteholders;
(vi) to evidence and provide for the acceptance of the
appointment hereunder by a successor trustee with respect to the
Notes and to add to or change any of the provisions of this Indenture
as shall be necessary to facilitate the administration of the trusts
hereunder by more than one trustee, pursuant to the requirements of
Article VI; or
(vii) to modify, eliminate or add to the provisions of this
Indenture to such extent as shall be necessary to affect the
qualification of this Indenture under the TIA or under any similar
federal statute hereafter enacted and to add to this Indenture such
other provisions as may be expressly required by the TIA.
The Indenture Trustee is hereby authorized to join in the execution
of any such supplemental indenture and to make any further appropriate
agreements and stipulations that may be therein contained.
(b) The Issuer and the Indenture Trustee, when authorized by an
Issuer Order, may, also without the consent of any of the Noteholders but with
prior notice to the Rating Agencies, enter into an indenture or indentures
supplemental hereto for the purpose of adding any provisions to, or changing
in any manner or eliminating any of the provisions of, this Indenture or of
modifying in any manner (other than the modifications set forth in Section
9.2) the rights of the Noteholders under this Indenture; provided, however,
that (i) such action shall not, as evidenced by an Opinion of Counsel,
adversely affect in any material respect the interests of any Noteholder, (ii)
the Rating Agency Condition shall have been satisfied with respect to such
action and (iii) such action shall not, as evidenced by an Opinion of Counsel,
cause the Issuer to be characterized for federal or any then Applicable Tax
State income tax purposes as an association taxable as a corporation or
otherwise have any material adverse impact on the federal or any then
Applicable Tax State income taxation of any Notes Outstanding or outstanding
Certificates or any Noteholder or Certificateholder.
SECTION 9.2 Supplemental Indentures with Consent of
Noteholders. The Issuer and the Indenture Trustee, when authorized by an
Issuer Order, also may, with prior notice to the Rating Agencies, enter into
an indenture or indentures supplemental hereto for the purpose of adding any
provisions to, or changing in any manner or eliminating any of the provisions
of, this Indenture or modifying in any manner the rights of the Noteholders
under this Indenture; provided, however, that (i) the Rating Agency Condition
shall have been satisfied with respect to such action and (ii) such action
shall not, as evidenced by an Opinion of Counsel, cause the Issuer to be
characterized for federal or any then Applicable Tax State income tax purposes
as an association taxable as a corporation or otherwise have any material
adverse impact on the federal or any then Applicable Tax State income taxation
of any Notes Outstanding or outstanding Certificates or any Noteholder or
Certificateholder, and (iii) (x) such action shall not, as evidenced by an
Opinion of Counsel, adversely affect in any material respect the interests of
any Noteholder, with respect to supplemental indentures relating to matters
other than those specified in clause (y) below or (y) the Noteholders of each
Outstanding Note affected thereby shall have consented thereto, with respect
to any supplemental indenture which would:
(i) modify or alter provisions of this Section 9.2;
(ii) change the Final Scheduled Payment Date or the date of payment
of any installment of principal of or interest on any Note, or reduce the
principal amount thereof, the interest rate thereon or the Prepayment Price
with respect thereto, change the provisions of this Indenture relating to the
application of collections on, or the proceeds of the sale of, the Indenture
Trust Estate to payment of principal of or interest on the Notes, or change
any place of payment where, or the coin or currency in which, any Note or the
interest thereon is payable, or impair the right to institute suit for the
enforcement of the provisions of this Indenture requiring the application of
funds available therefor, as provided in Article V, to the payment of any such
amount due on the Notes on or after the respective due dates thereof (or, in
the case of redemption, on or after the Prepayment Date);
(iii) reduce the percentage of the principal amount of the Notes
Outstanding, the consent of the Noteholders of which is required for any such
supplemental indenture, or the consent of the Noteholders of which is required
for any waiver of compliance with certain provisions of this Indenture or
certain Defaults or Events of Default hereunder and their consequences
provided for in this Indenture;
(iv) modify or alter the provisions of the proviso to the definition
of the term "Outstanding";
(v) reduce the percentage of the principal amount of the Notes
Outstanding required to direct or consent to a sale or liquidation by the
Indenture Trustee of the Indenture Trust Estate pursuant to Section 5.4 if the
proceeds of such sale or liquidation would be insufficient to pay the
principal amount and accrued but unpaid interest on the Notes and/or the
Certificates, as applicable;
(vi) modify any provision of this Indenture specifying a percentage
of the aggregate principal amount of the Notes necessary to amend this
Indenture or the other Basic Documents except to increase any percentage
specified herein or to provide that certain additional provisions of this
Indenture or the other Basic Documents cannot be modified or waived without
the consent of the holder of each Outstanding Note affected thereby;
(vii) modify any of the provisions of this Indenture in such manner
as to affect the calculation of the amount of any payment of interest or
principal due on any Note on any Payment Date (including the calculation of
any of the individual components of such calculation) or to affect the rights
of the Noteholders to the benefit of any provisions for the mandatory
redemption of the Notes contained herein; or
(viii) permit the creation of any lien ranking prior to or on a
parity with the lien of this Indenture with respect to any part of the
Indenture Trust Estate or, except as otherwise permitted or contemplated
herein, terminate the lien of this Indenture on any such collateral at any
time subject hereto or deprive any Noteholder of the security provided by the
lien of this Indenture.
The Indenture Trustee may in its discretion or upon receipt of an Opinion of
Counsel determine whether or not any Notes would be affected by any
supplemental indenture and any such determination shall be conclusive upon the
Noteholders of all Notes, whether theretofore or thereafter authenticated and
delivered hereunder. The Indenture Trustee shall not be liable for any such
determination made in good faith.
It shall not be necessary for any Act of Noteholders under this
Section 9.2 to approve the particular form of any proposed supplemental
indenture, but it shall be sufficient if such Act shall approve the substance
thereof.
Promptly after the execution by the Issuer and the Indenture Trustee
of any supplemental indenture pursuant to this Section 9.2, the Indenture
Trustee shall mail to the Noteholders of the Notes to which such amendment or
supplemental indenture relates a notice setting forth in general terms the
substance of such supplemental indenture. Any failure of the Indenture Trustee
to mail such notice, or any defect therein, shall not, however, in any way
impair or affect the validity of any such supplemental indenture.
SECTION 9.3 Execution of Supplemental Indentures. In executing, or
permitting the additional trusts created by, any supplemental indenture
permitted by this Article IX or the modification thereby of the trusts created
by this Indenture, the Indenture Trustee shall be entitled to receive, and
subject to Sections 6.1 and 6.2, shall be fully protected in relying upon, an
Opinion of Counsel stating that the execution of such supplemental indenture
is authorized or permitted by this Indenture and that all conditions precedent
to the execution and delivery of such supplemental indenture have been
satisfied. The Indenture Trustee may, but shall not be obligated to, enter
into any such supplemental indenture that affects the Indenture Trustee's own
rights, duties, liabilities or immunities under this Indenture or otherwise.
SECTION 9.4 Effect of Supplemental Indenture. Upon the execution of
any supplemental indenture pursuant to the provisions hereof, this Indenture
shall be and shall be deemed to be modified and amended in accordance
therewith with respect to the Notes affected thereby, and the respective
rights, limitations of rights, obligations, duties, liabilities and immunities
under this Indenture of the Indenture Trustee, the Issuer and the Noteholders
shall thereafter be determined, exercised and enforced hereunder subject in
all respects to such modifications and amendments, and all the terms and
conditions of any such supplemental indenture shall be and be deemed to be
part of the terms and conditions of this Indenture for any and all purposes.
SECTION 9.5 Conformity with Trust Indenture Act. Every amendment of
this Indenture and every supplemental indenture executed pursuant to this
Article IX shall conform to the requirements of the Trust Indenture Act as
then in effect so long as this Indenture shall then be qualified under the
Trust Indenture Act.
SECTION 9.6 Reference in Notes to Supplemental Indentures. Notes
authenticated and delivered after the execution of any supplemental indenture
pursuant to this Article IX may, and if required by the Indenture Trustee
shall, bear a notation in form approved by the Indenture Trustee as to any
matter provided for in such supplemental indenture. If the Issuer or the
Indenture Trustee shall so determine, new Notes so modified as to conform, in
the opinion of the Indenture Trustee and the Issuer, to any such supplemental
indenture may be prepared and executed by the Issuer and authenticated and
delivered by the Indenture Trustee in exchange for Outstanding Notes.
ARTICLE X
PREPAYMENT
SECTION 10.1 Prepayment. The Class A Notes are subject to prepayment
on any Payment Date on which the Servicer exercises its option to purchase the
assets of the Issuer pursuant to Section 8.1 of the Sale and Servicing
Agreement, and the amount paid by the Servicer shall be treated as collections
of Receivables and applied to pay the unpaid principal amount of the Notes and
the Certificate Balance of the Certificates plus accrued and unpaid interest
thereon. If the Notes are to be prepaid pursuant to this Section 10.1, the
Servicer or the Issuer shall furnish notice of such election to the Indenture
Trustee and the Rating Agencies not later than forty (40) days prior to the
Prepayment Date (and the Indenture Trustee shall promptly furnish notice to
the Noteholders) and the Servicer or the Issuer shall deposit by 10:00 a.m.
(New York City time) on the Prepayment Date with the Indenture Trustee in the
Collection Account the Prepayment Price of the Notes, whereupon all Notes
shall be due and payable on the Prepayment Date.
SECTION 10.2 Form of Prepayment Notice. Notice of prepayment under
Section 10.1 shall be given by the Indenture Trustee by first-class mail,
postage prepaid, or by facsimile mailed or transmitted promptly following
receipt of notice from the Issuer or Servicer pursuant to Section 10.1, but
not later than thirty (30) days prior to the applicable Prepayment Date, to
each Noteholder as of the close of business on the Record Date preceding the
applicable Prepayment Date, at such Noteholder's address or facsimile number
appearing in the Note Register.
All notices of prepayment shall state:
(i) the Prepayment Date;
(ii) the Prepayment Price;
(iii) the place where such Notes are to be surrendered for
payment of the Prepayment Price (which shall be the office or agency
of the Issuer to be maintained as provided in Section 3.2); and
(iv) that on the Prepayment Date, the Prepayment Price will
become due and payable upon each such Note and that interest thereon
shall cease to accrue for and after said date.
Notice of prepayment of the Notes shall be given by the Indenture Trustee in
the name and at the expense of the Issuer. Failure to give notice of
prepayment, or any defect therein, to any Noteholder shall not impair or
affect the validity of the prepayment of any other Note.
SECTION 10.3 Notes Payable on Prepayment Date. The Notes shall,
following notice of prepayment as required by Section 10.2, shall on the
Prepayment Date become due and payable at the Prepayment Price and (unless the
Issuer shall default in the payment of the Prepayment Price) no interest shall
accrue on the Prepayment Price for any period after the date to which accrued
interest is calculated for purposes of calculating the Prepayment Price.
ARTICLE XI
MISCELLANEOUS
SECTION 11.1 Compliance Certificates and Opinions, etc. (a) Upon any
application or request by the Issuer to the Indenture Trustee to take any
action under any provision of this Indenture, the Issuer shall furnish to the
Indenture Trustee (i) an Officer's Certificate stating that all conditions
precedent, if any, provided for in this Indenture relating to the proposed
action have been complied with, (ii) an Opinion of Counsel stating that in the
opinion of such counsel all such conditions precedent, if any, have been
complied with and (iii) (if required by the TIA) an Independent Certificate
from a firm of certified public accountants meeting the applicable
requirements of this Section 11.1, except that, in the case of any such
application or request as to which the furnishing of such documents is
specifically required by any provision of this Indenture, no additional
certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(A) a statement that each signatory of such
certificate or opinion has read or has caused to be read
such covenant or condition and the definitions herein
relating thereto;
(B) a brief statement as to the nature and scope of
the examination or investigation upon which the statements
or opinions contained in such certificate or opinion are
based;
(C) a statement that, in the opinion of each such
signatory, such signatory has made such examination or
investigation as is necessary to enable such signatory to
express an informed opinion as to whether or not such
covenant or condition has been complied with; and
(D) a statement as to whether, in the opinion of
each such signatory, such condition or covenant has been
complied with.
(b) (i) Prior to the deposit of any Collateral or other property or
securities with the Indenture Trustee that is to be made the basis for the
release of any property or securities subject to the lien of this Indenture,
the Issuer shall, in addition to any obligation imposed in Section 11.1(a) or
elsewhere in this Indenture, furnish to the Indenture Trustee an Officer's
Certificate certifying or stating the opinion of each person signing such
certificate as to the fair value (within ninety (90) days of such deposit) to
the Issuer of the Collateral or other property or securities to be so
deposited.
(ii) Whenever the Issuer is required to furnish to the
Indenture Trustee an Officer's Certificate certifying or stating the
opinion of any signer thereof as to the matters described in clause
(i) above, the Issuer shall also deliver to the Indenture Trustee an
Independent Certificate as to the same matters, if the fair value to
the Issuer of the securities to be so deposited and of all other such
securities made the basis of any such withdrawal or release since the
commencement of the then-current fiscal year of the Issuer, as set
forth in the certificates delivered pursuant to clause (i) above and
this clause (ii), is ten percent (10%) or more of the principal
amount of the Notes Outstanding, but such a certificate need not be
furnished with respect to any securities so deposited, if the fair
value thereof to the Issuer as set forth in the related Officer's
Certificate is less than $25,000 or less than one percent (1%) of the
principal amount of the Notes Outstanding.
(iii) Whenever any property or securities are to be released
from the lien of this Indenture, the Issuer shall also furnish to the
Indenture Trustee an Officer's Certificate certifying or stating the
opinion of each person signing such certificate as to the fair value
(within ninety (90) days of such release) of the property or
securities proposed to be released and stating that in the opinion of
such person the proposed release will not impair the security under
this Indenture in contravention of the provisions hereof.
(iv) Whenever the Issuer is required to furnish to the
Indenture Trustee an Officer's Certificate certifying or stating the
opinion of any signer thereof as to the matters described in clause
(iii) above, the Issuer shall also furnish to the Indenture Trustee
an Independent Certificate as to the same matters if the fair value
of the property or securities and of all other property, other than
property as contemplated by clause (v) below or securities released
from the lien of this Indenture since the commencement of the
then-current calendar year, as set forth in the certificates required
by clause (iii) above and this clause (iv), equals ten percent (10%)
or more of the principal amount of the Notes Outstanding, but such
certificate need not be furnished in the case of any release of
property or securities if the fair value thereof as set forth in the
related Officer's Certificate is less than $25,000 or less than one
percent (1%) of the principal amount of the Notes Outstanding.
(v) Notwithstanding Section 2.10 or any other provisions of
this Section 11.1, the Issuer may, without compliance with the
requirements of the other provisions of this Section 11.1, (A)
collect, liquidate, sell or otherwise dispose of Receivables and
Financed Vehicles as and to the extent permitted or required by the
Basic Documents and (B) make cash payments out of the Trust Accounts
as and to the extent permitted or required by the Basic Documents.
SECTION 11.2 Form of Documents Delivered to Indenture Trustee.
(a) In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and
one or more other such Persons as to other matters, and any such Person may
certify or give an opinion as to such matters in one or several documents.
(b) Any certificate or opinion of an Authorized Officer of the Issuer
may be based, insofar as it relates to legal matters, upon a certificate or
opinion of, or representations by, counsel, unless such officer knows, or in
the exercise of reasonable care should know, that the certificate or opinion
or representations with respect to the matters upon which such officer's
certificate or opinion is based are erroneous. Any such certificate of an
Authorized Officer or opinion of counsel may be based, insofar as it relates
to factual matters, upon a certificate or opinion of, or representations by,
an officer or officers of the Servicer, the Seller, the Administrator or the
Issuer, stating that the information with respect to such factual matters is
in the possession of the Servicer, the Seller, the Administrator or the
Issuer, or in the exercise of reasonable care should know, that the
certificate or opinion or representations with respect to such matters are
erroneous.
(c) Where any Person is required to make, give or execute two or more
applications, requests, comments, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
(d) Whenever in this Indenture, in connection with any application or
certificate or report to the Indenture Trustee, it is provided that the Issuer
shall deliver any document as a condition of the granting of such application,
or as evidence of the Issuer's compliance with any term hereof, it is intended
that the truth and accuracy, at the time of the granting of such application
or at the effective date of such certificate or report (as the case may be),
of the facts and opinions stated in such document shall in such case be
conditions precedent to the right of the Issuer to have such application
granted or to the sufficiency of such certificate or report. The foregoing
shall not, however, be construed to affect the Indenture Trustee's right to
rely upon the truth and accuracy of any statement or opinion contained in any
such document as provided in Article VI.
SECTION 11.3 Acts of Noteholders. (a) Any request, demand,
authorization, direction, notice, consent, waiver or other action provided by
this Indenture to be given or taken by Noteholders may be embodied in and
evidenced by one or more instruments of substantially similar tenor signed by
such Noteholders in person or by agents 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 Indenture Trustee, and,
where it is hereby expressly required, to the Issuer. Such instrument or
instruments (and the action embodied herein and evidenced thereby) are herein
sometimes referred to as the "Act" of the Noteholders signing such instrument
or instruments. Proof of execution of any such instrument or of a writing
appointing any such agent shall be sufficient for any purpose of this
Indenture and (subject to Section 6.1) conclusive in favor of the Indenture
Trustee and the Issuer, if made in the manner provided in this Section 11.3.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved in any manner that the Indenture Trustee
deems sufficient.
(c) The ownership of Notes shall be proved by the Note Register.
(d) Any request, demand, authorization, direction, notice, consent,
waiver or other action by the Noteholder of any Notes shall bind the
Noteholder of every Note issued upon the registration thereof or in exchange
therefor or in lieu thereof, in respect of anything done, omitted or suffered
to be done by the Indenture Trustee or the Issuer in reliance thereon, whether
or not notation of such action is made upon such Note.
SECTION 11.4 Notices, etc., to Indenture Trustee, Issuer and
Rating Agencies. Any request, demand, authorization, direction, notice,
consent, waiver or Act of Noteholders or other documents provided or permitted
by this Indenture shall be in writing and if such request, demand,
authorization, direction, notice, consent, waiver or Act of Noteholders is to
be made upon, given or furnished to or filed with:
(i) the Indenture Trustee by any Noteholder, the Servicer,
the Administrator or the Issuer shall be sufficient for every purpose
hereunder if made, given, furnished or filed in writing to or with
the Indenture Trustee at its Corporate Trust office; or
(ii) the Issuer by the Indenture Trustee or by any
Noteholder shall be sufficient for every purpose hereunder if in
writing and mailed first-class, postage prepaid to the Issuer
addressed to: USAA Auto Owner Trust ______, ____ in care of ____
____________________, ___________________________________________,
with a copy to the Administrator at 10750 McDermott Freeway, San
Antonio, TX 78288, Attention: Secretary, or at any other address
previously furnished in writing to the Indenture Trustee by the Issuer
or the Administrator. The Issuer shall promptly transmit any notice
received by it from the Noteholders to the Indenture Trustee.
Notices required to be given to the Rating Agencies by the Issuer,
the Indenture Trustee or the Owner Trustee shall be in writing, personally
delivered, telecopied or mailed by certified mail, return receipt requested,
to [(i) in the case of Moody's, at the following address: Moody's Investors
Service, Inc., ABS Monitoring Department, 99 Church Street, New York, New York
10007, (ii) in case of Standard & Poor's, at the following address: Standard &
Poor's Ratings Services, 55 Water Street, 40th Floor, New York, New York
10041, Attention: Asset Backed Surveillance Department and (iii) in the case
of Fitch, at the following address: Fitch IBCA, Inc., 1 State Street Plaza,
New York, New York 10004, Attention: Asset Backed Surveillance.]
SECTION 11.5 Notices to Noteholders; Waiver. (a) Where this
Indenture provides for notice to Noteholders of any event, such notice shall
be sufficiently given (unless otherwise herein expressly provided) if in
writing and mailed, first-class, postage prepaid to each Noteholder affected
by such event, at his address as it appears on the Note Register, not later
than the latest date, and not earlier than the earliest date, prescribed for
the giving of such notice. In any case where notice to Noteholders is given by
mail, neither the failure to mail such notice nor any defect in any notice so
mailed to any particular Noteholder shall affect the sufficiency of such
notice with respect to other Noteholders, and any notice that is mailed in the
manner herein provided shall conclusively be presumed to have been duly given.
(b) Where this Indenture provides for notice in any manner, such
notice may be waived in writing by any Person entitled to receive such notice,
either before or after the event, and such waiver shall be the equivalent of
such notice. Waivers of notice by Noteholders shall be filed with the
Indenture Trustee but such filing shall not be a condition precedent to the
validity of any action taken in reliance upon such a waiver.
(c) In case, by reason of the suspension of regular mail service as a
result of a strike, work stoppage or similar activity, it shall be impractical
to mail notice of any event to Noteholders when such notice is required to be
given pursuant to any provision of this Indenture, then any manner of giving
such notice as shall be satisfactory to the Indenture Trustee shall be deemed
to be a sufficient giving of such notice.
(d) Where this Indenture provides for notice to the Rating Agencies,
failure to give such notice shall not affect any other rights or obligations
created hereunder, and shall not under any circumstance constitute a Default
or Event of Default.
SECTION 11.6 Alternate Payment and Notice Provisions.
Notwithstanding any provision of this Indenture or any of the Notes to the
contrary, the Issuer may enter into any agreement with any Noteholder
providing for a method of payment, or notice by the Indenture Trustee or any
Note Paying Agent to such Noteholder, that is different from the methods
provided for in this Indenture for such payments or notices. The Issuer shall
furnish to the Indenture Trustee a copy of each such agreement and the
Indenture Trustee shall cause payments to be made and notices to be given in
accordance with such agreements.
SECTION 11.7 Conflict with Trust Indenture Act. If any
provision hereof limits, qualifies or conflicts with another provision hereof
that is required or deemed to be included in this Indenture by any of the
provisions of the Trust Indenture Act, such required or deemed provision shall
control.
The provisions of TIA Sections 310 through 317 that impose duties on
any Person (including the provisions automatically deemed included herein
unless expressly excluded by this Indenture) are a part of and govern this
Indenture, whether or not physically contained herein.
SECTION 11.8 Effect of Headings and Table of Contents. The
Article and Section headings herein and the Table of Contents are for
convenience only and shall not affect the construction hereof.
SECTION 11.9 Successors and Assigns. All covenants and
agreements in this Indenture and the Notes by the Issuer shall bind its
successors and assigns, whether so expressed or not. All agreements of the
Indenture Trustee in this Indenture shall bind its successors, co-trustees and
agents.
SECTION 11.10 Separability. In case any provision in this
Indenture or in the Notes shall be invalid, illegal or unenforceable, the
validity, legality, and enforceability of the remaining provisions shall not
in any way be affected or impaired thereby.
SECTION 11.11 Benefits of Indenture. Nothing in this Indenture or in
the Notes, express or implied, shall give to any Person, other than the
parties hereto and their successors hereunder, and the Noteholders, and any
other party secured hereunder, and any other Person with an ownership interest
in any part of the Indenture Trust Estate, any benefit or any legal or
equitable right, remedy or claim under this Indenture.
SECTION 11.12 Legal Holidays. In any case where the date on
which any payment is due shall not be a Business Day, then (notwithstanding
any other provision of the Notes or this Indenture) payment need not be made
on such date, but may be made on the next succeeding Business Day with the
same force and effect as if made on the date on which nominally due, and no
interest shall accrue for the period from and after any such nominal date.
SECTION 11.13 Governing Law. This Indenture shall be construed
in accordance with the laws of the State of New York, without reference to its
conflict of law provisions.
SECTION 11.14 Counterparts. This Indenture may be executed in
any number of counterparts, each of which so executed shall be deemed to be an
original, but all such counterparts shall together constitute but one and the
same instrument.
SECTION 11.15 Recording of Indenture. If this Indenture is
subject to recording in any appropriate public recording offices, such
recording is to be effected by the Issuer and at its expense accompanied by an
Opinion of Counsel (which shall be counsel reasonably acceptable to the
Indenture Trustee) to the effect that such recording is necessary either for
the protection of the Noteholders or any other Person secured hereunder or for
the enforcement of any right or remedy granted to the Indenture Trustee under
this Indenture.
SECTION 11.16 Trust Obligation. No recourse may be taken,
directly or indirectly, with respect to the obligations of the Issuer, the
Owner Trustee or the Indenture Trustee on the Notes or under this Indenture or
any certificate or other writing delivered in connection herewith or
therewith, against (i) the Indenture Trustee or the Owner Trustee in their
individual capacities, (ii) any owner of a beneficial interest in the Issuer
or (iii) any partner, owner, beneficiary, agent, officer, director, employee
or agent of the Indenture Trustee or the Owner Trustee in their individual
capacities, any holder of a beneficial interest in the Issuer, the Owner
Trustee or the Indenture Trustee or of any successor or assign of the
Indenture Trustee or the Owner Trustee in their individual capacities, except
as any such Person may have expressly agreed (it being understood that the
Indenture Trustee and the Owner Trustee have no such obligations in their
individual capacities), and except that any such partner, owner or beneficiary
shall be fully liable, to the extent provided by applicable law, for any
unpaid consideration for stock, unpaid capital contribution or failure to pay
any installment or call owing to such entity. For all purposes of this
Indenture, in the performance of any duties or obligations of the Issuer
hereunder, the Owner Trustee shall be subject to, and entitled to the benefits
of, the terms and provisions of Article VI and VII of the Trust Agreement.
SECTION 11.17 No Petition. The Indenture Trustee, by entering
into this Indenture, and each Noteholder or Note Owner, by accepting a Note
or, in the case of a Note Owner, a beneficial interest in a Note, hereby
covenant and agree that they will not at any time institute against the
Issuer, or join in any institution against the Issuer of, any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings, or other
proceedings under any United States federal or State bankruptcy or similar law
in connection with any obligations relating to the Notes, this Indenture or
any of the other Basic Documents.
SECTION 11.18 Inspection. The Issuer agrees that, with
reasonable prior notice, it will permit any representative of the Indenture
Trustee, during the Issuer's normal business hours, to examine all the books
of account, records, reports and other papers of the Issuer, to make copies
and extracts therefrom, to cause such books to be audited by Independent
certified public accountants, and to discuss the Issuer's affairs, finances
and accounts with the Issuer's officers, employees, and Independent certified
public accountants, all at such reasonable times and as often as may be
reasonably requested. The Indenture Trustee shall and shall cause its
representatives to hold in confidence all such information except to the
extent disclosure may be required by law (and all reasonable applications for
confidential treatment are unavailing) and except to the extent that the
Indenture Trustee may reasonably determine that such disclosure is consistent
with its obligations hereunder.
IN WITNESS WHEREOF, the Issuer and the Indenture Trustee have caused
this Indenture to be duly executed by their respective officers, thereunto
duly authorized, all as of the day and year first above written.
USAA AUTO OWNER TRUST ______
By: ____________________, not in its individual
capacity but solely as Owner Trustee of
USAA Auto Owner Trust ______
By: _______________________________________
Name:
Title:
_____________________, not in its individual
capacity but solely as Indenture Trustee
By: ______________________________________
Name:
Title:
EXHIBIT A-1
[FORM OF CLASS A-1 NOTE]
[UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED
IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED
BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO.
OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO
ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO.,
HAS AN INTEREST HEREIN.]
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH
HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME
MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
REGISTERED $____________
No. R-[ ] CUSIP NO. ____________
USAA AUTO OWNER TRUST ______
CLASS A-1 ______% [FLOATING RATE] ASSET BACKED NOTES
USAA Auto Owner Trust ______, a business trust organized and existing
under the laws of the State of Delaware (herein referred to as the "Issuer"),
for value received, hereby promises to pay to [CEDE & CO.], or registered
assigns, the principal sum of ______________________________________ payable
on each Payment Date in an amount equal to the result obtained by multiplying
(i) a fraction the numerator of which is $_________ (the original face amount
of this Note) and the denominator of which is $_________ by (ii) the aggregate
amount, if any, payable to holders of Class A-1 Notes on such Payment Date
from the Principal Distribution Account in respect of principal on the Class
A-1 Notes pursuant to Section 3.1 of the Indenture dated as of
_________________ (as from time to time amended, supplemented or otherwise
modified and in effect, the "Indenture"), between the Issuer and
_____________________, a ___________ corporation, as Indenture Trustee (in
such capacity the "Indenture Trustee"); provided, however, that the entire
unpaid principal amount of this Note shall be due and payable on the
______________ Payment Date (the "Class A-1 Final Scheduled Payment Date").
Capitalized terms used but not defined herein are defined in Article I of the
Indenture, which also contains rules as to construction that shall be
applicable herein.
The Issuer shall pay interest on this Note [at the rate per annum
shown above] [state floating rate] on each Payment Date until the principal of
this Note is paid or made available for payment, on the principal amount of
this Note outstanding on the preceding Payment Date (after giving effect to
all payments of principal made on the preceding Payment Date), subject to
certain limitations contained in Section 3.1 of the Indenture. Interest on
this Note will accrue for each Payment Date from and including the previous
Payment Date on which interest has been paid (or, in the case of the initial
Payment Date, from the Closing Date) to but excluding such Payment Date.
Interest will be computed on the basis of actual days elapsed and a 360-day
year. Such principal of and interest on this Note shall be paid in the manner
specified on the reverse hereof.
The principal of and interest on this Note are payable in such coin
or currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the
Issuer with respect to this Note shall be applied first to interest due and
payable on this Note as provided above and then to the unpaid principal of
this Note.
Reference is made to the further provisions of this Note set forth on
the reverse hereof, which shall have the same effect as though fully set forth
on the face of this Note.
Unless the certificate of authentication hereon has been executed by
the Indenture Trustee whose name appears below by manual signature, this Note
shall not be entitled to any benefit under the Indenture referred to on the
reverse hereof, or be valid or obligatory for any purpose.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.]
IN WITNESS WHEREOF, the Issuer has caused this instrument to be
signed, manually or in facsimile, by its Authorized Officer, as of the date
set forth below.
Date: _______________
USAA AUTO OWNER TRUST ______
By: ____________________, not in its individual
capacity but solely as Owner Trustee of
USAA Auto Owner Trust ______
By: _____________________________________
Authorized Officer
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Class A-1 Notes designated above and referred to
in the within-mentioned Indenture.
Date: _________________
_____________________, not in its individual
capacity but solely as Indenture Trustee
By: _____________________________________
Authorized Officer
[REVERSE OF NOTE]
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its Class A-1 [_____%] [Floating Rate] Asset Backed Notes (the
"Class A-1 Notes") which, together with the Issuer's Class A-2 [_____%]
[Floating Rate] Asset Backed Notes (the "Class A-2 Notes") and Class A-3
[_____%] [Floating Rate] Asset Backed Notes (the "Class A-3 Notes" and,
together with the Class A-1 Notes and the Class A-2 Notes, the "Class A Notes"
or the "Notes"), are issued under the Indenture, to which Indenture and all
indentures supplemental thereto reference is hereby made for a statement of
the respective rights and obligations thereunder of the Issuer, the Indenture
Trustee and the Noteholders. The Notes are subject to all terms of the
Indenture.
The Class A-1 Notes, Class A-2 Notes and Class A-3 Notes are and will
be equally and ratably secured by the collateral pledged as security therefor
as provided in the Indenture.
Principal of the Class A-1 Notes will be payable on each Payment Date
in an amount described on the face hereof. "Payment Date" means the _____ day
of each month, or, if any such day is not a Business Day, the next succeeding
Business Day, commencing _____________.
As described on the face hereof, the entire unpaid principal amount
of this Note shall be due and payable on the Class A-1 Final Scheduled Payment
Date. Notwithstanding the foregoing, the entire unpaid principal amount of the
Notes shall be due and payable on the date on which an Event of Default shall
have occurred and be continuing and the Indenture Trustee or the Noteholders
of Notes evidencing not less than a majority of the principal amount of the
Class A Notes have declared the Notes to be immediately due and payable in the
manner provided in Section 5.2 of the Indenture. All principal payments on the
Class A-1 Notes shall be made pro rata to the Noteholders entitled thereto.
Payments of interest on this Note on each Payment Date, together with
the installment of principal, if any, to the extent not in full payment of
this Note, shall be made to the Person whose name appears as the Registered
Noteholder of the Note (or one or more Predecessor Notes) on the Note Register
as of the close of business on each Record Date either by wire transfer in
immediately available funds, to the account of such Noteholder at a bank or
other entity having appropriate facilities therefor, if such Noteholder shall
have provided to the Note Registrar appropriate written instructions at least
_________ Business Days prior to such Payment Date and such Noteholder's Notes
in the aggregate evidence a denomination of not less than $1,000,000, or, if
not, by check mailed first-class postage prepaid to such Person's address as
it appears on the Note Register on such Record Date; provided that, unless
Definitive Notes have been issued to Note Owners, with respect to Notes
registered on the Record Date in the name of the nominee of the Clearing
Agency (initially, such nominee to be [Cede & Co.]), payments will be made by
wire transfer in immediately available funds to the account designated by such
nominee. Such payments will be made without requiring that this Note be
submitted for notation of payment. Any reduction in the principal amount of
this Note (or any one or more Predecessor Notes) effected by any payments made
on any Payment Date shall be binding upon all future Noteholders of this Note
and of any Note issued upon the registration of transfer hereof or in exchange
hereof or in lieu hereof, whether or not noted hereon. If funds are expected
to be available, as provided in the Indenture, for payment in full of the then
remaining unpaid principal amount of this Note on a Payment Date, then the
Indenture Trustee, in the name of and on behalf of the Issuer, will notify the
Person who was the Registered Noteholder hereof as of the Record Date
preceding such Payment Date by notice mailed or transmitted by facsimile prior
to such Payment Date, and the amount then due and payable shall be payable
only upon presentation and surrender of this Note at the Indenture Trustee's
principal Corporate Trust Office or at the office of the Indenture Trustee's
agent appointed for such purposes located in The City of New York.
The Issuer shall pay interest on overdue installments of interest at
the Class A-1 Rate to the extent lawful.
As provided in the Indenture, the Notes may be prepaid, in whole but
not in part, in the manner and to the extent described in the Indenture and
the Sale and Servicing Agreement.
As provided in the Indenture, and subject to certain limitations set
forth therein, the transfer of this Note may be registered on the Note
Register upon surrender of this Note for registration of transfer at the
office or agency designated by the Issuer pursuant to the Indenture, duly
endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Indenture Trustee duly executed by, the Noteholder hereof
or such Noteholder's attorney duly authorized in writing, with such signature
guaranteed by an "eligible guarantor institution" meeting the requirements of
the Note Registrar, and thereupon one or more new Notes of the same Class in
authorized denominations and in the same aggregate principal amount will be
issued to the designated transferee or transferees. No service charge will be
charged for any registration of transfer or exchange of this Note, but the
transferor may be required to pay a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection with any such
registration of transfer or exchange.
Each Noteholder or Note Owner, by its acceptance of a Note or, in the
case of a Note Owner, a beneficial interest in a Note, covenants and agrees
that no recourse may be taken, directly or indirectly, with respect to the
obligations of the Issuer, the Owner Trustee or the Indenture Trustee on the
Notes or under the Indenture or any certificate or other writing delivered in
connection therewith, against (i) the Indenture Trustee or the Owner Trustee,
each in its individual capacity, (ii) any owner of a beneficial interest in
the Issuer or (iii) any partner, owner, beneficiary, agent, officer, director
or employee of the Indenture Trustee or the Owner Trustee, each in its
individual capacity, any holder of a beneficial interest in the Issuer, the
Owner Trustee or the Indenture Trustee or of any successor or assign of the
Indenture Trustee or the Owner Trustee, each in its individual capacity,
except as any such Person may have expressly agreed and except that any such
partner, owner or beneficiary shall be fully liable, to the extent provided by
applicable law, for any unpaid consideration for stock, unpaid capital
contribution for stock, unpaid capital contribution or failure to pay any
installment or call owing to such entity.
Each Noteholder or Note Owner, by acceptance of a Note or, in the
case of a Note Owner, a beneficial interest in a Note, covenants and agrees by
accepting the benefits of the Indenture that such Noteholder or Note Owner
will not at any time institute against the Seller or the Issuer, or join in
any institution against the Seller or the Issuer of, any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings under any
United States federal or State bankruptcy or similar law in connection with
any obligations relating to the Notes, the Indenture or the other Basic
Documents.
The Issuer has entered into the Indenture and this Note is issued
with the intention that, for federal, State and local income, and franchise
tax purposes, the Notes will qualify as indebtedness of the Issuer secured by
the Indenture Trust Estate. Each Noteholder, by its acceptance of a Note (and
each Note Owner by its acceptance of a beneficial interest in a Note), will be
deemed to agree to treat the Notes for federal, State and local income and
franchise tax purposes as indebtedness of the Issuer.
Prior to the due presentment for registration of transfer of this
Note, the Issuer, the Indenture Trustee and any agent of the Issuer or the
Indenture Trustee may treat the Person in whose name this Note (as of the day
of determination or as of such other date as may be specified in the
Indenture) is registered as the owner hereof for all purposes, whether or not
this Note be overdue, and none of the Issuer, the Indenture Trustee or any
such agent shall be affected by notice to the contrary.
The Indenture permits (with certain exceptions requiring the consent
of all Noteholders adversely affected) the amendment thereof by the Issuer and
the Indenture Trustee without the consent of the Noteholders provided certain
conditions are satisfied. The Indenture also contains provisions permitting
the Noteholders of Notes evidencing specified percentages of the principal
amount of the Notes Outstanding, on behalf of all Noteholders, to waive
compliance by the Issuer with certain provisions of the Indenture and certain
past defaults under the Indenture and their consequences. Any such consent or
waiver by the Noteholder of this Note (or any one or more Predecessor Notes)
shall be conclusive and binding upon such Noteholder and upon all future
Noteholders of this Note and of any Note issued upon the registration of
transfer hereof or in exchange hereof or in lieu hereof whether or not
notation of such consent or waiver is made upon this Note.
The term "Issuer", as used in this Note, includes any successor to
the Issuer under the Indenture.
The Issuer is permitted by the Indenture, under certain
circumstances, to merge or consolidate, subject to the rights of the Indenture
Trustee and the Noteholders under the Indenture.
The Notes are issuable only in registered form in denominations as
provided in the Indenture, subject to certain limitations therein set forth.
This Note and the Indenture shall be governed by, and construed in
accordance with the laws of the State of New York, without reference to its
conflicts of law provisions.
No reference herein to the Indenture, and no provision of this Note
or of the Indenture, shall alter or impair the obligation of the Issuer, which
is absolute and unconditional, to pay the principal of and interest on this
Note at the times, place and rate, and in the coin or currency herein
prescribed.
Anything herein to the contrary notwithstanding, except as expressly
provided in the Basic Documents, none of _____________________, in its
individual capacity, ____________________, in its individual capacity, any
owner of a beneficial interest in the Issuer, or any of their respective
partners, beneficiaries, agents, officers, directors, employees or successors
or assigns shall be personally liable for, nor shall recourse be had to any of
them for, the payment of principal or of interest on this Note or performance
of, or omission to perform, any of the covenants, obligations or
indemnifications contained in the Indenture. The holder of this Note, by such
holder's acceptance hereof, agrees that, except as expressly provided in the
Basic Documents, in the case of an Event of Default under the Indenture, the
Noteholder shall have no claim against any of the foregoing for any
deficiency, loss or claim therefrom; provided, however, that nothing contained
herein shall be taken to prevent recourse to, and enforcement against, the
assets of the Issuer for any and all liabilities, obligations and undertakings
contained in the Indenture or in this Note.
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of assignee:
-----------------------------------------------------------
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto:
-------------------------------------------------------------------------------
(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints ____________________________________, attorney, to transfer said
Note on the books kept for registration thereof, with full power of
substitution in the premises.
Dated: _____________________ _______________________________*/
Signature Guaranteed
_______________________________*/
---------------------------
*/ NOTICE: The signature to this assignment must correspond with the name of
the registered owner as it appears on the face of the within Note in every
particular, without alteration, enlargement or any change whatever. Such
signature must be guaranteed by an "eligible guarantor institution" meeting
the requirements of the Note Registrar.
EXHIBIT A-2
[FORM OF CLASS A-2 NOTE]
[UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED
IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED
BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO.
OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO
ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO.,
HAS AN INTEREST HEREIN.]
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH
HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME
MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
REGISTERED $_____________
No. R-[ ] CUSIP NO. ___________
USAA AUTO OWNER TRUST ______
CLASS A-2 [_____%] [FLOATING RATE] ASSET BACKED NOTES
USAA Auto Owner Trust ______, a business trust organized and existing
under the laws of the State of Delaware (herein referred to as the "Issuer"),
for value received, hereby promises to pay to [CEDE & CO.], or registered
assigns, the principal sum of _______________________________________ payable
on each Payment Date in an amount equal to the result obtained by multiplying
(i) a fraction the numerator of which is $___________ (the original face
amount of this Note) and the denominator of which is $___________ by (ii) the
aggregate amount, if any, payable to holders of Class A-2 Notes on such
Payment Date from the Principal Distribution Account in respect of principal
on the Class A-2 Notes pursuant to Section 3.1 of the Indenture dated as of
_________________ (as from time to time amended, supplemented or otherwise
modified and in effect, the "Indenture"), between the Issuer and
_____________________, a New York corporation, as Indenture Trustee (in such
capacity the "Indenture Trustee"); provided, however, that the entire unpaid
principal amount of this Note shall be due and payable on the _________
Payment Date (the "Class A-2 Final Scheduled Payment Date"). Except in the
case of an Event of Default, no payments of principal of the Class A-2 Notes
will be made until the Class A-1 Notes have been paid in full. Capitalized
terms used but not defined herein are defined in Article I of the Indenture,
which also contains rules as to construction that shall be applicable herein.
The Issuer shall pay interest on this Note [at the rate per annum
shown above] [state floating rate] on each Payment Date until the principal of
this Note is paid or made available for payment, on the principal amount of
this Note outstanding on the preceding Payment Date (after giving effect to
all payments of principal made on the preceding Payment Date), subject to
certain limitations contained in Section 3.1 of the Indenture. Interest on
this Note will accrue for each Payment Date from and including the previous
Payment Date on which interest has been paid (or, in the case of the initial
Payment Date, from the Closing Date) to but excluding such Payment Date.
Interest will be computed on the basis of actual days elapsed and a 360-day
year. Such principal of and interest on this Note shall be paid in the manner
specified on the reverse hereof.
The principal of and interest on this Note are payable in such coin
or currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the
Issuer with respect to this Note shall be applied first to interest due and
payable on this Note as provided above and then to the unpaid principal of
this Note.
Reference is made to the further provisions of this Note set forth on
the reverse hereof, which shall have the same effect as though fully set forth
on the face of this Note.
Unless the certificate of authentication hereon has been executed by
the Indenture Trustee whose name appears below by manual signature, this Note
shall not be entitled to any benefit under the Indenture referred to on the
reverse hereof, or be valid or obligatory for any purpose.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.]
IN WITNESS WHEREOF, the Issuer has caused this instrument to be
signed, manually or in facsimile, by its Authorized Officer, as of the date
set forth below.
Date: __________________
USAA AUTO OWNER TRUST ______
By: ____________________, not in its individual
capacity but solely as Owner Trustee of
USAA Auto Owner Trust ______
By: ____________________________________
Authorized Officer
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Class A-2 Notes designated above and referred to
in the within-mentioned Indenture.
Date: __________________
_____________________, not in its individual
capacity but solely as Indenture Trustee
By: __________________________________
Authorized Officer
[REVERSE OF NOTE]
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its Class A-2 [_____%] [Floating Rate] Asset Backed Notes (the
"Class A-2 Notes") which, together with the Issuer's Class A-1 [_____%]
[Floating Rate] Asset Backed Notes (the "Class A-1 Notes") and Class A-3
[_____%] [Floating Rate] Asset Backed Notes (the "Class A-3 Notes" and,
together with the Class A-1 Notes and the Class A-2 Notes, the "Class A Notes"
or the "Notes"), are issued under the Indenture, to which Indenture and all
indentures supplemental thereto reference is hereby made for a statement of
the respective rights and obligations thereunder of the Issuer, the Indenture
Trustee and the Noteholders. The Notes are subject to all terms of the
Indenture.
The Class A-1 Notes, Class A-2 Notes and Class A-3 Notes are and will
be equally and ratably secured by the collateral pledged as security therefor
as provided in the Indenture.
Principal of the Class A-2 Notes will be payable on each Payment Date
in an amount described on the face hereof. "Payment Date" means the _____ day
of each month, or, if any such day is not a Business Day, the next succeeding
Business Day, commencing ________________.
As described on the face hereof, the entire unpaid principal amount
of this Note shall be due and payable on the Class A-2 Final Scheduled Payment
Date. Notwithstanding the foregoing, the entire unpaid principal amount of the
Notes shall be due and payable on the date on which an Event of Default shall
have occurred and be continuing and the Indenture Trustee or the Noteholders
of Notes evidencing not less than a majority of the principal amount of the
Class A Notes have declared the Notes to be immediately due and payable in the
manner provided in Section 5.2 of the Indenture. All principal payments on the
Class A-2 Notes shall be made pro rata to the Noteholders entitled thereto.
Payments of interest on this Note on each Payment Date, together with
the installment of principal, if any, to the extent not in full payment of
this Note, shall be made to the Person whose name appears as the Registered
Noteholder of the Note (or one or more Predecessor Notes) on the Note Register
as of the close of business on each Record Date either by wire transfer in
immediately available funds, to the account of such Noteholder at a bank or
other entity having appropriate facilities therefor, if such Noteholder shall
have provided to the Note Registrar appropriate written instructions at least
________ Business Days prior to such Payment Date and such Noteholder's Notes
in the aggregate evidence a denomination of not less than $1,000,000, or, if
not, by check mailed first-class postage prepaid to such Person's address as
it appears on the Note Register on such Record Date; provided that, unless
Definitive Notes have been issued to Note Owners, with respect to Notes
registered on the Record Date in the name of the nominee of the Clearing
Agency (initially, such nominee to be [Cede & Co.]), payments will be made by
wire transfer in immediately available funds to the account designated by such
nominee. Such payments will be made without requiring that this Note be
submitted for notation of payment. Any reduction in the principal amount of
this Note (or any one or more Predecessor Notes) effected by any payments made
on any Payment Date shall be binding upon all future Noteholders of this Note
and of any Note issued upon the registration of transfer hereof or in exchange
hereof or in lieu hereof, whether or not noted hereon. If funds are expected
to be available, as provided in the Indenture, for payment in full of the then
remaining unpaid principal amount of this Note on a Payment Date, then the
Indenture Trustee, in the name of and on behalf of the Issuer, will notify the
Person who was the Registered Noteholder hereof as of the Record Date
preceding such Payment Date by notice mailed or transmitted by facsimile prior
to such Payment Date, and the amount then due and payable shall be payable
only upon presentation and surrender of this Note at the Indenture Trustee's
principal Corporate Trust Office or at the office of the Indenture Trustee's
agent appointed for such purposes located in The City of New York.
The Issuer shall pay interest on overdue installments of interest at
the Class A-2 Rate to the extent lawful.
As provided in the Indenture, the Notes may be redeemed, in whole but
not in part, in the manner and to the extent described in the Indenture and
the Sale and Servicing Agreement.
As provided in the Indenture, and subject to certain limitations set
forth therein, the transfer of this Note may be registered on the Note
Register upon surrender of this Note for registration of transfer at the
office or agency designated by the Issuer pursuant to the Indenture, duly
endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Indenture Trustee duly executed by, the Noteholder hereof
or such Noteholder's attorney duly authorized in writing, with such signature
guaranteed by an "eligible guarantor institution" meeting the requirements of
the Note Registrar, and thereupon one or more new Notes of the same Class in
authorized denominations and in the same aggregate principal amount will be
issued to the designated transferee or transferees. No service charge will be
charged for any registration of transfer or exchange of this Note, but the
transferor may be required to pay a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection with any such
registration of transfer or exchange.
Each Noteholder or Note Owner, by its acceptance of a Note or, in the
case of a Note Owner, a beneficial interest in a Note, covenants and agrees
that no recourse may be taken, directly or indirectly, with respect to the
obligations of the Issuer, the Owner Trustee or the Indenture Trustee on the
Notes or under the Indenture or any certificate or other writing delivered in
connection therewith, against (i) the Indenture Trustee or the Owner Trustee,
each in its individual capacity, (ii) any owner of a beneficial interest in
the Issuer or (iii) any partner, owner, beneficiary, agent, officer, director
or employee of the Indenture Trustee or the Owner Trustee, each in its
individual capacity, any holder of a beneficial interest in the Issuer, the
Owner Trustee or the Indenture Trustee or of any successor or assign of the
Indenture Trustee or the Owner Trustee, each in its individual capacity,
except as any such Person may have expressly agreed and except that any such
partner, owner or beneficiary shall be fully liable, to the extent provided by
applicable law, for any unpaid consideration for stock, unpaid capital
contribution for stock, unpaid capital contribution or failure to pay any
installment or call owing to such entity.
Each Noteholder or Note Owner, by acceptance of a Note or, in the
case of a Note Owner, a beneficial interest in a Note, covenants and agrees by
accepting the benefits of the Indenture that such Noteholder or Note Owner
will not at any time institute against the Seller or the Issuer, or join in
any institution against the Seller or the Issuer of, any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings under any
United States federal or State bankruptcy or similar law in connection with
any obligations relating to the Notes, the Indenture or the other Basic
Documents.
The Issuer has entered into the Indenture and this Note is issued
with the intention that, for federal, State and local income, and franchise
tax purposes, the Notes will qualify as indebtedness of the Issuer secured by
the Indenture Trust Estate. Each Noteholder, by its acceptance of a Note (and
each Note Owner by its acceptance of a beneficial interest in a Note), will be
deemed to agree to treat the Notes for federal, State and local income and
franchise tax purposes as indebtedness of the Issuer.
Prior to the due presentment for registration of transfer of this
Note, the Issuer, the Indenture Trustee and any agent of the Issuer or the
Indenture Trustee may treat the Person in whose name this Note (as of the day
of determination or as of such other date as may be specified in the
Indenture) is registered as the owner hereof for all purposes, whether or not
this Note be overdue, and none of the Issuer, the Indenture Trustee or any
such agent shall be affected by notice to the contrary.
The Indenture permits (with certain exceptions requiring the consent
of all Noteholders adversely affected) the amendment thereof by the Issuer and
the Indenture Trustee without the consent of the Noteholders provided certain
conditions are satisfied. The Indenture also contains provisions permitting
the Noteholders of Notes evidencing specified percentages of the principal
amount of the Notes Outstanding, on behalf of all Noteholders, to waive
compliance by the Issuer with certain provisions of the Indenture and certain
past defaults under the Indenture and their consequences. Any such consent or
waiver by the Noteholder of this Note (or any one or more Predecessor Notes)
shall be conclusive and binding upon such Noteholder and upon all future
Noteholders of this Note and of any Note issued upon the registration of
transfer hereof or in exchange hereof or in lieu hereof whether or not
notation of such consent or waiver is made upon this Note.
The term "Issuer", as used in this Note, includes any successor to
the Issuer under the Indenture.
The Issuer is permitted by the Indenture, under certain
circumstances, to merge or consolidate, subject to the rights of the Indenture
Trustee and the Noteholders under the Indenture.
The Notes are issuable only in registered form in denominations as
provided in the Indenture, subject to certain limitations therein set forth.
This Note and the Indenture shall be governed by, and construed in
accordance with the laws of the State of New York, without reference to its
conflicts of law provisions.
No reference herein to the Indenture, and no provision of this Note
or of the Indenture, shall alter or impair the obligation of the Issuer, which
is absolute and unconditional, to pay the principal of and interest on this
Note at the times, place and rate, and in the coin or currency herein
prescribed.
Anything herein to the contrary notwithstanding, except as expressly
provided in the Basic Documents, none of _____________________, in its
individual capacity, ____________________, in its individual capacity, any
owner of a beneficial interest in the Issuer, or any of their respective
partners, beneficiaries, agents, officers, directors, employees or successors
or assigns shall be personally liable for, nor shall recourse be had to any of
them for, the payment of principal or of interest on this Note or performance
of, or omission to perform, any of the covenants, obligations or
indemnifications contained in the Indenture. The holder of this Note, by such
holder's acceptance hereof, agrees that, except as expressly provided in the
Basic Documents, in the case of an Event of Default under the Indenture, the
Noteholder shall have no claim against any of the foregoing for any
deficiency, loss or claim therefrom; provided, however, that nothing contained
herein shall be taken to prevent recourse to, and enforcement against, the
assets of the Issuer for any and all liabilities, obligations and undertakings
contained in the Indenture or in this Note.
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of assignee:
-----------------------------------------------------------
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto:
-------------------------------------------------------------------------------
(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints ________________________________, attorney, to transfer said Note
on the books kept for registration thereof, with full power of substitution in
the premises.
Dated: _____________________ _______________________________*/
Signature Guaranteed
_______________________________*/
______________________
*/ NOTICE: The signature to this assignment must correspond with the name of
the registered owner as it appears on the face of the within Note in every
particular, without alteration, enlargement or any change whatever. Such
signature must be guaranteed by an "eligible guarantor institution" meeting
the requirements of the Note Registrar.
EXHIBIT A-3
[FORM OF CLASS A-3 NOTE]
[UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED
IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED
BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO.
OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO
ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO.,
HAS AN INTEREST HEREIN.]
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH
HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME
MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
REGISTERED $_____________
No. R-[ ] CUSIP NO. _________
USAA AUTO OWNER TRUST ______
CLASS A-3 [____%] [FLOATING RATE] ASSET BACKED NOTES
USAA Auto Owner Trust ______, a business trust organized and existing
under the laws of the State of Delaware (herein referred to as the "Issuer"),
for value received, hereby promises to pay to [CEDE & CO.], or registered
assigns, the principal sum of
__________________________________________________ payable on each Payment
Date in an amount equal to the result obtained by multiplying (i) a fraction
the numerator of which is $_____________ (the original face amount of this
Note) and the denominator of which is $_____________ by (ii) the aggregate
amount, if any, payable to holders of Class A-3 Notes on such Payment Date
from the Principal Distribution Account in respect of principal on the Class
A-3 Notes pursuant to Section 3.1 of the Indenture dated as of
_________________ (as from time to time amended, supplemented or otherwise
modified and in effect, the "Indenture"), between the Issuer and
_____________________, a New York corporation, as Indenture Trustee (in such
capacity the "Indenture Trustee"); provided, however, that the entire unpaid
principal amount of this Note shall be due and payable on the __________
Payment Date (the "Class A-3 Final Scheduled Payment Date"). Except in the
case of an Event of Default, no payments of principal of the Class A-3 Notes
will be made until the Class A-1 Notes and Class A-2 Notes have been paid in
full. Capitalized terms used but not defined herein are defined in Article I
of the Indenture, which also contains rules as to construction that shall be
applicable herein.
The Issuer shall pay interest on this Note [at the rate per annum
shown above] [state floating rate] on each Payment Date until the principal of
this Note is paid or made available for payment, on the principal amount of
this Note outstanding on the preceding Payment Date (after giving effect to
all payments of principal made on the preceding Payment Date), subject to
certain limitations contained in Section 3.1 of the Indenture. Interest on
this Note will accrue for each Payment Date from and including the fifteenth
day of the calendar month immediately preceding such Payment Date (or, in the
case of the initial Payment Date, from the Closing Date) to but excluding the
fifteenth day of the following calendar month. Interest will be computed on
the basis of a 360-day year of twelve 30-day months. Such principal of and
interest on this Note shall be paid in the manner specified on the reverse
hereof.
The principal of and interest on this Note are payable in such coin
or currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the
Issuer with respect to this Note shall be applied first to interest due and
payable on this Note as provided above and then to the unpaid principal of
this Note.
Reference is made to the further provisions of this Note set forth on
the reverse hereof, which shall have the same effect as though fully set forth
on the face of this Note.
Unless the certificate of authentication hereon has been executed by
the Indenture Trustee whose name appears below by manual signature, this Note
shall not be entitled to any benefit under the Indenture referred to on the
reverse hereof, or be valid or obligatory for any purpose.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.]
IN WITNESS WHEREOF, the Issuer has caused this instrument to be
signed, manually or in facsimile, by its Authorized Officer, as of the date
set forth below.
Date: __________________
USAA AUTO OWNER TRUST ______
By: ____________________, not in its
individual capacity but solely as
Owner Trustee of USAA Auto
Owner Trust ______
By: _______________________________
Authorized Officer
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Class A-3 Notes designated above and referred to
in the within-mentioned Indenture.
Date: __________________
_____________________, not in its
individual capacity but solely as
Indenture Trustee
By: _______________________________
Authorized Officer
[REVERSE OF NOTE]
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its Class A-3 [_____%] [Floating Rate] Asset Backed Notes (the
"Class A-3 Notes") which, together with the Issuer's Class A-2 [_____%]
[Floating Rate] Asset Backed Notes (the "Class A-2 Notes") and Class A-1
[_____%] [Floating Rate] Asset Backed Notes (the "Class A-1 Notes" and,
together with the Class A-2 Notes and the Class A-3 Notes, the "Class A Notes"
or the "Notes"), are issued under the Indenture, to which Indenture and all
indentures supplemental thereto reference is hereby made for a statement of
the respective rights and obligations thereunder of the Issuer, the Indenture
Trustee and the Noteholders. The Notes are subject to all terms of the
Indenture.
The Class A-1 Notes, Class A-2 Notes and Class A-3 Notes are and will
be equally and ratably secured by the collateral pledged as security therefor
as provided in the Indenture.
Principal of the Class A-3 Notes will be payable on each Payment Date
in an amount described on the face hereof. "Payment Date" means the _____ day
of each month, or, if any such day is not a Business Day, the next succeeding
Business Day, commencing ________________.
As described on the face hereof, the entire unpaid principal amount
of this Note shall be due and payable on the Class A-3 Final Scheduled Payment
Date. Notwithstanding the foregoing, the entire unpaid principal amount of the
Notes shall be due and payable on the date on which an Event of Default shall
have occurred and be continuing and the Indenture Trustee or the Noteholders
of Notes evidencing not less than a majority of the principal amount of the
Class A Notes have declared the Notes to be immediately due and payable in the
manner provided in Section 5.2 of the Indenture. All principal payments on the
Class A-3 Notes shall be made pro rata to the Noteholders entitled thereto.
Payments of interest on this Note on each Payment Date, together with
the installment of principal, if any, to the extent not in full payment of
this Note, shall be made to the Person whose name appears as the Registered
Noteholder of the Note (or one or more Predecessor Notes) on the Note Register
as of the close of business on each Record Date either by wire transfer in
immediately available funds, to the account of such Noteholder at a bank or
other entity having appropriate facilities therefor, if such Noteholder shall
have provided to the Note Registrar appropriate written instructions at least
________ Business Days prior to such Payment Date and such Noteholder's Notes
in the aggregate evidence a denomination of not less than $1,000,000, or, if
not, by check mailed first-class postage prepaid to such Person's address as
it appears on the Note Register on such Record Date; provided that, unless
Definitive Notes have been issued to Note Owners, with respect to Notes
registered on the Record Date in the name of the nominee of the Clearing
Agency (initially, such nominee to be [Cede & Co.]), payments will be made by
wire transfer in immediately available funds to the account designated by such
nominee. Such payments will be made without requiring that this Note be
submitted for notation of payment. Any reduction in the principal amount of
this Note (or any one or more Predecessor Notes) effected by any payments made
on any Payment Date shall be binding upon all future Noteholders of this Note
and of any Note issued upon the registration of transfer hereof or in exchange
hereof or in lieu hereof, whether or not noted hereon. If funds are expected
to be available, as provided in the Indenture, for payment in full of the then
remaining unpaid principal amount of this Note on a Payment Date, then the
Indenture Trustee, in the name of and on behalf of the Issuer, will notify the
Person who was the Registered Noteholder hereof as of the Record Date
preceding such Payment Date by notice mailed or transmitted by facsimile prior
to such Payment Date, and the amount then due and payable shall be payable
only upon presentation and surrender of this Note at the Indenture Trustee's
principal Corporate Trust Office or at the office of the Indenture Trustee's
agent appointed for such purposes located in The City of New York.
The Issuer shall pay interest on overdue installments of interest at
the Class A-3 Rate to the extent lawful.
As provided in the Indenture, the Notes may be prepaid, in whole but
not in part, in the manner and to the extent described in the Indenture and
the Sale and Servicing Agreement.
The transfer of this Note is subject to the restrictions on transfer
specified on the face hereof and to the other limitations set forth in the
Indenture. Subject to the satisfaction of such restrictions and limitations,
the transfer of this Note may be registered on the Note Register upon
surrender of this Note for registration of transfer at the office or agency
designated by the Issuer pursuant to the Indenture, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Indenture Trustee duly executed by, the Noteholder hereof or such Noteholder's
attorney duly authorized in writing, with such signature guaranteed by an
"eligible guarantor institution" meeting the requirements of the Note
Registrar, and thereupon one or more new Notes of the same Class in authorized
denominations and in the same aggregate principal amount will be issued to the
designated transferee or transferees. No service charge will be charged for
any registration of transfer or exchange of this Note, but the transferor may
be required to pay a sum sufficient to cover any tax or other governmental
charge that may be imposed in connection with any such registration of
transfer or exchange.
Each Noteholder or Note Owner, by its acceptance of a Note or, in the
case of a Note Owner, a beneficial interest in a Note, covenants and agrees
that no recourse may be taken, directly or indirectly, with respect to the
obligations of the Issuer, the Owner Trustee or the Indenture Trustee on the
Notes or under the Indenture or any certificate or other writing delivered in
connection therewith, against (i) the Indenture Trustee or the Owner Trustee,
each in its individual capacity, (ii) any owner of a beneficial interest in
the Issuer or (iii) any partner, owner, beneficiary, agent, officer, director
or employee of the Indenture Trustee or the Owner Trustee, each in its
individual capacity, any holder of a beneficial interest in the Issuer, the
Owner Trustee or the Indenture Trustee or of any successor or assign of the
Indenture Trustee or the Owner Trustee, each in its individual capacity,
except as any such Person may have expressly agreed and except that any such
partner, owner or beneficiary shall be fully liable, to the extent provided by
applicable law, for any unpaid consideration for stock, unpaid capital
contribution for stock, unpaid capital contribution or failure to pay any
installment or call owing to such entity.
Each Noteholder or Note Owner, by acceptance of a Note or, in the
case of a Note Owner, a beneficial interest in a Note, covenants and agrees by
accepting the benefits of the Indenture that such Noteholder or Note Owner
will not at any time institute against the Seller or the Issuer, or join in
any institution against the Seller or the Issuer of, any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings under any
United States federal or State bankruptcy or similar law in connection with
any obligations relating to the Notes, the Indenture or the other Basic
Documents.
The Issuer has entered into the Indenture and this Note is issued
with the intention that, for federal, State and local income, and franchise
tax purposes, the Notes will qualify as indebtedness of the Issuer secured by
the Indenture Trust Estate. Each Noteholder, by its acceptance of a Note (and
each Note Owner by its acceptance of a beneficial interest in a Note), will be
deemed to agree to treat the Notes for federal, State and local income and
franchise tax purposes as indebtedness of the Issuer.
Prior to the due presentment for registration of transfer of this
Note, the Issuer, the Indenture Trustee and any agent of the Issuer or the
Indenture Trustee may treat the Person in whose name this Note (as of the day
of determination or as of such other date as may be specified in the
Indenture) is registered as the owner hereof for all purposes, whether or not
this Note be overdue, and none of the Issuer, the Indenture Trustee or any
such agent shall be affected by notice to the contrary.
The Indenture permits (with certain exceptions requiring the consent
of all Noteholders adversely affected) the amendment thereof by the Issuer and
the Indenture Trustee without the consent of the Noteholders provided certain
conditions are satisfied. The Indenture also contains provisions permitting
the Noteholders of Notes evidencing specified percentages of the principal
amount of the Notes Outstanding, on behalf of all Noteholders, to waive
compliance by the Issuer with certain provisions of the Indenture and certain
past defaults under the Indenture and their consequences. Any such consent or
waiver by the Noteholder of this Note (or any one or more Predecessor Notes)
shall be conclusive and binding upon such Noteholder and upon all future
Noteholders of this Note and of any Note issued upon the registration of
transfer hereof or in exchange hereof or in lieu hereof whether or not
notation of such consent or waiver is made upon this Note.
The term "Issuer", as used in this Note, includes any successor to
the Issuer under the Indenture.
The Issuer is permitted by the Indenture, under certain
circumstances, to merge or consolidate, subject to the rights of the Indenture
Trustee and the Noteholders under the Indenture.
The Notes are issuable only in registered form in denominations as
provided in the Indenture, subject to certain limitations therein set forth.
This Note and the Indenture shall be governed by, and construed in
accordance with the laws of the State of New York, without reference to its
conflicts of law provisions.
No reference herein to the Indenture, and no provision of this Note
or of the Indenture, shall alter or impair the obligation of the Issuer, which
is absolute and unconditional, to pay the principal of and interest on this
Note at the times, place and rate, and in the coin or currency herein
prescribed.
Anything herein to the contrary notwithstanding, except as expressly
provided in the Basic Documents, none of _____________________, in its
individual capacity, ____________________, in its individual capacity, any
owner of a beneficial interest in the Issuer, or any of their respective
partners, beneficiaries, agents, officers, directors, employees or successors
or assigns shall be personally liable for, nor shall recourse be had to any of
them for, the payment of principal or of interest on this Note or performance
of, or omission to perform, any of the covenants, obligations or
indemnifications contained in the Indenture. The holder of this Note, by such
holder's acceptance hereof, agrees that, except as expressly provided in the
Basic Documents, in the case of an Event of Default under the Indenture, the
Noteholder shall have no claim against any of the foregoing for any
deficiency, loss or claim therefrom; provided, however, that nothing contained
herein shall be taken to prevent recourse to, and enforcement against, the
assets of the Issuer for any and all liabilities, obligations and undertakings
contained in the Indenture or in this Note.
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of assignee:
----------------------------------------------------------
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto:
-------------------------------------------------------------------------------
(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints ________________________________, attorney, to transfer said Note
on the books kept for registration thereof, with full power of substitution in
the premises.
Dated: _____________________ _______________________________*/
Signature Guaranteed
_______________________________*/
---------------------------
*/ NOTICE: The signature to this assignment must correspond with the name of
the registered owner as it appears on the face of the within Note in every
particular, without alteration, enlargement or any change whatever. Such
signature must be guaranteed by an "eligible guarantor institution" meeting
the requirements of the Note Registrar.
SCHEDULE A
Schedule of Receivables
APPENDIX A
Definitions and Usage
<PAGE>
Exhibit 4.3
============================================================================
AMENDED AND RESTATED
TRUST AGREEMENT
between
USAA FEDERAL SAVINGS BANK
as Depositor
and
-------------------------------
as Owner Trustee
Dated as of _________________
============================================================================
Table of Contents
Page
ARTICLE I
DEFINITIONS AND USAGE
ARTICLE II
ORGANIZATION OF THE TRUST
<TABLE>
<CAPTION>
<S> <C> <C>
SECTION 2.1. Name........................................................................................1
SECTION 2.2. Offices.....................................................................................1
SECTION 2.3. Purposes and Powers.........................................................................1
SECTION 2.4. Appointment of Owner Trustee................................................................2
SECTION 2.5. Capital Contribution of Owner Trust Estate..................................................2
SECTION 2.6. Declaration of Trust........................................................................3
SECTION 2.7. Liability of the Depositor and the Certificateholders. ....................................3
SECTION 2.8. Title to Trust Property.....................................................................3
SECTION 2.9. Situs of Trust..............................................................................3
SECTION 2.10. Representations and Warranties of the Depositor.............................................3
SECTION 2.11. Federal Income Tax Matters..................................................................4
ARTICLE III
TRUST CERTIFICATES AND TRANSFER OF INTERESTS
SECTION 3.1. Initial Beneficial Ownership................................................................5
SECTION 3.2. The Certificates............................................................................5
SECTION 3.3. Authentication of Certificates..............................................................6
SECTION 3.4. Registration of Certificates; Transfer and Exchange of Certificates.........................6
SECTION 3.5. Mutilated, Destroyed, Lost or Stolen Certificates...........................................8
SECTION 3.6. Persons Deemed Owners of Certificates.......................................................8
SECTION 3.7. Access to List of Certificateholders' Names and Addresses...................................9
SECTION 3.8. Maintenance of Office or Agency.............................................................9
SECTION 3.9. Appointment of Certificate Paying Agent.....................................................9
SECTION 3.10. Certain Rights of Depositor................................................................10
SECTION 3.11. Book-Entry Certificates....................................................................10
SECTION 3.12. Notices to Clearing Agency.................................................................11
SECTION 3.13. Definitive Certificates....................................................................11
SECTION 3.14. Authenticating Agents......................................................................12
ARTICLE IV
ACTIONS BY OWNER TRUSTEE
SECTION 4.1. Prior Notice to Certificateholders with Respect to Certain Matters.........................12
SECTION 4.2. Action by Certificateholders with Respect to Certain Matters...............................13
SECTION 4.3. Action by Certificateholders with Respect to Bankruptcy....................................13
SECTION 4.4. Restrictions on Certificateholders' Power..................................................13
SECTION 4.5. Majority Control...........................................................................14
ARTICLE V
APPLICATION OF TRUST FUNDS; CERTAIN DUTIES
SECTION 5.1. Establishment of Certificate Distribution Account..........................................14
SECTION 5.2. Application of Trust Funds.................................................................14
SECTION 5.3. Method of Payment..........................................................................15
SECTION 5.4. No Segregation of Monies; No Interest......................................................16
SECTION 5.5. Accounting and Reports to Noteholders, Certificateholders, Internal Revenue
Service and Others.........................................................................16
SECTION 5.6. Signature on Returns; Tax Matters Partner..................................................16
ARTICLE VI
AUTHORITY AND DUTIES OF OWNER TRUSTEE
SECTION 6.1. General Authority..........................................................................16
SECTION 6.2. General Duties.............................................................................17
SECTION 6.3. Action upon Instruction....................................................................17
SECTION 6.4. No Duties Except as Specified in this Agreement or in Instructions.........................18
SECTION 6.5. No Action Except Under Specified Documents or Instructions.................................18
SECTION 6.6. Restrictions...............................................................................18
SECTION 6.7. Acceptance of Trusts and Duties............................................................19
SECTION 6.8. Furnishing of Documents....................................................................20
SECTION 6.9. Representations and Warranties.............................................................20
SECTION 6.10. Reliance; Advice of Counsel................................................................21
SECTION 6.11. Not Acting in Individual Capacity..........................................................21
SECTION 6.12. Owner Trustee Not Liable for Certificates or Receivables...................................21
SECTION 6.13. Owner Trustee May Own Certificates and Notes...............................................22
ARTICLE VII
COMPENSATION AND INDEMNITY OF OWNER TRUSTEE
SECTION 7.1. Owner Trustee's Fees and Expenses..........................................................22
SECTION 7.2. Indemnification. ..........................................................................22
SECTION 7.3. Payments to Owner Trustee..................................................................23
ARTICLE VIII
TERMINATION
SECTION 8.1. Termination of Agreement...................................................................23
SECTION 8.2. Prepayment of Certificates.................................................................24
ARTICLE IX
SUCCESSOR OWNER TRUSTEES AND ADDITIONAL OWNER TRUSTEES
SECTION 9.1. Eligibility Requirements for Owner Trustee.................................................25
SECTION 9.2. Resignation or Removal of Owner Trustee....................................................25
SECTION 9.3. Successor Owner Trustee....................................................................26
SECTION 9.4. Merger or Consolidation of Owner Trustee...................................................27
SECTION 9.5. Appointment of Co-Trustee or Separate Trustee..............................................27
SECTION 9.6. Compliance with Business Trust Statute.....................................................28
ARTICLE X
MISCELLANEOUS
SECTION 10.1. Supplements and Amendments.................................................................29
SECTION 10.2. No Legal Title to Owner Trust Estate in Certificateholders.................................30
SECTION 10.3. Limitation on Rights of Others.............................................................30
SECTION 10.4. Notices....................................................................................30
SECTION 10.5. Severability...............................................................................31
SECTION 10.6. Separate Counterparts......................................................................31
SECTION 10.7. Successors and Assigns.....................................................................31
SECTION 10.8. No Petition................................................................................31
SECTION 10.9. No Recourse................................................................................31
SECTION 10.10. Headings...................................................................................31
SECTION 10.11. Governing Law..............................................................................32
SECTION 10.12. Sale and Servicing Agreement Obligations...................................................32
EXHIBIT A FORM OF CLASS B CERTIFICATE...............................................................A-1
EXHIBIT B FORM OF CERTIFICATE OF TRUST..............................................................B-1
APPENDIX A Definitions and Usage....................................................................AA-1
</TABLE>
AMENDED AND RESTATED TRUST AGREEMENT, dated as of _________________
(as from time to time amended, supplemented or otherwise modified and in
effect, this "Agreement"), among USAA FEDERAL SAVINGS BANK, a federally
chartered savings association, as Depositor, having its principal executive
office at 10750 McDermott Freeway, San Antonio, TX 78288; and
______________________, a __________________ (the "Bank"), not in its
individual capacity but solely as trustee under this Agreement (in such
capacity, the "Owner Trustee"), having its principal corporate trust office at
______________________ __________________________ for the purpose of
establishing the USAA Auto Owner Trust __________.
WHEREAS, the parties hereto intend to amend and restate that certain
Trust Agreement, dated as of _________________, between the Depositor and the
Owner Trustee, on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the receipt and sufficiency of which are hereby
acknowledged, the Depositor and the Owner Trustee hereby agree as follows:
ARTICLE I
DEFINITIONS AND USAGE
Except as otherwise specified herein or as the context may otherwise
require, capitalized terms used but not otherwise defined herein are defined
in Appendix A hereto, which also contains rules as to usage that shall be
applicable herein.
ARTICLE II
ORGANIZATION OF THE TRUST
SECTION 2.1 Name. The Trust created hereby shall be known as "USAA
Auto Owner Trust __________", in which name the Owner Trustee may conduct the
business of the Trust, make and execute contracts and other instruments on
behalf of the Trust and sue and be sued on behalf of the Trust.
SECTION 2.2. Offices. The office of the Trust shall be in care of the
Owner Trustee at the Corporate Trust Office or at such other address in the
State of Delaware as the Owner Trustee may designate by written notice to the
Certificateholders and the Depositor.
SECTION 2.3. Purposes and Powers. (a) The purpose of the Trust is,
and the Trust shall have the power and _______________________________________
authority, to engage in the following activities:
(i) to acquire, hold and manage the Trust Property;
(ii) to issue the Notes pursuant to the Indenture, and the
Certificates pursuant to this Agreement, and to sell the Notes and
the Certificates upon the written order of the Depositor;
(iii) in exchange for the Notes and the Certificates, to acquire
the Receivables and funds in the amount of the Reserve Account
Initial Deposit, to pay the organizational, start-up and
transactional expenses of the Trust, and to pay the balance to the
Seller pursuant to the Sale and Servicing Agreement;
(iv) to pay interest on and principal of the Notes and
distributions on the Certificates;
(v) to Grant the Owner Trust Estate (other than the Certificate
Distribution Account and the proceeds thereof) to the Indenture
Trustee pursuant to the Indenture;
(vi) to enter into and perform its obligations under the Basic
Documents to which it is to be a party;
(vii) to engage in those activities, including entering into
agreements, that are necessary, suitable or convenient to accomplish
the foregoing or are incidental thereto or connected therewith; and
(viii) subject to compliance with the Basic Documents, to engage
in such other activities as may be required in connection with
conservation of the Owner Trust Estate and the making of
distributions to the Noteholders and the Certificateholders.
The Trust is hereby authorized to engage in the foregoing activities.
The Trust shall not engage in any activity other than in connection with the
foregoing or other than as required or authorized by the terms of this
Agreement or the other Basic Documents.
SECTION 2.4. Appointment of Owner Trustee. The Depositor hereby
appoints the Owner Trustee as trustee of the Trust effective as of the date
hereof, to have all the rights, powers and duties set forth herein.
SECTION 2.5. Capital Contribution of Owner Trust Estate. As of
_________________, the Depositor sold, assigned, transferred, conveyed and set
over to the Owner Trustee the sum of $1. The Owner Trustee hereby acknowledges
receipt in trust from the Depositor, as of such date, of the foregoing
contribution, which shall constitute the initial Owner Trust Estate and shall
be deposited in the Certificate Distribution Account. The Depositor shall pay
the organizational expenses of the Trust as they may arise or shall, upon the
request of the Owner Trustee, promptly reimburse the Owner Trustee for any
such expenses paid by the Owner Trustee. On the Closing Date, the Depositor
shall convey to the Trust the Trust Property and the Reserve Initial Deposit
and the Owner Trustee shall cause the delivery to or upon the order of the
Depositor the Notes and the Certificates.
SECTION 2.6. Declaration of Trust. The Owner Trustee hereby declares
that it will hold the Owner Trust Estate in trust upon and subject to the
conditions set forth herein for the use and benefit of the Certificateholders,
subject to the obligations of the Trust under the Basic Documents. It is the
intention of the parties hereto that (i) the Trust constitute a [business
trust under the Business Trust Statute] [a common law trust under Delaware
law] and that this Agreement constitute the governing instrument of such
[business] trust and (ii) for income and franchise tax purposes, the Trust
shall be treated as a partnership, with the assets of the partnership being
the Receivables and other assets held by the Trust, the partners of the
partnership being the Certificateholders and the Depositor and the Notes
constituting indebtedness of the partnership. The parties agree that, unless
otherwise required by the appropriate tax authorities, the Depositor, on
behalf of the Trust, will file or cause to be filed annual or other necessary
returns, reports and other forms consistent with the characterization of the
Trust as a partnership for such tax purposes. [Effective as of the date
hereof, the Owner Trustee shall have the rights, powers and duties set forth
herein and in the Business Trust Statute with respect to accomplishing the
purposes of the Trust. The Owner Trustee has filed the Certificate of Trust
with the Secretary of State.]
SECTION 2.7. Liability of the Depositor and the Certificateholders.
Neither the Depositor nor any Certificateholder shall have any personal
liability for any liability or obligation of the Trust.
SECTION 2.8. Title to Trust Property. Legal title to the entirety of
the Owner Trust Estate shall be vested at all times in the Trust as a separate
legal entity, except where applicable law in any jurisdiction requires title
to any part of the Owner Trust Estate to be vested in a trustee or trustees,
in which case title shall be deemed to be vested in the Owner Trustee, a
co-trustee and/or a separate trustee, as the case may be.
SECTION 2.9. Situs of Trust. The Trust shall be administered in the
State of Delaware. All bank accounts maintained by the Owner Trustee on behalf
of the Trust shall be located in the State of Delaware or the State of New
York. The Trust shall not have any employees in any state other than the State
of Delaware; provided, however, that nothing herein shall restrict or prohibit
the Bank or the Owner Trustee from having employees within or without the
State of Delaware. Payments will be received by the Trust only in Delaware or
New York, and payments will be made by the Trust only from Delaware or New
York. The principal office of the Trust shall be in care of the Owner Trustee
in the State of Delaware.
SECTION 2.10. Representations and Warranties of the Depositor. The
Depositor hereby represents and warrants to the Owner Trustee that:
(a) The Depositor is duly organized and validly existing as a
federally chartered banking association in good standing under the laws of the
United States, 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.
(b) The Depositor has the power and authority to execute and deliver
this Agreement and to carry out its terms, and the Depositor has full power
and authority to sell and assign the property to be sold and assigned to, and
deposited with, the Trust, and the Depositor has duly authorized such sale and
assignment and deposit to the Trust by all necessary corporate action; and the
execution, delivery and performance of this Agreement has been duly authorized
by the Depositor by all necessary corporate action.
(c) This Agreement constitutes a legal, valid, and binding obligation
of the Depositor, enforceable against the Depositor in accordance with its
terms, except as enforceability may be limited by bankruptcy, insolvency,
reorganization and other similar laws affecting the enforcement of creditors'
rights in general and by general equitable principles, regardless of whether
such enforceability is considered in a proceeding at law or in equity.
(d) The consummation of the transactions contemplated by this
Agreement and the fulfillment of the terms hereof (i) do not conflict with,
result in any breach of any of the terms and provisions of, or constitute
(with or without notice or lapse of time or both) a default under, its charter
or by-laws, or any indenture, agreement or other instrument to which the
Depositor is a party or by which it is bound, (ii) result in the creation or
imposition of any lien upon any of its properties pursuant to the terms of any
such indenture, agreement or other instrument (other than pursuant to the
Basic Documents) or (iii) violate any law or, to the best of the Depositor's
knowledge, any order, rule or regulation applicable to the Depositor of any
court or of any federal or state regulatory body, administrative agency or
other governmental instrumentality having jurisdiction over the Depositor or
its properties.
(e) There are no proceedings or investigations pending or, to the
Depositor's best knowledge, threatened before any court, regulatory body,
administrative agency or other governmental instrumentality having
jurisdiction over the Depositor or its properties (i) asserting the invalidity
of this Agreement, the Indenture, any of the other Basic Documents, the Notes
or the Certificates, (ii) seeking to prevent the issuance of the Notes or the
Certificates or the consummation of any of the transactions contemplated by
this Agreement, the Indenture or any of the other Basic Documents, (iii)
seeking any determination or ruling that might materially and adversely affect
the performance by the Depositor of its obligations under, or the validity or
enforceability of, this Agreement or (iv) which might adversely affect the
federal income tax attributes, or Applicable Tax State franchise or income tax
attributes, of the Notes and the Certificates.
SECTION 2.11. Federal Income Tax Matters. The Certificateholders
acknowledge that it is their intent and that they understand it is the intent
of the Depositor and the Servicer that, for purposes of federal income, state
and local income and franchise tax and any other income taxes, the Trust will
be treated as a partnership and the Certificateholders and the Depositor will
be treated as partners in that partnership. The Depositor hereby agrees and
the Certificateholders by acceptance of a Certificate agree to such treatment
and each agrees to take no action inconsistent with such treatment. For
purposes of federal income, State and local income and franchise tax and any
other income taxes each month:
(a) gross ordinary income of the Trust for such month as
determined for federal income tax purposes shall be allocated among
the Certificateholders as of the Record Date occurring within such
month, in proportion to their ownership of the Certificate Balance on
such date, in an amount up to the sum of (i) the Accrued Class B
Certificate Interest, (ii) the portion of the market discount on the
Receivables accrued during such month that is allocable to the
excess, if any, of the aggregate Initial Certificate Balance over the
initial aggregate issue price of the Certificates, (iii) prepayment
premium payable to the Certificateholders for such month and (iv) any
other amounts of income payable to the Certificateholders for such
month; and
(b) thereafter all remaining net income of the Trust (subject to
the modifications set forth below) for such month as determined for
federal income tax purposes (and each item of income, gain, credit,
loss or deduction entering into the computation thereof) shall be
allocated to the Depositor, to the extent thereof.
If the gross ordinary income of the Trust for any month is insufficient for
the allocations described in paragraph (a) above, subsequent gross ordinary
income shall first be allocated to make up such shortfall before any
allocation pursuant to paragraph (b) above. Net losses of the Trust, if any,
for any month as determined for federal income tax purposes (and each item of
income, gain, credit, loss or deduction entering into the computation thereof)
shall be allocated to the Depositor to the extent the Depositor is reasonably
expected to bear the economic burden of such net losses, and any remaining net
losses shall be allocated among the Certificateholders as of the Record Date
occurring within such month in proportion to their ownership of the
Certificate Balance on such Record Date. The Depositor is authorized to modify
the allocations in this paragraph if necessary or appropriate, in its sole
discretion, for the allocations to fairly reflect the economic income, gain or
loss to the Depositor or the Certificateholders or as otherwise required by
the Code.
ARTICLE III
TRUST CERTIFICATES AND TRANSFER OF INTERESTS
SECTION 3.1. Initial Beneficial Ownership. Upon the formation of the
Trust by the contribution by the Depositor pursuant to Section 2.5 and until
the issuance of the Certificates, the Depositor shall be the sole beneficial
owner of the Owner Trust Estate.
SECTION 3.2. The Certificates. (a) The Certificates shall be issued
as Book-Entry Certificates, substantially in the form set forth in Exhibit A,
in minimum denominations of $1,000 and in integral multiples of $1,000 in
excess thereof.
(b) The Certificates shall be executed on behalf of the Trust by
manual or facsimile signature of an authorized officer of the Owner 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 validly issued and entitled to the
benefits of this Agreement, notwithstanding that such individuals or any of
them shall have ceased to be so authorized prior to the authentication and
delivery of such Certificates or did not hold such offices at the date of
authentication and delivery of such Certificates.
(c) A transferee of a Certificate shall become a Certificateholder,
and shall be entitled to the rights and subject to the obligations of a
Certificateholder hereunder upon such transferee's acceptance of a Certificate
duly registered in such transferee's name pursuant to Section 3.4.
SECTION 3.3. Authentication of Certificates. Concurrently with the
initial sale of the Receivables to the Trust pursuant to the Sale and
Servicing Agreement, the Owner Trustee shall cause the Certificates, in an
aggregate principal balance equal to the Initial Certificate Balance, to be
executed on behalf of the Trust, authenticated and delivered to or upon the
written order of the Depositor, signed by the chairman of the board, the
president, any executive vice president, any vice president, the secretary,
any assistant secretary, the treasurer or any assistant treasurer of the
Depositor, without further action by the Depositor, in authorized
denominations. No Certificate shall entitle its Certificateholder to any
benefit under this Agreement, or shall be valid for any purpose, unless there
shall appear on such Certificate a certificate of authentication substantially
in the form set forth in Exhibit A, attached hereto executed by the Owner
Trustee by manual signature; such authentication shall constitute conclusive
evidence that such Certificate shall have been duly authenticated and
delivered hereunder. All Certificates shall be dated the date of their
authentication.
SECTION 3.4. Registration of Certificates; Transfer and Exchange of
Certificates. (a)The Certificate Registrar shall keep or cause to be kept, at
the office or agency maintained pursuant to Section 3.8, a Certificate
Register in which, subject to such reasonable regulations as it may prescribe,
the Trust shall provide for the registration of Certificates and of transfers
and exchanges of Certificates as herein provided. The Bank shall be the
initial Certificate Registrar. No transfer of a Certificate shall be
recognized except upon registration of such transfer in the Certificate
Register.
(b) With respect to each transfer of a Certificate, the prospective
transferee Certificate Owner shall be deemed to represent the following:
(i) It is either:
(A) not, and each account (if any) for which it is purchasing
the Certificates is not (1) an employee benefit plan, as defined
in Section 3(3) of ERISA, that is subject to Title I of ERISA,
(2) a plan described in Section 4975(e)(1) of the Code that is
subject to Section 4975 of the Code, (3) a governmental plan, as
defined in Section 3(32) of ERISA, subject to any federal, State
or local law which is, to a material extent, similar to the
provisions of Section 406 of ERISA or Section 4975 of the Code,
(4) an entity whose underlying assets include plan assets by
reason of a plan's investment in the entity (within the meaning
of Department of Labor Regulation 29 C.F.R. Section 2510.3-101
or otherwise under ERISA) or (5) a person investing "plan
assets" of any such plan (including without limitation, for
purposes of this clause (5), an insurance company general
account, but excluding any entity registered under the
Investment Company Act of 1940, as amended); or
(B) an insurance company acting on behalf of a general account
and (1) on the date of purchase less than 25% of the assets of
such general account (as reasonably determined by it) constitute
"plan assets" for purposes of Title I of ERISA and Section 4975
of the Code, (2) the purchase and holding of such Certificates
are eligible for exemptive relief under Sections (I) and (III)
of Prohibited Transaction Class Exemption 95-60, and (3) the
purchaser agrees that if, after the purchaser's initial
acquisition of the Certificates, at any time during any calendar
quarter 25% or more of the assets of such general account (as
reasonably determined by it no less frequently than each
calendar quarter) constitute "plan assets" for purposes of Title
I of ERISA or Section 4975 of the Code and no exemption or
exception from the prohibited transaction rules applies to the
continued holding of the Certificates under Section 401(c) of
ERISA and the final regulations thereunder or under an exemption
or regulation issued by the United States Department of Labor
under ERISA, it will dispose of all Certificates then held in
its general account by the end of the next following calendar
quarter.
(ii) It is, and each account (if any) for which it is purchasing
Certificates is, a Person who is (A) a citizen or resident of the
United States, (B) a corporation or partnership organized in or under
the laws of the United States or any political subdivision thereof,
(C) an estate the income of which is includible gross income for
United States tax purposes, regardless of its source, (D) a trust
with respect to which a U.S. court is able to exercise primary
supervision over the administration of such trust and one or more
Persons meeting the conditions of clause (A), (B), (C) or (E) of this
paragraph (ii) has the authority to control all substantial decisions
of the trust or (E) a Person not described in clauses (A) through (D)
above whose ownership of Certificates is effectively connected with
such Person's conduct of a trade or business within the United States
(within the meaning of the Code) and who provides the Owner Trustee
and the Depositor with an IRS Form 4224 (and such other
certifications, representations, or opinions of counsel as may be
requested by the Owner Trustee or the Depositor).
(iii) It understands that any purported transfer of any
Certificate (or any interest therein) to any Person who does not meet
the conditions of paragraphs (i) and (ii) above shall be void ab
initio, and the purported transferee in such a transfer shall not be
recognized by the Trust or any other Person as a Certificateholder
for any purpose.
(c) Upon surrender for registration of transfer of any Certificate at
the office or agency maintained pursuant to Section 3.8 and upon compliance
with any provisions of this Agreement relating to such transfer, the Owner
Trustee shall execute, authenticate and deliver, in the name of the designated
transferee or transferees, one or more new Certificates in authorized
denominations and aggregate amount dated the date of authentication by the
Owner Trustee or any authenticating agent. At the option of a
Certificateholder, Certificates may be exchanged for other Certificates of
authorized denominations and aggregate amount upon surrender of the
Certificates to be exchanged at the office or agency maintained pursuant to
Section 3.8.
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 Owner Trustee and the Certificate Registrar, duly
executed by the Certificateholder or his attorney duly authorized in writing,
with such signature guaranteed by a member firm 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 and subsequently
disposed of by the Certificate Registrar in accordance with its customary
practice.
No service charge shall be made for any registration of transfer or
exchange of Certificates, but the Owner Trustee or the 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.
The preceding provisions of this Section 3.4 notwithstanding, the
Owner Trustee shall not make and the Certificate Registrar need not register
any Transfer or exchange of Certificates for a period of fifteen (15) days
preceding any Payment Date for any payment with respect to the Certificates.
SECTION 3.5. Mutilated, Destroyed, Lost or Stolen Certificates. If
(a) any mutilated Certificate shall be surrendered to the Certificate
Registrar, or if the Certificate Registrar shall receive evidence to its
satisfaction of the destruction, loss or theft of any Certificate and (b)
there shall be delivered to the Certificate Registrar and the Owner Trustee
such security or indemnity as may be required by them to save each of them
harmless, then, in the absence of notice that such Certificate shall have been
acquired by a protected purchaser, the Owner Trustee on behalf of the Trust
shall execute and the Owner Trustee shall authenticate and deliver, in
exchange for, or in lieu of, any such mutilated, destroyed, lost or stolen
Certificate a new Certificate, of like tenor and denomination. In connection
with the issuance of any new Certificate under this Section 3.5, the Owner
Trustee or the Certificate Registrar may require the payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed
in connection therewith. Any duplicate Certificate issued pursuant to this
Section 3.5 shall constitute conclusive evidence of ownership in the Trust, as
if originally issued, whether or not the lost, stolen or destroyed Certificate
shall be found at any time.
SECTION 3.6. Persons Deemed Owners of Certificates. Prior to due
presentation of a Certificate for registration of transfer, the Owner Trustee,
the Certificate Registrar and any Certificate Paying Agent may treat the
Person in whose name any Certificate shall be registered in the Certificate
Register as the owner of such Certificate for the purpose of receiving
distributions pursuant to Section 5.2 and for all other purposes whatsoever,
and none of the Owner Trustee, the Certificate Registrar or any Certificate
Paying Agent shall be bound by any notice to the contrary.
SECTION 3.7. Access to List of Certificateholders' Names and
Addresses. The Owner Trustee shall furnish or cause to be furnished to the
Servicer and the Depositor, or to the Indenture Trustee, within fifteen (15)
days after receipt by the Owner Trustee of a written request therefor from the
Servicer or the Depositor, or the Indenture Trustee, as the case may be, a
list, in such form as the requesting party may reasonably require, of the
names and addresses of the Certificateholders as of the most recent Record
Date. If three or more Certificateholders or one or more holders of
Certificates evidencing not less than 25% of the Certificate Balance apply in
writing to the Owner Trustee, and such application states that the applicants
desire to communicate with other Certificateholders with respect to their
rights under this Agreement or under the Certificates and such application is
accompanied by a copy of the communication that such applicants propose to
transmit, then the Owner Trustee shall, within five (5) Business Days after
the receipt of such application, afford such applicants access during normal
business hours to the current list of Certificateholders. Each
Certificateholder, by receiving and holding a Certificate, shall be deemed to
have agreed not to hold any of the Depositor, the Certificate Registrar or the
Owner Trustee accountable by reason of the disclosure of its name and address,
regardless of the source from which such information was derived.
SECTION 3.8. Maintenance of Office or Agency. The Owner Trustee shall
maintain in the State of New York, an office or offices or agency or agencies
where Certificates may be surrendered for registration of transfer or exchange
and where notices and demands to or upon the Owner Trustee in respect of the
Certificates and the Basic Documents may be served. The Owner Trustee
initially designates _________________________________________________
________________________________ as its principal corporate trust office for
such purposes. The Owner Trustee shall give prompt written notice to the
Depositor and to the Certificateholders of any change in the location of the
Certificate Registrar or any such office or agency.
SECTION 3.9. Appointment of Certificate Paying Agent. The Certificate
Paying Agent shall make distributions to Certificateholders from the
Certificate Distribution Account pursuant to Section 5.2 and shall report the
amounts of such distributions to the Owner Trustee. Any Certificate Paying
Agent shall have the revocable power to withdraw funds from the Certificate
Distribution Account for the purpose of making the distributions referred to
above. The Owner Trustee may revoke such power and remove the Certificate
Paying Agent if the Owner Trustee determines in its sole discretion that the
Certificate Paying Agent shall have failed to perform its obligations under
this Agreement in any material respect. The Certificate Paying Agent shall
initially be __________. The Certificate Paying Agent shall be permitted to
resign as Certificate Paying Agent upon thirty (30) days' written notice to
the Owner Trustee. In the event that _________ shall no longer be the
Certificate Paying Agent, the Owner Trustee shall appoint a successor to act
as Certificate Paying Agent (which shall be a bank or trust company). The
Owner Trustee shall cause such successor Certificate Paying Agent to execute
and deliver to the Owner Trustee an instrument in which such successor
Certificate Paying Agent shall agree with the Owner Trustee that as
Certificate Paying Agent, such successor Certificate Paying Agent will hold
all sums, if any, held by it for payment to the Certificateholders in trust
for the benefit of the Certificateholders entitled thereto until such sums
shall be paid to such Certificateholders. The Certificate Paying Agent shall
return all unclaimed funds to the Owner Trustee and upon removal of a
Certificate Paying Agent such Certificate Paying Agent shall also return all
funds in its possession to the Owner Trustee. The provisions of Sections 6.7,
6.9, 6.10, 7.1 and 7.2 shall apply to the Certificate Paying Agent. The Owner
Trustee may appoint a co-paying agent. Any reference in this Agreement to the
Certificate Paying Agent shall include any co-paying agent appointed by the
Owner Trustee unless the context requires otherwise.
SECTION 3.10. Certain Rights of Depositor. The Depositor shall be
entitled to any amounts not needed on any Payment Date to make payments on the
Notes or the Certificates or to make deposits to the Reserve Account pursuant
to Section 4.6 of the Sale and Servicing Agreement, and to receive amounts
remaining in the Reserve Account following the payment in full of the
aggregate principal amount of the Notes and the Certificate Balance and of all
other amounts owing or to be distributed hereunder or under the Indenture or
the Sale and Servicing Agreement to Noteholders and Certificateholders and the
termination of the Trust. The Depositor may not Transfer any such rights
unless (i) the Owner Trustee and the Indenture Trustee shall have received an
Opinion of Counsel that such Transfer shall not cause the Trust to be
classified as an association (or publicly traded partnership) taxable as a
corporation, (ii) the transferee agrees in writing to take positions for
federal income tax purposes consistent with the federal income tax positions
previously taken by the Depositor and (iii) the Rating Agency Condition is
satisfied.
SECTION 3.11. Book-Entry Certificates. The Certificates, upon
original issuance, shall be issued in the form of typewritten Certificates
representing the Book-Entry Certificates, to be delivered to The Depository
Trust Company, the initial Clearing Agency, by, or on behalf of, the Trust.
The Book-Entry Certificates shall be registered initially on the Certificate
Register in the name of Cede & Co., the nominee of the initial Clearing
Agency, and no Certificate Owner thereof shall receive a Definitive
Certificate (as defined below) representing such Certificate Owner's
beneficial interest in such Certificate, except as provided in Section 3.13.
Unless and until definitive, fully registered Certificates (the "Definitive
Certificates") have been issued to Certificate Owners pursuant to Section
3.13:
(i) the provisions of this Section 3.11 shall be in full force
and effect;
(ii) the Certificate Registrar and the Owner Trustee shall
be entitled to deal with the Clearing Agency for all purposes of this
Agreement (including the payment of principal of and interest on the
Book-Entry Certificates and the giving of instructions or directions
hereunder) as the sole Certificateholder, and shall have no
obligation to the Certificate Owners;
(iii) to the extent that the provisions of this Section 3.11
conflict with any other provisions of this Agreement, the provisions
of this Section 3.11 shall control;
(iv) the rights of Certificate Owners shall be exercised
only through the Clearing Agency and shall be limited to those
established by law and agreements between such Certificate Owners and
the Clearing Agency and/or the Clearing Agency Participants pursuant
to the Securities Depository Agreement. Unless and until Definitive
Certificates are issued to Certificate Owners pursuant to Section
3.13, the initial Clearing Agency shall make book-entry transfers
among the Clearing Agency Participants and receive and transmit
payments of principal of and interest on the Book-Entry Certificates
to such Clearing Agency Participants; and
(v) whenever this Agreement requires or permits actions to
be taken based upon instructions or directions of holders of
Certificates evidencing a specified percentage of the Certificate
Balance, the Clearing Agency shall be deemed to represent such
percentage only to the extent that it has received instructions to
such effect from Certificate Owners and/or Clearing Agency
Participants owning or representing, respectively, such required
percentage of the beneficial interest of the Certificate Balance and
has delivered such instructions to the Owner Trustee.
SECTION 3.12. Notices to Clearing Agency. Whenever a notice or other
communication to the holders of Certificates is required under this Agreement,
unless and until Definitive Certificates shall have been issued to the
Certificate Owners pursuant to Section 3.13, the Owner Trustee shall give all
such notices and communications specified herein to be given to holders of
Certificates to the Clearing Agency, and shall have no obligation to such
Certificate Owners.
SECTION 3.13. Definitive Certificates. With respect to any Book-Entry
Certificates, if (i) the Administrator advises the Owner Trustee in writing
that the Clearing Agency is no longer willing or able to properly discharge
its responsibilities with respect to such Book-Entry Certificates and the
Administrator is unable to locate a qualified successor, (ii) the
Administrator, at its option, advises the Owner Trustee in writing that it
elects to terminate the book-entry system through the Clearing Agency or (iii)
after the occurrence of an Event of Default or an Event of Servicing
Termination, Certificate Owners with respect to Book-Entry Certificates
evidencing beneficial interests aggregating not less than a majority of the
Certificate Balance advise the Owner Trustee and the Clearing Agency in
writing that the continuation of a book-entry system through the Clearing
Agency is no longer in the best interests of the Certificate Owners, then the
Clearing Agency shall notify all Certificate Owners and the Owner Trustee of
the occurrence of such event and of the availability of Definitive
Certificates to the Certificate Owners. Upon surrender to the Owner Trustee of
the typewritten Certificates representing the Book-Entry Certificates by the
Clearing Agency, accompanied by registration instructions, the Owner Trustee
shall execute, authenticate and deliver the Definitive Certificates in
accordance with the instructions of the Clearing Agency. None of the Issuer,
the Certificate Registrar or the Owner 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 to Certificate Owners, the Owner Trustee shall recognize the
holders of such Definitive Certificates as Certificateholders.
SECTION 3.14. Authenticating Agents. (a) The Owner Trustee may
appoint one or more Persons (each, an "Authenticating Agent") with power to
act on its behalf and subject to its direction in the authentication of
Certificates in connection with issuance, transfers and exchanges under
Sections 3.3, 3.4 and 3.5, as fully to all intents and purposes as though each
such Authenticating Agent had been expressly authorized by those Sections to
authenticate such Certificates. For all purposes of this Agreement, the
authentication of Certificates by an Authenticating Agent pursuant to this
Section 3.14 shall be deemed to be the authentication of Certificates "by the
Owner Trustee."
(b) Any corporation into which any Authenticating Agent may be merged
or converted or with which it may be consolidated, or any corporation
resulting from any merger, consolidation or conversion to which any
Authenticating Agent shall be a party, or any corporation succeeding to all or
substantially all of the corporate trust business of any Authenticating Agent,
shall be the successor of such Authenticating Agent hereunder, without the
execution or filing of any further act on the part of the parties hereto or
such Authenticating Agent or such successor corporation.
(c) Any Authenticating Agent may at any time resign by giving written
notice of resignation to the Owner Trustee and the Depositor. The Owner
Trustee may at any time terminate the agency of any Authenticating Agent by
giving written notice of termination to such Authenticating Agent and the
Depositor. Upon receiving such notice of resignation or upon such a
termination, the Owner Trustee may appoint a successor Authenticating Agent
and shall give written notice of any such appointment to the Depositor.
(d) The Depositor agrees to pay to each Authenticating Agent from
time to time reasonable compensation for its services. The provisions of
Section 6.4 shall be applicable to any Authenticating Agent.
ARTICLE IV
ACTIONS BY OWNER TRUSTEE
SECTION 4.1. Prior Notice to Certificateholders with Respect to
Certain Matters. It is the intention of the Depositor and the
Certificateholders that the powers and duties of the Owner Trustee are
ministerial and non-ministerial; provided, however, that any non-ministerial
action (including the taking of any legal action) may only be taken by the
Owner Trustee in accordance with this Section 4.1. With respect to the
following matters, the Owner Trustee shall not take action unless, (I) at
least thirty (30) days before the taking of such action, the Owner Trustee
shall have notified the Certificateholders and the Rating Agencies in writing
of the proposed action and (II) Certificateholders holding not less than a
majority of the Certificate Balance shall not have notified the Owner Trustee
in writing prior to the 30th day after such notice is given that such
Certificateholders have withheld consent or provided alternative direction:
(a) the initiation of any material claim or lawsuit by the Trust
(except claims or lawsuits brought by the Servicer in connection with the
collection of the Receivables) and the settlement of any material action,
claim or lawsuit brought by or against the Trust (except with respect to the
aforementioned claims or lawsuits for collection by the Servicer of the
Receivables);
(b) the election by the Trust to file an amendment to the Certificate
of Trust (unless such amendment is required to be filed under the Business
Trust Statute);
(c) the amendment of the Indenture by a supplemental indenture in
circumstances where the consent of any Noteholder is required;
(d) the amendment of the Indenture by a supplemental indenture in
circumstances where the consent of any Noteholder is not required and such
amendment materially adversely affects the interests of any of the
Certificateholders; or
(e) the amendment, change or modification of the Sale and Servicing
Agreement or the Administration Agreement, except to cure any ambiguity or to
amend or supplement any provision in a manner or to add any provision that
would not materially adversely affect the interests of the Certificateholders.
SECTION 4.2. Action by Certificateholders with Respect to Certain
Matters. The Owner Trustee may not, except upon the occurrence of an Event of
Servicing Termination subsequent to the payment in full of the Notes and in
accordance with the written direction of Certificateholders holding not less
than a majority of the Certificate Balance, (a) remove the Servicer under the
Sale and Servicing Agreement pursuant to Article VII thereof, (b) appoint a
successor Servicer pursuant to Article VII of the Sale and Servicing
Agreement, (c) remove the Administrator under the Administration Agreement
pursuant to Section 9 thereof or (d) appoint a successor Administrator
pursuant to Section 9 of the Administration Agreement.
SECTION 4.3. Action by Certificateholders with Respect to Bankruptcy.
The Owner Trustee shall not have the power to commence a voluntary proceeding
in bankruptcy relating to the Trust unless the Notes have been paid in full
and each Certificateholder (other than the Depositor) approves of such
commencement in advance and delivers to the Owner Trustee a certificate
certifying that such Certificateholder reasonably believes that the Trust is
insolvent.
SECTION 4.4. Restrictions on Certificateholders' Power. The
Certificateholders shall not direct the Owner Trustee to take or refrain from
taking any action if such action or inaction would be contrary to any
obligation of the Trust or the Owner Trustee under this Agreement or any of
the other Basic Documents or would be contrary to Section 2.3, nor shall the
Owner Trustee be obligated to follow any such direction, if given.
SECTION 4.5. Majority Control. Except as expressly provided herein,
any action that may be taken by the Certificateholders under this Agreement
may be taken by the Certificateholders holding not less than a majority of the
Certificate Balance. Except as expressly provided herein, any written notice
of the Certificateholders delivered pursuant to this Agreement shall be
effective if signed by holders of Certificates evidencing not less than a
majority of the Certificate Balance at the time of the delivery of such
notice.
ARTICLE V
APPLICATION OF TRUST FUNDS; CERTAIN DUTIES
SECTION 5.1. Establishment of Certificate Distribution Account.
Pursuant to Section 4.1(c) of the Sale and Servicing Agreement, there has been
established and there shall be maintained an Eligible Account, in the name of
"__________________, as Owner Trustee", initially at the corporate trust
department of the Bank, which shall be designated as the "Certificate
Distribution Account." Except as expressly provided in Section 3.9, the
Certificate Distribution Account shall be under the sole dominion and control
of the Owner Trustee. All monies deposited from time to time in the
Certificate Distribution Account pursuant to the Sale and Servicing Agreement
shall be applied as provided in the Basic Documents. In the event that the
Certificate Distribution Account is no longer to be maintained at the
corporate trust department of the Bank, the Servicer shall, with the Owner
Trustee's assistance as necessary, cause an Eligible Account to be established
as the Certificate Distribution Account within ten (10) Business Days (or such
longer period not to exceed thirty (30) days as to which each Rating Agency
may consent). The Certificate Distribution Account will be established and
maintained pursuant to an account agreement which specifies New York law as
the governing law.
SECTION 5.2. Application of Trust Funds. (a) On each Payment Date,
the Owner Trustee shall, based on the information contained in the Servicer's
Certificate delivered on the relevant Determination Date pursuant to Section
3.8 of the Sale and Servicing Agreement withdraw the amounts deposited into
the Certificate Distribution Account pursuant to Sections 4.6(c) (if
applicable) and 4.6(d) of the Sale and Servicing Agreement or, if applicable,
Section 5.4(b) of the Indenture on or prior to such Payment Date and make or
cause to be made distributions and payments in the following order of
priority:
(i) first, to the Certificateholders, an amount equal to the
Accrued Class B Certificate Interest, provided that if there are not
sufficient funds available to pay the entire amount of the Accrued
Class B Certificate Interest, the amounts available shall be applied
to the payment of such interest on the Certificates on a pro rata
basis; and
(ii) second, to the Certificateholders in reduction of the
Certificate Balance, until the Certificate Balance has been reduced
to zero; provided that if there are not sufficient funds available to
reduce the Certificate Balance to zero, the amounts available shall
be applied among Certificateholders to the reduction of the
Certificate Balance on a pro rata basis.
(b) On each Payment Date, the Owner Trustee shall, or shall cause the
Certificate Paying Agent to, send to each Certificateholder as of the related
Record Date the statement provided to the Owner Trustee by the Servicer
pursuant to Section 4.9 of the Sale and Servicing Agreement with respect to
such Payment Date.
(c) In the event that any withholding tax is imposed on the Trust's
payment (or allocations of income) to a Certificateholder, such tax shall
reduce the amount otherwise distributable to such Certificateholder in
accordance with this Section 5.2. The Owner Trustee and each Certificate
Paying Agent is hereby authorized and directed to retain from amounts
otherwise distributable to the Certificateholders sufficient funds for the
payment of any such withholding tax that is legally owed by the Trust (but
such authorization shall not prevent the Owner Trustee from contesting any
such tax in appropriate proceedings, and withholding payment of such tax, if
permitted by law, pending the outcome of such proceedings). The amount of any
withholding tax imposed with respect to a Certificateholder shall be treated
as cash distributed to such Certificateholder at the time it is withheld by
the Trust and remitted to the appropriate taxing authority. If there is a
possibility that withholding tax is payable with respect to a distribution
(such as a distribution to a non-U.S. Certificateholder), the Owner Trustee
may, in its sole discretion, withhold such amounts in accordance with this
paragraph (c). In the event that a Certificateholder wishes to apply for a
refund of any such withholding tax, the Owner Trustee shall reasonably
cooperate with such Certificateholder in making such claim so long as such
Certificateholder agrees to reimburse the Owner Trustee for any out-of-pocket
expenses incurred.
SECTION 5.3. Method of Payment. Subject to Section 8.1(c),
distributions required to be made to Certificateholders on any Payment Date
shall be made to each Certificateholder of record on the preceding Record Date
either by wire transfer, in immediately available funds, to the account of
such Certificateholder at a bank or other entity having appropriate facilities
therefor, if (i) such Certificateholder shall have provided to the Certificate
Registrar appropriate written instructions at least five (5) Business Days
prior to such Payment Date and such Certificateholder's Certificates in the
aggregate evidence a denomination of not less than $1,000,000, or (ii) such
Certificateholder is the Depositor or, if not, by check mailed to such
Certificateholder at the address of such Certificateholder appearing in the
Certificate Register. Notwithstanding the foregoing, the final distribution in
respect of any Certificate (whether on the applicable Final Scheduled Payment
Date or otherwise) will be payable only upon presentation and surrender of
such Certificate at the office or agency maintained for that purpose by the
Owner Trustee pursuant to Section 3.8.
SECTION 5.4. No Segregation of Monies; No Interest. Subject to
Sections 5.1 and 5.2, monies received by the Owner Trustee hereunder need not
be segregated in any manner except to the extent required by law, the
Indenture or the Sale and Servicing Agreement, and may be deposited under such
general conditions as may be prescribed by law, and the Owner Trustee shall
not be liable for any interest thereon.
SECTION 5.5. Accounting and Reports to Noteholders,
Certificateholders, Internal Revenue Service and Others. The Owner Trustee
shall, based on information provided by or on behalf of the Depositor, (a)
maintain (or cause to be maintained) the books of the Trust on a calendar year
basis on the accrual method of accounting, (b) deliver (or cause to be
delivered) to each Certificateholder, as may be required by the Code, such
information as may be required (including Schedule K-1) to enable each
Certificateholder to prepare its federal and State income tax returns, (c)
file (or cause to be filed) such tax returns relating to the Trust (including
a partnership information return, IRS Form 1065), and make such elections, as
may from time to time be required or appropriate under any applicable State or
federal statute or rule or regulation thereunder so as to maintain the Trust's
characterization as a partnership for federal income tax purposes, (d) cause
such tax returns to be signed in the manner required by law and (e) collect
(or cause to be collected) any withholding tax as described in and in
accordance with Section 5.2(c) with respect to income or distributions to
Certificateholders. The Owner Trustee shall elect under Section 1278 of the
Code to include in income currently any market discount that accrues with
respect to the Receivables. The Owner Trustee shall not make the election
provided under Section 754 of the Code.
SECTION 5.6. Signature on Returns; Tax Matters Partner. (a) The
Depositor shall prepare (or cause to be prepared) and sign, on behalf of the
Trust, the tax returns of the Trust.
(b) The Depositor shall be designated the "tax matters partner" of
the Trust pursuant to Section 6231(a)(7)(A) of the Code.
ARTICLE VI
AUTHORITY AND DUTIES OF OWNER TRUSTEE
SECTION 6.1. General Authority. The Owner Trustee is authorized and
directed to execute and deliver on behalf of the Trust the Basic Documents to
which the Trust is to be a party and each certificate or other document
attached as an exhibit to or contemplated by the Basic Documents to which the
Trust is to be a party and any amendment or other agreement, in each case, in
such form as the Depositor shall approve, as evidenced conclusively by the
Owner Trustee's execution thereof and the Depositor's execution of this
Agreement, and to direct the Indenture Trustee to authenticate and deliver (i)
Class A-1 Notes in the aggregate principal amount of $__________, (ii) Class
A-2 Notes in the aggregate principal amount of $__________ and (iii) Class A-3
Notes in the aggregate principal amount of $___________. In addition to the
foregoing, the Owner Trustee is authorized to take all actions required of the
Trust pursuant to the Basic Documents. The Owner Trustee is further authorized
from time to time to take such action on behalf of the Trust as is permitted
by the Basic Documents and which the Servicer or the Administrator directs
with respect to the Basic Documents, except to the extent that this Agreement
expressly requires the consent of Certificateholders for such action.
SECTION 6.2. General Duties. Subject to Section 4.1 hereof, it shall
be the duty of the Owner Trustee to discharge (or cause to be discharged) all
of its responsibilities pursuant to the terms of this Agreement and the other
Basic Documents to which the Trust is a party and to administer the Trust in
the interest of the Certificateholders, subject to the lien of the Indenture
and in accordance with the provisions of this Agreement and the other Basic
Documents. Notwithstanding anything else to the contrary in this Agreement,
the Owner Trustee shall be deemed to have discharged its duties and
responsibilities hereunder and under the Basic Documents to the extent the
Administrator is required in the Administration Agreement to perform any act
or to discharge such duty of the Owner Trustee or the Trust hereunder or under
any other Basic Document, and the Owner Trustee shall not be held liable for
the default or failure of the Administrator to carry out its obligations under
the Administration Agreement. Except as expressly provided in the Basic
Documents, the Owner Trustee shall have no obligation to administer, service
or collect the Receivables or to maintain, monitor or otherwise supervise the
administration, servicing or collection of the Receivables.
SECTION 6.3. Action upon Instruction. (a) Subject to Article IV, and
in accordance with the terms of the Basic Documents, the Certificateholders
may, by written instruction, direct the Owner Trustee in the management of the
Trust.
(b) The Owner Trustee shall not be required to take any action
hereunder or under any Basic Document if the Owner Trustee shall have
reasonably determined, or shall have been advised by counsel, that such action
is likely to result in liability on the part of the Owner Trustee or is
contrary to the terms hereof or of any other Basic Document or is otherwise
contrary to law.
(c) Whenever the Owner Trustee is unable to decide between
alternative courses of action permitted or required by the terms of this
Agreement or any other Basic Document, the Owner Trustee shall promptly give
notice (in such form as shall be appropriate under the circumstances) to the
Certificateholders requesting instruction as to the course of action to be
adopted, and to the extent the Owner Trustee acts in good faith in accordance
with any written instruction of the Certificateholders received, the Owner
Trustee shall not be liable on account of such action to any Person. If the
Owner Trustee shall not have received appropriate instruction within ten (10)
days of such notice (or within such shorter period of time as reasonably may
be specified in such notice or may be necessary under the circumstances) it
may, but shall be under no duty to, take or refrain from taking such action,
not inconsistent with this Agreement or the other Basic Documents, as it shall
deem to be in the best interests of the Certificateholders, and shall have no
liability to any Person for such action or inaction.
(d) In the event the Owner Trustee is unsure as to the application of
any provision of this Agreement or any other Basic Document or any such
provision is ambiguous as to its application, or is, or appears to be, in
conflict with any other applicable provision, or in the event that this
Agreement permits any determination by the Owner Trustee or is silent or is
incomplete as to the course of action that the Owner Trustee is required to
take with respect to a particular set of facts, the Owner Trustee may give
notice (in such form as shall be appropriate under the circumstances) to the
Certificateholders requesting instruction and, to the extent that the Owner
Trustee acts or refrains from acting in good faith in accordance with any such
instruction received, the Owner Trustee shall not be liable, on account of
such action or inaction, to any Person. If the Owner Trustee shall not have
received appropriate instruction within ten (10) days of such notice (or
within such shorter period of time as reasonably may be specified in such
notice or may be necessary under the circumstances) it may, but shall be under
no duty to, take or refrain from taking such action not inconsistent with this
Agreement or the other Basic Documents, as it shall deem to be in the best
interests of the Certificateholders, and shall have no liability to any Person
for such action or inaction.
SECTION 6.4. No Duties Except as Specified in this Agreement or in
Instructions. The Owner Trustee shall not have any duty or obligation to
manage, make any payment with respect to, register, record, sell, dispose of,
or otherwise deal with the Owner Trust Estate, or to otherwise take or refrain
from taking any action under, or in connection with, any document contemplated
hereby to which the Owner Trustee or the Trust is a party, except as expressly
provided by the terms of this Agreement or in any document or written
instruction received by the Owner Trustee pursuant to Section 6.3; and no
implied duties or obligations shall be read into this Agreement or any other
Basic Document against the Owner Trustee. The Owner Trustee shall have no
responsibility for filing any financing or continuation statement in any
public office at any time or to otherwise perfect or maintain the perfection
of any security interest or lien granted to it hereunder or to prepare or file
any Commission filing for the Trust or to record this Agreement or any other
Basic Document. The Owner Trustee nevertheless agrees that it will, at its own
cost and expense, promptly take all action as may be necessary to discharge
any lien (other than the lien of the Indenture) on any part of the Owner Trust
Estate that results from actions by, or claims against, the Owner Trustee that
are not related to the ownership or the administration of the Owner Trust
Estate.
SECTION 6.5. No Action Except Under Specified Documents or
Instructions. The Owner Trustee shall not manage, control, use, sell, dispose
of or otherwise deal with any part of the Owner Trust Estate except (i) in
accordance with the powers granted to and the authority conferred upon the
Owner Trustee pursuant to this Agreement, (ii) in accordance with the other
Basic Documents to which the Trust or the Owner Trust is a party and (iii) in
accordance with any document or instruction delivered to the Owner Trustee
pursuant to Section 6.3. Neither the Depositor nor the Certificateholders
shall direct the Trustee to take any action that would violate the provisions
of this Section 6.5.
SECTION 6.6. Restrictions. The Owner Trustee shall not take any
action (a) that is inconsistent with the purposes of the Trust set forth in
Section 2.3 or (b) that, to the actual knowledge of the Owner Trustee, would
(i) affect the treatment of the Notes as indebtedness for federal income or
Applicable Tax State income or franchise tax purposes, (ii) be deemed to cause
a taxable exchange of the Notes for federal income or Applicable Tax State
income or franchise tax purposes or (iii) cause the Trust or any portion
thereof to be taxable as an association (or publicly traded partnership)
taxable as a corporation for federal income or Applicable Tax State income or
franchise tax purposes. The Certificateholders shall not direct the Owner
Trustee to take action that would violate the provisions of this Section 6.6.
SECTION 6.7. Acceptance of Trusts and Duties. The Owner Trustee
accepts the trusts hereby created and agrees to perform its duties hereunder
with respect to such trusts but only upon the terms of this Agreement. The
Owner Trustee also agrees to disburse all monies actually received by it
constituting part of the Owner Trust Estate upon the terms of this Agreement
and the other Basic Documents to which the Owner Trustee is a party. The Owner
Trustee shall not be answerable or accountable hereunder or under any other
Basic Document under any circumstances, except (i) for its own willful
misconduct, bad faith or negligence or (ii) in the case of the inaccuracy of
any representation or warranty contained in Section 6.9 expressly made by the
Owner Trustee. In particular, but not by way of limitation (and subject to the
exceptions set forth in the preceding sentence):
(a) the Owner Trustee shall not be liable for any error of
judgment made by a responsible officer of the Owner Trustee;
(b) the Owner Trustee shall not be liable with respect to any
action taken or omitted to be taken by it in accordance with the
instructions of any Certificateholder, the Indenture Trustee, the
Depositor, the Administrator or the Servicer;
(c) no provision of this Agreement or any other Basic Document
shall require the Owner Trustee to expend or risk funds or otherwise
incur any financial liability in the performance of any of its rights
or powers hereunder or under any other Basic Document if the Owner
Trustee shall have reasonable grounds for believing that repayment of
such funds or adequate indemnity against such risk or liability is
not reasonably assured or provided to it;
(d) under no circumstances shall the Owner Trustee be liable for
indebtedness evidenced by or arising under any of the Basic
Documents, including the principal of and interest on the Notes or
amounts distributable on the Certificates;
(e) the Owner Trustee shall not be responsible for or in respect
of the validity or sufficiency of this Agreement or for the due
execution hereof by the Depositor or for the form, character,
genuineness, sufficiency, value or validity of any of the Owner Trust
Estate or for or in respect of the validity or sufficiency of the
other Basic Documents, other than the certificate of authentication
on the Certificates, and the Owner Trustee shall in no event assume
or incur any liability, duty, or obligation to any Noteholder or to
any Certificateholder, other than as expressly provided for herein
and in the other Basic Documents;
(f) the Owner Trustee shall not be liable for the default or
misconduct of the Servicer, the Administrator, the Depositor or the
Indenture Trustee under any of the Basic Documents or otherwise and
the Owner Trustee shall have no obligation or liability to perform
the obligations of the Trust under this Agreement or the other Basic
Documents that are required to be performed by the Administrator
under the Administration Agreement, the Servicer under the Sale and
Servicing Agreement or the Indenture Trustee under the Indenture; and
(g) the Owner Trustee shall be under no obligation to exercise
any of the rights or powers vested in it by this Agreement, or to
institute, conduct or defend any litigation under this Agreement or
otherwise or in relation to this Agreement or any other Basic
Document, at the request, order or direction of any of the
Certificateholders, unless such Certificateholders have offered to
the Owner Trustee reasonable security or indemnity against the costs,
expenses and liabilities that may be incurred by the Owner Trustee
therein or thereby. The right of the Owner Trustee to perform any
discretionary act enumerated in this Agreement or in any other Basic
Document shall not be construed as a duty, and the Owner Trustee
shall not be answerable for other than its willful misconduct, bad
faith or negligence in the performance of any such act.
SECTION 6.8. Furnishing of Documents. The Owner Trustee shall furnish
to the Certificateholders, promptly upon receipt of a written request
therefor, duplicates or copies of all reports, notices, requests, demands,
certificates, financial statements and any other instruments furnished to the
Owner Trustee under the Basic Documents.
SECTION 6.9. Representations and Warranties. (a) The Owner Trustee
hereby represents and warrants to the Depositor, for the benefit of the
Certificateholders, that:
(i) It is a _________________ duly organized and validly
existing in good standing under the laws of the State of ___________.
It has all requisite corporate power and authority to execute,
deliver and perform its obligations under this Agreement.
(ii) It has taken all corporate action necessary to authorize
the execution and delivery by it of this Agreement, and this
Agreement will be executed and delivered by one of its officers who
is duly authorized to execute and deliver this Agreement on its
behalf.
(iii) Neither the execution nor the delivery by it of this
Agreement, nor the consummation by it of the transactions
contemplated hereby nor compliance by it with any of the terms or
provisions hereof will contravene any federal or Delaware State law,
governmental rule or regulation governing the banking or trust powers
of the Owner Trustee or any judgment or order binding on it, or
constitute any default under its charter documents or by-laws or any
indenture, mortgage, contract, agreement or instrument to which it is
a party or by which any of its properties may be bound.
SECTION 6.10. Reliance; Advice of Counsel. (a) The Owner Trustee may
rely upon, shall be protected in relying upon, and shall incur no liability to
anyone in acting upon, any signature, instrument, notice, resolution, request,
consent, order, certificate, report, opinion, bond, or other document or paper
believed by it to be genuine and believed by it to be signed by the proper
party or parties. The Owner Trustee may accept a certified copy of a
resolution of the board of directors or other governing body of any party as
conclusive evidence that such resolution has been duly adopted by such body
and that the same is in full force and effect. As to any fact or matter the
method of the determination of which is not specifically prescribed herein,
the Owner Trustee may for all purposes hereof rely on a certificate, signed by
the president or any vice president or by the treasurer or other authorized
officers of the relevant party, as to such fact or matter and such certificate
shall constitute full protection to the Owner Trustee for any action taken or
omitted to be taken by it in good faith in reliance thereon.
(b) In the exercise or administration of the trusts hereunder and in
the performance of its duties and obligations under this Agreement or the
other Basic Documents, the Owner Trustee (i) may act directly or through its
agents or attorneys pursuant to agreements entered into with any of them, and
the Owner Trustee shall not be liable for the conduct or misconduct of such
agents or attorneys if such agents or attorneys shall have been selected by
the Owner Trustee with reasonable care, and (ii) may consult with counsel,
accountants and other skilled Persons to be selected with reasonable care and
employed by it. The Owner Trustee shall not be liable for anything done,
suffered or omitted in good faith by it in accordance with the written opinion
or advice of any such counsel, accountants or other such Persons and not
contrary to this Agreement or any other Basic Document.
SECTION 6.11. Not Acting in Individual Capacity. Except as provided
in this Article VI, in accepting the trusts hereby created, _______________
acts solely as Owner Trustee hereunder and not in its individual capacity, and
all Persons having any claim against the Owner Trustee by reason of the
transactions contemplated by this Agreement or any other Basic Document shall
look only to the Owner Trust Estate for payment or satisfaction thereof.
SECTION 6.12. Owner Trustee Not Liable for Certificates or
Receivables. The recitals contained herein and in the Certificates (other than
the signature and countersignature of the Owner Trustee on the Certificates)
shall be taken as the statements of the Depositor, and the Owner Trustee
assumes no responsibility for the correctness thereof. The Owner Trustee makes
no representations as to the validity or sufficiency of this Agreement, of any
other Basic Document or of the Certificates (other than the signature and
countersignature of the Owner Trustee on the Certificates) or the Notes, or of
any Receivable or related documents. The Owner Trustee shall at no time have
any responsibility or liability for or with respect to the legality, validity
and enforceability of any Receivable, or the perfection and priority of any
security interest created by any Receivable in any Financed Vehicle or the
maintenance of any such perfection and priority, or for or with respect to the
sufficiency of the Owner Trust Estate or its ability to generate the payments
to be distributed to Certificateholders under this Agreement or the
Noteholders under the Indenture, including, without limitation: the existence,
condition and ownership of any Financed Vehicle; the existence and
enforceability of any insurance thereon; the existence and contents of any
Receivable on any computer or other record thereof; the validity of the
assignment of any Receivable to the Trust or any intervening assignment; the
completeness of any Receivable; the performance or enforcement of any
Receivable; the compliance by the Depositor or the Servicer with any warranty
or representation made under any Basic Document or in any related document, or
the accuracy of any such warranty or representation or any action of the
Indenture Trustee, the Administrator or the Servicer or any subservicer taken
in the name of the Owner Trustee.
SECTION 6.13. Owner Trustee May Own Certificates and Notes.
________________ ______________________, in its individual or any other
capacity, may become the owner or pledgee of Certificates or Notes and may
deal with the Depositor, the Servicer, the Administrator and the Indenture
Trustee in banking transactions with the same rights as they would have if it
was not the Owner Trustee.
ARTICLE VII
COMPENSATION AND INDEMNITY OF OWNER TRUSTEE
SECTION 7.1. Owner Trustee's Fees and Expenses. The Owner Trustee
shall receive as compensation for its services hereunder such fees as have
been separately agreed upon before the date hereof between the Depositor and
the Owner Trustee, and the Owner Trustee shall be entitled to and reimbursed
by the Depositor for its other reasonable expenses hereunder, including the
reasonable compensation, expenses and disbursements of such agents,
representatives, experts and counsel as the Owner Trustee may employ in
connection with the exercise and performance of its rights and its duties
hereunder. Such amounts shall be treated for tax purposes as having been
contributed to the Trust by the Depositor and the tax deduction for such
amounts shall be allocated to the Depositor.
SECTION 7.2. Indemnification. The Depositor shall be liable as prime
obligor for, and shall indemnify the Owner Trustee and its successors,
assigns, agents and servants (collectively, the "Indemnified Parties") from
and against, any and all liabilities, obligations, losses, damages, taxes,
claims, actions and suits, and any and all reasonable costs, expenses and
disbursements (including reasonable legal fees and expenses) of any kind and
nature whatsoever (collectively, "Expenses") which may at any time be imposed
on, incurred by, or asserted against the Owner Trustee or any Indemnified
Party in any way relating to or arising out of this Agreement, the other Basic
Documents, the Owner Trust Estate, the administration of the Owner Trust
Estate or the action or inaction of the Owner Trustee hereunder; provided that
the Depositor shall not be liable for or required to indemnify an Indemnified
Party from and against Expenses arising or resulting from (i) the Indemnified
Party's own willful misconduct, bad faith or negligence, or (ii) the
inaccuracy of any representation or warranty contained in Section 6.9
expressly made by the Indemnified Party. The indemnities contained in this
Section 7.2 shall survive the resignation or termination of the Owner Trustee
or the termination of this Agreement. In the event of any claim, action or
proceeding for which indemnity will be sought pursuant to this Section 7.2,
the Owner Trustee's choice of legal counsel shall be subject to the approval
of the Depositor, which approval shall not be unreasonably withheld.
SECTION 7.3. Payments to Owner Trustee. Any amounts paid to the Owner
Trustee pursuant to this Article VII shall be deemed not to be a part of the
Owner Trust Estate immediately after such payment.
ARTICLE VIII
TERMINATION
SECTION 8.1. Termination of Agreement. (a) This Agreement (other than
the provisions of Article VII) shall terminate and be of no further force or
effect and the Trust shall wind up and dissolve, (i) upon the maturity or
other liquidation of the last remaining Receivable and the disposition of any
amounts received upon such maturity or liquidation or (ii) upon the payment to
the Noteholders and the Certificateholders of all amounts required to be paid
to them pursuant to the terms of the Indenture, the Sale and Servicing
Agreement and Article V. Any Insolvency Event, liquidation, dissolution, death
or incapacity with respect to any Certificateholder or Certificate Owner shall
not (x) operate to terminate this Agreement or the Trust, nor (y) entitle such
Certificateholder's legal representatives or heirs to claim an accounting or
to take any action or proceeding in any court for a partition or winding up of
all or any part of the Trust or Owner Trust Estate nor (z) otherwise affect
the rights, obligations and liabilities of the parties hereto. Upon
dissolution of the Trust, the Owner Trustee shall wind up the business and
affairs of the Trust as required by Section 3808 of the Business Trust
Statute.
(b) Except as provided in Section 8.1(a), neither the Depositor nor
any Certificateholder shall be entitled to revoke or terminate the Trust.
(c) Notice of any termination of the Trust, specifying the Payment
Date upon which the Certificateholders shall surrender their Certificates to
the Certificate Paying Agent for payment of the final distribution and
cancellation, shall be given by the Owner Trustee by letter to
Certificateholders mailed within five (5) Business Days of receipt of notice
of such termination from the Servicer, stating (i) the Payment Date upon or
with respect to which final payment of the Certificates shall be made upon
presentation and surrender of the Certificates at the office of the
Certificate Paying Agent therein designated, (ii) the amount of any such final
payment (after reservation of sums sufficient to pay all claims and
obligations, if any, known to the Owner Trustee and payable by the Trust) and
(iii) that the Record Date otherwise applicable to such Payment Date is not
applicable, payments being made only upon presentation and surrender of the
Certificates at the office of the Certificate Paying Agent therein specified.
The Owner Trustee shall give such notice to the Certificate Registrar (if
other than the Owner Trustee) and the Certificate Paying Agent at the time
such notice is given to Certificateholders. Upon presentation and surrender of
the Certificates, the Certificate Paying Agent shall cause to be distributed
to Certificateholders amounts distributable on such Payment Date pursuant to
Section 5.2. Upon the satisfaction and discharge of the Indenture, and receipt
of a certificate from the Indenture Trustee stating that all Noteholders have
been paid in full and that the Indenture Trustee is aware of no claims
remaining against the Trust in respect of the Indenture and the Notes, the
Owner Trustee, in the absence of actual knowledge of any other claim against
the Trust, shall be deemed to have made reasonable provision to pay all claims
and obligations (including conditional, contingent or unmatured obligations)
for purposes of Section 3808(e) of the Business Trust Statute.
In the event that all of the Certificateholders shall not surrender
their Certificates for cancellation within six (6) months after the date
specified in the above mentioned written notice, the Owner Trustee shall give
a second written notice to the remaining Certificateholders to surrender their
Certificates for cancellation and receive the final distribution with respect
thereto. If within one year after the second notice all the Certificates shall
not have been surrendered for cancellation, the Owner 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 this Agreement. Subject to applicable
escheat laws, any funds remaining in the Trust after exhaustion of such
remedies shall be distributed by the Owner Trustee to the Depositor.
(d) Upon final distribution of any funds remaining in the Trust, the
Owner Trustee shall cause the Certificate of Trust to be cancelled by filing a
certificate of cancellation with the Secretary of State in accordance with the
provisions of Section 3810(c) of the Business Trust Statute.
SECTION 8.2. Prepayment of Certificates. (a) The Certificates shall
be prepaid in whole, but not in part, at the direction of the Servicer
pursuant to Section 8.1 of the Sale and Servicing Agreement, on any Payment
Date on which the Servicer exercises its option to purchase the assets of the
Trust pursuant to said Section 8.1, and the amount paid by the Servicer shall
be treated as collections of Receivables and applied to pay the unpaid
principal amount of the Notes and the Certificate Balance plus accrued and
unpaid interest (including any overdue interest, to the extent lawful)
thereon. The Servicer shall furnish the Rating Agencies and the Owner Trustee
notice of such prepayment. If the Certificates are to be prepaid pursuant to
this Section 8.2(a), the Servicer shall furnish notice of such election to the
Owner Trustee not later than forty (40) days prior to the Prepayment Date and
the Trust shall deposit by 10:00 A.M. (New York City time) on the Prepayment
Date in the Certificate Distribution Account the Prepayment Price of the
Certificates to be redeemed, whereupon all such Certificates shall be due and
payable on the Prepayment Date.
(b) Notice of prepayment under Section 8.2(a) shall be given by the
Owner Trustee by first-class mail, postage prepaid, or by facsimile mailed or
transmitted immediately following receipt of notice from the Trust or Servicer
pursuant to Section 8.2(a), but not later than thirty (30) days prior to the
applicable Prepayment Date, to each Certificateholder as of the close of
business on the Record Date preceding the applicable Prepayment Date, at such
Certificateholder's address or facsimile number appearing in the Certificate
Register.
All notices of prepayment shall state:
(i) the Prepayment Date;
(ii) the Prepayment Price; and
(iii) the place where such Certificates are to be surrendered
for payment of the Prepayment Price (which shall be the office or agency of
the Owner Trustee to be maintained as provided in Section 3.8).
Notice of prepayment of the Certificates shall be given by the Owner
Trustee in the name and at the expense of the Trust. Failure to give notice of
prepayment, or any defect therein, to any Certificateholder shall not impair
or affect the validity of the prepayment of any other Certificate.
(c) Following notice of prepayment as required by Section
8.2(b), the Certificates shall on the Prepayment Date be paid by the Trust at
the Prepayment Price and (unless the Trust shall default in the payment of the
Prepayment Price) no interest shall accrue on the Prepayment Price for any
period after the date to which accrued interest is calculated for purposes of
calculating the Prepayment Price. Following payment in full of the Prepayment
Price, this Agreement and the Trust shall terminate.
ARTICLE IX
SUCCESSOR OWNER TRUSTEES AND ADDITIONAL OWNER TRUSTEES
SECTION 9.1. Eligibility Requirements for Owner Trustee. (a) The
Owner Trustee shall at all times (i) be authorized to exercise corporate trust
powers; (ii) have a combined capital and surplus of at least $50,000,000 and
shall be subject to supervision or examination by federal or state
authorities; and (iii) shall have (or shall have a parent that has) a
[long-term] debt rating of investment grade by [each of the Rating Agencies]
or be otherwise acceptable to the Rating Agencies. If such corporation 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 9.1, the combined capital and surplus of such
corporation shall be deemed to be its combined capital and surplus as set
forth in its most recent report of condition so published. In case at any time
the Owner Trustee shall cease to be eligible in accordance with the provisions
of this Section 9.1, the Owner Trustee shall resign immediately in the manner
and with the effect specified in Section 9.2.
(b) The Owner Trustee shall at all times be a corporation satisfying
the provisions of Section 3807(a) of the Business Trust Statute.
SECTION 9.2. Resignation or Removal of Owner Trustee. (a) The Owner
Trustee may at any time resign and be discharged from the trusts hereby
created by giving written notice thereof to the Administrator. Upon receiving
such notice of resignation, the Administrator shall promptly appoint a
successor Owner Trustee by written instrument, in duplicate, one copy of which
instrument shall be delivered to the resigning Owner Trustee and one copy to
the applicable successor Owner Trustee. If no successor Owner Trustee shall
have been so appointed and have accepted appointment within thirty (30) days
after the giving of such notice of resignation, the resigning Owner Trustee
may petition any court of competent jurisdiction for the appointment of a
successor Owner Trustee; provided, however, that such right to appoint or to
petition for the appointment of any such successor shall in no event relieve
the resigning Owner Trustee from any obligations otherwise imposed on it under
the Basic Documents until such successor has in fact assumed such appointment.
(b) If at any time the Owner Trustee shall cease to be eligible in
accordance with the provisions of Section 9.1 or resigns pursuant to Section
9.2 of this Agreement and the ineligible or non-resigning Owner Trustee shall
fail to resign after written request therefor by the Administrator, or if at
any time the Owner Trustee shall be legally unable to act, or if at any time
an Insolvency Event with respect to the Owner Trustee shall have occurred and
be continuing, then the Administrator may remove the Owner Trustee. If the
Administrator shall remove the Owner Trustee under the authority of the
immediately preceding sentence, the Administrator shall promptly appoint a
successor Owner Trustee, by written instrument, in duplicate, one copy of
which instrument shall be delivered to the outgoing Owner Trustee so removed
and one copy to the successor Owner Trustee, and shall pay all fees owed to
the outgoing Owner Trustee.
(c) Any resignation or removal of an Owner Trustee and appointment of
a successor Owner Trustee pursuant to any of the provisions of this Section
9.2 shall not become effective until acceptance of appointment by the
successor Owner Trustee pursuant to Section 9.3, payment of all fees and
expenses owed to the outgoing Owner Trustee and the filing of a certificate of
amendment to the Certificate of Trust if required by the Business Trust
Statute. The Administrator shall provide notice of such resignation or removal
of the Owner Trustee to the Certificateholders, the Indenture Trustee, the
Noteholders and each of the Rating Agencies.
SECTION 9.3. Successor Owner Trustee. (a) Any successor Owner Trustee
appointed pursuant to Section 9.2 shall execute, acknowledge and deliver to
the Administrator and to its predecessor Owner Trustee an instrument accepting
such appointment under this Agreement. Upon the resignation or removal of the
predecessor Owner Trustee becoming effective pursuant to Section 9.2, such
successor Owner Trustee, without any further act, deed or conveyance, shall
become fully vested with all the rights, powers, duties, and obligations of
its predecessor under this Agreement, with like effect as if originally named
as Owner Trustee. The predecessor Owner Trustee shall, upon payment of its
fees and expenses, deliver to the successor Owner Trustee all documents and
statements and monies held by it under this Agreement, and the Administrator
and the predecessor Owner 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 Owner Trustee all such rights, powers,
duties, and obligations.
(b) No successor Owner Trustee shall accept appointment as provided
in this Section 9.3 unless, at the time of such acceptance, such successor
Owner Trustee shall be eligible pursuant to Section 9.1.
(c) Upon acceptance of appointment by a successor Owner Trustee
pursuant to this Section 9.3, the Administrator shall mail notice of the
successor of such Owner Trustee to all Certificateholders, the Indenture
Trustee, the Noteholders and the Rating Agencies. If the Administrator shall
fail to mail such notice within ten (10) after acceptance of appointment by
the successor Owner Trustee, the successor Owner Trustee shall cause such
notice to be mailed at the expense of the Administrator.
(d) Any successor Owner Trustee appointed hereunder shall file the
amendments to the Certificate of Trust with the Secretary of State identifying
the name and principal place of business of such successor Owner Trustee in
the State of Delaware.
SECTION 9.4. Merger or Consolidation of Owner Trustee. Any
corporation into which the Owner Trustee may be merged or converted or with
which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Owner Trustee shall be a party, or
any corporation succeeding to all or substantially all of the corporate trust
business of the Owner Trustee, shall, without the execution or filing of any
instrument or any further act on the part of any of the parties hereto,
anything herein to the contrary notwithstanding, be the successor of the Owner
Trustee hereunder; provided that such corporation shall be eligible pursuant
to Section 9.1; and provided further, that (i) the Owner Trustee shall mail
notice of such merger or consolidation to the Rating Agencies not less than
fifteen (15) days prior to the effective date thereof and (ii) the Owner
Trustee shall file an amendment to the Certificate of Trust as required by
Section 9.3.
SECTION 9.5. Appointment of Co-Trustee or Separate Trustee. (a)
Notwithstanding any other provisions of this Agreement, at any time, for the
purpose of meeting any legal requirements of any jurisdiction in which any
part of the Owner Trust Estate or any Financed Vehicle may at the time be
located, the Administrator and the Owner Trustee acting jointly shall have the
power and shall execute and deliver all instruments to appoint one or more
Persons approved by the Owner Trustee to act as co-trustee, jointly with the
Owner Trustee, or separate trustee or separate trustees, of all or any part of
the Trust, and to vest in such Person, in such capacity, such title to the
Owner Trust Estate, or any part thereof, and, subject to the other provisions
of this Section 9.5, such powers, duties, obligations, rights and trusts as
the Administrator and the Owner Trustee may consider necessary or desirable.
If the Administrator shall not have joined in such appointment within fifteen
(15) days after the receipt by it of a request so to do, the Owner Trustee
alone shall have the power to make such appointment. No co-trustee or separate
trustee under this Agreement shall be required to meet the terms of
eligibility as a successor trustee pursuant to Section 9.1 and no notice of
the appointment of any co-trustee or separate trustee shall be required
pursuant to Section 9.3.
(b) 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 Owner Trustee shall be conferred upon
and exercised or performed by the Owner 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
Owner 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, the Owner 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 Owner Trustee;
(ii) no trustee under this Agreement shall be personally
liable by reason of any act or omission of any other trustee under
this Agreement; and
(iii) the Administrator and the Owner Trustee acting jointly
may at any time accept the resignation of or remove any separate
trustee or co-trustee.
(c) Any notice, request or other writing given to the Owner 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 this Agreement
and the conditions of this Article IX. Each separate trustee and co-trustee,
upon its acceptance of the trusts conferred, shall be vested with the estates
or property specified in its instrument of appointment, either jointly with
the Owner Trustee or separately, as may be provided therein, subject to all
the provisions of this Agreement, specifically including every provision of
this Agreement relating to the conduct of, affecting the liability of, or
affording protection to, the Owner Trustee. Each such instrument shall be
filed with the Owner Trustee and a copy thereof given to the Administrator.
(d) Any separate trustee or co-trustee may at any time appoint the
Owner Trustee as 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 this 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 Owner Trustee, to the extent permitted by law, without the
appointment of a new or successor trustee.
SECTION 9.6. Compliance with Business Trust Statute. Notwithstanding
anything herein to the contrary, the Trust shall at all times have at least
one trustee which meets the requirements of Section 3807(a) of the Business
Trust Statute.
ARTICLE X
MISCELLANEOUS
SECTION 10.1. Supplements and Amendments. (a) This Agreement may be
amended by the Depositor and the Owner Trustee, with prior written notice to
the Rating Agencies, without the consent of any of the Noteholders or the
Certificateholders, to cure any ambiguity, to correct or supplement any
provisions in this Agreement inconsistent with any other provision of this
Agreement or for the purpose of adding any provisions to or changing in any
manner or eliminating any of the provisions in this Agreement; provided,
however, that such action shall not, as evidenced by an Opinion of Counsel
satisfactory to the Owner Trustee and the Indenture Trustee, adversely affect
in any material respect the interests of any Noteholder or Certificateholder;
and provided further that an Opinion of Counsel shall be furnished to the
Indenture Trustee and the Owner Trustee to the effect that such amendment (A)
will not materially adversely affect the federal or any Applicable Tax State
income or franchise taxation of any outstanding Note or Certificate, or any
Noteholder or Certificateholder and (B) will not cause the Trust to be taxable
as a corporation for federal or any Applicable Tax State income or franchise
tax purposes.
(b) This Agreement may also be amended from time to time by the
Depositor and the Owner Trustee, with prior written notice to the Rating
Agencies, with the consent of (i) the holders of Notes evidencing not less
than a majority of the principal amount of the Notes Outstanding and (ii) the
holders of Certificates evidencing not less than a majority of the Certificate
Balance, for the purpose of adding any provisions to or changing in any manner
or eliminating any of the provisions of this Agreement or of modifying in any
manner the rights of the Noteholders or the Certificateholders; provided,
however, that no such amendment shall (i) increase or reduce in any manner the
amount of, or accelerate or delay the timing of, or change the allocation or
priority of, collections of payments on Receivables or distributions that are
required to be made for the benefit of the Noteholders or the
Certificateholders, or (ii) reduce the aforesaid percentage of the principal
amount of the Notes Outstanding and the Certificate Balance required to
consent to any such amendment, without the consent of all the Noteholders and
Certificateholders affected thereby; and provided further, that an Opinion of
Counsel shall be furnished to the Indenture Trustee and the Owner Trustee to
the effect that such amendment (A) will not materially adversely affect the
federal or any Applicable Tax State income or franchise taxation of any
outstanding Note or Certificate, or any Noteholder or Certificateholder and
(B) will not cause the Trust to be taxable as a corporation for federal or any
Applicable Tax State income or franchise tax purposes.
(c) Promptly after the execution of any such amendment, the Owner
Trustee shall furnish written notification of the substance of such amendment
or consent to each Certificateholder, the Indenture Trustee and each of the
Rating Agencies.
(d) It shall not be necessary for the consent of Certificateholders,
the Noteholders or the Indenture Trustee pursuant to this Section 10.1 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 any other consents of Certificateholders
provided for in this Agreement or in any other Basic Document) and of
evidencing the authorization of the execution thereof by Certificateholders
shall be subject to such reasonable requirements as the Owner Trustee may
prescribe.
(e) Promptly after the execution of any amendment to the Certificate
of Trust, the Owner Trustee shall cause the filing of such amendment with the
Secretary of State.
(f) Prior to the execution of any amendment to this Agreement or the
Certificate of Trust, the Owner 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 this Agreement. The Owner Trustee may, but shall
not be obligated to, enter into any such amendment which affects the Owner
Trustee's own rights, duties or immunities under this Agreement or otherwise.
(g) In connection with the execution of any amendment to this
Agreement or any amendment to any other agreement to which the Trust is a
party, the Owner Trustee shall be entitled to receive and conclusively rely
upon an Opinion of Counsel to the effect that such amendment is authorized or
permitted by the Basic Documents and that all conditions precedent in the
Basic Documents for the execution and delivery thereof by the Trust or the
Owner Trustee, as the case may be, have been satisfied.
SECTION 10.2. No Legal Title to Owner Trust Estate in
Certificateholders. The Certificateholders shall not have legal title to any
part of the Owner Trust Estate. The Certificateholders shall be entitled to
receive distributions with respect to their beneficial interests therein only
in accordance with Articles V and VIII. No transfer, by operation of law or
otherwise, of any right, title, or interest of the Certificateholders to and
in their beneficial interest in the Owner Trust Estate shall operate to
terminate this Agreement or the trusts hereunder or entitle any transferee to
an accounting or to the transfer to it of legal title to any part of the Owner
Trust Estate.
SECTION 10.3. Limitation on Rights of Others. The provisions of this
Agreement are solely for the benefit of the Owner Trustee, the Depositor, the
Administrator, the Certificateholders, the Servicer and, to the extent
expressly provided herein, the Indenture Trustee and the Noteholders, and
nothing in this Agreement, whether express or implied, shall be construed to
give to any other Person any legal or equitable right, remedy or claim in the
Owner Trust Estate or under or in respect of this Agreement or any covenants,
conditions or provisions contained herein.
SECTION 10.4. Notices. (a) Unless otherwise expressly specified or
permitted by the terms hereof, all notices shall be in writing and shall be
deemed given upon receipt by the intended recipient or three (3) Business Days
after mailing if mailed by certified mail, postage prepaid (except that notice
to the Owner Trustee shall be deemed given only upon actual receipt by the
Owner Trustee), if to the Owner Trustee, addressed to the respective Corporate
Trust Office; if to the Depositor, addressed to USAA Federal Savings Bank at
the address of its principal executive office first above written; or, as to
each party, at such other address as shall be designated by such party in a
written notice to each other party.
(b) Any notice required or permitted to be given to a
Certificateholder shall be given by first-class mail, postage prepaid, at the
address of such Certificateholder as shown in the Certificate Register. Any
notice so mailed within the time prescribed in this Agreement shall be
conclusively presumed to have been duly given, whether or not the
Certificateholder receives such notice.
SECTION 10.5. Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate
or render unenforceable such provision in any other jurisdiction.
SECTION 10.6. Separate Counterparts. This Agreement may be executed
by the parties hereto in separate counterparts, each of which when so executed
and delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
SECTION 10.7. Successors and Assigns. All covenants and agreements
contained herein shall be binding upon, and inure to the benefit of, the
Depositor, the Owner Trustee and its successors and each Certificateholder and
its successors and permitted assigns, all as herein provided. Any request,
notice, direction, consent, waiver or other instrument or action by a
Certificateholder shall bind the successors and assigns of such
Certificateholder.
SECTION 10.8. No Petition. The Owner Trustee (not in its individual
capacity but solely as Owner Trustee), by entering into this Agreement, and
each Certificateholder, by accepting a Certificate, hereby covenants and
agrees that it will not, until after the Notes have been paid in full,
institute against the Trust, or join in any institution against the Trust of,
any bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings, or other proceedings under any United States federal or State
bankruptcy or similar law in connection with any obligations relating to the
Certificates, the Notes, this Agreement or any of the other Basic Documents.
SECTION 10.9. No Recourse. Each Certificateholder, by accepting a
Certificate, acknowledges that such Certificateholder's Certificates represent
beneficial interests in the Trust only and do not represent interests in or
obligations of the Depositor, the Seller, the Servicer, the Administrator, the
Owner Trustee, the Indenture Trustee or any Affiliate thereof, and no recourse
may be had against such parties or their assets, except as may be expressly
set forth or contemplated in this Agreement, the Certificates or the other
Basic Documents.
SECTION 10.10. Headings. The headings of the various Articles and
Sections herein are for convenience of reference only and shall not define or
limit any of the terms or provisions hereof.
SECTION 10.11. Governing Law. This Agreement shall be construed in
accordance with the laws of the State of Delaware and the obligations, rights
and remedies of the parties hereunder shall be determined in accordance with
such laws.
SECTION 10.12. Sale and Servicing Agreement Obligations.
Notwithstanding any other provision of this Agreement, the Owner Trustee
agrees that it will comply with its obligations under Sections 3.1 and 4.1 of
the Sale and Servicing Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective officers hereunto duly authorized, as of
the day and year first above written.
USAA Federal Savings Bank,
as Depositor
By: _________________________
Name:
Title:
__________________,
as Owner Trustee
By: _________________________
Name:
Title:
EXHIBIT A
[FORM OF CLASS B CERTIFICATE]
[UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER
OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER
NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT
IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.]
THE PRINCIPAL OF THIS CERTIFICATE IS PAYABLE IN INSTALLMENTS AS SET
FORTH IN THE TRUST AGREEMENT REFERRED TO BELOW. ACCORDINGLY, THE OUTSTANDING
PRINCIPAL AMOUNT OF THIS CERTIFICATE AT ANY TIME MAY BE LESS THAN THE AMOUNT
SHOWN ON THE FACE HEREOF.
NUMBER $
R-[ ] CUSIP NO.
USAA AUTO OWNER TRUST __________
CLASS B ____% ASSET BACKED CERTIFICATE
evidencing a beneficial interest in the Trust, as defined below. The property
of the Trust includes a pool of motor vehicle retail installment loans,
secured by security interests in the motor vehicles financed thereby, conveyed
by USAA Federal Savings Bank to the Trust. The property of the Trust has been
pledged to the Indenture Trustee pursuant to the Indenture to secure the
payment of the Notes issued thereunder.
(This Certificate is not a deposit, does not represent an interest in or
obligation of USAA Federal Savings Bank or any of its Affiliates and is not
insured by the Federal Deposit Insurance Corporation or any other entity.)
THIS CERTIFIES THAT _____________________ is the registered owner of
__________ DOLLARS principal amount of nonassessable, fully-paid
___________________ Class B ____% Asset Backed Certificates of USAA Auto Owner
Trust __________ (the "Trust") formed by USAA Federal Savings Bank, a
federally chartered savings association (the "Depositor"). The Class B _____%
Asset Backed Certificates have an aggregate Initial Certificate Balance of
$___________ and bear interest at a rate of ___% per annum (the "Class B
Rate").
The Trust is governed pursuant to an Amended and Restated Trust
Agreement, dated as of _________________ (as from time to time amended,
supplemented or otherwise modified and in effect, the "Trust Agreement"),
between the Depositor and __________________, not in its individual capacity
but solely as owner trustee (the "Owner Trustee"), a summary of certain of the
pertinent provisions of which is set forth below. To the extent not otherwise
defined herein, the capitalized terms used herein have the meanings assigned
to them in the Trust Agreement.
This Certificate is one of the duly authorized Certificates
designated as "Class B ___% Asset Backed Certificates" (herein called the
"Class B Certificates" or "Certificates") which are issued under and are
subject to the terms, provisions and conditions of the Trust Agreement, to
which Trust Agreement the holder of this Certificate by virtue of the
acceptance hereof assents and by which such Certificateholder is bound. Also
issued under the Indenture, dated as of _________________ (as from time to
time amended, supplemented or otherwise modified and in effect, the
"Indenture"), between the Trust and ______________________, as indenture
trustee (in such capacity, the "Indenture Trustee"), are the Notes designated
as "Class A-1 ____% Asset Backed Notes", "Class A-2 ____% Asset Backed Notes"
and "Class A-3 ____% Asset Backed Notes" (collectively, the "Notes"). The
property of the Trust includes (i) a pool of motor vehicle retail installment
loans for new and used automobiles and light trucks and certain rights and
obligations thereunder (the "Receivables"); (ii) the security interests in the
Financed Vehicles granted by Obligors pursuant to the Receivables and any
other interest of the Trust in the Financed Vehicles; (iii) rights to proceeds
from claims on certain physical damage, credit life, credit disability or
other insurance policies, if any, covering Financed Vehicles or Obligors; (iv)
all of the Seller's rights to the Receivable Files; (v) such amounts as from
time to time may be held in one or more accounts maintained pursuant to the
Sale and Servicing Agreement, dated as of _________________ (as from time to
time amended, supplemented or otherwise modified and in effect, the "Sale and
Servicing Agreement"), by and among the Trust, the Depositor, as seller (in
such capacity, the "Seller"), and USAA Federal Savings Bank, as servicer (the
"Servicer"); (vi) payments and proceeds with respect to the Receivables held
by the Servicer; (vii) all property (including the right to receive
Liquidation Proceeds) securing a Receivable (other than a Receivable
repurchased by the Servicer or purchased by the Seller); (viii) rebates of
premiums and other amounts relating to insurance policies and other items
financed under the Receivables in effect as of the Cut-off Date; and (ix) any
and all proceeds of the foregoing. THE RIGHTS OF THE TRUST IN THE FOREGOING
PROPERTY OF THE TRUST HAVE BEEN PLEDGED TO THE INDENTURE TRUSTEE TO SECURE THE
PAYMENT OF THE NOTES.
Under the Trust Agreement, there will be distributed on the _________
day of each month, or if such _________ day is not a Business Day, the next
Business Day (each, a "Payment Date"), commencing _____________, to the Person
in whose name this Certificate is registered at the close of business on the
last day of the preceding month (the "Record Date") such Certificateholder's
percentage interest in the amount to be distributed to Class B
Certificateholders on such Payment Date pursuant to the Trust Agreement.
Following the occurrence and during the continuation of certain events of
default under the Indenture which has resulted in an acceleration of the
Notes, no distributions of principal or interest will be made on the
Certificates until all principal and interest on the Notes has been paid in
full.
THE HOLDER OF THIS CERTIFICATE ACKNOWLEDGES AND AGREES THAT ITS
RIGHTS TO RECEIVE DISTRIBUTIONS IN RESPECT OF THIS CERTIFICATE ARE
SUBORDINATED TO THE RIGHTS OF THE NOTEHOLDERS AS DESCRIBED IN THE SALE AND
SERVICING AGREEMENT, THE INDENTURE AND THE TRUST AGREEMENT.
It is the intent of the Depositor, the Servicer and the
Certificateholders that, for purposes of federal income, state and local
franchise and income tax and any other income taxes, the Trust will be treated
as a partnership and the Certificateholders (including the Depositor) will be
treated as partners in that partnership. The Depositor and the other
Certificateholders by acceptance of a Certificate agree to treat, and to take
no action inconsistent with the treatment of, the Certificates for such tax
purposes as partnership interests in the Trust.
Each Certificateholder, by its acceptance of a Certificate, covenants
and agrees that such Certificateholder will not, until after the Notes have
been paid in full, institute against the Trust, or join in any institution
against the Trust of, any bankruptcy, reorganization, arrangement, insolvency
or liquidation proceedings, or other proceedings under any United States
federal or state bankruptcy or similar law in connection with any obligations
relating to the Notes, the Certificates, the Trust Agreement or any of the
other Basic Documents.
Distributions on this Certificate will be made as provided in the
Trust Agreement by the Owner Trustee or the Certificate Paying Agent by wire
transfer or 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 as otherwise provided in the Trust
Agreement and notwithstanding the above, the final distribution on this
Certificate will be made after due notice by the Owner Trustee of the pendency
of such distribution and only upon presentation and surrender of this
Certificate at the office or agency maintained for the purpose by the Owner
Trustee in New York, New York.
Reference is hereby made to the further provisions of this
Certificate set forth on the reverse hereof, which further provisions shall
for all purposes have the same effect as if set forth at this place.
Unless the certificate of authentication hereon shall have been
executed by an authorized officer of the Owner Trustee, by manual signature,
this Certificate shall not entitle the Certificateholder hereof to any benefit
under the Trust Agreement or be valid for any purpose.
This Certificate shall be construed in accordance with the laws of
the State of Delaware and the obligations, rights and remedies of the parties
hereunder shall be determined in accordance with such laws.
IN WITNESS WHEREOF, the Owner Trustee, on behalf of the Trust and not
in its individual capacity, has caused this Certificate to be duly executed.
USAA AUTO OWNER TRUST
By: __________________,
not in its individual
capacity but solely as
Owner Trustee
By: __________________,
Authorized Officer
OWNER TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Certificates referred to in the within-mentioned
Trust Agreement.
Dated: ____________________
_____________________,
not in its individual capacity
but solely as Owner Trustee
By: _______________________
Authorized Officer
[REVERSE OF CERTIFICATE]
The Certificates do not represent an obligation of, or an interest
in, the Depositor, the Seller, the Servicer, the Administrator, the Owner
Trustee or any Affiliates of any of them and no recourse may be had against
such parties or their assets, except as may be expressly set forth or
contemplated herein, in the Trust Agreement or in the other Basic Documents.
In addition, this Certificate is not guaranteed by any governmental agency or
instrumentality or by any other entity and is limited in right of payment to
certain collections with respect to the Receivables (and certain other
amounts), all as more specifically set forth herein and in the Sale and
Servicing Agreement.
The Trust Agreement permits, with certain exceptions therein
provided, the amendment thereof and the modification of the rights and
obligations of the Depositor and the rights of the Certificateholders under
the Trust Agreement at any time by the Depositor and the Owner Trustee with
the consent of the Noteholders and the Certificateholders evidencing not less
than a majority of the principal amount of the Notes Outstanding and the
Certificate Balance, respectively. Any such consent by the holder of this
Certificate shall be conclusive and binding on such Certificateholder and on
all future holders of this Certificate and of any Certificate issued upon the
registration of Transfer hereof or in exchange herefor or in lieu hereof
whether or not notation of such consent is made upon this Certificate. The
Trust Agreement also permits the amendment thereof, in certain limited
circumstances, without the consent of any of the Certificateholders.
As provided in the Trust Agreement and subject to certain limitations
therein set forth, the Transfer of the Certificates are registrable in the
Certificate Register upon surrender of this Certificate for registration of
Transfer at the offices or agencies maintained by ___________________________
in its capacity as Certificate Registrar, or by any successor Certificate
Registrar, in New York, New York, accompanied by a written instrument of
transfer in form satisfactory to the Owner Trustee and the Certificate
Registrar duly executed by the holder hereof or such holder's attorney duly
authorized in writing, and thereupon one or more new Certificates of
authorized denominations evidencing the same aggregate interest in the Trust
will be issued to the designated transferee.
The Certificates are issuable as registered Certificates without
coupons in denominations of at least $1,000 and in integral multiples of
$1,000 in excess thereof. Certificates are exchangeable for new Certificates
and authorized denominations evidencing the same aggregate denomination, as
requested by the Certificateholder surrendering the same. No service charge
will be made for any such registration of Transfer or exchange, but the Owner
Trustee or the Certificate Registrar may require payment of a sum sufficient
to cover any tax or governmental charge payable in connection therewith.
The Owner Trustee, the Certificate Registrar and any agent of the
Owner Trustee or the Certificate Registrar may treat the Person in whose name
this Certificate is registered as the owner hereof for all purposes, and none
of the Owner Trustee, the Certificate Registrar or any such agent shall be
affected by any notice to the contrary.
The Certificates may be acquired only by an entity that is either:
(a) not, and each account (if any) for which it is purchasing the Certificates
is not (i) an employee benefit plan (as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")) that is
subject to Title I of ERISA, (ii) a plan described in Section 4975(e)(1) of
the Internal Revenue Code of 1986, as amended (the "Code"), that is subject to
Section 4975 of the Code, (iii) a governmental plan, as defined in Section
3(32) of ERISA, subject to any federal, State or local law which is, to a
material extent, similar to the provisions of Section 406 of ERISA or Section
4975 of the Code, (iv) an entity whose underlying assets include plan assets
by reason of a plan's investment in the entity (within the meaning of
Department of Labor Regulation 29 C.F.R. ss. 2510.3-101 or otherwise under
ERISA) or (v) a person investing "plan assets" of any such plan (including
without limitation, for purposes of this clause (v), an insurance company
general account, but excluding any entity registered under the Investment
Company Act of 1940, as amended); or (b) an insurance company acting on behalf
of a general account and (i) on the date of purchase less than 25% of the
assets of such general account (as reasonably determined by it) constitute
"plan assets" for purposes of Title I of ERISA and Section 4975 of the Code,
(ii) the purchase and holding of such Certificates are eligible for exemptive
relief under Sections (I) and (III) of Prohibited Transaction Class Exemption
95-60, and (iii) the purchaser agrees that if, after the purchaser's initial
acquisition of the Certificates, at any time during any calendar quarter 25%
or more of the assets of such general account (as reasonably determined by it
no less frequently than each calendar quarter) constitute "plan assets" for
purposes of Title I of ERISA or Section 4975 of the Code and no exemption or
exception from the prohibited transaction rules applies to the continued
holding of the Certificates under Section 401(c) of ERISA and the final
regulations thereunder or under an exemption or regulation issued by the
United States Department of Labor under ERISA, it will dispose of all
Certificates then held in its general account by the end of the next following
calendar quarter.
In addition, the Certificates may not be acquired by or on behalf of
a Person other than (A) a citizen or resident of the United States, (B) a
corporation or partnership organized in or under the laws of the United States
or any political subdivision thereof, (C) an estate the income of which is
includible in gross income for United States tax purposes, regardless of its
source, (D) a trust with respect to which a U.S. court is able to exercise
primary supervision over the administration of such trust and one or more
Persons meeting the conditions of this paragraph has the authority to control
all substantial decisions of the trust or (E) a Person not described in
clauses (A) through (D) above whose ownership of the Certificates is
effectively connected with such Person's conduct of a trade or business within
the United States (within the meaning of the Code) and who provides the Owner
Trustee and the Depositor with an IRS Form 4224 (and such other
certifications, representations, or opinions of counsel as may be requested by
the Owner Trustee or the Depositor).
The obligations and responsibilities created by the Trust Agreement
and the Trust created thereby shall terminate (i) upon the maturity or other
liquidation of the last remaining Receivable and the disposition of any
amounts received upon such maturity or liquidation or (ii) upon the payment to
the Noteholders and the Certificateholders of all amounts required to be paid
to them pursuant to the Indenture, the Trust Agreement and the Sale and
Servicing Agreement, and upon such termination any remaining assets of the
Trust shall be distributed to the Depositor. The Servicer of the Receivables
may at its option purchase the assets of the Trust at a price specified in the
Sale and Servicing Agreement, and such purchase of the Receivables and other
property of the Trust will effect early retirement of the Notes and the
Certificates; however, such right of purchase is exercisable only as of the
last day of any Collection Period as of which the Pool Balance is less than or
equal to [__]% of the Initial Pool Balance.
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 type name and address, including postal zip code, of assignee)
_________________________________________________________________________
the within Certificate, and all rights thereunder, hereby irrevocably
constituting and appointing
Attorney to transfer said Certificate on the ______________ books of the
Certificate Registrar, with full power of substitution in the premises.
Dated:___________
*/
______________________________
Signature Guaranteed:
*/
______________________________
*/NOTICE: The signature to this assignment must correspond with the name as it
appears upon the face of the within Certificate in every particular, without
alteration, enlargement or any change whatever. Such signature must be
guaranteed by a member firm of the New York Stock Exchange or a commercial
bank or trust company.
EXHIBIT B
FORM OF CERTIFICATE OF TRUST
CERTIFICATE OF TRUST OF
USAA AUTO OWNER TRUST __________
This Certificate of Trust of USAA Auto Owner Trust __________ (the
"Trust"), dated as of _________________, is being duly executed and filed by
___________________________, a ______________________, as owner trustee (the
"Owner Trustee"), to form a business trust under the Delaware Business Trust
Act (12 Delaware Code, ss. 3801 et seq.) (the "Act").
1. Name. The name of the business trust formed hereby is USAA Auto
Owner Trust __________.
2. Owner Trustee. The name and business address of the trustee of the
Trust is _____________________.
3. Effective Date. This Certificate of Trust shall be effective upon
filing.
IN WITNESS WHEREOF, the undersigned, being the sole trustees of the
Trust, have executed this Certificate of Trust as of the date first above
written in accordance with Section 3811(a)(1) of the Act.
__________________, not in its
individual capacity but solely as
Owner Trustee under a Trust Agreement
dated as of _________________
By: _____________________
Name:
Title:
APPENDIX A
Definitions and Usage
<PAGE>
Exhibit 5.1
[Letterhead of Brown & Wood LLP]
August 4, 2000
USAA Federal Savings Bank
10750 McDermott Freeway
San Antonio, Texas 78288
Re: USAA Federal Savings Bank
Registration Statement on Form S-3 (File No. 333-30840)
--------------------------------------------------------
Ladies and Gentlemen:
We have acted as special counsel for you in connection with the
Registration Statement on Form S-3 (file no. 333-30840) (the "Registration
Statement"), filed with the Securities and Exchange Commission under the
Securities Act of 1933, as amended (the "Act"), for the registration under the
Act of $2,000,000,000 aggregate principal amount of asset backed notes (the
"Notes") and asset backed certificates (the "Certificates" and, together with
the Notes, the "Securities"). Each series of Notes will be issued pursuant to
an indenture substantially in the form filed as an exhibit to the Registration
Statement (an "Indenture") by and between the issuing trust and the indenture
trustee named in the related prospectus supplement. Certain series of
Certificates will be issued pursuant to a pooling and servicing agreement
substantially in the form filed as an exhibit to the Registration Statement
(the "Pooling and Servicing Agreement") by and between a trustee named in the
related prospectus supplement and USAA Federal Savings Bank (the
"Registrant").
We have made such investigation of law as we deemed appropriate and
have examined the proceedings heretofore taken and are familiar with the
procedures proposed to be taken by the Registrant in connection with the
authorization, issuance and sale of the Securities.
Based on the foregoing and subject to the qualifications set forth
below, we are of the opinion that:
1. When a Pooling and Service Agreement has been duly authorized by
all necessary action by the parties thereto and has been duly
executed and delivered by the parties thereto, and when the
Certificates issued pursuant to that Pooling and Service
Agreement have been duly executed, authenticated and delivered
and paid for as described in the related prospectus and
prospectus supplement, such Certificates will be validly issued,
fully paid and non-assessable.
2. When an Indenture has been duly authorized by all necessary
action by the parties thereto and has been duly executed and
delivered by the parties thereto, and the Notes issued pursuant
to such Indenture have been duly executed, authenticated and
delivered and paid for as described in the prospectus
supplement, such Notes will be validly issued and binding
obligations of the issuing trust, fully paid and non-assessable
and subject to applicable bankruptcy, insolvency, reorganization
and similar laws affecting creditors' rights generally and
subject to general principles of equity (regardless of whether
enforcement is sought in a proceeding in equity or at law).
In rendering the foregoing opinions, we have assumed that each party
to the Pooling and Servicing Agreement and the Indenture has full power and
authority to enter into and perform its obligations under those agreements, as
applicable. In addition, we have assumed that the Pooling and Servicing
Agreement, the Certificates, the Indenture and the Notes will be executed and
delivered in substantially the form filed as exhibits to the Registration
Statement with such changes acceptable to us, and that such Certificates and
Notes will be sold as described in the Registration Statement. We express no
opinion as to the laws of any jurisdiction other than the laws of the State of
New York.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to this firm under the heading
"Legal Opinions" in the prospectus forming a part of the Registration
Statement, without implying or admitting that we are "experts" within the
meaning of the Act or the rules and regulations of the Securities and Exchange
Commission issued thereunder with respect to any part of the Registration
Statement, including this exhibit.
Very truly yours,
Brown & Wood LLP
<PAGE>
Exhibit 5.2
August 4, 2000
USAA Federal Savings Bank
10750 McDermott Freeway
San Antonio, Texas 78288
Re: USAA Federal Savings Bank- Registration Statement on Form S-3
(File No. 333-30840)
--------------------------------------------------------------
Ladies and Gentlemen:
We have acted as special Delaware counsel for USAA Federal Savings
Bank (the "Registrant") in connection with the Registration Statement on Form
S-3 (File No. 333-30840) (the "Registration Statement"), filed with the
Securities and Exchange Commission under the Securities Act of 1933, as
amended (the "Act"), for the registration under the Act of Asset Backed Notes
("Notes") and Asset Backed Certificates ("Certificates").
As described in the Registration Statement, the Notes and the
Certificates may be issued from time to time by a Delaware business trust
(each, a "Delaware Trust") to be formed by the Registrant pursuant to a Trust
Agreement (each, a "Trust Agreement") among the Registrant and a trustee named
in the related Trust Agreement, as owner trustee. At your request, this
opinion is being furnished to you.
For purposes of giving the opinions hereinafter set forth, we have
examined and relied upon the form of Trust Agreement (including the form of
Certificate of Trust to be filed pursuant to the Delaware Business Trust Act
and the form of Certificate filed as an exhibit thereto). Terms used herein
without definition have the meanings given to such terms in the Trust
Agreement.
For purposes of this opinion, we have not reviewed any documents
other than the documents listed above, which we believe are all the documents
reasonably necessary for us to have considered for purposes of rendering the
opinions stated herein. We have conducted no independent factual investigation
of our own but rather have relied solely upon the foregoing documents, the
statements and information set forth therein and the additional matters
recited or assumed herein, all of which we assume to be true, complete and
accurate in all material respects.
Based upon the foregoing, and upon our examination of such questions
of law and statutes of the State of Delaware as we have considered necessary
or appropriate, and subject to the assumptions, qualifications, limitations
and exceptions set forth herein, we are of the opinion that:
1. With respect to a Delaware Trust, when (i) the Trust Agreement for
the related Delaware Trust has been duly completed, executed and delivered by
the parties thereto substantially in the form filed as an exhibit to the
Registration Statement, and (ii) the Certificate of Trust for the related
Delaware Trust has been duly executed by the owner trustee and filed with the
Secretary of State of the State of Delaware, the Trust Agreement will
constitute a valid and binding obligation of the Registrant, enforceable in
accordance with its terms.
2. With respect to the Certificates issued by a Delaware Trust, when
(i) the final terms of such Certificates have been duly established and
approved by or pursuant to authorization of the Board of Directors of the
Registrant, (ii) the Trust Agreement relating to such series has been duly
completed, executed and delivered by the parties thereto substantially in the
form filed as an exhibit to the Registration Statement, (iii) the Certificate
of Trust for the related Delaware Trust has been duly executed by the owner
trustee and filed with the Secretary of State of the State of Delaware, and
(iv) such Certificates have been duly authorized, executed and issued by the
related Delaware Trust and authenticated by the owner trustee, and delivered
to and paid for by the purchasers thereof, all in accordance with the terms
and conditions of the related Trust Agreement and in the manner described in
the Registration Statement, such Certificates will be validly issued, fully
paid and (except to the extent otherwise provided in the Trust Agreement)
nonassessable interests in the Trust and entitled to the benefits of the Trust
Agreement.
The foregoing opinion is subject to the following exceptions,
qualifications, limitations and assumptions:
A. This opinion is limited to the laws of the State of Delaware
(excluding the securities laws of the State of Delaware), and we have not
considered and express no opinion on the laws of any other jurisdiction,
including federal laws and rules and regulations relating thereto. Our
opinions are rendered only with respect to Delaware laws and rules,
regulations and orders thereunder which are currently in effect.
B. We have not participated in the preparation of the Registration
Statement (other than this opinion) or any offering materials with respect to
the Certificates and assume no responsibility for their contents (other than
this opinion).
C. The foregoing opinions are subject to (i) applicable bankruptcy,
insolvency, moratorium, reorganization, receivership, fraudulent transfer and
similar laws relating to or affecting the rights and remedies of creditors
generally, (ii) principles of equity (regardless of whether considered and
applied in a proceeding in equity or at law) and (iii) the effect of
applicable public policy on the enforceability of provisions relating to
indemnification or contribution.
We hereby consent to the use of this opinion as an exhibit to the
Registration Statement. In giving the foregoing consent, we do not thereby
admit that we come within the category of Persons whose consent is required
under Section 7 of the Act or the rules and regulations of the Securities and
Exchange Commission thereunder.
Very truly yours,
Richards, Layton & Finger
EAM/TJH
<PAGE>
Exhibit 8.1
[Letterhead of Brown & Wood LLP]
August 4, 2000
USAA Federal Savings Bank
10750 McDermott Freeway
San Antonio, Texas 78288
Re: USAA Federal Savings Bank
Registration Statement on Form S-3 (File No. 333-30840)
-------------------------------------------------------
Ladies and Gentlemen:
We have acted as special federal tax counsel to the trusts referred
to below in connection with the filing by USAA Federal Savings Bank, a
federally chartered savings association (the "Registrant"), of a Registration
Statement on Form S-3 (file no. 333-30840) (such registration statement,
together with the exhibits and any amendments thereto as of the date hereof,
the "Registration Statement") with the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "Act") for the
registration under the Act of asset backed notes (the "Notes") and asset
backed certificates (the "Certificates") in an aggregate principal amount of
up to $2,000,000,000. As described in the Registration Statement, the Notes
and/or the Certificates will be issued from time to time in series.
We have advised the Registrant with respect to certain federal income
tax consequences of the proposed issuance of the Notes and the Certificates.
This advice is summarized under the headings "Summary -- Tax Status" and
"Certain Federal Income Tax Consequences" in the prospectus contained in the
Registration Statement and "Summary -- Tax Status" and "Certain Federal Income
Tax Consequences" in the prospectus supplements contained in the Registration
Statement. Such description does not purport to discuss all possible federal
income tax ramifications of the proposed issuance, but with respect to those
federal income tax consequences that are discussed, in our opinion, the
description is accurate in all material respects.
We hereby consent to the filing of this letter as an exhibit to the
Registration Statement and to a reference to this firm (as special federal tax
counsel to each issuing trust) under the heading "Certain Federal Income Tax
Consequences" in the prospectus contained in the Registration Statement and
"Certain Federal Income Tax Consequences" in the prospectus supplements
contained in the Registration Statement, without implying or admitting that we
are "experts" within the meaning of the Act or the rules and regulations of
the Commission issued thereunder with respect to any part of the Registration
Statement, including this exhibit.
Very truly yours,
Brown & Wood LLP
<PAGE>
Exhibit 25
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
-------------------------
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF
A CORPORATION DESIGNATED TO ACT AS TRUSTEE
-------------------------------------------
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF
A TRUSTEE PURSUANT TO SECTION 305(b)(2) ________
----------------------------------------
THE CHASE MANHATTAN BANK
(Exact name of trustee as specified in its charter)
New York 13-4994650
(State of incorporation (I.R.S. employer
if not a national bank) identification No.)
270 Park Avenue
New York, New York 10017
(Address of principal executive offices) (Zip Code)
William H. McDavid
General Counsel
270 Park Avenue
New York, New York 10017
Tel: (212) 270-2611
(Name, address and telephone number of agent for service)
-------------------------------------------------------------
USAA Owner Trust_____
[each trust issuing the indenture securities]
(Exact name of obligor as specified in its charter)
Delaware Applied For
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
(Address of principal executive offices) (Zip Code)
-------------------------------------------------------------
Asset Backed Notes
(Title of the indenture securities)
-------------------------------------------------------------
GENERAL
Item 1. General Information.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to which
it is subject.
New York State Banking Department, State House, Albany, New York
12110.
Board of Governors of the Federal Reserve System, Washington, D.C.,
20551
Federal Reserve Bank of New York, District No. 2, 33 Liberty Street,
New York, N.Y.
Federal Deposit Insurance Corporation, Washington, D.C., 20429.
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
Item 2. Affiliations with the Obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
Item 16. List of Exhibits
List below all exhibits filed as a part of this Statement of
Eligibility.
1. A copy of the Articles of Association of the Trustee as now in
effect, including the Organization Certificate and the Certificates of
Amendment dated February 17, 1969, August 31, 1977, December 31, 1980,
September 9, 1982, February 28, 1985, December 2, 1991 and July 10, 1996 (see
Exhibit 1 to Form T-1 filed in connection with Registration Statement No.
333-06249, which is incorporated by reference).
2. A copy of the Certificate of Authority of the Trustee to Commence
Business (see Exhibit 2 to Form T-1 filed in connection with Registration
Statement No. 33-50010, which is incorporated by reference. On July 14, 1996,
in connection with the merger of Chemical Bank and The Chase Manhattan Bank
(National Association), Chemical Bank, the surviving corporation, was renamed
The Chase Manhattan Bank).
3. None, authorization to exercise corporate trust powers being
contained in the documents identified above as Exhibits 1 and 2.
4. A copy of the existing By-Laws of the Trustee (see Exhibit 4 to
Form T-1 filed in connection with Registration Statement No. 333-06249, which
is incorporated by reference).
5. Not applicable.
6. The consent of the Trustee required by Section 321(b) of the Act
(see Exhibit 6 to Form T-1 filed in connection with Registration Statement No.
33-50010, which is incorporated by reference. On July 14, 1996, in connection
with the merger of Chemical Bank and The Chase Manhattan Bank (National
Association), Chemical Bank, the surviving corporation, was renamed The Chase
Manhattan Bank).
7. A copy of the latest report of condition of the Trustee, published
pursuant to law or the requirements of its supervising or examining authority.
8. Not applicable.
9. Not applicable.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939 the
Trustee, The Chase Manhattan Bank, a corporation organized and existing under
the laws of the State of New York, has duly caused this statement of
eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of New York and State of New York, on the 12th day
of July 2000.
THE CHASE MANHATTAN BANK
By ______________________
Exhibit 7 to Form T-1
Bank Call Notice
RESERVE DISTRICT NO. 2
CONSOLIDATED REPORT OF CONDITION OF
The Chase Manhattan Bank
of 270 Park Avenue, New York, New York 10017
and Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System,
at the close of business December 31,
1999, in accordance with a call made by the
Federal Reserve Bank of this District pursuant to
the provisions of the Federal Reserve Act.
ASSETS
in Millions Dollar Amounts
Cash and balances due from depoistory institutions:
Noninterest-bearing balances and
currency and coin...................................... $ 13,271
Interest-bearing balances.............................. 30,165
Securities:.................................................
Held to maturity securities 724
Available for sale securities............................... 54,770
Federal funds sold and securities purchased under
agreements to resell................................... 29,694
Loans and lease financing receivaables:.....................
Loans and leases, net of unearned income $132,814
Less: Allowance for loan and lease losses 2,254
Less: Allocated transfer risk reserve.................. 0
--
Loans and leases, net of unearned income,
allowance and reserve.................................. 130,560
Trading Assets.............................................. 53,619
Premises and fixed assets (including capitalized
leases)..................................................... 3,359
Other real estate owned 29
Investments in unconsolidated subsidiaries and
associated companies................................... 186
Customer's liability to this bank on acceptances
outstanding............................................ 608
Intangible assets........................................... 3,659
Other assets................................................ 14,554
-------
TOTAL ASSETS................................................ $332,198
========
LIABILITIES
Deposits
In domestic offices.................................... $102,421
Noninterest bearing.................................... $41,580
Interest-bearing....................................... 60,841
In foreign offices, Edge and Agreement
subsdiaries and IBF's.................................. 108,233
Noninterest-bearing......................................... $6,061
Interest-bearing............................................ 102,172
Available for sale securities............................... 54,770
Federal funds sold and securities sold under
agreements to repurchase............................... 47,425
Demand notes issued to the U.S. Treasury:................... 100
Trading liabilities......................................... 33,626
Other borrowed money (includes mortgage indebtedness
and obligations under capitalized leases):
With a remaning maturity of one year or less........... 3,964
With a remaining maturity of more than one year
through three years................................ 14
With a remaining maturity of more than three years..... 99
Bank's liability on acceptances executed and outstanding 608
Subordinated notes and debentures........................... 5,430
Other liabilities 11,886
TOTAL LIABILITIES........................................... 313,806
EQUITY CAPITAL
Perpetual preferred stock and related surplus 0
Common stock................................................ 1,211
Surplus (exclude all surplus related to preferred stock).... 11,066
Undivided profits and capital reserves...................... 7,376
Net unrealized holding gaining (losses)
on available-for-sale securities............................ (1,277)
Accumulated net gains (losses) on cash flow hedges.......... 0
Cumulative foreign currency translation adjustments......... 16
TOTAL EQUITY CAPITAL........................................ 18,392
-------
TOTAL LIABILITIES AND EQUITY CAPITAL........................ $332,198
===========
I, Joseph L. Sclafani, E.V.P. & Controller of the above-named bank, do hereby
declare that this Report of Condition has been prepared in conformance with
the instructions issued by the appropriate Federal regulatory authority and is
true to the best of my knowledge and belief.
JOSEPH L. SCLAFANI
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us, and to the best of our
knowledge and belief has been prepared in conformance with the in- structions
issued by the appropriate Federal regulatory authority and is true and
correct.
WILLIAM B. HARRISON, JR. )
HELENE L. KAPLAN ) DIRECTORS
HENRY B. SCHACHT )
<PAGE>
Exhibit 99.1
=========================================================================
SALE AND SERVICING AGREEMENT
by and between
USAA AUTO OWNER TRUST _______,
as Issuer,
USAA FEDERAL SAVINGS BANK,
as Seller and Servicer
Dated as of _________________
=========================================================================
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS AND USAGE
ARTICLE II
TRUST PROPERTY
<TABLE>
<CAPTION>
<S> <C>
SECTION 2.1 Conveyance of Trust Property................................................................1
SECTION 2.2 Representations and Warranties of the Seller as to the Receivables..........................1
SECTION 2.3 Repurchase upon Breach......................................................................5
SECTION 2.4 Custody of Receivable Files.................................................................5
SECTION 2.5 Duties of Servicer as Custodian.............................................................6
SECTION 2.6 Instructions; Authority to Act..............................................................7
SECTION 2.7 Custodian's Indemnification.................................................................7
SECTION 2.8 Effective Period and Termination............................................................7
ARTICLE III
ADMINISTRATION AND SERVICING OF RECEIVABLES AND TRUST PROPERTY
SECTION 3.1 Duties of Servicer..........................................................................8
SECTION 3.2 Collection of Receivable Payments...........................................................8
SECTION 3.3 Realization Upon Receivables................................................................9
SECTION 3.4 Allocations of Collections..................................................................9
SECTION 3.5 Maintenance of Security Interests in Financed Vehicles.....................................10
SECTION 3.6 Covenants of Servicer......................................................................10
SECTION 3.7 Purchase of Receivables Upon Breach........................................................10
SECTION 3.8 Servicer Fees..............................................................................11
SECTION 3.9 Servicer's Certificate.....................................................................11
SECTION 3.10 Annual Statement as to Compliance; Notice of Event of Servicing Termination................11
SECTION 3.11 Annual Independent Certified Public Accountant's Report....................................12
SECTION 3.12 Access to Certain Documentation and Information Regarding Receivables......................13
SECTION 3.13 Servicer Expenses..........................................................................13
SECTION 3.14 Insurance..................................................................................13
ARTICLE IV
DISTRIBUTIONS; RESERVE ACCOUNT; STATEMENTS TO NOTEHOLDERS AND CERTIFICATEHOLDERS
SECTION 4.1 Accounts...................................................................................13
SECTION 4.2 Collections................................................................................15
SECTION 4.3 Application of Collections.................................................................15
SECTION 4.4 Advances...................................................................................15
SECTION 4.5 Additional Deposits........................................................................16
SECTION 4.6 Distributions..............................................................................16
SECTION 4.7 Reserve Account............................................................................19
SECTION 4.8 Net Deposits...............................................................................21
SECTION 4.9 Statements to Noteholders and Certificateholders...........................................21
ARTICLE V
THE SELLER
SECTION 5.1 Representations and Warranties of Seller...................................................23
SECTION 5.2 Liability of Seller; Indemnities...........................................................24
SECTION 5.3 Merger or Consolidation of, or Assumption of the Obligations of Seller.....................24
SECTION 5.4 Limitation on Liability of Seller and Others...............................................25
SECTION 5.5 Seller May Own Notes or Certificates.......................................................25
ARTICLE VI
THE SERVICER
SECTION 6.1 Representations of Servicer................................................................25
SECTION 6.2 Indemnities of Servicer....................................................................26
SECTION 6.3 Merger or Consolidation of, or Assumption of the Obligations of Servicer...................28
SECTION 6.4 Limitation on Liability of Servicer and Others.............................................28
SECTION 6.5 Delegation of Duties.......................................................................29
SECTION 6.6 Servicer Not to Resign as Servicer.........................................................29
SECTION 6.7 Servicer May Own Notes or Certificates.....................................................29
ARTICLE VII
SERVICING TERMINATION
SECTION 7.1 Events of Servicing Termination............................................................30
SECTION 7.2 Appointment of Successor Servicer..........................................................31
SECTION 7.3 Repayment of Advances......................................................................32
SECTION 7.4 Notification to Noteholders and Certificateholders.........................................32
SECTION 7.5 Waiver of Past Events of Servicing Termination.............................................33
ARTICLE VIII
TERMINATION
SECTION 8.1 Optional Purchase of All Receivables.......................................................33
SECTION 8.2. Succession Upon Satisfaction and Discharge of Indenture....................................34
ARTICLE IX
MISCELLANEOUS PROVISIONS
SECTION 9.1 Amendment..................................................................................34
SECTION 9.2 Protection of Title to Trust Property......................................................35
SECTION 9.3 Governing Law..............................................................................37
SECTION 9.4 Notices....................................................................................37
SECTION 9.5 Severability of Provisions.................................................................38
SECTION 9.6 Assignment.................................................................................38
SECTION 9.7 Further Assurances.........................................................................38
SECTION 9.8 No Waiver; Cumulative Remedies.............................................................38
SECTION 9.9 Third-Party Beneficiaries..................................................................39
SECTION 9.10 Actions by Noteholders or Certificateholders...............................................39
SECTION 9.11 Limitation of Liability of Owner Trustee and Indenture Trustee.............................39
SECTION 9.12 Savings Clause.............................................................................40
Schedule A Schedule of Receivables...................................................................A-1
Schedule B Location of Receivable Files .............................................................B-1
Appendix A Definitions and Usage....................................................................AA-1
</TABLE>
SALE AND SERVICING AGREEMENT, dated as of _________________ (as from
time to time amended, supplemented or otherwise modified and in effect, this
"Agreement"), by and between USAA AUTO OWNER TRUST _______ (the "Issuer"), a
Delaware business trust, and USAA FEDERAL SAVINGS BANK, a federally chartered
savings association, as seller (the "Seller") and servicer (the "Servicer").
WHEREAS, the Issuer desires to purchase a portfolio of receivables
and related property consisting of motor vehicle installment loan contracts
generated by USAA Federal Savings Bank in the ordinary course of its business;
WHEREAS, the Seller is willing to sell such portfolio of receivables
and related property to the Issuer; and
WHEREAS, USAA Federal Savings Bank is willing to service such
receivables on behalf of the Issuer;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto,
intending to be legally bound, agree as follows:
ARTICLE I
DEFINITIONS AND USAGE
Except as otherwise specified herein or as the context may otherwise
require, capitalized terms used but not otherwise defined herein are defined
in Appendix A hereto, which also contains rules as to usage that shall be
applicable herein.
ARTICLE II
TRUST PROPERTY
SECTION 2.1 Conveyance of Trust Property. In consideration of
the Issuer's delivery to, or upon the order of, the Seller of the Notes and
the Certificates, the Seller does hereby irrevocably transfer, assign and
otherwise convey to the Issuer (i) without recourse (subject to the
obligations herein) all right, title and interest of the Seller, whether now
owned or hereafter acquired, in and to the Trust Property and (ii) funds in
the amount of the Reserve Initial Deposit. The transfer, assignment and
conveyance made hereunder shall not constitute and is not intended to result
in an assumption by the Issuer of any obligation of the Seller to the Obligors
or any other Person in connection with the Receivables and the other Trust
Property or any agreement, document or instrument related thereto.
SECTION 2.2 Representations and Warranties of the Seller as to
the Receivables. The Seller makes the following representations and warranties
as to the Receivables on which the Issuer shall be deemed to have relied in
accepting the Receivables. Such representations and warranties speak as of the
Closing Date, but shall survive the transfer, assignment and conveyance of the
Receivables to the Issuer and the pledge thereof to the Indenture Trustee
pursuant to the Indenture.
(i) Schedule of Receivables. The information set forth in
Schedule A to this Agreement with respect to each Receivable is true
and correct in all material respects, and no selection procedures
adverse to the Securityholders 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 Issuer.
(iii) Good Title. Immediately prior to the transfer and
assignment of the Receivables to the Issuer herein contemplated, the
Seller had good and marketable title to each Receivable free and
clear of all Liens and rights of others; and, immediately upon the
transfer thereof, the Issuer, has either (i) good and marketable
title to each Receivable, free and clear of all of all Liens and
rights of others, and the transfer has been perfected under
applicable law or (ii) a first priority perfected security interest
in each Receivable.
(iv) Receivable Files. The Receivable Files shall be kept at one
or more of the locations specified in Schedule B hereto.
(v) Characteristics of Receivables. Each Receivable (a) has been
originated for the retail financing of a Financed Vehicle by an
Obligor located in one of the States of the United States or the
District of Columbia; (b) contains customary and enforceable
provisions such that the rights and remedies of the holder thereof
are adequate for realization against the collateral of the benefits
of the security; and (c) provides for fully amortizing level
scheduled monthly payments (provided that the payment in the last
month in the life of the Receivable may be different from the level
scheduled payment) and for accrual of interest at a fixed rate
according to the simple interest method.
(vi) Compliance with Law. Each Receivable and each sale of the
related Financed Vehicle complied at the time it was originated or
made, and complies on and after the Cutoff Date, in all material
respects with all requirements of applicable federal, state, and
local laws, and regulations thereunder, including usury laws, the
Federal Truth-in-Lending Act, the Equal Credit Opportunity Act, the
Fair Credit Reporting Act, the Federal Trade Commission Act, the
Magnuson-Moss Warranty Act, Federal Reserve Board Regulations B and
Z, state adaptations of the National Consumer Act and of the Uniform
Consumer Credit Code, and any other consumer credit, equal
opportunity, and disclosure laws applicable to such Receivable and
sale.
(vii) 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.
(viii) No Government Obligor. No Receivable is due from the
United States of America or any state or from any agency, department,
instrumentality or political subdivision of the United States of
America or any state or local municipality and no Receivable is due
from a business except to the extent that such receivable has a
personal guaranty.
(ix) 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.
(x) 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.
(xi) No Waiver. No provision of a Receivable has been waived in
such a manner that such Receivable fails either to meet all of the
representations and warranties made by the Seller herein with respect
thereto pursuant to this Section 2.2.
(xii) 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 warranties made by the
Seller herein with respect thereto pursuant to this Section 2.2.
(xiii) 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.
(xiv) No Liens. As of the Cutoff Date, the Seller has no
knowledge of any Liens or claims that have been filed, including
Liens for work, labor, materials or unpaid taxes relating to a
Financed Vehicle, that would be Liens prior to, or equal or
coordinate with, the Lien granted by the Receivable.
(xv) 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.
(xvi) Insurance. Each Receivable requires that the Obligor
thereunder obtain comprehensive and collision insurance covering the
Financed Vehicle.
(xvii) 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 is
unlawful, void or voidable.
(xviii) All Filings Made. No filings (other than UCC filings
which have been made) or other actions are necessary in any
jurisdiction to give the Issuer a first priority perfected security
interest in the Receivables and to give the Indenture Trustee a first
priority perfected security interest in the Receivables.
(xix) 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 Indenture
Trustee, was in the possession of the Seller.
(xx) Security. Each Receivable is secured by a new or used
automobile or light-duty truck.
(xxi) Maturity of Receivables. Each Receivable has a remaining
maturity, as of the Cutoff Date, of not less than __ months nor
greater than __ months and, (i) with respect to Receivables secured
by new Financed Vehicles, an original maturity of at least __ months
and not more than __ months and (ii) with respect to Receivables
secured by used Financed Vehicles, an original maturity of at least
__ months and not more than __ months. No Receivable has a scheduled
maturity later than
(xxii) Annual Percentage Rate. Each Receivable is a
fully-amortizing fixed rate simple interest contract that provides
for level scheduled monthly payments (except for the last payment,
which may be minimally different from the level payments) over its
respective remaining term, and has an Annual Percentage Rate that
equals or exceeds [__]%, is not secured by any interest in real
estate, and has not been identified on the computer files of the
Seller as relating to Obligors who have requested a reduction in the
periodic finance charges, as of the Cutoff Date, by application of
the Soldiers' and Sailors' Civil Relief Act of 1940, as amended.
(xxiii) 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.
(xxiv) 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.
(xxv) No Overdue Payments. No Receivable has any payment that is
more than [30] days past due as of the Cutoff Date.
(xxvi) Remaining Principal Balance. Each Receivable had a
remaining principal balance, as of the Cutoff Date, of at least
[$500].
SECTION 2.3 Repurchase upon Breach. The Seller, the Servicer,
the Issuer or the Owner Trustee, as the case may be, shall inform the other
parties to this Agreement, the Indenture Trustee and the Seller promptly, in
writing, upon the discovery of any breach of the Seller's representations and
warranties made by the Seller pursuant to Section 2.2. Unless the breach shall
have been cured by the last day of the second Collection Period following
written notice to the Indenture Trustee of such breach, the Indenture Trustee
shall enforce the obligation of the Seller under this Section 2.3 to
repurchase any Receivable, the Issuer's interest in which is materially and
adversely affected by the breach as of such last day (or, at the Seller's
option, the last day of the first Collection Period following the discovery).
In consideration of the purchase of the Receivable, the Seller shall remit the
Purchase Amount (less any Liquidation Proceeds deposited, or to be deposited,
in the Collection Account with respect to such Receivable pursuant to Section
3.3), in the manner specified in Section 4.5. The sole remedy of the Issuer,
the Owner Trustee, the Indenture Trustee, the Noteholders or the
Certificateholders with respect to a breach of the Seller's representations
and warranties pursuant to Section 2.2 shall be to require the Seller to
repurchase such Receivables pursuant to this Section 2.3. The obligation of
the Seller to repurchase under this Section 2.3 shall not be solely dependent
upon the actual knowledge of the Seller of any breached representation or
warranty. Neither the Owner Trustee nor the Indenture Trustee shall have any
duty to conduct an affirmative investigation as to the occurrence of any
condition requiring the repurchase of any Receivable pursuant to this Section
2.3 or the eligibility of any Receivable for purposes of this Agreement.
SECTION 2.4 Custody of Receivable Files. To assure uniform
quality in servicing the Receivables and to reduce administrative costs, the
Issuer, upon the execution and delivery of this Agreement, hereby revocably
appoints the Servicer, and the Servicer hereby accepts such appointment, to
act as the agent of the Issuer and the Indenture Trustee as custodian of the
following documents or instruments, which are hereby constructively delivered
to the Indenture Trustee, as pledgee of the Issuer pursuant to the Indenture,
with respect to each Receivable:
(i) The original executed Receivable or, if no such original
exists, a copy thereof.
(ii) The original credit application fully executed by the
Obligor or a photocopy thereof or a record thereof on a computer
file, diskette or on microfiche.
(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.
(iv) Any and all other documents (including any computer file,
diskette or microfiche) that the Servicer or the Seller 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 acknowledges that it holds the documents and instruments
relating to the Receivables for the benefit of the Issuer and the Indenture
Trustee. The Issuer and the Indenture Trustee shall have no responsibility to
monitor the Servicer's performance as custodian and shall have not liability
in connection with the Servicer's performance of such duties hereunder.
SECTION 2.5 Duties of Servicer as Custodian.
(a) Safekeeping. The Servicer shall hold the Receivable Files for the
benefit of the Issuer and the Indenture Trustee and maintain such accurate and
complete accounts, records, and computer systems pertaining to each Receivable
File as shall enable the Servicer and the Issuer to comply with the terms and
conditions of this Agreement, and the Indenture Trustee to comply with the
terms and conditions of the Indenture. 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
relating to all comparable automotive receivables that the Servicer services
for itself or others. The Servicer shall conduct, or cause to be conducted,
periodic audits of the Receivable Files held by it under this Agreement, and
of the related accounts, records, and computer systems, in such a manner as
shall enable the Issuer or the Indenture Trustee to identify all Receivables
Files and such related accounts, records and computer systems and verify the
accuracy of the Servicer's record keeping. The Servicer shall promptly report
to the Issuer and the Indenture Trustee any failure on its part to hold the
Receivable Files and maintain its accounts, records, and computer systems as
herein provided and promptly take appropriate action to remedy any such
failure. Nothing herein shall be deemed to require an initial review or any
periodic review by the Issuer, the Owner Trustee or the Indenture Trustee of
the Receivable Files.
(b) Maintenance of and Access to Records. The Servicer shall maintain
each Receivable File at its offices specified in Schedule B-1 to this
Agreement, or at such other office as shall be specified to the Issuer and the
Indenture Trustee by 30 days' prior written notice. The Servicer shall make
available to the Issuer and the Indenture Trustee or their duly authorized
representatives, attorneys, or auditors, the Receivable Files, and the related
accounts, records, and computer systems maintained by the Servicer during
normal business hours as the Issuer or the Indenture Trustee shall reasonably
request, which does not unreasonably interfere with the Servicer's normal
operations.
(c) Release of Documents. Upon written instructions from the
Indenture Trustee, the Servicer shall release or cause to be released any
document in the Receivable Files to the Indenture Trustee, the Indenture
Trustee's agent or the Indenture Trustee's designee, as the case may be, at
such place or places as the Indenture Trustee may reasonably designate, as
soon as is 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 Indenture Trustee or
its agent or designee to return any document or any delay in doing so.
SECTION 2.6 Instructions; Authority to Act. All instructions
from the Indenture Trustee shall be in writing and signed by an Authorized
Officer of the Indenture Trustee, and the Servicer shall be deemed to have
received proper instructions with respect to the Receivable Files upon its
receipt of such written instructions.
SECTION 2.7 Custodian's Indemnification. The Servicer, as
custodian, shall indemnify the Issuer, the Owner Trustee and the Indenture
Trustee for any and all liabilities, obligations, losses, compensatory
damages, payments, costs, or expenses of any kind whatsoever that may be
imposed on, incurred, or asserted against the Issuer, the Owner Trustee or the
Indenture Trustee 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 (i)
to the Issuer for any portion of any such amount resulting from the willful
misfeasance, bad faith, or negligence of the Indenture Trustee, the Owner
Trustee or the Issuer, (ii) to the Owner Trustee for any portion of any such
amount resulting from the willful misfeasance, bad faith, or negligence of the
Indenture Trustee, the Owner Trustee or the Issuer and (iii) to the Indenture
Trustee for any portion of any such amount resulting from the willful
misfeasance, bad faith, or negligence of the Indenture Trustee, the Owner
Trustee or the Issuer.
SECTION 2.8 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 2.8. If USAA FSB shall resign as Servicer in accordance with the
provisions of this Agreement or if all of the rights and obligations of the
Servicer shall have been terminated under Section 7.1, the appointment of the
Servicer as custodian hereunder may be terminated by the Indenture Trustee, or
by the holders of Notes evidencing not less than a majority of the principal
amount of the Notes Outstanding (or if no Notes are Outstanding, by holders of
Certificates evidencing not less than a majority of the Certificate Balance),
in the same manner as the Indenture Trustee or such Securityholders may
terminate the rights and obligations of the Servicer under Section 7.1. As
soon as practicable after any termination of such appointment, the Servicer
shall deliver to the Indenture Trustee or the Indenture Trustee's agent the
Receivable Files and the related accounts and records maintained by the
Servicer at such place or places as the Indenture Trustee may reasonably
designate.
ARTICLE III
ADMINISTRATION AND SERVICING OF RECEIVABLES AND TRUST PROPERTY
SECTION 3.1 Duties of Servicer. The Servicer shall manage,
service, administer, and make collections on the Receivables with reasonable
care, using that degree of skill and attention that the Servicer exercises
with respect to all 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 of Obligors on
such Receivables, investigating delinquencies, sending payment coupons to
Obligors, reporting tax information to Obligors, accounting for collections,
furnishing monthly and annual statements to the Owner Trustee and the
Indenture Trustee with respect to distributions, and making Advances pursuant
to Section 4.4. 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 is hereby authorized and empowered
to execute and deliver, on behalf of itself, the Issuer, the Owner Trustee,
the Indenture Trustee, the Noteholders, the Certificateholders, or any of
them, any and all instruments of satisfaction or cancellation, or partial or
full release or discharge, and all other comparable instruments, with respect
to such Receivables or to the Financed Vehicles securing such Receivables. If
the Servicer shall commence a legal proceeding to enforce a Receivable, the
Owner Trustee (in the case of a Receivable other than a Purchased Receivable)
shall thereupon be deemed to have automatically assigned, solely for the
purpose of collection, such Receivable to the Servicer. 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 Owner Trustee shall, at the
Servicer's expense and direction, take steps to enforce the Receivable,
including bringing suit in its name or the names of the Indenture Trustee, the
Noteholders, the Certificateholders, or any of them. The Owner Trustee shall
furnish the Servicer with any powers of attorney and other documents
reasonably necessary or appropriate to enable the Servicer to carry out its
servicing and administrative duties hereunder.
SECTION 3.2 Collection of Receivable Payments. The Servicer
shall make reasonable efforts to collect all payments called for under the
terms and provisions of the Receivables as and when the same shall become due
and shall follow such collection procedures as it follows with respect to all
comparable new or used automobile and light-duty truck receivables that it
services for itself. The Servicer shall not change the amount of or reschedule
the due date of any scheduled payment of a Receivable 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 this
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, and (d) the maturity of such
Receivable would not be extended beyond the Collection Period immediately
preceding the Final Scheduled Maturity Date. If, as a result of inadvertently
rescheduling or extending 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 3.7. For
the purpose of such purchases pursuant to Section 3.7, notice shall be deemed
to have been received by the Servicer at such time as shall make purchase
mandatory as of the last day of the Collection Period during which the
discovery of such breach occurred.
SECTION 3.3 Realization Upon Receivables. On behalf of the
Issuer, the Servicer shall use reasonable efforts, consistent with its
customary standards, policies and procedures, to repossess or otherwise
convert the ownership of the Financed Vehicle securing any Receivable as to
which the Servicer shall have determined shall have determined to be a
Defaulted Receivable or otherwise (and shall specify any such Defaulted
Receivable to the Indenture 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 standards, policies
and procedures as it shall deem necessary or advisable in its servicing of
comparable receivables, which may include selling the Financed Vehicle at
public or private sale. The Servicer shall be entitled to recover from
proceeds all reasonable expenses incurred by it in the course of converting
the Financed Vehicle into cash proceeds. The Liquidation Proceeds (net of such
expenses) realized in connection with any such action with respect to a
Receivable shall be deposited by the Servicer in the Collection Account in the
manner specified in Section 4.2 and shall be applied to reduce (or to satisfy,
as the case may be) the Purchase Amount of the Receivable, if such Receivable
is to be repurchased by the Seller pursuant to Section 2.3, or is to be
purchased by the Serivcer pursuant to Section 3.7. 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 be required to expend funds in
connection with the repair or the repossession of such Financed Vehicle unless
it shall determine in its discretion that such repair and/or repossession will
increase the Liquidation Proceeds by an amount greater than the amount of such
expenses.
SECTION 3.4 Allocations of Collections. If an Obligor is
obligated under one or more Receivables and also under one or more other
assets owned by USAA FSB or assigned by USAA FSB to third parties, then any
payment on any such asset received from or on behalf of such Obligor shall, if
identified as being made with respect to a particular item or asset, be
applied to such item, and otherwise shall be allocated by USAA FSB in
accordance with its customary standards, policies and procedures.
SECTION 3.5 Maintenance of Security Interests in Financed
Vehicles. The Servicer shall, in accordance with its customary procedures,
take such steps as are necessary to maintain perfection of the security
interest created by each Receivable in the related Financed Vehicle. The
Issuer hereby authorizes the Servicer to take such steps as are necessary to
re-perfect such security interest on behalf of the Issuer and the Indenture
Trustee 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 Issuer
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 transfer to the Issuer 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 Issuer and the Indenture Trustee and further
agrees to hold such certificate of title as the agent and custodian of the
Issuer and the Indenture Trustee; provided that the Servicer shall not, nor
shall the Issuer or the Indenture Trustee 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 3.6 Covenants of Servicer. The Servicer shall not (i)
release the Financed Vehicle securing each such Receivable from the security
interest granted by such Receivable in whole or in part except in the event of
payment in full by or on behalf of the Obligor thereunder, (ii) impair the
rights of the Trust in the Receivables, or (iii) increase the number of
payments under a Receivable, increase the Amount Financed under a Receivable
or extend or forgive payments on a Receivable, except as provided in Section
3.2. 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 Class B Final
Scheduled Payment Date.
SECTION 3.7 Purchase of Receivables Upon Breach. (a) The Seller,
the Servicer or the Owner Trustee, as the case may be, promptly shall inform
the other parties to this Agreement, in writing, upon the discovery of any
breach pursuant to Section 3.2, 3.5 or 3.6. Unless the breach shall have been
cured by the last day of the second Collection Period following such discovery
(or, at the Servicer's election, the last day of the first following
Collection Period), the Servicer shall purchase any Receivable materially and
adversely affected by such breach as determined by the Indenture Trustee
(which shall include any Receivable as to which a breach of Section 3.6 has
occurred) at the Purchase Amount (less any Liquidation Proceeds deposited, or
to be deposited, in the Collection Account with respect to such Receivable
pursuant to Section 3.3). In consideration of the purchase of such Receivable,
the Servicer shall remit the Purchase Amount in the manner specified in
Section 4.5. For purposes of this Section 3.7, the Purchase Amount shall
consist in part of a release by the Servicer of all rights of reimbursement
with respect to Outstanding Advances on the Receivable. The sole remedy of the
Issuer, the Owner Trustee, the Indenture Trustee, the Noteholders or the
Certificateholders with respect to a breach pursuant to Section 3.2, 3.5 or
3.6 shall be to require the Servicer to purchase Receivables pursuant to this
Section 3.7.
(b) With respect to all Receivables purchased pursuant to this
Section 3.7, the Issuer shall assign to the Servicer or the Seller, as
applicable, without recourse, representation or warranty, all of the Issuer's
right, title and interest in and to such Receivables and all security and
documents relating thereto.
SECTION 3.8 Servicer Fees. The Servicer shall be entitled to any
interest earned on the amounts deposited in the Collection Account during each
Collection Period plus all late fees, prepayment charges and other
administrative fees and expenses or similar charges, if any, allowed by
applicable law and the terms of the Receivables during each Collection Period
(the "Supplemental Servicing Fee"). The Servicer also shall be entitled to the
Servicing Fee, as provided herein.
SECTION 3.9 Servicer's Certificate. (a) On or about the _____
day of each calendar month, the Servicer shall deliver to the Owner Trustee,
each Note Paying Agent and Certificate Paying Agent, the Indenture Trustee and
the Seller, with a copy to the Rating Agencies, a Servicer's Certificate
containing all information (including all specific dollar amounts) necessary
to make the transfers and distributions pursuant to Sections 4.3, 4.4, 4.5,
4.6 and 4.7 for the Collection Period preceding the date of such Servicer's
Certificate, together with the written statements to be furnished by the Owner
Trustee to Certificateholders pursuant to Section 4.9 and by the Indenture
Trustee to the Noteholders pursuant to Section 4.9 hereof and Section 6.6 of
the Indenture. Receivables purchased or to be purchased by the Servicer or the
Seller shall be identified by the Servicer by the Seller's account number with
respect to such Receivable (as specified in the Schedule of Receivables).
(b) On or about the _____ (but in no event later than the _____)
calendar day of each calendar month, the Servicer shall deliver to the
respective underwriters of the Notes and the Certificates the Note Pool Factor
for each Class of Notes and the Certificate Pool Factor for the Class B
Certificates as of the close of business on the Payment Date occurring in that
month.
SECTION 3.10 Annual Statement as to Compliance; Notice of
Event of Servicing Termination. (a) The Servicer shall deliver to the Owner
Trustee, the Indenture Trustee and each Rating Agency on or before March 31 of
each year beginning March 31, ____, an Officer's Certificate, with respect to
the preceding 12-month period (or such shorter period in the case of the first
such certificate), stating that (i) a review of the activities of the Servicer
during the preceding 12-month period (or such shorter period in the case of
the first such certificate) and of its performance under this Agreement has
been made under such officer's supervision and (ii) to the best of such
officer's knowledge, based on such review, the Servicer has fulfilled all its
obligations under this Agreement throughout such period, or, if there has been
a default in the fulfillment of any such obligation, specifying each such
default known to such officer and the nature and status thereof. A copy of
such Officer's Certificate and the report referred to in Section 3.11 may be
obtained by any Certificateholder by a request in writing to the Owner
Trustee, or by any Noteholder or Person certifying that it is a Note Owner by
a request in writing to the Indenture Trustee, in either case addressed to the
applicable Corporate Trust Office. Upon the telephone request of the Owner
Trustee, the Indenture Trustee shall promptly furnish the Owner Trustee a list
of Noteholders as of the date specified by the Owner Trustee.
(b) The Servicer shall deliver to the Owner Trustee, the Indenture
Trustee and each Rating Agency promptly after having obtained knowledge
thereof, but in no event later than five (5) Business Days thereafter, written
notice in an Officer's Certificate of any event which with the giving of
notice or lapse of time, or both, would become an Event of Servicing
Termination under Section 7.1. The Seller shall deliver to the Owner Trustee,
the Indenture Trustee and each Rating Agency promptly after having obtained
knowledge thereof, but in no event later than five (5) Business Days
thereafter, written notice in an Officer's Certificate of any event which with
the giving of notice or lapse of time, or both, would become an Event of
Servicing Termination under clause (a)(ii) of Section 7.1.
SECTION 3.11 Annual Independent Certified Public Accountant's
Report. The Servicer shall cause a firm of independent certified public
accountants, who may also render other services to the Servicer or to the
Seller, to deliver to the Owner Trustee and the Indenture Trustee on or before
March 31 of each year beginning March 31, _____ with respect to the prior
calendar year (or such shorter period in the case of the first such report) a
report addressed to the board of directors of the Servicer and to the Owner
Trustee and the Indenture Trustee, to the effect that such firm has examined
the automobile and light-duty truck receivable servicing functions of the
Servicer for such period, 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 during such period in compliance with this Agreement except for
(a) such exceptions as such firm believes to be immaterial and (b) such other
exceptions as shall be set forth in such firm's report. In addition, such
report shall state that such firm has compared the mathematical calculations
of each amount set forth in the Servicer's Certificates forwarded by the
Servicer pursuant to Section 3.9 during the period covered by such report
(which shall be the preceding calendar year or such shorter period in the case
of the first such report) 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
Servicer's Certificates delivered pursuant to Section 3.9 in such period.
The report will also indicate that the firm is independent of the
Servicer within the meaning of the Code of Professional Ethics of the American
Institute of Certified Public Accountants.
SECTION 3.12 Access to Certain Documentation and Information
Regarding Receivables. The Servicer shall provide to the Certificateholders,
the Indenture Trustee and the Noteholders access to the Receivable Files in
such cases where the Certificateholders, the Indenture Trustee or the
Noteholders shall be required by applicable statutes or regulations to review
such documentation. Access shall be afforded without charge, but only upon
reasonable request and during the normal business hours at the respective
offices of the Servicer. Nothing in this Section 3.12 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 3.12.
SECTION 3.13 Servicer Expenses. The Servicer shall be required
to pay all expenses incurred by it in connection with its activities
hereunder, including fees and disbursements of the Owner Trustee and the
Indenture Trustee, independent accountants, taxes imposed on the Servicer and
expenses incurred in connection with distributions and reports to Noteholders
and Certificateholders.
SECTION 3.14 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 related Financed Vehicle as of the execution
of the Receivable. The Servicer shall enforce its rights under the Receivables
to require the Obligors to maintain comprehensive and collision insurance, in
accordance with the Servicer's customary practices and procedures with respect
to comparable new or used automobile and light-duty truck receivables that it
services for itself or others.
ARTICLE IV
DISTRIBUTIONS; RESERVE ACCOUNT;
STATEMENTS TO NOTEHOLDERS AND CERTIFICATEHOLDERS
SECTION 4.1 Accounts. (a) The Servicer shall, prior to the
Closing Date, cause to be established and maintained an Eligible Deposit
Account in the name "____________________ as Indenture Trustee, as secured
party from USAA Auto Owner Trust _______", initially at the corporate trust
department of ______________________, which shall be designated as the
"Collection Account". Initially, the Collection Account shall be account
number ___________ and shall include any successor or replacement accounts
thereto. The Collection Account shall be under the sole dominion and control
of the Indenture Trustee; provided, that the Servicer may make deposits to and
direct the Indenture Trustee in writing to make withdrawals from the
Collection Account in accordance with the terms of the Basic Documents. The
Collection Account will be established and maintained pursuant to an account
agreement which specifies New York law as the governing law. In addition, the
Collection Account shall be established and maintained at an Institution which
agrees in writing that for so long as the Notes are outstanding it will comply
with entitlement orders (as defined in Article 8 of the UCC) originated by the
Indenture Trustee without further consent of the Issuer. All monies deposited
from time to time in the Collection Account shall be held by the Indenture
Trustee as secured party for the benefit of the Noteholders and, after payment
in full of the Notes, as agent of the Owner Trustee and as part of the Trust
Property. All deposits to and withdrawals from the Collection Account shall be
made only upon the terms and conditions of the Basic Documents.
If the Servicer is required to remit collections pursuant to the
first sentence of Section 4.2, all amounts held in the Collection Account
shall, to the extent permitted by applicable law, rules and regulations, be
invested, as directed in writing by the Servicer, by the bank or trust company
then maintaining the Collection Account in specified Permitted Investments
that mature not later than the Business Day immediately prior to the Payment
Date for the Collection Period to which such amounts relate and such Permitted
Investments shall be held to maturity. All interest and other income (net of
losses and investment expenses) on funds on deposit in the Collection Account
shall be withdrawn from the Collection Account at the written direction of the
Servicer and shall be paid to the Servicer. The Indenture Trustee shall not be
liable for investment losses in Permitted Investments made in accordance with
directions from the Servicer. In the event that the Collection Account is no
longer to be maintained at the corporate trust department of _________, the
Servicer shall, with the Indenture Trustee's or Owner Trustee's assistance as
necessary, cause an Eligible Deposit Account to be established as the
Collection Account within ten (10) Business Days (or such longer period not to
exceed thirty (30) calendar days as to which each Rating Agency may consent).
(b) The Servicer shall, prior to the Closing Date, establish and
maintain an administrative subaccount within the Collection Account at the
bank or trust company then maintaining the Collection Account, which
subaccount shall be designated as the "Principal Distribution Account". The
Principal Distribution Account is established and maintained solely for
administrative purposes.
(c) The Servicer shall, prior to the Closing Date, cause an Eligible
Deposit Account to be established and maintained, in the name
"_______________________ as Owner Trustee", initially at the corporate trust
department of _______________________, which shall be designated as the
"Certificate Distribution Account". The Certificate Distribution Account shall
be under the sole dominion and control of the Owner Trustee. All monies
deposited from time to time in the Certificate Distribution Account pursuant
to this Agreement and the Indenture shall be held by the Owner Trustee as part
of the Trust Property and shall be applied as provided in the Basic Documents.
In the event that the Certificate Distribution Account is no longer to be
maintained at the corporate trust department of _______________________, the
Servicer shall cause an Eligible Deposit Account to be established as the
Certificate Distribution Account within ten (10) Business Days (or such longer
period not to exceed thirty (30) calendar days as to which each Rating Agency
may consent). The Certificate Distribution Account will be established and
maintained pursuant to an account agreement which specifies New York law as
the governing law.
SECTION 4.2 Collections. The Servicer shall remit to the
Collection Account within two (2) Business Days of the receipt thereof (i) all
payments by or on behalf of the Obligors (but excluding Purchased Receivables)
and (ii) all Liquidation Proceeds, both as collected during the Collection
Period; provided that USAA FSB, so long as it is acting as the Servicer and no
Event of Servicing Termination has occurred and is continuing, may make
remittances of collections on a less frequent basis than that specified in the
immediately preceding sentence. It is understood that such less frequent
remittances may be made only on the specific terms and conditions set forth
below in this Section 4.2 and only for so long as such terms and conditions
are fulfilled. Accordingly, notwithstanding the provisions of the first
sentence of this Section 4.2, the Servicer shall remit collections received
during a Collection Period to the Collection Account in immediately available
funds on [the Business Day preceding] the related Payment Date but only for so
long as the Monthly Remittance Condition is satisfied. The Owner Trustee or
the Indenture Trustee shall not be deemed to have knowledge of any event or
circumstance in the definition of Monthly Remittance Condition that would
require remittance by the Servicer to the Collection Account within two (2)
Business Days of receipt as aforesaid unless the Owner Trustee or the
Indenture Trustee has received notice of such event or circumstance from the
Seller or the Servicer in an Officer's Certificate or from the holders of
Notes evidencing not less than 25% of the principal amount of the Notes
Outstanding or from the Certificateholders of Certificates evidencing not less
than 25% of the Certificate Balance or a Trustee Officer in the Corporate
Trust Office with knowledge hereof or familiarity herewith has actual
knowledge of such event or circumstance. For purposes of this Article IV the
phrase "payments by or on behalf of Obligors" shall mean payments made by
Persons other than the Servicer or by other means.
SECTION 4.3 Application of Collections. For the purposes of this
Agreement, as of the close of business on the last day of each Collection
Period, all collections for the Collection Period with respect to each
Receivable (other than a Purchased Receivable) shall be applied by the
Servicer as follows:
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 4.4 Advances. (a) As of each Determination Date, the
Servicer shall 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 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 Purchase Amount
during or with respect to such Collection Period. The Servicer shall deposit
all such Advances into the Collection Account in immediately available funds
no later than, 11:00 a.m. New York City time, on the Determination Date.
Notwithstanding the foregoing, 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 4.6(b). In addition, in the event that a
Receivable becomes a Defaulted Receivable, Outstanding Advances in respect of
that Receivable 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, and if such amounts are not sufficient,
from amounts on deposit in the Collection Account. The Servicer shall not make
any advance with respect to principal of Receivables.
(b) The Servicer shall deposit in the Collection Account the
aggregate Advances on the Receivables pursuant to Section 4.4(a). To the
extent that the Servicer fails to make an Advance pursuant to Section 4.4(a)
on the date required, the Servicer shall so notify the Issuer and the
Indenture Trustee in writing specifying the amount of the Advance and the
Receivable to which such Advance related, 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 Collection Account.
SECTION 4.5 Additional Deposits. (a) The Seller and the Servicer
shall deposit in the Collection Account the aggregate Purchase Amounts with
respect to Purchased Receivables pursuant to Sections 2.3 and 3.7,
respectively, and the Servicer shall deposit therein all amounts to be paid
under Section 8.1. All such deposits with respect to a Collection Period shall
be made, in immediately available funds, on the Business Day preceding the
Payment Date related to such Collection Period.
(b) The Indenture Trustee, in accordance with the written
instructions of the Servicer, shall, on the Payment Date relating to each
Collection Period, make withdrawals from the Reserve Account (i) first, in an
amount equal to the Reserve Account Excess Amount and (ii) second, in an
amount equal to the amount (if positive) calculated by the Servicer pursuant
to the second sentence of Section 4.6(b).
SECTION 4.6 Distributions. (a) On each Payment
Date, the Indenture Trustee shall cause the transfer and distribution of the
amounts set forth in the Servicer's Certificate for such Payment Date from the
Collection Account to the Servicer, in immediately available funds, for
repayment of Outstanding Advances pursuant to Section 4.4(a).
(b) The Servicer shall on or before each Determination Date calculate
the Available Collections, the Reserve Account Excess Amount, the Available
Funds, the Servicing Fee and all unpaid Servicing Fees from prior Collection
Periods, if any, the Accrued Class A Note Interest, the Accrued Class B
Certificate Interest and the Regular Principal Distribution Amount. In
addition, the Servicer shall calculate on or before each Determination Date
the difference, if any, between the Total Required Payment and the Available
Funds and, pursuant to Section 4.5(b), the Indenture Trustee shall withdraw
funds from the Reserve Account in an amount equal to the lesser of such
difference (if positive) or the balance of such Reserve Account.
(c) On each Payment Date, the Servicer shall instruct the Indenture
Trustee (based on the information contained in the Servicer's Certificate
delivered on or before the related Determination Date pursuant to Section
3.9), to make the following withdrawals from the Collection Account and make
deposits, distributions and payments, to the extent of Available Funds for
such Payment Date (plus funds, if any, deposited in the Collection Account
from the Reserve Account pursuant to Section 4.5(b)), in the following order
of priority:
(i) first, to the Servicer, the Servicing Fee and all unpaid
Servicing Fees from prior Collection Periods;
(ii) second, to the Noteholders, the Accrued Class A Note
Interest for such Payment Date; provided that if there are not
sufficient funds available to pay the entire amount of the Accrued
Class A Note Interest, the amounts available shall be applied to the
payment of such interest on the Class A Notes on a pro rata basis;
(iii) third, to the Certificate Distribution Account, the
Accrued Class B Certificate Interest for such Payment Date;
(iv) fourth, to the Principal Distribution Account, the
Regular Principal Distribution Amount for such Payment Date;
(v) fifth, if such Payment Date is a Final Scheduled Payment
Date for any Class, to the Principal Distribution Account, the amount
necessary to reduce the remaining principal amount of such Class to
zero;
(vi) sixth, to the Reserve Account, the amount, if any,
required to reinstate the amount in the Reserve Account up to the
Specified Reserve Balance for such Payment Date;
(vii) seventh, to the Indenture Trustee any amounts owed to
it pursuant to Section 6.7 of the Indenture and not previously paid;
and
(viii) eighth, to the Seller, any remaining Available Funds
for such Payment Date.
Notwithstanding the foregoing in this Section 4.6(c),
(A) if the Class A Notes have been accelerated after an
Event of Default specified in Section 5.1(iii) of the Indenture,
then the Available Funds remaining after clause (iii) above
shall instead be applied in the following order of priority:
(1) to the holders of the Class A Notes on a pro
rata basis in reduction of principal until the
principal amount of the Class A Notes has been
paid in full;
(2) to the Certificate Distribution Account, the
Certificate Balance of the Class B Certificates;
(3) to the Indenture Trustee, any amounts owed to it
pursuant to Section 6.7 of the Indenture and not
previously paid; and
(4) to the Seller, any remaining Available Funds for
such Payment Date; and
(B) if the Class A Notes have been accelerated after an
Event of Default specified in Section 5.1(i), (ii), (iv) or (v)
of the Indenture, then the Available Funds remaining after
clause (ii) above shall instead be applied in the following
order of priority:
(1) to the holders of the Class A Notes on a pro
rata basis in reduction of principal until the
principal amount of the Class A Notes has been
paid in full;
(2) to the Certificate Distribution Account, the sum
of (x) the Accrued Class B Certificate Interest
for such Payment Date and (y) the Certificate
Balance of the Class B Certificates;
(3) to the Indenture Trustee, any amounts owed to it
pursuant to Section 6.7 of the Indenture and not
previously paid; and
(4) to the Seller, any remaining Available Funds for
such Payment Date.
(d) If the Notes have not been accelerated because of an Event of
Default, then on each Payment Date the Servicer shall instruct the Indenture
Trustee (based on the information contained in the Servicer's Certificate
delivered on or before the related Determination Date pursuant to Section
3.9), to withdraw the funds deposited in the Principal Distribution Account on
such Payment Date and make distributions and payments in the following order
of priority:
(i) first, to the holders of the Class A-1 Notes on a pro
rata basis in reduction of principal until the principal amount of
the Class A-1 Notes has been paid in full;
(ii) second, to the holders of the Class A-2 Notes on a pro
rata basis in reduction of principal until the principal amount of
the Class A-2 Notes has been paid in full;
(iii) third, to the holders of the Class A-3 Notes on a pro
rata basis in reduction of principal until the principal amount of
the Class A-3 Notes has been paid in full;
(iv) fourth, to the Certificate Distribution Account, in
reduction of the Certificate Balance of the Class B Certificates,
until the Certificate Balance of the Class B Certificates has been
reduced to zero; and
(v) fifth, to the Seller, any funds remaining on deposit in
the Principal Distribution Account.
If the Notes have been accelerated because of an Event of
Default, then on each Payment Date the Servicer shall instruct the Indenture
Trustee (based on the information contained in the Servicer's Certificate
delivered on or before the related Determination Date pursuant to Section
3.9), to withdraw the funds deposited in the Principal Distribution Account on
such Payment Date and pay them to the holders of the Notes on a pro rata basis
in reduction of principal until the principal amount of the Notes has been
paid in full.
SECTION 4.7 Reserve Account. (a) (i) The Servicer
shall, prior to the Closing Date, cause to be established and maintained an
Eligible Deposit Account in the name "________________ as Indenture Trustee,
as secured party from USAA Auto Owner Trust _______", initially at the
corporate trust department of __________________), which shall be designated
as the "Reserve Account" (the Reserve Account, together with the Collection
Account (including the Principal Distribution Account), the "Trust Accounts").
The Reserve Account shall be under the sole dominion and control of the
Indenture Trustee; provided, that the Servicer may make deposits to the
Reserve Account in accordance with the Basic Documents. The Reserve Account
will be established and maintained pursuant to an account agreement which
specifies New York law as the governing law. In addition, the Reserve Account
shall be established and maintained at an institution which agrees in writing
that for so long as the Notes are outstanding it will comply with entitlement
orders (as defined in Article 8 of the UCC) originated by the Indenture
Trustee without further consent of the Issuer. On the Closing Date, the Seller
shall deposit the Reserve Initial Deposit into the Reserve Account. The
Reserve Account and all amounts, securities, investments, financial assets and
other property deposited in or credited to the Reserve Account (such amounts,
the "Reserve Account Property") shall be held by the Indenture Trustee as
secured party for the benefit of the Noteholders and, after payment in full of
the Notes, as agent of the Owner Trustee and as part of the Trust Property,
and all deposits to and withdrawals from there from shall be made only upon
the terms and conditions of the Basic Documents.
The Reserve Account Property shall, to the extent permitted by
applicable law, rules and regulations, be invested, as directed in writing by
the Seller, by the bank or trust company then maintaining the Reserve Account
in Permitted Investments that mature not later than the next Payment Date or
such later date that satisfies the Rating Agency Condition, and such Permitted
Investments shall be held to maturity. [In the absence of written direction,
all funds shall be invested in the Chase Vista money market fund.] All
interest and other income (net of losses and investment expenses) on funds on
deposit in the Reserve Account shall be deposited therein. The Indenture
Trustee shall not be liable for investment losses in Permitted Investments
made in accordance with directions from the Servicer. In the event the Reserve
Account is no longer to be maintained at the corporate trust department of
___________________, the Seller shall, with the Indenture Trustee's or Owner
Trustee's assistance as necessary, cause an Eligible Deposit Account to be
established as the Reserve Account within ten (10) Business Days (or such
longer period not to exceed thirty (30) calendar days as to which each Rating
Agency may consent).
(ii) With respect to Reserve Account Property:
(A) any Reserve Account Property that is a
"financial asset" as defined in Section 8-102(a)(9) of the
UCC shall be physically delivered to, or credited to an
account in the name of, the institution maintaining the
Reserve Account in accordance with such institution's
customary procedures such that such institution establishes
a "securities entitlement" in favor of the Indenture Trustee
with respect thereto; and
(B) any Reserve Account Property that is held in
deposit accounts shall be held solely in the name of the
Indenture Trustee at one or more depository institutions
having the Required Rating and each such deposit account
shall be subject to the exclusive custody and control of the
Indenture Trustee and the Indenture Trustee shall have sole
signature authority with respect thereto.
(iii) Except for any deposit accounts specified in clause
(ii)(B) above, the Reserve Account shall only be invested in
securities or in other assets which the institution maintaining the
Reserve Account agrees to treat as "financial assets" as defined in
Section 8-102(a)(9) of the UCC.
(b) If the Servicer pursuant to Section 4.4 determines on or before
any Determination Date that it is required to make an Advance and does not do
so from its own funds, the Servicer shall promptly instruct the Indenture
Trustee in writing to withdraw funds, in an amount specified by the Servicer,
from the Reserve Account and deposit them in the Collection Account to cover
any shortfall. Such payment shall be deemed to have been made by the Servicer
pursuant to Section 4.4 for purposes of making distributions pursuant to this
Agreement, but shall not otherwise satisfy the Servicer's obligation to
deliver the amount of the Advances to the Indenture Trustee, and the Servicer
shall within two (2) Business Days replace any funds in the Reserve Account so
used.
(c) Following the payment in full of the aggregate principal amount
of the Notes and the Certificate Balance and of all other amounts owing or to
be distributed hereunder or under the Indenture or the Trust Agreement to
Noteholders and Certificateholders and the termination of the Trust, any
remaining Reserve Account Property shall be distributed to the Seller.
(d) The Seller shall be permitted to sell, transfer, convey or assign
in any manner its rights in the Reserve Account under Section 4.7(c), together
with its rights to receive amounts under Section 4.6(c)(vii) of this Agreement
and Sections 5.4(b)(viii) and 8.2(c)(vii) of the Indenture, provided that each
of the following:
(i) the Rating Agency Condition is satisfied with respect
to such action;
(ii) such action shall not, as evidenced by an Opinion of
Counsel, cause the Issuer to be characterized as an association (or a
publicly traded partnership) taxable as a corporation for federal
income tax purposes; and
(iii) the transferee or assignee agrees in writing to take
positions for federal income tax purposes consistent with the federal
income tax positions taken previously by the Seller.
SECTION 4.8 Net Deposits. For so long as (i)USAA FSB shall be
the Servicer and (ii) the Servicer shall be entitled pursuant to Section 4.2 to
remit collections on a monthly basis rather than within two (2) Business Days
of receipt, USAA FSB may make the remittances pursuant to Sections 4.2 and 4.5
above, net of amounts to be distributed to USAA FSB pursuant to Section
4.6(c). Nonetheless, the Servicer shall account for all of the above described
remittances and distributions except for the Supplemental Servicing Fee in the
Servicer's Certificate as if the amounts were deposited and/or transferred
separately.
SECTION 4.9 Statements to Noteholders and
Certificateholders. On [the Business Day prior to] each Payment Date, the
Servicer shall provide to the Indenture Trustee (with copies to the Rating
Agencies and each Note Paying Agent) for the Indenture Trustee to forward to
each Noteholder of record as of the most recent Record Date and to the Owner
Trustee (with copies to the Rating Agencies and to each Certificate Paying
Agent) for the Owner Trustee to forward to each Certificateholder of record as
of the most recent Record Date a statement based on information in the
Servicer's Certificate furnished pursuant to Section 3.9, setting forth for
the Collection Period relating to such Payment Date the following information
as to the Notes and the Certificates to the extent applicable:
(i) the amount of such distribution allocable to principal
allocable to the Notes and to the Certificate Balance;
(ii) the amount of such distribution allocable to interest
allocable to the Notes and the Certificates;
(iii) the amount of such distribution allocable to draws
from the Reserve Account, if any;
(iv) the Pool Balance as of the close of business on the
last day of the preceding Collection Period;
(v) the Specified Reserve Balance as of such Payment Date;
(vi) the amount of the Servicing Fee paid to the Servicer
with respect to the related Collection Period and the amount of any
unpaid Servicing Fees and the change in such amount from that of the
prior Payment Date;
(vii) the amounts of the Class A Noteholders' Interest
Carryover Shortfall and the Class B Certificateholders' Interest
Carryover Shortfall, if any, on such Payment Date and the change in
such amounts from the preceding Payment Date;
(viii) the aggregate outstanding principal amount of each
Class of Notes, the Note Pool Factor for each Class of Notes, the
Certificate Balance and the Certificate Pool Factor as of such
Payment Date;
(ix) the amount of any previously due and unpaid payment of
principal of the Notes or of the Certificate Balance, as applicable,
and the change in such amount from that of the prior Payment Date;
(x) the balance of the Reserve Account on such Payment Date,
after giving effect to distributions made on such Payment Date and
the change in such balance from the preceding Payment Date;
(xi) the amount of the aggregate Realized Losses, if any,
with respect to the related Collection Period;
(xii) the aggregate Purchase Amount of Receivables
repurchased by the Seller or purchased by the Servicer, if any, with
respect to the related Collection Period;
(xiii) the amount of Advances, if any, on such Payment Date;
(xiv) the aggregate Collections for the related Collection
Period; and
(xv) the aggregate Principal Balance of the Receivables that
became designated as Defaulted Receivables during the related
Collection Period.
In addition, such statements may be posted by the Indenture Trustee
on its website.
Each amount set forth on the Payment Date statement pursuant to
clauses (i), (ii), (vi), (vii) and (ix) above shall be expressed as a dollar
amount per $1,000 of original principal amount of a Note or original
Certificate Balance of a Certificate, as applicable.
ARTICLE V
THE SELLER
SECTION 5.1 Representations and Warranties of Seller.
The Seller makes the following representations and warranties on which the
Issuer is deemed to have relied in acquiring the Trust Property. The
representations and warranties speak as of the execution and delivery of this
Agreement and shall survive the conveyance of the Trust Property to the Issuer
and the pledge thereof by the Issuer to the Indenture Trustee pursuant to the
Indenture:
(a) 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.
(b) Power and Authority. The Seller has the power and authority to
execute and deliver this Agreement and the other Basic Documents to which it
is a party and to carry out their terms; the Seller has full power and
authority to sell and assign the property to be sold and assigned to the Trust
and has duly authorized such sale and assignment to the Trust by all necessary
corporate action; and the execution, delivery, and performance of this
Agreement and the other Basic Documents to which it is a party shall have been
duly authorized, executed and delivered by the Seller by all necessary
corporate action.
(c) Binding Obligations. This Agreement constitutes a legal, valid,
and binding obligation of the Seller enforceable in accordance with its terms,
except as enforceability may be limited by bankruptcy, insolvency,
reorganization, or other similar laws affecting the enforcement of creditors'
rights in general and by general principles of equity, regardless of whether
such enforceability is considered in a proceeding in equity or at law.
(d) No Violation. The consummation of the transactions contemplated
by this Agreement and the other Basic Documents to which the Seller is a party
and the fulfillment of the terms hereof and thereof do not (i) 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, (ii) 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 (iii) 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.
(e) No Proceedings. There are no proceedings or investigations
pending, or, to the best of the Seller's knowledge, threatened, before any
court, regulatory body, administrative agency, or other governmental
instrumentality having jurisdiction over the Seller or its properties (i)
asserting the invalidity of this Agreement, any of the other Basic Documents
or the Securities, (ii) seeking to prevent the issuance of the Securities or
the consummation of any of the transactions contemplated by this Agreement or
the other Basic Documents, (iii) seeking any determination or ruling that
might materially and adversely affect the performance by the Seller of its
obligations under, or the validity or enforceability of, this Agreement, any
of the other Basic Documents or the Securities or (iv) relating to the Seller
and which might adversely affect the federal income tax attributes of the
Securities.
SECTION 5.2 Liability of Seller; Indemnities. The Seller shall be
liable in accordance herewith only to the extent of the obligations
specifically undertaken by the Seller under this Agreement, and hereby agrees
to the following:
(a) The Seller shall indemnify, defend, and hold harmless the Issuer,
the Owner Trustee and the Indenture Trustee from and against any taxes that
may at any time be asserted against any such Person with respect to, and as of
the date of, the conveyance of the Receivables to the Issuer or the issuance
and original sale of the Notes and the Certificates, including any sales,
gross receipts, general corporation, tangible personal property, privilege, or
license taxes (but, in the case of the Issuer, not including any taxes
asserted with respect to ownership of the Receivables or federal or state
income taxes arising out of the transactions contemplated by this Agreement
and the other Basic Documents) and costs and expenses in defending against the
same.
(b) The Seller shall indemnify, defend, and hold harmless the Issuer,
the Owner Trustee, the Indenture Trustee, the Noteholders and the
Certificateholders 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 under this Agreement, or by reason of reckless
disregard of its obligations and duties under this Agreement and (ii) the
Seller's violation of federal or State securities laws in connection with the
registration or the sale of the Notes or the Certificates.
(c) Indemnification under this Section 5.2 shall survive the
resignation or removal of the Owner Trustee or the Indenture Trustee and the
termination of this Agreement and shall include, without limitation,
reasonable fees and expenses of counsel and expenses of litigation. If the
Seller shall have made any indemnity payments pursuant to this Section 5.2 and
the Person to or on behalf of whom such payments are made thereafter shall
collect any of such amounts from others, such Person shall promptly repay such
amounts to the Seller, without interest.
SECTION 5.3 Merger or Consolidation of, or
Assumption of the Obligations of Seller. Any Person (i) into which the Seller
may be merged or consolidated, (ii) resulting from any merger, conversion, or
consolidation to which the Seller shall be a party, or (iii) succeeding to the
business of the Seller, which Person in any of the foregoing cases executes an
agreement of assumption to perform every obligation of the Seller under this
Agreement, will be the successor to the Seller under this Agreement without
the execution or filing of any document or any further act on the part of any
of the parties to this Agreement. The Seller shall provide notice of any
merger, conversion, consolidation, or succession pursuant to this Section 5.3
to the Rating Agencies.
SECTION 5.4 Limitation on Liability of Seller and Others.
The Seller and any officer or 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 to appear in, prosecute,
or defend any legal action that shall not be incidental to its obligations
under this Agreement, and that in its opinion may involve it in any expense or
liability.
SECTION 5.5 Seller May Own Notes or Certificates. The
Seller, and any Affiliate of the Seller, may in its individual or any other
capacity become the owner or pledgee of Notes or Certificates with the same
rights as it would have if it were not the Seller or an Affiliate thereof,
except as otherwise expressly provided herein or in the other Basic Documents.
Except as set forth herein or in the other Basic Documents, Notes and
Certificates so owned by or pledged to the Seller or any such Affiliate shall
have an equal and proportionate benefit under the provisions of this Agreement
and the other Basic Documents, without preference, priority, or distinction as
among all of the Notes and Certificates.
ARTICLE VI
THE SERVICER
SECTION 6.1 Representations of Servicer. The Servicer makes
the following representations on which the Issuer is deemed to have relied in
acquiring the Trust Property. The representations speak as of the execution and
delivery of this Agreement and shall survive the conveyance of the Trust
Property to the Issuer and the pledge thereof by the Issuer pursuant to the
Indenture:
(a) 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
Indenture Trustee.
(b) Power and Authority. The Servicer has the power and authority to
execute and deliver this Agreement and the other Basic Documents to which it
is a party and to carry out their terms; and the execution, delivery, and
performance of this Agreement and the other Basic Documents to which it is a
party shall have duly authorized, executed and delivered by the Servicer by
all necessary corporate action.
(c) Binding Obligations. This Agreement constitutes a legal, valid,
and binding obligation of the Servicer enforceable in accordance with their
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.
(d) No Violation. The consummation of the transactions contemplated
by this Agreement and the other Basic Documents to which the Servicer is a
party 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 (i) (with or
without notice or lapse of time) a default under, the articles of association
or bylaws of the Servicer, or conflict with or breach any of the material
terms or provisions of, or constitute (with or without notice or lapse of
time) a default under, any indenture, agreement, or other instrument to which
the Servicer is a party or by which it shall be bound, (ii) 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 (iii) 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.
(e) 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 (i)
asserting the invalidity of this Agreement, any of the other Basic Documents
or the Securities, (ii) seeking to prevent the issuance of the Securities or
the consummation of any of the transactions contemplated by this Agreement and
the other Basic Documents, (iii) seeking any determination or ruling that
might materially and adversely affect the performance by the Servicer of its
obligations under, or the validity or enforceability of, this Agreement, any
of the other Basic Documents or the Securities, or (iv) relating to the
Servicer and which might adversely affect the federal income tax attributes of
the Securities.
(f) 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 6.2 Indemnities of Servicer. The Servicer shall be
liable in accordance herewith only to the extent of the obligations
specifically undertaken by the Servicer under this Agreement, and hereby
agrees to the following:
(a) The Servicer shall defend, indemnify and hold harmless the
Issuer, the Owner Trustee, the Indenture Trustee, the Noteholders, the
Certificateholders and the Seller 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.
(b) The Servicer shall indemnify, defend and hold harmless the
Issuer, the Owner Trustee and the Indenture Trustee from and against any taxes
that may at any time be asserted against any such Person with respect to the
transactions contemplated herein or in the other Basic Documents, if any,
including, without limitation, any sales, gross receipts, general corporation,
tangible personal property, privilege, or license taxes (but, in the case of
the Issuer, not including any taxes asserted with respect to, and as of the
date of, the conveyance of the Receivables to the Issuer or the issuance and
original sale of the Notes and the Certificates, or asserted with respect to
ownership of the Receivables, or federal or state income taxes arising out of
the transactions contemplated by this Agreement and the other Basic Documents)
and costs and expenses in defending against the same.
(c) The Servicer shall indemnify, defend and hold harmless the
Issuer, the Owner Trustee, the Indenture Trustee, the Noteholders, the
Certificateholders and the Seller 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 any such Person through, the negligence, willful misfeasance, or bad
faith of the Servicer in the performance of its duties under this Agreement or
any other Basic Document to which it is a party, or by reason of reckless
disregard of its obligations and duties under this Agreement or any other
Basic Document to which it is a party.
(d) The Servicer shall indemnify, defend, and hold harmless the Owner
Trustee and the Indenture Trustee, as applicable, from and against all costs,
expenses, losses, claims, damages, and liabilities arising out of or incurred
in connection with the acceptance or performance of the trusts and duties
contained herein and in the other Basic Documents, if any, except to the
extent that such cost, expense, loss, claim, damage, or liability: (i) shall
be due to the willful misfeasance, bad faith, or negligence (except for errors
in judgment) of the Owner Trustee or the Indenture Trustee, as applicable;
(ii) in the case of the Owner Trustee, shall arise from the Owner Trustee's
breach of any of its representations or warranties set forth in Section 6.9 of
the Trust Agreement or, in the case of the Indenture Trustee, from the
Indenture Trustee's breach of any of its representations or warranties set
forth in the Indenture; or (iii) in the case of the Indenture Trustee, shall
arise out of or be incurred in connection with the performance by the
Indenture Trustee of the duties of a Successor Servicer hereunder.
(e) Indemnification under this Section 6.2 by USAA FSB (or any
successor thereto pursuant to Section 7.2) as Servicer, with respect to the
period such Person was the Servicer, shall survive the termination of such
Person as Servicer or a resignation by such Person as Servicer as well as the
termination of this Agreement or the resignation or removal of the Owner
Trustee or the Indenture Trustee and 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 6.2 and the Person to or
on behalf of whom such payments are made thereafter shall collect any of such
amounts from others, such Person shall promptly repay such amounts to the
Servicer, without interest.
SECTION 6.3 Merger or Consolidation of, or
Assumption of the Obligations of Servicer. Any Person (i) into which the
Servicer may be merged or consolidated, (ii) resulting from any merger,
conversion, or consolidation to which the Servicer shall be a party, (iii)
succeeding to the business of the Servicer or (iv) 50% or more of the equity
of which is owned, directly or indirectly, by the United Services Automobile
Association, which Person in any of the foregoing cases executes an agreement
of assumption to perform every obligation of the Servicer under this
Agreement, will be the successor to the Servicer under this Agreement without
the execution or filing of any paper or any further act on the part of any of
the parties to this Agreement. The Servicer shall provide notice of any
merger, conversion, consolidation or succession pursuant to this Section 6.3
to the Rating Agencies and the Indenture Trustee.
SECTION 6.4 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
Issuer, the Noteholders or the Certificateholders, except as provided under
this Agreement, for any action taken or for refraining from the taking of any
action pursuant to this 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 or bad faith in the performance of duties or by reason of reckless
disregard of obligations and duties under this Agreement, or by reason of
negligence in the performance of its duties under this Agreement. The Servicer
and any director, officer or employee or agent of the Servicer may rely in
good faith on any Opinion of Counsel or on any Officer's Certificate of the
Seller or certificate of auditors believed to be genuine and to have been
signed by the proper party in respect of any matters arising under this
Agreement.
(b) Except as provided in this Agreement, the Servicer shall not be
under any obligation to appear in, prosecute, or defend any legal action that
shall not be incidental to its duties to service the Receivables in accordance
with this 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 this Agreement
and the rights and duties of the parties to this Agreement and the interests
of the Noteholders and Certificateholders under this 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 Issuer, and the
Servicer shall be entitled to be reimbursed therefor. Any amounts due the
Servicer pursuant to this subsection shall be payable on a Payment Date from
the Available Collections on deposit in the Collection Account only after all
payments required to be made on such date to the Noteholders, the
Certificateholders and the Servicer have been made, and deposits of any amount
required to be deposited into the Reserve Account pursuant to Section
4.6(c)(vi) to maintain the amount on deposit therein (exclusive of investment
income and earnings on amounts on deposit therein) at the Specified Reserve
Balance on such date have been made.
(c) 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 this Agreement, other than (i) any loss or
liability otherwise reimbursable pursuant to this Agreement; (ii) any loss,
liability, or expense incurred solely by reason of the Servicer's willful
misfeasance, negligence, or bad faith in the performance of its duties
hereunder or by reason of reckless disregard of its obligations and duties
under this Agreement; and (iii) any loss, liability, or expense for which the
Issuer is to be indemnified by the Servicer under this Agreement. Any amounts
due the Servicer pursuant to this subsection shall be payable on a Payment
Date from the Available Collections on deposit in the Collection Account only
after all payments required to be made on such date to the Noteholders, the
Certificateholdes and the Servicer have been made, and deposits of any amount
required to be deposited into the Reserve Account pursuant to Section
4.6(c)(vi) to maintain the amount on deposit therein (exclusive of investment
income and earnings on amounts on deposit therein) at the Specified Reserve
Balance on such date have been made.
SECTION 6.5 Delegation of Duties. The Servicer
may at any time perform specific duties as servicer under this Agreement
through sub-contractors; provided that no such delegation or subcontracting
shall relieve the Servicer of its responsibilities with respect to such duties
as to which the Servicer shall remain primarily responsible and the Servicer
shall be solely responsible for the fees of any such sub-contractors.
SECTION 6.6 Servicer Not to Resign as Servicer.
Subject to the provisions of Section 6.3, the Servicer shall not resign from
its obligations and duties under this Agreement except upon determination that
the performance of its duties under this Agreement shall no longer be
permissible under applicable law. Notice of any such determination permitting
the resignation of the Servicer shall be communicated to the Owner Trustee and
the Indenture Trustee at the earliest practicable time (and, if such
communication is not in writing, shall be confirmed in writing at the earliest
practicable time) and any such determination shall be evidenced by an Opinion
of Counsel to such effect delivered to the Owner Trustee and the Indenture
Trustee concurrently with or promptly after such notice. No such resignation
shall become effective until the Indenture Trustee or a Successor Servicer
shall have (i) taken the actions required by Section 7.1(b), (ii) assumed the
responsibilities and obligations of the Servicer in accordance with Section
7.2 [and (iii) become the Administrator under the Administration Agreement
pursuant to Section 9 thereof.]
SECTION 6.7 Servicer May Own Notes or Certificates. The
Servicer, and any Affiliate of the Servicer, may, in its individual or any
other capacity, become the owner or pledgee of Notes or Certificates with the
same rights as it would have if it were not the Servicer or an Affiliate
thereof, except as otherwise expressly provided herein or in the other Basic
Documents. Except as set forth herein or in the other Basic Documents, Notes
and Certificates so owned by or pledged to the Servicer or such Affiliate shall
have an equal and proportionate benefit under the provisions of this Agreement,
without preference, priority or distinction as among all of the Notes and
Certificates.
ARTICLE VII
SERVICING TERMINATION
SECTION 7.1 Events of Servicing Termination. (a) If any one
of the following events ("Events of Servicing Termination") occur and be
continuing:
(i) Any failure by the Servicer (or, so long as the Seller
is the Servicer, the Seller) to deliver to the Owner Trustee or the
Indenture Trustee any proceeds or payment required to be so delivered
under the terms of the Notes and the Certificates and this Agreement
that shall continue unremedied for a period of five (5) Business Days
after written notice of such failure is received by the Servicer or
the Seller, as the case may be, from the Owner Trustee or the
Indenture Trustee or after discovery of such failure by an officer of
the Servicer or the Seller, as the case may be; 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, as the case
may be, set forth in the Notes, the Certificates or in this
Agreement, which failure shall (A) materially and adversely affect
the rights of Noteholders or Certificateholders and (B) continue
unremedied for a period of ninety (90) 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 the Seller, as the case
may be, by the Owner Trustee or the Indenture Trustee, or (2) to the
Owner Trustee, the Indenture Trustee, the Seller and the Servicer by
the Noteholders of Notes evidencing not less than 25% of the
principal amount of the Notes or, if no Notes are outstanding, by
Certificateholders of Certificates evidencing not less than 25% of
the Certificate Balance; 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 its respective affairs, and the continuance of any
such decree or order unstayed and in effect for a period of sixty
(60) consecutive days; or
(iv) The consent by the Servicer to the appointment of a
conservator or receiver or liquidator in any insolvency, readjustment
of debt, marshalling of assets and liabilities, or similar
proceedings of or relating to the Servicer of or relating to
substantially all of its 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 voluntary suspend payment of its obligations or become
insolvent;
then the Indenture Trustee shall promptly notify each Rating Agency, and in
each and every case, so long as an Event of Servicing Termination shall not
have been remedied, either the Indenture Trustee or the holders of Notes
evidencing not less than a majority of the principal amount of the Notes
Outstanding (or, if no Notes are Outstanding, Certificates evidencing not less
than a majority of the Certificate Balance), by notice then given in writing
to the Servicer (and to the Indenture Trustee and the Owner Trustee if given
by the Noteholders and to the Owner Trustee if given by the
Certificateholders) (with a copy to the Rating Agencies) may terminate all of
the rights and obligations of the Servicer under this Agreement. On or after
the receipt by the Servicer of such written notice, all authority and power of
the Servicer under this Agreement, whether with respect to the Notes, the
Certificates or the Trust Property or otherwise, shall pass to and be vested
in the Indenture Trustee or such Successor Servicer as may be appointed under
Section 7.2; and, without limitation, the Indenture Trustee and the Owner
Trustee are hereby authorized and empowered to execute and deliver, on behalf
of the predecessor Servicer, as attorney-in-fact or other wise, any and all
documents and other instruments, and to do or accomplish all other acts or
things necessary or appropriate to effect the purposes of such notice of
termination, whether to complete the transfer and endorsement of the
Receivables and related documents, or otherwise.
(b) Upon termination of the Servicer under Section 7.1(a), the
predecessor Servicer shall cooperate with the Indenture Trustee, the Owner
Trustee and such Successor Servicer in effecting the termination of the
responsibilities and rights of the predecessor Servicer under this Agreement,
including the transfer to the Indenture Trustee or such Successor Servicer for
administration of all cash amounts that shall at the time be held by the
predecessor Servicer for deposit, or shall thereafter be received with respect
to a Receivable and the delivery of the Receivable Files and the related
accounts and records maintained by the Servicer. All reasonable costs and
expenses (including attorneys' fees) incurred in connection with transferring
the Receivable Files to the Successor Servicer and amending this Agreement to
reflect such succession as Servicer pursuant to this Section 7.1 shall be paid
by the predecessor Servicer upon presentation of reasonable documentation of
such costs and expenses.
SECTION 7.2 Appointment of Successor Servicer. (a) Upon
the Servicer's receipt of notice of termination pursuant to Section 7.1 or
the Servicer's resignation in accordance with the terms of this Agreement,
the predecessor Servicer shall continue to perform its functions as Servicer
under this Agreement, in the case of termination, only until the date specified
in such termination notice or, if no such date is specified in a notice of
termination, until receipt of such notice and, in the case of resignation,
until the later of (x) the date 45 days from the delivery to the Indenture
Trustee and the Owner Trustee of written notice of such resignation (or
written confirmation of such notice) in accordance with the terms of this
Agreement and (y) the date upon which the predecessor Servicer shall become
unable to act as Servicer, as specified in the notice of resignation and
accompanying Opinion of Counsel. In the event of the Servicer's resignation or
termination hereunder, the Issuer shall appoint a Successor Servicer, and the
Successor Servicer shall accept its appointment by a written assumption in
form acceptable to the Owner Trustee and the Indenture Trustee (with a copy to
each Rating Agency). In the event that a Successor Servicer has not been
appointed at the time when the predecessor Servicer has ceased to act as
Servicer in accordance with this Section 7.2, the Indenture Trustee without
further action shall automatically be appointed the Successor Servicer. The
Indenture Trustee may resign as the Servicer by giving written notice of such
resignation to the Issuer and in such event shall be released from such duties
and obligations, such release not to be effective until the date a Successor
Servicer enters into a written assumption as provided in this Section. Upon
delivery of any such notice to the Issuer, the Issuer shall obtain a new
servicer as the Successor Servicer in accordance with this Section.
Notwithstanding the above, if the Indenture Trustee shall be legally unable so
to act or if, within 30 days after the delivery of its notice of resignation,
the Issuer shall not have obtained a Successor Servicer, the Indenture Trustee
shall appoint, or petition a court of competent jurisdiction to appoint, any
established institution, having a net worth of not less than $100,000,000 and
whose regular business shall include the servicing of automotive receivables,
as the successor to the Servicer under this Agreement; provided that the
Rating Agency Condition shall be satisfied in connection with such
appointment.
(b) Upon appointment, the Successor Servicer shall be the successor
in all respects to the predecessor Servicer and shall be subject to all the
responsibilities, duties, and liabilities arising thereafter relating thereto
placed on the predecessor Servicer, by the terms and provisions of this
Agreement.
(c) In connection with such appointment, the Indenture 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 predecessor Servicer under this Agreement. The Indenture Trustee
and such Successor Servicer shall take such action, consistent with this
Agreement, as shall be necessary to effectuate any such succession.
SECTION 7.3 Repayment of Advances. If the
identity of the Servicer shall change, the predecessor Servicer shall be
entitled to receive to the extent of available funds reimbursement for
Outstanding Advances pursuant to Section 4.3 and 4.4, in the manner specified
in Section 4.6, with respect to all Advances made by the predecessor Servicer.
SECTION 7.4 Notification to Noteholders and
Certificateholders. Upon any termination of, or appointment of a successor to,
the Servicer pursuant to this Article VII, the Indenture Trustee shall give
prompt written notice thereof to Noteholders, and the Owner Trustee shall give
prompt written notice thereof to Certificateholders at their respective
addresses of record and to each Rating Agency.
SECTION 7.5 Waiver of Past Events of Servicing
Termination. The holders of Notes evidencing not less than a majority of the
principal amount of the Notes (or, if no Notes are outstanding, holders of
Certificates evidencing not less than a majority of the Certificate Balance)
may, on behalf of all Noteholders and Certificateholders, waive any Event of
Servicing Termination hereunder and its consequences, except an event
resulting from the failure to make any required deposits to or payments from
any of the Trust Accounts or the Certificate Distribution Account in
accordance with this Agreement, which shall require the unanimous vote of all
Holders of Outstanding Securities. Upon any such waiver of a past Event of
Servicing Termination, such Event of Servicing Termination shall cease to
exist, and shall be deemed to have been remedied for every purpose of this
Agreement. No such waiver shall extend to any subsequent or other event or
impair any right consequent thereon. The Issuer shall provide written notice
of any such waiver to the Rating Agencies.
ARTICLE VIII
TERMINATION
SECTION 8.1 Optional Purchase of All
Receivables. As of the last day of any Collection Period as of which the Pool
Factor shall be equal to or less than the Optional Purchase Percentage, the
Servicer shall have the option to purchase the Trust Property from the Trust.
To exercise such option, the Servicer shall deposit pursuant to Section 4.5 in
the Collection Account an amount equal to the aggregate Purchase Amount for
the Receivables, and shall succeed to all interests in and to the Trust.
Notwithstanding the foregoing, the Servicer shall not be permitted to exercise
such option unless the amount to be deposited in the Collection Account
pursuant to the preceding sentence is greater than or equal to the sum of the
outstanding principal amount of the Notes and the Certificate Balance and all
accrued but unpaid interest (including any over due interest) thereon. The
amount deposited in the Collection Account pursuant to this Section 8.1 shall
be used on the next Payment Date to make payments in full to Noteholders and
Certificateholders in the manner set forth in Article IV. The Purchase of the
Trust Property pursuant to this Section shall not be permitted unless either
(i) the Servicer's long-term unsecured debt is rated at the time of such
purchase at least Baa3 by Moody's or (ii) the Servicer provides to the
Indenture Trustee and the Owner Trustee an Opinion of Counsel in form
reasonably satisfactory to the Indenture Trustee and the Owner Trustee and in
form and substance satisfactory to Moody's to the effect that such purchase
will not constitute a fraudulent transfer of assets of the Servicer under
applicable state and federal law; provided that this sentence may be deleted
or modified with the consent of Moody's and without the consent of any
Securityholder, the Indenture Trustee or the Owner Trustee.
SECTION 8.2 Succession Upon Satisfaction and
Discharge of Indenture. Following the satisfaction and discharge of the
Indenture and the payment in full of the principal of and interest on the
Notes, to the extent permitted by applicable law, the Indenture Trustee will
continue to carry out its obligations hereunder as agent for the Owner
Trustee, including without limitation making distributions from the Collection
Account in accordance with Section 4.6 and making withdrawals from the Reserve
Account in accordance with Section 4.5(b) and Section 4.7.
ARTICLE IX
MISCELLANEOUS PROVISIONS
SECTION 9.1 Amendment. (a) This Agreement may be
amended by the Seller, the Servicer and the Issuer, with the consent of the
Indenture Trustee and the Owner Trustee to the extent that their respective
rights or obligations may be affected thereby (which consent may not be
unreasonably withheld), but without the consent of any of the Noteholders or
the Certificateholders, to cure any ambiguity, to correct or supplement any
provisions in this Agreement, or to add any provisions to or change or
eliminate any provisions or to modify the rights of the Noteholders or
Certificateholders; provided, however, that such action shall not, as
evidenced by either an Opinion of Counsel or an Officer's Certificate
delivered to the Owner Trustee and the Indenture Trustee, materially and
adversely affect the interests of any Noteholder or Certificateholder and the
Rating Agency Condition shall be satisfied.
(b) This Agreement may also be amended from time to time by the
Seller, the Servicer and the Issuer, with the consent of the Indenture Trustee
and the Owner Trustee to the extent that their respective rights or
obligations may be affected thereby (which consent may not be unreasonably
withheld) and with the consent of (i) the Noteholders of Notes evidencing not
less than a majority of the principal amount of each Class of Notes and (ii)
the Certificateholders of Certificates evidencing not less than a majority of
the Certificate Balance (which consent of any holder of a Note or holder of a
Certificate given pursuant to this Section 9.1 or pursuant to any other
provision of this Agreement shall be conclusive and binding on such Note or
Certificate, as the case may be, and on all future holders of such Note or
holders of such Certificate, as the case may be, and of any Note or
Certificate, as applicable, issued upon the transfer thereof or in exchange
thereof or in lieu thereof whether or not notation of such consent is made
upon such Note or the Certificate), for the purpose of adding any provisions
to or changing in any manner or eliminating any of the provisions of this
Agreement, or of modifying in any manner the rights of the Noteholders or the
Certificateholders; provided, however, that no such amendment shall (A)
increase or reduce in any manner the amount of, or accelerate or delay the
timing of, or change the allocation or priority of, collections of payments on
Receivables or distributions that shall be required to be made on any Note or
Certificate or change any Note Interest Rate or any Certificate Rate or the
amount required to be on deposit in the Reserve Account, without the consent
of all Noteholders or Certificateholders or (B) reduce the aforesaid
percentage required to consent to any such amendment, without the consent of
the holders of all Notes and holders of all Certificates. Notwithstanding the
foregoing, the Seller may decrease the Specified Balance Amount upon
satisfaction of the Rating Agency Condition without the consent of any other
party hereto and any Noteholder or Certificateholder.
(c) Prior to the execution of any such amendment the Servicer will
provide, and the Owner Trustee shall distribute, written notification of the
substance of such amendment to each Rating Agency.
(d) Promptly after the execution of any such amendment, the Owner
Trustee shall furnish written notification of the substance of such amendment
to each Certificateholder, the Indenture Trustee and each Rating Agency and
the Indenture Trustee will provide notification of the substance of such
amendment to each Noteholder. It shall not be necessary for the consent of
Noteholders or the Certificateholders pursuant to this Section 9.1 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 any other consents of Noteholders and
Certificateholders provided for in this Agreement) and of evidencing the
authorization of the execution thereof by Noteholders and Certificateholders
shall be subject to such reasonable requirements as the Owner Trustee and the
Indenture Trustee may prescribe, including the establishment of record dates
pursuant to the Note Depository Agreement.
(e) Prior to the execution of any amendment to this Agreement, the
Owner Trustee and the Indenture 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 this Agreement and the Opinion of Counsel referred
to in Section 9.2(i)(1). The Owner Trustee or the Indenture Trustee may, but
shall not be obligated to, enter into any such amendment which affects such
Owner Trustee's or Indenture Trustee's own rights, duties or immunities under
this Agreement or otherwise.
SECTION 9.2 Protection of Title to Trust Property. (a) The
Seller 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 interest of the Issuer and the Indenture Trustee for the benefit of the
Noteholders in the Receivables and in the proceeds thereof. The Seller shall
deliver (or cause to be delivered) to the Owner Trustee and the Indenture
Trustee file-stamped copies of, or filing receipts for, any document filed
as provided above, as soon as available following such filing.
(b) Neither the Seller nor the Servicer shall change its name,
identity, or corporate structure in any manner that would, could, or might
make any financing statement or continuation statement filed by the Seller in
accordance with paragraph (a) above seriously misleading within the meaning of
ss. 9-402(7) of the UCC, unless it shall have given the Owner Trustee and the
Indenture Trustee at least 10 days' prior written notice thereof, with a copy
to the Rating Agencies, and shall have promptly filed appropriate amendments
to all previously filed financing statements or continuation statements.
(c) The Seller and the Servicer shall give the Owner Trustee and the
Indenture Trustee at least 10 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 and shall promptly file any such amendment or new
financing statement. The Servicer shall at all times maintain each office from
which it shall service Receivables, and its principal executive office, within
the United States of America.
(d) The Servicer shall maintain accounts and records as to each
Receivable accurately and in sufficient detail to permit (i) the reader
thereof to know at any time the status of such Receivable, including payments
and recoveries made and payments owing (and the nature of each) and (ii)
reconciliation between payments or recoveries on (or with respect to) each
Receivable and the amounts from time to time deposited in the Collection
Account and the Reserve Account in respect of such Receivable.
(e) The Servicer shall maintain its computer systems so that, from
and after the time of conveyance under this Agreement of the Receivables to
the Issuer, the Servicer's master computer records (including any back-up
archives) that refer to a Receivable shall indicate clearly, by numerical code
or otherwise, that such Receivable is owned by the Issuer and has been pledged
to the Indenture Trustee pursuant to the Indenture. Indication of the Issuer's
and the Indenture Trustee's interest in a Receivable shall not be deleted from
or modified on the Servicer's computer systems until, and only until, the
Receivable shall have been paid in full or repurchased.
(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 automotive
receivables to any prospective purchaser, lender, or other transferee, the
Servicer shall give to such prospective purchaser, lender, or other transferee
computer tapes, records, or print-outs (including any restored from back-up
archives) that, if they shall refer in any manner whatsoever to any
Receivable, shall indicate clearly that such Receivable has been conveyed to
and is owned by the Issuer and has been pledged to the Indenture Trustee.
(g) The Servicer, upon receipt of reasonable prior notice, shall
permit the Owner Trustee, the Indenture Trustee and their respective agents at
any time during normal business hours to inspect, audit, and make copies of
and to obtain abstracts from the Servicer's records regarding any Receivable.
(h) Upon request, the Servicer shall furnish to the Owner Trustee and
the Indenture Trustee, within five (5) Business Days, a list of all
Receivables (by contract number and name of Obligor) then owned by the Issuer,
together with a reconciliation of such list to the Schedule of Receivables and
to each of the Servicer's Certificates furnished before such request
indicating removal of Receivables from the Trust.
(i) The Servicer shall deliver to the Owner Trustee and the Indenture
Trustee:
(1) promptly after the execution and delivery of this
Agreement and of each amendment thereto, an Opinion of Counsel either
(A) stating that, in the opinion of such Counsel and subject to
customary qualifications and assumptions, all financing statements
and continuation statements have been executed and filed that are
necessary fully to preserve and protect the interest of the Issuer
and the Indenture 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; and
(2) within 120 days after the beginning of each calendar
year beginning with the first calendar year beginning more than three
months after the Cutoff Date, an Opinion of Counsel, dated as of a
date during such 120-day period, either (A) stating that, in the
opinion of such counsel and subject to customary qualifications and
assumptions, all financing statements and continuation statements
have been executed and filed that are necessary fully to preserve and
protect the interest of the Issuer and the Indenture Trustee in the
Receivables, and re citing 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.
Each Opinion of Counsel referred to in clause (i)(1) or (i)(2) above
shall specify any action necessary (as of the date of such opinion) to be
taken in the following year to preserve and protect such interest.
(j) For the purpose of facilitating the execution of this Agreement
and for other purposes, this Agreement may be executed 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 9.3 Governing Law. THIS AGREEMENT SHALL
BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK AND THE
OBLIGATIONS, RIGHTS, AND REMEDIES OF THE PARTIES UNDER THIS AGREEMENT SHALL BE
DETERMINED IN ACCORDANCE WITH SUCH LAWS.
SECTION 9.4 Notices. All demands, notices, and
communications under this Agreement shall be in writing, personally delivered,
sent by telecopier, over night courier or mailed by certified mail, return
receipt requested, and shall be deemed to have been duly given upon receipt
(a) in the case of the Seller or the Servicer, to the agent for service as
specified in Section 9.11 hereof, or at such other address as shall be
designated by the Seller or the Servicer in a written notice to the Owner
Trustee and the Indenture Trustee, (b) in the case of the Owner Trustee, at
the Corporate Trust Office of the Owner Trustee, (c) in the case of the
Indenture Trustee, at the Corporate Trust Office of the Indenture Trustee,
[(d) in the case of Moody's Investors Service, Inc., at the following address:
Moody's Investors Service, Inc., ABS Monitoring Department, 99 Church Street,
New York, New York 10007, (e) in the case of Standard & Poor's Ratings
Services, at the following address: Standard & Poor's Ratings Services, 55
Water Street, 40th Floor, New York, New York 10041, Attention: Asset Backed
Surveillance Department and (f) in the case of Fitch IBCA, Inc., at the
following address: Fitch IBCA, Inc., 1 State Street Plaza, New York, New York
10004, Attention: Asset Backed Surveillance.] Any notice required or permitted
to be mailed to a Noteholder or Certificateholder shall be given by first
class mail, postage prepaid, at the address of such Person as shown in the
Note Register or the Certificate Register, as applicable. Any notice so mailed
within the time prescribed in this Agreement shall be conclusively presumed to
have been duly given, whether or not the Noteholder or Certificateholder shall
receive such notice.
SECTION 9.5 Severability of Provisions. If any
one or more of the covenants, agreements, provisions, or terms of this
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 this Agreement and
shall in no way affect the validity or enforceability of the other provisions
of this Agreement or of the Notes, the Certificates or the rights of the
holders thereof.
SECTION 9.6 Assignment. Notwithstanding anything
to the contrary contained herein, except as provided in Sections 6.3 and 7.2
and as provided in the provisions of this Agreement concerning the resignation
of the Servicer, this Agreement may not be assigned by the Seller or the
Servicer unless (i)(A) the Rating Agency Condition is satisfied and (B) the
Indenture Trustee and the Owner Trustee have consented thereto, which consent
shall not be unreasonably withheld or (ii) the Owner Trustee, the Indenture
Trustee, the Noteholders of Notes evidencing not less than 66 2/3% of the
principal amount of the Notes Outstanding and the Certificateholders of
Certificates evidencing not less than 66 2/3% of the Certificate Balance
consent thereto. Any transfer or assignment with respect to the Servicer of
all its rights, obligations and duties will not become effective until a
successor Servicer has assumed the Servicer's rights, duties and obligations
under this 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 9.7 Further Assurances. The Seller and
the Servicer agree to do and perform, from time to time, any and all acts and
to execute any and all further instruments required or reasonably requested by
the Owner Trustee or the Indenture Trustee more fully to effect the purposes
of this Agreement, including, without limitation, the execution of any
financing statements or continuation statements relating to the Receivables
for filing under the provisions of the UCC of any applicable jurisdiction.
SECTION 9.8 No Waiver; Cumulative Remedies. No
failure to exercise and no delay in exercising, on the part of the Owner
Trustee, the Indenture Trustee, the Noteholders or the Certificateholders, any
right, remedy, power or privilege hereunder, shall operate as a waiver
thereof; nor shall any single or partial exercise of any right, remedy, power
or privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, remedy, power or privilege. The rights, remedies,
powers and privileges therein provided are cumulative and not exhaustive of
any rights, remedies, powers and privileges provided by law.
SECTION 9.9 Third-Party Beneficiaries. This
Agreement will inure to the benefit of and be binding upon the parties hereto,
the Noteholders, the Certificateholders, the Indenture Trustee and the Owner
Trustee and their respective successors and permitted assigns and each of the
Indenture Trustee and the Owner Trustee may enforce the provisions hereof as
if they were parties thereto. Except as otherwise provided in this Article IX,
no other Person will have any right or obligation hereunder. The parties
hereto hereby acknowledge and consent to the pledge of this Agreement by the
Issuer to the Indenture Trustee for the benefit of the Noteholders pursuant to
the Indenture.
SECTION 9.10 Actions by Noteholders or
Certificateholders. (a) Wherever in this Agreement a provision is made that an
action may be taken or a notice, demand, or instruction given by Noteholders
or Certificateholders, such action, notice, or instruction may be taken or
given by any Noteholder or Certificateholder, as applicable, unless such
provision requires a specific percentage of Noteholders or Certificateholders.
(b) Any request, demand, authorization, direction, notice, consent,
waiver, or other act by a Noteholder or Certificateholder shall bind such
Noteholder or Certificateholder and every subsequent holder of such Note or
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 Owner Trustee, the Indenture Trustee or the Servicer in reliance
thereon, whether or not notation of such action is made upon such Note or
Certificate.
SECTION 9.11 Limitation of Liability of Owner
Trustee and Indenture Trustee. (a) Notwithstanding anything contained herein
to the contrary, this Agreement has been countersigned by __________________
not in its individual capacity but solely in its capacity as Owner Trustee of
the Issuer and in no event shall __________________ in its individual capacity
or, except as expressly provided in the Trust Agreement, as Owner Trustee of
the Issuer have any liability for the representations, warranties, covenants,
agreements or other obligations of the Issuer hereunder or in any of the
certificates, notices or agreements delivered pursuant hereto, as to all of
which recourse shall be had solely to the assets of the Issuer. For all
purposes of this Agreement, in the performance of its duties or obligations
hereunder or in the performance of any duties or obligations of the Issuer
hereunder, the Owner Trustee shall be subject to, and entitled to the benefits
of, the terms and provisions of Articles VI and VII of the Trust Agreement.
(b) Notwithstanding anything contained herein to the contrary, this
Agreement has been accepted by __________________, not in its individual
capacity but solely as Indenture Trustee, and in no event shall
__________________ have any liability for the representations, warranties,
covenants, agreements or other obligations of the Issuer hereunder or in any
of the certificates, notices or agreements delivered pursuant hereto, as to
all of which recourse shall be had solely to the assets of the Issuer.
SECTION 9.12 Savings Clause. It is the intention
of the Seller and the Issuer that the transfer of the Trust Property
contemplated herein constitute an absolute transfer of the Trust Property,
conveying good title to the Trust Property from the Seller to the Issuer.
However, in the event that such transfer is deemed to be a pledge, the Seller
hereby grants to the Issuer a first priority security interest in all of the
Seller's right, title and interest in, to and under the Trust Property, and
all proceeds thereof, to secure a loan in an amount equal to all amounts
payable under the Notes and the Certificates, and in such event, this
Agreement shall constitute a security agreement under applicable law.
IN WITNESS WHEREOF, the parties have caused this Sale and Servicing
Agreement to be duly executed by their respective officers thereunto duly
authorized as of the day and year first above written.
USAA FEDERAL SAVINGS BANK,
as Seller and Servicer
By: _______________________
Name:
Title:
USAA AUTO OWNER TRUST _______,
as Issuer
By: _____________________________,
not in its individual capacity
but solely as Owner Trustee
By: _________________________
Name:
Title:
Accepted and agreed:
_________________________________,
not in its individual capacity
but solely as Indenture Trustee
By: _____________________________
Name:
Title:
_________________________________,
not in its individual capacity
but solely as Owner Trustee
By: _____________________________
Name:
Title:
A-1
SCHEDULE A
SCHEDULE OF RECEIVABLES
Delivered to Indenture Trustee at Closing
SCHEDULE B
Location of Receivable Files
APPENDIX A
Definitions and Usage
<PAGE>
Exhibit 99.2
ADMINISTRATION AGREEMENT
This ADMINISTRATION AGREEMENT, dated as of ______________ (as from
time to time amended, supplemented or otherwise modified and in effect, this
"Agreement"), is by and among USAA AUTO OWNER TRUST ____, a Delaware [common
law] [business] trust (the "Issuer"), USAA FEDERAL SAVINGS BANK, a federally
chartered banking association, as administrator (the "Administrator"), and
_______________________ , a _____________________ , not in its individual
capacity but solely as Indenture Trustee (the "Indenture Trustee").
WHEREAS, the Issuer is issuing the Notes pursuant to the Indenture
and the Certificates pursuant to the Trust Agreement and has entered into
certain agreements in connection therewith, including (i) the Sale and
Servicing Agreement, (ii) the Note Depository Agreement and (iii) the
Indenture (the Sale and Servicing Agreement, the Note Depository Agreement and
the Indenture being referred to hereinafter collectively as the "Related
Agreements");
WHEREAS, the Issuer and the Owner Trustee desire to have the
Administrator perform certain duties of the Issuer and the Owner Trustee under
the Related Agreements and to provide such additional services consistent with
the terms of this Agreement and the Related Agreements as the Issuer and the
Owner Trustee may from time to time request; and
WHEREAS, the Administrator has the capacity to provide the services
required hereby and is willing to perform such services for the Issuer and the
Owner Trustee on the terms set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the parties hereto, intending to be legally
bound, agree as follows:
1. Definitions and Usage. Except as otherwise specified herein or as
the context may otherwise require, capitalized terms used but not otherwise
defined herein are defined in Appendix A hereto, which also contains rules as
to usage that shall be applicable herein.
2. Duties of the Administrator. (a) Duties with Respect to the
Indenture and the Note Depository Agreement. (i) The Administrator agrees to
perform all its duties as Administrator and the duties of the Issuer under the
Note Depository Agreement. In addition, the Administrator shall consult with
the Owner Trustee regarding the duties of the Issuer under the Indenture and
the Note Depository Agreement. The Administrator shall monitor the performance
of the Issuer and shall advise the Owner Trustee when action is necessary to
comply with the Issuer's duties under the Indenture and the Note Depository
Agreement. The Administrator shall prepare for execution by the Issuer, or
shall cause the preparation by other appropriate Persons of, all such
documents, reports, filings, instruments, certificates and opinions that it
shall be the duty of the Issuer to prepare, file or deliver pursuant to the
Indenture and the Note Depository Agreement. In furtherance of the foregoing,
the Administrator shall take, in the name and on behalf of the Issuer, all
appropriate action that is the duty of the Issuer to take, pursuant to the
Indenture including, without limitation, such of the foregoing as are required
with respect to the following matters under the Indenture (references are to
sections of the Indenture):
(A) the preparation of or obtaining of the documents and
instruments required for execution of the Notes and delivery of the
same to the Indenture Trustee for authentication (Section 2.2);
(B) the duty to cause the Note Register to be kept and to give
the Indenture Trustee notice of any appointment of a new Note
Registrar and the location, or change in location, of the Note
Register (Section 2.5);
(C) the determination as to whether the requirements of UCC
Section 8-405 are met and the preparation of an Issuer Request
requesting the Indenture Trustee to authenticate and deliver
replacement Notes in lieu of mutilated, destroyed, lost or stolen
Notes (Section 2.6);
(D) the determination of the expenses associated with the
issuance of replacement Notes (Section 2.6(b));
(E) the preparation, obtaining or filing of Issuer Requests,
instruments, opinions and certificates and other documents required
for the release of property from the lien of the Indenture (Section
2.10);
(F) the preparation of Definitive Notes in accordance with the
instructions of the Clearing Agency and delivery of such to the
Indenture Trustee (Section 2.13);
(G) the maintenance and notice of location of the office in the
Borough of Manhattan, The City of New York, for registration of
transfer or exchange of Notes if the Indenture Trustee ceases to
maintain such an office (Section 3.2);
(H) the duty to cause newly appointed Note Paying Agents, if
any, to deliver to the Indenture Trustee the instrument specified in
the Indenture regarding funds held in trust (Section 3.3(c));
(I) the delivery of the Issuer Order to the Indenture Trustee to
deposit monies with Note Paying Agents, if any, other than the
Indenture Trustee (Section 3.3(d));
(J) the delivery of an Issuer Request for publication and
notification of unclaimed amounts (Section 3.3(e));
(K) the maintenance of the Trust's status as a [common law]
[business] trust and the obtaining and preservation of the Issuer's
qualification to do business in each jurisdiction in which such
qualification is or shall be necessary to protect the validity and
enforceability of the Indenture, the Notes, the Collateral and each
other instrument or agreement included in the Indenture Trust Estate
(Section 3.4);
(L) the preparation of all supplements and amendments to the
Indenture and all financing statements, continuation statements,
instruments of further assurance and other instruments and the taking
of such other action as is necessary or advisable to protect the
Indenture Trust Estate (Sections 3.5 and 3.7(c));
(M) the delivery of the Opinion of Counsel on the Closing Date
and the annual delivery of Opinions of Counsel as to the Indenture
Trust Estate, and the annual delivery of the Officer's Certificate
and certain other statements as to compliance with the Indenture
(Sections 3.6 and 3.9);
(N) the identification to the Indenture Trustee in an Officer's
Certificate of any Person with whom the Issuer has contracted to
perform its duties under the Indenture (Section 3.7(b));
(O) the notification of the Indenture Trustee and the Rating
Agencies of an Event of Servicing Termination under the Sale and
Servicing Agreement and, if such Event of Servicing Termination
arises from the failure of the Servicer to perform any of its duties
under the Sale and Servicing Agreement with respect to the
Receivables, the taking of all reasonable steps available to remedy
such failure (Section 3.7(d));
(P) the appointment of the Successor Servicer and preparation of
the related servicing agreement (Section 3.7(e));
(Q) the notification of the termination of the Servicer and
appointment of the Successor Servicer (Section 3.7(f));
(R) the preparation and obtaining of documents and instruments
required for the consolidation or merger of the Issuer with another
entity or the transfer by the Issuer of its properties or assets
(Section 3.10);
(S) the delivery of a letter for release (Section 3.11(b);
(T) the duty to cause the Servicer to comply with Sections 3.9,
3.10, 3.11, 3.12, 3.13 and 4.9 and Article VI of the Sale and
Servicing Agreement (Section 3.14);
(U) upon the request of the Indenture Trustee, the execution and
delivery of any instruments and the undertaking of any actions
reasonably necessary to carry out more effectively the purpose of the
Indenture (Section 3.17);
(V) the delivery of written notice to the Indenture Trustee and
the Rating Agencies of each Event of Default under the Indenture and
each default by any party to the Sale and Servicing Agreement
(Section 3.19);
(W) the monitoring of the Issuer's obligations as to the
satisfaction and discharge of the Indenture and the preparation of an
Officer's Certificate and the obtaining of the Opinions of Counsel
and the Independent Certificate relating thereto and the demand to
the Indenture Trustee for execution of certain instruments (Section
4.1);
(X) the monitoring of the Issuer's obligations as to the
satisfaction, discharge and defeasance of the Notes and the
preparation of an Officer's Certificate and the obtaining of an
opinion of a nationally recognized firm of independent certified
public accountants, a written certification thereof and the Opinions
of Counsel relating thereto (Section 4.2);
(Y) the demand to remit monies (Section 4.4));
(Z) the preparation of an Officer's Certificate to the Indenture
Trustee after the occurrence of any event which with the giving of
notice and the lapse of time would become an Event of Default under
Section 5.1(iii) of the Indenture, its status and what action the
Issuer is taking or proposes to take with respect thereto (Section
5.1);
(AA) the compliance with any written directive of the Indenture
Trustee with respect to the sale of the Indenture Trust Estate at one
or more public or private sales called and conducted in any manner
permitted by law if an Event of Default shall have occurred and be
continuing (Section 5.4);
(AB) the undertaking of actions set forth in Section 5.16 as
requested by the Indenture Trustee (Section 5.16);
(AC) the payment of expenses and costs to the Indenture Trustee
(Section 6.7);
(AD) the removal of the Indenture Trustee upon the occurrence of
certain events, the preparation and delivery of notice to Noteholders
of the removal of the Indenture Trustee, the appointment of a
successor Indenture Trustee and, if necessary, the petition of a
court of competent jurisdiction for the appointment of a successor
Indenture Trustee (Section 6.8);
(AE) the furnishing of the Indenture Trustee with the names and
addresses of Noteholders during any period when the Indenture Trustee
is not the Note Registrar (Section 7.1);
(AF) the preparation and, after execution by the Issuer, the
filing with the Commission, any applicable state agencies and the
Indenture Trustee of documents required to be filed on a periodic
basis with, and summaries thereof as may be required by rules and
regulations prescribed by, the Commission and any applicable state
agencies and the transmission of such summaries, as necessary, to the
Noteholders (Section 7.3(a));
(AG) the notification to the Indenture Trustee of the listing of
the Notes on any stock exchange (Section 7.4);
(AH) the preparation of an Issuer Request and Officer's
Certificate and the obtaining of an Opinion of Counsel and
Independent Certificates, if necessary, for the release of the
Indenture Trust Estate (Sections 8.4 and 8.5);
(AI) the preparation of Issuer Orders and the obtaining of
Opinions of Counsel with respect to the execution of supplemental
indentures and the mailing to the Noteholders of notices with respect
to such supplemental indentures (Sections 9.1, 9.2 and 9.3);
(AJ) the determination to execute and deliver new Notes
conforming to any supplemental indenture (Section 9.6);
(AK) the notice and deposit of money for redemption of the Notes
(Section 10.1);
(AL) the notice to the Indenture Trustee and the duty to cause
the Indenture Trustee to provide notification to Noteholders of
redemption of the Notes (Section 10.2);
(AM) the preparation of all Officer's Certificates, Issuer
Requests and Issuer Orders and the obtaining of Opinions of Counsel
and Independent Certificates with respect to any requests by the
Issuer to the Indenture Trustee to take any action under the
Indenture (Section 11.1(a));
(AN) the preparation of Officer's Certificates and the obtaining
of Independent Certificates, if necessary, for the release of
property from the lien of the Indenture (Section 11.1(b));
(AO) the notification of the Rating Agencies pursuant to Section
11.4 of the Indenture (Section 11.4);
(AP) the preparation and delivery to Noteholders and the
Indenture Trustee of any agreements with respect to alternate payment
and notice provisions (Section 11.6); and
(AQ) the recording of the Indenture and payment of related
expenses, if applicable (Section 11.15).
(ii) The Administrator will:
(A) pay the Indenture Trustee from time to time reasonable
compensation for all services rendered by the Indenture Trustee under
the Indenture (which compensation shall not be limited by any
provision of law in regard to the compensation of a trustee of an
express trust);
(B) except as otherwise expressly provided in the Indenture,
reimburse the Indenture Trustee upon its request for all reasonable
expenses, disbursements and advances incurred or made by the
Indenture Trustee in accordance with any provision of the Indenture
(including the reasonable compensation, expenses and disbursements of
its agents and counsel), except any such expense, disbursement or
advance as may be attributable to its wilful misconduct, negligence
or bad faith;
(C) indemnify the Indenture Trustee and its agents for, and hold
them harmless against, any losses, liability or expense incurred
without wilful misconduct, negligence or bad faith on their part,
arising out of or in connection with the acceptance or administration
of the transactions contemplated by the Indenture, including the
reasonable costs and expenses (including reasonable attorneys' fees)
of defending themselves against any claim or liability in connection
with the exercise or performance of any of their powers or duties
under the Indenture; and
(D) indemnify, defend and hold harmless the Issuer, the
Indenture Trustee and any of their respective officers, directors,
employees and agents from and against any loss, liability or expense
incurred by reason of (i) the Depositor's or the Issuer's violation
of federal or state securities laws in connection with the offering
and sale of the Notes and the Certificates or (ii) any breach of the
Depositor of any term, provision or covenant contained in the Sale
and Servicing Agreement.
Indemnification under this Section shall survive the resignation or
removal of the Indenture Trustee and the termination of this Agreement and
shall include reasonable fees and expenses of counsel and expenses of
litigation. If the Administrator shall have made any indemnity payments
pursuant to this Section and the Person to or on behalf of whom such payments
are made thereafter shall collect any such amount from others, such Person
shall promptly repay such amounts to the Administrator, without interest.
(b) Additional Duties. (i) In addition to the duties of the
Administrator set forth above, the Administrator shall perform such
calculations and shall prepare or shall cause the preparation by other
appropriate persons of, and shall execute on behalf of the Issuer or the Owner
Trustee, all such documents, reports, filings, instruments, certificates and
opinions that it shall be the duty of the Issuer or the Owner Trustee to
prepare, file or deliver pursuant to the Related Agreements, and at the
request of the Owner Trustee shall take all appropriate action that it is the
duty of the Issuer or the Owner Trustee to take pursuant to the Related
Agreements. Subject to Section 6 of this Agreement, the Administrator shall
administer, perform or supervise the performance of such other activities in
connection with the Collateral (including the Related Agreements) as are not
covered by any of the foregoing provisions and as are expressly requested by
the Owner Trustee and are reasonably within the capability of the
Administrator.
(ii) Notwithstanding anything in this Agreement or the Related
Agreements to the contrary, the Administrator shall be responsible for
promptly notifying the Owner Trustee in the event that any withholding tax is
imposed on the Trust's payments (or allocations of income) to a
Certificateholder as contemplated in Section 5.2(c) of the Trust Agreement.
Any such notice shall specify the amount of any withholding tax required to be
withheld by the Owner Trustee pursuant to such provision.
(iii) Notwithstanding anything in this Agreement or the Related
Agreements to the contrary, the Administrator shall be responsible for
performance of the duties of the Trust, the Depositor, or the Owner Trustee
set forth in Section 5.5(a), (b), (c) and (d) and the penultimate sentence of
Section 5.5 of the Trust Agreement with respect to, among other things,
accounting and reports to Certificateholders.
(iv) The Administrator will provide prior to _________________ a
certificate of an Authorized Officer in form and substance satisfactory to the
Owner Trustee as to whether any tax withholding is then required and, if
required, the procedures to be followed with respect thereto to comply with
the requirements of the Code. The Administrator shall be required to update
the letter in each instance that any additional tax withholding is
subsequently required or any previously required tax withholding shall no
longer be required.
(v) The Administrator shall perform the duties of the Administrator
specified in Section 9.2 of the Trust Agreement required to be performed in
connection with the resignation or removal of the Owner Trustee and any other
duties expressly required to be performed by the Administrator pursuant to the
Trust Agreement.
(vi) In carrying out the foregoing duties or any of its other
obligations under this Agreement, the Administrator may enter into
transactions or otherwise deal with any of its Affiliates; provided, however,
that the terms of any such transactions or dealings shall be in accordance
with any directions received from the Issuer and shall be, in the
Administrator's opinion, no less favorable to the Issuer than would be
available from unaffiliated parties.
(c) Non-Ministerial Matters. (i) With respect to matters that in the
reasonable judgment of the Administrator are non-ministerial, the
Administrator shall not take any action unless within a reasonable time before
the taking of such action, the Administrator shall have notified the Owner
Trustee of the proposed action and the Owner Trustee shall not have withheld
consent or provided an alternative direction. For the purpose of the preceding
sentence, "non-ministerial matters" shall include, without limitation:
(A) the amendment of or any supplement to the Indenture;
(B) the initiation of any claim or lawsuit by the Issuer and the
compromise of any action, claim or lawsuit brought by or against the
Issuer (other than in connection with the collection of the
Receivables or Permitted Investments);
(C) the amendment, change or modification of the Related
Agreements;
(D) the appointment of successor Note Registrars, successor Note
Paying Agents and successor Indenture Trustees pursuant to the
Indenture or the appointment of successor Administrators or Successor
Servicers, or the consent to the assignment by the Note Registrar,
Note Paying Agent or Indenture Trustee of its obligations under the
Indenture; and
(E) the removal of the Indenture Trustee.
(ii) Notwithstanding anything to the contrary in this Agreement, the
Administrator shall not be obligated to, and shall not, (x) make any payments
to the Noteholders under the Related Agreements, (y) sell the Indenture Trust
Estate pursuant to Section 5.4 of the Indenture or (z) take any other action
that the Issuer directs the Administrator not to take on its behalf.
3. Records. The Administrator shall maintain appropriate books of
account and records relating to services performed hereunder, which books of
account and records shall be accessible for inspection by the Issuer and the
Depositor at any time during normal business hours.
4. Compensation. As compensation for the performance of the
Administrator's obligations under this Agreement and, as reimbursement for its
expenses related thereto, the Administrator shall be entitled to $___________
annually which shall be solely an obligation of the Depositor.
5. Additional Information To Be Furnished to the Issuer. The
Administrator shall furnish to the Issuer from time to time such additional
information regarding the Collateral as the Issuer shall reasonably request.
6. Independence of the Administrator. For all purposes of this
Agreement, the Administrator shall be an independent contractor and shall not
be subject to the supervision of the Issuer or the Owner Trustee with respect
to the manner in which it accomplishes the performance of its obligations
hereunder. Unless expressly authorized by the Issuer, the Administrator shall
have no authority to act for or represent the Issuer or the Owner Trustee in
any way and shall not otherwise be deemed an agent of the Issuer or the Owner
Trustee.
7. No Joint Venture. Nothing contained in this Agreement (i) shall
constitute the Administrator and either of the Issuer or the Owner Trustee as
members of any partnership, joint venture, association, syndicate,
unincorporated business or other separate entity, (ii) shall be construed to
impose any liability as such on any of them or (iii) shall be deemed to confer
on any of them any express, implied or apparent authority to incur any
obligation or liability on behalf of the others.
8. Other Activities of Administrator. Nothing herein shall prevent
the Administrator or its Affiliates from engaging in other businesses or, in
its sole discretion, from acting in a similar capacity as an administrator for
any other person or entity even though such person or entity may engage in
business activities similar to those of the Issuer, the Owner Trustee or the
Indenture Trustee.
9. Term of Agreement; Resignation and Removal of Administrator. (a)
This Agreement shall continue in force until the termination of the Issuer in
accordance with Section 8.1 of the Trust Agreement, upon which event this
Agreement shall automatically terminate.
(b) Subject to Sections 9(e) and 9(f), the Administrator may resign
its duties hereunder by providing the Issuer with at least sixty (60) days'
prior written notice.
(c) Subject to Sections 9(e) and 9(f), the Issuer may remove the
Administrator without cause by providing the Administrator with at least sixty
(60) days' prior written notice.
(d) Subject to Sections 9(e) and 9(f), at the sole option of the
Issuer, the Administrator may be removed immediately upon written notice of
termination from the Issuer to the Administrator if any of the following
events shall occur:
(i) the Administrator shall default in any material respect in the
performance of any of its duties under this Agreement and, after notice of
such default, shall not cure such default within ten (10) days (or, if such
default cannot be cured in such time, such longer period acceptable to the
Issuer);
(ii) a court having jurisdiction in the premises shall enter a decree
or order for relief, and such decree or order shall not have been vacated
within sixty (60) days, in respect of the Administrator in any involuntary
case under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect or appoint a receiver, liquidator, assignee, custodian,
trustee, sequestrator or similar official for the Administrator or any
substantial part of its property or order the winding-up or liquidation of its
affairs; or
(iii) the Administrator shall commence a voluntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, shall consent to the entry of an order for relief in an involuntary
case under any such law, shall consent to the appointment of a receiver,
liquidator, assignee, trustee, custodian, sequestrator or similar official for
the Administrator or any substantial part of its property, shall consent to
the taking of possession by any such official of any substantial part of its
property, shall make any general assignment for the benefit of creditors or
shall fail generally to pay its debts as they become due.
The Administrator agrees that if any of the events specified in
clauses (ii) or (iii) of this Section 9(d) shall occur, it shall give written
notice thereof to the Issuer and the Indenture Trustee within ______ days
after the happening of such event.
(e) No resignation or removal of the Administrator pursuant to this
Section 9 shall be effective until (i) a successor Administrator shall have
been appointed by the Issuer and (ii) such successor Administrator shall have
agreed in writing to be bound by the terms of this Agreement in the same
manner as the Administrator is bound hereunder. The Issuer shall provide
written notice of any such resignation or removal to the Indenture Trustee,
with a copy to the Rating Agencies.
(f) The appointment of any successor Administrator shall be effective
only after satisfaction of the Rating Agency Condition with respect to the
proposed appointment.
(g) Subject to Sections 9(e) and 9(f), the Administrator acknowledges
that upon the appointment of a successor Servicer pursuant to the Sale and
Servicing Agreement, the Administrator shall immediately resign and such
successor Servicer shall automatically become the Administrator under this
Agreement.
10. Action upon Termination, Resignation or Removal. Promptly upon
the effective date of termination of this Agreement pursuant to Section 9(a)
or the resignation or removal of the Administrator pursuant to Section 9(b),
(c) or (d), respectively, the Administrator shall be entitled to be paid all
fees and reimbursable expenses accruing to it to the date of such termination,
resignation or removal. The Administrator shall forthwith upon such
termination pursuant to Section 9(a) deliver to the Issuer all property and
documents of or relating to the Collateral then in the custody of the
Administrator. In the event of the resignation or removal of the Administrator
pursuant to Section 9(b), (c) or (d), respectively, the Administrator shall
cooperate with the Issuer and take all reasonable steps requested to assist
the Issuer in making an orderly transfer of the duties of the Administrator.
11. Notices. Any notice, report or other communication given
hereunder shall be in writing and addressed of follows:
(a) if to the Issuer or the Owner Trustee, to:
USAA Auto Owner Trust ____
c/o
Attention:
Telephone:
Facsimile:
(b) if to the Administrator, to:
USAA Federal Savings Bank 10750 McDermott Freeway San
Antonio, TX 78288 Attention:
Telephone:
Facsimile:
(c) if to the Indenture Trustee, to:
Attention:
Telephone:
Facsimile:
or to such other address as any party shall have provided to the other parties
in writing. Any notice required to be in writing hereunder shall be deemed
given if such notice is mailed by certified mail, postage prepaid, or
hand-delivered to the address of such party as provided above.
12. Amendments. This Agreement may be amended from time to time by a
written amendment duly executed and delivered by the Issuer, the Administrator
and the Indenture Trustee, with the written consent of the Owner Trustee,
without the consent of the Noteholders and the Certificateholders, for the
purpose of adding any provisions to or changing in any manner or eliminating
any of the provisions of this Agreement or of modifying in any manner the
rights of the Noteholders or Certificateholders; provided that such amendment
will not, as set forth in an Opinion of Counsel satisfactory to the Indenture
Trustee and the Owner Trustee, materially and adversely affect the interest of
any Noteholder or Certificateholder. This Agreement may also be amended by the
Issuer, the Administrator and the Indenture Trustee with the written consent
of the Owner Trustee and the Noteholders of Notes evidencing not less than a
majority of the Notes Outstanding and the Certificateholders of Certificates
evidencing not less than a majority of the Certificate Balance for the purpose
of adding any provisions to or changing in any manner or eliminating any of
the provisions of this Agreement or of modifying in any manner the rights of
Noteholders or the Certificateholders; provided, however, that no such
amendment may (i) increase or reduce in any manner the amount of, or
accelerate or delay the timing of, collections of payments on Receivables or
distributions that are required to be made for the benefit of the Noteholders
or Certificateholders or (ii) reduce the aforesaid percentage of the
Noteholders and Certificateholders which are required to consent to any such
amendment, without the consent of the Noteholders of all the Notes Outstanding
and Certificateholders of Certificates evidencing the Certificate Balance.
13. Successors and Assigns. This Agreement may not be assigned by the
Administrator unless such assignment is previously consented to in writing by
the Issuer and the Owner Trustee and subject to the satisfaction of the Rating
Agency Condition in respect thereof. An assignment with such consent and
satisfaction, if accepted by the assignee, shall bind the assignee hereunder
in the same manner as the Administrator is bound hereunder. Notwithstanding
the foregoing, this Agreement may be assigned by the Administrator without the
consent of the Issuer or the Owner Trustee to a corporation or other
organization that is a successor (by merger, consolidation or purchase of
assets) to the Administrator; provided that such successor organization
executes and delivers to the Issuer, the Owner Trustee and the Indenture
Trustee an agreement in which such corporation or other organization agrees to
be bound hereunder by the terms of said assignment in the same manner as the
Administrator is bound hereunder. Subject to the foregoing, this Agreement
shall bind any successors or assigns of the parties hereto.
14. Governing Law. This agreement shall be construed in accordance
with the laws of the State of New York, and the obligations, rights and
remedies of the parties hereunder shall be determined in accordance with such
laws.
15. Headings. The Section headings hereof have been inserted for
convenience of reference only and shall not be construed to affect the
meaning, construction or effect of this Agreement.
16. Counterparts. This Agreement may be executed in counterparts,
each of which when so executed shall be an original, but all of which together
shall constitute but one and the same agreement.
17. Severability. Any provision of this Agreement that is prohibited
or unenforceable in any jurisdiction shall be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in
any other jurisdiction.
18. Not Applicable to USAA FSB in Other Capacities. Nothing in this
Agreement shall affect any right or obligation USAA FSB may have in any other
capacity.
19. Limitation of Liability of Owner Trustee and Indenture Trustee.
(a) Notwithstanding anything contained herein to the contrary, this instrument
has been signed on behalf of the Issuer by not in its individual capacity but
solely in its capacity as Owner Trustee of the Issuer and in no event shall
________________________ in its individual capacity or any beneficial owner of
the Issuer have any liability for the representations, warranties, covenants,
agreements or other obligations of the Issuer hereunder, as to all of which
recourse shall be had solely to the assets of the Issuer. For all purposes of
this Agreement, in the performance of any duties or obligations of the Issuer
hereunder, the Owner Trustee shall be subject to, and entitled to the benefits
of, the terms and provisions of the Trust Agreement.
(b) Notwithstanding anything contained herein to the contrary, this
Agreement has been countersigned by not in its individual capacity but solely
as Indenture Trustee and in no event shall have any liability for the
representations, warranties, covenants, agreements or other obligations of the
Issuer hereunder or in any of the certificates, notices or agreements
delivered pursuant hereto, as to all of which recourse shall be had solely to
the assets of the Issuer.
20. Third-Party Beneficiary. The Owner Trustee is a third-party
beneficiary to this Agreement and is entitled to the rights and benefits
hereunder and may enforce the provisions hereof as if it was a party hereto.
21. Nonpetition Covenants. Notwithstanding any prior termination of
this Agreement, the Depositor, the Administrator, the Owner Trustee and the
Indenture Trustee shall not, prior to the date which is one year and one day
after the termination of this Agreement with respect to the Issuer, acquiesce,
petition or otherwise invoke or cause the Issuer to invoke the process of any
court or government authority for the purpose of commencing or sustaining a
case against the Issuer under any federal or State bankruptcy, insolvency or
similar law or appointing a receiver, liquidator, assignee, trustee,
custodian, sequestrator or other similar official of the Issuer or any
substantial part of its property, or ordering the winding up or liquidation of
the affairs of the Issuer.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered as of the day and year first above written.
USAA AUTO OWNER TRUST ____
By: ________ , not in its individual
capacity but solely as Owner Trustee
By:
Name:
Title:
___________, not in its individual capacity
but solely as Indenture Trustee
By:
Name:
Title:
USAA FEDERAL SAVINGS BANK, as Administrator
and the Depositor
By:
Name:
Title:
APPENDIX A
Definitions and Usage
