As filed with the Securities and Exchange Commission on April 30, 1999
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
UACSC AUTO TRUSTS
(Issuer with respect to the securities)
UAC SECURITIZATION CORPORATION
(Originator of the Trusts described herein)
(Exact name of registrant as specified in its charter)
Delaware 35-1937340
(State or other jurisdiction (I.R.S. Employer
of incorporation or Identification No.)
organization of registrant)
9240 Bonita Beach Road, Suite 1109-A
Bonita Springs, Florida 34135
(941) 948-1850
(Address, including ZIP code, and
telephone number, including
area code, of registrant's
principal place of business)
LEEANNE W. GRAZIANI
UAC Securitization Corporation
9240 Bonita Beach Road, Suite 1109-A
Bonita Springs, Florida 34135
(941) 948-1850
(Name, address, including ZIP code,
and telephone number, including
area code, of agent for service)
Copies to:
ERIC R. MOY, ESQ. RICHARD M. SCHETMAN, ESQ.
Barnes & Thornburg Cadwalader, Wickersham & Taft
11 South Meridian Street 100 Maiden Lane
Indianapolis, Indiana 46204 New York, New York 10038
Approximate date of commencement of proposed sale to the public: From time
to time after the effective date of this Registration Statement as determined by
market conditions.
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
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 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. [ ]
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
=====================================================================================================================
Proposed Proposed maximum Amount of
Title of each class of Amount to be maximum offering aggregate offering registration
securities registered registered (1) price per unit (1) price (1) fee (2)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Asset Backed Securities $1,000,000.00 100% $1,000,000.00 $278.00
=====================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
(2) Determined pursuant to Section 6(b) of the Securities Act at a rate of $278
per $1,000,000.
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
INTRODUCTORY NOTE
This Registration Statement contains a form of prospectus relating to
the offering of Series of Asset Backed Securities (consisting of notes and/or
certificates) by various UACSC Auto Trusts created from time to time by UAC
Securitization Corporation and two forms of prospectus supplement. One form of
prospectus supplement is for a form of Owner Trust and the other is for a form
of Grantor Trust. Each of these prospectus supplements relates to the offering
of the the particular Series of Asset Backed Securities described therein. Each
form of Prospectus Supplement relates only to the securities described therein
and is a form that may be used, among others, by UAC Securitization Corporation
to offer Asset Backed Securities including Asset Backed Certificates and/or
Asset Backed Notes under this Registration Statement.
I-2
<PAGE>
CROSS REFERENCE SHEET
Name and Caption in Form S-3 Caption in Prospectus
---------------------------- ---------------------
1. Foreport of the Registration
Statement and Outside Front
Cover Page of Prospectus............ Front Cover Page of Registration
Statement; Outside Front Cover Page
of Prospectus and Prospectus
Supplements
2. Inside Front and Outside Back
Cover Pages of Prospectus........... Inside Front Page Prospectus
Supplements
3. Summary Information, Risk Factors
and Ratio of Earnings to Fixed
Charges............................. Summary of Terms (Prospectus
Supplements and Prospectus), Risk
Factors (Prospectus Supplements and
Prospectus); Yield and Prepayment
Considerations (Prospectus
Supplement)
4. Use of Proceeds..................... Use of Proceeds (Prospectus)
5. Determination of Offering Price..... *
6. Dilution............................ *
7. Selling Security Holders............ *
8. Plan of Distribution................ Underwriting (Prospectus
Supplements); Plan of Distribution
(Prospectus)
9. Description of Securities to Be
Registered.......................... Summary of Terms (Prospectus
Supplements and Prospectus); The
Receivables Pools (Prospectus), The
Receivables Pool (Prospectus
Supplements); Description of
the Securities (Prospectus); The
Notes Prospectus Supplement); The
Certificates (Grantor Trust
Prospectus Supplement); Certain
Legal Aspects of the Receivables
(Prospectus); Certain Federal
Income Tax Consequences
(Prospectus)
10. Interests of Named Experts and
Counsel............................. Legal Opinions (Prospectus
Supplements); Experts (Prospectus
Supplements); Legal Matters
(Prospectus)
11. Material Changes.................... *
12. Information with Respect to the
Registrant.......................... Union Acceptance Corporation and
Affiliates (Prospectus); The Trusts
(Prospectus); Formation of the
Trust (Prospectus Supplements);
Description of the Securities
(Prospectus); The Notes Owner Trust
Prospectus Supplement); The
Certificates (Grantor Trust
Prospectus Supplement)
13. Incorporation of Certain
Information by Reference............ Incorporation of Certain
Information by Reference
(Prospectus)
14. Disclosure of Commission Position
on Indemnification for Securities
Act Liabilities..................... See page II-2
- -------------
*Not Applicable
<PAGE>
[PROSPECTUS SUPPLEMENT FOR OWNER TRUST]
UACSC [YEAR] - _____ Owner Trust
Automobile Receivable Backed Notes
UAC Securitization Corporation, Union Acceptance Corporation,
as seller as servicer
-----------------------------------------------------
We are offering the following classes of automobile receivable backed
notes:
<TABLE>
<CAPTION>
Final Underwriting
Class of Initial Aggregate Maturity Price to Public Discount
Notes Principal Balance Interest Rate Date per Note per Note
- ----- ----------------- ------------- ---- -------- --------
<S> <C> <C> <C> <C> <C>
A-1
A-2
A-3
A-4
B
</TABLE>
The total price to the public is $_____________. The total underwriting
discount is $____________. The total proceeds to the trust are $_______________.
You should carefully consider the factors set forth
under "Risk Factors" beginning on page __ of
this prospectus supplement
and on page __ in the prospectus.
The notes and certificates represent interests in the UACSC [Year] -
____ Owner Trust only and do not represent obligations of or interests in UAC
Securitization Corporation, Union Acceptance Corporation, any of their
affiliates or any governmental agency.
-----------------------------------------------------
This prospectus supplement may be used to offer and sell the notes
certificates only if accompanied by the prospectus.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined that
this prospectus supplement or the accompanying prospectus is truthful or
complete. Any representation to the contrary is a criminal offense.
-----------------------------------------------------
[Underwriters]
The date of this prospectus is ___________.
<PAGE>
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS PROSPECTUS
SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS
We tell you about the notes in the following documents: (1) this
prospectus supplement, which describes the specific terms of your notes; and (2)
the accompanying prospectus, which provides general information, some of which
may not apply to the notes.
If the description of the notes varies between this prospectus
supplement and the prospectus, you should rely on the information in this
prospectus supplement.
We include cross-references in this prospectus supplement and in the
accompanying prospectus to captions in these materials where you can find
further related discussions. The following table of contents and the table of
contents included in the accompanying prospectus provide the pages on which
these captions are located.
You can find a listing of the pages where capitalized terms used in
this prospectus supplement are defined under the caption "Index of Principal
Terms" beginning on page S-__ in this prospectus supplement and under the
caption "Index of Principal Terms" beginning on page __ in the accompanying
prospectus.
In this prospectus supplement and the accompanying prospectus, "we"
refers to the seller, UAC Securitization Corporation, and "you" refers to any
prospective investor in the notes.
<PAGE>
SUMMARY OF TERMS............................................. 1
Issuer ........................................... 1
Seller ........................................... 1
Servicer ........................................... 1
Indenture Trustee................................... 1
Owner Trustee....................................... 1
Closing Date........................................ 1
The Notes........................................... 2
Payment Date........................................ 2
Interest on the Notes............................... 2
Note Principal...................................... 3
The Certificate..................................... 4
The Trust Assets.................................... 4
Spread Account; Rights of the
Certificateholder.......................... 5
The Policy.......................................... 6
Policy Amount....................................... 6
Insurer ........................................... 7
Indenture Default; Control by the Insurer and
Noteholders................................ 7
Legal Investment.................................... 7
Optional Redemption................................. 8
Increase of the Class A-4 Interest Rate and
the Class B Interest Rate.................. 8
Tax Status.......................................... 8
Ratings ........................................... 8
ERISA Considerations................................ 9
RISK FACTORS................................................. 10
You May Not be Able to Resell the Notes............. 10
The Notes Are Obligations of the Trust Only
and are Not Guaranteed by any Other
Party...................................... 10
The Amount in the Spread Account May Not
be Sufficient to Assure Payment of
Principal and Interest..................... 10
You May Incur a Loss if there is a Default
Under the Policy........................... 11
Some Notes are More at Risk than Others if
there are Losses on the Receivables........ 11
The Class B Notes are Subordinate to the
Class A Notes.............................. 11
Noteholders Have a Limited Right to Declare
Indenture Defaults or Remedies............. 12
A Change in the Note Ratings May Adversely
Affect the Notes........................... 13
<PAGE>
FORMATION OF THE TRUST....................................... 13
THE RECEIVABLES POOL......................................... 14
Composition of the Receivables as of
____________............................... 15
Distribution of the Receivables by Remaining
Term as of ____________.................... 15
Geographic Distribution of the Receivables as
of ____________............................ 15
Distribution of the Receivables by Financed
Vehicle Model Year as of
____________............................... 15
Distribution of the Receivables by Contract
Rate as of ____________.................... 16
Delinquencies and Net Losses........................ 16
Delinquency and Credit Loss Experience.............. 17
WEIGHTED AVERAGE LIFE OF THE NOTES........................... 17
Percent of Initial Note Balance at Various
ABS Percentages (1)........................ 19
YIELD AND PREPAYMENT CONSIDERATIONS
............................................................. 20
THE NOTES.................................................... 20
Sale and Assignment of Receivables.................. 21
Accounts ........................................... 21
Advances ........................................... 22
Payments on the Notes............................... 22
Distributions on the Certificate.................... 30
The Policy.......................................... 30
Rights of the Insurer upon Servicer Default,
Amendment or Waiver........................ 31
THE SELLER AND UAC........................................... 32
THE INSURER.................................................. 32
REPORTS TO NOTEHOLDERS....................................... 32
FEDERAL INCOME TAX CONSEQUENCES.............................. 32
ERISA CONSIDERATIONS......................................... 35
UNDERWRITING................................................. 36
LEGAL OPINIONS............................................... 37
EXPERTS...................................................... 37
INDEX OF PRINCIPAL TERMS..................................... 37
<PAGE>
SUMMARY OF TERMS
o This summary highlights selected information from this prospectus
supplement and does not contain all of the information that you should
consider in making your investment decision. To understand all of the
terms of this offering, read the entire prospectus supplement and the
accompanying prospectus.
o The definitions of capitalized terms used in this prospectus supplement
can be found on the pages indicated in the "Index of Principal Terms"
beginning on page S-___ in this prospectus supplement or beginning on
page ___ of the accompanying prospectus.
Issuer
The UACSC [ ]-__ Owner Trust, a Delaware business trust, will issue the notes
offered in this prospectus supplement.
Seller
UAC Securitization Corporation is the seller and the depositor of the trust. In
this capacity, the seller will transfer the automobile receivables and related
property to the trust.
Servicer
Union Acceptance Corporation ("UAC") will act as the servicer of the trust. The
servicer will receive and apply payments on the automobile receivables, service
the collection of the receivables and direct the trustees to make the
appropriate payments to the noteholders and the certificateholders. The servicer
will receive a monthly servicing fee as compensation for its services.
Indenture Trustee
_________________________ will serve as the indenture trustee under the terms of
an indenture between the trust and the indenture trustee.
Owner Trustee
___________________________ [Delaware] will serve as the owner trustee under the
terms of a trust and servicing agreement between the seller, the servicer and
the owner trustee.
Closing Date
The closing date will be on or about __________________.
1
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The Notes
On the closing date, the trust will issue the class A-1 notes, the class A-2
notes, the class A-3 notes, the class A-4 notes and the class B notes, as
described below, under an indenture between the trust and the indenture trustee.
We are offering the notes for sale in this prospectus supplement. The notes are
non-recourse obligations of the trust and are secured by certain assets of the
trust. The interest rates and initial principal balances of the notes are as
follows:
Interest Rate Initial Note Balance
class A-1 notes ____% per annum $____________
class A-2 notes ____% per annum $____________
class A-3 notes ____% per annum $____________
class A-4 notes ____% per annum $____________
class B notes ____% per annum $____________
Payment Date
The trust will pay interest and principal on the notes on the eighth calendar
day of each month or, if such day is not a business day, on the next business
day. The payments will begin on ____________ and will be made to holders of
record of the notes as of the record date, which will be the day before the
payment date. However, if definitive notes are issued, the record date will be
the last day of the collection period related to the payment date. The
collection period with respect to any payment date is the calendar month
immediately preceding the calendar month in which such payment date occurs.
Interest on the Notes
Interest on the class A-1 notes will be calculated on the basis of a 360-day
year and the actual number of days from the previous payment date through the
day before the related payment date. Interest on all other classes of notes will
be calculated on the basis of a 360-day year consisting of twelve 30- day
months. See "Yield and Prepayment Considerations" and "The Notes -- Payments on
the Notes" in this prospectus supplement.
Class A-1 Monthly Interest. Generally, the amount of monthly interest
distributable to the class A-1 noteholders on each payment date is the product
of:
(1) 1/360th of the interest rate for the class A-1 notes;
(2) the actual number of days from the previous payment date
through the day before the related payment date; and
2
<PAGE>
(3) the aggregate outstanding principal balance of the class A-1
notes on the preceding payment date (after giving effect to
all payments to noteholders on such date).
Monthly Interest for Other Notes. Generally, the amount of monthly interest
distributable to each class of noteholders (other than the class A-1
noteholders) on each payment date is the product of:
(1) one-twelfth of the interest rate applicable to such class of
notes; and
(2) the outstanding principal balance of such class on the
preceding payment date (after giving effect to all payments to
noteholders on such date).
The amount of interest distributable on the first payment date of _________ will
be based upon the initial aggregate principal balance of the applicable class of
notes and will accrue from the closing date until the day before the first
payment date (and in the case of all of the notes other than the class A-1
notes, assuming that the month of the closing date has 30 days).
Note Principal
The trust will distribute principal on each payment date to the noteholders of
record as of the record date. Generally, the amount of monthly principal the
trust will pay is equal to the decrease in the outstanding principal balance of
the receivables pool during the preceding calendar month. Additional amounts of
available cash flow from the receivables will be used to reduce the outstanding
aggregate principal balances of the notes below the pool balance, until the pool
balance exceeds such aggregate note balances by ____% of the initial aggregate
principal balance of the notes or $______________.
Generally, principal will be distributed to the noteholders in the order of the
alpha-numeric designation of each class of the notes, starting with the class
A-1 notes and ending with the class B notes. For example, no principal will be
distributed to the class A-2 noteholders until the outstanding principal balance
of the class A-1 notes has been reduced to zero. No principal will be
distributed to the class B noteholders until the principal of all of the class A
notes has been paid in full.
The trust must pay the outstanding principal amount of each class of notes, to
the extent not previously paid, by the respective final maturity date as
follows:
FINAL MATURITY DATE
class A-1 notes _______________
class A-2 notes _______________
class A-3 notes _______________
class A-4 notes _______________
class B notes _______________
3
<PAGE>
Since the rate of payment of principal of each class of notes depends greatly
upon the rate of payment of principal on the receivables (including voluntary
prepayments and principal in respect of defaulted receivables and purchased
receivables), the final payment in respect of each class of notes could occur
significantly earlier than the respective final maturity dates. See "Risk
Factors -- You May Incur a Loss if there is a Default Under the Policy" and "The
Notes -- Payments on the Notes" in this prospectus supplement.
The Certificate
In addition to the notes, the trust will issue an automobile receivable backed
certificate pursuant to the trust and servicing agreement. The certificate
represents an undivided beneficial ownership interest in the trust and will be
retained by the seller. We are not offering the certificate for sale in this
offering.
The Trust Assets
The trust will pledge its assets to the indenture trustee as collateral for the
repayment of the notes. The trust assets will include:
o a pool of simple and precomputed interest installment sale and
installment loan contracts originated in various states in the
United States of America, secured by new and used automobiles,
light trucks and vans;
o certain monies due in respect of the receivables as of and
after __________;
o security interests in the related vehicles financed through
the receivables;
o funds on deposit in a collection account and a spread account;
o any proceeds from claims on certain insurance policies
relating to the financed vehicles or the related obligors;
o any lender's single interest insurance policy;
o an unconditional and irrevocable insurance policy issued by
_____________________ ___________ guaranteeing payments of
principal and interest on the notes; and
o certain rights under the agreements by which the receivables
are sold from UAC to the seller and from the seller to the
trust.
The trust will acquire its assets from the seller pursuant to the trust and
servicing agreement.
4
<PAGE>
Spread Account; Rights of the Certificateholder
The trust will establish a spread account on the closing date for the benefit of
the noteholders and the insurer. The spread account will hold the excess, if
any, of the collections on the receivables over the amounts which the trust is
required to pay to the noteholders, the servicer and the insurer. The amount of
funds available for payment to noteholders on any payment date will consist of
funds from the following sources:
(1) payments received from obligors in respect of the receivables
(net of any amount required to be deposited to the payahead
account in respect of precomputed receivables);
(2) any net withdrawal from the payahead account in respect of
precomputed receivables;
(3) interest earned on funds on deposit in the collection account;
(4) liquidation proceeds received in respect of receivables;
(5) advances received from the servicer in respect of interest on
certain delinquent receivables; and
(6) amounts received in respect of required repurchases or
purchases of receivables by UAC or the servicer.
The indenture trustee will withdraw funds from the spread account (up to the
amount on deposit in the account) and then draw on the policy, if the amount of
available funds for any payment date is not sufficient to pay:
(1) the amounts owed to the servicer (including the monthly
servicing fee and reimbursement for advances made by the
servicer to the trust); and
(2) the required payments of interest and principal to the
noteholders.
If the amount on deposit in the spread account is zero, after any withdrawals
for the benefit of the noteholders, and there is a default under the policy, any
remaining losses on the receivables will be borne directly by the class B
noteholders (up to the full class B note balance at the time a loss is incurred)
and then by the class A noteholders pro rata (to the extent of the outstanding
class or classes of class A notes at such time). See "Risk Factors -- You May
Incur a Loss if there is a Default Under the Policy," "The Notes -- Accounts"
and "-- Payments on the Notes" in this prospectus supplement.
The trust will be required to maintain a specified amount on deposit in the
spread account. The required deposit or required spread amount with respect to
any payment date will equal the lesser of:
5
<PAGE>
(1) ____% of the initial principal balance of all the classes of
notes, or
(2) the outstanding principal balance of all the classes of notes
as of the previous payment date (after giving effect to all
payments of principal to noteholders on such date).
Any amount on deposit in the spread account on any payment date in excess of the
required spread amount (after all other required deposits to and withdrawals
from the spread account have been made) will be distributed to the
certificateholder. Any such distribution to the certificateholder will no longer
be an asset of the trust.
We intend for the amount on deposit in the spread account to grow over time to
the required spread amount through the deposit of the excess collections, if
any, on the receivables. However, we cannot assure you that the amount on
deposit in the spread account will actually grow to the required spread amount.
If the average aggregate yield of the receivables in excess of losses falls
below the levels set forth in the insurance and reimbursement agreement among
the seller, the trust, Union Acceptance Funding Corporation ("UAFC"), UAC, in
its individual capacity and as servicer, and the insurer, the required spread
amount will be increased to ____% of the aggregate principal balance of the
notes. The required spread amount may be increased:
(1) if the servicer defaults, fails to performs or breaches a
material representation under the trust and servicing
agreement or the insurance agreement; or
(2) upon the occurrence of certain other events described in the
insurance agreement generally involving the amount of losses
on the receivables. See "The Notes -- Accounts" and "-- The
Policy" in this prospectus supplement.
The Policy
The seller will obtain an unconditional and irrevocable insurance policy.
Subject to the terms of the policy, the insurer will guarantee the payment of
monthly interest and monthly principal on the notes (exclusive of any
accelerated principal amount) up to the policy amount.
Policy Amount
The policy amount with respect to any payment date will be:
(1) the sum of:
(A) the lesser of: (i) the aggregate principal balances
of the notes (after giving effect to any distribution
of available funds and any funds withdrawn from the
spread account to pay monthly principal on such
payment date) and (ii) the
6
<PAGE>
initial principal balances of the notes minus all
amounts previously drawn on the policy or withdrawn
from the spread account with respect to monthly
principal, plus
(B) monthly interest, plus
(C) the monthly servicing fee;
less
(2) all amounts on deposit in the spread account on such payment
date (after giving effect to any funds withdrawn from the
spread account to pay monthly principal on such payment date).
Insurer
__________________________ is the insurer and will guarantee the payment of
monthly interest and monthly principal (exclusive of any accelerated payments of
principal) under the terms of the policy.
Indenture Default; Control by the Insurer and Noteholders
Certain events will cause events of default under the indenture. If an
indenture default occurs and the insurer is not in default under the policy, the
insurer may declare the indenture default and control the remedy. If an
indenture default occurs and the insurer is in default under the policy, the
noteholders holding notes evidencing at least two-thirds of the outstanding
principal balances of the notes may declare the indenture default and control
the remedy.
The party that controls the remedy may give notice of acceleration,
accelerate the payment of principal in respect of the notes and declare the
principal of the notes to be immediately due and payable. The rights and
remedies of the indenture trustee and the noteholders upon the occurrence of an
indenture default may include the right to direct the indenture trustee to
liquidate the property of the trust. The rights and remedies are further
described under "The Indenture - Default Under the Indenture" in the
accompanying prospectus.
Legal Investment
The class A-1 notes will be eligible for purchase by money market funds under
Rule 2a-7 of the Investment Company Act of 1940, as amended.
7
<PAGE>
Optional Redemption
The certificateholder has the right to redeem all of the receivables as of the
last day of any collection period on which the aggregate principal balance of
the receivables pool is equal to or less than 10% of the original pool balance.
The purchase price for the optional redemption will be equal to the fair market
value of the receivables; provided that such amount is equal to or greater than
the sum of:
(1) 100% of the outstanding principal balances of the notes,
(2) accrued and unpaid interest on the outstanding principal
balances of the notes at the weighted average contract rates
of the receivables less any payments received but not applied
to interest or principal, and
(3) any amounts due the insurer.
Increase of the Class A-4 Interest Rate and the Class B Interest Rate
If the certificateholder does not exercise its rights with respect to the
optional redemption on the first payment date that the optional redemption is
permitted, the class A-4 interest rate and the class B interest rate will be
increased by 0.50% after such date.
Tax Status
In the opinion of special tax counsel to the seller, for federal income tax
purposes, the class A notes will be characterized as debt, the class B notes
should also be characterized as debt and the trust will not be treated as an
association taxable as a corporation or as a "publicly traded partnership"
taxable as a corporation. The owner trustee, the noteholders and the
certificateholder will agree to treat the notes as indebtedness for federal
income tax purposes. See "Federal Income Tax Consequences" in this prospectus
supplement and "Federal Income Tax Consequences" in the accompanying prospectus.
Ratings
On the closing date, each class of notes will be issued only if it receives
ratings from Moody's Investors Service, Inc. and Standard & Poor's Ratings
Services, a division of The McGraw-Hill Companies, Inc. as follows:
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<PAGE>
Rating
-------------------------------
Class Moody's S&P
----- ------- ---
A-1 P-1 A-1+
A-2 Aaa AAA
A-3 Aaa AAA
A-4 Aaa AAA
B Aaa AAA
A rating is not a recommendation to buy, sell or hold the notes and may
be subject to revision or withdrawal at any time by the assigning rating agency.
See "Risk Factors -- A Change in the Note Ratings May Adversely Affect the
Notes" in this prospectus supplement.
ERISA Considerations
The class A notes may be eligible for purchase by employee benefit plans subject
to Title I of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"). Any benefit plan fiduciary considering the purchase of notes should,
among other things, consult with experienced legal counsel in determining
whether all required conditions for such purchase have been satisfied. Neither
an employee benefit plan subject to ERISA or Section 4975 of the Code nor an
individual retirement account may purchase class B notes. See "ERISA
Considerations" in this prospectus supplement and in the accompanying
prospectus.
9
<PAGE>
RISK FACTORS
You should carefully consider the risk factors set forth below and in
the accompanying prospectus as well as the other investment considerations
described in such documents as you decide whether to purchase the notes.
You May Not be Able to
Resell the Notes There is currently no secondary market for
the notes. The underwriters currently intend
to make a market to enable resale of the
notes, but are under no obligation to do so.
As such, we cannot assure you that a
secondary market will develop for your notes
or, if one does develop, that such market
will provide you with liquidity of investment
or that it will continue for the life of your
notes.
The Notes Are Obligations of the
Trust Only and are Not Guaranteed
by any Other Party The notes are obligations of the trust only
and do not represent an interest in or
obligation of the seller, UAC, any of their
affiliates or any other party or governmental
body. Except for the policy, the notes have
not been insured or guaranteed by any party
or governmental body. See "The Notes --
Payments on the Notes" and "-- The Policy"
and "The Insurer" in this prospectus
supplement.
The Amount in the Spread Account
May Not be Sufficient to Assure
Payment of
Principal and Interest If the amount of available funds on any
payment date is not sufficient to pay monthly
interest and monthly principal (after payment
of the monthly servicing fee) to you, the
indenture trustee will withdraw funds from
the spread account, up to the full balance of
the funds on deposit in such account.
The amount on deposit in the spread account
may increase over time to an amount equal to
the required spread amount. We cannot assure
you that such growth will occur or that the
balance in the spread account will always be
sufficient to assure payment in full of
monthly interest and monthly principal. If
the amount on deposit in the spread account
is reduced to zero (after giving effect to
all deposits and
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withdrawals from the spread account), the
indenture trustee will then draw on the
policy, up to the policy amount, in an amount
equal to any remaining shortfall in respect
of monthly interest and monthly principal.
You May Incur a Loss if there
is a Default Under the Policy If the spread account is reduced to zero and
the insurer defaults under the policy, the
trust will depend solely on payments on and
proceeds from the receivables to make
payments on the notes. The insurer will
default under the policy if it fails to pay
any required amount to the trust when due,
for any reason, including the insolvency of
the insurer.
If the trust does not have sufficient funds
to fully make the required payments to
noteholders on a payment date during a
default by the insurer, payments on the notes
on such payment date will generally be
reduced in the following order:
1. class B monthly principal,
2. class B monthly interest,
3. class A monthly principal, pro rata,
and
4. class A monthly interest, pro rata.
You may not recover the shortfall in your
payment from subsequent collections on the
receivables or from the insurer. See "The
Receivables Pool -- Delinquencies and Net
Losses" and "-- Delinquency and Credit Loss
Experience" and "The Notes -- Accounts," "--
Payments on the Notes" and "-- The Policy" in
this prospectus supplement.
Some Notes are More at Risk
than Others if There are Losses
on the Receivables Principal will be paid on the notes in
alpha-numeric order, beginning with the class
A-1 notes and ending with the class B notes,
with the exceptions noted in this prospectus
supplement if an indenture default occurs.
Because payments of principal will be applied
first to the class A-1 notes, second to the
class A-2 notes, third to the class A-3
notes, fourth to the class A-4 notes, and
finally to the class B notes, in the event
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<PAGE>
the insurer defaults under the policy after
the class A-1 notes have been fully or
partially repaid and before the other classes
of notes have been fully repaid,
delinquencies, defaults and losses
experienced on the receivables will have a
disproportionately greater effect on the
classes of notes which return principal to
noteholders later.
The Class B Notes are
Subordinate to the Class A Notes Interest and principal due on the class B
notes is subordinate in priority of payment
to interest and principal due on the class A
notes. Consequently, the class B noteholders
will not receive any interest or principal on
a payment date until the full amount of
interest and principal on the class A notes
due on such payment date has been paid.
In the event of a default by the insurer, the
class B notes will be more at risk than the
class A notes due to delinquencies, defaults
and losses experienced on the receivables.
See "The Notes - Payments on the Notes" in
this prospectus supplement.
Noteholders Have a Limited Right
to Declare Indenture Defaults
or Remedies The insurer is the only party that has the
right to declare an indenture default and
control the remedy for such default, unless
the insurer is in default under the policy,
in which case the noteholders will have such
right subject to applicable voting
requirements.
If an indenture default occurs, the insurer
or, in certain circumstances, the
noteholders, will have the right to
accelerate the payment of principal of the
notes and, possibly, to direct the indenture
trustee to liquidate the trust property.
Following an indenture default, the indenture
trustee and the owner trustee will continue
to submit claims under the policy to enable
the trust to make payments to you each month.
However, following an indenture default, the
insurer may elect to pay all or any portion
of the outstanding notes, plus accrued
interest.
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<PAGE>
A Change in the Note Ratings
May Adversely Affect the Notes [Moody's Investors Service] and [Standard &
Poor's Rating Services] are the rating
agencies rating the notes. Such ratings will
reflect only the views of the relevant rating
agency. We cannot assure you that any such
rating will continue for any period of time
or that any rating will not be revised or
withdrawn entirely by such rating agency if,
in its judgment, circumstances so warrant. A
revision or withdrawal of such rating may
have an adverse effect on the liquidity and
market price of your notes. A rating is not a
recommendation to buy, sell or hold the
notes.
FORMATION OF THE TRUST
The trust is a business trust formed under the laws of the State of
Delaware under a trust and servicing agreement between the seller, the servicer
and the owner trustee. The trust was formed solely for the purpose of
accomplishing the transactions described in this prospectus supplement. Upon
formation, the trust will not engage in any business activity other than:
o acquiring, managing and holding the receivables and related
interests described in this prospectus supplement;
o issuing the notes and the certificate;
o making payments and distributions on the notes and the
certificate; and
o engaging in those activities, including entering into
agreements, that are necessary, suitable or convenient to
accomplish the above listed activities or are incidental to
those activities.
Pursuant to an indenture between the trust and the indenture trustee,
the trust will grant a security interest in the trust assets in favor of the
indenture trustee on behalf of the noteholders and for the benefit of the
insurer. The seller will transfer the trust assets to the owner trustee in
exchange for the cash proceeds of the notes and the certificate. The seller will
retain the certificate. UAC will be responsible for servicing the receivables
pursuant to the trust and servicing agreement and will be compensated for acting
as the servicer. To facilitate servicing and to minimize administrative burden
and expense, the servicer will be appointed custodian of the receivables by the
indenture trustee. However, the servicer will not stamp the receivables to
reflect the sale and assignment of the receivables to the trust or the indenture
trustee or make any notation of the indenture trustee's lien on the certificates
of title of the financed vehicles. In the absence of such notation on the
certificates of title, the trust or the indenture trustee may not have perfected
security interests in the financed vehicles securing the receivables. Under the
terms of the trust and servicing agreement, UAC may
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<PAGE>
delegate its duties as servicer and custodian; however, any such delegation will
not relieve UAC of its liability and responsibility with respect to such duties.
See "Description of the Transfer and Servicing Agreements -- Servicing
Compensation and Payment of Expenses" and "Certain Legal Aspects of the
Receivables" in the accompanying prospectus.
The trust will establish a spread account for the benefit of the
noteholders and the insurer and will obtain the policy. The indenture trustee
will draw on the policy, up to the Policy Amount, if Available Funds and the
amount on deposit in the spread account (after paying amounts owed to the
servicer) are not sufficient to fully distribute Monthly Interest and Monthly
Principal. If the spread account is reduced to zero and there is a default under
the policy, the trust will look only to the obligors on the receivables and the
proceeds from the repossession and sale of financed vehicles that secure
defaulted receivables for payments of interest and principal on the notes. In
such event, certain factors, such as the indenture trustee's not having
perfected security interests in some of the financed vehicles, may affect the
trust's ability to realize on the collateral securing the receivables, and thus
may reduce the proceeds to be distributed to the noteholders. See "The Notes --
Accounts," "-- The Policy" and "-- Payments on the Notes" in this prospectus
supplement and "Certain Legal Aspects of the Receivables" in the accompanying
prospectus.
THE RECEIVABLES POOL
The receivables were selected from the portfolio of UAFC for purchase
by the seller according to several criteria, including that each receivable:
o has an original number of payments of not more than ___
payments and not less than twelve payments (except that
approximately ____% of the aggregate principal balance of the
receivables as of ____________ consist of modified receivables
which have been amended or modified after origination to
provide that the number of payments from the time of
origination to maturity may exceed ___ payments);
o has a remaining maturity of not more than ___ months and not
less than three months;
o provides for level monthly payments that fully amortize the
amount financed over the original term; and
o has a contract rate of interest (exclusive of prepaid finance
charges) of not less than ----%.
The weighted average remaining maturity of the receivables is
approximately ___ months as of ____________.
Approximately ____% of the aggregate principal balance of the
receivables as of ____________ were selected from the "non-prime" or "Tier II"
portfolio of UAFC. See "-- Delinquency and Credit Loss Experience."
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<PAGE>
Approximately _____% of the aggregate principal balance of the
receivables as of ____________ are simple interest contracts which provide for
equal monthly payments. Approximately ____% of the aggregate principal balance
of the receivables as of ____________ are precomputed receivables originated in
the State of California. All of such precomputed receivables are rule of 78's
receivables. Approximately _____% of the aggregate principal balance of the
receivables as of ____________ represent financing of new vehicles; the
remainder of the receivables represent financing of used vehicles.
Receivables representing more than 10% of the aggregate principal
balance of the receivables as of ____________ were originated in the States of
_______________ and _______________. The performance of the receivables in the
aggregate could be adversely affected in particular by the development of
adverse economic conditions in such states.
Composition of the Receivables as of ____________
[Table]
(1) References to vans include minivans and van conversions.
(2) Based on scheduled maturity and assuming no prepayments of the receivables.
(3) Sum may not equal 100% due to rounding.
Distribution of the Receivables by Remaining Term as of ____________
[Table]
(1) Sum may not equal 100% due to rounding.
Geographic Distribution of the Receivables as of ____________
(1) Based on address of the dealer selling the related financed vehicle.
(2) Receivables originated in the State of Ohio were solicited by dealers
for direct financing by UAC or UAC's predecessor. All other receivables
were originated by dealers and purchased from such dealers by UAC or
UAC's predecessor.
(3) Sum may not equal 100% due to rounding.
Distribution of the Receivables by Financed Vehicle Model
Year as of ____________
[Table]
(1) Sum may not equal 100% due to rounding.
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<PAGE>
Distribution of the Receivables by Contract Rate as of ____________
[Table]
(1) Sum may not equal 100% due to rounding.
Delinquencies and Net Losses
16
<PAGE>
Delinquency and Credit Loss Experience
[Table]
[Discussion of Delinquency and Credit Loss Experience will be provided in the
applicable prospectus supplement.]
UAC's expectations with respect to delinquency and credit loss trends
constitute forward-looking statements and are subject to important factors that
could cause actual results to differ materially from those projected by UAC.
Such factors include, but are not limited to, general economic factors affecting
obligors' abilities to make timely payments on their indebtedness such as
employment status, rates of consumer bankruptcy, consumer debt levels generally
and the interest rates applicable thereto. In addition, credit losses are
affected by UAC's ability to realize on recoveries of repossessed vehicles,
including, but not limited to, the market for used cars at any given time.
WEIGHTED AVERAGE LIFE OF THE NOTES
Information regarding certain maturity and prepayment considerations
about the notes is described under "Weighted Average Life of the Securities" in
the accompanying prospectus. Because the rate of payment on principal of the
notes depends primarily on the rate of payment (including voluntary prepayments,
principal in respect of receivables as to which there has been a default,
principal in respect of required repurchases or purchases of receivables by UAC
or the servicer, and the application of Available Excess Funds to pay principal
on the notes) of the receivables, final payment on each class of notes could
occur much earlier than the applicable final maturity date. You will bear the
risk of being able to reinvest early principal payments on the notes at yields
at least equal to the yield on your notes.
Prepayments on retail installment sale contracts, such as the
receivables, can be measured relative to a prepayment standard or model. The
model used in this prospectus supplement is the Absolute Prepayment Model
("ABS"). The ABS model represents an assumed rate of prepayment each month
relative to the original number of receivables in a pool. The ABS model further
assumes that all of the receivables are the same size, amortize at the same rate
and that each receivable will be paid as scheduled or will be prepaid in full.
For example, in a pool of receivables originally containing 100 receivables, a
1% ABS rate means that one receivable prepays in full each month. The ABS model,
like any prepayment model, does not claim to be either a historical description
of prepayment experience or a prediction of the anticipated rate of prepayment.
The tables on pages S-___ to S-___ have been prepared on the basis of
certain assumptions, including that:
o the receivables prepay in full at the specified monthly ABS;
o each scheduled payment on the receivables is made on the last
day of each collection period and includes a full month of
interest;
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<PAGE>
o payments on the notes are paid in cash on each payment date
commencing _____________ and on the eighth calendar day of
each subsequent month in accordance with the description set
forth under "The Notes -- Payments on the Notes;"
o the closing date will be _________________;
o the interest rates for the notes are as follows:
class A-1 notes ___%
class A-2 notes ___%
class A-3 notes ___%
class A-4 notes ___%
class B notes ___%
o no defaults or delinquencies in the payment of any of the
receivables occur;
o no receivables are repurchased due to a breach of any
representation or warranty or for any other reason; and
o the certificateholder exercises its rights with respect to the
optional purchase of the receivables on the first payment date
that it is entitled to exercise such rights.
The tables indicate the projected weighted average life of each class of notes
and sets forth the percentage of the initial aggregate principal balance of each
class of notes that is projected to be outstanding after each of the payment
dates shown at specified ABS percentages. The tables also assume that the
receivables have been aggregated into ___ hypothetical pools with all of the
receivables within each such pool having the characteristics described below:
[Form of Table]
The information included in the following tables consists of
forward-looking statements and involves risks and uncertainties that could cause
actual results to differ materially from those in the forward-looking
statements. The actual characteristics and performance of the receivables will
differ from the assumptions used in constructing the tables on pages S-___ to
S-___. We have provided these hypothetical illustrations using the assumptions
listed above to give you a general illustration of how the aggregate principal
balance of the notes may decline. However, it is highly unlikely that the
receivables will prepay at a constant ABS until maturity or that all of the
receivables will prepay at the same ABS. In addition, the diverse terms of
receivables within each of the ___ hypothetical pools could produce slower or
faster rates of principal payments than indicated in the table at the various
specified ABS rates. Any difference between such hypothetical assumptions, the
actual characteristics, performance and prepayment experience of the receivables
will affect the percentages
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of the initial principal balances of the notes outstanding over time and the
weighted average lives of the notes.
Important notice regarding calculation of the weighted
average life and the assumptions upon which the tables on
pages S-__ to S-__ are based
The weighted average life of a note is determined by: (a) multiplying
the amount of each principal payment on the applicable note by the number of
years from the assumed closing date to the related payment date, (b) adding the
results, and (c) dividing the sum by the related initial principal amount of
such note.
The tables on pages S-__ to S-__ have been prepared based on (and
should be read in conjunction with) the assumptions described on pages S-__ and
S-__ (including the assumptions regarding the characteristics and performance of
the receivables, which will differ from the actual characteristics and
performance of the receivables).
Percent of Initial Note Balance at Various ABS Percentages (1)
<TABLE>
<CAPTION>
Class A-1 Notes Class A-2 Notes
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Payment Date 1.0% 1.4% 1.6% 1.8% 2.5% 1.0% 1.4% 1.6% 1.8% 2.5%
- ----------------------------------------------------------------------------------------------------------------
Class A-3 Notes Class A-4 Notes
Payment Date 1.0% 1.4% 1.6% 1.8% 2.5% 1.0% 1.4% 1.6% 1.8% 2.5%
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
(1) See the important notice on page S-__ of this prospectus supplement
regarding calculation of the weighted average life and the assumptions
upon which these tables are based.
Percent of Initial Note Balance at Various ABS Percentages (1)
<TABLE>
<CAPTION>
Class B Notes
<S> <C> <C> <C> <C> <C>
Payment Date 1.0% 1.4% 1.6% 1.8% 2.5%
- ---------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE>
(1) See the important notice on page S-__ of this prospectus supplement
regarding calculation of the weighted average life and the assumptions
upon which these tables are based.
YIELD AND PREPAYMENT CONSIDERATIONS
Monthly Interest will be distributed to noteholders on each payment
date to the extent of the interest rate applicable to each class of notes
applied to the aggregate principal balance for each class of notes, as of the
preceding payment date or the closing date, as applicable (after giving effect
to payments of principal on such preceding payment date). See "The Notes --
Payments on the Notes" in this prospectus supplement.
Upon a full or partial prepayment on a receivable, noteholders should
receive interest for the full month of such prepayment either:
(1) through the distribution of interest paid on the receivables;
(2) from a withdrawal from the spread account;
(3) by an advance from the servicer; or
(4) by a draw on the policy.
Although the receivables will have different contract rates, the
contract rate of each receivable generally will exceed the sum of:
(1) the weighted average of the class A-1 interest rate, the class
A-2 interest rate, the class A-3 interest rate, the class A-4
interest rate and the class B interest rate;
(2) the per annum rate used to calculate the insurance premium
paid to the insurer; and
(3) the per annum rate used to calculate the monthly servicing
fee.
However, the contract rate on a small percentage of the receivables
will be less than the foregoing sum. Disproportionate rates of prepayments
between receivables with higher and lower contract rates could affect the
ability of the trust to pay Monthly Interest to you.
THE NOTES
The notes will be issued by the trust pursuant to the indenture and the
certificate will be issued pursuant to the trust and servicing agreement. You
may request a copy of these agreements (without exhibits) by contacting the
servicer at the address set forth under "Reports to Noteholders" in this
prospectus supplement. We do not claim that the following summary is complete.
For a more
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<PAGE>
detailed description of the agreements, you should read the indenture and the
trust and servicing agreement.
Sale and Assignment of Receivables
We have described the conveyance of the receivables (1) from UAFC to
the seller pursuant to a purchase agreement dated as of ________________, among
UAFC, UAC and the seller, (2) from the seller to the trust pursuant to the trust
and servicing agreement and (3) from the trust to the indenture trustee pursuant
to the indenture in the accompanying prospectus under the heading "Description
of the Transfer and Servicing Agreements -- Sale and Assignment of Receivables."
Accounts
In addition to the collection account, the property of the trust will
include the spread account and the payahead account.
Spread Account. On the closing date, the indenture trustee will
establish the spread account for the benefit of the noteholders and the insurer.
The amount held in the spread account will increase up to the required spread
amount by the deposit of payments on the receivables not used to make payments
to the noteholders, the insurer and the servicer for the monthly servicing fee
and any permitted reimbursements of outstanding advances on any payment date.
Although we intend for the amount on deposit in the spread account to grow over
time to equal the required spread amount through monthly deposits of any excess
collections on the receivables, we cannot assure you that such growth will
actually occur. On each payment date, any amounts on deposit in the spread
account after the payment of any amounts owed to the noteholders and the insurer
in excess of the required spread amount will be distributed to the
certificateholder.
Under the terms of the indenture, the indenture trustee will withdraw
funds from the spread account, up to the amount on deposit in such account, and
transfer such funds to the collection account for any deficiency of Monthly
Interest or Monthly Principal as further described below under "-- Payments on
the Notes," prior to making any draw on the policy.
In the event that the balance of the spread account is reduced to zero
and there is a default under the policy on any payment date, the trust will
depend solely on current distributions on the receivables to make payments of
principal and interest on the notes. In addition, because the market value of
motor vehicles generally declines with age and because of difficulties that may
be encountered in enforcing motor vehicle contracts as described in the
accompanying prospectus under "Certain Legal Aspects of the Receivables," the
servicer may not recover the entire amount due on such receivables in the event
of a repossession and resale of a financed vehicle securing a receivable in
default. In such event, the class B noteholders may suffer a corresponding loss
up to the extent of the outstanding principal balance of the class B notes at
such time. Any remaining losses will be borne pro rata by the class A
noteholders (based upon the then relative outstanding principal balance of each
class of class A notes).
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<PAGE>
Payahead Account. The servicer will establish a payahead account in the
name of the indenture trustee on behalf of obligors on the receivables and the
noteholders. The payahead account will initially be maintained with the
indenture trustee. To the extent required by the trust and servicing agreement,
early payments by or on behalf of obligors on precomputed receivables will be
deposited in the payahead account until such time as the payment becomes due.
Until such time as payments are transferred from the payahead account to the
collection account, they will not constitute collected interest or collected
principal and will not be available for payment to noteholders. We will pay the
interest earned on the balance in the payahead account to the servicer each
month. We will apply collections received with respect to a precomputed
receivable during a collection period first to any overdue scheduled payment on
such receivable, then to the scheduled payment on such receivable due in such
collection period. If the amount collected on a precomputed receivable exceeds
the amount required for any overdue scheduled payment or scheduled payment, but
is insufficient to prepay the precomputed receivable in full, then generally
such excess collections will be transferred to and kept in the payahead account
until such amount may be applied either to a later scheduled payment or to
prepay such receivable in full.
Advances
With respect to each receivable delinquent more than 30 days at the end
of a collection period, the servicer will make an advance in an amount equal to
30 days of interest but only if the servicer, in its sole discretion, expects to
recover the advance from subsequent collections on the receivable. The servicer
will deposit the advance in the collection account on or before the second
business day before the payment date. The servicer will recover its advance from
subsequent payments by or on behalf of the respective obligor, from insurance
proceeds or, upon the servicer's determination that reimbursement from the
preceding sources is unlikely, will recover its advance from any collections
made on other receivables.
Payments on the Notes
Available Funds. The servicer will deposit in the collection account
the aggregate principal payments, including full and partial prepayments (except
certain prepayments in respect of precomputed receivables as described above
under "--Accounts") received on all receivables with respect to the preceding
collection period. The funds available for distribution on the next payment date
("Available Funds") will consist of:
o all payments on the simple interest receivables;
o the scheduled payments received from obligors on precomputed
receivables;
o interest earned on funds on deposit in the collection account;
o the net amount to be transferred from the payahead account to
the collection account for the related payment date;
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<PAGE>
o all advances for such collection period; and
o the purchase amount for all receivables that were purchased or
repurchased by UAC or the servicer during the preceding
collection period.
As an administrative convenience, the servicer will be permitted to
make the deposit of collections and aggregate advances and purchase amounts for
or with respect to the collection period net of distributions to be made to the
servicer with respect to the collection period (as described below). The
servicer, however, will account to the indenture trustee and to the noteholders
as if all deposits and distributions were made individually.
The servicer will determine the amount of funds necessary to make
payments of Monthly Principal and Monthly Interest to the holders of the notes
and to pay the monthly servicing fee to the servicer. If there is a deficiency
with respect to Monthly Interest or Monthly Principal on any payment date, after
giving effect to payments of the monthly servicing fee and permitted
reimbursements of outstanding advances to the servicer on such payment date, or
if there is a deficiency with respect to the monthly servicing fee, the servicer
will direct the indenture trustee to withdraw amounts from the spread account,
up to the amount on deposit in such account. If there remains a deficiency of
Monthly Interest or Monthly Principal or the monthly servicing fee after such a
withdrawal, the servicer will notify the indenture trustee of the remaining
deficiency, and the indenture trustee will draw on the policy, up to the Policy
Amount, to pay Monthly Interest, Monthly Principal, and the monthly servicing
fee. Additionally, if the Available Funds for a payment date are not sufficient
to pay current and past due insurance premiums and other amounts owed to the
insurer pursuant to the insurance agreement, plus accrued interest thereon, the
servicer will notify the indenture trustee and the owner trustee of such
deficiency. The amount, if any, then on deposit in the spread account (after
giving effect to any withdrawal to satisfy a deficiency described in this and
the preceding sentences) will be available to cover such deficiency.
Payments. On each payment date, the indenture trustee will use the
Available Funds (plus any amounts withdrawn from the spread account or drawn on
the policy, as applicable) to make the following payments in the following
priority:
(a) without duplication, an amount equal to the sum of (1) the
amount of outstanding advances in respect of receivables that
became defaulted receivables during the prior collection
period plus (2) the amount of outstanding advances in respect
of receivables that the servicer determines to be
unrecoverable, to the servicer;
(b) the monthly servicing fee, including any overdue monthly
servicing fee, to the servicer, to the extent not previously
distributed to the servicer;
(c) Class A Monthly Interest to the class A noteholders;
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<PAGE>
(d) Monthly Principal to the class A noteholders, in accordance
with the Principal Payment Sequence;
(e) Class B Monthly Interest to the class B noteholders;
(f) Monthly Principal to the class B noteholders, in accordance
with the Principal Payment Sequence (only after the principal
balances of the class A notes have been repaid in full);
(g) the insurance premium including any overdue insurance premium
plus any accrued interest to the insurer;
(h) the amount of recoveries of advances (to the extent such
recoveries have not previously been reimbursed to the servicer
pursuant to clause (a) above), to the servicer;
(i) the aggregate amount of any unreimbursed draws on the policy
payable to the insurer under the insurance agreement, for
Monthly Interest, Monthly Principal and any other amounts
owing to the insurer under the insurance agreement plus
accrued interest thereon; and
(j) the balance into the spread account.
After all distributions pursuant to clauses (a) through (j) above have
been made for each payment date, the servicer will determine the amount of funds
remaining in the spread account on such date. If the funds in the spread account
exceed the required spread amount, the indenture trustee will distribute any
such excess to the owner trustee for distribution to the certificateholder or by
the indenture trustee directly to the certificateholder. Any amounts so
distributed to the certificateholder will no longer be property of the trust and
will not be available to make payments to you.
Accelerated Payments Following Indenture Default. If the notes are
accelerated following an indenture default, amounts collected will be applied in
the following priority:
(a) first, to pay any unpaid monthly servicing fee;
(b) second, to pay any accrued and unpaid fees of the indenture
trustee and the owner trustee without preference or priority
of any kind;
(c) third, to pay accrued interest on each class of class A notes
on a pro rata basis based on the interest accrued (including
interest accrued on past due interest) on each class of class
A notes;
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<PAGE>
(d) fourth, to pay principal on each class of class A notes, on a
pro rata basis based on the aggregate principal balance of
each class of class A notes, until the aggregate principal
balance of each class of class A notes is reduced to zero;
(e) fifth, to pay accrued interest on the class B notes (including
accrued interest on past due interest);
(f) sixth, to pay principal on the class B notes until the
aggregate principal balance of the class B notes is reduced to
zero;
(g) seventh, to pay amounts owing the insurer under the insurance
agreement; and
(h) eighth, to the spread account, to be applied in accordance
with the insurance agreement.
Definitions. The following defined terms are used in this "Payments on
the Note" section.
"Monthly Principal" for any payment date will equal the sum of the
following:
1. the amount by which the aggregate principal balance of the
receivables pool declined during the related collection
period;
2. the amount, if any, which is necessary to reduce the principal
balance of a class of notes to zero on its final maturity
date; and
3. the Accelerated Principal Amount.
For the purpose of determining Monthly Principal, the unpaid principal balance
of a defaulted receivable or a receivable required to be purchased or
repurchased by UAC or the servicer will be zero as of the end of the collection
period in which such receivable became a defaulted receivable or a purchased
receivable.
A defaulted receivable for any collection period is a receivable as to
which any of the following has occurred: (1) any payment, or part thereof, in
excess of $10 is 120 days or more delinquent as of the last day of such
collection period; (2) the financed vehicle that secures the receivable has been
repossessed; or (3) the receivable has been determined to be uncollectable in
accordance with the servicer's customary practices on or prior to the last day
of such collection period; provided, however, that any receivable which the
seller or the servicer is obligated to repurchase or purchase pursuant to the
trust and servicing agreement shall be deemed not to be a defaulted receivable.
"Accelerated Principal Amount" means, for any payment date, after
giving effect to all payments of interest and principal (other than any
Accelerated Principal Amount) to the noteholders,
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an amount equal to the lesser of (1) the Available Excess Funds or (2) the
amount necessary to reduce the aggregate principal balances of the notes below
the aggregate principal balance of the receivables pool as of the end of the
related collection period until the aggregate principal balance of the
receivables pool exceeds the aggregate principal balance of the notes by ___% of
the initial aggregate principal balance of notes or $__________________________
"Available Excess Funds" for any payment date means the amount of
Available Funds remaining from such payment date after paying the servicer, the
noteholders and the insurer the amounts they are entitled to receive, without
considering the amount of the Monthly Principal payment in respect of the
Accelerated Principal Amount.
"Monthly Interest" for any payment date will equal the sum of Class A
Monthly Interest and Class B Monthly Interest for such payment date and the
related collection period.
"Class A Monthly Interest" means the sum of Class A-1 Monthly Interest,
Class A-2 Monthly Interest, Class A-3 Monthly Interest and Class A-4 Monthly
Interest.
"Class A-1 Monthly Interest" means:
(1) for the first payment date, the product of the following:
(a) one-three hundred sixtieth (1/360th) of the class A-1
interest rate,
(b) the actual number of days from the closing date
through the day before the first payment date, and
(c) the aggregate principal balance of the class A-1
notes on the closing date; and
(2) for any subsequent payment date, the product of the following:
(a) one-three hundred sixtieth (1/360th) of the class A-1
interest rate,
(b) the actual number of days from the previous payment
date through the day before the related payment date,
and
(c) the aggregate principal balance of the class A-1
notes as of the immediately preceding payment date
(after giving effect to any distribution of Monthly
Principal made on such payment date).
"Class A-2 Monthly Interest" means:
(1) for the first payment date, the product of the following:
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<PAGE>
(a) one-twelfth of the class A-2 interest rate,
(b) the number of days from the closing date (assuming
the month of the closing date has 30 days) through
the day before the first payment date, divided by 30,
and
(c) the aggregate principal balance of the class A-2
notes on the closing date; and
(2) for any subsequent payment date, the product of the following:
(a) one-twelfth of the class A-2 interest rate, and
(b) the aggregate principal balance of the class A-2
notes as of the immediately preceding payment date
(after giving effect to any distribution of Monthly
Principal made on such payment date).
"Class A-3 Monthly Interest" means:
(1) for the first payment date, the product of the following:
(a) one-twelfth of the class A-3 interest rate,
(b) the number of days from the closing date (assuming
the month of the closing date has 30 days) through
the day before the first payment date, divided by 30,
and
(c) the aggregate principal balance of the class A-3
notes on the closing date; and
(2) for any subsequent payment date, the product of the following:
(a) one-twelfth of the class A-3 interest rate, and
(b) the aggregate principal balance of the class A-3
notes as of the immediately preceding payment date
(after giving effect to any distribution of Monthly
Principal made on such payment date).
"Class A-4 Monthly Interest" means:
(1) for the first payment date, the product of the following:
(a) one-twelfth of the class A-4 interest rate,
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<PAGE>
(b) the number of days from the closing date (assuming
the month of the closing date has 30 days) through
the day before the first payment date, divided by 30,
and
(c) the aggregate principal balance of the class A-4
notes on the closing date; and
(2) for any subsequent payment date, the product of the following:
(a) one-twelfth of the class A-4 interest rate, and
(b) the aggregate principal balance of the class A-4
notes as of the immediately preceding payment date
(after giving effect to any distribution of Monthly
Principal made on such payment date).
"Class B Monthly Interest" means:
(1) for the first payment date, the product of the following:
(a) one-twelfth of the class B interest rate,
(b) the number of days from the closing date (assuming
the month of the closing date has 30 days) through
the day before the first payment date, divided by 30,
and
(c) the aggregate principal balance of the class B notes
on the closing date; and
(2) for any subsequent payment date, the product of the following:
(a) one-twelfth of the class B interest rate, and
(b) the aggregate principal balance of the class B notes
as of the immediately preceding payment date (after
giving effect to any distribution of Monthly
Principal made on such payment date).
"Principal Payment Sequence" means the order in which Monthly Principal
will be distributed among the noteholders. The order of distribution of Monthly
Principal is:
(1) to the class A-1 noteholders until the aggregate principal
balance of the class A-1 notes has been reduced to zero;
(2) to the class A-2 noteholders until the aggregate principal
balance of the class A-2 notes has been reduced to zero;
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<PAGE>
(3) to the class A-3 noteholders until the aggregate principal
balance of the class A-3 notes has been reduced to zero;
(4) to the class A-4 noteholders until the aggregate principal
balance of the class A-4 notes has been reduced to zero; and
(5) to the class B noteholders until the aggregate principal
balance of the class B notes has been reduced to zero.
However, if the amount of Available Funds (together with amounts withdrawn from
the spread account and/or the policy) are not sufficient to pay the required
payment of Class A Monthly Principal to class A noteholders in full on any
payment date, the amount of such funds available to pay Class A Monthly
Principal to class A noteholders will be distributed pro rata to the class A
noteholders based upon the relative aggregate principal balance of each class of
class A notes.
Example of Payment Date Activities. The following chart sets forth an
example of the application of the foregoing provisions to the first payment date
on _____________:
_______________ Collection Period. The
collection period is the calendar month
preceding the payment date. The servicer
receives monthly payments, prepayments, and
other proceeds in respect of the receivables
and deposits them in the collection account.
The servicer may deduct the monthly servicing
fee from such deposits.
_______________ Determination Date. The
determination date is the second business day
before the payment date. On or before this
date, the servicer delivers the servicer's
certificate setting forth the amounts to be
distributed on the payment date and the
amounts of any deficiencies. If necessary,
the indenture trustee notifies the insurer of
any draws in respect of the policy.
_______________ Record Date. The record date
is the day before the payment date. Payments
on the payment date are made to noteholders
of record at the close of business on this
date.
_______________ Payment Date. The payment
date is the eighth calendar day of the month,
or if such day is not a business day, the
first business day thereafter. The indenture
trustee withdraws funds from the collection
account and, as necessary, from the spread
account and then draws on the policy, if
necessary, to pay Monthly Interest and
Monthly Principal (exclusive of any
Accelerated Principal Amount, in the case of
a draw on the policy) to the noteholders as
described in this prospectus supplement. The
indenture trustee
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<PAGE>
distributes the portion of Monthly Interest
and Monthly Principal to the noteholders,
pays the monthly servicing fee to the extent
not previously paid, pays the insurance
premium and all other amounts owing to the
insurer.
Distributions on the Certificate
The certificate will be in the form of a trust certificate initially
issued to the seller and will entitle the seller to receive all funds held in
the spread account in excess of the required spread amount on each payment date
after payment of all amounts owed to the noteholders, the servicer and the
insurer. On or after the termination of the trust, the certificateholder is
entitled to receive any amounts remaining in the spread account (only after all
required payments to the insurer are made) after the payment of expenses and
payments to the noteholders. See "-- Accounts" and "-- Payments on the Notes"
above.
The Policy
On or before the closing date, the seller, the trust, UAFC, UAC, in its
individual capacity and as servicer, and the insurer will enter into the
insurance agreement pursuant to which the insurer will issue an unconditional
and irrevocable insurance policy. Subject to the terms of the policy, the
insurer will guarantee the payment of Monthly Interest and Monthly Principal
(exclusive of any Accelerated Principal Amount) up to the Policy Amount. Under
the terms of the indenture, after withdrawal of any amounts in the spread
account with respect to a payment date to pay a deficiency in Monthly Interest
or Monthly Principal, the indenture trustee will be authorized to draw on the
policy for the benefit of the noteholders and credit the collection account for
such draws as described above under "--Payments on the Notes." The maximum
amount that may be drawn under the policy on any payment date is limited to the
Policy Amount for such payment date. The "Policy Amount," with respect to any
payment date, will equal:
(1) the sum of:
(A) the lesser of: (i) the aggregate outstanding
principal balances of the notes (after giving effect
to any distribution of Available Funds and any funds
withdrawn from the spread account to pay Monthly
Principal on such payment date) and (ii) the initial
aggregate principal balances of the notes minus all
amounts previously drawn on the policy or withdrawn
from the spread account with respect to Monthly
Principal, plus
(B) Monthly Interest, plus
(C) the monthly servicing fee;
less
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<PAGE>
(2) all amounts on deposit in the spread account on such payment
date (after giving effect to any funds withdrawn from the
spread account to pay Monthly Principal on such payment date).
The policy will also cover any amount paid or required to be paid by
the trust to noteholders that is sought to be recovered as a voidable preference
by a trustee in bankruptcy of UAC, the seller or UAFC pursuant to the United
States Bankruptcy Code (11 U.S.C.), as amended from time to time, in accordance
with a final nonappealable order of a court having competent jurisdiction.
The insurer will be entitled to receive the insurance premium and
certain other amounts on each payment date as described under "--Payments on the
Notes" and to receive amounts on deposit in the spread account as described
above under "--Accounts." The insurance premium for any payment date will be
one-twelfth of the product of the policy per annum fee rate set forth in the
insurance agreement and the aggregate principal balances of the notes calculated
as of the last day of the collection period to which such payment date relates
and payable monthly in arrears. The insurer will not be entitled to
reimbursement of any amounts from the noteholders. The insurer's obligation
under the policy is irrevocable and unconditional. The insurer will have no
obligation to the noteholders or the indenture trustee other than its
obligations under the policy.
If the balance in the spread account is reduced to zero and there has
been a default under the policy, the trust will depend solely on current
collections on the receivables to make payments of principal and interest on the
notes. In addition, because the market value of motor vehicles generally
declines with age and because of difficulties that may be encountered in
enforcing motor vehicle contracts as described in the accompanying prospectus
under "Certain Legal Aspects of the Receivables," the servicer may not recover
the entire amount due on such receivables in the event of a repossession and
resale of a financed vehicle securing a receivable in default. In such event,
first, the class B noteholders and second, the class A noteholders may suffer a
corresponding loss. Any such losses of the class A noteholders would be borne
pro rata based upon the relative principal balances of the outstanding classes
of class A notes. See " -- Payments on the Notes" above.
Rights of the Insurer upon Servicer Default, Amendment or Waiver
Upon the occurrence of an event of default by the servicer under the
trust and servicing agreement, the insurer, or the owner trustee upon the
consent of the insurer, will be entitled to appoint a successor servicer. In
addition to the events constituting a servicer default as described in the
accompanying prospectus, the trust and servicing agreement will also permit the
insurer to appoint a successor servicer and to redirect payments made under the
receivables to the indenture trustee upon the occurrence of certain additional
events involving a failure of performance by the servicer or a material
misrepresentation made by the servicer under the insurance agreement.
The trust and servicing agreement cannot be amended or any provisions
thereof waived without the consent of the insurer if such amendment or waiver
would have a materially adverse effect upon the rights of the insurer.
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THE SELLER AND UAC
UAC currently acquires receivables from over 3,900 manufacturer
franchised automobile dealerships in 32 states. UAC is an Indiana corporation,
formed in December 1993 by UAC's predecessor, Union Federal Savings Bank of
Indianapolis, to succeed to the predecessor's indirect automobile finance
business, which the predecessor had operated since 1986. UAC began purchasing
and originating receivables in April 1994. For the fiscal years ended June 30,
1995, 1996, 1997, and 1998, UAC and/or its predecessor acquired prime
receivables aggregating $767 million, $995 million, $1,076 million and $945
million, respectively, representing annual increases of 30%, 8% and an annual
decrease of 12%, respectively. Of the approximately $2.0 billion of receivables
in the servicing portfolio of UAC (consisting of the principal balance of
receivables held for sale and securitized receivables) at June 30, 1998,
approximately 76% represented receivables on used cars and approximately 24%
represented receivables on new cars. The seller is a wholly-owned bankruptcy
remote subsidiary of UAC.
THE INSURER
[Information about the applicable insurer will be provided in the
related prospectus supplement.]
REPORTS TO NOTEHOLDERS
Unless and until definitive notes are issued (which will occur only
under the limited circumstances described in the accompanying prospectus),
_____________________________, as indenture trustee, will provide monthly and
annual statements concerning the trust and the notes to Cede & Co., the nominee
of The Depository Trust Company, as registered holder of the notes. Such
statements will not constitute financial statements prepared in accordance with
generally accepted accounting principles. A copy of the most recent monthly or
annual statement concerning the trust and the notes may be obtained by
contacting the servicer at Union Acceptance Corporation, 250 North Shadeland
Avenue, Indianapolis, Indiana 46219 (telephone (317) 231-2717).
FEDERAL INCOME TAX CONSEQUENCES
General
Set forth below is a summary of certain United States federal income
tax considerations relevant to the beneficial owner of a note that holds the
note as a capital asset and, unless otherwise indicated below, is a U.S. Person
(as defined in the accompanying prospectus). This summary does not address
special tax rules which may apply to certain types of investors, and investors
that hold notes as part of an integrated investment. This summary supplements
the discussion contained in the accompanying prospectus under the heading
"Federal Income Tax Consequences," and supercedes that discussion to the extent
that the two discussions are not consistent. The authorities on which we based
this discussion are subject to change or differing interpretations, and any such
change or
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<PAGE>
interpretation could apply retroactively. This discussion reflects the
applicable provisions of the Internal Revenue Code of 1986, as amended (the
"Code"), as well as regulations promulgated by the U.S. Department of Treasury.
You should consult your own tax advisors in determining the federal, state,
local and any other tax consequences of the purchase, ownership and disposition
of the Notes.
Characterization of the Notes. There are no regulations, published
rulings or judicial decisions addressing the characterization for federal income
tax purposes of securities with terms that are substantially the same as those
of the notes. A basic premise of United States federal income tax law is that
the economic substance of a transaction generally will determine the United
States federal income tax consequences of such transaction. The determination of
whether the economic substance of a loan secured by an interest in property is
instead a sale of a beneficial ownership interest in such property has been made
by the Internal Revenue Service (the "IRS") and the courts on the basis of
numerous factors designed to determine whether the trust has relinquished (and
the investor has obtained) substantial incidents of ownership in such property.
Among those factors, the primary factors examined are whether the investor has
the opportunity to gain if the property increases in value, and has the risk of
loss if the property decreases in value. Based on an assessment of these
factors, in the opinion of Cadwalader, Wickersham & Taft, special counsel to the
seller, the class A notes will be treated as indebtedness and the class B should
also be characterized as indebtedness for federal income tax purposes and not as
an ownership interest in the receivables or an equity interest in the trust. See
"Federal Income Tax Consequences" in the accompanying prospectus.
Classification of the Trust. In the opinion of Cadwalader, Wickersham &
Taft, special counsel to the seller, the trust will not be treated as an
association or a publicly traded partnership taxable as a corporation for
federal income tax purposes, but rather will be ignored and treated as a mere
security device when there is a single beneficial owner of the trust, or will be
treated as a domestic partnership when there are two or more beneficial owners
of the trust.
Discount and Premium
For federal income tax reporting purposes, it is anticipated that the
notes [(other than the class [ ] notes)] will not be treated as having been
issued with original issue discount. [The class [ ] notes will not bear stated
interest and the original issue discount thereon will equal all amounts
scheduled to be paid thereon over their issue price.] The prepayment assumption
that will be used in determining the rate of accrual of original issue discount
and of market discount and premium, if any, for federal income tax purposes will
be based on the assumption that subsequent to the date of any determination the
receivables will prepay at [ %] ABS, and there will be no extensions of maturity
for any receivable. However, no representation is made as to the rate, if any,
at which the receivables will prepay.
The IRS has issued regulations under Sections 1271 and 1275 of the Code
generally addressing the treatment of debt instruments issued with original
issue discount. Purchasers of the notes should be aware that the original issue
discount regulations and Section 1272(a)(6) of the Code do not adequately
address certain issues relevant to, or are not applicable to, securities such as
the
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<PAGE>
notes. Prospective purchasers of the notes are advised to consult with their tax
advisors concerning the tax treatment of such notes.
Certain classes of the notes may be treated for federal income tax
purposes as having been issued at a premium. Whether any holder of such a class
of notes will be treated as holding notes with amortizable bond premium will
depend on such noteholder's purchase price and the payments remaining to be made
on such note at the time of its acquisition by such noteholder. You should
consult your own tax advisors regarding the possibility of making an election to
amortize such premium on such classes of notes.
Gain or Loss on Disposition
If you sell a note, you must recognize gain or loss equal to the
difference between the amount realized from the sale and your adjusted basis in
such note. The adjusted basis generally will equal your cost of such note,
increased by any original issue discount included in your ordinary gross income
with respect to the note and reduced (but not below zero) by any payments on the
note previously received or accrued by you (other than qualified stated interest
payments) and any amortizable premium. Similarly, a noteholder who receives a
principal payment with respect to a note will recognize gain or loss equal to
the difference between the amount of the payment and holder's allocable portion
of his or her adjusted basis in the note. Such gain or loss will generally be a
long-term capital gain or loss if the note was held for more than one year.
Backup Withholding and Information Reporting
Payments of interest and principal, as well as payments of proceeds
from the sale of notes, may be subject to the "backup withholding tax" under
Section 3406 of the Code at a rate of 31% if recipients of such payments fail to
furnish to the payor certain information, including their taxpayer
identification numbers, or otherwise fail to establish an exemption from such
tax. Any amounts deducted and withheld from a payment to be allowed as a credit
against such federal income tax. Furthermore, certain penalties may be imposed
by the IRS on a recipient of payments that is required to supply information but
that does not do so in the proper manner.
We will report to noteholders and to the IRS for each calendar year the
amount of any "reportable payments" during such year and the amount of tax
withheld, if any, with respect to payments on the notes.
New Withholding Regulations
On October 6, 1997, the Treasury Department issued new regulations
which make certain modifications to the withholding rules for investors who are
Non-U.S. Persons and the backup withholding and information reporting rules
described above. The new regulations attempt to unify certification requirements
and modify reliance standards. Such regulations will generally be effective
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<PAGE>
for payments made after December 31, 1999, subject to certain transaction rules.
You are urged to consult your tax advisors regarding the new regulations.
ERISA CONSIDERATIONS
Subject to the considerations set forth below and under "ERISA
Considerations" in the accompanying prospectus, the class A notes may be
purchased by an employee benefit plan or an individual retirement account (a
"Benefit Plan") subject to ERISA or Section 4975 of the Code. A fiduciary of a
Benefit 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 Internal
Revenue Code. Section 406 of ERISA prohibits parties in interest or disqualified
persons ("Parties in Interest") with respect to a Benefit Plan from engaging in
certain transactions (including loans) involving a Benefit Plan and its assets
unless a statutory or administrative exemption applies to the transaction.
Section 4975 of the Internal Revenue Code imposes certain excise taxes (or, in
some cases, a civil penalty may be assessed pursuant to section 502(i) of ERISA)
on Parties in Interest which engage in non-exempt prohibited transactions.
The United States Department of Labor has issued a regulation (29 CFR
Section 2510.3-101) concerning the definition of what constitutes the assets of
a Benefit Plan. This regulation provides that, as a general rule, the underlying
assets and properties of corporations, partnerships, trusts and certain other
entities in which a Benefit Plan purchases an "equity interest" will be deemed
for purposes of ERISA to be assets of the investing Benefit Plan unless certain
exceptions apply. This regulation defines an "equity interest" as any interest
in an entity other than an instrument that is treated as indebtedness under
applicable local law and which has no substantial equity features. Although the
issue is not free from doubt, we believe that the class A notes should not be
treated as "equity interests" for purposes of the regulation. Accordingly, the
acquisition of the class A notes by benefit plan investors should not cause the
assets of the trust to be treated as Benefit Plan assets for purposes of Title I
of ERISA. However, the notes may not be purchased with the assets of a Benefit
Plan if the seller, the servicer, the indenture trustee, the owner trustee or
any of their affiliates:
(1) has investment or administrative discretion with respect to such
Benefit Plan assets;
(2) has authority or responsibility to give, or regularly gives,
investment advice with respect to such Benefit Plan assets, for a fee and
pursuant to an agreement or understanding that such advice (a) will serve as a
primary basis for investment decisions with respect to such Benefit Plan assets
and (b) will be based on the particular investment needs for such Benefit Plan;
or
(3) is an employer maintaining or contributing to such Benefit Plan.
Certain affiliates of the trust or the servicer might be considered or
might become Parties in Interest with respect to a Benefit Plan. In either case,
the acquisition or holding of class A notes by or on behalf of such a Benefit
Plan could be considered to give rise to an indirect prohibited
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transaction within the meaning of ERISA and the Internal Revenue Code, unless it
is subject to one or more exemptions such as one of the following Prohibited
Transaction Class Exemptions ("PTCE"):
o PTCE 84-14, which exempts certain transactions effected on
behalf of a Benefit Plan by a "qualified professional asset
manager,"
o PTCE 90-1, which exempts certain transactions involving
insurance company pooled separate accounts,
o PTCE 91-38, which exempts certain transactions involving bank
collective investment funds,
o PTCE 95-60, which exempts certain transactions involving
insurance company general accounts, or
o PTCE 96-23, which exempts certain transactions effected on
behalf of a Benefit Plan by certain "in-house asset managers."
Each purchaser or transferee of a note that is a Benefit Plan shall be
deemed to have represented that the relevant conditions for exemptive relief
under at least one of the foregoing exemptions (or other applicable exemption
providing substantially similar relief) have been satisfied.
Because the class B notes may be considered to have "substantial equity
features," you should not purchase class B notes if you are a Benefit Plan or
any person using the assets of a Benefit Plan.
For additional information regarding treatment of the notes under
ERISA, see "ERISA Considerations" in the accompanying prospectus.
UNDERWRITING
Under the terms and subject to the conditions set forth in the
underwriting agreement for the sale of the notes, dated _________________, the
seller has agreed to cause the trust to sell and each of the underwriters named
below has severally agreed to purchase the principal amount of the notes set
forth below its name below:
---------------- -----------
________ ________ Total
In the underwriting agreement, the underwriters have agreed, subject to
the terms and conditions set forth therein, to purchase all the notes offered by
the trust.
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The underwriters propose to offer part of the notes directly to you at
the prices set forth on the cover page of this prospectus supplement and part to
certain dealers at a price that represents a concession not in excess of _____%
of the denominations of the class A-1 notes, _____% of the denominations of the
class A-2 notes, _____% of the denominations of the class A-3 notes, _____% of
the denominations of the class A-4 notes, or _____% of the denominations of the
class B notes. The underwriters may allow and such dealers may reallow a
concession not in excess of _____% of the denominations of the class A-1 notes,
_____% of the denominations of the class A-2 notes, _____% of the denominations
of the class A-3 notes, _____% of the denominations of the class A-4 notes, or
_____% of the denominations of the class B notes.
The seller and UAC have agreed to indemnify the underwriters against
certain liabilities, including liabilities under the Securities Act of 1933, as
amended.
The underwriters tell us that they intend to make a market in the
notes, as permitted by applicable laws and regulations. However, the
underwriters are not obligated to make a market in the notes and any such
market-making may be discontinued at any time at the sole discretion of the
underwriters. Accordingly, we give no assurances regarding the liquidity of, or
trading markets for, the notes.
In connection with this offering, the underwriters may over-allot or
effect transactions which stabilize or maintain the market price of the notes at
a level above that which might otherwise prevail in the open market. Such
stabilizing, if commenced, may be discontinued at any time.
In the ordinary course of their businesses, the underwriters and their
affiliates have engaged and may in the future engage in investment banking,
commercial banking and other advisory or commercial relationships with the
seller, UAC and their affiliates.
LEGAL OPINIONS
Certain legal matters relating to the notes will be passed upon for the
seller and the trust by Barnes & Thornburg, Indianapolis, Indiana, and for the
underwriters by Cadwalader, Wickersham & Taft. Certain federal income tax
consequences with respect to the notes will be passed upon for the trust by
Cadwalader, Wickersham & Taft.
EXPERTS
[The financial statements of the insurer are expected to be expertized
by its independent accountants.]
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INDEX OF PRINCIPAL TERMS
We have listed below the terms used in this prospectus supplement and
the pages where definitions of the terms can be found.
ABS ....................................................................... 17
Accelerated Principal Amount .............................................. 25
Available Excess Funds .................................................... 26
Available Funds ........................................................... 22
Benefit Plan .............................................................. 35
Class A Monthly Interest .................................................. 26
Class A-1 Monthly Interest ................................................ 26
Class A-2 Monthly Interest ................................................ 26
Class A-3 Monthly Interest ................................................ 27
Class A-4 Monthly Interest ................................................ 27
Class B Monthly Interest .................................................. 28
Code ...................................................................... 33
ERISA ..................................................................... 9
IRS ....................................................................... 33
Monthly Interest .......................................................... 26
Monthly Principal ......................................................... 25
Parties in Interest ....................................................... 35
Principal Payment Sequence ................................................ 28
PTCE ...................................................................... 36
UAC ....................................................................... 1
UAFC ...................................................................... 6
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$____________________
UACSC [YEAR]-___ AUTO TRUST
UAC Securitization Corporation
Seller
[logo]
Union Acceptance Corporation
Servicer
$_____________ Class A-1 Money Market Automobile Receivable Backed Notes
$_____________ Class A-2 Automobile Receivable Backed Notes
$_____________ Class A-3 Automobile Receivable Backed Notes
$_____________ Class A-4 Automobile Receivable Backed Notes
$_____________ Class A-5 Automobile Receivable Backed Notes
---------------------
PROSPECTUS SUPPLEMENT
---------------------
[UNDERWRITERS]
You should rely only on the information contained or incorporated by
reference in this prospectus supplement and the accompanying prospectus. We have
not authorized anyone to provide you with different or additional information.
We are not offering the securities in any state where the offer is not
permitted.
Dealers will deliver this prospectus supplement and prospectus when
acting as underwriters of the securities with respect to their unsold allotments
or subscriptions. In addition, all dealers selling the securities will deliver
this prospectus supplement and prospectus until _____________________.
<PAGE>
[PROSPECTUS SUPPLEMENT FOR GRANTOR TRUST]
UACSC [YEAR]-___ Grantor Trust
UAC Securitization Corporation
Seller [LOGO]
Union Acceptance Corporation
Servicer
Consider carefully the risk factors beginning on page S-12 in this prospectus
supplement and on page __ in the prospectus.
The certificates represent interests in the UACSC [Year]-__ Grantor Trust only
and do not represent obligations of or interests in UAC Securitization
Corporation, Union Acceptance Corporation or any of their affiliates.
This prospectus supplement may be used to offer and sell the certificates only
if accompanied by the prospectus.
The trust will issue and the seller will sell the following
classes of certificates:
================================================================================
Class A Class B
Certificates Certificates
- --------------------------------------------------------------------------------
Initial Aggregate
Principal Balance $ $
- --------------------------------------------------------------------------------
Pass-Through
Rate % %
(per annum)
- --------------------------------------------------------------------------------
Final Scheduled
Payment
Date
- --------------------------------------------------------------------------------
Price to Public 1 % %
- --------------------------------------------------------------------------------
Underwriting
Discount 2 % %
- --------------------------------------------------------------------------------
Proceeds to
Seller 3 % %
================================================================================
1 Plus accrued interest, if any, after _______________.
Total price to public (excluding such interest) =
$---------------.
2 Total underwriting discount = $__________.
3 Total proceeds to the seller = $____________.
o The class B certificates will be subordinate to the
class A certificates.
o A spread account will serve as credit enhancement for
the certificates. Over time, it is expected that the
amount on deposit in the spread account will grow to
____% of the initial aggregate principal balance of the
receivables pool.
o The trust will include up to $__________ of subsequent
receivables to be purchased after ______________.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or determined that this
prospectus supplement or the accompanying prospectus is accurate or complete.
Any representation to the contrary is a criminal offense.
[Underwriters of the Certificates]
The date of this prospectus supplement is ____________
<PAGE>
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS
We tell you about the certificates in the following documents: (1) this
prospectus supplement, which describes the specific terms of your certificates;
and (2) the accompanying prospectus, which provides general information, some of
which may not apply to the certificates.
If the description of the certificates varies between this prospectus
supplement and the prospectus, you should rely on the information in this
prospectus supplement.
We include cross-references in this prospectus supplement and in the
accompanying prospectus to captions in these materials where you can find
further related discussions. The following Table of Contents and the Table of
Contents included in the accompanying prospectus provide the pages on which
these captions are located.
You can find a listing of the pages where capitalized terms used in
this prospectus supplement are defined under the caption "Index of Principal
Terms" beginning on page S-__ in this prospectus supplement and under the
caption "Index of Principal Terms" beginning on page __ in the accompanying
prospectus.
In this prospectus supplement and the accompanying prospectus, "we"
refers to the depositor, UAC Securitization Corporation, and "you" refers to any
prospective investor in the certificates.
1
<PAGE>
TABLE OF CONTENTS
SUMMARY OF TERMS................................... S-4
Issuer.......................................... S-4
Seller.......................................... S-4
Servicer........................................ S-5
Trustee......................................... S-5
The Certificates................................ S-5
Interest........................................ S-6
Principal....................................... S-7
Subordination................................... S-7
The Receivables................................. S-8
Pre-Funding Account............................. S-9
Spread Account.................................. S-10
Optional Sale................................... S-11
Tax Status...................................... S-11
Ratings......................................... S-12
ERISA Considerations............................ S-12
RISK FACTORS....................................... S-12
You may not be able to resell the certificates.. S-12
The Certificates Are
Obligations of the Trust Only
and are not guaranteed by any other party..... S-12
The Amount in the Spread Account may not be s
sufficient to assure payment of principal and
interest...................................... S-13
A change in the Certificate Ratings may adversely
affect the Certificates....................... S-14
Subordination................................... S-14
FORMATION OF THE TRUST............................. S-15
THE RECEIVABLES POOL............................... S-16
Composition of the Initial Receivables
as of _______________......................... S-18
Distribution of the Initial Receivables by
Remaining Term as of ________________......... S-19
Geographic Distribution
of the Initial Receivables as of
_______________............................... S-19
Distribution of the Initial Receivables by
Financed Vehicle Model Year
as of _____________........................... S-19
Distribution of the Initial Receivables
by Contract Rate as of the
as of _____________........................... S-19
Delinquencies, Repossessions and
Net Losses.................................... S-21
Delinquency and Credit
Loss Experience............................... S-21
2
<PAGE>
WEIGHTED AVERAGE LIFE OF
THE CERTIFICATES................................ S-21
Percent of Initial Certificate Balance
at Various ABS Percentages.................... S-24
YIELD AND PREPAYMENT
CONSIDERATIONS.................................. S-25
Mandatory Repurchase............................ S-26
THE DEPOSITOR AND UAC.............................. S-26
THE CERTIFICATES................................... S-26
Sale and Assignment of Receivables;
Subsequent Receivables........................ S-27
Accounts........................................ S-28
Subordination of the
Class B Certificates.......................... S-30
Advances........................................ S-31
Distributions on the Certificates............... S-31
REPORTS TO
CERTIFICATEHOLDERS.............................. S-34
ERISA CONSIDERATIONS............................... S-35
UNDERWRITING....................................... S-35
LEGAL OPINIONS..................................... S-36
INDEX OF PRINCIPAL TERMS........................... S-37
3
<PAGE>
SUMMARY OF TERMS
o This summary highlights selected information from this prospectus
supplement and does not contain all of the information that you should
consider in making your investment decision. To understand all of the
terms of this offering, read the entire prospectus supplement and the
accompanying prospectus.
o The definitions of capitalized terms used in this prospectus supplement
can be found on the pages indicated in the "Index of Principal Terms"
beginning on page S-28 in this prospectus supplement or beginning on
page 44 of the accompanying prospectus.
Issuer
The UACSC [YEAR]-___ Grantor Trust is the trust which will issue the
certificates offered in this prospectus supplement.
Seller
UAC Securitization Corporation is the depositor of or the seller to the trust.
The seller will transfer the automobile receivables and related property to the
trust.
4
<PAGE>
Servicer
Union Acceptance Corporation ("UAC") will act as the servicer of the trust. The
servicer will receive and apply payments on the automobile receivables, service
the collection of the receivables and direct the trustee to make the appropriate
distributions to the certificateholders. The servicer will receive a monthly
servicing fee as compensation for its services.
Trustee
- ----------------------.
Closing Date
The closing date will be ______________________.
The Certificates
The trust will issue automobile receivable backed certificates on or about the
closing date under the terms of a pooling and servicing agreement among the
seller, the servicer and the trustee. The certificates will consist of the
following:
o _____% class A automobile receivable pass-through certificates in the
aggregate principal amount of $__________________; and
o ____% class B automobile receivable pass-through certificates in the
aggregate principal amount of $__________________;
Each of the certificates will represent a fractional and undivided interest in
the trust. The trust assets will include:
o a pool of simple and precomputed interest installment sale and
installment loan contracts originated in various states in the United
States of America, secured by new and used automobiles, light trucks
and vans;
o certain monies due in respect of the receivables as of and after
a cutoff date of ______________;
o security interests in the related vehicles financed through the
receivables;
o funds on deposit in a certificate account, a yield supplement account
and a spread account;
5
<PAGE>
o any proceeds from claims on certain insurance policies relating to the
financed vehicles or the related obligors;
o any lender's single interest insurance policy; and
o certain rights under the pooling and servicing agreement.
Interest
The trust will distribute interest on the eighth calendar day of each month or,
if such day is not a business day, on the next business day, beginning
_______________, to holders of record of the class A certificates and the class
B certificates as of the record date, which will be the day before the payment
date. However, if definitive certificates are issued, the record date will be
the last day of the calendar month immediately preceding the calendar month in
which such payment date occurs.
The applicable pass-through rates for the certificates are:
o _____% for the class A certificates; and
o _____% for the class B certificates.
Interest on the class A certificates and the class B certificates will be
calculated on the basis of a 360-day year consisting of twelve 30-day months.
See "Yield and Prepayment Considerations" and "The Certificates -- Distributions
on the Certificates" in this prospectus supplement.
Generally, the amount of interest distributable to the certificateholders on
each payment date is the product of one-twelfth of the pass-through rate
applicable to such class and the aggregate outstanding principal balance of such
class as of the preceding payment date (after giving effect to all distributions
to certificateholders on such date).
The amount of interest distributable on the first payment date of
________________ will be based upon the original principal balance of the
applicable class and will accrue from the closing date until the day before the
first payment date (and assuming that the month of the closing date has 30
days).See "The Certificates -- Distributions on
the Certificates" in this prospectus supplement.
6
<PAGE>
Principal
The trust will distribute principal on each payment date to the
certificateholders of record as of the record date. Generally, the amount of
principal which will be distributed is equal to the difference between the
aggregate outstanding principal balance of the certificates as of the preceding
payment date (after giving effect to any distributions of principal made on such
payment date) and the outstanding balance of the receivables pool on the last
day of the immediately preceding calendar month.
The aggregate outstanding principal balance of the certificates as of the
closing date is as follows:
o $_____________ for the class A certificates; and
o $______________ for the class B certificates.
The outstanding principal amount of the class A certificates and the class B
certificates, as the case may be, will be payable in full on _______ the final
scheduled payment date.
Generally, on any payment date monthly principal will be distributed
proportionately between the class A certificateholders and the class B
certificateholders pro rata based upon the aggregate balances of the
certificates as of the preceding payment date. However, if there is a shortfall
in the funds available to pay monthly principal, no principal will be
distributed to the class B certificateholders until the full amount of interest
on and principal of the class A certificates payable on such payment date has
been distributed to the class A certificateholders.
Since the rate of payment of principal of each class of certificates depends
upon the rate of payment of principal on the receivables (including voluntary
prepayments and principal in respect of defaulted receivables and receivables
purchased or repurchased by UAC), the final distribution in respect of the
certificates could occur significantly earlier than the final scheduled payment
date. See "The Certificates -- Distributions on the Certificates" in this
prospectus supplement.
Subordination
The rights of the class B certificateholders to receive distributions of monthly
interest and monthly principal are subordinated to the rights of the class A
7
<PAGE>
certificateholders. See "The Certificates -- Subordination of the Class B
Certificates," "-- Distributions on the Certificates," "-- Accounts -- Spread
Account," "Risk Factors -- Spread Account" and " -- Subordination" in this
prospectus supplement.
The Receivables
On the closing date, the seller will convey initial receivables to the trust
having an aggregate principal balance of approximately $________ as of an
initial cutoff date of _________. The trust will acquire the initial receivables
from the seller pursuant to the pooling and servicing agreement. In addition,
the seller must sell subsequent receivables to the trust (subject to
availability) having an aggregate principal balance or pre-funded amount equal
to approximately $_______. The trust will be obligated to purchase the
subsequent receivables from the seller (subject to the satisfaction of certain
conditions) prior to the end of a specific funding period.
The seller will designate as a subsequent cutoff date each effective date that
subsequent receivables are conveyed to the trust. Each date during the funding
period on which subsequent receivables will be conveyed to the trust is a
subsequent transfer date. See "The Certificates--Sale and Assignment of
Receivables; Subsequent Receivables" and "The Receivables Pool" in this
prospectus supplement and "The Receivables Pools" in the accompanying
prospectus.
The initial receivables were selected and the subsequent receivables will be
selected from the contracts owned by Union Acceptance Funding Corporation
("UAFC"), based on the criteria specified in the pooling and servicing agreement
and described in this prospectus supplement under "The Receivables Pool" and in
the accompanying prospectus under "The Receivables Pools."
UAC may originate subsequent receivables using credit criteria that differ from
those used for the initial receivables. Therefore, the initial receivables may
be of a different credit quality and seasoning. In addition, the transfer of
subsequent receivables to the trust may adversely affect the characteristics of
the entire pool of receivables. The provisions describing the transfer of
subsequent receivables and verification that subsequent receivables conform to
the requirements of the pooling and servicing agreement can be found in "The
Receivables Pool" and "The Certificates -- Sale and Assignment of Receivables;
Subsequent Receivables" in this prospectus supplement. See also "Risk Factors --
Certain Risks Associated with Pre-Funding" and "Description of the Transfer and
Servicing Agreements -- Sale and Assignment of Subsequent Receivables" in the
accompanying prospectus.
8
<PAGE>
Pre-Funding Account
The trustee will deposit and maintain the pre-funded amount in a pre-funding
account during the funding period from the closing date until the earliest of:
(1) the date on which the amount on deposit in the pre-funding account is
equal to or less than $_______;
(2) the occurrence of an event of default under the pooling and servicing
agreement;
(3) the occurrence of certain events of insolvency of the seller or the
servicer; or
(4) the [third] payment date.
The funding period will not be more than three calendar months.
The pre-funded amount initially will equal $_________ and will be reduced by the
amount used to purchase subsequent receivables. See "Description of the Transfer
and Servicing Agreements -- Accounts -- Pre-Funding Account" in the accompanying
prospectus and "The Certificates-- Sale and Assignment of Receivables;
Subsequent Receivables" in this prospectus supplement.
The trustee will invest funds on deposit in the pre-funding account during the
funding period in eligible investments, subject to certain limitations. Any
investment income from such investments will be transferred from the pre-funding
account to the collection account on each payment date and will be included in
available funds for such payment date.
If any pre-funded amount remains in the pre-funding account at the end of the
pre-funding period, the trustee will pay such amount to the certificateholders
on the payment date on or immediately following the last day of the pre-funding
period. The trustee will pay the amount to the certificateholders pro rata,
based on the initial principal amounts of the certificates held by the
certificateholders. The amount the trustee pays to the certificateholders will
constitute a prepayment of the aggregate principal balance of the certificates
and may reduce the certificateholders' anticipated yield. See "The Certificates
- -- Sale and Assignment of Receivables; Subsequent Receivables" in this
prospectus supplement. See also "Risk Factors -- Certain Risks Associated with
Pre-Funding" and "Description of the Transfer and Servicing Agreements --
Accounts" in the accompanying prospectus.
9
<PAGE>
Spread Account
The seller will establish a spread account on the closing date in the name of
the trustee for the benefit of the certificateholders. The spread account will
hold the excess, if any, of the collections on the receivables over the amounts
which the trust is required to distribute to the certificateholders and the
servicer. The amount of funds available for distribution to certificateholders
on any payment date will consist of funds from the following sources:
(1) payments received from obligors in respect of the receivables (net of
any amount required to be deposited to the payahead account in respect
of precomputed receivables);
(2) any net withdrawal from the payahead account in respect of precomputed
receivables;
(3) liquidation proceeds received in respect of receivables;
(4) advances received from the servicer in respect of interest on certain
delinquent receivables;
(5) amounts received in respect of required repurchases or purchases of
receivables by UAC or the servicer; and
(6) investment income from funds on deposit in the pre-funding account.
The trustee will withdraw funds from the spread account (up to the amount on
deposit in the account) if the amount of available funds for any payment date is
not sufficient to pay:
(1) the amounts owed to the servicer (including the monthly servicing fee
and reimbursement for advances made by the servicer to the trust), and
(2) the required payments of monthly interest and monthly principal to the
certificateholders.
If the amount on deposit in the spread account is zero, after any withdrawals
for the benefit of the certificateholders, any remaining losses on the
receivables will be borne directly pro rata first by the class B
certificateholders (up to the aggregate principal balance of the class B
certificates at such time)
10
<PAGE>
and then by the class A certificateholders. See "Risk Factors," "The
Certificates -- Accounts" and "-- Distributions on the Certificates" in this
prospectus supplement.
Any amount on deposit in the spread account on any payment date in excess of the
required spread amount (after all other required deposits to and withdrawals
from the spread account have been made) will be distributed to the seller. Any
such distribution to the seller will no longer be an asset of the trust.
We intend for the amount on deposit in the spread account to grow over time to
the required spread amount through the deposit of the excess collections, if
any, on the receivables. However, we cannot assure you that the amount on
deposit in the spread account will actually grow to the required spread amount.
The required spread amount with respect to any payment date will equal ____% of
the aggregate principal balance of the certificates.
Optional Sale
The servicer has the right to purchase all of the receivables as of the last day
of any collection period on which the aggregate principal balance of the
receivables pool is equal to or less than 10% of the initial aggregate principal
balance of the certificates.
The purchase price applicable to the optional sale will be equal to the fair
market value of the receivables; provided that such amount is equal to or
greater than the sum of:
(1) 100% of the outstanding aggregate principal balance of the
certificates; and
(2) accrued and unpaid interest on the outstanding aggregate principal
balance of the certificates at the weighted average contract rates of the
receivables less any payments received but not applied to interest or principal.
Tax Status
In the opinion of special tax counsel to the seller, the trust will be treated
as a grantor trust for federal income tax purposes and will not be subject to
federal income tax. Certificateholders will be required to report their
respective shares of the trust's taxable income, and, subject to certain
limitations in the case of such owners who are individuals, trusts or estates,
may deduct their respective shares of reasonable servicing and other fees. See
"Federal Income Tax Consequences" in the accompanying prospectus.
11
<PAGE>
Ratings
On the closing date, the class A certificates must be rated at least _____ and
the class B certificates must be rated at least ____ by at least ____ nationally
recognized statistical rating agencies. A security rating is not a
recommendation to buy, sell or hold securities and may be subject to revision or
withdrawal at any time by the assigning rating agency. See "Risk Factors-- A
Change in the Certificate Ratings May Adversely Affect the Certificates" in this
prospectus supplement.
ERISA Considerations
The class A certificates may be eligible for purchase by employee benefit plans
subject to Title I of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"). Any benefit plan fiduciary considering the purchase of class
A certificates should, among other things, consult with experienced legal
counsel in determining whether all required conditions for such purchase have
been satisfied. See "ERISA Considerations" in this prospectus supplement and in
the accompanying prospectus.
Plans should not purchase class B certificates, because the class B certificates
are subordinate to the class A certificates.
RISK FACTORS
You should carefully consider the risk factors set forth below and in
the accompanying prospectus as well as the other investment considerations
described in such documents as you decide whether to purchase the class A
certificates.
You May Not be Able to
Resell the Notes There is currently no secondary market
for the certificates. The underwriters
currently intend to make a market to
enable resale of the certificates, but
are under no obligation to do so. As
such, we cannot assure you that a
secondary market will develop for your
certificates or, if one does develop,
that such market will provide you with
liquidity of investment or that it will
continue for the life of your
certificates.
The Certificates Are Obligations
of the Trust Only and are Not
Guaranteed by any Other Party The certificates are interests in the
trust only and do not represent an
interest in or obligation of the
seller, UAC or any other party or
governmental body. The certificates have
not been insured or guaranteed by any
party or governmental body. See "The
Certificates -- Distributions on the
Certificates" in this prospectus
supplement.
12
<PAGE>
The Amount in the Spread
Account May Not be Sufficient
to Assure Payment of Principal
and Interest The trustee will withdraw funds from the
spread account, up to the full balance
of the funds on deposit in such account,
if the amount of available funds on any
payment date is not sufficient to
distribute monthly interest and monthly
principal (after payment of the monthly
servicing fee) to you. The amount on
deposit in the spread account may
increase over time to an amount equal to
the required spread amount. We cannot
assure you that such growth will occur
or that the balance in the spread
account will always be sufficient to
assure payment in full of monthly
interest and monthly principal. If the
balance of the spread account is reduced
to zero on any payment date, the
trust will depend solely on current
distributions on the receivables to make
distributions of principal and interest
on the certificates.
13
<PAGE>
A Change in the Certificate
Ratings May Adversely
Affect the Certificates On the closing date, the class A
certificates must be rated at least
_____ and the class B certificates must
be rated at least _____ by the rating
agencies. Such ratings will reflect only
the views of the relevant rating agency.
We cannot assure you that any such
rating will continue for any period of
time or that any rating will not be
revised or withdrawn entirely by such
rating agency if, in its judgment,
circumstances so warrant. A revision or
withdrawal of such rating may have an
adverse effect on the liquidity and
market price of your certificates. A
security rating is not a recommendation
to buy, sell or hold securities.
Subordination The rights of the class B
certificateholders to receive
distributions of monthly interest and
monthly principal are subordinated to
the rights of the class A
certificateholders. See "The
Certificates -- Subordination of the
Class B Certificates," "-- Distributions
on the Certificates" and " Accounts--
Spread Account" in this prospectus
supplement. No distribution of interest
will be made to the class B
certificateholders on any payment
date until the full amount of interest
payable on the class A certificates on
such payment date has been
distributed to the class A
certificateholders, and no distribution
of principal will be made to the class B
certificateholders on any payment
date until the full amount of class A
monthly interest and class A monthly
principal payable on such payment
14
<PAGE>
date has been paid. Distributions of
interest on the class B certificates
will not be subordinated to
distributions of principal on the class
A certificates. Because the rights of
the class B certificateholders to
receive distributions of principal will
be subordinated to the rights of the
class A certificateholders to receive
distributions of interest and principal,
the class B certificates will be more
likely than the class A certificates to
suffer losses due to losses on the
receivables. If the aggregate amount of
losses on the receivables exceeds the
amount on deposit in the spread account,
class B certificateholders may not
recover their initial investment in the
class B certificates.
FORMATION OF THE TRUST
The seller will establish the trust by assigning the trust assets to
the trustee in exchange for the certificates. UAC will be responsible for
servicing the receivables pursuant to the pooling and servicing agreement and
will be compensated for acting as the servicer. To facilitate servicing and to
minimize administrative burden and expense, the servicer will be appointed
custodian of the receivables by the trustee. However, the servicer will not
stamp the receivables to reflect the sale and assignment of the receivables to
the trust or make any notation of the trust's lien on the certificates of title
of the financed vehicles. In the absence of such notation on the certificates of
title, the trustee may not have perfected security interests in the financed
vehicles securing the receivables. Under the terms of the pooling and servicing
agreement, UAC may delegate its duties as servicer and custodian; however, any
such delegation will not relieve UAC of its liability and responsibility with
respect to such duties. See "Description of the Transfer and Servicing
Agreements -- Servicing Compensation and Payment of Expenses" and "Certain Legal
Aspects of the Receivables" in the accompanying prospectus.
The seller will establish the spread account for the benefit of the
certificateholders. If Available Funds and the amount on deposit in the spread
account (after paying amounts owed to the servicer) are not sufficient to fully
15
<PAGE>
distribute Monthly Interest and Monthly Principal, the trust will look only to
the obligors on the receivables and the proceeds from the repossession and sale
of financed vehicles that secure defaulted receivables for distributions of
interest and principal on the certificates. In such event, certain factors, such
as the trustee's not having perfected security interests in some of the financed
vehicles, may affect the trust's ability to realize on the collateral securing
the receivables, and thus may reduce the proceeds to be distributed to
certificateholders. See "The Certificates -- Accounts" in this prospectus
supplement and "Certain Legal Aspects of the Receivables" in the accompanying
prospectus.
THE RECEIVABLES POOL
The pool of receivables conveyed to the trust will include the initial
receivables purchased as of _______________ and any subsequent receivables
purchased as of the applicable subsequent cutoff dates.
The initial receivables were, and the subsequent receivables were or
will be, selected from the portfolio of UAFC for purchase by the seller by
several criteria, including that each receivable:
o had or will have an original number of payments of not more than
___ payments and not less than ____ payments (except that
approximately ___% of the aggregate principal balance of the
initial receivables as of _____________ consist of modified
receivables which have been amended or modified after origination
to provide that the number of payments from the time of
origination to maturity may exceed ___ payments);
o had or will have a remaining maturity of not more than ___ months
and not less than _____ months;
o provided or will provide for level monthly payments that fully
amortize the amount financed over the remaining term; and
o had or will have a contract rate of interest (exclusive of
prepaid finance charges) of not less than _____%.
The weighted average remaining maturity of the initial receivables is
approximately ___ months as of _______________.
Approximately _____% of the aggregate principal balance of the initial
receivables as of _______________ were selected from the "non-prime" or "Tier
II" portfolio of UAFC. See "-- Delinquency and Credit Loss Experience."
16
<PAGE>
Approximately _____% of the aggregate principal balance of the initial
receivables as of _______________ are simple interest contracts which provide
for equal monthly payments. Approximately _____% of the aggregate principal
balance of the initial receivables as of _______________ are precomputed
receivables originated in the State of California. All of such precomputed
receivables are rule of 78's receivables. Approximately _____% of the aggregate
principal balance of the initial receivables as of _____________ represent
financing of new vehicles; the remainder of the initial receivables represent
financing of used vehicles.
Initial receivables representing more than 10% of the aggregate
principal balance of the initial receivables as of _______________ were
originated in the States of __________ and _________. The performance of the
receivables in the aggregate could be adversely affected in particular by the
development of adverse economic conditions in such states.
The trust is obligated to purchase subsequent receivables on a
subsequent transfer date only if the subsequent receivables satisfy certain
criteria, including that:
o the aggregate principal balance of subsequent receivables that
are Tier II receivables will not be more than ____% of the
aggregate principal balance of the subsequent receivables;
o the aggregate principal balance of subsequent receivables that
are modified receivables will not be more than ____% of the
aggregate principal balance of the subsequent receivables;
o [describe other criteria specific to the particular
transaction].
In addition, the trust is obligated to purchase the subsequent
receivables only if the weighted average remaining term of the receivables
(including the subsequent receivables) is not more than _____ months. The trust
will determine whether the receivables satisfy the above criteria based on the
characteristics of the initial receivables as of _______________ and any
subsequent receivables as of the related subsequent cutoff date.
The initial receivables will represent approximately _____% of the
initial aggregate principal balance of the certificates. However, except for the
criteria described in the preceding paragraphs, the subsequent receivables are
17
<PAGE>
not required to have any other specified criteria. Therefore, following the
transfer of subsequent receivables to the trust, the aggregate characteristics
of the entire receivables pool, including the composition of the receivables,
the distribution by contract rate and the geographic distribution, may vary
significantly from those of the initial receivables.
The composition, distribution by contract rate and geographic
distribution of the initial receivables as of _______________ are as set forth
in the following tables.
Composition of the Initial Receivables as of _______________
<TABLE>
<CAPTION>
Weighted
Aggregate Original Average
Number of Principal Principal Contract
Receivables Balance Balance Rate
----------- ------- ------- ----
<S> <C> <C> <C> <C>
New Automobiles and Light-Duty Trucks............ $ $ %
Used Automobiles and Light-Duty Trucks........... %
New Vans (1)..................................... %
Used Vans (1).................................... %
----------- ----------- ---------- -----
All Receivables.................................. $ $ %
=========== =========== ========== -----
Weighted Weighted Percent
Average Average of Aggregate
Remaining Original Principal
Term(2) Term(2) Balance(3)
------- ------- ----------
New Automobiles and Light-Duty Trucks.......... mos. mos. %
Used Automobiles and Light-Duty Trucks.........
New Vans (1)...................................
Used Vans (1)..................................
----------- ----------- ----------
All Receivables................................ mos. mos. %
=========== =========== ==========
</TABLE>
18
<PAGE>
(1) References to vans include minivans and van conversions.
(2) Based on scheduled maturity and assuming no prepayments of the receivables.
(3) Sum may not equal 100% due to rounding.
Distribution of the Initial Receivables by Remaining Term
as of ___________________
<TABLE>
<CAPTION>
Percent Percent
of Total Aggregate of Aggregate
Remaining Number of Number of Principal Principal
Term Range Receivables Receivables (1) Balance Balance(1)
---------- ----------- --------------- ------- ----------
<S> <C> <C> <C> <C>
to months........... % $ %
to months...........
to months...........
----------- ---------- ----------- ----------
Total........... % $ %
=========== ========== ===========
==========
</TABLE>
(1) Sum may not equal 100% due to rounding.
Geographic Distribution of the Initial Receivables
as of _______________
<TABLE>
<CAPTION>
Percent Percent
of Total Aggregate of Aggregate
Number of Number of Principal Principal
State (1) (2) Receivables Receivables (3) Balance Balance (3)
------------- ----------- --------------- ------- -----------
<S> <C> <C> <C> <C>
........................ % $ %
........................
........................
19
<PAGE>
........................
........................
----------- --------- ---------- ---------
Total............... % $ %
=========== ========= ==========
=========
</TABLE>
(1) Based on address of the dealer selling the related financed vehicle.
(2) Receivables originated in Ohio were solicited by dealers for direct
financing by UAC or its predecessor. All other receivables were originated
by dealers and purchased from such dealers by UAC or its predecessor.
(3) Sum may not equal 100% due to rounding.
Distribution of the Initial Receivables by Financed Vehicle Model
Year as of _______________
<TABLE>
<CAPTION>
Percent Percent
of Total Aggregate of Aggregate
Model Number of Number of Principal Principal
Year Receivables Receivables(1) Balance Balance(1)
---- ----------- -------------- ------- ----------
<S> <C> <C> <C> <C>
.......................... % $ %
..........................
..........................
..........................
----------- ---------- ----------- --------
Total........ % $ %
=========== ========== =========== ========
</TABLE>
(1) Sum may not equal 100% due to rounding.
20
<PAGE>
Distribution of the Initial Receivables by Contract Rate
as of _______________
<TABLE>
<CAPTION>
Percent Percent
of Total Aggregate of Aggregate
Number of Number of Principal Principal
Contract Rate Range Receivables Receivables(1) Balance Balance(1)
- ------------------- ----------- -------------- ------- ----------
<S> <C> <C> <C>
to ...................... % $ %
to ......................
to ......................
to ......................
----------- ---------- ========= ----------
Total...................... % $ %
=========== =========== =========
==========
</TABLE>
(1) Sum may not equal 100% due to rounding.
Delinquency and Credit Loss Experience
[Discussion of Delinquencies and Credit Loss Experience to be updated per
current information]
UAC's expectations with respect to delinquency and credit loss trends
constitute forward-looking statements and are subject to important factors that
could cause actual results to differ materially from those projected by UAC.
Such factors include, but are not limited to, general economic factors affecting
obligors' abilities to make timely payments on their indebtedness such as
employment status, rates of consumer bankruptcy, consumer debt levels generally
and the interest rates applicable thereto. In addition, credit losses are
affected by UAC's ability to realize on recoveries of repossessed vehicles,
including, but not limited to, the market for used cars at any given time.
WEIGHTED AVERAGE LIFE OF THE CERTIFICATES
Information regarding certain maturity and prepayment considerations
about the certificates is described under "Weighted Average Life of the
21
<PAGE>
Securities" in the accompanying prospectus. Because the rate of payment of
principal of the certificates depends primarily on the rate of payment
(including voluntary prepayments and principal in respect of defaulted
receivables and purchased receivables) of the principal balance of the
receivables, final payment of each class of certificates could occur much
earlier than the applicable final scheduled payment date. You will bear the risk
of being able to reinvest early principal payments on the certificates at yields
at least equal to the yield on your certificates.
Prepayments on retail installment sale contracts, such as the
receivables, can be measured relative to a prepayment standard or model. The
model used in this prospectus supplement is the Absolute Prepayment Model
("ABS"). The ABS model represents an assumed rate of prepayment each month
relative to the original number of receivables in a pool. The ABS model further
assumes that all of the receivables are the same size, amortize at the same rate
and that each receivable will be paid as scheduled or will be prepaid in full.
For example, in a pool of receivables originally containing 100 receivables, a
1% ABS rate means that one receivable prepays in full each month. The ABS model,
like any prepayment model, does not claim to be either a historical description
of prepayment experience or a prediction of the anticipated rate of prepayment.
The tables on page S-__ have been prepared on the basis of certain
assumptions, including that:
o the receivables prepay in full at the specified monthly ABS;
o each scheduled payment on the receivables is made on the last
day of each collection period and includes a full month of
interest;
o distributions on the certificates are paid in cash on each
payment date commencing ____________ and on the eighth
calendar day of each subsequent month in accordance with the
description set forth under "The Certificates -- Distributions
on the Certificates;"
o the closing date occurs on ______________;
o no defaults or delinquencies in the payment of any of the
receivables occur;
o none of the receivables are repurchased due to a breach of any
representation or warranty or for any other reason;
22
<PAGE>
o the servicer exercises its rights with respect to the optional
sale on the first possible payment date; and
o the entire amount of funds deposited in the pre-funding
account is used to purchase subsequent receivables.
The table indicates the projected weighted average life of each class of
certificates and sets forth the percentage of the initial aggregate principal
balance of each class of certificates that is projected to be outstanding after
each of the payment dates shown at specified ABS percentages. The table also
assumes that the receivables have been aggregated into five hypothetical pools
with all of the receivables within each such pool having the characteristics
described below:
<TABLE>
<CAPTION>
Assumed Weighted Average Weighted Average
Cutoff Date Weighted Average Cutoff Remaining Term to Original Term to
Pool Principal Balance Contract Rate Date Maturity (in Months) Maturity (in Months)
---- ----------------- ------------- ---- -------------------- --------------------
<S> <C> <C> <C> <C> <C>
1 $ %
2
3
4
5
----------------- ------------- ---- -------------- ---------------
Total $ %
================== ============ ==== ==============
===============
</TABLE>
The information included in the following tables consists of
forward-looking statements and involves risks and uncertainties that could cause
actual results to differ materially from those in the forward-looking
statements. The actual characteristics and performance of the receivables will
differ from the assumptions used in constructing the tables on page S-19. We
have provided these hypothetical illustrations using the assumptions listed
above to give you a general illustration of how the principal balances of the
certificates may decline. However, it is highly unlikely that the receivables
23
<PAGE>
will prepay at a constant ABS until maturity or that all of the receivables will
prepay at the same ABS. In addition, the diverse terms of receivables within
each of the five hypothetical pools could produce slower or faster rates of
principal distributions than indicated in the table at the various specified ABS
rates. Any difference between such hypothetical assumptions, the actual
characteristics, performance and prepayment experience of the receivables will
affect the percentages of initial aggregate principal balance of the
certificates outstanding over time and the weighted average lives of the
certificates.
Important notice regarding calculation of the weighted average life and
the assumptions upon which the tables on page S-__ are based
The weighted average life of a certificate is determined by: (a)
multiplying the amount of each principal payment on the applicable
certificate by the number of years from the assumed closing date to the
related payment date, (b) adding the results, and (c) dividing the sum by
the related initial aggregate principal balance of such certificate.
The tables on page S-__ have been prepared based on (and should be read
in conjunction with) the assumptions described on pages S-__ and S__
(including the assumptions regarding the characteristics and performance of
the receivables, which will differ from the actual characteristics and
performance of the receivables).
Percent of Initial Certificate Balance at Various ABS Percentages (1)
<TABLE>
<CAPTION>
Class A Certificates Class B Certificates
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Payment Date 1.0% 1.4% 1.6% 1.8% 2.5% 1.0% 1.4% 1.6% 1.8% 2.5%
- ----------------------------------------------------------------------------------------------------------------
closing date........ % % % % % % % % % %
................ % % % % % % % % % %
................ % % % % % % % % % %
................ % % % % % % % % % %
................ % % % % % % % % % %
................ % % % % % % % % % %
................ % % % % % % % % % %
Weighted Average Life (in years) .....
</TABLE>
(1) See the important notice on page S-__ of this prospectus supplement
regarding calculation of the weighted average life and the assumptions upon
which these tables are based.
24
<PAGE>
YIELD AND PREPAYMENT CONSIDERATIONS
Monthly Interest will be distributed to certificateholders on each
payment date to the extent of the pass-through rate applied to the applicable
certificate balance as of the preceding payment date or the closing date, as
applicable (after giving effect to distributions of principal on such preceding
payment date). See "The Certificates -- Distributions on the Certificates" in
this prospectus supplement.
Upon a full or partial prepayment on a receivable, certificateholders
will receive interest for the full month of such prepayment either:
(1) through the distribution of interest paid on the receivables;
(2) from a withdrawal from the spread account; or
(3) by an advance from the servicer.
Although the receivables will have different contract rates, the
contract rate of each receivable generally will exceed the sum of:
(1) the weighted average of the class A pass-through rate and the
class B pass-through rate; and
(2) the per annum rate used to calculate the monthly servicing
fee.
However, the contract rate on a small percentage of the receivables
will be less than the foregoing sum. For such receivables, amounts on deposit in
the yield supplement account will be used to cover resulting shortfalls with
respect to Monthly Interest and the servicing fee. The availability of amounts
on deposit in the yield supplement account reduces the likelihood that
disproportionate rates of prepayments between receivables with higher and lower
contract rates will affect the ability of the trust to distribute Monthly
Interest to certificateholders. See "The Certificates -- Accounts."
25
<PAGE>
Mandatory Repurchase
If any pre-funded amount remains in the pre-funding account at the end
of the pre-funding period, the trustee will pay such amount to the
certificateholders on the payment date on or immediately following the last day
of the pre-funding period. The trustee will pay the amount, which will be
applied as a principal prepayment of the certificates, to the certificateholders
pro rata, based on the initial principal amounts of the certificates held by the
certificateholders.
THE DEPOSITOR AND UAC
UAC currently acquires receivables from over 3,900 manufacturer
franchised automobile dealerships in 32 states. UAC is an Indiana corporation,
formed in December 1993 by UAC's predecessor, Union Federal Savings Bank of
Indianapolis, to succeed to the predecessor's indirect automobile finance
business, which the predecessor had operated since 1986. UAC began purchasing
and originating receivables in April 1994. For the fiscal years ended June 30,
1995, 1996, 1997, and 1998, UAC and/or its predecessor acquired prime
receivables aggregating $767 million, $995 million, $1,076 million and $945
million, respectively, representing annual increases of 30%, 8% and an annual
decrease of 12%, respectively. Of the approximately $2.0 billion of receivables
in the servicing portfolio of UAC (consisting of the principal balance of
receivables held for sale and securitized receivables) at June 30, 1998,
approximately 76% represented receivables on used cars and approximately 24%
represented receivables on new cars.
THE CERTIFICATES
The certificates will be issued pursuant to the pooling and servicing
agreement. You may request a copy of the pooling and servicing agreement
(without exhibits) by contacting the servicer at the address set forth under
"Reports to Certificateholders" in this prospectus supplement. References to the
relevant sections of the pooling and servicing agreement appear below in
parentheses. We do not claim that the following summary is complete and this
summary is subject to and qualified in its entirety by reference to the pooling
and servicing agreement.
26
<PAGE>
Sale and Assignment of Receivables; Subsequent Receivables
We have described the conveyance of the initial receivables (1) from
UAFC to the seller pursuant to the purchase agreement dated as of ____________,
among UAFC, UAC and the seller and (2) from the seller to the trust pursuant to
the pooling and servicing agreement in the accompanying prospectus under the
heading "Description of the Transfer and Servicing Agreements -- Sale and
Assignment of Receivables." In addition, during the funding period, UAFC will be
obligated to sell to the seller and the seller will be obligated to sell to the
trust, subsequent receivables having an aggregate principal balance equal to the
pre-funded amount of approximately $_______________ to the extent that
subsequent receivables are available.
On each subsequent transfer date during the funding period, UAFC will
sell and assign to the seller, and the seller will sell and assign to the trust,
without recourse, their respective interests in the subsequent receivables. The
subsequent receivables will be designated by UAFC as of the related subsequent
cutoff date and identified in a schedule attached to a subsequent assignment
instrument relating to such subsequent receivables. Such instrument will be
executed and delivered on such subsequent transfer date by the seller for
delivery to the trustee pursuant to the pooling and servicing agreement, subject
to the conditions described below.
Any conveyance of subsequent receivables is subject to the satisfaction
of the following conditions, among others, on or before the related subsequent
transfer date:
o each such subsequent receivable must satisfy the eligibility criteria
specified in the pooling and servicing agreement and shall not have
been selected from among such eligible receivables in a manner that
UAFC or the seller deems adverse to the interests of the
certificateholders;
o as of the related subsequent cutoff date, the receivables in the trust
at that time, including the subsequent receivables to be conveyed by
the seller as of such subsequent cutoff date, will satisfy the criteria
described under "The Receivables Pool" in this prospectus supplement
and under "The Receivables Pools" in the accompanying prospectus; and
o UAFC shall have executed and delivered to the seller, and the seller
shall have executed and delivered to the trustee, a written assignment
conveying such subsequent receivables to the seller and the trust,
respectively (including a schedule identifying such subsequent
receivables).
27
<PAGE>
Moreover, any such conveyance of subsequent receivables will also be subject to
the satisfaction of the following requirements within ____ days after the
termination of the funding period:
o the seller must deliver certain opinions of counsel to the trustee
and the rating agencies with respect to the validity of the conveyance
of the subsequent receivables to the trust;
o the trustee shall have received written confirmation from a firm of
certified independent public accountants that the receivables,
including the subsequent receivables, satisfy the criteria described
under "The Receivables Pool" in this prospectus supplement and under
"The Receivables Pools" in the accompanying prospectus; and
o the rating agencies shall have notified the seller in writing that,
following the addition of the subsequent receivables to the trust, the
certificates will continue to be rated by such rating agencies in at
least the same rating categories in which they were rated on the
closing date.
Such confirmation of the ratings of the certificates may depend on factors other
than the characteristics of the subsequent receivables, including the
delinquency, repossession and net loss experience on the automobile, light duty
truck and minivan receivables in the portfolio serviced by the servicer. UAC
will immediately repurchase from the trustee, at a price equal to the Purchase
amount thereof, any subsequent receivable that fails to satisfy any of the
foregoing conditions subsequent.
Subsequent receivables may be or may have been originated or acquired
by UAC at a later date using credit criteria different from those that were
applied to the initial receivables. See "The Receivables Pool" in this
prospectus supplement.
Accounts
In addition to the certificate account, the servicer will establish
with the trustee for the benefit of the certificateholders the yield supplement
account, the spread account and the payahead account.
Yield Supplement Account. For each receivable on which the contract
rate is less than the sum of (a) the weighted average of the class A
pass-through rate and the class B pass-through rate and (b) the annual
percentage rate at which the servicing fee is calculated with respect to the
28
<PAGE>
certificate balance for such receivable, on the closing date the seller will
deposit into the yield supplement account an amount equal to the aggregate of
such shortfall over the term of such receivables based on the scheduled payments
of the receivables. We refer to the amount to be deposited in the yield
supplement account as total yield supplement deposit. On each determination
date, the servicer shall withdraw an amount to apply to distributions on the
certificates on the related payment date equal to the scheduled shortfall for
the previous collection period, or the yield supplement amount. The yield
supplement account will be maintained by the trustee for the benefit of the
certificateholders, but will not form part of the trust. (Section ___.)
Spread Account. On the closing date, the trustee will establish the
spread account, into which the seller will deposit an amount equal to ___% of
the initial aggregate principal balance of the certificates. Thereafter, the
amount held in the spread account will increase up to the required spread amount
by the deposit of payments on the receivables not used to make payments to the
certificateholders and the servicer for the monthly servicing fee and any
permitted reimbursements of outstanding advances on any payment date. Although
we intend for the amount on deposit in the spread account to grow over time to
equal the required spread amount through monthly deposits of any excess
collections on the receivables, we cannot assure you that such growth will
actually occur. On each payment date, any amounts on deposit in the spread
account, after the payment of any amounts owed to the certificateholders, in
excess of the required spread amount will be distributed to the seller.
Under the terms of the pooling and servicing agreement, the trustee
will withdraw funds from the spread account to the extent available and transfer
such funds to the certificate account for any deficiency of Monthly Interest or
Monthly Principal as further described below under "-- Distributions on the
Certificates."
If the balance of the spread account is reduced to zero on any payment
date, the trust will depend solely on current distributions on the receivables
to make distributions of principal and interest on the certificates. In
addition, because the market value of motor vehicles generally declines with age
and because of difficulties that may be encountered in enforcing motor vehicle
contracts as described in the accompanying prospectus under "Certain Legal
Aspects of the Receivables," the servicer may not recover the entire amount due
on such receivables in the event of a repossession and resale of a financed
vehicle securing a receivable in default. In such event, you may suffer a
corresponding loss which will be borne first pro rata by the class B
certificateholders, up to the aggregate principal balance of the class B
certificates, and then pro rata by the class A certificateholders.
29
<PAGE>
Payahead Account. On the closing date, the servicer will establish a
payahead account, in the name of the trustee on behalf of obligors on the
receivables and the certificateholders. Payments on precomputed receivables will
be deposited and held until they are withdrawn and applied as payments on the
certificates. [Insert description of mechanism for determining the precomputed
payment schedule for specific transaction.]
Subordination of the Class B Certificates
The rights of the class B certificateholders to receive distributions
with respect to the receivables will be subordinated to such rights of the class
A certificateholders to the extent described in this prospectus supplement. This
subordination is intended to enhance the likelihood of timely receipt by the
class A certificateholders of the full amount of interest and principal
distributable to them on each payment date, and to afford the class A
certificateholders limited protection against losses due to losses on the
receivables.
No distribution of interest will be made to the class B
certificateholders on any payment date until the full amount of interest payable
on the class A certificates on such payment date has been distributed to the
class A certificateholders, and no distribution of principal will be made to the
class B certificateholders on any payment date until the full amount of Class A
Monthly Interest and Class A Monthly Principal payable on such payment date has
been paid. Distributions of interest on the class B certificates will not be
subordinated to distributions of principal of the class A certificates. Because
the rights of the class B certificateholders to receive distributions of
principal will be subordinated to the rights of the class A certificateholders
to receive distributions of interest and principal, the class B certificates
will be more likely than the class A certificates to suffer losses due to losses
on the receivables. If the aggregate amount of losses on the receivables exceeds
the amount on deposit in the spread account, class B certificateholders may not
recover their initial investment in the class B certificates.
The class A certificateholders are protected by the right of the class
A certificateholders to receive distributions on the receivables before the
class B certificateholders receive distributions, in the manner and to the
extent described above. In addition, if there are delinquencies or losses on the
receivables, the class A certificateholders may be protected by the funds, if
any, on deposit in the spread account.
30
<PAGE>
Advances
With respect to each receivable delinquent more than 30 days at the end
of a collection period, the servicer will make an advance in an amount equal to
30 days of interest but only if the servicer, in its sole discretion, expects to
recover the advance from subsequent collections on the receivable. The servicer
will deposit the advance in the certificate account on or before the
determination date. The servicer will recover its advance from subsequent
payments by or on behalf of the respective obligor, from insurance proceeds or,
upon the servicer's determination that reimbursement from the preceding sources
is unlikely, will recover its advance from any collections made on other
receivables.
Distributions on the Certificates
The servicer will deposit in the certificate account the aggregate
principal payments, including full and partial prepayments (except certain
prepayments in respect of precomputed receivables as described above under
"--Accounts") received on all receivables with respect to the preceding
collection period. The funds available for distribution on the next payment date
("Available Funds") will consist of:
o all payments on the simple interest receivables;
o the scheduled payments on precomputed receivables;
o the yield supplement amount for the related payment date;
o the net amount to be transferred from the payahead account to
the collection account for the related payment date;
o all advances for such collection period; and
o the purchase amount for all receivables that became purchased
receivables during the preceding collection period.
The servicer will determine the amount of funds necessary to make distributions
of Monthly Principal and Monthly Interest to the certificateholders and to pay
the monthly servicing fee to the servicer. If there is a deficiency with respect
to Monthly Interest or Monthly Principal on any payment date, after giving
effect to payments of the monthly servicing fee and permitted reimbursements of
outstanding advances to the servicer on such payment date, the servicer will
withdraw amounts from the spread account, up to the amount on deposit in
31
<PAGE>
such account. If there remains a deficiency of Monthly Interest or Monthly
Principal after such a withdrawal, the servicer will notify the trustee of the
remaining deficiency.
On each payment date, the trustee will apply or cause to be applied the
Available Funds (plus any amounts withdrawn from the spread account) to make the
following payments in the following priority:
(a) without duplication, an amount equal to the sum of the amount
of outstanding advances in respect of receivables (x) that
became defaulted receivables during the prior collection
period plus (y) that the servicer determines to be
unrecoverable, to the servicer;
(b) the monthly servicing fee, including any overdue monthly
servicing fee, to the servicer, to the extent not previously
distributed to the servicer;
(c) pro rata, Class A Monthly Interest, including any overdue
Class A Monthly Interest, to the class A certificateholders;
(d) pro rata, Class B Monthly Interest, including any overdue
Class B Monthly Interest, to the class B certificateholders;
(e) pro rata, Class A Monthly Principal, to the class A
certificateholders;
(f) pro rata, Class B Monthly Principal, to the class B
certificateholders;
(g) the amount of recoveries of advances (to the extent such
recoveries have not previously been reimbursed to the servicer
pursuant to clause (a) above), to the servicer;
(h) the amount of liquidation proceeds on purchased receivables
purchased by the servicer, to the servicer;
(i) the amount of liquidation proceeds on purchased receivables
repurchased by the seller, to the seller; and
(j) the balance into the spread account.
32
<PAGE>
After all distributions pursuant to clauses (a) through (j) above have
been made for each payment date, the amount of funds remaining in the spread
account on such date, if any, in excess of the required spread amount, will be
distributed by the trustee to the seller. Any amounts so distributed to the
seller will no longer be property of the trust and will not be available to make
payments to you.
"Class A Monthly Interest" means, (1) for the first payment date, the
product of the following: (one-twelfth of the class A pass-through rate)
multiplied by (the number of days from the closing date (assuming the month of
the closing date has 30 days) through the day before the first payment date
divided by 30) multiplied by (the aggregate principal balance of the class A
certificates at the closing date) and (2) for any subsequent payment date,
one-twelfth of the product of the class A pass-through rate and the aggregate
principal balance of the class A certificates as of the immediately preceding
payment date (after giving effect to any distribution of Monthly Principal
required to be made on such preceding payment date).
"Class A Monthly Principal" for any payment date will equal the amount
necessary to reduce the aggregate principal balance of the class A certificates
to ____% of the aggregate unpaid principal balances of the receivables on the
last day of the preceding collection period; provided, however, that Class A
Monthly Principal on the final scheduled payment date will equal the aggregate
principal balance of the class A certificates on such date. For the purpose of
determining Class A Monthly Principal, the unpaid principal balance of a
defaulted receivable or a purchased receivable is deemed to be zero on and after
the last day of the collection period in which such receivable became a
defaulted receivable or a purchased receivable.
"Class B Monthly Interest" means, (1) for the first payment date, the
product of the following: (one-twelfth of the class B pass-through rate)
multiplied by (the number of days from the closing date (assuming the month of
the closing date has 30 days) through the day before the first payment date
divided by 30) multiplied by (the aggregate principal balance of the class B
certificates at the closing date) and (2) for any subsequent payment date,
one-twelfth of the product of the class B pass-through rate and the aggregate
principal balance of the class B certificates as of the immediately preceding
payment date (after giving effect to any distribution of Monthly Principal
required to be made on such preceding payment date).
"Class B Monthly Principal" for any payment date will equal the amount
necessary to reduce the aggregate principal balance of the class B certificates
to ____% of the sum of the
33
<PAGE>
aggregate unpaid principal balances of the receivables on the last day of the
preceding collection period; provided, however, that Class B Monthly Principal
on the final scheduled payment date will equal the aggregate principal balance
of the class B certificates on such date. For the purpose of determining Class B
Monthly Principal, the unpaid principal balance of a defaulted receivable or a
purchased receivable is deemed to be zero on and after the last day of the
collection period in which such receivable became a defaulted receivable or a
purchased receivable.
A defaulted receivable for any collection period is any receivable as
to which any of the following has occurred: (1) any payment, or part thereof, in
excess of $10 is 120 days or more delinquent as of the last day of such
collection period; (2) the financed vehicle that secures the receivable has been
repossessed; or (3) the receivable has been determined to be uncollectable in
accordance with the servicer's customary practices on or prior to the last day
of such collection period; provided, however, that any receivable which the
seller or the servicer is obligated to repurchase or purchase pursuant to the
pooling and servicing agreement shall be deemed not to be a defaulted
receivable.
"Monthly Interest" for any payment date will equal the sum of the Class
A Monthly Interest and the class B Monthly Interest.
As an administrative convenience, the servicer will be permitted to
make the deposit of collections and aggregate advances and purchase amounts for
a purchased or repurchased receivables for or with respect to the collection
period, net of distributions to be made to the servicer or seller with respect
to the collection period. The servicer, however, will account to the trustee and
to the certificateholders as if all deposits and distributions were made
individually.
The following chart sets forth an example of the application of the
foregoing provisions to the first payment date on _________________:
__________________ .....................Collection Period. The servicer receives
monthly payments, prepayments, and other
proceeds in respect of the receivables
and deposits them in the collection
account. The servicer may deduct the
monthly Servicing fee from such
deposits.
__________________......................Determination Date. The determination
date is the second business day before
the payment date. On or before this
date, the servicer delivers the
servicer's certificate setting forth the
amounts to be distributed on the payment
date and notifying the trustee of any
deficiencies.
__________________ ....................Record Date. Distributions on the
payment date are made to
certificateholders of record at the
close of business on this date.
__________________......................Payment Date. The payment date is the
eighth calendar day of the month, or if
such day is not a business day, the
first business day thereafter. The
trustee withdraws funds from the spread
account, if necessary, to pay Monthly
Principal and Monthly Interest to
certificateholders as described in this
prospectus supplement. The trustee
distributes to certificateholders
amounts payable in respect of the
certificates and pays the monthly
servicing fee to the extent not
previously paid.
REPORTS TO CERTIFICATEHOLDERS
Unless and until definitive certificates are issued (which will occur
only under the limited circumstances described in this prospectus supplement),
____________________________, as trustee, will provide monthly and annual
statements concerning the trust and the certificates to Cede & Co., the nominee
of The Depository Trust Company, as registered holder of the certificates. Such
statements will not constitute financial statements prepared in accordance with
generally accepted accounting principles. A copy of the most recent monthly or
annual statement concerning the trust and the certificates may be obtained by
contacting the servicer at Union Acceptance Corporation, 250 North Shadeland
Avenue, Indianapolis, Indiana 46219 (telephone (317) 231-7939).
34
<PAGE>
ERISA CONSIDERATIONS
Subject to the considerations set forth under "ERISA Considerations" in
the accompanying prospectus, the class A certificates may be eligible for
purchase by an employee benefit plan or an individual retirement account (a
"Benefit Plan") subject to Title I of ERISA or Section 4975 of the Internal
Revenue Code of 1986, as amended (the "Code"). A fiduciary of a Benefit Plan
must determine that the purchase of a class A certificate 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. For
additional information regarding treatment of the class A certificates under
ERISA, see "ERISA Considerations" in the accompanying prospectus.
Benefit Plans should not purchase class B certificates because the class
B certificates are subordinate to the class A certificates.
UNDERWRITING
Under the terms and subject to the conditions set forth in the
underwriting agreement for the sale of the certificates, dated ______________,
the seller has agreed to sell and each of the underwriters named below severally
agreed to purchase the principal amount of the certificates set forth below its
name below:
Principal Amount of Principal Amount of
Underwriters Class A Certificates Class B Certificates
- ------------ -------------------- --------------------
$ $
$ $
Total $ $
In the underwriting agreement, the underwriters have agreed, subject to
the terms and conditions set forth therein, to purchase all the certificates
offered by the seller.
The underwriters propose to offer part of the certificates directly to
you at the prices set forth on the cover page of this prospectus supplement and
part to certain dealers at a price that represents a concession not in excess of
_____% of the denominations of the class A certificates or _____% of the
denominations of the class B certificates. The underwriters may allow and such
dealers may reallow a concession not in excess of _____% of the denominations of
the class A certificates or _____% of the denominations of the class B
certificates.
The seller and UAC have agreed to indemnify the underwriters against
certain liabilities, including liabilities under the Securities Act of 1933, as
amended.
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<PAGE>
The underwriters tell us that they intend to make a market in the
certificates, as permitted by applicable laws and regulations. However, the
underwriters are not obligated to make a market in the certificates and any such
market-making may be discontinued at any time at the sole discretion of the
underwriters. Accordingly, we give no assurances regarding the liquidity of, or
trading markets for, the certificates.
In connection with this offering, the underwriters may over-allot or
effect transactions which stabilize or maintain the market price of the class A
certificates at a level above that which might otherwise prevail in the open
market. Such stabilizing, if commenced, may be discontinued at any time.
In the ordinary course of their businesses, the underwriters and their
affiliates have engaged and may in the future engage in investment banking,
commercial banking and other advisory or commercial relationships with the
seller, UAC and their affiliates.
The seller will receive proceeds of approximately $_____________ from
the sale of the class A certificates (representing approximately _____________%
of the principal amount of the class A certificates) after paying the
underwriting discount of $_____________ (representing approximately
_____________% of the principal amount of the class A certificates), and
approximately $_____________ from the sale of the class B certificates
(representing approximately _____________% of the principal amount of the class
B certificates) after paying the underwriting discount of $_____________
(representing approximately _____________% of the principal amount of the class
B certificates). Additional offering expenses are estimated to be
$-------------.
LEGAL OPINIONS
Certain legal matters relating to the certificates will be passed upon
for the seller by Barnes & Thornburg, Indianapolis, Indiana, and for the
Underwriters by Cadwalader, Wickersham & Taft. Certain federal income tax
consequences with respect to the certificates will be passed upon for the seller
by Cadwalader, Wickersham & Taft.
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<PAGE>
INDEX OF PRINCIPAL TERMS
We have listed below the terms used in this prospectus supplement and
the pages where definitions of the terms can be found.
ABS ........................................................ S-22
Available Funds ............................................ S-31
Benefit Plan ............................................... S-35
Class A Monthly Interest.................................... S-33
Class A Monthly Principal .................................. S-33
Class B Monthly Interest.................................... S-33
Class B Monthly Principal .................................. S-33
Code ....................................................... S-35
ERISA ...................................................... S-35
Monthly Interest ........................................... S-34
Monthly Principal .......................................... S-33
UAC ........................................................ S-5
UAFC ....................................................... S-8
<PAGE>
[BASE PROSPECTUS]
PROSPECTUS
================================================================================
UACSC Auto Trusts
Asset Backed Certificates
UAC Securitization Corporation
depositor
Union Acceptance Corporation
servicer
The trusts--
o A new trust will be formed to issue each
series of asset backed securities
("Securities").
o The primary assets of each trust will be a
pool of new and used automobile retail
installment sale and installment loan
contracts secured by new and used
automobiles, light trucks and vans.
o Each trust will hold security or ownership
interests in the vehicles financed under the
trust's receivables, any proceeds from
claims on certain related insurance
policies, amounts on deposit in the trust
accounts identified in the related
prospectus supplement and any credit
enhancement arrangements specified in the
related prospectus supplement.
o If specified in the related prospectus
supplement, the trust will own funds on
deposit in a pre-funding account which will
be used to purchase additional receivables
during the period specified in the related
prospectus supplement.
The offered securities--
o will represent beneficial interests in the
related trust;
o will be paid only from the assets of the
related trust;
o will be rated by one or more nationally
recognized rating agencies on the related
closing date;
o may benefit from one or more forms of credit
enhancement; and
o will be issued as part of a designated
series, which will include one or more
classes of notes and/or certificates.
Consider carefully the risk factors beginning on page ___ in this prospectus.
The Securities of a given series represent beneficial interests in the related
trust only. Such Securities do not represent obligations of or interests in, and
are not guaranteed or insured by UAC Securitization Corporation, Union
Acceptance Corporation or any of their affiliates.
This prospectus may be used to offer and sell any series of Securities only if
accompanied by the related prospectus supplement.
----------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined that
this prospectus is accurate or complete. Any representation to the contrary is a
criminal offense.
----------
The date of this prospectus is ____________________.
<PAGE>
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS PROSPECTUS
AND THE RELATED PROSPECTUS SUPPLEMENT
We tell you about the securities in two separate documents that
progressively provide more detail: (1) this prospectus, which provides general
information, some of which may not apply to a particular series of securities,
including your series; and (2) the related prospectus supplement, which will
describe the specific terms of your series of securities, including:
o the timing of interest and principal payments;
o the priority of interest and principal payments;
o financial and other information about the receivables;
o information about credit enhancement for each class;
o the ratings of each class; and
o the method for selling the securities.
If the descriptions of a particular series of securities vary between
this prospectus and the prospectus supplement, you should rely on the
information in the prospectus supplement.
You should rely only on the information provided in this prospectus and
the related prospectus supplement, including the information incorporated by
reference. We have not authorized anyone to provide you with any additional or
different information. The information in the related prospectus supplement is
only accurate as of the date of the related prospectus supplement. We are not
offering the securities in any state where the offer is not permitted.
We include cross-references in this prospectus and in the related
prospectus supplement to captions in these materials where you can find further
related discussions. The following table of contents provides the pages on which
these captions are located.
You can find a listing of the pages where capitalized terms used in
this prospectus are defined under the caption "Index of Principal Terms"
beginning on page __ of this prospectus.
In this prospectus and in any related prospectus supplement, "we"
refers to the seller, UAC Securitization Corporation, and "you" refers to any
prospective investor in the securities.
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<PAGE>
SUMMARY OF TERMS..........................................
Issuer ........................................
Seller ........................................
Servicer ........................................
Trustee ........................................
Indenture Trustee................................
The Notes........................................
The Certificates.................................
Strip Securities.................................
Book Entry Securities............................
Prepayment of Securities Due to Purchase
The Trust Property...............................
Pre-Funded Receivables...........................
Credit Enhancement...............................
Transfer and Servicing Agreements................
Repurchase of Receivables by UAC or the
Servicer................................
Certain Legal Aspects of the Receivables;
Repurchase Obligations..................
Tax Considerations...............................
ERISA Considerations.............................
Ratings ........................................
RISK FACTORS..............................................
Pre-Funding May Reduce Your
Anticipated Yield.......................
If the Trust Does Not Have a Perfected
Security Interest in a Financed
Vehicle, It May Not Be Able to
Collect on the Receivable...............
If a Receivables Transfer is Not a Sale, the
Insolvency of UAC or Its Affiliates
Could Reduce Payments to You
Limited Obligations of UAC and Its
Affiliates Have Limited
Obligations to Make Payments to
the Trusts..............................
Each Trust Will Have Limited Assets .............
Payments on Some Securities May be
Subordinated to Payments on
Other Securities........................
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<PAGE>
Rapid Prepayments May Reduce Your
Anticipated Yield.......................
Book-Entry Registration........
THE TRUSTS................................................
The Owner Trustee and the Indenture
Trustee.................................
THE RECEIVABLES POOLS.....................................
General ........................................
Underwriting Procedures..........................
Allocation of Payments...........................
Delinquencies, Repossessions and Net
Losses..................................
WEIGHTED AVERAGE LIFE OF THE
SECURITIES.......................................
POOL FACTORS AND OTHER POOL
INFORMATION......................................
USE OF PROCEEDS...........................................
UNION ACCEPTANCE CORPORATION AND
AFFILIATES.......................................
UAC Finance Corporation..........................
Union Acceptance Funding Corporation.............
Performance Funding Corporation..................
UAC Securitization Corporation...................
DESCRIPTION OF THE SECURITIES.............................
General ........................................
Payments of Principal and Interest...............
Book-Entry Registration..........................
Definitive Securities............................
Statements to Securityholders....................
List of Securityholders..........................
DESCRIPTION OF THE TRANSFER AND
SERVICING AGREEMENTS.............................
Sale and Assignment of Receivables...............
Sale and Assignment of Subsequent
Receivables.............................
3
<PAGE>
Accounts ........................................
Servicing Procedures.............................
Collections......................................
Advances ........................................
Servicing Compensation and Payment of
Expenses................................
Payments and Distributions.......................
Credit Enhancement...............................
Evidence of Compliance...........................
Certain Matters Regarding the Servicer...........
Servicer Defaults................................
Rights Upon Servicer Default.....................
Waiver of Past Defaults..........................
Amendment........................................
Termination......................................
THE INDENTURE.............................................
Default under the Indenture......................
Certain Covenants................................
Satisfaction and Discharge of Indenture..........
Modification of Indenture........................
CERTAIN LEGAL ASPECTS OF THE
RECEIVABLES......................................
Security Interest in Vehicles....................
Notice of Sale; Redemption Rights................
Deficiency Judgments and Excess
Proceeds................................
Consumer Protection Laws.........................
Other Limitations................................
Bankruptcy Matters...............................
FEDERAL INCOME TAX CONSEQUENCES...........................
FASITs ........................................
Tax Characterization of the Trust as a
Partnership.............................
Tax Consequences to Holders of the
Notes ..................................
Tax Consequences to Holders of the
Certificates............................
TRUSTS TREATED AS GRANTOR
TRUSTS..................................
Tax Characterization of Grantor Trusts...........
4
<PAGE>
Stripped Bonds and Stripped Coupons..............
ERISA CONSIDERATIONS......................................
PLAN OF DISTRIBUTION......................................
LEGAL MATTERS.............................................
WHERE YOU CAN FIND MORE
INFORMATION......................................
INDEX OF PRINCIPAL TERMS..................................
5
<PAGE>
SUMMARY OF TERMS
o This summary highlights selected information from this prospectus and
does not contain all of the information that you should consider in
making your investment decision. To understand all of the terms of this
offering, read the entire prospectus and the accompanying prospectus
supplement.
o The definitions of capitalized terms used in this prospectus can be
found on the pages indicated in the "Index of Principal Terms"
beginning on page __ of this prospectus.
Issuer
The issuer with respect to any series of notes and/or certificates will be a
trust. If the trust issues notes and certificates, the trust will be formed
under a trust and servicing agreement between the seller, the servicer and the
owner trustee. If the trust only issues certificates, the trust will be formed
under a pooling and servicing agreement among the seller, the servicer and the
trustee.
Seller
UAC Securitization Corporation will be the seller in connection with each trust.
The seller's principal executive offices are located at 9240 Bonita Beach Road,
Suite 1109-A, Bonita Springs, Florida 34135, and its telephone number is (941)
948-1850.
Servicer
Union Acceptance Corporation ("UAC") will be the servicer of each trust. The
servicer's principal executive offices are located at 250 North Shadeland
Avenue, Indianapolis, Indiana 46219, and its telephone number is (317) 231-2717.
Trustee
The trustee or owner trustee will be specified in the prospectus supplement for
each trust.
Indenture Trustee
The indenture trustee with respect to any series of securities that includes one
or more classes of notes will be the indenture trustee specified in the related
prospectus supplement.
The Notes
A series of securities issued by a trust may include one or more classes of
notes. Each class of notes of a series will be issued under an indenture between
the applicable trust and the related indenture trustee. We will specify in the
related prospectus supplement which class or classes of notes, if any, will be
offered in connection with the issuance of a series.
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<PAGE>
Generally, each class of notes will have a stated note principal balance
specified in the related prospectus supplement and the notes will accrue
interest on the stated note principal balance at a specified rate. Each class of
notes may have a different interest rate, which may be fixed, variable,
adjustable, or any combination of fixed, variable and adjustable. We will
specify the interest rate for each class of notes or the method for determining
such interest rate in the related prospectus supplement. In the related
prospectus supplement we will specify the timing and amount of principal
payments or the method for determining the timing and amount of principal
payments of each class of notes.
If a series includes two or more classes of notes, as specified in the related
prospectus supplement, each class may differ as to:
o timing and/or priority of payments;
o seniority and/or allocation of payments and losses;
o calculation and rate of interest;
o amount of payments of principal or interest;
o dependence of payments upon the occurrence of specified events
or upon collections from certain designated receivables; and
o any combination of the above.
The Certificates
A series of securities issued by a trust may include one or more classes of
certificates. We will issue each class of certificates of a series pursuant to
the related trust and servicing agreement or pooling and servicing agreement. We
will specify in the related prospectus supplement which class or classes of
certificates of the related series are being offered. Generally, each class of
offered certificates will have a stated certificate principal balance and will
accrue interest on such class certificate balance at a specified pass-through
rate. See "Description of the Securities -- Payments of Principal and Interest."
The pass-through rate applicable to each class of certificates may be fixed,
variable, adjustable or any combination of fixed, variable and adjustable.
We will specify the pass-through rate or the method for determining the
applicable pass-through rate for each class of certificates in the related
prospectus supplement. A series of certificates may include two or more classes
of certificates that may differ as to:
o timing and/or priority of distributions;
2
<PAGE>
o seniority and/or allocations of distributions and losses;
o calculation and pass-through rate of interest;
o amount of distributions in respect of principal or interest;
o dependence of payments upon the occurrence of specified events
or upon collections from certain designated receivables; or
o any combination of the above.
Strip Securities
If provided in the related prospectus supplement, a series may include one or
more classes of strip notes or strip certificates entitled to:
o interest payments with disproportionate, nominal or no
principal payments or
o principal payments with disproportionate, nominal or no
interest payments.
Book Entry Securities
We expect that the securities will be available in book-entry form only and will
be available for purchase in minimum denominations of $1,000 and integral
multiples thereof, except that one security of each class may be issued in such
denomination as is required to include any residual amount. You will be able to
receive definitive securities only in the limited circumstances described
elsewhere in this prospectus or in the related prospectus supplement. See
"Description of the Securities -- Definitive Securities."
Prepayment of Securities due to Purchase
If so provided in the related prospectus supplement, the servicer or another
entity will be entitled to purchase the receivables from a trust or to cause
such receivables to be purchased by another entity when the outstanding
principal balance has declined below a specified level, in the manner described
in such prospectus supplement. If the servicer or any such other entity
exercises any such option to purchase the receivables, the trust will prepay the
outstanding securities. See "Description of the Transfer and Servicing
Agreements -- Termination." In addition, if the related prospectus supplement
provides that the property of a trust will include a pre-funding account for the
purchase of receivables for a specified funding period after the closing date,
one or more classes of securities may be subject to a partial prepayment of
principal following the end of the funding period, in the manner and to the
extent specified in the related prospectus supplement. See "Description of the
Transfer and Servicing Agreements -- Accounts -- Pre-Funding Account."
3
<PAGE>
The Trust Property
Unless the related prospectus supplement specifies otherwise, the property of
each trust will include:
o a pool of simple interest and precomputed interest installment
sale and installment loan contracts secured by new and used
automobiles, light trucks and vans;
o certain amounts due or received from the receivables after the
cutoff date specified in the related prospectus supplement;
o security interests in the vehicles financed through the
receivables;
o any right to recourse UAC has against the dealers who sold the
financed vehicles;
o proceeds from claims on certain insurance policies;
o certain rights under the related purchase agreement to cause
UAC to repurchase receivables affected materially and
adversely by breaches of the representations and warranties of
UAC; and
o all proceeds of the above.
The property of each trust also will include amounts on deposit in, or certain
rights with respect to, certain accounts, including the related collection
account and any pre-funding account, spread account (or cash collateral
account), payment account, yield supplement account or any other account
identified in the applicable prospectus supplement. See "Description of the
Transfer and Servicing Agreements -- Accounts."
The receivables arise, or will arise, from:
(1) motor vehicle installment sale contracts that were originated by
dealers for assignment to UAC (directly or through UAC Finance
Corporation, a wholly-owned subsidiary of UAC ("UACFC"), or Union
Federal Savings Bank of Indianapolis, UAC's predecessor and parent
corporation before August 7, 1995 ) or
(2) motor vehicle loan contracts that were solicited by dealers for
origination by UAC, UACFC or UAC's predecessor.
UAFC will sell all the receivables to be included in a trust to the seller.
Then, the seller will transfer the receivables to the trust.
Immediately after UAC originates or otherwise acquires the automobile receivable
contracts, UAC sells the receivables to its subsidiary, Union Acceptance Funding
Corporation ("UAFC"). From time
4
<PAGE>
to time, UAC repurchases receivables from UAFC which are modified to provide a
different monthly payment or longer term to maturity or a different contract
rate of interest. Any modified receivables to be included in a trust with other
receivables will be sold by UAC to UAFC for subsequent resale to the seller
pursuant to the purchase agreement.
Payment of the amount due to the registered lienholder under each receivable is
secured by a first perfected security interest in the related financed vehicle.
UAFC, UAC, UACFC, Performance Funding Corporation ("PFC") or UAC's predecessor
is or will be the registered lienholder on the certificate of title of each of
the financed vehicles.
The receivables for each receivables pool will be selected from the automobile
receivable portfolio of UAFC or, in the case of any modified receivables to be
included in the trust, UAC, based on the criteria specified in the related trust
and servicing agreement or pooling and servicing agreement and described in this
prospectus under "The Receivables Pools," "Description of the Transfer and
Servicing Agreements-- Sale and Assignment of Receivables" and " - Sale and
Assignment of Subsequent Receivables," and in the related prospectus supplement
under "The Receivables Pool."
On the date a series of securities is issued, the seller will convey receivables
to the related trust in the aggregate principal amount provided in the related
prospectus supplement.
Pre-Funded Receivables
With respect to any series of securities, the trust may commit to purchase
additional receivables from the seller following the date on which the trust is
established and the related securities are issued. See "Description of Transfer
and Servicing Agreements -- Accounts -- Pre-Funding Account." We will describe
any such pre-funding arrangement in the related prospectus supplement.
Credit Enhancement
A trust may provide any one or more of the following forms of credit enhancement
for one or more class or classes of securities to the extent described in the
related prospectus supplement:
o subordination of one or more other classes of securities of
the same series,
o spread accounts (or cash collateral accounts),
o yield supplement accounts,
o insurance policies,
o surety bonds,
o letters of credit,
5
<PAGE>
o credit or liquidity facilities,
o over-collateralization,
o guaranteed investment contracts,
o swaps or other interest rate protection agreements,
o repurchase obligations,
o other agreements providing third-party payments or other
support,
o cash deposits, or
o any other arrangements described in the prospectus supplement.
We will describe any form of credit enhancement, including any limitations and
exclusions from coverage, with respect to a trust or class or classes of
securities in the related prospectus supplement.
Transfer and Servicing Agreements
UAFC will sell the receivables to the seller without recourse, pursuant to the
related purchase agreement among UAC, UAFC and the seller. If the trust will
issue one or more classes of notes, the trust will pledge the receivables and
the trust's property to the indenture trustee as collateral for repayment of the
notes. In addition, the servicer will agree in the related trust and servicing
agreement or pooling and servicing agreement to service, manage, maintain
custody of and make collections on the related receivables.
Unless otherwise provided in the related prospectus supplement, the servicer
will advance funds to cover 30 days of interest due on any receivable that is
more than 30 days delinquent. The servicer will make such an advance only if the
servicer expects to recover such advance from subsequent payments on the
receivable. Advances by the servicer will increase the funds available for
distributions to securityholders on a payment date, but the servicer will
recover such advances from subsequent payments of the receivables or, to the
extent set forth in the related prospectus supplement, from insurance proceeds
or withdrawals from any spread account or other available credit enhancement.
See "Description of the Transfer and Servicing Agreements -- Advances."
Repurchase of Receivables by UAC or the Servicer
UAC must repurchase from the trust any receivable in which the interest of such
trust is materially and adversely affected by a breach of any representation or
warranty made by UAC and/or UAFC in the related purchase agreement, unless such
breach is cured in a timely manner following the discovery by or notice to UAC.
6
<PAGE>
In addition, the servicer must purchase any receivable if:
(1) among other things, without being ordered to do so by a
bankruptcy court or otherwise being mandated by law, the
servicer:
o reduces the rate of interest under the related receivable
contract,
o changes the amount of the scheduled monthly payments or the
amount financed or
o fails to maintain a perfected security interest in the related
financed vehicle
and
(2) the interest of the securityholders in such receivable is
materially and adversely affected by such action or failure to
act of the servicer.
If the servicer extends the date for final payment by the obligor on the related
receivable beyond the latest final scheduled maturity date for any class
specified in the related prospectus supplement, the servicer must purchase the
receivable on such final scheduled maturity date. Except as described above,
none of UAC, UAFC, the trust or the seller will have any other obligation with
respect to the receivables or the securities. See "Description of the Transfer
and Servicing Agreements -- Sale and Assignment of Receivables."
The servicer will receive a monthly fee for servicing the receivables of each
trust. The monthly servicing fee will be equal to (1) the monthly servicing fee
rate multiplied by (2) the aggregate principal balance of the receivables pool
as of the beginning of the related collection period (after giving effect to any
payments of principal made on such date as of the beginning of each collection
period). In addition, the servicer will receive certain late fees, prepayment
charges and other administrative fees or similar charges. UAC may also receive
investment earnings from certain accounts and other cash flows with respect to a
trust. See "Description of the Transfer and Servicing Agreements -- Servicing
Compensation and Payment of Expenses."
Certain Legal Aspects of the Receivables; Repurchase Obligations
In connection with the sale of receivables by UAFC to the seller, by the seller
to a trust, and, in the case of a series of notes issued by the trust, the
pledge of the receivables and the trust's property to the indenture trustee,
security interests in the related financed vehicles will be assigned by UAFC to
the seller, by the seller to the trust and, if applicable, by the trust to the
indenture trustee. However, the certificates of title to such financed vehicles
will not be amended to reflect the assignments to the seller, to the trust or to
the indenture trustee. In the absence of such amendments, the trust or the
indenture trustee may not have a perfected security interest in the financed
vehicles securing the receivables in some states.
7
<PAGE>
Unless otherwise specified in the related prospectus supplement, UAC must
repurchase from a trust any receivable sold to such trust as to which all action
necessary to secure a first perfected security interest in the related financed
vehicle in the name of UAFC, UAC, UACFC, PFC or UAC's predecessor has not been
taken as of the date such receivable is purchased by such trust, if:
(1) such breach materially and adversely affects the interest of
the related securityholders in such receivable, and
(2) such breach is not cured by the end of the second month
following the discovery by or notice to UAC of such breach.
If a trust or the indenture trustee does not have a perfected security interest
in a financed vehicle, it may not be able to enforce its rights to repossess or
otherwise collect on the financed vehicle. If the trust or the indenture trustee
has a perfected security interest in the financed vehicle, the trust or the
indenture trustee will have a prior claim over subsequent purchasers of the
financed vehicle and holders of subsequently perfected security interests.
However, a trust or indenture trustee could lose its security interest or the
priority of its security interest in a financed vehicle due to liens for repairs
of financed vehicles due to liens for unpaid taxes by the related obligor, or
through fraud or negligence of a third party. None of the seller, UAFC, UAC,
UACFC, PFC or UAC's predecessor will be required to repurchase a receivable with
respect to which a trust or indenture trustee loses its security interest or the
priority of its security interest in the related financed vehicle after the
closing date as the result of any such mechanic's lien, tax lien or the fraud or
negligence of a third party.
Creditors such as UAC and UACFC are required to comply with federal and state
consumer protection laws in connection with originating, purchasing and
collecting consumer receivables such as the receivables. Certain of these laws
provide that an assignee of such a receivable (such as a trust or an indenture
trustee) is liable to the related obligor for any violation of such laws by the
creditor. Unless otherwise specified in the related prospectus supplement, UAC
must repurchase from the trust any receivable that fails to comply with the
requirements of such consumer protection laws on the closing date if:
(1) such failure materially and adversely affects the interests of
the related securityholders in such receivable; and
(2) such breach is not cured by the end of the second month
following the discovery by or notice to UAC of such breach.
UAC must repurchase any such receivable for which there is an uncured breach on
or before the date that such breach is required to be cured. See "Certain Legal
Aspects of the Receivables."
Tax Considerations
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If the prospectus supplement does not specify that the related trust will be
treated as a grantor trust, upon the issuance of a series of securities, special
federal tax counsel to such trust identified in the related prospectus
supplement will deliver an opinion to the effect that:
o any notes of such series will or, if so specified in the
related prospectus supplement, should be characterized as debt
for federal income tax purposes; and
o such trust will not be characterized as an association (or a
publicly traded partnership) taxable as a corporation for
federal income tax purposes.
If a prospectus supplement specifies that the related trust is a grantor trust,
federal tax counsel will deliver an opinion to the effect that such trust will
be treated as a grantor trust for federal income tax purposes and will not be
subject to federal income tax. See "Federal Income Tax Consequences" for
additional information regarding the application of federal tax laws to a trust
and the related securities.
ERISA Considerations
Subject to the considerations discussed under "ERISA Considerations" in this
prospectus and in the related prospectus supplement and unless otherwise
provided therein, any securities that meet certain U. S. Department of Labor
requirements are eligible for purchase by employee benefit plans and plans
subject to the Employee Retirement Income Security Act of 1974, as amended
("ERISA"). Notes that are treated as indebtedness under applicable local law and
which have no substantial equity features may be acquired by such employee
benefit plans. A class of certificates that is subordinated to any other class
of certificates of the same series may not be acquired by any such employee
benefit plan, a plan subject to ERISA or an individual retirement account. The
related prospectus supplement will indicate if we do not believe a class of
securities is eligible for purchase by such plans. See "ERISA Considerations" in
this prospectus and in the related prospectus supplement.
Ratings
To the extent described in the related prospectus supplement, the securities
must be rated by one or more nationally recognized statistical rating
organizations. A rating is not a recommendation to purchase, hold or sell the
securities because a rating does not comment as to market price or suitability
for a particular investor. Ratings of securities address the likelihood of the
payment of principal and interest on the securities pursuant to their terms. We
cannot assure you that any rating will remain for a given period of time or that
any rating will not be lowered or withdrawn entirely by a rating agency. For
more detailed information regarding the ratings assigned to any class of
securities of a particular series, see "Summary of Terms -- Ratings" and "Risk
Factors -- The Limitations of the Note Ratings" in the related prospectus
supplement.
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RISK FACTORS
You should carefully consider the risk factors set forth below before
purchasing any securities of any series.
Pre-Funding May Reduce
Your Anticipated Yield If the related prospectus supplement provides
for the sale and purchase of receivables
during a funding period after the closing
date using a pre-funded amount, the seller or
the trust will deposit the pre- funded amount
specified in such prospectus supplement into
the pre-funding account on the closing date.
During the funding period and until such
amounts are applied by the trustee to
purchase subsequent receivables, amounts on
deposit in the pre- funding account will be
invested in eligible investments. Any
investment income with respect to such
investments (net of any related investment
expenses) will be distributed on each payment
date during the funding period as part of the
available funds for the preceding calendar
month. We expect that the investment income
earned on amounts on deposit in the
pre-funding account will be less than the
interest accrued at the interest rate or
pass-through rate applicable to the portion
of the securities represented by the
pre-funded amount.
If the principal amount of receivables
originated or acquired by UAC during a
funding period and possessing the required
attributes to transfer to a trust is less
than the pre-funded amount, UAFC and the
seller may have insufficient eligible
receivables to subsequently transfer to a
trust. To the extent that the entire
pre-funded amount has not been applied to the
subsequent purchase of receivables by the end
of the related funding period, any amounts
remaining in the pre-funding account will be
distributed as a full or partial prepayment
of principal to holders of one or more
classes of the related series of securities
following the end of the funding period, in
the amounts and pursuant to the priorities
set forth in the related prospectus
supplement. Such prepayment may reduce the
securityholder's outstanding principal
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balance and anticipated yield. See "Summary
of Terms -- Pre-Funded Receivables" and
"Description of the Transfer and Servicing
Agreements -- Sale and Assignment of
Subsequent Receivables."
If the Trust Does Not Have a
Perfected Security Interest
in a Financed Vehicle,
It May Not be Able to Collect
on the Receivable Simultaneously with each sale of receivables,
UAFC will assign to the seller, the seller
will assign to the related trust, and, in the
case of a series of notes issued by the
trust, the trust will pledge to the indenture
trustee, security interests in the related
financed vehicles. Due to administrative
burden and expense, however, the certificates
of title to such financed vehicles will not
be amended to reflect the assignments to the
seller, the trust or the indenture trustee.
In the absence of such amendments, a trust or
the indenture trustee may not have a
perfected security interest in such financed
vehicles in some states.
If a trust or the indenture trustee does not
have a perfected security interest in a
financed vehicle, it may not be able to
enforce its rights to repossess or otherwise
collect on such financed vehicle in the event
of a default by the obligor. As such, the
trust or the indenture trustee may be
adversely affected by such failure. If the
trust's or the indenture trustee's security
interest in a financed vehicle is perfected,
the trust or the indenture trustee will have
a prior claim over subsequent purchasers of
such financed vehicle and holders of
subsequently perfected security interests.
However, the trust or the indenture trustee
could lose its security interest or the
priority of its security interest in a
financed vehicle due to liens for repairs of
such financed vehicle, due to liens for taxes
unpaid by the related obligor or through the
fraud or negligence of a third party. None of
the seller, UAFC, UAC, UACFC, PFC or UAC's
predecessor will have any obligation to
repurchase a receivable in respect of which a
trust or the indenture trustee loses its
security interest or the priority of its
security interest in the related financed
vehicle as the result of any such
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mechanic's lien, tax lien or fraud or
negligence occurring after the date such
security interest was conveyed to the trust
or the indenture trustee. See "Certain Legal
Aspects of the Receivables -- Security
Interest in Vehicles" and "-- Consumer
Protection Laws."
If a Receivables Transfer is
Not a Sale, the Insolvency of
UAC or its Affiliates
Could Reduce Payments to You UAC and UAFC will warrant to the seller in
each purchase agreement that the sales of the
receivables by UAFC to the seller, and by the
seller to the related trust, respectively,
are valid sales of the receivables to the
seller and to such trust. The benefit of such
warranty will be assigned by the seller to
each trust in the related trust and servicing
agreement or pooling and servicing agreement
and further, in the case of a series of notes
issued by the related trust, will be assigned
by the related trust to the indenture
trustee. However, the interest of the trust
or the indenture trustee could be affected by
the insolvency of UAC or its affiliates as
follows:
(1) If UAC, UACFC, UAFC or the seller becomes
a debtor in a bankruptcy case and a creditor
or trustee-in-bankruptcy of such debtor or
such debtor itself claims that the sale of
receivables to the seller or such trust, as
applicable, constitutes a pledge of such
receivables to secure a loan by such debtor,
then delays in distributions on the
receivables to securityholders could occur.
If the court rules in favor of any such
bankruptcy trustee, creditor or debtor, then
reductions in the amounts of such payments
could result.
(2) If the transfer of receivables to the
seller or any trust is treated as a pledge
rather than a sale, a tax or government lien
on the property of UAFC or the seller arising
before the transfer of such receivables to
such trust may have priority over such
trust's interest in such receivables.
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However, if the transfers of receivables from
UAC and UAFC to the seller and from the
seller to the trust are treated as sales, the
receivables would not be part of UAFC's or
the seller's bankruptcy estate and would not
be available to creditors of UAFC or the
seller. See "Certain Legal Aspects of the
Receivables -- Bankruptcy Matters."
UAC and its Affiliates Have
Limited Obligations to Make
Payments to the Trusts Generally, none of the seller, UAFC, UAC,
UACFC, PFC or UAC's predecessor on the
certificates of title to the financed
vehicles (or any of their affiliates) will be
obligated to make any payments to a trust in
respect of the related securities or
receivables. The limited circumstances under
which UAC will be required to make payments
to a trust relate to UAC's obligation to
repurchase from the trust any receivables
with respect to which UAC has breached any
representations and warranties made in the
purchase agreements and such breach
materially and adversely affects the trust's
interest in such receivable. In addition,
UAC, as servicer, may be required to purchase
receivables from a trust under certain
circumstances set forth in the trust and
servicing agreement or the pooling and
servicing agreement. See "Description of the
Transfer and Servicing Agreements -- Sale and
Assignment of Receivables" and "-- Servicing
Procedures."
Each Trust Will Have
Limited Assets None of the trusts will have significant
assets or sources of funds other than the
related receivables and, to the extent
provided in the related prospectus
supplement, a pre-funding account, spread
account, yield supplement account or other
form of credit enhancement. The securities of
each series will represent obligations of or
interests in the related trust only and will
not represent obligations of or interests in,
or be insured or guaranteed by, any of the
lienholders named on the certificates of
title, the applicable trustees or any other
entity. Consequently, you must rely for
repayment upon payments on the related
receivables and, if and to the extent
available,
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amounts available under any available form of
credit enhancement, all as specified in the
related prospectus supplement.
Payments on Some Securities May
Be Subordinated to Payments on
Other Securities To the extent specified in the related
prospectus supplement, payments or
distributions on certain classes of
securities may be subordinated to payments or
distributions on other classes of securities.
Rapid Prepayments May Reduce
Your Anticipated Yield Any of the receivables can be prepaid at any
time by the related obligor. With respect to
any receivable, the term prepayment includes
prepayments in full, partial prepayments
(including those related to rebates of
extended warranty contract costs and
insurance premiums) and liquidations due to
defaults, as well as receipts of proceeds
from physical damage, credit life and
disability insurance policies and any
lender's single insurance policy, and
purchase amounts with respect to certain
other receivables repurchased by UAC as a
result of a breach of a representation or
warranty or purchased by the servicer for
administrative reasons. The rate of
prepayments on the receivables may be
influenced by many economic, social and other
factors, including the fact that an obligor
generally may not sell or transfer the
financed vehicle securing a receivable
without the consent of the appropriate
lienholder. The rate of prepayment on the
receivables may also be influenced by the
structure of the underlying contracts. If the
receivables prepay more rapidly than
expected, your anticipated yield may be
reduced. See "Weighted Average Life of the
Securities." In addition, if so provided in
the related prospectus supplement, the
servicer or another entity may be entitled to
purchase the receivables of a given
receivables pool under the circumstances
described in such prospectus supplement which
may further reduce your anticipated yield.
See "Description of the Transfer and
Servicing Agreements - Termination."
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In addition, a series of securities may
include one or more classes of interest-only
or other strip securities entitled to (1)
interest payments with disproportionate
nominal or no principal payments or (2)
principal payments with disproportionate,
nominal or no interest payments. Such strip
securities may be more sensitive than other
classes of securities of such series to the
rate of payment on the related receivables.
If you wish to invest in any such class of
securities, you should carefully consider the
information provided with respect to such
strip securities under "Risk Factors" and
elsewhere in the related prospectus
supplement.
Book-Entry Registration Unless otherwise specified in the related
prospectus supplement, each class of the
securities of a given series initially will
be represented by one or more certificates
registered in the name of Cede & Co., or any
other nominee of The Depository Trust Company
("DTC") set forth in the related prospectus
supplement, and will not be registered in the
names of the holders of such securities or
their nominees. Because of this, unless and
until definitive securities for such series
are issued, you will not be recognized by the
trustee as securityholders as such term is
used in this prospectus. As such, until
definitive securities are issued, beneficial
owners of the securities will be able to
exercise the rights of securityholders only
indirectly through DTC and its participating
organizations. See "Description of the
Securities -- Book-Entry Registration" and "
-- Definitive Securities."
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THE TRUSTS
Each series of securities will be issued by a separate trust
established by the seller pursuant to a trust and servicing agreement or pooling
and servicing agreement for the transactions described in this prospectus and in
the related prospectus supplement. Except as otherwise provided in the related
prospectus supplement, the property of each trust will include:
(1) a pool of receivables, including any receivables conveyed to
the trust after the closing date, and certain payments due or
received thereunder after the applicable cutoff date;
(2) a pre-funded amount to purchase receivables after the closing
date, if so provided in the related prospectus supplement;
(3) interests in certain amounts that may from time to time be
held in separate trust accounts established and maintained
pursuant to the related trust and servicing agreement or
pooling and servicing agreement and, if so provided in the
related prospectus supplement, the proceeds of such accounts;
(4) security interests in the financed vehicles and any other
interest of UAFC, UAC, UACFC, PFC and UAC's predecessor (the
"Named Lienholders") as the registered lienholders on the
certificates of title of each of the financed vehicles and the
seller in such financed vehicles;
(5) any recourse rights of the Named Lienholders against dealers;
(6) any rights of UAC or its predecessor to proceeds from claims
on or refunds of premiums with respect to certain physical
damage, credit life and disability insurance policies covering
the financed vehicles or the obligors, as the case may be,
including any lender's single interest insurance policy;
(7) any property that secures a receivable and that has been
acquired by the trust;
(8) certain rights under the related purchase agreement among UAC,
UAFC and the seller; and
(9) any and all proceeds of the foregoing.
The receivables in each receivables pool were or will be either (a)
originated by dealers for assignment to UAC (either directly or indirectly
through UAC's predecessor) or (b) solicited by dealers for origination by UAC or
its predecessor. Immediately after the origination or other acquisition of the
receivables by UAC, UAC sells the receivables to UAFC in the ordinary course of
business. Modified receivables are resold by UAFC to UAC at the time such
receivables are modified. Modified receivables included in a trust will be
repurchased from UAC by UAFC for
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subsequent resale to the seller pursuant to the purchase agreement. One of the
Named Lienholders will be the registered lienholder listed on the certificates
of title of the financed vehicles. The receivables will continue to be serviced
by UAC as the initial servicer under each trust and servicing agreement or
pooling and servicing agreement.
On or prior to the applicable closing date, UAFC will sell to the
seller, pursuant to the related purchase agreement, receivables in the aggregate
principal amount specified in the related prospectus supplement. Thereafter, on
such closing date, the seller will convey such receivables to the related trust.
UAFC and the seller may be required to convey additional receivables to the
trust after the closing date if indicated in the prospectus supplement. See
"Description of the Transfer and Servicing Agreements -- Sale and Assignment of
Subsequent Receivables" in this prospectus.
UAFC and the seller will not convey to a trust any contract with a
dealer establishing "dealer reserves" or any rights to recapture dealer reserves
pursuant to such a contract. To the extent specified in the related prospectus
supplement, a pre-funding account, spread account, yield supplement account,
surety bond, swap or other interest rate protection, or any other form of credit
enhancement may be a part of the property of a trust or may be held by the
applicable trustee for the benefit of holders of the related securities.
If the protection provided to the securityholders by the subordination,
if any, of one or more classes of securities of such series and by any spread
account, yield supplement account or other available form of credit enhancement
for such series is insufficient, the securityholders will have to look to
payments by or on behalf of obligors on the related receivables and the proceeds
from the repossession and sale of financed vehicles that secure defaulted
receivables for distributions of principal of and interest on the related
securities. In such event, certain factors, such as the trust or the indenture
trustee not having perfected security interests in all of the financed vehicles,
may limit the ability of a trust to liquidate the collateral securing the
related receivables or may limit the amount realized to less than the amount due
under such receivable. Securityholders may not receive timely payment on, or may
incur losses on their investment in, such securities as a result of defaults or
delinquencies by obligors and depreciation in the value of the related financed
vehicles. See "Description of the Transfer and Servicing Agreements -- Credit
Enhancement" and "Certain Legal Aspects of the Receivables."
The Owner Trustee and the Indenture Trustee
The owner trustee for each trust and, if the trust issues notes, the
indenture trustee for the series of notes, will be specified in the related
prospectus supplement. The liability of the owner trustee and/or the indenture
trustee in connection with the issuance and sale of the related securities is
limited solely to the express obligations of such trustee set forth in the
related trust and servicing agreement or pooling and servicing agreement and, if
applicable, in the related indenture.
A trustee may resign at any time. The servicer may remove an owner
trustee, and the servicer or the insurer may remove an indenture trustee, if
such trustee ceases to be eligible to
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continue as trustee under the trust and servicing agreement or pooling and
servicing agreement, or, if applicable, under the indenture, or if such trustee
becomes insolvent. If the trustee resigns or if the servicer or the insurer
removes a trustee, the servicer will be obligated to appoint a successor to such
trustee. The insurer must consent to any such appointment of a successor
trustee. Any resignation or removal of a trustee and appointment of a successor
trustee will not become effective until the successor trustee accepts the
appointment.
THE RECEIVABLES POOLS
General
The receivables in each receivables pool were or will be acquired by
UAC, UACFC or UAC's predecessor from dealers or originated by UAC, UACFC or
UAC's predecessor through dealers in the ordinary course of business.
Immediately after their origination or acquisition by UAC, the receivables were
or will be conveyed to UAFC. Modified receivables are resold by UAFC to UAC at
the time such receivables are modified. Modified receivables included in a trust
will be repurchased from UAC by UAFC for subsequent resale to the seller
pursuant to the purchase agreement. One of the Named Lienholders will be the
registered lienholder on the certificates of title to each of the financed
vehicles.
The receivables to be sold to each trust will be selected from UAFC's
portfolio for inclusion in a receivables pool based on several criteria,
including that, unless otherwise provided in the related prospectus supplement,
each receivable:
o is secured by a new or used vehicle;
o provides for level monthly payments (except for the last
payment, which may be different from the level payments) that
fully amortize the amount financed over the original term to
maturity of the receivable;
o is a precomputed receivable or a simple interest receivable;
and
o satisfies the other criteria, if any, set forth in the related
prospectus supplement. Except as described in the related
prospectus supplement, no selection procedures believed by
UAFC or the seller to be adverse to securityholders were or
will be used in selecting the receivables.
Underwriting Procedures
UAC uses the degree of the applicant's creditworthiness as the basic
criterion when originating an installment sale contract or purchasing such a
contract from a dealer. Each credit application requires that the applicant
provide current information regarding the applicant's employment history, bank
accounts, debts, credit references, and other factors that bear on
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creditworthiness. UAC applies uniform underwriting standards when originating
loans on new and used vehicles. UAC also typically obtains credit reports from
major credit reporting agencies summarizing the applicant's credit history and
paying habits, including such items as open accounts, delinquent payments,
bankruptcies, repossessions, lawsuits, and judgments. UAC's credit analysts may
verify an applicant's employment or, where appropriate, check directly with the
applicant's creditors. On the basis of such information, extensive historical
data and the experience of its senior management, UAC is in a position to assess
an applicant's ability to repay a loan. Since December 1988, the criteria
applied by UAC to evaluate applicants have included credit scoring using models
developed by independent firms experienced in developing credit scoring models.
Credit scoring evaluates an applicant's credit profile to arrive at an estimate
of the associated credit risk. Credit scoring models are developed by
statistically evaluating common characteristics of applicants and their
correlation with credit risk.
While UAC adheres to no specific loan-to-value ratios, the amount
financed by UAC under an installment contract generally will not exceed, in the
case of new vehicles, the manufacturer's suggested retail price of the financed
vehicle, including sales tax, license fees and title fees, plus the cost of
service and warranty contracts and premiums for physical damage, credit life and
disability insurance obtained in connection with the vehicle or the financing.
In the case of used vehicles, if the applicant meets UAC's creditworthiness
criteria, the amount financed may exceed the "average black book value" (as
published by National Auto Research, a standard reference source for dealers in
used cars) of the financed vehicle, including sales tax, license fees and title
fees, plus the cost of service and warranty contracts and premiums for physical
damage, credit life and disability insurance obtained in connection with the
vehicle or financing. UAC believes that the resale value of a new vehicle
purchased by an obligor will generally decline below the manufacturer's
suggested retail price and, in some cases, may decline for a period of time
below the principal balance outstanding on the related installment contract. UAC
also believes that the resale value of a used vehicle purchased by an obligor
will generally decline, but believes that the percentage of such decline
generally will be less than the percentage of decline in the resale value of a
new vehicle. UAC regularly reviews the quality of the receivables purchased from
dealers and regularly conducts quality audits to ensure compliance with its
established policies and procedures.
The underwriting procedures and standards employed by UAC's predecessor
are substantially similar to those used by UAC and, accordingly, references to
UAC in the foregoing discussion of UAC's underwriting procedures apply also to
any receivables included in a receivables pool that was acquired by UAC from
UACFC or UAC's predecessor or receivables that are otherwise originated by UACFC
or UAC's predecessor. See also "Union Acceptance Corporation and Affiliates."
Allocation of Payments
The receivables will be either simple interest receivables or
precomputed receivables. Simple interest receivables provide for equal monthly
payments that are applied, first to interest accrued to the date of such
payment, then to principal due on such date, then to pay any applicable late
charges, and then to further reduce the outstanding principal balance.
Accordingly, if an obligor pays a fixed
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monthly installment before its due date under a simple interest receivable, the
portion of the payment allocable to interest for the period since the preceding
payment will be less than it would have been had the payment been made on the
contractual due date and the portion of the payment applied to reduce the
principal balance of the receivable will be correspondingly greater. Conversely,
if an obligor pays a fixed monthly installment under a simple interest
receivable after its contractual due date, the portion of such payment allocable
to interest for the period since the preceding payment will be greater than it
would have been had the payment been made when due and the portion of such
payment applied to reduce the principal balance of the receivable will be
correspondingly less, in which case a larger portion of the principal balance
may be due on the final scheduled payment date.
Precomputed receivables consist of either (1) monthly actuarial
receivables or (2) receivables that provide for allocation of payments according
to the "sum of periodic balances" method, similar to the rule of 78's. An
actuarial receivable provides for amortization of the receivable over a series
of fixed level monthly installments. Each monthly installment, including the
monthly installment representing the final payment of the receivable, consists
of an amount of interest equal to one-twelfth of the annual percentage rate of
the receivable multiplied by the unpaid principal balance of the loan, and an
amount of principal equal to the remainder of the monthly payment. A rule of
78's receivable provides for the payment by the obligor of a specified total
amount of payments, payable in equal monthly installments on each due date,
which total represents the principal amount financed and add-on interest for the
term of the receivable. The rate at which the amount of add-on interest is
earned and, correspondingly, the amount of each fixed monthly payment allocated
to reduction of the outstanding principal amount of the receivable are
calculated in accordance with the sum of the periodic time balances or the "rule
of 78's". If a precomputed receivable is prepaid in full (voluntarily or by
liquidation, acceleration or otherwise), under the terms of the contract a
"refund" or "rebate" will be made to the obligor of the portion of the total
amount of payments then due and payable under the contract allocable to
"unearned" interest. Unearned interest is calculated in accordance with the sum
of the periodic time balances method or a method equivalent to the "rule of
78's". The amount of any such rebate under a precomputed receivable generally
will be less than or equal to the remaining scheduled payments of interest that
would have been due under a simple interest receivable for which all payments
were made on schedule and generally will be significantly less than such amount.
Unless otherwise stated in the related prospectus supplement, all of
the receivables that are precomputed receivables will be rule of 78's
receivables; however, the trust will account for all rule of 78's receivables as
if such receivables were actuarial receivables. Except as otherwise indicated in
the related prospectus supplement, early payments on precomputed receivables
will be deposited to the payahead account as described under "Description of the
Transfer and Servicing Agreements -- Accounts." Amounts received upon prepayment
in full of a rule of 78's receivable in excess of the then outstanding principal
balance of such receivable (computed on an actuarial basis) will not be passed
through to securityholders, except to the extent necessary to pay interest and
principal on the securities.
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In the event of the liquidation of a receivable or the repossession of
a financed vehicle, amounts recovered are applied first to the expenses of
repossession and then to unpaid principal and interest and any related payment
or other fee.
Delinquencies, Repossessions and Net Losses
Certain information concerning the experience of UAC pertaining to
delinquencies, repossessions and net losses with respect to new and used retail
automobile, light truck and van receivables (including receivables previously
sold by UAC or its predecessor but which UAC continues to service) will be set
forth in each prospectus supplement. There can be no assurance that the
delinquency, repossession and net loss experience with respect to any
receivables pool will be comparable to prior experience or to such information.
WEIGHTED AVERAGE LIFE OF THE SECURITIES
The weighted average life of the securities of any series generally
will be influenced by the rate at which the principal balances of the related
receivables are paid, which payment may be in the form of scheduled amortization
or prepayments. For this purpose, the term prepayments includes prepayments in
full, partial prepayments (including those related to rebates of extended
warranty contract costs and insurance premiums), liquidations due to defaults,
as well as receipts of proceeds, if any, from physical damage, credit life and
disability and/or any lender's single interest insurance policies, and the
purchase amount of receivables repurchased by UAC due to a breach of a
representation or warranty or purchased by the servicer for administrative
purposes. Obligors may prepay the receivables at any time without penalty. The
rate of prepayment of automotive receivables is influenced by a variety of
economic, social and other factors, including the fact that an obligor generally
may not sell or transfer the financed vehicle securing a receivable without the
consent of the applicable Named Lienholder as the registered lienholder (or the
servicer on behalf of such lienholder). The rate of prepayment on the
receivables may also be influenced by the structure of the underlying contracts.
A series of securities which includes notes may require, to the extent specified
in the related prospectus supplement, principal payments at a rate faster than
the rate at which principal payments on the receivables are received. Such
accelerated payments, if any, will be made from the excess cash flows expected
to come from the receivables and this feature should shorten the average life of
some or all of the securities of such series. In addition, under certain
circumstances, UAC will be obligated to repurchase receivables from a trust as a
result of breaches of representations and warranties, and the servicer will be
obligated to purchase receivables from a trust as a result of breaches of
certain covenants. In each case, UAC will repurchase such receivables pursuant
to the related Transfer and Servicing Agreements. See "Description of the
Transfer and Servicing Agreements -- Sale and Assignment of Receivables," " --
Servicing Procedures," and "-- Termination" regarding the option of the servicer
or any other entity to purchase or cause the receivables to be purchased from a
trust.
A series of securities may include one or more classes of strip notes
or strip certificates that may be entitled to interest payments with
disproportionate, nominal or no principal payments or
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principal payments with disproportionate, nominal or no interest payments
("Strip Securities"). Such Strip Securities may be more sensitive than certain
other classes of securities of the same series to the rate of payment of the
related receivables. Prospective investors in any such Strip Securities should
consider carefully the information regarding such securities in the related
prospectus supplement.
In light of the above considerations, there can be no assurance as to
the amount of principal payments to be made on the securities of a series on any
payment date since such amount will depend, in part, on the amount of principal
collected on the related receivables pool 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
particular receivables pool and the related series of securities or particular
classes of securities.
POOL FACTORS AND OTHER POOL INFORMATION
The "Pool Factor" for each class of securities will be a seven-digit
decimal which the servicer will compute prior to each distribution with respect
to such class of securities and which will indicate the remaining aggregate
principal balance of such class of securities, as of the applicable payment date
(after giving effect to distributions to be made on such payment date), as a
fraction of the initial aggregate principal balance of such class of securities.
Each Pool Factor will be 1.0000000 as of the related closing date and thereafter
will decline to reflect reductions in the applicable aggregate principal balance
of the notes or the certificates. A securityholder's portion of the aggregate
outstanding aggregate principal balance of the notes or the certificates will
equal the product of (1) the original denomination of such securityholder's
security and (2) the applicable Pool Factor at the time of determination for
such class of securities.
Unless otherwise provided in the related prospectus supplement,
securityholders will receive reports on or about each payment date concerning
payments received on the receivables, the aggregate principal balance of the
receivables pool and each Pool Factor. In addition, securityholders of record
during any calendar year will be furnished information for tax reporting
purposes not later than the latest date permitted by law. See "Description of
the Securities -- Statements to Securityholders."
USE OF PROCEEDS
Unless otherwise provided in the related prospectus supplement, the
seller will apply the net proceeds from the sale of the securities to the
purchase of the receivables from UAFC and, if so provided in the related
prospectus supplement, to fund the pre-funding account. UAFC will use the
portion of such proceeds paid to it to repay short-term borrowings and/or to
purchase receivables from UAC and for general corporate purposes, and UAC will
use such proceeds for general corporate purposes.
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UNION ACCEPTANCE CORPORATION AND AFFILIATES
UAC is an automotive finance company engaged primarily in the indirect
financing (the purchase of loan contracts from dealers) of automobile purchases
by individuals. UAC consummated its initial public offering of its Class A
Common Stock on August 7, 1995. In conjunction with such offering, UAC's
predecessor, Union Federal Savings Bank of Indianapolis, completed a spin-off of
UAC. UAC is no longer a subsidiary of its predecessor.
UAC Finance Corporation
UACFC is a wholly-owned subsidiary of UAC, formed in November 1996 as
an Indiana corporation. UACFC is organized primarily for the purpose of
purchasing or originating automobile installment sale contracts and installment
loan contracts from dealers in certain states where UAC is not licensed to do
so, reselling such receivables to UAC and conducting activities incidental
thereto.
Union Acceptance Funding Corporation
UAFC is a special purpose, bankruptcy remote, wholly-owned subsidiary
of UAC, formed in April 1994 as a Delaware corporation, and is organized for the
limited purpose of acquiring from UAC and holding automobile installment sale
and installment loan contracts, reselling such receivables and conducting
activities incidental thereto. Immediately upon its acquisition of receivables,
UAC sells such receivables to UAFC, together with its security interest in the
related financed vehicle and other collateral. UAFC is registered as lienholder
on most of the certificates of title for the financed vehicles. Effective
February 28, 1998, UAFC acquired the non-prime automobile financing portfolio of
PFC, another wholly-owned subsidiary of UAC, and also succeeded to its business
of purchasing "non-prime" or "Tier II" automobile loan contracts from UAC. On
January 1, 1999, UAC ceased purchasing Tier II installment loan contracts;
however, a small percentage of the receivables included in a trust may be Tier
II receivables originated before January 1, 1999.
Performance Funding Corporation
PFC is a special purpose, bankruptcy remote, wholly-owned subsidiary of
UAC, formed in October 1994 as a Delaware corporation, and was organized for the
limited purpose of acquiring and holding "non-prime" automobile installment sale
and installment loan contracts from UAC, reselling such receivables, and
conducting activities incidental thereto. Prior to March 1998, UAC sold
non-prime receivables to PFC together with its security interest in the related
financed vehicle and other collateral immediately upon its acquisition of
receivables. PFC is registered as lienholder on a limited number of the
certificates of title for the financed vehicles.
UAC Securitization Corporation
UAC Securitization Corporation is a special purpose, bankruptcy remote,
wholly-owned subsidiary of UAC, formed in October 1994 as a Delaware corporation
and is organized for the
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limited purpose of acquiring automobile installment sale and installment loan
contracts from UAC or UAFC, reselling such receivables and conducting activities
incidental thereto.
The seller has taken steps in structuring the transactions contemplated
hereby that are intended to ensure that the voluntary or involuntary application
for relief by UAC or UAFC under the United States Bankruptcy Code or similar
applicable state insolvency laws will not result in the consolidation of the
assets and liabilities of the seller with those of UAC, UACFC or UAFC. These
steps include the creation of the seller as a separate, limited-purpose
subsidiary pursuant to a certificate of incorporation containing certain
limitations (including restrictions on the nature of the seller's business, as
described above, and restrictions on the seller's ability to commence a
voluntary case or proceeding under any bankruptcy or insolvency law without the
unanimous affirmative vote of all its directors). However, there can be no
assurance that the activities of the seller would not result in a court
concluding that the assets and liabilities of the seller should be consolidated
with those of UAC or UAFC in a proceeding under such bankruptcy or insolvency
law. See "Certain Legal Aspects of the Receivables -- Bankruptcy Matters."
In addition, tax and certain other statutory liabilities, such as
liabilities to the Pension Benefit Guaranty Corporation, if any, relating to the
underfunding of pension plans of UAC or its affiliates can be asserted against
the seller. To the extent that any such liabilities arise after the transfer of
receivables to a trust, the trust's or the indenture trustee's interest in the
receivables would be prior to the interest of the claimant with respect to any
such liabilities. However, the existence of a claim against the seller could
permit the claimant to subject the seller to an involuntary proceeding under the
United States Bankruptcy Code or other bankruptcy or insolvency laws. See
"Certain Legal Aspects of the Receivables -- Bankruptcy Matters."
DESCRIPTION OF THE SECURITIES
General
With respect to each trust that issues notes and certificates, one or
more classes of notes of the related series will be issued pursuant to the terms
of an indenture and one or more classes of certificates of the related series
will be issued pursuant to the terms of a trust and servicing agreement or a
pooling and servicing agreement. With respect to each trust that only issues
certificates, one or more classes of certificates of the related series will be
issued pursuant to the terms of a pooling and servicing agreement. A form of
each of the indenture, the trust and servicing agreement and the pooling and
servicing agreement has been filed as an exhibit to the registration statement
of which this prospectus forms a part.
Unless otherwise specified in the related prospectus supplement, the
securities will be available for purchase in minimum denominations of $1,000 and
integral multiples in excess thereof in book-entry form only. The statements
made under this caption are summaries only. For a more detailed description of
the securities, you should read the indenture, the trust and servicing agreement
and/or the pooling and servicing agreement, as applicable.
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Payments of Principal and Interest
The timing and priority of payments of principal and interest,
distributions, seniority, allocations of losses, interest rate, pass-through
rate and amount of or method of determining payments of or distributions with
respect to principal and interest on each class of securities of a series will
be described in the related prospectus supplement. Payments or distributions on
the securities will be made on the payment dates specified in the related
prospectus supplement. To the extent provided in the related prospectus
supplement, a series of securities may include one or more classes of Strip
Securities entitled to (1) interest distributions with disproportionate, nominal
or no principal distributions or (2) principal distributions with
disproportionate, nominal or no interest distributions. Each class of securities
may have a different interest rate or pass-through rate, which may be a fixed,
variable or adjustable rate (and which may be zero for certain classes of Strip
Securities) or any combination of the foregoing. The related prospectus
supplement will specify the interest rate and/or pass-through rate for each
class of securities of a series or the method for determining such rates.
To the extent specified in any prospectus supplement, one or more
classes of securities of a given series may have fixed principal and/or interest
payment schedules or provisions for minimum mandatory payments, as set forth in
such prospectus supplement.
In the case of a series of securities that includes two or more classes
of securities, the timing, sequential order, priority of payment or amount of
distributions in respect of interest and principal, and any schedule or formula
or other provisions applicable to the determination thereof, of each such class
shall be as set forth in the related prospectus supplement. Unless otherwise
specified in the related prospectus supplement, distributions in respect of
interest on and principal of any class of securities will be made on a pro rata
basis among all holders of securities of such class.
Book-Entry Registration
Unless otherwise specified in the related prospectus supplement, each
class of securities initially will be represented by one or more certificates,
in each case registered in the name of the nominee of DTC. Unless another
nominee is specified in the related prospectus supplement, the nominee of DTC
will be Cede & Co. Accordingly, such nominee is expected to be the holder of
record of the securities of each series, except for securities, if any, retained
by the seller or UAC. Unless and until definitive securities are issued under
the limited circumstances described in this prospectus or in the related
prospectus supplement, no securityholder will be entitled to receive a physical
certificate representing a security. All references in this prospectus and in
the related prospectus supplement to actions by securityholders will refer to
actions taken by DTC upon instructions from the participating members of DTC,
and all references in this prospectus and in the related prospectus supplement
to distributions, notices, reports and statements to securityholders will refer
to distributions, notices, reports and statements to DTC or its nominee, as the
case may be, as the registered holder of the securities, for distribution to
securityholders in accordance with DTC's procedures with respect thereto.
Beneficial owners of the securities ("Security Owners") will not be
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recognized as "securityholders" by the related trustee and/or, if applicable the
indenture trustee, and Security Owners will be permitted to exercise the rights
of securityholders only indirectly through DTC and its participants.
DTC is a limited-purpose trust company organized under the laws of the
State of New York, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the Uniform Commercial Code (the "UCC") in effect in the
State of New York, and a "clearing agency" registered pursuant to the provisions
of Section 17A of the Securities and Exchange Act of 1934, as amended. DTC was
created to hold securities for the DTC participants and to facilitate the
clearance and settlement of securities transactions between DTC participants
through electronic book-entries, thereby eliminating the need for physical
movement of certificates. DTC participants include securities brokers and
dealers, banks, trust companies and clearing corporations. Indirect access to
the DTC system also is available to banks, brokers, dealers and trust companies
that clear through or maintain a custodial relationship with a DTC participant,
either directly or indirectly.
Unless otherwise specified in the related prospectus supplement,
Security Owners that are not DTC participants or indirect participants but
desire to purchase, sell or otherwise transfer ownership of, or an interest in,
the securities may do so only through DTC participants and indirect
participants. In addition, all Security Owners will receive all distributions of
principal and interest from the related trustee through DTC participants. Under
a book-entry format, Security Owners may experience some delay in their receipt
of payments, since such payments will be forwarded by the related trustee to
DTC's nominee. DTC will then forward such payments to the DTC participants,
which thereafter will forward them to indirect participants or Security Owners.
Under the rules, regulations and procedures creating and affecting DTC
and its operations, DTC is required to make book-entry transfers among DTC
participants on whose behalf it acts with respect to the securities and to
receive and transmit distributions of principal of and interest on the
securities. DTC participants and indirect participants with which Security
Owners have accounts with respect to the securities similarly are required to
make book-entry transfers and to receive and transmit such payments on behalf of
their respective Security Owners. Accordingly, although Security Owners will not
possess physical securities representing the securities, the DTC rules provide a
mechanism by which DTC participants and indirect participants will receive
payments and transfer interests, directly or indirectly, on behalf of Security
Owners.
Because DTC can act only on behalf of DTC participants, who in turn act
on behalf of indirect participants and certain banks, the ability of a Security
Owner 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 representing such securities.
DTC has advised the seller that it will take any action permitted to be
taken by a Security Owner under the applicable trust and servicing agreement or
pooling and servicing agreement and the indenture only at the direction of one
or more DTC participants to whose account with DTC the
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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 DTC
participants whose holdings include such undivided interests.
Except as required by law, neither the trustee nor the indenture
trustee, if applicable, will have any liability for any aspect of the records
relating to or payments made on account of beneficial ownership interests of
securities of any series held by DTC's nominee, or for maintaining, supervising
or reviewing any records relating to such beneficial ownership interests.
Definitive Securities
Unless otherwise stated in the related prospectus supplement, the
securities of a given series will be issued in fully registered, certificated
form to securityholders or their respective nominees, rather than to DTC or its
nominee, only if
o the related trustee or, if applicable, the indenture trustee
determines that DTC is no longer willing or able to discharge
properly its responsibilities as depository with respect to
the related securities and such trustees are unable to locate
a qualified successor,
o the trustee or, if applicable, the indenture trustee elects to
terminate the book-entry system through DTC, or
o after the occurrence of a default by the servicer under the
applicable trust and servicing agreement or pooling and
servicing agreement, Security Owners representing at least a
majority of the outstanding principal amount of the securities
of such series, advise the related trustee through DTC that
the continuation of a book-entry system through DTC (or a
successor thereto) is no longer in the best interests of the
related Security Owners.
Upon the occurrence of any of the events described in the immediately
preceding paragraph, the related trustee will be required to notify the related
Security Owners, through DTC participants, of the availability of definitive
securities. Upon surrender by DTC of the certificates representing all
securities of any affected class and the receipt of instructions for
re-registration, the trustee or indenture trustee will issue definitive
securities to the related Security Owners. Payments on the related definitive
securities will be made thereafter by the related trustee directly to the
holders in whose name the related definitive securities are registered at the
close of business on the applicable record date, in accordance with the
procedures set forth in this prospectus and in the related trust and servicing
agreement or pooling and servicing agreement and the indenture, if applicable.
Payments will be made by check mailed to the address of such holders as they
appear on the register specified in the related agreements; however, the final
payment on any securities (whether definitive securities or securities
registered in the name of a depository or its nominee) will be made only upon
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presentation and surrender of such securities at the office or agency specified
in the notice of final payment to securityholders.
Definitive securities will be transferable and exchangeable at the
offices of the related trustee (or any security registrar appointed thereby). No
service charge will be imposed for any registration of transfer or exchange, but
such trustee may require payment of a sum sufficient to cover any tax or other
governmental charge imposed in connection therewith.
Statements to Securityholders
With respect to each series of securities, on or prior to each payment
date, the servicer (to the extent applicable to such securityholder) will
prepare and forward to the related trustee and, if applicable, the indenture
trustee to be included with the payment to each securityholder of record a
statement setting forth for the related collection period the following
information (and any other information specified in the related prospectus
supplement):
(1) the amount of the payment allocable to principal of each class
of securities of such series;
(2) the amount of the payment allocable to interest on each class
of securities of such series;
(3) the amount of the servicing fee paid to the servicer with
respect to the related collection period;
(4) the aggregate principal balance of the notes or the
certificates and the Pool Factor for each class of securities
of such series as of the payment date after giving effect to
all payments under clause (1) above on such date;
(5) the balance of any spread account or other form of credit
enhancement, after giving effect to any additions thereto or
withdrawals therefrom or reductions thereto to be made on the
following payment date;
(6) with respect to any series of securities as to which a
pre-funding account has been established, for payment dates
during the funding period, the remaining pre-funded amount;
and
(7) with respect to any series of securities as to which a
pre-funding account has been established, for the payment date
that falls on or immediately after the end of the funding
period, the amount, if any, of the pre-funded amount that has
not been used to purchase subsequent receivables.
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In addition, within the prescribed period of time for tax reporting
purposes after the end of each calendar year during the term of each trust, the
related trustee or indenture trustee, as applicable, will mail to each person
who at any time during such calendar year shall have been a registered
securityholder a statement containing certain information for the purposes of
such securityholder's preparation of federal income tax returns. See "Federal
Income Tax Consequences."
List of Securityholders
Unless otherwise specified in the related prospectus supplement, each
trustee and indenture trustee, within 15 days after receipt of written request
of the servicer, will provide the servicer with a list of the names and
addresses of all holders of record as of the most recent record date of the
related series of securities. In addition, three or more holders of the
securities of any series or one or more holders of such securities evidencing
not less than 25% of the applicable aggregate principal balance of the
certificates or 25% of the applicable aggregate principal balance of the notes,
as the case may be, may, by written request to the related trustee or indenture
trustee, obtain access to the list of all certificateholders or noteholders, as
the case may be, maintained by such trustee for the purpose of communicating
with other certificateholders or noteholders with respect to their rights under
the related trust and servicing agreement or pooling and servicing agreement,
under the indenture, if applicable, or under such securities.
DESCRIPTION OF THE TRANSFER AND SERVICING AGREEMENTS
The following summary describes certain terms of (1) each purchase
agreement pursuant to which the seller will purchase receivables from UAFC and
(2) each trust and servicing agreement or pooling and servicing agreement
pursuant to which a trust will be created and will purchase receivables from the
seller and the servicer will agree to service such receivables and pursuant to
which securities may be issued (collectively, the "Transfer and Servicing
Agreements"). If the trust also issues a series of notes, the notes will be
issued pursuant to an indenture. See "The Indenture" in this prospectus. Forms
of the Transfer and Servicing Agreements have been filed as exhibits to the
registration statement of which this prospectus forms a part. This summary of
the Transfer and Servicing Agreements is not complete. For a more detailed
description of the agreements, you should read the Transfer and Servicing
Agreements and the related prospectus supplement.
Sale and Assignment of Receivables
On the related closing date:
(1) UAFC will sell and assign to the seller pursuant to the
related purchase agreement, without recourse, its entire right
in the related receivables, including its security interests
in the related financed vehicles;
(2) the seller will sell and assign to the related trust pursuant
to the applicable Transfer and Servicing Agreements, without
recourse, (a) its entire right in such receivables,
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including the security interests in the financed vehicles, and
(b) if so provided in the related prospectus supplement, the
applicable pre-funded amount; and
(3) in the case of a series of notes issued by a trust, the trust
will pledge its entire right in such receivables and the other
property of the trust as collateral for repayment of the
notes.
Each receivable will be identified in a schedule appearing as an exhibit to the
related Transfer and Servicing Agreement. Concurrently with the sale and
assignment of the receivables and, if applicable, the pre-funded amount to the
related trust, the trustee or indenture trustee will execute, authenticate and
deliver the related series of securities to the seller, or the trust, as
applicable, in exchange for such receivables and such pre-funded amount, if any.
The related prospectus supplement will specify whether the property of a trust
will include the pre-funded amount and, if so, the terms, conditions and manner
under which subsequent receivables will be sold and assigned by the seller to
the related trust and, if applicable, the related indenture trustee.
In each purchase agreement, UAFC and UAC will represent and warrant to
the seller, among other things, that:
(1) the information provided with respect to the related
receivables is correct in all material respects;
(2) the obligor on each such receivable has obtained or agreed to
obtain and maintain physical damage insurance covering the
financed vehicle in accordance with UAC's normal requirements;
(3) at the closing date, with respect to receivables conveyed to a
trust on the closing date, and on the applicable subsequent
transfer date with respect to any subsequent receivables, the
receivables are free and clear of all security interests,
liens, charges and encumbrances, other than the lien of the
seller, and no offsets, defenses or counterclaims against the
seller, UAFC, UACFC or UAC have been asserted or threatened
with respect to the related receivables;
(4) at the closing date or subsequent transfer date, as
applicable, each of the related receivables is secured by a
first perfected security interest in the related financed
vehicle in favor of UAFC (or one of the other Named
Lienholders) or all necessary action has been taken by UAC, or
one of the other Named Lienholders to secure such a first
perfected security interest; and
(5) each of the related receivables, at the time it was
originated, complied and, at the closing date or subsequent
transfer date, as applicable, complies, in all material
respects with applicable federal and state laws, including,
without limitation, consumer credit, truth in lending, equal
credit opportunity and disclosure laws.
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As of the last day of any collection period following the discovery by
or notice to UAC of a breach of any such representation or warranty that
materially and adversely affects the interests of the seller or its assignee in
a receivable (or as of the last day of the preceding collection period, if UAC
so elects), UAC, unless it has cured such breach, will repurchase the receivable
at a price equal to the unpaid principal balance owed by the obligor thereon
plus, accrued interest on such amount at the contract rate of such receivable to
the date of purchase, and such receivable will be considered a purchased
receivable as of the purchase date. In each trust and servicing agreement or
pooling and servicing agreement, the seller will assign certain rights under the
related purchase agreement to the related trust, and in each indenture, the
trust will assign such rights under the related purchase agreement to the
related indenture trustee. Such rights include the right to cause UAC to
repurchase receivables with respect to which it is in breach of any such
representation and warranty. The repurchase obligation of UAC pursuant to each
Transfer and Servicing Agreement or indenture will constitute the sole remedy
available to the related securityholders or applicable trustee for any uncured
breach of a representation or warranty.
Sale and Assignment of Subsequent Receivables
If the related prospectus supplement provides that the property of a
trust will include a pre- funding account, UAFC will be obligated to sell and
assign to the seller pursuant to the related purchase agreement, and the seller
will be obligated to sell and assign to the related trust pursuant to the
related trust and servicing agreement or pooling and servicing agreement,
subsequent receivables from time to time during the funding period in an
aggregate outstanding principal amount approximately equal to the pre-funded
amount. If the trust issues a series of notes, the trust will pledge its right
in such subsequent receivables to the indenture trustee as collateral for
payment of the notes. The related trust will be obligated pursuant to the
related trust and servicing agreement or pooling and servicing agreement to
purchase all such subsequent receivables from the seller, and, as applicable,
the related indenture trustee will be obligated pursuant to the related
indenture to accept the pledge of such subsequent receivables from the trust,
subject to the satisfaction, on or before the related subsequent transfer date,
of the following conditions precedent, among others:
(1) each such subsequent receivable shall satisfy the eligibility
criteria specified in the related trust and servicing
agreement or pooling and servicing agreement and shall not
have been selected from among the eligible receivables in a
manner that UAFC or the seller deems adverse to the interests
of the related securityholders;
(2) as of the applicable cutoff date for such subsequent
receivables, all of the receivables in the related trust,
including the subsequent receivables to be conveyed to the
trust as of such date, must satisfy the parameters described
under "The Receivables Pools" in this prospectus and "The
Receivables Pool" in the related prospectus supplement;
(3) any required deposit to any spread account or other similar
account must have been made; and
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(4) UAFC must execute and deliver to the seller, the seller must
execute and deliver to such trust, and, if applicable, the
trust must execute and deliver to the indenture trustee, a
written assignment conveying such subsequent receivables to
the seller, the related trust and the indenture trustee,
respectively.
In addition, the conveyance of subsequent receivables to a trust is
subject to the satisfaction of the following conditions subsequent, among
others, each of which must be satisfied within the applicable time period
specified in the related prospectus supplement:
(1) the seller must deliver certain opinions of counsel to the
related owner trustee and, if applicable, the indenture
trustee with respect to the validity of the conveyance of such
subsequent receivables to the trust and, if applicable, the
indenture trustee;
(2) the applicable trustee must receive written confirmation from
a firm of certified independent public accountants that, as of
the end of the period specified therein, the receivables in
the related receivables pool, including all such subsequent
receivables, satisfied the parameters described under "The
Receivables Pools" in this prospectus and "The Receivables
Pool" in the related prospectus supplement; and
(3) each of the rating agencies must have notified the seller in
writing that, following the conveyance of the subsequent
receivables to the trust and, if applicable, the pledge of the
subsequent receivables to the indenture trustee, each class of
securities of the related series will have the same rating
assigned to it by such rating agency that it had on the
related closing date.
If any such conditions precedent or conditions subsequent are not met
with respect to any subsequent receivables within the time period specified in
the related prospectus supplement, UAC will be required under the related
Transfer and Servicing Agreement to repurchase such subsequent receivables from
the related trust, at a purchase price equal to the related purchase amounts
therefor.
Accounts
Collection Account. With respect to each trust, the seller will
establish and the servicer will maintain a collection account with and in the
name of the related trust on behalf of the related securityholders, into which
all payments made on or in respect of the related receivables will be deposited
(as described in this prospectus) and from which all payments or distributions
with respect to the related securities will be made. The amounts on deposit in
the collection account will be invested by the applicable trustee in eligible
investments.
Payahead Account. If so provided in the related prospectus supplement,
the servicer will establish a payahead account in the name of the related trust
and for the benefit of obligors on the receivables, into which, to the extent
required by the trust and servicing agreement or pooling and servicing
agreement, payaheads on precomputed receivables will be deposited until such
time as the
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payment becomes due. Until such time as payments are transferred from the
payahead account to the collection account, they will not constitute collected
interest or collected principal and will not be available for distribution to
securityholders. The payahead account will initially be maintained with the
applicable trustee. Interest earned on the balance in the payahead account will
be remitted to the servicer monthly. Collections on a precomputed receivable
made during a collection period shall be applied first to any overdue scheduled
payment on such receivable, then to the scheduled payment on such receivable due
in such collection period. If any collections remaining after the scheduled
payment is made are insufficient to prepay the precomputed receivable in full,
then generally such remaining collections shall be transferred to and kept in
the payahead account until such later collection period as the collections may
be retransferred to the collection account and applied either to a later
scheduled payment or to prepay such receivable in full.
Pre-Funding Account. If so provided in the related prospectus
supplement, the servicer will establish and maintain a pre-funding account in
the name of the related owner trustee (or, in the case of a series of securities
which includes notes, the indenture trustee) on behalf of the related
securityholders, into which the seller or the trust, as applicable, will deposit
the pre-funded amount on the related closing date. In no event will the
pre-funded amount exceed 25% of the original aggregate principal balance of the
receivables pool for the related series of securities. The pre-funded amount
will be used by the related trustee to purchase subsequent receivables from the
seller from time to time during the funding period. The amounts on deposit in
the pre-funding account during the funding period will be invested by the
applicable trustee in eligible investments. Any investment income, net of any
related investment expenses, received on the eligible investments during a
collection period will be included in the interest distribution amount on the
following payment date. The funding period, if any, for a trust will begin on
the related closing date and will end on the date specified in the related
prospectus supplement, which in no event will be later than the date that is
three calendar months after the related closing date. Any amounts remaining in
the pre-funding account at the end of the funding period will be distributed to
the related securityholders, in the manner and priority specified in the related
prospectus supplement, as a prepayment of principal of the related securities.
Other Accounts; Investment of trust Funds. Any other accounts to be
established with respect to a trust, including any spread account, payment
account or yield supplement account, will be described in the related prospectus
supplement.
For each series of securities, funds in the collection account,
pre-funding account and any other trust accounts identified as such in the
related prospectus supplement will be invested in eligible investments as
provided in the related Transfer and Servicing Agreement or, if applicable, the
indenture, and any related investment income will be distributed as described in
this prospectus and in the related prospectus supplement. Eligible investments
generally will be limited to investments acceptable to the rating agencies as
being consistent with the rating of the related securities. Except as may be
otherwise indicated in the applicable prospectus supplement, eligible
investments will include:
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(1) direct obligations of, and obligations guaranteed by, the
United States of America, the Federal National Mortgage
Association, or any instrumentality of the United States of
America;
(2) demand and time deposits in or similar obligations of any
depository institution or trust company (including the
trustees or any agent of the trustees, acting in their
respective commercial capacities) having an approved rating of
at least P-1 by Moody's Investors Service, Inc. or A-1+ by
Standard & Poor's Rating Services (an "Approved Rating") or
any other deposit which is fully insured by the Federal
Deposit Insurance Corporation;
(3) repurchase obligations with respect to any security issued or
guaranteed by an instrumentality of the United States of
America entered into with a depository institution or trust
company having an Approved Rating (acting as principal);
(4) short-term corporate securities bearing interest or sold at a
discount issued by any corporation incorporated under the laws
of the United States of America or any State, the short-term
unsecured obligations of which have an Approved Rating, or
higher, at the time of such investment;
(5) commercial paper having an Approved Rating at the time of such
investment;
(6) a guaranteed investment contract issued by any insurance
company or other corporation acceptable to the rating
agencies;
(7) interests in any money market fund having a rating of Aaa by
Moody's Investors Service, Inc. or AAAm by Standard & Poor's
Ratings Services; and
(8) any other investment approved in advance in writing by the
rating agencies.
Except as described in this prospectus or in the related prospectus
supplement, eligible investments will be limited to obligations or securities
that mature on or before the date of the next scheduled distribution to
securityholders of such series; provided, however, that, unless the related
prospectus supplement requires otherwise, each trust and servicing agreement or
pooling and servicing agreement and indenture, if applicable, will generally
permit the investment of funds in any spread account or similar type of credit
enhancement account to be invested in eligible investments without the
limitation that such eligible investments mature not later than the business day
prior to the next succeeding payment date if (1) the servicer obtains a
liquidity facility or similar arrangement with respect to such spread account or
other account and (2) each rating agency that initially rated the related
securities confirms in writing that the ratings of such securities will not be
lowered or withdrawn as a result of eliminating or modifying such limitation.
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The accounts established on behalf of the trusts will be maintained as
eligible deposit accounts. Eligible deposit account means either:
(1) a segregated account with an eligible institution, or
(2) a segregated trust account with the corporate trust department
of a depository institution organized under the laws of the
United States of America 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 that signifies investment grade.
Eligible institution means, with respect to a trust,
(1) the corporate trust department of the applicable trustee, or
(2) a depository institution organized under the laws of the
United States of America or any one of the states thereof or
the District of Columbia (or any domestic branch of a foreign
bank)
(a) that has either (i) a long-term unsecured debt rating
of at least Baa3 from Moody's Investor's Service,
Inc. or (ii) a long-term unsecured debt rating, a
short-term unsecured debt rating or a certificate of
deposit rating acceptable to the rating agencies, and
(b) whose deposits are insured by the FDIC.
Servicing Procedures
The servicer will make reasonable efforts to collect all payments due
with respect to the receivables and, consistent with the related trust and
servicing agreement or pooling and servicing agreement, will follow such
collection procedures as it follows with respect to comparable automotive
installment contracts that it owns or services for others. The servicer will
continue to follow such normal collection practices and procedures as it deems
necessary or advisable to realize upon any receivables with respect to which the
servicer determines that eventual payment in full is unlikely. The servicer may
sell the financed vehicle securing such receivables at a public or private sale,
or take any other action permitted by applicable law.
Consistent with its normal procedures, the servicer may, in its
discretion, arrange with the obligor on a receivable to extend or modify the
payment schedule; if, however, the extension of a payment schedule causes a
receivable to remain outstanding on the latest final scheduled payment date of
any class of securities with respect to a series of securities specified in the
related prospectus
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supplement, the servicer will purchase such receivable as of the last day of the
collection period preceding such final scheduled payment date. The servicer's
purchase obligation will constitute the sole remedy available to the related
securityholders or applicable trustee for any such modification of a receivable.
Collections
With respect to each trust, the servicer will deposit all payments
(from whatever source) on and all proceeds of the related receivables collected
during a collection period into the related collection account not later than
two business days after receipt thereof. However, at any time that and for so
long as (1) UAC is the servicer, (2) no servicer default under the trust and
servicing agreement or pooling and servicing agreement shall have occurred and
be continuing with respect to the servicer and (3) each other condition to
making deposits less frequently than daily as may be specified by the rating
agencies or set forth in the related prospectus supplement is satisfied, the
servicer will not be required to deposit such amounts into the collection
account until on or before the applicable payment date. Pending deposit into the
collection account, collections may be invested by the servicer at its own risk
and for its own benefit and will not be segregated from its own funds. If the
servicer were unable to remit such funds, securityholders might incur a loss. 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 on the related receivables and payment of the aggregate purchase
amounts with respect to receivables purchased by the servicer.
Unless otherwise provided in the applicable prospectus supplement,
payaheads on precomputed receivables will be transferred from the collection
account and deposited into the payahead account for subsequent transfer to the
collection account, as described above under "-- Accounts."
Advances
Unless otherwise provided in the related prospectus supplement, if a
receivable is delinquent more than 30 days at the end of a collection period,
the servicer will make an advance in the amount of 30 days of interest due on
such receivable, but only to the extent that the servicer, in its sole
discretion, expects to recover the advance from subsequent collections on the
receivable or from withdrawals from any spread account or other form of credit
enhancement. The servicer will deposit advances in the collection account on or
prior to the date specified therefor in the related prospectus supplement. If
the servicer determines that reimbursement of an advance from subsequent
payments on or with respect to the related receivable is unlikely, the servicer
may recover such advance from insurance proceeds, collections made on other
receivables or from any other source specified in the related prospectus
supplement.
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Servicing Compensation and Payment of Expenses
Unless otherwise specified in the related prospectus supplement, the
servicer will be entitled to receive a servicing fee with respect to each trust,
at a rate equal to one percent (1.00%) per annum, payable monthly at one-twelfth
the annual rate, of the related aggregate principal balance of the receivables
pool as of the beginning of the related collection period. Unless otherwise
provided in the related prospectus supplement, the servicer also will collect
and retain any late fees, prepayment charges, other administrative fees or
similar charges allowed by applicable law with respect to the receivables and
will be entitled to reimbursement from each trust for certain liabilities.
The servicing fee will compensate the servicer for performing the
functions of a third-party servicer of automotive receivables as an agent for
the related trust, including collecting and posting all payments, making
advances, responding to inquiries of obligors on the receivables, investigating
delinquencies, sending payment coupons to obligors, and overseeing the
collateral in cases of obligor default. The servicing fee will also compensate
the servicer for administering the related receivables pool, including
accounting for collections and furnishing monthly and annual statements to the
related trustee with respect to distributions, and generating federal income tax
information for such trust and for the related securityholders. The servicing
fee also will reimburse the servicer for certain taxes, accounting fees, outside
auditor fees, data processing costs, and other costs incurred in connection with
administering the applicable receivables pool.
Payments and Distributions
With respect to each series of securities, beginning on the payment
date specified in the related prospectus supplement, payments of principal and
interest (or, where applicable, of interest only or principal only) on each
class of securities entitled thereto will be made by the related trustee to the
related securityholders. The timing, calculation, allocation, order, source and
priorities of, and requirements for, all payments to the holders of each class
of securities will be set forth in the related prospectus supplement.
With respect to each trust, collections on or with respect to the
related receivables will be deposited into the related collection account for
distribution to the related securityholders on each payment date to the extent
and in the priority provided in the related prospectus supplement. Credit
enhancement, such as a spread account, yield supplement account or other
arrangement, may be available to cover shortfalls in the amount available for
distribution on such date to the extent specified in the related prospectus
supplement. As more fully described in the related prospectus supplement, and
unless otherwise specified therein, payments in respect of principal of a class
of securities of a series will be subordinate to payments in respect of interest
on such class, and payments in respect of one or more classes of securities of a
series may be subordinate to payments in respect of other classes of securities.
Payments of principal on the securities of a series may be based on the amount
of principal collected or due, or the amount of realized losses incurred, in a
collection period or, to the extent provided in the related prospectus
supplement, may be made on an accelerated basis subject to the availability of
excess cash flow from the receivables.
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Credit Enhancement
The amounts and types of any credit enhancement arrangements and the
provider thereof, if applicable, with respect to each class of securities of a
series will be set forth in the related prospectus supplement. To the extent
provided in the related prospectus supplement, credit or cash flow enhancement
may be in the form of subordination of one or more classes of securities, spread
accounts, cash collateral accounts, reserve accounts, yield supplement accounts,
insurance policies, letters of credit, surety bonds, over-collateralization,
credit or liquidity facilities, guaranteed investment contracts, swaps or other
interest rate protection agreements, repurchase obligations, other agreements
with respect to third-party payments or other support, cash deposits, or such
other arrangements as may be described in the related prospectus supplement, or
any combination of the foregoing. If specified in the applicable prospectus
supplement, credit or cash flow enhancement for a class of securities may cover
one or more other classes of securities of the same series, and credit
enhancement for a series of securities may cover one or more other series of
securities.
The existence of a spread account or other form of credit enhancement
for the benefit of any class or series of securities is intended to enhance the
likelihood of receipt by the securityholders of such class or series of the full
amount of principal and interest due thereon and to decrease the likelihood that
such securityholders will experience losses. Unless otherwise specified in the
related prospectus supplement, the credit enhancement for a class or series of
securities will not provide protection against all risks of loss and will not
guarantee repayment of all principal and interest thereon. If losses occur which
exceed the amount covered by such credit enhancement or which are not covered by
such credit enhancement, securityholders will bear their allocable share of such
losses, as described in the related prospectus supplement. In addition, if a
form of credit enhancement covers more than one series of securities,
securityholders of any such series will be subject to the risk that such credit
enhancement may be exhausted by the claims of securityholders of other series.
Spread Account. If so provided in the related prospectus supplement,
pursuant to the related trust and servicing agreement or pooling and servicing
agreement or indenture, if applicable, the seller or the trust, as applicable,
will cause the applicable trustee to establish a spread account for a series or
class or classes of securities, which will be maintained with such trustee. To
the extent provided in the related prospectus supplement, a spread account may
be funded by an initial deposit by the seller on the closing date in the amount
set forth in the related prospectus supplement and, if the related series has a
funding period, may also be funded 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 the spread account
may be increased or reinstated on each payment date, to the extent described in
the related prospectus supplement, by the deposit thereto of the amount of
collections on the related receivables remaining on such payment date after the
payment of all other required payments and distributions on such date. The
related prospectus supplement will describe the circumstances under which and
the manner in which distributions may be made out of any such spread account,
either to holders of the certificates covered thereby or to the seller or to any
other entity.
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Evidence of Compliance
Each trust and servicing agreement or pooling and servicing agreement
will provide that a firm of independent public accountants will furnish annually
to the related trustee a statement as to compliance by the servicer during the
preceding twelve months with certain standards relating to the servicing of the
receivables.
Each trust and servicing agreement or pooling and servicing agreement
will also provide for delivery to the related trustee each year of a certificate
signed by an officer of the servicer stating that the servicer has fulfilled its
obligations under such agreements throughout the preceding twelve months or, if
there has been a default in the fulfillment of any such obligation, describing
each such default. The servicer has agreed or will agree to give each trustee
notice of the occurrence of certain servicer defaults under the related trust
and servicing agreement or pooling and servicing agreement.
Copies of the foregoing statements and certificates may be obtained by
securityholders by a request in writing addressed to the related trustee or
indenture trustee at the Corporate trust Office for such trustee specified in
the related prospectus supplement.
Certain Matters Regarding the Servicer
Each trust and servicing agreement or pooling and servicing agreement
will provide that UAC may not resign from its obligations and duties as servicer
thereunder, except upon determination that UAC's performance of such duties is
no longer permissible under applicable law. No such resignation will become
effective until the related trustee or a successor servicer has assumed UAC's
servicing obligations and duties under the related trust and servicing agreement
or pooling and servicing agreement.
Each trust and servicing agreement or 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 securityholders for taking any action or for refraining from taking any
action pursuant to the related trust and servicing agreement or pooling and
servicing agreement or for errors in judgment; provided, however, that neither
the servicer nor any such person will be protected against any liability that
would otherwise be imposed by reason of willful misfeasance, bad faith or
negligence in the performance of the servicer's duties or by reason of reckless
disregard of its obligations and duties thereunder. In addition, each trust and
servicing agreement or 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 its servicing responsibilities under such
agreements and that, in its opinion, may cause it to incur any expense or
liability.
Under the circumstances specified in each trust and servicing agreement
or pooling and servicing agreement, any entity into which UAC may be merged or
consolidated, or any entity resulting from any merger or consolidation to which
UAC is a party, or any entity succeeding to the indirect automobile financing
and receivable servicing business of UAC, which corporation or other entity
assumes the obligations of the servicer, will be the successor to the servicer
under such agreements.
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Servicer Defaults
Unless otherwise provided in the related prospectus supplement,
servicer defaults under each trust and servicing agreement or pooling and
servicing agreement will consist of:
(1) any failure by the servicer or UAC to deliver to the related
owner trustee or, if applicable, the indenture trustee for
payment to the related securityholders any required payment,
which failure continues unremedied for five business days
after written notice to the servicer of such failure from the
applicable trustee or holders of the related securities
evidencing not less than 25% of the aggregate principal
balance of the notes (or aggregate principal balance of the
certificates and/or notional principal amount, if applicable);
(2) any failure by the servicer, UAC or the seller duly to observe
or perform in any material respect any covenant or agreement
in the related trust and servicing agreement or pooling and
servicing agreement, which failure materially and adversely
affects the rights of the related securityholders and which
continues unremedied for 60 days after written notice of such
failure is given to the servicer, UAC or the seller, as the
case may be, by the related owner trustee, or, if applicable,
the indenture trustee, or holders of the related securities
evidencing not less than 25% of the aggregate principal
balance of the notes (or aggregate principal balance of the
certificates and/or notional principal amount, if applicable);
and
(3) certain events of insolvency, readjustment of debt, marshaling
of assets and liabilities, or similar proceedings with respect
to the servicer and certain actions by the servicer indicating
its insolvency, reorganization pursuant to bankruptcy
proceedings or inability to pay its obligations.
Rights Upon Servicer Default
Unless otherwise provided in the related prospectus supplement, as long
as a servicer default under the related trust and servicing agreement or pooling
and servicing agreement remains unremedied, the related owner trustee or, if
applicable, indenture trustee, upon direction to do so by holders of securities
of the related series evidencing not less than 25% of the aggregate principal
balance of the notes (or aggregate principal balance of the certificates and/or
notional principal amount, if applicable) may terminate all the rights and
obligations of the servicer under such agreements, whereupon a successor
servicer appointed by the related trustee or such trustee will succeed to all
the responsibilities, duties and liabilities of the servicer under such
agreements and will be entitled to similar compensation arrangements. If,
however, a bankruptcy trustee or similar official has been appointed for the
servicer, and no servicer default other than such appointment has occurred, such
trustee or official may have the power to prevent the related trustee or the
related securityholders from effecting a transfer of servicing. In the event
that the related trustee is unwilling or unable to act as successor to the
servicer, such trustee may appoint, or may petition a court of
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competent jurisdiction to appoint, a successor with assets of at least
$50,000,000 and whose regular business includes the servicing of automotive
receivables. The related trustee may arrange for compensation to be paid to such
successor servicer, which in no event may be greater than the servicing
compensation paid to the servicer under the related trust and servicing
agreement or pooling and servicing agreement.
Waiver of Past Defaults
Unless otherwise provided in the related prospectus supplement, holders
of securities evidencing not less than a majority of the related aggregate
principal balance of the notes (or aggregate principal balance of the
certificates or notional principal amount, if applicable) may, on behalf of all
such securityholders, waive any default by the servicer in the performance of
its obligations under the related trust and servicing agreement or pooling and
servicing agreement and its consequences, except a default in making any
required deposits to or payments from any account in accordance with the trust
and servicing agreement. No such waiver will impair the securityholders' rights
with respect to subsequent servicer defaults.
Amendment
Unless otherwise specified in the related prospectus supplement, each
trust and servicing agreement or pooling and servicing agreement may be amended
from time to time by the seller, the servicer, the trust and the related owner
trustee or, if applicable, indenture trustee, without the consent of the related
securityholders, to cure any ambiguity, correct or supplement any provision
therein that may be inconsistent with other provisions therein, or to make any
other provisions with respect to matters or questions arising under such
agreements that are not inconsistent with the provisions of the agreements;
provided that such action shall not, in the opinion of counsel satisfactory to
the related trustee, materially and adversely affect the interests of any
related securityholder. Each trust and servicing agreement or pooling and
servicing agreement may also be amended by the seller, the servicer and the
related trustee with the consent of the holders of the related securities
evidencing not less than 51% of the related aggregate principal balance of the
notes (or aggregate principal balance of the certificates or notional principal
amount, if applicable) for the purpose of adding any provisions to or changing
in any manner or eliminating any of the provisions of such agreements or of
modifying in any manner the rights of such 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 or in respect
of the related receivables or distributions that are required to be made for the
benefit of such securityholders or (2) reduce the aforesaid percentage of the
aggregate principal balance of such series that is required to consent to any
such amendment, without the consent of the holders of all of the outstanding
securities of such series. No amendment of the trust and servicing agreement
shall be permitted unless an opinion of counsel is delivered to the trustee to
the effect that such amendment will not adversely affect the tax status of the
trust.
Termination
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Unless otherwise specified in the related prospectus supplement, the
obligations of the servicer, the seller, the trust and the related owner trustee
or indenture trustee pursuant to the applicable trust and servicing agreement or
pooling and servicing agreement or indenture, if applicable, will terminate upon
the earliest to occur of (1) the maturity or other liquidation of the last
receivable in the related receivables pool and the disposition of any amounts
received upon liquidation of any such remaining receivables and (2) the payment
to the related securityholders of all amounts required to be paid to them
pursuant to the applicable trust and servicing agreement or pooling and
servicing agreement and, in the case of a series of notes issued by a trust, the
indenture.
Unless otherwise specified in the related prospectus supplement, in
order to avoid excessive administrative expenses, the servicer or one or more
other entities identified in the related prospectus supplement, will be
permitted, at its option, to purchase from each trust or to cause such trust to
sell all remaining receivables in the related receivables pool as of the end of
any collection period, if the aggregate principal balance of the receivables
pool as of the end of the related collection period would be less than or equal
to 10% of the initial aggregate principal balance of the receivables pool, at a
purchase price equal to the fair market value of such receivables, but not less
than the sum of (1) the outstanding aggregate principal balance of the
receivables pool and (2) accrued and unpaid interest on such amount computed at
a rate equal to the weighted average contract rate of the receivables, minus any
amount representing payments received on the receivables and not yet applied to
reduce the principal balance thereof or interest related thereto.
THE INDENTURE
The following summary describes certain terms of each indenture
pursuant to which a trust will issue a series of notes, if any. A form of
indenture has been filed as an exhibit to the registration statement of which
this prospectus is a part. The following summary is not complete. For a more
detailed description of the indenture, you should read the indenture and the
related prospectus supplement.
Default under the Indenture
With respect to the notes of a given series, unless otherwise specified
in the related prospectus supplement, an indenture default under the related
indenture will occur if:
o the trust fails to pay any interest or principal on any note
after such amounts are due and payable for five or more days
after notice thereof is given to the trust by the indenture
trustee, or if applicable, the insurer, or after notice is
given to such trust and the indenture trustee by the holders
of at least 25% of the principal amount of the outstanding
notes;
o the trust defaults in the observance or performance of any
covenant or agreement that it made in the related indenture
and the default continues for a period of 90 days after notice
is given to such trust by the indenture trustee or, if
applicable, the insurer, or
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after notice is given to such trust and such indenture trustee
by the holders of at least 25% of the principal amount of the
outstanding notes;
o the trust makes any representation or warranty in the related
indenture (or in any certificate delivered in connection with
such indenture) that was incorrect in a material respect as of
the time made, and such breach is not cured within 30 days
after notice is given to such trust by the indenture trustee
or, if applicable, the insurer, or after notice is given to
such trust and such indenture trustee by the holders of at
least 25% of the principal amount of the outstanding notes
(voting as a single class); or
o certain events of bankruptcy, insolvency, receivership or
liquidation of the applicable trust (a "Trust Bankruptcy
Event") occur.
Either the insurer or the noteholders may declare an indenture default.
The insurer will control the remedy for an indenture default, unless the insurer
is in default under the policy, in which case the noteholders will control the
remedy. The party who declares the indenture default may give notice and
accelerate the payment of principal in respect of the notes, declaring the
principal on the notes immediately due and payable.
If an indenture default occurs and the insurer is not in default under
the Policy, the insurer will have the right to control the remedy. The insurer
may, at its discretion, require the indenture trustee to liquidate the property
of the trust, in whole or in part, on any date following the acceleration of the
notes due to such indenture default. Such liquidation will cause a full or
partial redemption of the notes. However, the insurer may not cause the
indenture trustee to liquidate the property of the trust if the liquidation
proceeds would not be enough to pay all outstanding principal and accrued
interest on the notes, unless the indenture default arose from a Trust
Bankruptcy Event. Following an indenture default and acceleration of the notes,
the indenture trustee will continue to submit claims under the Policy for any
shortfalls in amounts needed to make payments on the notes, unless the party
controlling the remedies liquidates the property of the trust.
If an indenture default occurs and the insurer is in default under the
Policy, the holders of at least two-thirds (2/3) of the aggregate principal
balance of the notes then outstanding (voting as a single class) will have the
right to control the remedies available under the indenture with respect to such
default, including the right to direct the indenture trustee to liquidate the
property of the trust. However, the noteholders may not direct the indenture
trustee to liquidate the property of the trust unless the indenture default
arose from a Trust Bankruptcy Event.
If the noteholders elect to liquidate the trust property upon the
occurrence of a Trust Bankruptcy Event, as described above, the Policy may not
be available to cover losses to noteholders resulting from the liquidation of
the trust assets. The Policy will be terminated, and the insurer will have no
further obligation to make any additional payment under the Policy. The
noteholders may determine to sell the receivables whether or not the proceeds of
such sale will be sufficient to pay any portion of the principal and interest
payable with respect to any subordinated class of notes. Upon
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such a sale of the receivables by the indenture trustee, if the proceeds from
such sale and any amounts on deposit in the spread account and the collection
account are not sufficient to pay all the notes in full, then the subordinated
class of notes will bear losses as described in the prospectus supplement.
Certain Covenants
Unless otherwise specified in a prospectus supplement with respect to a
series that includes notes, each indenture will provide that the related trust
may not consolidate with or merge into any other entity, unless:
o 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;
o such entity expressly assumes the trust's obligation to make
due and punctual payments on the notes of the related series
and the performance or observance of every obligation of the
trust under the indenture;
o no indenture default shall have occurred and be continuing
immediately after such merger or consolidation;
o the indenture trustee has been advised that the rating of the
securities of such series then in effect would not be reduced
or withdrawn by any rating agency as a result of such merger
or consolidation; and
o the indenture trustee has received an opinion of counsel to
the effect that such consolidation or merger would have no
material adverse tax consequence to the trust or to any of its
noteholders.
Each trust that issues notes will not, among other things:
o except as expressly permitted by the applicable indenture, the
applicable Transfer and Servicing Agreements or certain
related documents with respect to such trust, sell, transfer,
exchange or otherwise dispose of any of the assets of such
trust;
o claim any credit on or make any deduction from the principal
and interest payable in respect of the notes of the related
series (other than amounts withheld under the Internal Revenue
Code of 1986, as amended (the "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 such trust;
o dissolve or liquidate in whole or in part until the notes are
repaid or will be repaid as a result thereof;
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o 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
o permit any lien, charge, excise, claim, security interest,
mortgage or other encumbrance to be created on or extend to or
otherwise impair the assets of such trust or the proceeds
thereof.
Satisfaction and Discharge of Indenture
An indenture will be discharged with respect to the collateral securing
the related notes upon the delivery to the 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
With respect to each trust that issues notes, unless otherwise provided
in the related prospectus supplement, the trust and the indenture trustee may,
with the consent of the holders of notes of the related series evidencing not
less than 51% of the outstanding principal balance of such notes, acting as a
single class and with the consent of the servicer (which consent may not be
unreasonably withheld) execute a supplemental indenture to add to or change in
any manner the indenture, or modify (except as provided below) in any manner the
rights of the noteholders.
Unless otherwise specified in the related prospectus supplement with
respect to a series of securities which includes notes, the indenture may not be
amended to:
o change the due date of any installment of principal of or
interest on any outstanding note or reduce the principal
amount, the interest rate on or the redemption price with
respect thereto or change the method, place, or currency of
payment;
o impair the right to institute suit for the enforcement of
certain provisions of the indenture regarding payment;
o reduce the percentage of the aggregate amount of the
outstanding notes of such series which is required for any
such indenture supplement or the consent of the holders of
which is required for any waiver of compliance with certain
provisions of the indenture or defaults thereunder;
o modify or alter the provisions of the indenture regarding the
voting of notes held by the applicable trust, the seller or an
affiliate of any of them;
o reduce the percentage of the aggregate outstanding amount of
such series which is required to direct the indenture trustee
to sell or liquidate the receivables if the
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proceeds of such sale would be insufficient to pay the
principal amount and accrued but unpaid interest on the
outstanding notes of such series; or
o permit the creation of any lien ranking prior to or on a
parity with the lien of the indenture trustee 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 trustee.
Unless otherwise provided in the applicable prospectus supplement with
respect to a series that includes notes, the related trust and the indenture
trustee may also enter into supplemental indentures, without obtaining the
consent of the noteholders of the related series, but with the consent of the
servicer (which consent may not be unreasonably withheld) for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions of the indenture or of modifying in any manner the rights of such
noteholders; provided that such action will not materially and adversely affect
the interest of any such noteholder.
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES
Security Interest in Vehicles
Installment sale contracts such as those included in the receivables
evidence the credit sale of automobiles, light trucks and vans by dealers to
obligors; the contracts and the installment loan and security agreements also
constitute personal property security agreements and include grants of security
interests in the vehicles under the UCC. Perfection of security interests in the
vehicles is generally governed by the motor vehicle registration laws of the
state in which the vehicle is located. In all of the states where UAC currently
acquires or originates receivables, a security interest in a vehicle is
perfected by notation of the secured party's lien on the vehicle's certificate
of title. With respect to the receivables, the lien is or will be perfected in
the name of one of the Named Lienholders. The terms of each receivable prohibit
the sale or transfer of the financed vehicle without the lienholder's consent.
Pursuant to each purchase agreement, UAFC will assign its security
interests in the financed vehicles to the seller along with the receivables.
Pursuant to each trust and servicing agreement or pooling and servicing
agreement, the seller will assign its security interests in the financed
vehicles to the related trust along with the receivables. In the case of a
series of notes issued by a trust, pursuant to each indenture, the trust will
grant the indenture trustee a security interest in its assets, including its
security interest in the financed vehicles and the receivables. Because of the
administrative burden and expense, neither the seller nor the applicable trustee
will amend any certificate of title to identify itself as the secured party.
In most states, an assignment or pledge such as that under the Transfer
and Servicing Agreements or the indenture is an effective conveyance of a
security interest without amendment of
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any lien noted on a vehicle's certificate of title, and the assignee succeeds
thereby to the assignor's rights as secured party. In many states in which the
receivables were originated, the laws governing certificates of title are silent
on the question of the effect of an assignment on the continued validity and
perfection of a security interest in vehicles. However, with respect to security
interests perfected by a central filing, the UCC in these states provides that a
security interest continues to be valid and perfected even though the security
interest has been assigned to a third party and no amendments or other filings
are made to reflect the assignment. An official comment to the UCC states that
this rule should control a security interest in a vehicle which is perfected by
the notation of the lien on the certificate of title. Although the comment does
not have the force of law, official comments are typically given substantial
weight by the courts.
The other states in which the receivables were originated have
statutory provisions that address or could be interpreted as addressing
assignments. However, nearly all of these statutory provisions either do not
require compliance with the procedure outlined to insure the continued validity
and perfection of the lien or are ambiguous on the issue of whether the
procedure must be followed. Under the official comment noted above, if these
procedures for noting an assignee's name on a certificate of title are
determined to be merely permissive in nature, the procedures would not have to
be followed as a condition to the continued validity and perfection of the
security interest.
By not identifying the trust or the indenture trustee as the secured
party on the certificate of title, the security interest of the trust or the
indenture trustee in the vehicle could be defeated through fraud or negligence.
In the absence of fraud or forgery by the vehicle owner or one of the Named
Lienholders, or administrative error by state or local agencies, the notation of
UAFC's or its predecessor's lien on the certificates should be sufficient to
protect the trust or the indenture trustee against the right of subsequent
purchasers of a vehicle or subsequent lenders who take a security interest in a
vehicle securing a receivable. If there are any vehicles as to which one of the
Named Lienholders failed to obtain a perfected security interest, its security
interest would be subordinate to, among others, subsequent purchasers of the
vehicles and holders of perfected security interests. Such a failure, however,
would constitute a breach of warranties under the related Transfer and Servicing
Agreements and would create an obligation of UAC to repurchase the related
receivable, unless such breach were cured in a timely manner. See "Description
of the Transfer and Servicing Agreements -- Sale and Assignment of Receivables."
Under the laws of most states, including most of the states in which
the receivables have been or will be originated, the perfected security interest
in a vehicle continues for four months after a vehicle is moved to a state other
than the state which issued the certificate of title and thereafter until the
vehicle owner re-registers the vehicle in the new state. A majority of states
require surrender of a certificate of title to re-register a vehicle. Since UAFC
(or one of the other Named Lienholders) will have its lien noted on the
certificates of title and the servicer will retain possession of the
certificates of title issued by most states in which receivables were or will be
originated, the servicer would ordinarily learn of an attempt at re-registration
through the request from the obligor to surrender possession of the certificate
of title or would receive notice of surrender from the state of re-registration
since the security interest would be noted on the certificate of title. Thus,
the secured
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party would have the opportunity to re-perfect its security interest in the
vehicle in the state of relocation. In states that do not require a certificate
of title for registration of a motor vehicle, re- registration could defeat
perfection.
In the ordinary course of servicing receivables, the servicer takes
steps to effect re-perfection upon receipt of notice of re-registration or
information from the obligor as to relocation. Similarly, when an obligor sells
a vehicle, the servicer must surrender possession of the certificate of title or
will receive notice as a result of UAFC's (or one of the other Named
Lienholders') lien noted thereon and accordingly will have an opportunity to
require satisfaction of the related receivable before release of the lien. Under
each trust and servicing agreement or pooling and servicing agreement, the
servicer is obligated to take appropriate steps, at its own expense, to maintain
perfection of security interests in the financed vehicles.
Under the laws of most states, liens for repairs performed on a motor
vehicle and liens for unpaid taxes would take priority over even a perfected
security interest in a financed vehicle. In some states, a perfected security
interest in a financed vehicle may take priority over liens for repairs.
UAC and UAFC will represent and warrant in each Transfer and Servicing
Agreement that, as of the date of issuance of the securities, each security
interest in a financed vehicle is or will be prior to all other present liens
(other than tax liens and liens that arise by operation of law) upon and
security interests in such financed vehicle. However, liens for repairs or taxes
could arise at any time during the term of a receivable. No notice will be given
to the trustee, the indenture trustee or the securityholders in the event such a
lien arises.
Repossession
In the event of a default by vehicle purchasers, the holder of a retail
installment sale contract or an installment loan and security agreement has all
of the remedies of a secured party under the UCC, except where specifically
limited by other state laws. The remedy employed by the servicer in most cases
of default is self-help repossession and is accomplished simply by taking
possession of the financed vehicle. The self-help repossession remedy is
available under the UCC in most of the states in which receivables have been or
will be originated as long as the repossession can be accomplished without a
breach of the peace.
In cases where the obligor objects or raises a defense to repossession,
or if otherwise required by applicable state law, a court order must be obtained
from the appropriate state court. The vehicle must then be repossessed in
accordance with that order.
Notice of Sale; Redemption Rights
In the event of default by an obligor, some jurisdictions require that
the obligor be notified of the default and be given a time period within which
the obligor may cure the default prior to
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repossession. Generally, this right of reinstatement may be exercised on a
limited number of occasions in any one-year period.
The UCC and other state laws require the secured party to provide an
obligor with reasonable notice of the date, time and place of any public sale
and/or the date after which any private sale of the collateral may be held. The
obligor generally has the right to redeem the collateral prior to actual sale by
paying the secured party the unpaid principal balance of the obligation plus
reasonable expenses for repossessing, holding, and preparing the collateral for
disposition and arranging for its sale, and, to the extent provided in the
related retail installment sale contract, and, as permitted by law, reasonable
attorneys' fees.
Deficiency Judgments and Excess Proceeds
The proceeds of resale of financed vehicles generally will be applied
first to the expenses of resale and repossession and then to the satisfaction of
the indebtedness. If the net proceeds from resale do not cover the full amount
of the indebtedness, a deficiency judgment may be sought. However, the
deficiency judgment would be a personal judgment against the obligor for the
shortfall, and a defaulting obligor can be expected to have very little capital
or sources of income available following repossession. Therefore, in many cases,
it may not be useful to seek a deficiency judgment or, if one is obtained, it
may be settled at a significant discount.
Occasionally, after resale of a vehicle and payment of all expenses and
all indebtedness, there is a surplus of funds. In that case, the UCC requires
the lender to remit the surplus to any holder of a lien with respect to the
vehicle or if no such lienholder exists, the UCC requires the lender to remit
the surplus to the former owner of the vehicle.
Consumer Protection Laws
Numerous federal and state consumer protection laws and related
regulations impose substantial requirements upon lenders and servicers involved
in consumer finance. These laws include the Truth-in-Lending Act, the Equal
Credit Opportunity Act, the Federal Trade Commission Act, the Fair Credit
Billing Act, the Fair Credit Reporting Act, the Fair Debt Collection Practices
Act, the Magnuson-Moss Warranty Act, the Federal Reserve Board's Regulations B
and Z, state adaptations of the National Consumer Act and of the Uniform
Consumer Credit Code and state motor vehicle retail installment sales acts, and
other similar laws. Also, state laws impose finance charge ceilings and other
restrictions on consumer transactions and require contract disclosures in
addition to those required under federal law. Those requirements impose specific
statutory liabilities upon creditors who fail to comply with their provisions.
In some cases, this liability could affect an assignee's ability to enforce
consumer finance contracts such as the receivables.
The so-called "Holder-in-Due-Course" Rule of the Federal Trade
Commission (the "FTC Rule"), the provisions of which are generally duplicated by
the Uniform Consumer Credit Code, other state statutes, or the common laws in
certain states, has the effect of subjecting a seller (and certain
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related lenders and their assignees) in a consumer credit transaction and any
assignee of the seller to all claims and defenses that the obligor in the
transaction could assert against the seller of the goods. Liability under the
FTC Rule is limited to the amounts paid by the obligor under the contract, and
the holder of the contract may also be unable to collect any balance remaining
due thereunder from the obligor. Most of the receivables will be subject to the
requirements of the FTC Rule. Accordingly, the trustee or the indenture trustee,
as holder of the receivables, will be subject to any claims or defenses that the
obligor of the related financed vehicle may assert against the seller of the
vehicle. Such claims are limited to a maximum liability equal to the amounts
paid by the obligor on the receivable.
Under most state motor vehicle dealer licensing laws, dealers of motor
vehicles are required to be licensed to sell motor vehicles at retail sale. In
addition, with respect to used vehicles, the Federal Trade Commission's Rule on
Sale of Used Vehicles requires that all used vehicle dealers prepare, complete
and display a "Buyer's Guide" which explains the warranty coverage for such
vehicles. Furthermore, federal odometer regulations promulgated under the Motor
Vehicle Information and Cost Savings Act requires that all used vehicle dealers
furnish a written statement signed by the seller certifying the accuracy of the
odometer reading. If a dealer is not properly licensed or if either a Buyer's
Guide or Odometer Disclosure Statement was not provided to the purchaser of the
related financed vehicle, the obligor may be able to assert a defense against
the dealer. If an obligor were successful in asserting any such claim or
defense, such claim or defense would constitute a breach of UAC's
representations and warranties under each Transfer and Servicing Agreement and
would create an obligation of UAC to repurchase the receivable unless such
breach were cured in a timely manner. See "Description of the Transfer and
Servicing Agreements -- Sale and Assignment of Receivables."
Courts have applied general equitable principles to secured parties
pursuing repossession or litigation involving deficiency balances. These
equitable principles may have the effect of relieving an obligor from some or
all of the legal consequences of a default.
In several cases, consumers have asserted that the self-help remedies
of secured parties under the UCC and related laws violate the due process
protections provided under the 14th Amendment to the Constitution of the United
States. Courts have generally upheld the notice provisions of the UCC and
related laws as reasonable or have found that the repossession and resale by the
creditor do not involve sufficient state action to afford constitutional
protection to consumers.
UAC will represent and warrant in each purchase agreement 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 or the indenture
trustee's interest in a receivable, such violation would constitute a breach of
UAC's representations and warranties under the purchase agreement and would
create an obligation of UAC to repurchase such receivable unless the breach were
cured. See "Description of the Transfer and Servicing Agreements -- Sale and
Assignment of Receivables."
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Other Limitations
In addition to the laws limiting or prohibiting deficiency judgments,
numerous other statutory provisions, including federal bankruptcy laws and
related state laws, may interfere with or affect the ability of a lender to
realize upon collateral or enforce a deficiency judgment. For example, in a
Chapter 13 proceeding under the federal bankruptcy law, a court may prevent a
lender from repossessing an automobile, and, as part of the rehabilitation plan,
reduce the amount of the secured indebtedness to the market value of the
automobile at the time of bankruptcy (as determined by the court), leaving the
party providing financing as a general unsecured creditor for the remainder of
the indebtedness. A bankruptcy court may also reduce the monthly payments due
under a contract or change the rate of interest and time of repayment of the
indebtedness.
Bankruptcy Matters
UAC and UAFC will represent and warrant to the seller in each purchase
agreement, and the seller will warrant to the related trust in each trust and
servicing agreement or pooling and servicing agreement, that the sales of the
receivables by UAC to UAFC, by UAFC to the seller and by the seller to the trust
are valid sales of the receivables to UAFC, the seller and such trust,
respectively. Notwithstanding the foregoing, if UAC, UAFC, UACFC or the seller
were to become a debtor in a bankruptcy case and a creditor or
trustee-in-bankruptcy of such debtor or such debtor itself were to take the
position that the sale of receivables to UAFC, the seller or the trust should
instead be treated as a pledge of such receivables to secure a borrowing of such
debtor, delays in payments of collections of receivables to securityholders
could occur or (should the court rule in favor of any such trustee, debtor or
creditor) reductions in the amounts of such payments could result. If the
transfer of receivables to the trust is treated as a pledge instead of a sale, a
tax or government lien on the property of UAC, UAFC or the seller arising before
the transfer of the related receivables to such trust may have priority over
such trust's interest in such receivables. If the transfers of receivables from
UAC and UAFC to the seller and from the seller to the trust are treated as
sales, the receivables would not be part of the UAC's, UAFC's, UACFC's or the
seller's bankruptcy estate and would not be available to the bankrupt entity's
creditors.
The decision of the U.S. Court of Appeals for the Tenth Circuit,
Octagon Gas System, Inc. v. Rimmer (In re Meridian Reserve, Inc.) (decided May
27, 1993), contains language to the effect that under the UCC accounts sold by a
debtor would remain property of the debtor's bankruptcy estate, whether or not
the sale of the accounts was perfected. Although the receivables constitute
chattel paper under the UCC, rather than accounts, Article 9 of the UCC applies
to the sale of chattel paper as well as the sale of accounts, and perfection of
a security interest in both chattel paper and accounts may be accomplished by
the filing of a UCC-1 financing statement. If, following a bankruptcy of UAC,
UAFC or the seller, a court were to follow the reasoning of the Tenth Circuit
reflected in the above case, then the receivables could be included in the
bankruptcy estate of UAC, UAFC, UACFC or the seller, as applicable, and delays
in payments of collections on or in respect of the receivables could occur. UAC
and UAFC will warrant to the seller in each purchase agreement, and the seller
will warrant to the trust in each trust and servicing agreement or pooling
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and servicing agreement, that the sale of the related receivables to the seller
or the related trust is a sale of such receivables to the seller and to the
trust, respectively.
FEDERAL INCOME TAX CONSEQUENCES
The following is a general summary of the material federal income tax
consequences of the purchase, ownership and disposition of the securities. 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, its does not discuss the tax treatment of securityholders that are
insurance companies, regulated investment companies or dealers in securities.
You are urged to consult your own tax advisors in determining the federal,
state, local, foreign and any other tax consequences to you of the purchase,
ownership and disposition of the securities.
The following summary is based upon current provisions of 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 federal tax counsel regarding certain
federal income tax matters discussed below. Such opinions, however, are not
binding on the Internal Revenue Service (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 in this prospectus, to each trust, the notes and the certificates and
the related terms, parties and documents applicable to such trust.
The federal income tax consequences to certificateholders will vary
depending on whether the trust is treated as a partnership under the Code and
applicable Treasury regulations or whether the trust will be treated as a
grantor trust. The prospectus supplement for each series of certificates will
specify whether the trust will be treated as a partnership or as a grantor
trust.
FASITs
Sections 860H through 860L of the Code provide for the creation of an
entity for federal income tax purposes, referred to as a "financial asset
securitization investment trust" ("FASIT"). These provisions were effective as
of September 1, 1997, but many technical issues concerning FASITs have not yet
been addressed by Treasury regulations. To qualify as a FASIT, an entity must
meet certain requirements under Section 860L of the Code and must elect such
treatment. The applicable trust and servicing agreement or pooling and servicing
agreement and indenture, if applicable, may be amended in accordance with the
provisions thereof to provide that the seller and trustee will cause a FASIT
election to be made for the trust if the seller delivers to the trustee or the
indenture trustee and, if applicable, the insurer, an opinion of counsel to the
effect that, for federal income tax purposes, (1) the deemed issuance of FASIT
regular interests (occurring in connection with such election) will not
adversely affect the federal income tax treatment of the securities, (2)
following such election such trust will not be deemed to be an association (or
publicly traded
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partnership) taxable as a corporation and (3) such election will not cause or
constitute an event in which gain or loss would be recognized by any
securityholder or the trust.
TRUSTS TREATED AS PARTNERSHIPS
Tax Characterization of the Trust as a Partnership
A trust which does not affirmatively elect to be treated as a
corporation will be treated as a partnership under applicable Treasury
regulations as long as there are two or more beneficial owners and will be
ignored as a separate entity where there is a single beneficial owner of all
equity classes of the related series. Federal tax counsel will deliver its
opinion that a trust 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 and servicing agreement or
pooling and servicing agreement and indenture and related documents will be
complied with, including the making of no affirmative election to be treated as
a corporation. Such counsel's opinion will also conclude that the nature of the
income of the trust will exempt it from the rule that certain publicly traded
partnerships are taxable as corporations.
If a trust were taxable as a corporation for federal income tax
purposes, it would be subject to corporate income tax on its taxable income. The
trust's taxable income would include all of its income on the related
receivables, less servicing fees and other deductible expenses, which may
include its interest expense on the notes. Any such corporate income tax could
materially reduce cash available to make distributions on the securities, and
beneficial owners of securities (the "Security Owners") could be liable for any
such tax that is unpaid by the trust.
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
should be classified as debt for federal income tax purposes. The discussion
below assumes this characterization of the notes is correct.
OID. The discussion below assumes that all payments on the notes are
denominated in U.S. dollars, and 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., 0.25% 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 any given series of notes, additional tax considerations with
respect to such notes will be disclosed in the applicable prospectus supplement.
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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 more than 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. 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 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
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. Capital
losses generally may be used only to offset capital gains.
Non-U.S. Holders. Interest payments made (or accrued) to a noteholder
who is a nonresident alien, foreign corporation or other holder who is a
Non-U.S. Person (as defined below under "Trusts Treated as Grantor Trusts -- Tax
Consequences to Non-U.S. Certificateholders") 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 Non-U.S.
Person and the Non-U.S. Person (1) is not actually or constructively a "10
percent shareholder" of the trust or the seller (including a holder of 10% of
the
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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 (2) provides the trustee or other person who is otherwise required to
withhold U.S. tax with respect to the notes with an appropriate statement (on
Form W-8 or a similar form), signed under penalties of perjury, certifying that
the beneficial owner of the note is a Non-U.S. Person and providing the Non-U.S.
Person's name and address. If a note is held through a securities clearing
organization or certain other financial institutions, the organization or
institution may provide the relevant signed statement to the withholding agent.
In that case, however, the signed statement must be accompanied by a Form W-8 or
substitute form provided by the Non-U.S. Person that owns the note. If such
interest is not portfolio interest, then it will be subject to United States
federal income and withholding tax at a rate of 30 percent, unless reduced or
eliminated pursuant to an applicable tax treaty.
Any capital gain realized on the sale, redemption, retirement or other
taxable disposition of a note by a Non-U.S. Person will be exempt from United
States federal income and withholding tax, provided that (1) such gain is not
effectively connected with the conduct of a trade or business in the United
States by the Non-U.S. Person and (2) in the case of an individual Non-U.S.
Person, the individual is not present in the United States for 183 days or more
in the taxable year.
Final regulations dealing with withholding tax on income paid to
Non-U.S. Persons and related matters were issued by the Treasury Department on
October 6, 1997. These new withholding regulations will generally be effective
for payments made after December 31, 1999, subject to certain transition rules.
Prospective investors who are Non-U.S. Persons are strongly urged to consult
their own tax advisors with respect to the new withholding regulations.
Backup Withholding. Each noteholder (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.
Possible Alternative Treatments of the Notes. If, contrary to the
opinion of federal tax counsel, the IRS successfully asserted that one or more
classes of notes in a series did not represent debt for federal income tax
purposes, such notes might be treated as equity interests in the trust. If so
treated, the trust might 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
publicly traded 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 Non-U.S. Persons
generally would be subject to U.S. tax and U.S. tax return filing and
withholding tax requirements, and individual holders might be subject to certain
limitations on their ability to deduct their share of trust expenses.
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Tax Consequences to Holders of the Certificates
Treatment of the trust as a Partnership. The seller and the servicer
will agree, and the related 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 holder of any certificates representing the retained interest in the trust)
and the notes being debt of the 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.
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 related receivables
(including appropriate adjustments for market discount, OID and bond premium)
and any gain upon collection or disposition of such 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
(i.e., 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:
(1) the interest that accrues on the certificates in accordance
with their terms for such month, including interest accruing
at the related pass-through rate for such month and interest,
if any, on amounts previously due on the certificates but not
yet distributed;
(2) any trust income attributable to discount on the related
receivables that corresponds to any excess of the principal
amount of the certificates over their initial issue price;
(3) any other amounts of income payable to the certificateholders
for such month; and
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(4) in the case of an individual, estate or trust, such
certificateholder's share of income corresponding to the
miscellaneous itemized deductions described in the next
paragraph.
Such allocation of interest 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. Unless otherwise provided in
the related prospectus supplement, all remaining taxable income of the trust
will be allocated to the owner of the retained interest of the trust. In the
event the trust issues certificates which are Strip Securities, the amount
allocated to such certificateholders will equal the excess of (1) the
pass-through rate applicable to the Strip Securities times the notional
principal amount for the Strip Securities for such month over (2) the portion of
the amount distributed with respect to the Strip Securities for such month that
would constitute a return of basis if the Strip Securities constituted an
instrument described in Section 860G(a)(1)(B)(ii) of the Code, applying the
principles of Section 1272(a)(6) of the Code and employing the constant yield
method of accrual (utilizing the appropriate prepayment assumption); provided,
that no negative accruals shall be permitted, and, provided further, that other
deductions derived by the trust equal to the aggregate remaining capital account
balances of the certificateholders will be allocated to such Strip Securities in
proportion to the respective capital account balances immediately before the
final redemption.
The portion of expenses of the trust (including fees to the servicer,
but not interest expense) allocated to taxpayers that are individuals, estates
or trusts would be miscellaneous itemized deductions to such taxpayers. Such
deductions might be disallowed to such taxpayers in whole or in part and might
result in such taxpayers being taxed on an amount of income that exceeds the
amount of cash actually distributed to such taxpayers over the life of the
trust. Any net loss of the trust will be allocated first to the retained
interest holder to the extent of its adjusted capital account, then to the other
certificateholders in the priorities set forth in the trust Agreement to the
extent of their respective adjusted capital accounts, and thereafter to the
retained interest holder.
The trust intends to make all calculations relating to market discount
income and amortization of premium with respect to both simple interest
receivables and precomputed receivables on an aggregate basis rather than a
receivable-by-receivable 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. Except as otherwise provided in the related
prospectus supplement, 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 related 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.)
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If the trust acquires the related receivables at a market discount or
premium, it will elect to include any such discount in income currently as it
accrues over the life of such receivables or to offset any such premium against
interest income on such 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. Under applicable Treasury regulations, such a 50% or greater
transfer would cause a deemed contribution of the assets of the trust to a new
partnership in exchange for interests in the trust. Such interests in a new
partnership would be deemed distributed to the partners of the trust in
liquidation thereof, which would not constitute a sale or exchange. The trust
will not comply with certain technical requirements that might apply when such a
constructive termination occurs. As a result, the trust may be subject to
certain tax penalties and may incur additional expenses if it is required to
comply with those requirements. Furthermore, the trust might not be able to
comply due to lack of data.
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.
With respect to noncorporate certificateholders, such capital gain or loss will
be short-term or long-term, depending on whether the certificate has been held
for (1) 12 months or less, or (2) more than 12 months, respectively. (Long-term
capital gain tax rates provide a reduction as compared with short-term capital
gains, which are taxed at ordinary income tax rates.) 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 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, to 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 related 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 certificateholders 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.
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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 (or notional principal
amount, in the case of any Strip Securities) 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 retained
interest holder, acting as tax matters partner for the trust, 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 (loss), the purchasing certificateholder will have a
higher (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 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
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 is expected to 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-l 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 (1) the name, address
and taxpayer identification number of the nominee and (2) as to each beneficial
owner (a) the name, address and identification number of such person, (b)
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 (c) 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
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directly to the trust information as to themselves and their ownership of
certificates. A clearing agency registered under Section 17A of the Securities
Exchange Act of 1934 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 retained interest holder will be designated as the tax matters
partner for each trust in the related trust Agreement and, as such, will be
responsible for representing the certificateholder 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 Non-U.S. Certificateholders. Pursuant to a change
in the safe harbor provisions of Section 864(b)(2)(A) of the Code (applicable to
tax years beginning after December 31, 1997), Non-U.S. Persons which are
certificateholders will not 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 solely as a result of owning or trading certificates. As a
result, the trust is not obligated to withhold on the portion of its taxable
income that is allocable to Non-U.S. Persons at regular graduated rates (35% for
Non-U.S. Persons that are taxable as corporations and 39.6% for all other
Non-U.S. Persons), unless such Non-U.S. Person hold certificates in connection
with the conduct of a U.S. trade or business.
Interest allocable to a Non-U.S. Person that does not hold certificates
in connection with the conduct of a U. S. trade or business will not qualify for
the exemption for portfolio interest under Section 871(h) of the Code, because
underlying receivables owned by the trust are not in "registered form" as that
term is defined in applicable Treasury regulations. As a result, such Non-U.S.
Person who holds certificates will be subject to United States withholding tax
on interest or OID attributable to the underlying receivables (whether or not
such amount is distributed) at a rate of 30 percent, unless reduced or
eliminated pursuant to an applicable treaty. Potential investors who are
Non-U.S. Persons should consult their own tax advisors regarding the specific
tax consequences of owning a certificate.
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.
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TRUSTS TREATED AS GRANTOR TRUSTS
Tax Characterization of Grantor Trusts
If specified in the related prospectus supplement, 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 I of subchapter J of the Code. In this case,
beneficial owners of grantor trust certificates 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 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 Code Sections 162 or 212, each grantor trust certificateholder will be
entitled to deduct its pro rata share of servicing fees, prepayment fees,
assumption fees 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 their respective adjusted
gross incomes. 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 "coupon stripping" rules of the Code discussed below.
Stripped Bonds and Stripped Coupons. Although the tax treatment of
stripped bonds is not entirely clear, based on recent guidance by the IRS, it
appears that 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 OID. Generally, under the recently issued Treasury regulations under Section
1286 of the Code, if the
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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. For these purposes, OID is the excess of the
"stated redemption price at maturity" (generally, principal and any interest
which is not "qualified stated interest") of a debt instrument over its issue
price. See "-- Original Issue Discount" below. 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. It is possible that the treatment described in this paragraph will
apply only to that portion of the receivables in a particular trust as to which
there is "excess servicing" and that the remainder of such receivables will not
be treated as stripped bonds, but as undivided interests as described above.
Unless indicated otherwise in the applicable prospectus supplement, it is not
anticipated that grantor trust certificates will be issued with greater than de
minimis OID.
Original Issue Discount. The rules of the Code relating to OID
(currently Sections 1271 through 1273 and 1275) will be applicable to a grantor
trust certificateholder that acquires an undivided interest in a stripped bond
issued or acquired with OID, and such person 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. Because payments on such stripped bonds may
be accelerated by prepayments on the underlying obligations, OID will be
determined as required under Code Section 1272(a)(6). Pursuant to Code Section
1272(a)(6), OID accruals will be calculated based on a constant interest method
and a prepayment assumption indicated in such prospectus supplement. In the case
of an original grantor trust certificateholder, the daily portions of OID
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 (1) the present value of all remaining payments to be
received on the stripped bond under the prepayment assumption used in respect of
the grantor trust certificates and (2) any payments (other than qualified stated
interest) received during such accrual period, and subtracting from the total
the "adjusted issue price" of the stripped bond at the beginning of such accrual
period. No representation is made that the grantor trust certificates 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. A subsequent grantor trust
certificateholder will be required to adjust its OID accrual to reflect its
purchase price, the remaining period to maturity and, possibly, a new prepayment
assumption. The servicer will report to all grantor trust certificateholders as
if they were original holders.
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With respect to the receivables, 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 receivables. Subsequent purchasers that
purchase grantor trust certificates at more than a de minimis discount should
consult their tax advisors with respect to the proper method to accrue such OID.
Market Discount. 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
or stripped bond 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 or stripped bond 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 Section 1276 and 1278. The IRS may require you
to compute market discount on a receivable by receivable basis, based on the
allocation of your purchase price among the receivables based on their fair
market values. However, we will not furnish information to you on a receivable
by receivable basis. Accordingly, if you compute premium amortization on an
aggregate basis, you may be required by the IRS to recompute such premium on a
receivable by receivable basis.
The Code provides that any principal payment (whether a scheduled
payment or a prepayment) or any gain or 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 (1) the total
remaining market discount and (2) 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 (1) the total remaining market discount and (2) a
fraction, the numerator of which is the amount of stated interest paid during
the accrual period and
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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 to 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.
We cannot tell you whether a reasonable prepayment assumption should be used in
computing amortization of premium allowable under Section 171 of the Code. 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. We will not furnish information
to you on a receivable by receivable basis. Accordingly, if you compute premium
amortization on an aggregate basis, the IRS may require you to recompute such
premium.
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
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clear whether any other adjustments would be required to reflect differences
between an assumed prepayment rate and the actual rate of prepayments.
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 discount or OID) 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
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 and any market discount included in the seller's gross
income with respect to the grantor trust certificate, and reduced by any market
premium amortized by the seller and 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 of the Code (except in the case of
gain attributable to accrued market discount, as noted above under "--Market
Discount") and, with respect to noncorporate owners, will be short-term or
long-term, depending on whether the grantor trust certificate has been held for
12 months or less, or more than 12 months, respectively. (Long-term capital gain
tax rates provide a reduction as compared with short-term capital gains, which
are taxed at ordinary income tax rates.)
Grantor trust certificates will be "evidences of indebtedness" within
the meaning of Section 582(c)(1) of the Code, 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. Interest or OID paid to Non-U.S. Persons who own
grantor trust certificates will be treated as "portfolio interest" for purposes
of United States withholding tax. Such interest (including OID, if any)
attributable to the underlying receivables will not be subject to the normal 30%
(or such lower rate provided for by an applicable tax treaty) withholding tax
imposed on such amounts provided that (1) the Non-U.S. Person is not a "10%
shareholder" (within the definition of Section 871(h)(3)) of any obligor on the
receivables; and is not a controlled foreign corporation (within the definition
of Section 957) related to any obligor on the receivables and (2) such
certificateholder fulfills certain certification requirements. Under these
requirements, the certificateholder must certify, under penalty of perjury, that
it is not a "U.S. Person" and must provide
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<PAGE>
its name and address. For this purpose "U.S. Person" means a citizen or resident
of the United States, a corporation, partnership (except to the extent provided
in applicable Treasury regulations), or other entity created or organized in or
under the laws of the U.S. or any political subdivision thereof, or an estate
that is subject to U.S. federal income tax regardless of the source of its
income or a trust if a court within the U.S. is able to exercise primary
supervision over the administration of such trust, and one or more such U.S.
Persons have the authority to control all substantial decisions of such trust
(or, to the extent provided in applicable Treasury regulations, certain trusts
in existence on August 20, 1996, which are eligible to and elect to be treated
as U.S. Persons). If, however, such interest or gain is effectively connected to
the conduct of a trade or business within the U.S. by such certificateholder,
such owner will be subject to U.S. federal income tax thereon at graduated
rates. Potential investors who are not U.S. Persons should consult their own tax
advisors regarding the specific tax consequences of owning a certificate.
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 the servicer deems 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.
***
The federal tax discussion set forth above is included for general
information only and may not be applicable to your particular tax situation. You
should consult your own tax advisor with respect to the tax consequences of the
purchase, ownership and disposition of securities, including the tax
consequences under state, local and 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 plan, as well as individual retirement
accounts and certain types of Keogh Plans (each, a "Benefit Plan"), from
engaging in certain transactions involving "plan assets" with persons that are
"parties in interest" under ERISA or "disqualified persons" under the Code with
respect to the Benefit Plan. ERISA also imposes certain duties on persons who
are fiduciaries of Benefit Plans subject to ERISA and prohibits certain
transactions between a Benefit Plan and parties in interest with respect to such
Benefit Plans. Under ERISA, any person who exercises any authority
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<PAGE>
or control with respect to the management or disposition of the assets of a
Benefit Plan is considered to be a fiduciary of such Benefit Plan (subject to
certain exceptions not here relevant). A violation of these "prohibited
transaction" rules may generate excise tax and other liabilities under ERISA and
the Code for such persons.
Certain transactions involving a trust might be deemed to constitute
prohibited transactions under ERISA and the Code with respect to a Benefit Plan
that purchased notes or certificates if assets of the trust were deemed to be
assets of the Benefit Plan. Under a regulation issued by the United States
Department of Labor (the "Plan Assets Regulations"), the assets of a trust would
be treated as plan assets of a Benefit Plan for the purposes of ERISA and the
Code only if the Benefit Plan acquired an "equity interest" in the trust and
none of the exceptions contained in the Plan Assets Regulation was applicable.
An equity interest is defined under the Plan Assets Regulation as an interest
other than an instrument that is treated as indebtedness under applicable local
law and which has no substantial equity features. To the extent that the notes
are treated as indebtedness under applicable local law and do not have
substantial equity features, their acquisition would not be considered the
acquisition of an "equity interest" in the related trust. In addition, although
they may represent equity interests in the related trust, nonsubordinated
certificates ("Senior Certificates") may be exempted from certain of the
prohibited transaction rules of ERISA as discussed below. The likely treatment
in this context of notes or certificates of a given series will be discussed in
the related prospectus supplement.
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.
A Benefit Plan fiduciary considering the purchase of notes or
certificates 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.
The U.S. Department of Labor may have granted to the underwriter (or in
the case of series offered by more than one underwriter, the lead underwriter)
named in each 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 Benefit Plans of certificates
representing interests in asset-backed pass-through trusts that consist of
certain receivables, loans and other obligations that meet the conditions and
requirements of the Exemption. The receivables covered by the Exemption include
motor vehicle installment sales contracts such as the receivables. The Exemption
will apply to the acquisition, holding and resale of Senior Certificates by a
Benefit Plan, provided that certain conditions (certain of which are described
below) are met.
Among the conditions that must be satisfied for the Exemption to apply
to the Senior Certificates are the following:
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<PAGE>
(1) The trust is considered to consist solely of obligations which
bear interest or are purchased at a discount and which are
secured by motor vehicles or equipment, or "qualified motor
vehicle leases" (as defined in the Exemption), property that
had secured such obligations or qualified motor vehicle
leases, cash or temporary investments maturing no later than
the next date on which payments are to be made to the Senior
Certificate owners, and rights of the indenture trustee under
the indenture or the rights of the owner trustee or trustee
under the Transfer and Servicing Agreements and under credit
support arrangements with respect to such obligations or
qualified motor vehicle leases.
(2) The acquisition of the Senior Certificates by a Benefit Plan
is on terms (including the price for the Senior Certificates)
that are at least as favorable to the Benefit Plan as they
would be in an arm's length transaction with an unrelated
party;
(3) The rights and interests evidenced by the Senior Certificates
acquired by the Benefit Plan are not subordinated to the
rights and interests evidenced by other certificates of the
trust;
(4) The Senior Certificates acquired by the Benefit Plan have
received a rating at the time of such acquisition that is in
one of the three highest generic rating categories from either
Standard & Poor's Ratings Services, Moody's Investors Service,
Inc., Duff & Phelps Credit Rating Co. or Fitch IBCA, Inc;
(5) The related owner trustee or indenture trustee is not an
affiliate of any other member of the Restricted Group (as
defined below);
(6) 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 related 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
related Transfer and Servicing Agreements and indenture, if
applicable, and reimbursement of the servicer's reasonable
expenses in connection therewith; and
(7) The Benefit Plan investing in the Senior Certificates is an
"accredited investor" as defined in Rule 501(a)(1) of
Regulation D of the Commission under the securities Act of
1933, as amended.
Moreover, the Exemption would provide relief from certain
self-dealing/conflict of interest or prohibited transactions only if, among
other requirements, (1) in the case of the acquisition of Senior Certificates in
connection with the initial issuance, at least fifty percent of the Senior
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<PAGE>
Certificates are acquired by persons independent of the Restricted Group (as
defined below), (2) the Benefit Plan's investment in Senior Certificates does
not exceed twenty-five percent of all of the Senior Certificates outstanding at
the time of the acquisition and (3) immediately after the acquisition, no more
than twenty-five percent of the assets of the Benefit Plan 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 Benefit
Plans sponsored by the seller, any underwriter, the related trustee, the
servicer, any obligor with respect to receivables included in the related 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").
PLAN OF DISTRIBUTION
On the terms and conditions set forth in an underwriting agreement with
respect to a given series, the seller will agree to cause the related trust to
sell to the underwriters named therein and in the related prospectus supplement,
and each of such underwriters will severally agree to purchase, the principal
amount of each class of securities of the related series set forth therein and
in the related prospectus supplement.
In each underwriting agreement, the several underwriters will agree,
subject to the terms and conditions set forth therein, to purchase all of the
securities described therein that are offered hereby and by the related
prospectus supplement if any of such securities are purchased.
Each prospectus supplement will either (1) set forth the price at which
each class of securities being offered thereby will be offered to the public and
any concessions that may be offered to certain securities dealers participating
in the offering of such securities or (2) specify that the related securities
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 securities, such public offering prices and such
concessions may be changed.
Each underwriting agreement will provide that UAC and the seller will
indemnify the related underwriters against certain civil liabilities, including
liabilities under the Securities Act of 1934, 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 the related
Accounts in eligible investments acquired from such underwriters.
Pursuant to each underwriting agreement, the closing of the sale of any
class of securities subject thereto will be conditioned on the closing of the
sale of all other classes of securities of such series.
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.
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LEGAL MATTERS
Certain legal matters relating to the securities of any series will be
passed upon for the related trust, the seller and the servicer by Barnes &
Thornburg, Indianapolis, Indiana, and for the underwriters by Cadwalader,
Wickersham & Taft, New York, New York or such other firm as shall be identified
in the related prospectus supplement. Certain federal income tax and other
matters will be passed upon for each trust by Cadwalader, Wickersham & Taft,
Barnes & Thornburg or such other firm as shall be identified in the related
prospectus supplement.
WHERE YOU CAN FIND MORE INFORMATION
The seller, as originator of each trust, filed a registration statement
relating to the securities with the Securities and Exchange Commission (the
"SEC"). This prospectus is part of the registration statement, but the
registration statement includes additional information about the securities.
The servicer will file with the SEC all required periodic and special
SEC reports and other information about any trust.
You may read and copy any reports, statements or other information we
file at the SEC's public reference room at 450 Fifth Street, N.W., Washington,
D.C. 20549. You can request copies of these documents, upon payment of a
duplicating fee, by writing to the SEC. Please call the SEC at (800) SEC-0330
for further information on the operation of the public reference rooms. Our SEC
filings are also available to the public on the SEC Internet site
(http://www.sec.gov.).
The SEC allows us to "incorporate by reference" information that the
seller files with it, which means that the seller 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 the seller files later with the SEC which we have incorporated
by reference 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 and special SEC reports and proxy
materials filed by or on behalf of any trust until we terminate offering the
securities.
As a recipient of this prospectus, you may request a copy of any
document we incorporate by reference, except exhibits to the documents (unless
the exhibits are specifically incorporated by reference), at no cost, by writing
or calling: Union Acceptance Corporation, 250 North Shadeland Avenue,
Indianapolis, IN 46219, Attention: Structured Finance Manager (telephone:
317-231- 2717).
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INDEX OF PRINCIPAL TERMS
We set forth below is a list of certain of the more significant terms
used in this prospectus and the pages on which you may find the definitions of
such terms.
TERM PAGE
Approved Rating ........................................................... 34
Benefit Plan .............................................................. 67
Code ...................................................................... 44
DTC ....................................................................... 15
ERISA ..................................................................... 9
Exemption.................................................................. 67
FASIT ..................................................................... 52
FTC Rule .................................................................. 50
IRS ....................................................................... 52
Non-U.S. Person ........................................................... 66
OID ....................................................................... 53
OID Regulations ........................................................... 53
PFC ....................................................................... 5
Plan Assets Regulation .................................................... 67
Restricted Group .......................................................... 69
SEC ....................................................................... 70
Security Owners ........................................................... 53
Senior Certificates ....................................................... 67
Trust Bankruptcy Event .................................................... 43
UAC ....................................................................... 1
UACFC ..................................................................... 4
UAFC ...................................................................... 4
UCC ....................................................................... 26
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
Expenses in connection with the offering of the Securities being registered
herein are estimated as follows:
SEC registration fee (1)...................................$ 278.00
Legal fees and expenses (2)................................
Accounting fees and expenses (2)...........................
Blue sky fees and expenses (2)............................
Rating agency fees (2).....................................
Trustees' fees and expenses (2)............................
Printing (2)...............................................
Miscellaneous (2)..........................................
-------------
Total (2)..............................................$
=============
- ------------
(1) See footnote number 1 to Calculation of Fee Table
(2) To be provided by amendment.
Item 15. Indemnification of Directors and Officers.
Section 145 of the Delaware General Corporation Law provides that a
Delaware corporation may indemnify any persons, including officers and
directors, who are, or are threatened to be made, parties to any threatened,
pending or completed legal action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of such
corporation), by reason of the fact that such person was an officer or director
of such corporation, or is or was serving at the request of such corporation as
a director, officer, employee or agent of another corporation or enterprise. The
indemnity may include expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by such person in
connection with such claim, suit or proceeding, provided that such officer or
director acted in good faith and in a manner he or she reasonably believed to be
in or not opposed to the corporation's best interests, and, for criminal
proceedings, had no reasonable cause to believe that his or her conduct was
illegal. A Delaware corporation may indemnify officers and directors in an
action by or in the right of the corporation under the same conditions, except
that no indemnification is permitted without judicial approval if the officer or
director is adjudged to be liable to the corporation. Where an officer or
director is successful on the merits or otherwise in the defense of any action
referred to above, the corporation must indemnify such officer or director
against the expenses that such officer or director actually and reasonably
incurred.
The Bylaws of UAC Securitization Corporation provide for indemnification of
officers and directors to the full extent permitted by the Delaware General
Corporation Law.
The Pooling and Servicing Agreement and the Trust and Servicing Agreement
provide that the Servicer, any subservicer and the partners, directors,
officers, employees or agents of any of them will be entitled to indemnification
by the Trust and will be held harmless against any loss, liability or expense
incurred in connection with any legal action relating to the Pooling and
Servicing Agreement and the Trust and Servicing Agreement or the Securities,
other than any loss, liability or expense incurred by reason of willful
misfeasance, bad faith or gross negligence in the performance of such persons
duties thereunder or by reason of reckless disregard of such persons obligations
and duties thereunder.
II-1
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Item 16. Exhibits.
1 Underwriting Agreement Standard Provisions for UACSC
Trusts (incorporated by reference to Exhibit 1 to Form
S-3 of UACSC Auto Trusts, Reg. No. 333-52101)
3 Certificate of Incorporation and Bylaws of UAC
Securitization Corporation (incorporated by reference to
Exhibit 3 to Form S-3 of UACSC 1995-A Grantor Trust, Reg.
No. 33- 88352)
4.1(a) Form of Pooling and Servicing Agreement for Grantor
Trusts including form of Certificates (incorporated by
reference to Exhibit 4.1(a) to Form S-3 Amendment No. 1
of UACSC Auto Trusts, Reg. No. 33-97320)
4.1(b) Form of Standard Terms and Conditions of UACSC Grantor
Trusts (incorporated by reference to Exhibit 4.1(b) to
Form S-3 Amendment No. 1 of UACSC Auto Trusts, Reg. No.
33- 97320)
4.2 Form of Trust and Servicing Agreement for Owner Trusts
4.3 Form of Indenture
* 5(a) Opinion of Barnes & Thornburg with respect to
legality of the Securities, dated ______________
* 5(b) Opinion of Cadwalader, Wickersham & Taft with respect
to legality of the Securities, dated ______________
* 8 Opinion of Cadwalader, Wickersham & Taft with respect
to tax matters, dated ______________
10 Form of Purchase Agreement (incorporated by reference to
Exhibit 10 to Form S-3 of UACSC Auto Trusts, Reg. No.
333-52101)
* 23(a) Consent of Barnes & Thornburg (included in Exhibit 5(a))
* 23(b) Consent of Cadwalader, Wickersham & Taft (included in
Exhibit 5(b))
* 23(c) Consent of Cadwalader, Wickersham & Taft (included in
Exhibit 8)
24 Power of Attorney (included on page II-4)
25 Form T-1 Statement of Eligibility of Trustee under the
Trust Indenture Act of 1399
- ----------------------
* To be provided by amendment
Item 17. Undertakings.
The undersigned Registrant hereby undertakes as follows:
(a) To file during any period in which offers or sales are being made,
a post-effective amendment to this registration statement to include any
material information with respect to the plan of distribution not
previously disclosed in the registration statement or any material change
to such information in the registration statement.
(b) That, for the purpose of determining any liability under the
Securities Act of 1933, as amended (the "Securities Act"), 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.
(c) 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.
(d) For purposes of determining any liability under the Securities Act,
each filing of the Registrant's annual reports pursuant to Section 13(a) or
Section 15(d) of the Certificates Exchange Act of 1934 that is incorporated
by reference in the registration statement shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
II-2
<PAGE>
(e) To provide to the Underwriters at the closing specified in the
Underwriting Agreements certificates in such denominations and registered
in such names as required by the Underwriters to provide prompt delivery to
each purchaser.
(f) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission (the "Commission") such indemnification
is against public policy as expressed in the Securities 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 Securities Act and will be governed by the final adjudication of such
issue.
(g) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(h) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3, and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized in the City of Bonita Springs, State of Florida, on April 29, 1999.
UAC SECURITIZATION CORPORATION
as Seller
(Registrant)
By /s/ Leeanne W. Graziani
-------------------------------
Leeanne W. Graziani
President and Treasurer
POWER OF ATTORNEY
Each person whose signature appears below hereby authorizes Leeanne W.
Graziani and Dawn M. Huerta, and each of them, to file one or more amendments
(including post-effective amendments) to be the registration statement, which
amendments may make such changes in the registration statement as either of them
deem appropriate, and each such person hereby appoints Leeanne W. Graziani and
Dawn M. Huerta, and each of them, as attorney-in-fact to execute in the name and
on the behalf of each person individually, and in each capacity stated below,
and such amendments to the registration statement.
Pursuant to the requirements of the Securities Act of 1933, this
Registation Statement has been signed by the following persons in the
capacities and on the dates indicated.
UAC SECURITIZATION CORPORATION Date: April 29, 1999
Signature Title
---------------------- ------------------------
/s/ Leeanne W. Graziani President and Treasurer
----------------------------- (Principal Executive Officer)
Leeanne W. Graziani
/s/ Leeanne W. Graziani
----------------------------- President and Treasurer
Leeanne W. Graziani (Principal Financial
and Accounting Officer)
/s/ Jerry D. Von Deylen
----------------------------- Director
Jerry D. Von Deylen
/s/ John M. Stainbrook
----------------------------- Director
John M. Stainbrook
/s/ Thomas M. West
----------------------------- Director
Thomas M. West
----------------------------- Director
Gary Mullennix
/s/ D. Michael Pointer II
----------------------------- Director
D. Michael Pointer II
<PAGE>
EXHIBIT INDEX
Exhibit No.
- -----------
1 Underwriting Agreement Standard Provisions
for UACSC Trusts (incorporated by reference
to Exhibit 1 to Form S-3 of UACSC Auto Trusts,
Reg. No. 333-52101)
3 Certificate of Incorporation and Bylaws of
UAC Securitization Corporation (incorporated
by reference to Exhibit 3 to Form S-3 of
UACSC 1995-A Grantor Trust, Reg. No.
33-88352)
4.1(a) Form of Pooling and Servicing Agreement for
Grantor Trusts including form of Certificates
(incorporated by reference to Exhibit 4.1(a)
to Form S-3 Amendment No. 1 of UACSC Auto
Trusts, Reg. No. 33-97320)
4.1(b) Form of Standard Terms and Conditions of
UACSC Grantor Trusts (incorporated by
reference to Exhibit 4.1(b) to Form S-3
Amendment No. 1 of UACSC Auto Trusts, Reg.
No. 33-97320)
4.2 Form of Trust and Servicing Agreement for
Owner Trusts
4.3 Form of Indenture
*5(a) Opinion of Barnes & Thornburg with respect to
legality of the Securities, dated
______________
*5(b) Opinion of Cadwalader, Wickersham & Taft
with respect to legality of the Securities,
dated ______________
*8 Opinion of Cadwalader, Wickersham & Taft with
respect to tax matters, dated ______________
10 Form of Purchase Agreement (incorporated by
reference to Exhibit 10 to Form S-3 of UACSC
Auto Trusts, Reg. No. 333-52101)
*23(a) Consent of Barnes & Thornburg (included in
Exhibit 5(a))
*23(b) Consent of Cadwalader, Wickersham & Taft
(included in Exhibit 5(b))
*23(c) Consent of Cadwalader, Wickersham & Taft
(included in Exhibit 8)
24 Power of Attorney (included on page II-4)
25 Form T-1 Statement of Eligibility of Trustee
under the Trust Indenture Act of 1399
- -------
* To be provided by amendment.
UAC SECURITIZATION CORPORATION
Seller
UNION ACCEPTANCE CORPORATION
Servicer
and
--------------------------------,
Owner Trustee
TRUST AND SERVICING AGREEMENT,
Dated as of __________, ____
UACSC ____-__ Owner Trust
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TABLE OF CONTENTS
Page
ARTICLE I Creation of Trust........................................1
SECTION 1.01. Name....................................................1
SECTION 1.02. Office..................................................1
SECTION 1.03. Purposes and Powers....................................1
SECTION 1.04. Appointment of Owner Trustee............................2
SECTION 1.05. Initial Capital Contribution of Trust Estate............2
SECTION 1.06. Declaration of Trust....................................2
SECTION 1.07. Title to Trust Property.................................2
SECTION 1.08. Situs of Trust..........................................3
ARTICLE II Definitions..............................................3
SECTION 2.01. Definitions............................................3
SECTION 2.02. Usage of Terms........................................14
SECTION 2.03. Cutoff Date and Record Date...........................14
SECTION 2.04. Section References....................................14
ARTICLE III Conveyance of Receivables...............................14
ARTICLE IV Acceptance by Trustee...................................15
ARTICLE V Information Delivered to the Rating Agencies............15
ARTICLE VI Agent for Service.......................................16
ARTICLE VII The Receivables.........................................17
SECTION 7.01. Representations and Warranties of Seller..............17
SECTION 7.02. Repurchase Upon Breach................................17
SECTION 7.03. Custody of Receivable Files...........................18
SECTION 7.04. Duties of Servicer as Custodian.......................18
SECTION 7.05. Instructions; Authority to Act........................19
SECTION 7.06. Custodian's Indemnification...........................19
SECTION 7.07. Effective Period and Termination......................19
ARTICLE VIII Administration and Servicing of Receivables.............20
SECTION 8.01. Duties of Servicer....................................20
SECTION 8.02. Collection of Receivable Payments.....................20
SECTION 8.03. Realization Upon Receivables..........................21
SECTION 8.04. Physical Damage Insurance.............................21
SECTION 8.05. Maintenance of Security Interests
in Financed Vehicles............................22
SECTION 8.06. Covenants of Servicer.................................22
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SECTION 8.07. Purchase of Receivables Upon Breach...................22
SECTION 8.08. Servicing Fee.........................................22
SECTION 8.09. Servicer's Certificate................................23
SECTION 8.10. Annual Statement as to Compliance;
Notice of Default...............................23
SECTION 8.11. Annual Independent Certified Public
Accountant's Report.............................24
SECTION 8.12. Access to Certain Documentation and Information
Regarding Receivables...........................24
SECTION 8.13. Servicer Expenses.....................................24
SECTION 8.14. Reports to Noteholders................................25
ARTICLE IX Collections; Distributions to Noteholders and
Certificateholders..............................25
SECTION 9.01. Collection Account....................................25
SECTION 9.02. Collections...........................................25
SECTION 9.03. Purchase Amounts......................................26
SECTION 9.04. Application of Funds..................................26
SECTION 9.05. Advances..............................................27
SECTION 9.06. Net Deposits..........................................28
SECTION 9.07. No Segregation of Moneys; No Interest.................28
SECTION 9.08. Accounting and Reports to the Noteholders,
Certificateholders, the
Internal Revenue Service and Others......28
SECTION 9.09. Payahead Account. ...................................28
ARTICLE X Intentionally Blank.....................................29
ARTICLE XI The Certificates........................................29
SECTION 11.01. The Certificates.....................................29
SECTION 11.02. Authentication of Certificates.......................29
SECTION 11.03. Registration of Transfer and Exchange
of Certificates.................................30
SECTION 11.04. Mutilated, Destroyed, Lost, or Stolen Certificates...30
SECTION 11.05. Agreement Regarding Tax Matters......................31
SECTION 11.06. Signature on Returns; Tax Matters Partner............31
ARTICLE XII The Seller..............................................31
SECTION 12.01. Representations and Undertakings of Seller...........31
SECTION 12.02. Liability of Seller; Indemnities.....................33
SECTION 12.03. Merger or Consolidation of, or Assumption of
the Obligations of Seller.......................34
SECTION 12.04. Limitation on Liability of Seller and Others.........34
ARTICLE XIII The Servicer............................................35
SECTION 13.01. Representations of Servicer..........................35
SECTION 13.02. Indemnities of Servicer..............................36
SECTION 13.03. Merger or Consolidation of, or Assumption of
the Obligations of Servicer.....................37
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SECTION 13.04. Limitation on Liability of Servicer and Others.......38
SECTION 13.05. Servicer Not to Resign...............................38
SECTION 13.06. Delegation of Duties.................................38
ARTICLE XIV Servicer Default........................................39
SECTION 14.01. Events of Servicer Default...........................39
SECTION 14.02. Appointment of Successor.............................40
SECTION 14.03. Notice of Events of Servicer Default.................41
SECTION 14.04. Waiver of Past Defaults..............................41
ARTICLE XV The Owner Trustee.......................................41
SECTION 15.01. Duties of Owner Trustee..............................41
SECTION 15.02. Owner Trustee's Certificate..........................43
SECTION 15.03. Owner Trustee's Assignment of Purchased Receivables..44
SECTION 15.04. Certain Matters Affecting the Owner Trustee..........44
SECTION 15.05. Owner Trustee Not Liable for Certificates
or Receivables..................................45
SECTION 15.06. Owner Trustee May Own Notes..........................46
SECTION 15.07. Owner Trustee's and Indenture Trustee's
Fees and Expenses...............................46
SECTION 15.08. Eligibility Requirements for Owner Trustee...........47
SECTION 15.09. Resignation or Removal of Owner Trustee..............47
SECTION 15.10. Successor Owner Trustee..............................48
SECTION 15.11. Merger or Consolidation of Owner Trustee.............48
SECTION 15.12. Appointment of Co-Trustee or Separate Owner Trustee..48
SECTION 15.13. Representations and Warranties of Owner Trustee......50
ARTICLE XVI Termination.............................................50
SECTION 16.01. Termination of the Trust.............................50
SECTION 16.02. Optional Disposition of All Receivables..............51
ARTICLE XVII Miscellaneous Provisions................................51
SECTION 17.01. Amendment............................................51
SECTION 17.02. Protection of Title to Trust.........................52
SECTION 17.03. Limitation on Rights of Certificateholders...........54
SECTION 17.04. Governing Law........................................55
SECTION 17.05. Notices..............................................55
SECTION 17.06. Severability of Provisions...........................55
SECTION 17.07. Assignment...........................................55
SECTION 17.08. Certificates Nonassessable and Fully Paid............55
SECTION 17.09. Nonpetition Covenant.................................55
SECTION 17.10. Counterparts.........................................56
SECTION 17.11. Third Party Beneficiary. ...........................56
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EXHIBIT 1 - Owner Trustee's Certificate Pursuant to Section 15.02
EXHIBIT 2 - Owner Trustee's Certificate Pursuant to Section 15.02
EXHIBIT 3 - Servicer's Certificate
EXHIBIT A - Form of Certificate of Trust
EXHIBIT B - Form of Certificate
SCHEDULE A - Schedule of Receivables
SCHEDULE B - Location of Receivables
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This TRUST AND SERVICING AGREEMENT, dated as of _________, ____, is
made with respect to the formation of the UACSC ____-__ Owner Trust, among UAC
SECURITIZATION CORPORATION, a Delaware corporation, as depositor (the "Seller"),
UNION ACCEPTANCE CORPORATION, an Indiana corporation, as servicer (the
"Servicer"), and __________________, a Delaware banking corporation, as owner
trustee (the "Owner Trustee").
WITNESSETH THAT: In consideration of the premises and of the mutual
agreements herein contained, the parties hereto agree as follows:
ARTICLE I
Creation of Trust
Upon the execution of this Agreement by the parties hereto and the
prompt filing thereafter of the Certificate of Trust in the State of Delaware,
there is hereby created the UACSC ____-__ Owner Trust.
SECTION 1.01. Name. The Trust created hereby shall be known as "UACSC
____-__ 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. The Trust shall constitute a business trust within
the meaning of Section 3801(a) of the Delaware Business Trust Act for which the
Owner Trustee has filed a certificate of trust with the Secretary of State of
the State of Delaware pursuant to Section 3810(a) of the Delaware Business Trust
Act.
SECTION 1.02. Office. The office of the Trust shall be in care of the
Owner Trustee at its Corporate Trust Office or at such other address as the
Owner Trustee may designate by written notice to the Certificateholders, the
Servicer, the Seller, the Insurer and the Indenture Trustee.
SECTION 1.03. Purposes and Powers. The purpose of the Trust is to
engage in the following activities:
(i) to issue the Notes pursuant to the Indenture and the
Certificates pursuant to this Agreement and to sell or transfer the
Notes and the Certificates in one or more transactions;
(ii) with the proceeds of the sale of the Notes and the
Certificates, to fund the Spread Account pursuant to Section 10.02 of
the Indenture and to purchase the Receivables pursuant to this
Agreement;
(iii) to assign, grant, transfer, pledge, mortgage and
convey the Trust estate pursuant to the Indenture and to hold, manage
and distribute to the Certificateholders pursuant to the terms of this
Agreement any portion of the Trust estate released from the Lien of,
and remitted to the Trust pursuant to, the Indenture;
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(iv) to enter into and perform its obligations under the
related documents to which it is to be a party;
(v) 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
(vi) subject to compliance with the related documents, to
engage in such other activities as may be required in connection with
conservation of the Trust estate and the making of distributions to the
Certificateholders, the Noteholders and the others specified in this
Agreement.
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 related documents.
SECTION 1.04. Appointment of Owner Trustee. The Seller 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 1.05. Initial Capital Contribution of Trust Estate. The Seller
hereby sells, assigns, transfers, conveys and sets over to the Owner Trustee, as
of the date hereof, the Trust estate. The Owner Trustee hereby acknowledges
receipt in trust from the Seller, as of the date hereof, of the foregoing
contribution, which shall constitute the initial Trust estate. The Seller 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.
SECTION 1.06. Declaration of Trust. The Owner Trustee hereby declares
that it will hold the 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 other related documents. It is the
intention of the parties hereto that the Trust constitute a business trust under
Delaware law and that this Agreement constitute the governing instrument of such
trust. It is the intention of the parties hereto that the Trust will be
disregarded and that the Certificateholders will be treated as the owner of the
Trust estate, and that the Notes will be treated as indebtedness of the
Certificateholders for all federal and state income and franchise tax purposes.
The Owner Trustee and the Certificateholders, by acceptance of the Certificates,
agree to treat the Notes for purposes of federal, state and local income or
franchise taxes as indebtedness.
SECTION 1.07. Title to Trust Property. Legal title to all of the 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 Trust estate to be vested in a trustee or trustees, in which case title
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shall be deemed to be vested in the Owner Trustee, a co-trustee and/or a
separate trustee, as the case may be.
SECTION 1.08. Situs of Trust. The Trust will be located and
administered in the State of Delaware. Any bank accounts maintained by the Owner
Trustee on behalf of the Trust shall be located in the State of Delaware. The
Trust shall not have any employees in any state other than Delaware; provided,
however, that nothing herein shall restrict or prohibit the Owner Trustee from
having employees within or without the State of Delaware. Payments, if any, will
be received by the Trust only in Delaware, and payments, if any, will be made by
the Trust only from Delaware. The only office of the Trust will be at the
Corporate Trust Office in Delaware.
ARTICLE II
Definitions
SECTION 2.01. Definitions. Whenever used in this Agreement, the
following words and phrases, unless the context otherwise requires, shall have
the following meanings:
"Accrued Interest" means all interest accrued on the Receivables prior
to the opening of business on the day following the Cutoff Date.
"Administration Agreement" means the Administration Agreement dated as
of __________, _____ among the Trust, the Owner Trustee and UAC as
administrator.
"Administrator" means the Administrator under the Administration
Agreement, which is initially UAC, and its successors and assigns thereunder.
"Advance" means, with respect to a Receivable and with respect to a
Collection Period, the amount that the Servicer is required to advance pursuant
to Section 9.05.
"Agreement" means this Trust and Servicing Agreement executed by the
Seller, the Servicer and the Owner Trustee, and all amendments and supplements
thereto.
"Amount Financed" means, with respect to a Receivable, the amount
advanced under the Receivable toward the purchase price of the Financed Vehicle
and any related costs.
"Approved Rating" means a rating of P-1 by Moody's or A-l+ by Standard
& Poor's.
"Authorized Newspaper" means a newspaper of general circulation in the
Borough of Manhattan, the City of New York, printed in the English language and
customarily published on each Business Day, whether or not published on
Saturdays, Sundays and holidays.
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"Available Spread Amount" means, on any Payment Date, the amount on
deposit in the Spread Account, including any income or gain from any investment
of funds in the Spread Account, net of any losses from such investment before
giving effect to deposits into or withdrawals from the Spread Account pursuant
to Article IX of the Indenture.
"Available Funds" means the amount defined as such in Section
9.04(a)(i).
"Business Day" means, unless otherwise specified, any day other than a
Saturday, a Sunday or a day on which banking institutions in Wilmington,
Delaware, Chicago, Illinois or New York, New York (or, if the Servicer has
provided prior written notice to each of the Owner Trustee and the Insurer that
such day is not a Business Day, in Little Rock, Arkansas or Indianapolis,
Indiana) shall be authorized or obligated by law, executive order, or
governmental decree to be closed.
"Certificate" means a certificate executed on behalf of the Trust and
authenticated by the Owner Trustee substantially in the form attached hereto as
Exhibit B, which represents ownership of a 100% interest in the Trust.
"Certificate of Trust" means the Certificate of Trust of the Trust in
substantially the form of Exhibit A hereto.
"Certificate Register" means the register maintained by the Owner
Trustee pursuant to Section 11.03.
"Certificateholder" or "Holder" means the Person in whose name the
Certificate shall be registered in the Certificate Register.
"Closing Date" means _________________.
"Collection Account" means the account designated as such, established
and maintained pursuant to Section 9.01.
"Collected Interest" on a Receivable, as of the last day of a
Collection Period, means the portion of all payments received by the Servicer
allocable to interest relating to such Collection Period.
"Collected Principal" on a Receivable, as of the last day of a
Collection Period, means the portion of all payments received by the Servicer
allocable to principal relating to such Collection Period.
"Collection Period" means (i) initially, the period from the day after
the Cutoff Date to the end of the calendar month of ________, ____, and (ii)
thereafter, each calendar month, until the Trust shall terminate pursuant to
Article XVI.
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"Consolidated Net Income" means, for any period, the consolidated net
income of UAC and its subsidiaries determined in accordance with GAAP and, with
respect to Consolidated Net Income for any fiscal year, as reported in UAC's
audited consolidated financial statements.
"Consolidated Tangible Net Worth" means the excess, if any, of the
consolidated assets of UAC and its subsidiaries over the consolidated
liabilities of UAC and its subsidiaries less any goodwill, trade names,
trademarks, patents, unamortized debt discount and expense, and other
intangibles, except that dealer premium rebates and excess servicing shall not
be so deducted, determined in accordance with GAAP.
"Contract Rate" means, with respect to a Receivable, the contract rate
of interest on such Receivable, exclusive of prepaid finance charges.
"Corporate Trust Office" means the office of the Owner Trustee at which
its corporate trust business shall, at any particular time, be administered,
which office at the date of the execution of this Agreement is located at
___________________________________________________________; Attention:
__________________________; Telecopy ______________ or at such other address as
the Owner Trustee may designate from time to time by notice to the
Certificateholders, the Seller, the Servicer and the Indenture Trustee.
"Cutoff Date" means __________, ____.
"Dealer" means the seller of a Financed Vehicle, who originated and
assigned the related Receivable to UAC, UAC Finance Corporation, PAC or the
Predecessor under an existing agreement with UAC, UAC Finance Corporation, PAC
or the Predecessor or who arranged for a loan from UAC, PAC or the Predecessor
to the purchaser of a Financed Vehicle under an existing agreement with UAC, PAC
or the Predecessor.
"Defaulted Receivable" means, for any Collection Period, a Receivable
as to which any of the following has occurred: (i) any payment, or part thereof,
in excess of $10.00 was delinquent 120 days or more as of the last day of such
Collection Period, (ii) the Financed Vehicle that secures the Receivable has
been repossessed, or (iii) the Servicer has determined that the Receivable is
uncollectible in accordance with the Servicer's customary practices on or before
the last day of such Collection Period; provided, however, that "Defaulted
Receivable" shall not include any Receivable that is to be repurchased pursuant
to Section 7.02 or purchased pursuant to Section 8.07; provided further, that
any Advances made with respect to a Receivable shall not be considered in the
determination of the delinquency status of such Receivable.
"Determination Date" means, for each Collection Period, the second
Business Day prior to the related Payment Date.
"Dissolution Payment Date" means the Payment Date following the
liquidation of the trust corpus pursuant to Section 16.02.
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"Eligible Bank" means any depository institution with trust powers
(including the Owner Trustee and the Indenture Trustee), organized under the
laws of the United States or any State having a net worth in excess of
$50,000,000, the deposits of which are insured to the full extent permitted by
law by the Federal Deposit Insurance Corporation, which is subject to
supervision and examination by Federal or State authorities and which (i) has a
long-term unsecured debt rating of at least Baa3 from Moody's or (ii) is
approved by each Rating Agency.
"Eligible Investment" means any of the following:
(i) direct obligations of, and obligations the full and
timely payment of principal and interest on which is fully guaranteed
by, the United States of America, the Federal National Mortgage
Association, or any agency or instrumentality of the United States of
America the obligations of which are backed by the full faith and
credit of the United States of America;
(ii) (A) demand and time deposits in, certificates of deposits of,
bankers' acceptances issued by, or federal funds sold by any depository
institution or trust company (including the Owner Trustee, the
Indenture Trustee or any of their agents, acting in their respective
commercial capacities) incorporated under the laws of the United States
of America, any State thereof or the District of Columbia or any
foreign depository institution with a branch or agency licensed under
the laws of the United States of America or any State, in each case
subject to supervision and examination by Federal and/or State banking
authorities and having an Approved Rating at the time of such
investment or contractual commitment providing for such investment or
(B) any other demand or time deposit or certificate of deposit which is
fully insured by the Federal Deposit Insurance Corporation;
(iii) repurchase obligations with respect to (A) any security
described in clause (i) above or (B) any other security issued or
guaranteed by an agency or instrumentality of the United States of
America, in either case entered into with a depository institution or
trust company (acting as principal) described in clause (ii) (A) above;
(iv) short-term securities bearing interest or sold at a
discount issued by any corporation incorporated under the laws of the
United States of America or any State the short-term unsecured
obligations of which have an Approved Rating, or higher, at the time of
such investment; provided, however, that securities issued by any
particular corporation will not be Eligible Investments to the extent
that investment therein will cause the then outstanding principal
amount of securities issued by such corporation and held as part of the
corpus of the Trust to exceed 10% of amounts held in the Collection
Account;
(v) commercial paper having an Approved Rating at the time of
such investment;
(vi) a guaranteed investment contract issued by any insurance
company or other corporation acceptable to the Rating Agency, provided
that the Owner Trustee or the
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Indenture Trustee shall have received written notice from the Rating
Agency to the effect that the investment of funds in such a contract
will not result in the reduction or withdrawal of any rating on the
Notes;
(vii) interests in any money market fund having a rating of
Aaa by Moody's or AAAm by Standard & Poor's; and
(viii) any other investment approved in advance in writing by
the Rating Agencies and the Insurer.
"Event of Servicer Default" means an event specified in Section 14.01.
"Financed Vehicle" means a new or used automobile, light truck or van,
together with all accessions thereto, securing an Obligor's indebtedness under
the respective Receivable.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board, or in such other statements that are
described in Statement on Auditing Standards No. 69 "The Meaning of Present
Fairly in Conformity With Generally Accepted Accounting Principles in the
Independent Auditor's Report" that are applicable to the circumstances as of the
date of determination, applied on a consistent basis.
"Holder" -- see "Certificateholder."
"Indenture" means the Indenture dated as of __________________ among
the Owner Trustee as issuer (on behalf of the Trust) and ____________________ as
Indenture Trustee, which provides for the issuance of the Notes.
"Indenture Trustee" means _____________________ in its role as
Indenture Trustee under the Indenture and its permitted successors and assigns.
"Indenture Trustee Office" means the office of the Indenture Trustee at
which its business as Indenture Trustee under the Indenture shall be
administered, which office is presently located at
______________________________________; telecopy _______________ or at such
other address as the Indenture Trustee may designate from time to time by notice
to the Owner Trustee, the Servicer and the Noteholders.
"Insolvency Event" with respect to a party means (i) the entry of a
decree or order by a court or agency or supervisory authority having
jurisdiction in the premises for the appointment of a trustee-in-bankruptcy or
similar official for such party 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
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period of 60 consecutive days; or (ii) the consent by such party to the
appointment of a trustee-in- bankruptcy or similar official in any insolvency,
readjustment of debt, marshalling of assets and liabilities, or similar
proceedings of or relating to such party or of or relating to substantially all
of its property; or (iii) such party 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.
"Insolvency Proceeding" means the commencement, after the date hereof,
of any bankruptcy, insolvency, readjustment of debt, reorganization, marshaling
of assets and liabilities or similar proceedings by or against UAC, UAFC or the
Seller, the commencement, after the date hereof, of any proceedings by or
against UAC, UAFC or the Seller for the winding up or liquidation of its affairs
or the consent, after the date hereof, to the appointment of a trustee,
conservator, receiver, or liquidator in any bankruptcy, insolvency, readjustment
of debt, reorganization, marshaling of assets and liabilities or similar
proceedings of or relating to UAC, UAFC or the Seller.
"Insurance Agreement" means the Insurance and Reimbursement Agreement,
dated as of the Closing Date, among the Trust, the Seller, UAC individually and
as Servicer, UAFC and the Insurer pursuant to which the Insurer issued the
Policy.
"Insurer" means __________________________, a ________ domiciled
insurance company.
"Interest Advance Amount" with respect to a simple interest Receivable
as to which an Advance is required to be made on the last day of a Collection
Period, shall mean an amount equal to 30 days of interest upon the Principal
Balance of such Receivable as of such date; and, with respect to a Precomputed
Receivable as to which an Advance is required to be made on the last day of a
Collection Period, shall mean an amount equal to that portion of the earliest
delinquent Scheduled Payment allocable to interest (using the actuarial or
constant yield method).
"Interest Shortfall" means, as to any simple interest Receivable as of
the last day of any Collection Period, the amount, if any, by which (a) interest
due on such Receivable exceeds (b) the Collected Interest on such Receivable.
"Interest Shortfall" with respect to a Precomputed Receivable as of the last day
of any Collection Period means the amount, if any, by which the portion of the
Scheduled Payment due during such Collection Period allocable to interest (using
the actuarial or constant yield method) exceeds the Collected Interest on such
Receivable (computed using the same method except that the amount of Collected
Interest in respect of Precomputed Receivables shall be increased by giving
effect to the withdrawal for the related Payment Date of any previously received
Scheduled Payments in respect of such Receivable from the Payahead Account in
accordance with Sections 8.02(b) and 9.09 hereof).
"Lien" means a security interest, lien, charge, pledge, equity, or
encumbrance of any kind other than tax liens, mechanics' liens, and any liens
which attach to the respective Receivable or related Financed Vehicle by
operation of law.
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"Liquidation Proceeds" means the monies collected from whatever source,
including insurance proceeds, on Defaulted Receivables, net of the sum of any
amounts expended by the Servicer for the account of the Obligor plus any amounts
required by law to be remitted to the Obligor. "Liquidation Proceeds" with
respect to a Payment Date means such monies collected during the preceding
Collection Period. In no event shall Liquidation Proceeds be less than zero.
"Monthly Interest" means the amount of interest which is payable to the
Noteholders on any Payment Date pursuant to the terms of the Indenture.
"Monthly Principal" means the amount of principal which is payable to
the Noteholders on any Payment Date pursuant to the terms of the Indenture.
"Monthly Servicing Fee" means, (i) for the first Payment Date, the
product of the following: the (a) monthly Servicing Rate (b) the number of days
remaining in the month of the Closing Date from and including the Closing Date,
assuming a 30-day month, divided by 30 and (c) the Original Pool Balance and
(ii) for any subsequent Payment Date, the product of (a) the Pool Balance as of
the beginning of the related Collection Period and (b) the monthly Servicing
Rate.
"Moody's" means Moody's Investors Service, Inc.
"Notes" mean the Notes issued by the Trust pursuant to the Indenture.
"Noteholders" mean the holders of the Notes issued pursuant to the
Indenture.
"Obligor" on a Receivable means the purchaser or the co-purchasers of
the Financed Vehicle or any other Person who owes payments under the Receivable.
The phrase "payment made on behalf of an Obligor" shall mean all payments made
with respect to a Receivable except payments made by UAC, the Seller or the
Servicer.
"Officers' Certificate" means a certificate signed by any two of the
chairman of the board, the president, any vice chairman of the board, any vice
president, the treasurer, or the controller of UAC, the Seller or the Servicer,
as the case may be; provided that no individual shall sign in a dual capacity.
"Opinion of Counsel" means a written opinion of counsel, who may be
counsel to the Seller and/or Servicer, which counsel shall be acceptable to the
Owner Trustee.
"Optional Disposition Price" means the amount specified as such in
Section 16.02.
"Original Pool Balance" means $______________.
"Outstanding Advances" as of any date, with respect to a Receivable,
means the total amount of Advances made on such Receivable for which the
Servicer has not been reimbursed.
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"Owner Trustee" means ________________________, a banking corporation
organized under the laws of the State of Delaware and its successors or any
corporation resulting from or surviving any merger or consolidation to which it
or its successors may be a party or any successor trustee at the time serving as
successor trustee hereunder.
"Owner Trustee's Certificate" means a certificate completed and
executed by the Owner Trustee by a Responsible Officer pursuant to Section
15.02, substantially in the form of, in the case of an assignment to UAC,
Exhibit 1, and in the case of an assignment to the Servicer, Exhibit 2.
"PAC" means Performance Acceptance Corporation, a subsidiary of UAC
which was merged into UAC, and/or UAC doing business as Performance Acceptance
Corporation.
"Payahead" on a Precomputed Receivable means the amount, as of the
close of business on the last day of a Collection Period, computed in accordance
with Section 8.02(b) with respect to such Receivable.
"Payahead Account" means the account designated as such, established
and maintained pursuant to Section 9.09.
"Payahead Balance" on a Precomputed Receivable means the sum, as of the
close of business on the last day of a Collection Period, of all Payaheads made
by or on behalf of the Obligor with respect to such Precomputed Receivable, as
reduced by applications of previous Payaheads with respect to such Precomputed
Receivable, pursuant to Sections 8.02(b) and 9.09.
"Payment Date" means, for each Collection Period, the eighth calendar
day of the month or, if such day is not a Business Day, the first Business Day
thereafter. The first Payment Date shall be ----------, ----.
"Person" means any individual, corporation, estate, partnership, joint
venture, association, joint stock company, trust, unincorporated organization,
or government or any agency or political subdivision thereof.
"Policy" means the irrevocable Financial Guaranty Insurance Policy
dated as of the Closing Date issued by the Insurer to the Indenture Trustee for
the benefit of the Noteholders as required under the Indenture.
"Pool Balance" as of any date means the aggregate Principal Balance of
the Receivables as of such date; provided, however, that for purposes of
determining Monthly Principal, the Principal Balance of a Defaulted Receivable
or a Purchased Receivable (if actually purchased by the Servicer or repurchased
by UAC) shall be deemed to be zero on and after the close of business on the
last day of the Collection Period in which the Receivable becomes a Defaulted
Receivable or a Purchased Receivable that is actually purchased or repurchased.
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"Precomputed Receivable" means any Receivable under which the portion
of a payment allocable to earned interest (which may be referred to in the
related contract as an add-on finance charge) and the portion allocable to the
Amount Financed is determined according to the sum of periodic balances, the sum
of monthly balances, the rule of 78's or any equivalent method.
"Predecessor" means Union Federal Savings Bank of Indianapolis, a
federally chartered stock savings bank.
"Prepayment Charges," as used in the Agreement, shall be interpreted to
include, without limitation, in the case of a Precomputed Receivable that is
prepaid in full, the difference between the Principal Balance of such Receivable
(plus accrued interest to the date of prepayment) and the Principal Balance of
such Receivable computed in accordance with the method provided for in the
contract governing such Receivable, such as the rule of 78's.
"Principal Balance" of a simple interest Receivable, as of the close of
business on the last day of a Collection Period, means the Amount Financed minus
that portion of all payments received on or before the close of business on such
last day allocable to principal of such Receivable. "Principal Balance" with
respect to a Precomputed Receivable, as of the close of business on the Cutoff
Date, means the gross principal balance of such Receivable on the records of the
Servicer, net of unearned or accrued interest reflected therein, and as of the
close of business on the last day of a Collection Period, means the Principal
Balance as of the Cutoff Date minus that portion of all Scheduled Payments
received with respect to such Receivable in respect of such Collection Period
and all prior Collection Periods allocable to principal of such Receivable using
the actuarial or constant yield method.
"Purchase Agreement" means the Purchase Agreement dated as of the date
hereof by and between the Seller, UAC and UAFC, as amended, supplemented or
modified from time to time pursuant to which the Seller purchases Receivables
which have been or shall be transferred to the Trust.
"Purchase Amount" of any Receivable, as of the close of business on the
last day of any Collection Period, means the amount equal to the sum of the
Principal Balance of such Receivable plus any unpaid interest accrued and due
during or prior to such Collection Period on such Receivable.
"Purchased Receivable" means a Receivable purchased by the Servicer
pursuant to Section 8.07 or repurchased by UAC pursuant to Section 7.02 not
later than the respective dates required thereby.
"Rating Agency" means each of Moody's and Standard & Poor's and their
successors and assigns.
"Rating Agency Condition" has the meaning specified in the Indenture.
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"Receivable" means any simple interest or pre-computed (add-on)
interest installment sales contract or installment loan and security agreement
which shall appear on Schedule A to the Agreement.
"Receivable Files" means the documents specified in Section 7.03.
"Receivables" or "Receivables Pool" means those Receivables conveyed to
the Trust by the Seller listed as of the Cutoff Date in Schedule A.
"Record Date" has the meaning specified in the Indenture.
"Recoveries of Advances" means, for any Collection Period, all payments
received by the Servicer by or on behalf of Obligors (other than Obligors with
respect to Defaulted Receivables and excluding reimbursements of Outstanding
Advances on Defaulted Receivables pursuant to Sections 9.04(a)(i) and 9.05)
during such Collection Period representing recoveries of Interest Shortfalls for
which Advances were made for prior Collection Periods.
"Responsible Officer" means, when used with respect to the Owner
Trustee, any officer within the Corporate Trust Office (or any successor group
of the Owner Trustee) including any managing director, vice president, assistant
vice president, assistant treasurer, assistant secretary or any other officer of
the Owner Trustee customarily performing functions similar to those performed by
the persons who at the time shall be such officers, respectively, or to whom any
corporate trust matter is referred because of his knowledge of and familiarity
with the particular subject.
"Scheduled Payment" on a Receivable means that portion of the payment
required to be made by the Obligor during the respective Collection Period
sufficient to amortize the Principal Balance and to provide interest at the
Contract Rate.
"Secured Parties" means each of the Indenture Trustee, the Noteholders
and the Insurer pursuant to the Indenture.
"Seller" means UAC Securitization Corporation, a Delaware corporation,
in its capacity as the seller of the Receivables under this Agreement, and each
successor to UAC Securitization Corporation (in the same capacity) pursuant to
Section 12.03.
"Servicer" means Union Acceptance Corporation, an Indiana corporation,
in its capacity as the servicer of the Receivables and each successor to Union
Acceptance Corporation (in the same capacity) pursuant to Section 13.03 or
14.02.
"Servicer's Certificate" means a certificate completed and executed by
an officer of the Servicer pursuant to Section 8.09.
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"Servicing Rate" means 1.00% per annum, payable monthly at one-twelfth
of the annual rate, subject to adjustment with respect to a successor Servicer
pursuant to Section 14.02.
"Spread Account" means the account designated as such, established and
maintained pursuant to the Indenture.
"Spread Account Surplus" means, on any Payment Date, the excess, if
any, of the Available Spread Amount on such Payment Date, after giving effect to
deposits into and withdrawals from the Spread Account pursuant to Article IX of
the Indenture on such Payment Date, over the Required Spread Amount on such
Payment Date (after giving effect to any payments of Monthly Principal and
Monthly Interest and all amounts owing to the Insurer on such Payment Date
pursuant to the Indenture).
"Standard & Poor's" means Standard & Poor's Ratings Services, a
division of The McGraw- Hill Companies, Inc.
"State" means (i) any state of the United States of America or (ii) the
District of Columbia.
"Stated Final Payment Date" means ____________________.
"Trigger Event" means any of the events identified as such in Section
6.01 of the Insurance Agreement.
"Trust" means the Delaware business trust created by the Agreement, the
estate of which shall generally comprise the Receivables (other than Purchased
Receivables) and all monies paid thereon, and all monies due thereon, including
Accrued Interest, as of and after the Cutoff Date (but excluding Accrued
Interest paid on or prior to the Closing Date); security interests in the
Financed Vehicles; funds deposited in the Collection Account; all documents
contained in the Receivable Files; any property that shall have secured a
Receivable and that shall have been acquired by or on behalf of the Trust; any
Liquidation Proceeds and any rights of the Seller in proceeds from claims or
refunds of premiums on any physical damage, lender's single interest, credit
life, disability, and hospitalization insurance policies covering Financed
Vehicles or Obligors; the interest of the Seller in recourse to Dealers relating
to certain of the Receivables; the proceeds of the foregoing; amounts on deposit
from time to time in the Spread Account; and certain rights of the Seller under
the Purchase Agreement, including, without limitation, Section 3.04 thereof.
"UAC" means Union Acceptance Corporation, an Indiana corporation, and
its successors and assigns, other than in its capacity as Servicer.
"UAC Finance Corporation" means UAC Finance Corporation, an Indiana
corporation, and its successors and assigns.
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"UAFC" means Union Acceptance Funding Corporation, a Delaware
corporation, and its successors and assigns.
"UCC" means the Uniform Commercial Code as in effect in the respective
jurisdiction.
SECTION 2.02. Usage of Terms. With respect to all terms in this
Agreement, the singular includes the plural and the plural the singular; words
importing any gender include the other genders; references to "writing" include
printing, typing, lithography and other means of reproducing words in a visible
form; references to agreements and other contractual instruments include all
subsequent amendments thereto or changes therein entered into 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"
means "including without limitation."
SECTION 2.03. Cutoff Date and Record Date. All references to the Record
Date prior to the first Record Date in the life of the Trust shall be to the
Closing Date.
SECTION 2.04. Section References. All section references in this
Agreement shall be to Sections in this Agreement unless otherwise specified.
ARTICLE III
Conveyance of Receivables
In consideration of the Owner Trustee's delivery to the Seller of the
Certificates and the proceeds to be realized by the Trust from the issuance of
the Notes pursuant to the Indenture, the Seller does hereby sell, transfer,
assign, and otherwise convey to the Owner Trustee, in trust without recourse
(subject to the obligations herein):
(i) all right, title, and interest of the Seller in and to the
Receivables listed in Schedule A hereto;
(ii) the security interests in the Financed Vehicles granted
by Obligors pursuant to the Receivables;
(iii) any Liquidation Proceeds and any proceeds from claims or
refunds of premiums on any physical damage, lender's single interest,
credit life, disability and hospitalization insurance policies covering
Financed Vehicles or Obligors;
(iv) funds deposited in the Collection Account;
(v) the interest of the Seller in any proceeds from recourse
to Dealers relating to the Receivables;
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(vi) all documents contained in the Receivable Files;
(vii) all monies paid and all monies due, including Accrued
Interest, as of and after the Cutoff Date, with respect to the
Receivables held by the Servicer or Seller (but excluding Accrued
Interest paid on or prior to the Closing Date);
(viii) the rights of the Seller pursuant to the Purchase
Agreement to require UAC to repurchase any Receivables as to which
there has been a breach of the representations and warranties contained
therein;
(ix) the benefits of the Policy; and
(x) all proceeds of the foregoing.
The Seller does hereby further assign, convey, pledge and grant a
security interest in (i) any and all other right, title and interest, including
any beneficial interest the Seller may have in the Collection Account, the
Spread Account and the funds deposited therein, and (ii) any proceeds of any of
the foregoing, to the Owner Trustee and for the benefit of the Noteholders to
secure amounts payable to Noteholders as provided under this Agreement. The
Seller acknowledges that all of the foregoing shall constitute the "Pledged
Assets" pursuant to the terms of the Indenture and the Seller hereby consents to
the pledge of all of such assets to the Indenture Trustee for the benefit of the
Secured Parties pursuant to the Indenture.
The Seller does not convey to the Owner Trustee any interest in any
contracts with Dealers related to any "dealer reserve" or any rights to the
recapture of any dealer reserve.
ARTICLE IV
Acceptance by Trustee
The Owner Trustee does hereby accept all consideration conveyed by the
Seller pursuant to Article III, and declares that the Owner Trustee shall hold
such consideration upon the trusts herein set forth for the benefit of all
present and future Certificateholders, subject to the terms and provisions of
this Agreement.
ARTICLE V
Information Delivered to the Rating Agencies
(a) The Servicer hereby expresses its intention to deliver
promptly to each Rating Agency (i) a copy of each Servicer's Certificate that it
delivers to the Owner Trustee, the Indenture Trustee and the Insurer pursuant to
Section 8.09, (ii) a copy of each annual Officers' Certificate as to compliance
and any notice of default that it delivers to the Indenture Trustee or the Owner
Trustee
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pursuant to Section 8.10, (iii) delinquency and loss information for the
Receivables, the amount of any draws on the Policy, written notice of any
merger, consolidation, or other succession of the Servicer, pursuant to Section
13.03, or the Seller, pursuant to Section 12.03, (iv) a copy of each amendment
to this Agreement and (v) any Opinion of Counsel delivered to the Owner Trustee
pursuant to Section 17.02(i).
(b) The Owner Trustee hereby expresses its intention to
deliver promptly to each Rating Agency (i) a copy of each annual certified
public accountant's report received by the Owner Trustee pursuant to Section
8.11, (ii) a copy of each amendment to this Agreement and (iii) a copy of the
notice of termination of the Trust provided to Certificateholders pursuant to
Section 16.01.
(c) For purposes of delivery pursuant to paragraphs (a) and
(b) of this Article V, the addresses for the Rating Agencies are:
Structured Finance/Asset Backed Surveillance Group
Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc.
26 Broadway, 15th Floor
New York, New York 10004
Moody's Investors Service, Inc.
Attention: ABS Monitoring Department
4th Floor
99 Church Street
New York, New York 10007
(d) The provisions of this Article V are included herein for
convenience of reference only and shall not be construed to be contractual
undertakings or obligations. The failure of the Servicer or the Owner Trustee to
comply with any or all of the provisions of this Article V shall not constitute
an Event of Default or a default of any kind under this Agreement or make any
remedy available to any Person.
ARTICLE VI
Agent for Service
The agent for service for the Seller shall be Leeanne Graziani, Vice
President of the Seller. Any and all service on the agent for service of the
Seller shall be sent to UAC Securitization Corporation, 9240 Bonita Beach Road,
Suite 1109-A, Bonita Springs, Florida 34135 or such other address as the Seller
shall provide notice thereof pursuant to Sections 17.02(c) or 17.05.
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The agent for service for the Servicer shall be Melanie S. Otto, Vice
President of the Servicer. Any and all service on the agent for service of the
Servicer shall be sent to Union Acceptance Corporation, 250 North Shadeland
Avenue, Indianapolis, Indiana 46219.
ARTICLE VII
The Receivables
SECTION 7.01. Representations and Warranties of Seller. Pursuant to
Article III, the Seller has assigned to the Trust the benefit of, and its rights
respecting, the representations and warranties made to the Seller in the
Purchase Agreement as to the Receivables on which the Owner Trustee relies in
accepting the Receivables in trust and executing and authenticating the
Certificates and executing and delivering the Indenture. The Seller agrees that
the representations shall also be for the benefit of the Secured Parties. Such
representations and warranties speak as of the execution and delivery of the
Purchase Agreement but shall survive the sale, transfer, and assignment of the
Receivables to the Owner Trustee.
(a) The Seller hereby represents and warrants to the Owner Trustee that
it has entered into the Purchase Agreement with UAC and UAFC, that UAC and UAFC
have made the representations and warranties set forth therein, that such
representations and warranties run to and are for the benefit of the Seller, and
that pursuant to Article III of this Agreement the Seller has transferred and
assigned to the Owner Trustee all rights of the Seller to cause UAC under the
Purchase Agreement to repurchase Receivables in the event of a breach of such
representations and warranties.
(b) It is the intention of the Seller that the transfer and assignment
herein contemplated, taken as a whole, constitute a sale of the Receivables from
the Seller to the Trust and that the beneficial interest in and title to the
Receivables not be part of the receivership estate in the event of the
appointment of a receiver for the Seller. No Receivable has been sold,
transferred, assigned, or pledged by the Seller to any Person other than the
Owner Trustee. Immediately prior to the transfer and assignment herein
contemplated, the Seller had good and marketable title to each Receivable free
and clear of all liens, and, immediately upon the transfer thereof, the Owner
Trustee (for the benefit of the Certificateholders and the Secured Parties
pursuant to the Indenture) shall have good and marketable title to each
Receivable, free and clear of all liens and rights of others, except for the
rights of the Certificateholders and the Insurer; and the transfer has been
perfected under the UCC. On or prior to the Closing Date, all filings
(including, without limitation, UCC filings) necessary in any jurisdiction to
give the Owner Trustee a first perfected ownership interest in the Receivables
shall have been made.
SECTION 7.02. Repurchase Upon Breach. The Seller, UAC, the Servicer, or
the Owner Trustee, as the case may be, shall inform the Indenture Trustee, the
Insurer and the other parties promptly, in writing, upon the discovery of any
breach of the representations and warranties contained in the Purchase
Agreement. This obligation shall not constitute an obligation on the part
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of the Owner Trustee to actively seek to discover any such breaches. Unless the
breach shall have been cured by the second Record Date following the discovery,
UAC, pursuant to its obligations under the Purchase Agreement, shall repurchase
any Receivable materially and adversely affected by the breach as of such Record
Date (or, at UAC's option, the first Record Date following the discovery). In
consideration of the purchase of the Receivable, UAC shall remit the Purchase
Amount, in the manner specified in Section 9.03. The sole remedy of the Owner
Trustee, the Trust, or the Indenture Trustee with respect to a breach of the
representations and warranties referred to in Section 7.01 shall be to require
UAC to repurchase Receivables pursuant to the Purchase Agreement and this
Section 7.02.
SECTION 7.03. Custody of Receivable Files. To assure uniform quality in
servicing the Receivables and to reduce administrative costs, the Owner Trustee,
upon the execution and delivery of the Agreement, hereby revocably appoints the
Servicer, and the Servicer hereby accepts such appointment, for the benefit of
the Trust and the Indenture Trustee, to act as the agent of the Owner Trustee as
custodian of the following documents or instruments which are hereby
constructively delivered to the Owner Trustee with respect to each Receivable:
(i) The original of the Receivable.
(ii) The original credit application fully executed by the
Obligor.
(iii) The original certificate of title or such documents that
the Seller or Servicer shall keep on file, in accordance with its
customary procedures, evidencing the security interest of the Seller in
the Financed Vehicle.
(iv) Any and all other documents that the Servicer or the
Seller shall keep on file, in accordance with its customary procedures,
relating to a Receivable, an Obligor, or a Financed Vehicle.
SECTION 7.04. Duties of Servicer as Custodian.
(a) Safekeeping. The Servicer, in its capacity as custodian, shall hold
the Receivable Files on behalf of the Owner Trustee for the use and benefit of
all present and future Owner Trustees, and maintain such accurate and complete
accounts, records, and computer systems pertaining to each Receivable File as
shall enable the Owner Trustee to comply with this 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 relating to all comparable automotive receivables that the
Servicer services for itself. 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 Owner Trustee to verify the accuracy of the
Servicer's record keeping. The Servicer shall promptly report to the Owner
Trustee 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
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to remedy any such failure; provided, however, notwithstanding anything to the
contrary in Section 7.03 or this Section 7.04, the Servicer shall not be
required to possess the original of Receivables representing less than 2% of the
Original Pool Balance until 30 days following the Closing Date.
(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 Owner Trustee
and the Indenture Trustee by prior written notice. The Servicer shall make
available to the Owner Trustee and the Indenture Trustee and their duly
authorized representatives, attorneys, or auditors a list of locations of the
Receivable Files, the Receivable Files, and the related accounts, records, and
computer systems maintained by the Servicer at such times as the Owner Trustee
shall instruct.
(c) Release of Documents. Upon instruction from the Owner Trustee, the
Servicer shall release any document in a Receivable File to the Owner Trustee,
the Owner Trustee's agent, or the Owner Trustee's designee, as the case may be,
at such place or places as the Owner Trustee may designate, as soon as
practicable.
SECTION 7.05. Instructions; Authority to Act. The Servicer shall be
deemed to have received proper instructions with respect to the Receivable Files
upon its receipt of written instructions signed by a Responsible Officer of the
Owner Trustee.
SECTION 7.06. Custodian's Indemnification. The Servicer, shall
indemnify the Trust, the Owner Trustee and the Indenture Trustee (which shall
include, for purposes of this Section 7.06, their directors, officers, employees
and agents) 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 Trust, 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 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
Owner Trustee or the Indenture Trustee. This indemnity shall survive the
termination of this Agreement and the resignation or removal of the Owner
Trustee or the Indenture Trustee.
SECTION 7.07. 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
7.07. If the Servicer shall resign 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 14.01, the appointment of the Servicer as
custodian may be terminated by the Owner Trustee with the consent of the
Indenture Trustee and the Insurer (so long as the Insurer is not in default of
its obligations under the Policy). In addition, the Owner Trustee may terminate
the Servicer's appointment as custodian with cause at any time upon written
notification to the Servicer and the Indenture Trustee. As soon as practicable
after any termination of such appointment, the Servicer shall deliver the
Receivable Files to the Owner Trustee or the Owner Trustee's agent at such place
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or places as the Owner Trustee, with the consent of the Insurer and the
Indenture Trustee, may reasonably designate.
ARTICLE VIII
Administration and Servicing of Receivables
SECTION 8.01. Duties of Servicer. The Servicer, for the benefit of the
Trust and the Secured Parties, 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
automotive receivables that it services for itself. The Servicer's duties shall
include collection and posting of all payments, making Advances (in the
Servicer's sole discretion), responding to inquiries of Obligors or of federal,
state or local governmental authorities with respect to the Receivables,
investigating delinquencies, sending payment coupons to Obligors, accounting for
collections, and furnishing monthly and annual statements to the Owner Trustee
and the Indenture Trustee with respect to distributions. 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 authorized and empowered by the Owner Trustee to execute and
deliver, on behalf of itself, the Trust, the Owner Trustee, the Indenture
Trustee 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 or a Defaulted Receivable, the Owner Trustee and the Indenture
Trustee shall thereupon be deemed to have automatically assigned, solely for the
purpose of collection, such Receivable to the Servicer. The Owner Trustee and
the Indenture Trustee shall execute any documents prepared by the Servicer and
delivered to the Owner Trustee for execution that are necessary or appropriate
to enable the Servicer to carry out its servicing and administrative duties
hereunder.
SECTION 8.02. Collection of Receivable Payments (a) The Servicer shall
make reasonable efforts to collect all payments called for under the terms and
provisions of such Receivables as and when the same shall become due and shall
follow such collection procedures as it follows with respect to all comparable
automotive receivables that it services for itself. If payments are extended in
the ordinary course of the Servicer's collection procedures, and, as a result,
any Receivable would be outstanding at the Stated Final Payment Date, then the
Servicer shall be obligated to purchase such Receivable pursuant to Section 8.07
(unless such Receivable is otherwise being purchased pursuant to Section 16.02)
as of the last day of the Collection Period immediately preceding the Stated
Final Payment Date. The Servicer may in its discretion waive any late payment
charge or any other fees that it is entitled to retain under Section 8.08, or
other fee (to the extent consistent with its credit and collection policy on the
Closing Date) that may be collected in the ordinary course of servicing a
Receivable.
(b) All allocations of payments with respect to a simple-interest
Receivable to principal and interest and determinations of periodic charges and
the like shall be made using the simple interest
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method, based on either the actual number of days elapsed and the actual number
of days in the calendar year or on the basis of a thirty-day month and a 360-day
calendar year, as specified in the related installment sales contract or
installment loan and security agreement. Each payment on a simple interest
Receivable shall be applied first to the amount of interest accrued on such
Receivable to the date of receipt; second, to principal due on such Receivable;
third, to late charges, if any, accrued on such Receivable; and last, to reduce
the remaining principal amount outstanding on such Receivable. Payments made by
or on behalf of an Obligor including any Payaheads previously made and added to
the Payahead Balance with respect to a Precomputed Receivable shall be applied
first to overdue Scheduled Payments (including reduction of Outstanding Advances
as provided in Section 9.04). Next, any excess shall be applied to the Scheduled
Payment and any remaining excess shall be added to the Payahead Balance, and
shall be applied to prepay the Precomputed Receivable, but only if such Payahead
Balance shall be sufficient to prepay the Receivable in full. Otherwise, any
such remaining excess payments shall constitute a Payahead and shall increase
the Payahead Balance.
SECTION 8.03. Realization Upon Receivables. (a) On behalf of the Trust
and the Secured Parties the Servicer shall use its best efforts, consistent with
its customary servicing procedures, to repossess or otherwise convert the
ownership of the Financed Vehicle securing any Receivable as to which the
Servicer shall have determined that eventual payment in full is unlikely. The
Servicer shall follow such customary and usual practices and procedures as it
shall deem necessary or advisable in its servicing of automotive receivables,
which may include reasonable efforts to realize upon any recourse to Dealers and
selling the Financed Vehicle at public or private sale. 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 discretion that such repair and/or repossession will increase the
Liquidation Proceeds. After appropriate disposition of the Financed Vehicle, the
Servicer shall also take such measures as it deems reasonable and appropriate to
realize value in respect of any deficiency balance of the Receivable including
pursuit of action on behalf of the Trust and/or the Secured Parties against the
Obligor or public or private sale of the remaining interest of the Trust and/or
the Secured Parties in such Receivable.
(b) Unless otherwise stated in this Agreement, the Servicer shall
either purchase or liquidate each Financed Vehicle that has not previously been
liquidated and that secures, or previously secured, a Defaulted Receivable
either (i) by the end of the Collection Period preceding the final scheduled
Payment Date during the life of the Trust or (ii) if earlier, by the end of the
ninth Collection Period following the Collection Period during which such
Receivable became a Defaulted Receivable. Any purchase of a Financed Vehicle by
the Servicer shall be made at a price equal to the fair market value of the
Financed Vehicle as determined by the Servicer in accordance with the Servicer's
normal servicing standards.
SECTION 8.04. Physical Damage Insurance. The Servicer, in accordance
with its customary servicing procedures and underwriting standards, shall
require that each Obligor shall have obtained and shall maintain physical damage
insurance covering the Financed Vehicle.
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SECTION 8.05. Maintenance of Security Interests in Financed Vehicles.
The Servicer shall, in accordance with its customary servicing procedures, take
such steps as are necessary to ensure that perfection of the security interest
created by each Receivable in the related Financed Vehicle has been obtained,
and to maintain such security interest. The Owner Trustee and the Indenture
Trustee hereby authorize the Servicer to take such steps as are necessary to
re-perfect such security interest on behalf of the Trust in the event of the
relocation of a Financed Vehicle or for any other reason. Without limiting the
forgoing, in the event that the Servicer consigns a repossessed Financed Vehicle
to an affiliate for liquidation, it shall take such measures as are necessary or
appropriate to maintain the security interest in the Financed Vehicle in the
hands of the consignee until such Financed Vehicle is liquidated, including
appropriate precautionary UCC-1 filings. In addition, UAC and/or such affiliate
will notify the creditors, if any, of such affiliate that have entered into a
consignment arrangement on or before such arrangements are made.
SECTION 8.06. Covenants of Servicer. The Servicer shall not release the
Financed Vehicle securing any Receivable from the security interest granted by
such Receivable in whole or in part except in the event of payment in full by
the Obligor thereunder or repossession, nor shall the Servicer impair the rights
of the Certificateholders or the Secured Parties in the Receivables, nor shall
the Servicer change the amount of the Scheduled Payment under a Receivable or
change the Amount Financed under a Receivable or reduce the Contract Rate of a
Receivable (except if so ordered by a bankruptcy court in a proceeding
concerning the Obligor or otherwise mandated by law).
SECTION 8.07. Purchase of Receivables Upon Breach. The Servicer or the
Owner Trustee shall inform the other party and the Insurer promptly, in writing,
upon the discovery of (i) any breach by the Servicer of its obligations under
Section 8.06 or (ii) the existence of the Servicer's obligation to purchase a
Receivable pursuant to Section 8.02(a). This obligation shall not constitute an
obligation on the part of the Owner Trustee to discover any such breaches or
circumstances. Unless the breach under Section 8.06 shall have been cured by the
second Record Date following the discovery, the Servicer shall purchase any
Receivable materially and adversely affected by such breach as of such day (or,
at the Servicer's election, as of the first Record Date following the
discovery). In consideration of the purchase of such Receivable, the Servicer
shall remit the Purchase Amount with respect to such Receivable in the manner
specified in Section 9.03. The sole remedy of the Owner Trustee, the Trust, or
the Secured Parties with respect to a breach pursuant to Section 8.06 or the
grant of an extension which triggers an obligation of the Servicer under Section
8.02(a) shall be to require the Servicer to purchase Receivables pursuant to
this Section 8.07, except as provided in Section 13.02.
SECTION 8.08. Servicing Fee. The servicing fee for a Collection Period
shall equal the Monthly Servicing Fee (except that in the case of a successor
Servicer, the servicing fee shall equal such amount as is arranged in accordance
with Section 14.02). The Servicer shall be entitled to retain from payments of
interest on the Receivables collected during a Collection Period an amount equal
to the Monthly Servicing Fee due the Servicer in respect of such Collection
Period and need not deposit such amount in the Collection Account. The Servicer
shall also be entitled to retain, and need not deposit in the Collection
Account, all late fees, Prepayment Charges, other administrative fees
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or similar charges allowed by applicable law with respect to Receivables, if
any, collected (from whatever source) on the Receivables. The Monthly Servicing
Fee will be paid only out of the funds of the Trust and not from the Owner
Trustee's own funds. So long as Union Acceptance Corporation is the Servicer, if
the Servicer fails to pay the fees and expenses of the Owner Trustee or the
Indenture Trustee pursuant to Section 15.07 hereof or the Indenture, the Owner
Trustee and Indenture Trustee shall be entitled to receive such amount from the
Monthly Servicing Fee prior to payment thereof to the Servicer and the Servicer
shall not retain from collections that portion of the Monthly Servicing Fee
equal to any fees of the Owner Trustee and Indenture Trustee that are due and
payable and any unpaid amount that the Servicer has received notice is due the
Owner Trustee as reimbursement for expenses.
SECTION 8.09. Servicer's Certificate. On or before the Determination
Date following each Collection Period, the Servicer shall deliver to the Owner
Trustee, the Indenture Trustee and the Insurer a Servicer's Certificate in
substantially the form of Exhibit 3 attached hereto containing all information
necessary to make the distributions pursuant to Section 9.04 of the Indenture
(so long as the Notes remain outstanding) for the Collection Period preceding
the date of such Servicer's Certificate and all information necessary for the
Indenture Trustee to send statements to the Noteholders, including (A) the
amount of aggregate collections on the Receivables, (B) the aggregate Purchase
Amount of the Receivables repurchased by UAC and purchased by the Servicer, (C)
with respect to Precomputed Receivables the net deposit from the Collection
Account to the Payahead Account or the net withdrawal from the Payahead Account
to the Collection Account required for the Collection Period in accordance with
Section 9.09, and in the case of a net withdrawal, the Monthly Interest and
Monthly Principal reported on such Servicer's Certificate shall reflect the
portions of such withdrawal allocable to interest and principal, respectively,
in accordance with this Agreement, (D) the amount, if any, to be withdrawn from
the Spread Account and the amount, if any, to be drawn on the Policy, (E)
information respecting (i) delinquent Receivables that are 30, 60 and 90 days
past due, and (ii) the number of repossessions of Financed Vehicles during the
preceding Collection Period, number of unliquidated repossessed Financed
Vehicles, gross and net losses on the Receivables, and recoveries on charged off
Receivables; and (F) each other item listed in Section 9.04 of the Indenture
reasonably requested by a Rating Agency, the Indenture Trustee or the Insurer in
order to monitor the performance of the Receivables. Receivables purchased by
UAC as of the last day of such Collection Period shall be identified by the UAC
account number with respect to such Receivable (as specified in Schedule A to
this Agreement).
SECTION 8.10. Annual Statement as to Compliance; Notice of Default. (a)
The Servicer shall deliver to the Owner Trustee, the Indenture Trustee and the
Insurer, on or before April 30 of each year, beginning on the first April 30
that is at least six months after the Closing Date, an Officers' Certificate,
dated as of December 31 of the preceding year, stating that (i) a review of the
activities of the Servicer during the preceding 12-month period (or in the case
of the initial Officer's Certificate, the period from the Closing Date to and
including the date of such Officer's 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 year, or, if
there has been a default in the
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fulfillment of any such obligation, specifying each such default known to such
officer and the nature and status thereof. A copy of such certificate and the
report referred to in Section 8.11 may be obtained by any Certificateholder at
its own expense by a request in writing to the Owner Trustee addressed to the
Corporate Trust Office.
(b) The Servicer shall deliver to a Responsible Officer of the Owner
Trustee, the Indenture Trustee and the Insurer, promptly after having obtained
knowledge thereof, but in no event later than 5 Business Days thereafter,
written notice in an Officers' Certificate of any event which with the giving of
notice or lapse of time, or both, would become an Event of Default under Section
14.01. The Seller or UAC shall deliver to a Responsible Officer of the Owner
Trustee, the Indenture Trustee and the Insurer, promptly after having obtained
knowledge thereof, but in no event later than 5 Business Days thereafter,
written notice in an Officers' Certificate of any event which with the giving of
notice or lapse of time, or both, would become an Event of Default under clause
(ii) of Section 14.01.
SECTION 8.11. 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, to deliver to the Owner Trustee,
the Indenture Trustee and the Insurer on or before September 30 of each year
concerning the 12-month period ended June 30 of such year (or shorter period
since the date of this Agreement), beginning on the first September 30 following
the first June 30 after the Closing Date, a report addressed to the Board of
Directors of the Servicer to the effect that such firm has reviewed the
servicing of the Receivables by the Servicer and that such review (1) included
tests relating to new or used automobile, van and light truck loans serviced for
others in accordance with the requirements of the Uniform Single Audit Program
for Mortgage Bankers, to the extent the procedures in such program are
applicable to the servicing obligations set forth in the Agreement, and (2)
except as described in the report, disclosed no exceptions or errors in the
records relating to automobile, van or light truck loans serviced for others
that, in the firm's opinion, paragraph four of such program requires such firm
to report.
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 8.12. Access to Certain Documentation and Information Regarding
Receivables. The Servicer shall provide to the Owner Trustee, Indenture Trustee
and the Insurer access to the Receivables Files in such cases where such parties
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 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 8.12.
SECTION 8.13. 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
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independent accountants, taxes imposed on the Servicer, and expenses incurred in
connection with regular payments and reports to Noteholders.
SECTION 8.14. Reports to Noteholders. The Owner Trustee shall provide
to any Noteholder who so requests in writing (addressed to the Corporate Trust
Office) a copy of any certificate described in Section 8.09, the annual
statement described in Section 8.10, or the annual report described in Section
8.11. The Owner Trustee may require the requesting party to pay a reasonable sum
to cover the cost of the Owner Trustee's complying with such request.
ARTICLE IX
Collections; Distributions to Noteholders and Certificateholders
SECTION 9.01. Collection Account. The Seller shall establish the
Collection Account with an Eligible Bank as a segregated trust account in the
name of the Trust for the benefit of the Secured Parties with the Indenture
Trustee (at the Indenture Trustee Office) or another Eligible Bank. The Servicer
shall direct the Indenture Trustee to invest the amounts in the Collection
Account in Eligible Investments that mature not later than the Business Day
prior to the next succeeding Payment Date and to hold such Eligible Investments
to maturity. The Indenture Trustee (or its custodian) shall (i) maintain
possession of any negotiable instruments or securities evidencing Eligible
Investments until the time of sale or maturity and each certificated security or
negotiable instrument evidencing an Eligible Investment shall be endorsed in
blank or to the Indenture Trustee or registered in the name of the Owner Trustee
and (ii) cause any Eligible Investment represented by an uncertificated security
to be registered in the name of the Indenture Trustee.
SECTION 9.02. Collections. (a) The Servicer shall remit to the
Collection Account all payments by or on behalf of the Obligors on the
Receivables and all Liquidation Proceeds, both as collected during the
Collection Period net of Monthly Servicing Fees and administrative fees allowed
to be retained by the Servicer pursuant to Section 8.08 and net of charge backs
(attributable to errors in posting, returned checks, or rights of offset for
amounts that should not have been paid or that must be refunded as the result of
a successful claim or defense under bankruptcy or similar laws) not later than
the second Business Day following the Business Day on which such amounts are
received by the Servicer. Notwithstanding the foregoing, for so long as (a) UAC
remains the Servicer, (b) no Event of Default shall have occurred and be
continuing and (c)(1) UAC maintains a short-term rating of at least A-1 by
Standard & Poor's and P-l by Moody's (and for five Business Days following a
reduction in either such rating) or (2) prior to ceasing daily remittances, the
Rating Agency Condition shall have been satisfied (and any conditions or
limitations imposed by the Rating Agencies in connection therewith are complied
with) and the prior written consent of the Insurer (not to be unreasonably
withheld) shall have been obtained, the Servicer may remit all such payments and
Liquidation Proceeds with respect to any Collection Period to the Collection
Account on a less frequent basis, but in no event later than the Determination
Date immediately preceding each Payment Date. The Servicer shall remit any
Advances with respect to a Collection Period to the Collection Account on or
before the Determination Date.
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(b) The Servicer, the Owner Trustee and/or Indenture Trustee shall
deposit in the Collection Account any funds received by such parties in respect
of funds drawn under the Policy from the Insurer.
(c) If the Available Funds for a Payment Date are insufficient to pay
current and past due Insurance Premiums, or any amounts owing to the Insurer
pursuant to the Insurance Agreement including, without limitation,
reimbursements, indemnities, fees and expenses, plus accrued interest thereon,
to the Insurer, the Servicer shall notify the Owner Trustee and the Indenture
Trustee of such deficiency, and the Available Spread Amount, if any, then on
deposit in the Spread Account (after giving effect to any withdrawal to satisfy
a deficiency in Monthly Interest or Monthly Principal) shall be available to
cover such deficiency.
SECTION 9.03. Purchase Amounts. Not later than the Determination Date,
the Servicer or UAC shall remit to the Collection Account the aggregate Purchase
Amount for such Collection Period pursuant to Sections 7.02 and 8.07.
SECTION 9.04. Application of Funds. (a) On each Determination Date, the
Servicer shall determine (i) the amount of payments on all Receivables and all
Liquidation Proceeds received during such Collection Period, the amount of
Advances for such Collection Period, and the Purchase Amount for all Receivables
purchased or repurchased with respect to such Collection Period which have been
deposited in the Collection Account (net of amounts required to be paid pursuant
to Section 9.04(d) of the Indenture and excluding amounts required to be paid
pursuant to Sections 7.02, 8.07, and 9.05 but not so paid) after giving effect
to the net transfer from the Collection Account to the Payahead Account or from
the Payahead Account to the Collection Account as provided in Section 9.09, (the
"Available Funds"), and (ii) the amount of funds necessary to make the
distributions required pursuant to Section 9.04(a) of the Indenture, inclusive,
on the next Payment Date. The Servicer shall by a Servicer's Certificate on or
before the Determination Date notify the Owner Trustee and the Indenture Trustee
of such amounts by telecopy to the Corporate Trust Office and the Indenture
Trustee Office or to such numbers as the Owner Trustee or Indenture Trustee may
from time to time provide, followed promptly by mailing such notice to the Owner
Trustee and the Indenture Trustee and to the Insurer.
(b) On any Payment Date on which there are not sufficient Available
Funds to make the distributions required pursuant to Section 9.04(a) of the
Indenture, the Indenture Trustee, or the Servicer on its behalf, shall withdraw
from the Spread Account, to the extent of the Available Spread Amount, an amount
equal to such deficiency and promptly deposit such amount in the Collection
Account. If such deficiency exceeds the Available Spread Amount, the Servicer
shall simultaneously and in the same manner also notify the Owner Trustee, the
Indenture Trustee and the Insurer of the amount of such excess deficiency.
(c) On each Payment Date, the Owner Trustee shall distribute to each
Certificateholder such Certificateholder's interest and principal, if any, for
such Distribution Date, as received from the Indenture Trustee pursuant to
Section 9.04 of the Indenture on such Distribution Date.
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(d) On each Payment Date, the Owner Trustee shall send to each
Certificateholder the statement provided to the Owner Trustee by the Servicer
pursuant to Section 9.04 of this Agreement on such Distribution Date.
(e) 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 the Certificateholder in accordance with
this Section 9.04. The Owner Trustee is hereby authorized and directed to retain
from amounts otherwise distributable to the Certificateholders sufficient funds
for the payment of any 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 to be 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 in its sole discretion may (but
unless otherwise required by law shall not be obligated to) withhold such
amounts in accordance with this paragraph (e). 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.
(f) Subject to Section 16.01, 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, or by check mailed to such
Certificateholder at the address of such Certificateholder appearing in the
Certificate Register.
SECTION 9.05. Advances. (a) As of the last day of the initial
Collection Period, the Servicer shall advance funds equal to the excess, if any,
of Monthly Interest due in respect of the initial Collection Period, over the
Collected Interest for such Collection Period; and (b) as of the last day of
each subsequent Collection Period, the Servicer shall advance funds in the
amount of the Interest Advance Amount (or such other amount as the Servicer
shall reasonably determine to cover an Interest Shortfall) with respect to each
Receivable that is delinquent for more than 30 days, in each such case, to the
extent that the Servicer, in its sole discretion, determines that the Advance
will be recoverable from payments by or on behalf of the Obligor, the Purchase
Amount, or Liquidation Proceeds. With respect to each Receivable, the Advance
paid pursuant to this Section 9.05 shall increase Outstanding Advances.
Outstanding Advances shall be reduced by subsequent payments by or on behalf of
the Obligor, collections of Liquidation Proceeds, or payments of the Purchase
Amount. The Servicer shall remit any Advances with respect to a Collection
Period to the Collection Account by the related Determination Date.
If the Servicer shall determine that an Outstanding Advance with
respect to any Receivable shall not be recoverable, the Servicer shall be
reimbursed from any collections made on other
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Receivables in the Trust, and Outstanding Advances with respect to such
Receivable shall be reduced accordingly.
SECTION 9.06. Net Deposits. For so long as Union Acceptance Corporation
is the Servicer, Union Acceptance Corporation (in whatever capacity) may make
the remittances with respect to any Payment Date pursuant to Section 9.02 above,
net of amounts to be distributed to itself or its delegee under Section 13.06
(also in whatever capacity), if it determines pursuant to Section 9.02 that
there is no deficiency in Available Funds for such Payment Date. Nonetheless,
the Servicer shall account for all of the above described amounts as if such
amounts were deposited and distributed.
SECTION 9.07. No Segregation of Moneys; No Interest. Subject to Section
9.04, moneys received by the Owner Trustee hereunder need not be segregated in
any manner except to the extent required by law or this 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 9.08. Accounting and Reports to the Certificateholder, the
Internal Revenue Service and Others. The Owner Trustee shall deliver to the
Certificateholder, as may be required by the Code and applicable Treasury
Regulations, or as may be requested by such Certificateholder, such information,
reports or statements as may be necessary to enable each Owner to prepare its
federal and state income tax returns. Consistent with the Trust's
characterization for tax purposes as a security arrangement for the issuance of
non-recourse debt so long as the Seller or any other Person is the sole
beneficiary owner of the Trust, no federal income tax return shall be filed on
behalf of the Trust unless either (i) the Owner Trustee shall receive an Opinion
of Counsel that, based on a change in applicable law occurring after the date
hereof], or as a result of a transfer by the Company permitted by Section
11.03], the Code requires such a filing or (ii) the Internal Revenue Service
shall determine that the Trust is required to file such a return. In the event
that there shall be two or more beneficial owners of the Trust, the Owner
Trustee shall inform the Indenture Trustee in writing of such event, (x) the
Owner Trustee shall prepare or shall cause to be prepared federal and, if
applicable, state or local partnership tax returns required to be filed by the
Trust and shall remit such returns to the Seller (or if the Seller no longer
owns the Certificate, to the Seller to the extent its tax liability is affected
thereby and otherwise to the successor Certificateholder) at least (5) days
before such returns are due to be filed, and (y) capital accounts shall be
maintained for each beneficial owner in accordance with the Treasury Regulations
under Section 704(b) of the Code reflecting each such beneficial owner's share
of the income, gains, deductions, and losses of the Trust and/or guaranteed
payments made by the Trust and contributions to, and distributions from, the
Trust. The Seller (or such successor Certificateholder, as applicable) shall
promptly sign such returns and deliver such returns after signature to the Owner
Trustee and such returns shall be filed by the Owner Trustee with the
appropriate tax authorities. In the event that a "tax matters partner" (within
the meaning of Code Section 6231(a)(7)) is required to be appointed with respect
to the Trust, the Seller is hereby designated as tax matters partner or, if the
Seller is not the Certificateholder, the Seller to the extent its tax liability
is affected thereby and otherwise the successor Certificateholder, shall be
designated as tax matters partner. In no event shall the Owner Trustee or the
Seller (or such designee Certificateholder, as applicable) be liable for any
liabilities, costs or expenses of the Trust or the Noteholders arising out of
the application of any tax law, including federal, state, foreign or local
income or excise taxes or any other tax imposed on or measured by income (or any
interest, penalty or addition with respect thereto or arising from a failure to
comply therewith) except for any such liability, cost or expense attributable to
any act or omission by the Owner Trustee or the Seller (or such designee
Certificateholder as applicable), as the case may be, in breach of its
obligations under this Agreement.
SECTION 9.09. Payahead Account. The Servicer shall establish the
Payahead Account in the name of the Trust on behalf of the Obligors and the
Secured Parties as their interests may appear. The Payahead Account shall be a
segregated interest bearing trust account established with the Indenture Trustee
or another Eligible Bank. Amounts in the Payahead Account shall be invested in
Eligible Investments that mature not later than the Business Day prior to the
next succeeding Payment Date. The Payahead Account is not property of the Trust.
Investment income or interest earned on the Payahead Account shall be remitted
to the Servicer at least monthly, or as frequently as the Servicer may
reasonably request. On or prior to each Payment Date, the Servicer shall
transfer or the Indenture Trustee (as instructed in the Servicer's Certificate)
shall transfer (a) from the Collection Account to the Payahead Account, in
immediately available funds, all Payaheads received by the Servicer and
previously deposited to the Collection Account during the Collection Period as
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described in Section 8.02(b); and (b) from the Payahead Account to the
Collection Account, in immediately available funds, the aggregate amount of
previously deposited Payaheads to be applied to Scheduled Payments on
Precomputed Receivables for the related Collection Period or prepayments for the
related Collection Period, pursuant to Section 8.02(b), each in the amounts set
forth in the Servicer's Certificate delivered on the related Determination Date.
A single, net transfer between the Payahead Account and the Collection Account
may be made. Any amount deposited in the Payahead Account shall not constitute
Available Funds under Section 9.02. Any amount deposited to the Collection
Account from the Payahead Account pursuant to Section 9.09(b) shall be included
in Available Funds under Section 9.02.
ARTICLE X
Intentionally Blank
ARTICLE XI
The Certificates
SECTION 11.01. The Certificates. The Certificates shall be issued in
the form of one or more certificates and shall initially be issued to the
Seller. The Certificates shall be executed on behalf of the Trust by manual or
facsimile signature of a Responsible 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 valid and binding obligations of the Trust, 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 such Certificates.
SECTION 11.02. Authentication of Certificates. The Owner Trustee shall
cause the Certificates to be executed on behalf of the Trust, authenticated, and
delivered to or upon the written order of the Seller, signed by its chairman of
the board, its president, or any vice president, without further corporate
action by the Seller, in authorized denominations, pursuant to this Agreement.
No Certificate shall entitle its holder 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 as set forth in the forms of
Certificate attached as exhibits to this Agreement, executed by a Responsible
Officer of 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.
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SECTION 11.03. Registration of Transfer and Exchange of Certificates.
The Owner Trustee shall keep or cause to be kept, at the Corporate Trust Office,
a Certificate Register in which, subject to such reasonable regulations as it
may prescribe, the Owner Trustee shall provide for the registration of
Certificates and of transfers and exchanges of Certificates subject to the
restrictions provided herein.
Upon surrender for registration of transfer of any Certificate at the
Corporate Trust Office, 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 of a like aggregate amount dated
the date of authentication by the Owner Trustee, provided, however, that
registration of transfer of the Certificates may not be effected unless (A) the
Owner Trustee receives an Opinion of Counsel, satisfactory to it, to the effect
that (i) such transfer may be made in reliance upon an exemption from the
registration requirements of the Securities Act of 1933, as amended, and (ii)
such transfer will not adversely affect the tax treatment of the Trust or the
Notes; (B) the Insurer has consented to such transfer and (C) the Rating Agency
Condition shall have been satisfied with respect to such transfer.
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 duly executed by the Holder or his attorney
duly authorized in writing. Each Certificate surrendered for registration of
transfer and exchange shall be canceled and subsequently destroyed by the Owner
Trustee.
No service charge shall be made for any registration of transfer or
exchange of Certificates, but the Owner Trustee may require payment of a sum
sufficient to cover any tax or governmental charge that may be imposed in
connection with any transfer or exchange of Certificates.
SECTION 11.04. Mutilated, Destroyed, Lost, or Stolen Certificates. If
(a) any mutilated Certificate shall be surrendered to the Owner Trustee, or if
the Owner Trustee shall receive evidence to its satisfaction of the destruction,
loss, or theft of any Certificate and (b) there shall be delivered to the Owner
Trustee such security or indemnity as may be required by it to save it harmless,
then in the absence of notice that such Certificate shall have been acquired by
a bona fide 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 11.04, the Owner Trustee 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 11.04 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 11.05. Agreement Regarding Tax Matters. The Owner Trustee, the
Seller as initial Certificateholder and each successor Certificateholder (as a
condition to acquiring its Certificate)
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agree to disregard the Trust as a separate entity and to treat the Notes as
indebtedness for federal, state and local income and franchise tax purposes.
SECTION 11.06. Signature on Returns; Tax Matters Partner. (a) The
Seller shall sign on behalf of the Trust the tax returns of the Trust.
(b) If Subchapter K of the Code should be applicable to the Trust, the
Seller shall be designated the "tax matters partner" of the Trust pursuant to
Section 6231(a)(7)(A) of the Code and applicable Treasury Regulations.
ARTICLE XII
The Seller
SECTION 12.01. Representations and Undertakings of Seller. (a) The
Seller makes the following representations on which the Owner Trustee relies in
accepting the Receivables in trust and executing and authenticating the
Certificates and undertaking its obligations under the Indenture. The Seller
agrees that the representations shall also be for the benefit of the Secured
Parties. The representations speak as of the execution and delivery of this
Agreement and shall survive the sale of the Receivables to the Owner Trustee.
(i) Organization and Good Standing. The Seller
shall have been duly organized and shall be validly existing
as a corporation in good standing under the laws of the State
of Delaware, with power and authority to own its properties
and to conduct its business as such properties shall be
currently owned and such business is presently conducted, and
had at all relevant times, and shall have, power, authority,
and legal right to acquire and own the Receivables.
(ii) Due Qualification. The Seller shall be
duly qualified to do business as a foreign corporation in good
standing, and shall have obtained all necessary licenses and
approvals in all jurisdictions in which the ownership or lease
of property or the conduct of its business shall require such
qualifications.
(iii) Power and Authority. The Seller shall have
the power and authority to execute and deliver this Agreement
and to carry out its terms; the Seller shall have full power
and authority to sell and assign the property to be sold and
assigned to and deposited with the Owner Trustee as part of
the Trust and shall have duly authorized such sale and
assignment to the Owner Trustee by all necessary corporate
action; and the execution, delivery, and performance of the
Agreement shall have been duly authorized by the Seller by all
necessary corporate action.
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(iv) Valid Sale; Binding Obligations. This
Agreement shall evidence a valid sale, transfer, and
assignment of the Receivables, enforceable against creditors
of and purchasers from the Seller; and shall evidence a legal,
valid, and binding obligation of the Seller enforceable in
accordance with its terms.
(v) No Violation. The consummation of the
transactions contemplated by the Agreement and the fulfillment
of the terms hereof shall not conflict with, result in any
breach of any of the terms and provisions of, nor constitute
(with or without notice or lapse of time) a default under, the
charter or by-laws of the Seller, or any indenture, agreement,
or other instrument to which the Seller is a party or by which
it shall be bound; nor result in the creation or imposition of
any Lien upon any of its properties pursuant to the terms of
any such indenture, agreement, or other instrument (other than
this Agreement); nor 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.
(vi) No Proceedings. There are no proceedings
or investigations pending, or, to the Seller's best 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, (B) seeking to prevent 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 (D) which might adversely affect the
federal income tax attributes of the Trust.
(b) The Seller further covenants that, prior to termination of the
Trust:
(i) It will not engage at any time in any
business or business activity other than such activities
expressly set forth in its Certificate of Incorporation
delivered to the Insurer on or prior to the Closing Date, and
will not amend its Certificate of Incorporation without the
prior written consent of the Insurer.
(ii) It will not, without the consent of the
Insurer (not to be unreasonably withheld), sell, assign,
pledge or otherwise transfer, in whole, or in part or in any
series of related or unrelated transactions any of its right,
title or interest in or to the Certificates.
(iii) It will not:
(A) Fail to do all things necessary to
maintain its corporate existence separate and apart
from UAC and any other Person, including,
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without limitation, holding regular meetings of its
stockholders and board of directors and maintaining
appropriate corporate books and records (including a
current minute book);
(B) Suffer any limitation on the
authority of its own directors and officers to
conduct its business and affairs in accordance with
their independent business judgment or authorize or
suffer any Person other than its own officers and
directors to customarily delegated to others under
powers of attorney) for which a corporation's own
Officers and directors would customarily be
responsible;
(C) Fail to (I) maintain or cause to
be maintained by an agent of the Seller under the
Seller's control physical possession of all its books
and records, (II) maintain capitalization adequate
for the conduct of its business, (III) account for
and manage all its liabilities separately from those
of any other Person, including payment by it of all
payroll, administrative expenses and taxes, if any,
from its own assets, (IV) segregate and identify
separately all of its assets from those of any other
Person, (V) to the extent any such payments are made,
pay its employees, officers and agents for services
performed for the Seller or (VI) maintain a separate
office address with a separate telephone number from
those of UAC or any other affiliate thereof; or
(D) Except as may be provided in
this Agreement, or a similar agreement relating to
other securitizations in which the Seller has similar
rights and/or obligations, commingle its funds with
those of UAC or any affiliate thereof or use its
funds for other than the Seller's uses.
SECTION 12.02. 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.
(i) The Seller shall indemnify, defend, and hold
harmless the Owner Trustee, the Indenture Trustee, their respective
officers, directors, employees and agents, the Trust and the
Noteholders from and against any taxes that may at any time be asserted
against such parties with respect to, and as of the date of, the sale
of the Receivables to the Owner Trustee or the issuance and original
sale of the Certificates and the Notes, including any sales, gross
receipts, general corporation, tangible or intangible personal
property, privilege, or license taxes (but, in the case of the Trust,
not including any taxes asserted with respect to ownership of the
Receivables or federal or other income taxes arising out of
distributions on the Certificates or the Notes) and costs and expenses
in defending against the same.
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(ii) The Seller shall indemnify, defend, and hold
harmless the Owner Trustee, its officers, directors, employees and
agents and the Trust from and against any loss, liability, or expense
incurred by reason of (a) 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 (b) 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 12.02 shall include, without
limitation, reasonable fees and expenses of counsel and expenses of litigation.
If the Seller shall have made any indemnity payments to the Owner Trustee or the
Trust pursuant to this Section and the Owner Trustee or the Trust thereafter
shall collect any of such amounts from others, the Owner Trustee or the Trust,
as the case may be, shall repay such amounts to the Seller, without interest.
This indemnification shall survive the termination of this Agreement and the
resignation or removal of the Owner Trustee.
SECTION 12.03. Merger or Consolidation of, or Assumption of the
Obligations of Seller. Any Person (a) into which the Seller may be merged or
consolidated, (b) which may result from any merger or consolidation to which the
Seller shall be a party, or (c) which may succeed to all or substantially all of
the properties and assets of the Seller's business, which Person in any of the
foregoing cases 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; provided, however, that (i) immediately
after giving effect to such transaction, no representation or warranty made
pursuant to Section 7.01 shall have been breached and no Event of Default, and
no event that, after notice or lapse of time, or both, would become an Event of
Default shall have happened and be continuing, (ii) the Seller shall have
delivered to the Owner Trustee an Officers' Certificate and an Opinion of
Counsel each stating that such consolidation, merger, or succession and such
agreement of assumption comply with this Section 12.03 and that all conditions
precedent, if any, provided for in this Agreement relating to such transaction
have been complied with and (iii) the Seller shall have delivered an Opinion of
Counsel either (A) stating that, in the opinion of such counsel, all financing
statements and continuation statements and amendments thereto have been executed
and filed that are necessary fully to preserve and protect the interest of the
Owner Trustee and the Indenture Trustee in the Receivables, and reciting the
details of such filings, or (B) stating that, in the opinion of such Counsel, no
such action shall be necessary to preserve and protect such interest.
Notwithstanding the forgoing, the Seller shall not engage in any merger or
consolidation with any Person, or a disposition of all or substantially all of
its assets without the prior written consent of the Insurer, not to be
unreasonably withheld.
SECTION 12.04. Limitation on Liability of Seller and Others. The Seller
and any director or 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
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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.
ARTICLE XIII
The Servicer
SECTION 13.01. Representations of Servicer. The Servicer makes the
following representations on which the Owner Trustee relies in accepting the
Receivables in trust and executing and authenticating the Certificates and
executing and delivering the Indenture. The Servicer agrees that the
representations shall also be for the benefit of the Secured Parties. The
representations speak as of the execution and delivery of this Agreement and
shall survive the sale of the Receivables to the Owner Trustee and the pledge to
the Secured Parties pursuant to the Indenture.
(i) Organization and Good Standing. The Servicer shall
have been duly organized and shall be validly existing as a corporation
under the laws of the State of Indiana, with power and authority to own
its properties and to conduct its business as such properties shall be
currently owned and such business is presently conducted, and had at
all relevant times, and shall have, power, authority, and legal right
to acquire, own, sell, and service the Receivables and to hold the
Receivable Files as custodian on behalf of the Owner Trustee.
(ii) Due Qualification. The Servicer shall be duly
qualified to do business as a foreign corporation in good standing, and
shall have obtained all necessary licenses and approvals in all
jurisdictions in which the ownership or lease of property or the
conduct of its business (including the servicing of the Receivables as
required by this Agreement) shall require such qualifications.
(iii) Power and Authority. The Servicer shall have the
power and authority to execute and deliver this Agreement and to carry
out its terms; and the execution, delivery, and performance of this
Agreement shall have been duly authorized by the Servicer by all
necessary corporate action.
(iv) Binding Obligations. This Agreement shall
constitute a legal, valid, and binding obligation of the Servicer
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
shall be considered in a proceeding in equity or at law.
(v) No Violation. The consummation of the transactions
contemplated by this Agreement and the fulfillment of the terms hereof
shall not conflict with, result in any breach of any of the terms and
provisions of, nor constitute (with or without notice or lapse of time)
a default under, the charter or by-laws of the Servicer, or any
indenture, agreement,
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or other instrument to which the Servicer is a party or by which it
shall be bound; nor result in the creation or imposition of any Lien
upon any of its properties pursuant to the terms of any such indenture,
agreement, or other instrument (other than this Agreement); nor 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.
(vi) No Proceedings. There are no proceedings or
investigations pending, or, to 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, (B)
seeking to prevent 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 (D) which might adversely affect the federal
income tax attributes of the Trust.
SECTION 13.02. 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.
(i) The Servicer shall defend, indemnify, and hold
harmless the Owner Trustee, the Indenture Trustee, and their officers,
directors, employees and agents, the Trust, the Certificateholders and
the Noteholders 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 Owner Trustee, the Indenture Trustee, their officers,
directors, employees and agents and the Trust from and against any
taxes that may at any time be asserted against such parties with
respect to the transactions contemplated herein, including, without
limitation, any sales, gross receipts, general corporation, tangible or
intangible personal property, privilege, or license taxes (but, in the
case of the Trust, 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 Certificates, the Notes, or asserted
with respect to ownership of the Receivables, or federal or other
income taxes arising out of distributions on the Certificates or the
Notes) and costs and expenses in defending against the same.
(iii) The Servicer shall indemnify, defend, and hold
harmless the Owner Trustee, the Indenture Trustee, the Insurer, their
officers, directors, employees and agents, and the Trust, the
Certificateholders and the Noteholders 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 such parties through, the negligence, willful
misfeasance, or bad faith of the Servicer in the performance of its
duties
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under this Agreement, or by reason of reckless disregard of its
obligations and duties under this Agreement. This indemnity shall
survive the termination of this Agreement or the Trust and the
resignation or removal of the Owner Trustee.
(iv) The Servicer shall indemnify, defend, and hold
harmless the Owner Trustee, the Indenture Trustee, their respective
officers, directors, employees and agents and the Trust 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 cost, expense, loss, claim, damage or liability: (a)
shall be due to the willful misfeasance, bad faith, or negligence of
the Owner Trustee or the Indenture Trustee; (b) relates to any tax
other than the taxes with respect to which either the Seller or
Servicer shall be required to indemnify the Owner Trustee or the
Indenture Trustee; (c) shall arise from the breach of any of
representations or warranties of the Owner Trustee set forth in Section
15.13 or by the Indenture Trustee set forth in Section 15.13 of the
Indenture; (d) shall be one as to which the Seller is required to
indemnify the Owner Trustee or the Indenture Trustee; or (e) shall
arise out of or be incurred in connection with the acceptance or
performance by the Owner Trustee of the duties of successor Servicer.
Indemnification under this Section 13.02 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 and the recipient
thereafter collects any of such amounts from others, the recipient shall
promptly repay such amounts to the Servicer, without interest. This
indemnification shall survive the termination of this Agreement and the removal
of the Servicer.
SECTION 13.03. Merger or Consolidation of, or Assumption of the
Obligations of Servicer. Any Person (a) into which the Servicer may be merged or
consolidated, (b) which may result from any merger or consolidation to which the
Servicer shall be a party, or (c) which may succeed to all or substantially all
of the properties and assets of the Servicer's indirect automobile financing and
receivables servicing business, which Person in any of the foregoing cases
executes an agreement of assumption to perform every obligation of the Servicer
hereunder, shall be the successor to the Servicer under this Agreement without
further act on the part of any of the parties to this Agreement; provided,
however, that (i) immediately after giving effect to such transaction, no Event
of Default, and no event which, after notice or lapse of time, or both, would
become an Event of Default shall have happened and be continuing, (ii) the
Servicer shall have delivered to the Owner Trustee an Officers' Certificate and
an Opinion of Counsel each stating that such consolidation, merger or succession
and such agreement of assumption comply with this Section 13.03 and that all
conditions precedent provided for in this Agreement relating to such transaction
have been complied with and (iii) the Servicer shall have delivered an Opinion
of Counsel either (A) stating that, in the opinion of such counsel, all
financing statements and continuation statements and amendments thereto have
been executed and filed that are necessary fully to preserve and protect the
interest of the Owner Trustee and the Secured Parties in the Receivables, and
reciting the details of such filings, or (B) stating that, in the opinion of
such Counsel, no such action shall be necessary to preserve and protect such
interest. Notwithstanding the forgoing, the Servicer shall not engage in any
merger or consolidation
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in which it is not the surviving corporation without the prior written consent
of the Insurer, not to be unreasonably withheld.
SECTION 13.04. Limitation on Liability of Servicer and Others. 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 Indenture Trustee, the
Certificateholders or the Noteholders, except as provided under this Agreement,
for any action taken or for refraining from the taking of any action pursuant to
this Agreement; provided, however, that this provision shall not protect the
Servicer or any such person against any liability that would otherwise be
imposed by reason of willful misfeasance, bad faith, or negligence in the
performance of duties or by reason of reckless disregard of obligations and
duties under this Agreement. The Servicer and any director or officer or
employee or agent of the Servicer may rely in good faith on any document of any
kind prima facie properly executed and submitted by any Person respecting any
matters arising under this Agreement.
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 (collection actions with respect to Defaulted Receivables are
understood to be incidental to the Servicer's duties to service the
Receivables), and that in its opinion may involve it in any expense or
liability.
SECTION 13.05. Servicer Not to Resign. The Servicer shall not resign
from its obligations and duties under this Agreement except upon determination
that the performance of its duties shall no longer be permissible under
applicable law or otherwise with the consent of the Owner Trustee, the Indenture
Trustee and the Insurer. Any determination described above permitting the
resignation of the Servicer shall be evidenced by an Opinion of Counsel to such
effect delivered to the Owner Trustee. No such resignation shall become
effective until the Owner Trustee or a successor servicer shall have assumed the
responsibilities and obligations of the Servicer in accordance with Section
14.02.
SECTION 13.06. Delegation of Duties. Except as provided in Section
13.03 hereof, it is understood and agreed by the parties hereto that the
Servicer or the Seller may at any time delegate any duties including duties as
custodian to any Person willing to accept such delegation and to perform such
duties (including any affiliate of the Servicer) in accordance with the
customary procedures of the Servicer. In connection with such delegation, the
Servicer or the Seller may assign rights to the delegee or direct the payment to
the delegee of benefits or amounts otherwise inuring to the benefit of, or
payable to, the Seller or the Servicer hereunder. Any such delegation shall not
relieve the Servicer or the Seller of their respective liability and
responsibility with respect to such duties, and shall not constitute a
resignation within Section 13.05 hereof. The Servicer shall give written notice
to the Rating Agencies, the Owner Trustee, the Indenture Trustee and the Insurer
of any such delegation.
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ARTICLE XIV
Servicer Default
SECTION 14.01. Events of Servicer Default. If any one of the following
events ("Events of Servicer Default") shall occur and be continuing:
(i) Any failure by the Servicer or UAC to deliver to
the Collection Account (or to the Indenture Trustee for distribution to
the Noteholders) any proceeds or payment required to be so delivered
under the terms of the Indenture, this Agreement or the Purchase
Agreement or any failure by the Servicer to deliver any Servicer's
Certificate pursuant to Section 8.09 that, in either case, shall
continue unremedied for a period of two Business Days (A) after written
notice from either the Owner Trustee, the Indenture Trustee or the
Insurer (so long as the Insurer is not in default of its obligations
under the Policy) or by the holders of Notes evidencing not less than
25% of the aggregate outstanding balance of the Notes is received by
the Servicer or UAC as specified in this Agreement or (B) after
discovery by an officer of the Servicer; or
(ii) Failure on the part of the Servicer, the Seller or
UAC duly to observe or to perform in any material respect any other
covenants or agreements of the Servicer, the Seller or UAC, as the case
may be, set forth in this Agreement or the Purchase Agreement, which
failure shall (a) materially and adversely affect the rights of
Certificateholders or the Secured Parties and (b) continue unremedied
for a period of 60 days after the date on which written notice of such
failure, requiring the same to be remedied, shall have been given to
the Servicer, UAC or the Seller, as the case may be, by the Owner
Trustee, the Indenture Trustee or the Insurer (so long as the Insurer
is not in default of its obligations under the Policy) or by the
holders of Notes evidencing not less than 25% of the aggregate
outstanding balance of the Notes; or
(iii) The occurrence of an Insolvency Event with respect to
the Servicer;
then, and in each and every case, so long as an Event of Default shall not have
been remedied, the Insurer (so long as the Insurer is not in default of its
obligations under the Policy), or the Indenture Trustee (upon direction to do so
by the holders of Notes evidencing not less than 25% of the outstanding
principal balance of the Notes if the Insurer is in default under the Policy),
by notice then given in writing to the Servicer may, terminate all of the rights
and obligations of the Servicer under this Agreement. In addition, if a Trigger
Event (as defined in the Insurance Agreement) shall have occurred, the Insurer
may (A) require that the Owner Trustee deliver a notice of termination to the
Servicer and appoint a successor Servicer designated by the Insurer in such
notice pursuant to Section 14.02; (B) require that the Owner Trustee amend
certificates of title relating to the Financed Vehicles and take other actions
to identify the Indenture Trustee (on behalf of the Secured Parties) as the new
secured party on such certificates of title; (C) as provided in the Insurance
Agreement, require that the Servicer or successor Servicer or the Owner Trustee
instruct Obligors in respect of the
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Receivables to remit payment on the Receivable directly to the Owner Trustee or
a separate account established exclusively for the Trust; and (D) as provided in
the Insurance Agreement, compel transfer by the Servicer of all Receivables
Files and, if applicable, certain rights in respect of servicing systems assets
to the Insurer or to the successor Servicer designated by the Insurer. 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, the Notes or the Receivables or otherwise, shall, without further
action, pass to and be vested in the Owner Trustee (except that the Owner
Trustee may but shall not be required to make Advances) or such successor
Servicer as may be appointed under Section 14.02 pursuant to and under this
Section 14.01; and, without limitation, the Owner Trustee is hereby authorized
and empowered to execute and deliver, on behalf of the predecessor Servicer, as
attorney-in-fact or otherwise, any and all documents and other instruments, and
to do or accomplish all other acts or things necessary or appropriate to effect
the purposes of such notice of termination, whether to complete the transfer and
endorsement of the Receivables and related documents, or otherwise. The
predecessor Servicer shall cooperate with the successor Servicer and the Owner
Trustee in effecting the termination of the responsibilities and rights of the
predecessor Servicer under this Agreement, including the transfer to the
successor Servicer of electronic records related to the Receivables in such form
as the successor Servicer may reasonably request and the transfer to the
successor Servicer for administration by it of all cash amounts that shall at
the time be held by the predecessor Servicer for deposit, or shall thereafter be
received with respect to a Receivable. 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 14.01 shall be paid
by the predecessor Servicer upon presentation of reasonable documentation of
such costs and expenses.
SECTION 14.02. Appointment of Successor. (a) Upon the Servicer's
receipt of notice of termination pursuant to Section 14.01 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 Owner Trustee and the Indenture
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 Indenture
Trustee shall appoint a successor Servicer, which successor Servicer shall be
reasonably acceptable to the Insurer (so long as the Insurer is not in default
of its obligations under the Policy), and the successor Servicer shall accept
its appointment by a written assumption in form acceptable to the Owner Trustee
and the Indenture Trustee. 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 14.02, the Indenture Trustee without
further action shall automatically be appointed the successor Servicer.
Notwithstanding the above, the Indenture Trustee shall, if it shall be legally
unable or unwilling 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 $50,000,000 and whose regular
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business shall include the servicing of automotive receivables, as the successor
to the Servicer under this Agreement and which financial institution is, in the
case of appointment by the Owner Trustee, reasonably acceptable to the Insurer
and the Indenture Trustee.
(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, and shall be entitled to the Monthly
Servicing Fee and all of the rights granted to the predecessor Servicer, by the
terms and provisions of this Agreement. The predecessor Servicer shall be
entitled to be reimbursed for Outstanding Advances.
(c) In connection with such appointment, the Owner Trustee may make
such arrangements for the successor Servicer out of payments on Receivables it
and such successor Servicer shall agree; provided, however, that no such
compensation shall be in excess of that permitted the original Servicer under
this Agreement. The Owner Trustee and such successor Servicer shall take such
action, consistent with this Agreement, as shall be necessary to effectuate any
such succession.
SECTION 14.03. Notice of Events of Servicer Default. Upon any notice of
an Event of Servicer Default or upon any termination of, or appointment of a
successor to, the Servicer pursuant to this Article XIV, the Owner Trustee shall
give prompt written notice thereof to Certificateholders at their respective
addresses appearing in the Certificate Register and to the Indenture Trustee for
further notice thereof to the Noteholders.
SECTION 14.04. Waiver of Past Defaults. The Insurer (so long as the
Insurer is not in default of its obligations under the Policy) or the Indenture
Trustee (if the Insurer is in default under the Policy) upon direction from
holders of Notes evidencing not less than 51% of the outstanding principal
balance of the Notes may waive any default by the Servicer in the performance of
its obligations hereunder and its consequences, except a default in making any
required deposits to or payments from the Collection Account in accordance with
this Agreement; provided, that no waiver of any default or provision of this
Agreement shall become effective without the consent of the Insurer (unless the
Insurer is in default of its obligations under the Policy). Upon any such waiver
of a past default, such default shall cease to exist, and any Event of Default
arising therefrom shall be deemed to have been remedied for every purpose of
this Agreement. No such waiver shall extend to any subsequent or other default
or impair any right consequent thereon.
ARTICLE XV
The Owner Trustee
SECTION 15.01. Duties of Owner Trustee. The Owner Trustee, both prior
to and after the occurrence of an Event of Default, shall undertake to perform
such duties as are specifically set forth in this Agreement. If an Event of
Default shall have occurred and shall not have been cured and, in
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the case of an Event of Default described in clause (i) of Section 14.01, the
Owner Trustee has received notice of such Event of Default, the Owner 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 own
affairs; provided, however, that if the Owner Trustee shall assume the duties of
the Servicer pursuant to Section 14.02, the Owner Trustee in performing such
duties shall use the degree of skill and attention customarily exercised by a
servicer with respect to automobile receivables that it services for itself or
others.
It shall be the duty of the Owner Trustee to discharge (or cause to be
discharged) all its responsibilities pursuant to the terms of this Agreement and
the other documents to which the Trust is a party and to administer the Trust in
the interest of the Certificateholders, subject to and in accordance with the
provisions of this Agreement and the other documents to which the Trust is a
party. Without limiting the foregoing, the Owner Trustee shall on behalf of the
Trust file and prove any claim or claims that may exist on behalf of the Trust
against the Seller in connection with any claims paying procedure as part of an
insolvency or a receivership proceeding involving the Seller. Notwithstanding
the foregoing, the Owner Trustee shall be deemed to have discharged its duties
and responsibilities hereunder and under the other documents to which the Trust
is a party to the extent the Administrator has agreed in the Administration
Agreement to perform any act or to discharge any duty of the Owner Trustee
hereunder or under any other document to which the Trust is a party, 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 documents to which the Trust is a party, 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.
The Owner Trustee, upon receipt of all resolutions, certificates,
statements, opinions, reports, documents, orders or other instruments furnished
to the Owner 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.
No provision of this Agreement shall be construed to relieve the Owner
Trustee from liability for its own negligent action, its own negligent failure
to act, or its own bad faith; provided, however, that:
(i) Prior to the occurrence of an Event of Default, and
after the curing of all such Events of Servicer Default that may have
occurred, the duties and obligations of the Owner Trustee shall be
determined solely by the express provisions of this Agreement, the
Owner 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 Owner Trustee and, in the absence of bad faith on
the part of the Owner Trustee, or manifest error, the Owner Trustee may
conclusively rely on the truth of the statements and the correctness of
the opinions expressed in any certificates or opinions furnished to the
Owner Trustee and conforming to the requirements of this Agreement;
(ii) The Owner Trustee shall not be liable for an error
of judgment made in good faith by a Responsible Officer, unless it
shall be proved that the Owner Trustee shall have been negligent in
ascertaining the pertinent facts;
(iii) The Owner Trustee shall not be 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 Certificates
relating to the time, method, and place of conducting any proceeding
for any remedy available to the Owner Trustee, or exercising any trust
or power conferred upon the Owner Trustee, under this Agreement;
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(iv) The Owner Trustee shall not be charged with
knowledge of any failure by the Servicer to comply with the obligations
of the Servicer referred to in clauses (i) or (ii) of Section 14.01, or
of any failure by the Seller to comply with the obligations of the
Seller referred to in clause (ii) of Section 14.01, unless a
Responsible Officer of the Owner Trustee receives written notice of
such failure (it being understood that knowledge of the Servicer or the
Servicer as custodian, in its capacity as agent for the Owner Trustee,
is not attributable to the Owner Trustee) from the Servicer or the
Seller, as the case may be; and
(v) Without limiting the generality of this Section or
Section 15.04, the Owner Trustee shall have no duty (A) to see to any
recording, filing, or depositing of this Agreement or any agreement
referred to therein or any financing statement evidencing a security
interest in the Receivables or the Financed Vehicles, 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 of the Financed Vehicles or Obligors or to effect or maintain
any such 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, (D) to confirm or verify the contents of any reports or
certificates of the Servicer delivered to the Owner Trustee pursuant to
this Agreement believed by the Owner Trustee to be genuine and to have
been signed or presented by the proper party or parties, or (E) to
inspect the Financed Vehicles at any time or ascertain or inquire as to
the performance or observance of any of the Seller's or the Servicer's
representations, warranties or covenants or the Servicer's duties and
obligations as Servicer and as custodian of the Receivable Files under
this Agreement.
The Owner Trustee shall not be required to expend or risk its own funds
or otherwise incur financial liability in the performance of any of its duties
hereunder, or in the exercise of any of its rights or powers, if there shall be
reasonable ground for believing that the repayment of such funds or adequate
indemnity against such risk or liability shall not be reasonably assured to it,
and none of the provisions contained in this Agreement shall in any event
require the Owner Trustee to perform, or be responsible for the manner of
performance of, any of the obligations of the Servicer under this Agreement
except during such time, if any, as the Owner 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. Except for actions expressly
authorized by this Agreement, the Owner 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.
SECTION 15.02. Owner Trustee's Certificate. On or as soon as
practicable after each Payment Date on which Receivables shall be (i) assigned
to UAC pursuant to Section 7.02 or deemed to be assigned to the Seller as a
result of the application of Available Funds in respect of Defaulted Receivables
pursuant to Sections 9.04 and 9.05 or (ii) assigned to the Servicer pursuant to
Section 8.07 or to the Certificateholder pursuant to Section 16.02, the Owner
Trustee shall, at the written request of the Servicer, execute a Owner Trustee's
Certificate, substantially in the form of, in the case of an assignment to UAC,
Exhibit 1, or, in the case of an assignment to the Servicer, Exhibit 2, based
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on the information contained in the Servicer's Certificate for the related
Collection Period, amounts deposited to the Collection Account, and notices
received pursuant to this Agreement, identifying the Receivables repurchased or
deemed to be repurchased by UAC pursuant to Section 7.02 or 9.02 or purchased by
the Servicer pursuant to Section 8.07 or the Certificateholders pursuant to
Section 16.02 during such Collection Period, and shall deliver such Owner
Trustee's Certificate, accompanied by a copy of the Servicer's Certificate for
such Collection Period to UAC or the Servicer, as the case may be. The Owner
Trustee's Certificate shall be an assignment pursuant to Section 15.03.
SECTION 15.03. Owner Trustee's Assignment of Purchased Receivables.
With respect to each Receivable repurchased by UAC pursuant to Section 7.02, or
deemed to be so repurchased pursuant to Section 9.02, purchased by the Servicer
pursuant to Section 8.07 or the Certificateholders pursuant to Section 16.02,
the Owner Trustee shall assign, as of the last day of the Collection Period
during which such Receivable became a Defaulted Receivable or became subject to
repurchase by UAC or purchase by the Servicer or the Certificateholders, without
recourse, representation, or warranty, to UAC, the Servicer or the
Certificateholders (as the case may be) all the Owner Trustee's right, title,
and interest in and to such Receivables, and all security and documents relating
thereto, such assignment being an assignment outright and not for security. 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, take such steps as the Owner Trustee deems
necessary to enforce the Receivable, including bringing suit in its name and/or
the name of the Indenture Trustee.
SECTION 15.04. Certain Matters Affecting the Owner Trustee. Except as
otherwise provided in Section 15.01:
(i) The Owner Trustee may rely and shall be protected
in acting or refraining from acting upon any resolution, Officers'
Certificate, Servicer's Certificate, certificate of auditors, or any
other certificate, statement, instrument, opinion, report, notice,
request, consent, order, appraisal, bond, or other paper or document
believed by it to be genuine and to have been signed or presented by
the proper party or parties.
(ii) The Owner Trustee may consult with counsel and any
written 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 written advice or Opinion of Counsel.
(iii) 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
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
Owner Trustee reasonable security or indemnity reasonably satisfactory
to the Owner Trustee against the costs, expenses, and liabilities that
may be incurred therein or thereby. Nothing contained in this
Agreement,
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however, shall relieve the Owner Trustee of the obligations, upon the
occurrence of an Event of Default (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 man would exercise or use under the circumstances in the
conduct of his own affairs.
(iv) The Owner Trustee shall not be 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 Default and
after the curing of all Events of Servicer Default that may have
occurred, the Owner Trustee shall not be bound to make any
investigation into the facts of matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice, request,
consent, order, approval, bond, or other paper or document, unless
requested in writing so to do by the Indenture Trustee or holders of
Notes evidencing not less than 25% of the outstanding principal balance
of the Notes; provided, however, that if the payment within a
reasonable time to the Owner 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 Owner Trustee, not
reasonably assured to the Owner Trustee by the security afforded to it
by the terms of this Agreement, the Owner Trustee may require
reasonable indemnity against such cost, expense, or liability as a
condition to so proceeding. The reasonable expense of every such
examination shall be paid by the Servicer or, if paid by the Owner
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 Owner 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. The Owner
Trustee shall not be responsible for any misconduct or negligence
solely attributable to the acts or omissions of the Servicer in its
capacity as Servicer or custodian.
(vii) Subsequent to the sale of the Receivables by the
Seller to the Owner Trustee, the Owner Trustee shall have no duty of
independent inquiry, except as may be required by Section 15.01, and
the Owner Trustee may rely upon the representations and warranties and
covenants of the Seller and the Servicer contained in this Agreement
with respect to the Receivables and the Receivable Files.
SECTION 15.05. Owner Trustee Not Liable for Certificates or
Receivables. The recitals contained herein and in the Certificates (other than
the certificate of authentication on the Certificates) shall be taken as the
statements of the Seller or the Servicer, as the case may be, and the Owner
Trustee assumes no responsibility for the correctness thereof. The Owner Trustee
shall make no representations as to the validity or sufficiency of this
Agreement or of the Certificates (other than the certificate of authentication
on the Certificates), or of any Receivable or related document. The
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Owner Trustee shall at no time have any responsibility or liability for or with
respect to the legality, validity, and enforceability of any security interest
in any Financed Vehicle or any Receivable, or the perfection and priority of
such a security interest or the maintenance of any such perfection and priority,
or for or with respect to the efficacy of the Trust or its ability to generate
the payments to be distributed to the Certificateholder or the Noteholders under
this Agreement or the Indenture, including, without limitation: the existence,
condition, location, and ownership of any Financed Vehicle; the existence and
enforceability of any physical damage insurance, lender's single interest
insurance, or credit life or disability and hospitalization insurance with
respect to any Receivable; the existence and contents of any Receivable or any
computer or other record thereof; the validity of the assignment of any
Receivable to the Trust or of any intervening assignment; the completeness of
any Receivable; the performance or enforcement of any Receivable; the compliance
by the Seller or the Servicer with any warranty or representation made under
this Agreement or in any related document and the accuracy of any such warranty
or representation prior to the Owner Trustee's receipt of notice or other
discovery of any noncompliance therewith or any breach thereof; any investment
of monies by the Servicer or any loss resulting therefrom (it being understood
that the Owner Trustee shall remain responsible for any Trust property that it
may hold); the acts or omissions of the Seller, the Servicer, or any Obligor; an
action of the Servicer taken in the name of the Owner Trustee; or any action by
the Owner Trustee taken at the instruction of the Servicer; provided, however,
that the foregoing shall not relieve the Owner Trustee of its obligation to
perform its duties under this Agreement. Except with respect to a claim based on
the failure of the Owner Trustee to perform its duties under this Agreement or
based on the Owner Trustee's negligence or willful misconduct, no recourse shall
be had for any claim based on any provision of this Agreement, the
Certificateholder or the Noteholders, or any Receivable or assignment thereof
against the Owner Trustee in its individual capacity, the Owner Trustee shall
not have any personal obligation, liability, or duty whatsoever to any
Certificateholder or the Noteholders or any other Person with respect to any
such claim, and any such claim shall be asserted solely against the Trust or any
indemnitor who shall furnish indemnity as provided in this Agreement. The Owner
Trustee shall not be accountable for the use or application by the Seller of any
of the Certificates or Notes or of the proceeds thereof, or for the use or
application of any funds paid to the Seller or the Servicer in respect of the
Receivables.
SECTION 15.06. Owner Trustee May Own Notes. The Owner Trustee in its
individual or any other capacity may become the owner or pledgee of Notes with
the same rights as it would have if it were not Trustee.
SECTION 15.07. Owner Trustee's and Indenture Trustee's Fees and
Expenses. (a) The Servicer shall pay to the Owner Trustee, and the Owner Trustee
shall be entitled to, reasonable compensation (which shall not be limited by any
provision of law in regard to the compensation of a trustee of an express trust)
for all services rendered by it in the execution of the trusts created by this
Agreement and in the exercise and performance of any of the Owner Trustee's
powers and duties under this Agreement and the Indenture, and the Servicer shall
pay or reimburse the Owner 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 Owner Trustee in accordance with any
provisions of this
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Agreement and the Indenture, except any such expense, disbursement, or advance
as may be attributable to its willful misfeasance, negligence, or bad faith, and
the Servicer shall indemnify the Owner Trustee (which, for purposes of this
section, shall include its directors, officers, employees, and agents) for and
hold it harmless against any loss, liability, or expense incurred without
willful misfeasance, negligence, or bad faith on its part, arising out of or in
connection with the acceptance or administration of the Trust, 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 under
this Agreement and the Indenture. Additionally, the Seller, pursuant to Section
12.02, and the Servicer, pursuant to Section 13.02, respectively, shall
indemnify the Owner Trustee with respect to certain matters. This indemnity
shall survive the termination of this Agreement and the Indenture or the
termination of the Trust and the resignation or removal of the Owner Trustee.
(b) The Servicer hereby agrees to pay or reimburse the fees and
expenses of the Indenture Trustee as provided in Section 15.07 of the Indenture.
SECTION 15.08. Eligibility Requirements for Owner Trustee. The Owner
Trustee under this Agreement shall at all times be a corporation (i) having an
office in the same State as the location of the Corporate Trust Office as
specified in this Agreement; (ii) organized and doing business under the laws of
such State or the United States of America; (iii) authorized under such laws to
exercise corporate trust powers; (iv) having a net worth of at least
$50,000,000; (v) subject to supervision or examination by federal or State
authorities; and (vi) the long-term unsecured debt of which is rated at least
Baa3 or which is approved by the Insurer and each Rating Agency. 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 15.08, 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 15.08, the Owner Trustee shall resign immediately in the manner
and with the effect specified in Section 15.09.
SECTION 15.09. Resignation or Removal of Owner Trustee. The Owner
Trustee may at any time resign and be discharged from the trusts hereby created
by giving written notice thereof to the Servicer. Upon receiving such notice of
resignation, the Servicer, with the prior written consent of the Insurer, shall
promptly appoint a successor Owner Trustee, by written instrument, in duplicate,
one copy of which instrument shall be delivered to the resigning Trustee and one
copy to the successor Owner Trustee. If no successor Owner 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 Owner Trustee.
If at any time the Owner Trustee shall cease to be eligible in
accordance with the provisions of Section 15.08 and shall fail to resign after
written request therefor by the Servicer, or if at any time the Owner Trustee
shall be legally unable to act, or shall be adjudged a bankrupt or insolvent, or
a receiver of the Owner Trustee or of its property shall be appointed, or any
public officer shall take
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charge or control of the Owner Trustee or of its property or affairs for the
purpose of rehabilitation, conservation, or liquidation, then the Servicer may
remove the Owner Trustee. If it shall remove the Owner Trustee under the
authority of the immediately preceding sentence, the Servicer shall promptly
appoint a successor Owner Trustee by written instrument, in duplicate, one copy
of which instrument shall be delivered to the Owner Trustee so removed and one
copy to the successor Owner Trustee.
Any resignation or removal of the Owner Trustee and appointment of a
successor Owner Trustee pursuant to any of the provisions of this Section 15.09
shall not become effective until acceptance of appointment by the successor
Owner Trustee pursuant to Section 15.10.
SECTION 15.10. Successor Owner Trustee. Any successor Owner Trustee
appointed pursuant to Section 15.09 shall execute, acknowledge, and deliver to
the Servicer and to its predecessor Owner Trustee an instrument accepting such
appointment under this Agreement, and thereupon the resignation or removal of
the predecessor Owner Trustee shall become effective and 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 Trustee. The
predecessor Owner Trustee shall deliver to the successor Owner Trustee all
documents and statements held by it under this Agreement; and the Servicer 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.
No successor Owner Trustee shall accept appointment as provided in this
Section 15.10 unless at the time of such acceptance such successor Owner Trustee
shall be eligible pursuant to Section 15.08.
Upon acceptance of appointment by a successor Owner Trustee pursuant to
this Section 15.10, the Servicer shall mail notice of the successor of such
Trustee under this Agreement to the Indenture Trustee and to all Holders of
Certificates at their addresses as shown in the Certificate Register. If the
Servicer shall fail to mail such notice within 10 days 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 Servicer.
SECTION 15.11. 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 be the successor of the Owner Trustee
hereunder, provided such corporation shall be eligible pursuant to Section
15.08, 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.
SECTION 15.12. Appointment of Co-Trustee or Separate Owner Trustee.
Notwithstanding any other provisions of this Agreement, at any time, for the
purpose of meeting any legal
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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 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 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 15.12, such
powers, duties, obligations, rights, and trusts as the Servicer and the Owner
Trustee may consider necessary or desirable. If the Servicer shall not have
joined in such appointment within 15 days after the receipt by it of a request
so to do, or in the case an Event of Default shall have occurred and be
continuing, the 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 Owner Trustee pursuant
to Section 15.08 and no notice to Certificateholders of the appointment of any
co-trustee or separate trustee shall be required pursuant to Section 15.10.
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 (whether as Trustee under this Agreement or as successor to
the Servicer under this Agreement), 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 Servicer and the Owner Trustee acting jointly
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 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 XV. 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
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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 Servicer.
Any separate trustee or co-trustee may at any time appoint the Owner
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 Owner Trustee, to the extent permitted by law, without the appointment of
a new or successor Owner Trustee.
SECTION 15.13. Representations and Warranties of Owner Trustee. The
Owner Trustee shall make the following representations and warranties on which
the Seller, the Certificateholders and the Noteholders may rely:
(i) Organization and Existence. The Owner Trustee is a
Delaware banking corporation duly organized and validly existing under
the laws of the State of Delaware and authorized to engage in a banking
and trust business under such laws.
(ii) Power and Authority. The Owner Trustee has full
power, authority, and legal right to execute, deliver, and perform this
Agreement, and shall have taken all necessary action to authorize the
execution, delivery, and performance by it of this Agreement.
(iii) Duly Executed. This Agreement shall have been duly
executed and delivered by the Owner Trustee and shall constitute the
legal, valid, and binding agreement of the Owner Trustee, enforceable
in accordance with its terms, except as such enforceability may be
limited by (i) bankruptcy, insolvency, liquidation, reorganization,
moratorium, conservatorship, receivership or other similar laws now or
hereinafter in effect relating to the enforcement of creditors' rights
in general, as such laws would apply in the event of a bankruptcy,
insolvency, liquidation, reorganization, moratorium, conservatorship,
receivership or similar occurrence affecting the Owner Trustee, and
(ii) general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law) as
well as concepts of reasonableness, good faith and fair dealing.
ARTICLE XVI
Termination
SECTION 16.01. Termination of the Trust. The respective obligations and
responsibilities of the Seller, the Servicer and the Owner Trustee created
hereby and the Trust created by this Agreement shall terminate upon (i) the
disposition of the Trust corpus as of the last day of any Collection Period at
the direction of the Certificateholder, at its option, pursuant to Section
16.02, or (ii) the payment to Noteholders and the Insurer of all amounts
required to be paid to them pursuant
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to this Agreement, the Indenture and the Insurance Agreement (as set forth in
writing by the Insurer) and the disposition of all property held as part of the
Trust; provided, however, that the Trust shall terminate one year and one day
following the date of the occurrence of (i) above, if on the date of such
occurrence, UAC's Consolidated Tangible Net Worth is less than $45,000,000, plus
50% of UAC's cumulative Consolidated Net Income (with no reduction for losses)
from and after August 31, 1995; provided, further, that in no event shall the
trust created by this Agreement continue beyond the expiration of 21 years from
the date as of which this Agreement is executed. The Servicer shall promptly
notify the Owner Trustee of any prospective termination pursuant to this Section
16.01. Notwithstanding the foregoing, the Trust shall continue and the Owner
Trustee shall pursue recovery of any Preference Amounts under the Policy and the
distribution of the same to Noteholders until the Policy terminates by its own
terms.
SECTION 16.02. Optional Disposition of All Receivables. On the last day
of any Collection Period on which the Pool Balance is equal to or less than 10%
of the Original Pool Balance, any Certificateholders owning a majority of
interest in the outstanding Certificates shall have the option to cause the
Owner Trustee to sell (to the Certificateholders or any other person designated
by such Certificateholders) the corpus of the Trust at a price (the "Optional
Disposition Price") equal to the fair market value of the Receivables, but not
less than the sum of (x) 100% of the outstanding principal balance of the Notes
(including any overdue principal or interest thereon), (y) accrued and unpaid
interest on such amount computed at a rate equal to the weighted average
Contract Rate, and (z) all amounts due and owing to the Insurer under this
Agreement, the Indenture and the Insurance Agreement minus any amounts
representing payments received on the Receivables not yet applied to the
interest related thereto or to reduce the principal balance thereof. The
proceeds of such sale will be deposited into the Collection Account for
distribution to the Indenture Trustee (and, to the extent applicable, the
Insurer) on the next succeeding Payment Date. In connection with such
disposition, the Certificateholder is required to pay any unpaid fees and
expenses of the Owner Trustee and the Indenture Trustee that it would otherwise
have been entitled to pursuant to this Agreement. The Servicer shall notify the
Owner Trustee and the Certificateholder on or before the Determination Date if
the Pool Balance as of the end of the related Collection Period will be less
than or equal to 10% of the Original Pool Balance. The Certificateholder shall
notify the Owner Trustee on or before the Determination Date if the
Certificateholder intends to exercise its option to purchase the corpus of the
Trust pursuant to this Section 16.02. Such price shall be deposited to the
Collection Account in immediately available funds by 12:00 noon, New York City
time, on the Payment Date and, upon notice to the Owner Trustee of such deposit,
the Owner Trustee shall transfer the Receivables and the Receivable Files to the
purchaser, whereupon the Certificates shall no longer evidence any right or
interest in the Receivables or any proceeds thereof.
ARTICLE XVII
Miscellaneous Provisions
SECTION 17.01. Amendment. This Agreement may be amended by the Seller,
the Servicer and the Owner Trustee, without the consent of any of the
Certificateholders or the Noteholders, to
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cure any ambiguity, to correct or supplement any provisions in 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
Opinion of Counsel, adversely affect in any material respect the interests of
any Certificateholders or the Secured Parties.
Notwithstanding anything to the contrary in this Agreement (i) no
amendment of this Agreement shall be effective without the prior written consent
of the Insurer and the holders of 51% of the outstanding Note Balances and (ii)
except as provided in the third paragraph of this Section 17.01, no amendment to
this Agreement shall be recognized or be effective without the written consent
of the Owner Trustee and receipt by the Owner Trustee of an Opinion of Counsel
to the effect that such amendment will not cause the Trust to be treated as an
association taxable as a corporation or as a publicly-traded partnership.
Promptly after the execution of any amendment or consent, the Owner
Trustee shall furnish written notification of the substance of such amendment or
consent to each Certificateholder.
It shall not be necessary for the consent of Certificateholders
pursuant to this Section 17.01 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 Owner Trustee may prescribe.
Prior to the execution of any amendment to this Agreement, 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 and the Opinion of Counsel referred to in Section 17.02(i)(1). 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.
SECTION 17.02. Protection of Title to Trust.
(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 Trust under this Agreement 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 at least
60 days' prior written notice thereof.
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<PAGE>
(c) The Seller and the Servicer shall give the Owner Trustee at least
60 days' prior written notice of any relocation of its principal executive
office if, as a result of such relocation, the applicable provisions of the UCC
would require the filing of any amendment of any previously filed financing or
continuation statement or of any new financing statement (in which case the
Servicer shall file or cause to be filed such amendment or continuation
statement or new financing statement). The Owner Trustee shall be permitted to
waive the 60 day notice period to any shorter period; provided that such UCC
financing statements or amendments have been filed on or before the effective
date of any such waiver. 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 Owner
Trustee, the Servicer's master computer records (including any back-up archives)
that refer to a Receivable shall indicate clearly with reference to the
particular trust that such Receivable is owned by the Owner Trustee. Indication
of the Owner Trustee'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 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 sold and is owned by the
Owner Trustee.
(g) The Servicer shall permit the Owner Trustee and its agents at any
time during normal business hours to inspect, audit, and make copies of and
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 Business Days, a list of all Receivables (by
contract number and name of Obligor) then held as part of the Trust, together
with a reconciliation of such list to the Schedule of Receivables and to each of
the Servicer's Certificates furnished before such request indicating removal of
Receivables from the Trust.
(i) The Servicer shall deliver to the Owner Trustee and the Indenture
Trustee:
53
<PAGE>
(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, all financing
statements and continuation statements have been executed and filed
that are necessary fully to preserve and protect the interest of the
Owner 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 90 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 90-day period, either (a) stating that, in the opinion of such
counsel, all financing statements and continuation statements have been
executed and filed that are necessary fully to preserve and protect the
interest of the Owner 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.
SECTION 17.03. Limitation on Rights of Certificateholders. The death or
incapacity of a Certificateholder shall not operate to terminate this Agreement
or the Trust, nor entitle such Certificateholder's legal representatives or
heirs to claim an accounting or to take any action or commence any proceeding in
any court for a partition or winding up of the Trust, nor otherwise affect the
rights, obligations, and liabilities of the parties to this Agreement or any of
them.
No Certificateholder shall have any right to vote (except as provided
in Section 17.01, 17.03 or 17.07) or in any manner otherwise control the
operation and management of the Trust, or the obligations of the parties to this
Agreement except as expressly set forth herein, nor shall anything in this
Agreement set forth, or contained in the terms of the Certificates, be construed
so as to constitute the Certificateholders from time to time as 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 provisions of this Agreement to institute any suit, action, or
proceeding in equity or at law upon or under or with respect to this Agreement,
unless such Holder previously shall have given to the Owner Trustee a written
notice of default and of the continuance thereof, as hereinbefore provided, and
unless also the Certificateholder requests in writing to the Owner Trustee to
institute such action, suit, or proceeding in its own name as Trustee under this
Agreement and shall have offered to the Owner Trustee such reasonable indemnity
as it may require against the costs, expenses, and liabilities to be incurred
therein or thereby, and the Owner Trustee, for 30 days after its receipt of such
notice, request, and offer of indemnity, shall have neglected or refused to
institute any such action, suit, or proceeding and during such 30-day period no
direction inconsistent with such written request has been given to the Owner
Trustee.
54
<PAGE>
SECTION 17.04. Governing Law. This Agreement shall be construed in
accordance with the laws of the State of [Delaware] applicable to agreements
made and to be performed within the State of [Delaware], and the obligations,
rights, and remedies of the parties under this Agreement shall be determined in
accordance with such laws.
SECTION 17.05. Notices. All demands, notices, and communications under
this Agreement shall be in writing, personally delivered, sent by facsimile to,
sent by courier to or mailed by certified mail, return receipt requested, and
shall be deemed to have been duly given unless otherwise provided herein, upon
receipt (a) in the case of the Seller to the agent for service as specified in
this Agreement, at the following address: UAC Securitization Corporation, 9240
Bonita Beach Road, Suite 1109-A, Bonita Springs, Florida 34135, or at such other
address as shall be designated by the Seller in a written notice to the Servicer
or Trustee; (b) in the case of the Servicer to the agent for service as
specified in this Agreement, at the following address, Union Acceptance
Corporation, 250 North Shadeland Avenue, Indianapolis, Indiana 46219, (c) in the
case of the Owner Trustee, at the Corporate Trust Office, (d) in the case of the
Insurer, at ____________________________________ and (e) in the case of the
Indenture Trustee __________________________. Unless otherwise provided herein,
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 shall receive such notice.
SECTION 17.06. 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.
SECTION 17.07. Assignment. Notwithstanding anything to the contrary
contained herein, except as provided below or in Sections 12.03 and 13.03 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
without the prior written consent of the Owner Trustee and the
Certificateholders.
SECTION 17.08. Certificates Nonassessable and Fully Paid.
Certificateholders shall not be personally liable for obligations of the Trust.
The interests represented by the Certificates shall be nonassessable for any
losses or expenses of the Trust or for any reason whatsoever, and, upon
authentication thereof by the Owner Trustee pursuant to Section 11.02,
Certificates shall be deemed fully paid.
SECTION 17.09. Nonpetition Covenants. Notwithstanding any prior
termination of this Agreement, the Servicer, UAC and the Owner Trustee shall
not, prior to the date which is one year and one day after the termination of
this Agreement with respect to the Trust or the Seller, acquiesce, petition or
otherwise invoke or cause the Trust or the Seller to invoke the process of any
court or
55
<PAGE>
government authority for the purpose of commencing or sustaining a case against
the Trust or the Seller 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 Trust or the Seller or any
substantial part of its property, or ordering the winding up or liquidation of
the affairs of the Trust or the Seller.
SECTION 17.10. Counterparts. 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 17.11. Third Party Beneficiary. This Agreement shall inure to
the benefit of the Insurer, the Indenture Trustee and their successors and
assigns.
[Next page is signature page]
56
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Trust and
Servicing Agreement to be duly executed by their respective officers as of the
day and year first above written.
UAC SECURITIZATION CORPORATION,
as Seller
By
TITLE: Vice President
UNION ACCEPTANCE CORPORATION,
as Servicer
By
TITLE: Vice President
______________________________,
as Owner Trustee
By
TITLE: Vice President
57
<PAGE>
Exhibit 1
Owner Trustee's Certificate
pursuant to Section 15.02
of the Trust and Servicing Agreement
________________________, as owner trustee (the "Owner Trustee") of the
UACSC ____- __ Owner Trust created pursuant to the Trust and Servicing Agreement
(the "Trust Agreement") dated as of ________________, among UAC Securitization
Corporation, as depositor (the "Seller"), Union Acceptance Corporation, as
servicer (the "Servicer") and the Owner Trustee, does hereby sell, transfer,
assign, and otherwise convey to Union Acceptance Corporation without recourse,
representation, or warranty, all of the Owner Trustee's right, title, and
interest in and to all of the Receivables (as defined in the Trust Agreement)
identified in the attached Servicer's Certificate as "Purchased Receivables,"
which have been repurchased by the Seller pursuant to Section 7.02 and all
security and documents relating thereto.
IN WITNESS WHEREOF I have hereunto set my hand this _____ day of
- -----------------, -------.
------------------------------------
58
<PAGE>
Exhibit 2
Owner Trustee's Certificate
pursuant to Section 15.02
of the Trust and Servicing Agreement
________________________, as trustee (the "Owner Trustee") of the UACSC
____-__ Owner Trust created pursuant to the Trust and Servicing Agreement (the
"Trust Agreement") dated as of ________________, among UAC Securitization
Corporation, as depositor (the "Seller"), Union Acceptance Corporation, as
servicer (the "Servicer") and the Owner Trustee, does hereby sell, transfer,
assign, and otherwise convey to the [Servicer or the Certificateholders],
without recourse, representation, or warranty, all of the Owner Trustee's right,
title, and interest in and to all of the Receivables (as defined in the Trust
Agreement) identified in the attached Servicer's Certificate as "Purchased
Receivables," which have been purchased by [the Servicer pursuant to Section
8.07 or by the Certificateholders pursuant to Section 16.02], and all security
and documents relating thereto.
IN WITNESS WHEREOF I have hereunto set my hand this _____ day of
- -----------------, --------.
------------------------------------------
59
<PAGE>
Exhibit 3
Form of Servicer's Certificate
pursuant to Sections 8.09 and 9.02
of the Trust and Servicing Agreement
SERVICER'S CERTIFICATE
60
<PAGE>
EXHIBIT A
CERTIFICATE OF TRUST OF
UACSC OWNER TRUST ______-____
This Certificate of Trust of UACSC Owner Trust ______-____ (the
"Trust"), dated as of ___________________, is being duly executed and filed by
_________________, a [Delaware banking corporation], as trustee, to form a
business trust under the [Delaware Business Trust Act (12 Del. Code, Section
3801 et seq.)].
1. Name. The name of the business trust formed hereby is UACSC OWNER
TRUST -----------.
2. [Delaware] Trustee. The name and business address of the trustee of
the Trust in the State of [Delaware] is ____________________, (Address),
Attention: ________________.
IN WITNESS WHEREOF, the undersigned, being the sole trustee of the
Trust, has executed this Certificate of Trust as of the date first above
written.
___________________________,
not in its individual capacity but solely as owner
trustee under a Trust Agreement dated as of
--------------,
By:
Name:
Title:
61
<PAGE>
EXHIBIT B
[Form of Certificate]
THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. NEITHER THIS CLASS IC CERTIFICATE NOR ANY PORTION HEREOF MAY BE
TRANSFERRED, ASSIGNED, EXCHANGED OR OTHERWISE PLEDGED OR CONVEYED EXCEPT (1) IN
COMPLIANCE WITH THE REGISTRATION PROVISIONS OF SUCH ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM SUCH REGISTRATION PROVISIONS AND (2) IN COMPLIANCE WITH
THE RESTRICTIONS OF THE POOLING AND SERVICING AGREEMENT REFERRED TO HEREIN.
UACSC ____-__ OWNER TRUST
AUTOMOBILE RECEIVABLE
BACKED CERTIFICATE
evidencing an undivided interest in the Trust, as defined below, the property of
which includes a pool of simple interest installment loan and security
agreements and installment sales contracts secured by new and used automobiles,
light trucks and vans. The contracts were sold to the Owner Trustee by UAC
Securitization Corporation.
(This Certificate does not represent an interest in or obligation of UAC
Securitization Corporation or any of its affiliates. Neither this Certificate
nor the underlying Receivables, as defined below, are insured or guaranteed by
any other government agency).
NUMBER One Unit
R-1
THIS CERTIFIES THAT UAC Securitization Corporation, a Delaware
corporation, is the registered owner of a nonassessable, fully-paid interest in
the UACSC ____-__ Owner Trust (the "Trust"), a Delaware business trust. The
Trust was created pursuant to a Trust and Servicing Agreement dated as of
________________ (the "Agreement"), among UAC Securitization Corporation as
Seller, Union Acceptance Corporation, as Servicer and ________________________
(the "Owner Trustee"), a summary of certain of the pertinent provisions of which
is set forth below. A copy of the Agreement may be examined during normal
business hours at the Corporate Trust Office of the Owner Trustee by any
Certificateholder upon request. To the extent not otherwise defined herein, the
capitalized terms used herein have the meanings assigned to them in the
Agreement. This Certificate is issued under and is subject to the terms,
provisions, and conditions of the Agreement, to which Agreement the holder of
this Certificate by virtue of the acceptance hereof assents and by which such
holder is bound. The property of the Trust includes a pool of simple and
precomputed interest loan and security agreements and installment sales
contracts for new and used automobiles, light trucks, vans and van conversions
(the "Receivables"), all monies paid thereon, and all monies due thereon,
including Accrued Interest, after ________________ (but excluding Accrued
Interest paid or due before the Closing Date), security interests in the
vehicles financed thereby, certain bank accounts and the proceeds thereof and
certain other property and rights described in the Agreement and the proceeds of
the foregoing.
This Certificate represents an interest in certain assets of the Trust,
including the right to receive a portion of the collections and other amounts at
the times and in the amounts specified in the Agreement. The rights of the
Certificateholders in the assets of the Trust are subordinated to the rights of
the Noteholders as set forth in the Indenture and the Agreement.
Unless the certificate of authentication hereon shall have been
executed by a Responsible Officer of the Owner Trustee, by manual or facsimile
signature, this Certificate shall not entitle the holder hereof to any benefit
under the Agreement or be valid for any purpose. Registration of transfer of
this Certificate to a person may not be effected unless (a)
62
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the Insurer consents to such transfer, (b) the Owner Trustee receives an Opinion
of Counsel, satisfactory to it, to the effect that such transfer may be made in
reliance upon an exemption from the registration requirements of the Securities
Act of 1933, as amended, (c) such transfer will not adversely affect the tax
treatment of the Trust or the Notes, and (d) the Rating Agency Condition has
been satisfied with respect to such transfer. Notwithstanding the foregoing, the
Seller shall have no obligation to register this Certificate under the
Securities Act of 1933, as amended.
The obligations and responsibilities created by the Agreement and the
Trust created thereby shall terminate upon the payment to Certificateholders of
all amounts required to be paid to them pursuant to the Agreement and the
disposition of all property held as part of the Trust. The holder of a majority
in interest of the outstanding Certificates may at its option cause the Owner
Trustee to sell the corpus of the Trust at a price not to be less than the price
specified in the Agreement; however, such right is exercisable only as of the
last day of a Collection Period on which the Pool Balance is less than or equal
to 10% of the Original Pool Balance. The Certificateholders are required to pay
any unpaid fees and expenses of the Owner Trustee and in connection with such
disposition.
Although this Certificate summarizes certain provisions of the
Agreement, this Certificate does not purport to summarize the Agreement and
reference is made to the Agreement for information with respect to the
interests, rights, benefits, obligations, proceeds and duties evidenced hereby
and the rights, duties and obligations of the Owner Trustee. In the event of any
inconsistency or conflict between the terms of this Certificate and the terms of
the Agreement, the terms of the Agreement shall control. By acceptance of this
Certificate, the holder agrees to be bound by the terms of the Agreement,
including the agreement to treat the Trust as a partnership for income tax
purposes and the Certificates as an equity interest therein.
63
<PAGE>
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.
Dated:
UACSC ____-__ OWNER TRUST
By ________________________, solely in its
capacity as Owner Trustee
By
Responsible Officer
CERTIFICATE OF AUTHENTICATION
This is the Certificate referred to in the
within-mentioned Agreement.
------------------------,
as Owner Trustee
By
Signatory
Dated:
64
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers unto
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER
OF ASSIGNEE
(Please print or typewrite name and address, including postal zip code, of
assignee) the within Certificate, and all rights thereunder, hereby irrevocably
constituting and appointing Attorney to transfer said Certificate on the books
of the Certificate Registrar, with full power of substitution in the premises.
Dated:
*
Signature Guaranteed:
*
* NOTICE: The signature to this assignment must correspond with the name as it
appears upon the face of the within Certificate in every particular, without
alteration, enlargement or any change whatever. Such signature must be
guaranteed by a member of the New York Stock Exchange or a commercial bank,
trust company savings bank or other savings and loan institution.
65
<PAGE>
Schedule A
to the Trust and
Servicing Agreement
SCHEDULE OF RECEIVABLES
Seller Name of
Account Number Obligor Amount Financed
(as of the Cutoff Date)
$
A COPY OF THE SCHEDULE OF RECEIVABLES, INCLUDING THE
ABOVE CAPTIONED INFORMATION WITH RESPECT TO EACH
RECEIVABLE, WAS DELIVERED TO THE OWNER TRUSTEE WITH A
COUNTERPART OF THE TRUST AND SERVICING AGREEMENT.
66
<PAGE>
Schedule B
to the Trust and
Servicing Agreement
1. Location of Receivables:
Union Acceptance Corporation
250 N. Shadeland Avenue
Indianapolis, IN 46219
INDENTURE
between
UACSC ____-__ OWNER TRUST
as Issuer
and
------------------------
as Indenture Trustee
Dated as of ____________
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS AND INCORPORATION BY REFERENCE...............2
SECTION 1.01. Definitions............................................2
SECTION 1.02. Incorporation by Reference of Trust Indenture Act.....14
SECTION 1.03. Rules of Construction.................................14
ARTICLE II THE NOTES...............................................15
SECTION 2.01. Form..................................................15
SECTION 2.02. Execution, Authentication and Delivery................15
SECTION 2.03. Temporary Notes.......................................16
SECTION 2.04. Registration; Registration of Transfer and Exchange...16
SECTION 2.05. Mutilated, Destroyed, Lost or Stolen Notes............17
SECTION 2.06. Intentionally Blank...................................18
SECTION 2.07. Payment of Principal and Interest; Defaulted Interest.18
SECTION 2.08. Cancellation..........................................20
SECTION 2.09. Book-Entry Notes......................................20
SECTION 2.10. Notices to Clearing Agency............................21
SECTION 2.11. Definitive Notes......................................21
SECTION 2.12. Release of Pledged Assets.............................21
SECTION 2.13. Tax Treatment.........................................22
SECTION 2.14. ERISA.................................................22
ARTICLE III COVENANTS...............................................22
SECTION 3.01. Payment of Principal and Interest.....................22
SECTION 3.02. Maintenance of Office or Agency.......................22
SECTION 3.03. Money for Payments to be Held in Trust................22
SECTION 3.04. Existence.............................................24
SECTION 3.05. Protection of Trust Estate............................24
SECTION 3.06. Opinions as to Pledged Assets.........................25
SECTION 3.07. Performance of Obligations; Servicing of Receivables..25
SECTION 3.08. Negative Covenants....................................27
SECTION 3.09. Annual Statement as to Compliance.....................27
SECTION 3.10. Issuer May Consolidate, etc. Only on
Certain Conditions..............................28
SECTION 3.11. Successor Transferee..................................30
SECTION 3.12. No Other Business.....................................30
SECTION 3.13. Servicer's Obligations................................30
SECTION 3.14. Restricted Payments...................................30
SECTION 3.15. Notice of Events of Default...........................31
SECTION 3.16. Further Instruments and Acts..........................31
SECTION 3.17. Compliance with Laws..................................31
i
<PAGE>
SECTION 3.18. Amendments of Trust Agreement.........................31
ARTICLE IV SATISFACTION AND DISCHARGE..............................31
SECTION 4.01. Satisfaction and Discharge of Indenture...............31
SECTION 4.02. Application of Trust Money............................32
SECTION 4.03. Repayment of Monies Held by Paying Agent.............33
ARTICLE V EVENTS OF DEFAULT; REMEDIES.............................33
SECTION 5.01. Events of Default.....................................33
SECTION 5.02. Rights Upon Event of Default..........................34
SECTION 5.03. Collection of Indebtedness and Suits for
Enforcement by Indenture Trustee................35
SECTION 5.04. Remedies..............................................36
SECTION 5.05. Optional Preservation of the Receivables..............38
SECTION 5.06. Priorities............................................38
SECTION 5.07. Limitation of Suits...................................38
SECTION 5.08. Unconditional Rights of Noteholders to Receive
Principal and Interest....................39
SECTION 5.09. Restoration of Rights and Remedies....................39
SECTION 5.10. Rights and Remedies Cumulative........................39
SECTION 5.11. Delay or Omission Not a Waiver........................40
SECTION 5.12. Control by Noteholders................................40
SECTION 5.13. Waiver of Past Defaults...............................40
SECTION 5.14. Undertaking for Costs.................................41
SECTION 5.15. Waiver of Stay or Extension Laws......................41
SECTION 5.16. Action on Notes.......................................41
SECTION 5.17. Performance and Enforcement of Certain Obligations....41
ARTICLE VI THE INDENTURE TRUSTEE...................................42
SECTION 6.01. Duties of Indenture Trustee...........................42
SECTION 6.02. Rights of Indenture Trustee...........................44
SECTION 6.03. Individual Rights of Indenture Trustee................45
SECTION 6.04. Indenture Trustee's Disclaimer........................46
SECTION 6.05. Notice of Defaults....................................46
SECTION 6.06. Reports by Indenture Trustee to Holders...............46
SECTION 6.07. Compensation and Indemnity............................46
SECTION 6.08. Replacement of Indenture Trustee......................47
SECTION 6.09. Successor Indenture Trustee by Merger.................48
SECTION 6.10. Appointment of Co-Indenture Trustee or Separate
Indenture Trustee.........................48
SECTION 6.11. Eligibility...........................................50
SECTION 6.12. Preferential Collection of Claims Against Issuer......50
SECTION 6.13. Representations and Warranties of Indenture Trustee...50
ii
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ARTICLE VII NOTEHOLDERS' LISTS AND REPORTS..........................50
SECTION 7.01. Issuer to Furnish Indenture Trustee Names and
Addresses of Noteholders..................51
SECTION 7.02. Preservation of Information; Communications
to Noteholders..................................51
SECTION 7.03. Reports by Issuer.....................................51
SECTION 7.04. Reports by Indenture Trustee..........................52
ARTICLE VIII INTENTIONALLY BLANK.....................................52
ARTICLE IX DISTRIBUTIONS; STATEMENTS TO THE NOTEHOLDERS............52
SECTION 9.01. Collection Account....................................52
SECTION 9.02. Collections...........................................52
SECTION 9.03. Purchase Amounts.....................................53
SECTION 9.04. Distributions to Parties..............................53
SECTION 9.06. Net Deposits..........................................55
SECTION 9.07. Intentionally Blank...................................56
SECTION 9.08. Intentionally Blank...................................56
SECTION 9.09. Payahead Account......................................56
ARTICLE X CREDIT ENHANCEMENT......................................56
SECTION 10.01. Subordination.......................................56
SECTION 10.02. Spread Account......................................56
SECTION 10.03. Policy..............................................58
ARTICLE XI SUPPLEMENTAL INDENTURES.................................59
SECTION 11.01. Supplemental Indentures Without Consent
of Noteholders..................................59
SECTION 11.02. Supplemental Indentures With Consent of Noteholders..60
SECTION 11.03. Execution of Supplemental Indentures.................61
SECTION 11.04. Effect of Supplemental Indenture.....................62
SECTION 11.05. Conformity With Trust Indenture Act..................62
SECTION 11.06. Reference in Notes to Supplemental Indentures........62
ARTICLE XII REDEMPTION OF NOTES.....................................62
SECTION 12.01. Redemption...........................................62
SECTION 12.02. Form of Redemption Notice............................62
SECTION 12.03. Notes Payable on Redemption Date.....................63
ARTICLE XIII MISCELLANEOUS...........................................63
SECTION 13.01. Compliance Certificates and Opinions, etc............63
SECTION 13.02. Form of Documents Delivered to Indenture Trustee.....65
SECTION 13.03. Acts of Noteholders..................................66
SECTION 13.04. Notices, etc., to Indenture Trustee, Issuer,
Insurer and Rating Agencies.....................66
iii
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SECTION 13.05. Notices to Noteholders; Waiver.......................67
SECTION 13.06. Alternate Payment and Notice Provisions..............68
SECTION 13.07. Conflict With Trust Indenture Act....................68
SECTION 13.08. Effect of Headings and Table of Contents.............68
SECTION 13.09. Successors and Assigns...............................68
SECTION 13.10. Separability.........................................68
SECTION 13.11. Benefits of Indenture................................68
SECTION 13.12. Legal Holidays.......................................68
SECTION 13.13. Governing Law........................................69
SECTION 13.14. Counterparts.........................................69
SECTION 13.15. Recording of Indenture...............................69
SECTION 13.16. Trust Obligation.....................................69
SECTION 13.17. No Petition..........................................69
SECTION 13.18. Inspection...........................................69
SECTION 13.19. Limitation of Liability of Owner Trustee.............70
SECTION 13.20. Certain Matters Regarding the Insurer................70
EXHIBITS
Schedule A Form of Depository Agreement
Exhibit A-1 Form of Class A-1 Note
Exhibit A-2 Form of Class A-2 Note
Exhibit A-3 Form of Class A-3 Note
Exhibit A-4 Form of Class A-4 Note
Exhibit B Form of Class B Note
CROSS-REFERENCE TABLE
310(a).....................................................................6.11
310(b).....................................................................6.11
310(c)......................................................................N/A
311(a).....................................................................6.12
311(b).....................................................................6.12
311(c)......................................................................N/A
312(a)...............................................................7.01, 7.02
312(b).....................................................................7.02
312(c).....................................................................7.02
313(a).....................................................................7.04
313(b).....................................................................7.04
313(c).....................................................................7.03
314(a).....................................................................7.03
314(b).....................................................................3.06
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314(c).........................................................3.06, 4.01, 13.01
314(d).....................................................................13.01
314(e).....................................................................13.01
314(f).......................................................................N/A
315(a)......................................................................6.01
315(b)......................................................................6.05
315(c)......................................................................6.01
315(d)......................................................................6.01
315(e)......................................................................5.14
316(a)......................................................................5.04
316(b).....................................................................11.02
316(c).....................................................................13.03
317(a)......................................................................5.03
317(b)......................................................................3.03
318(a)......................................................................1.02
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This INDENTURE, dated as of ____________, ____, is entered into between
UACSC ____- ___ OWNER TRUST, a Delaware business trust, as issuer (the
"Issuer"), and ___________________, a Delaware banking corporation, as indenture
trustee (the "Indenture Trustee").
Each party agrees as follows for the benefit of the other parties and
for the benefit of the Noteholders and the Insurer:
GRANTING CLAUSE
The Issuer hereby Grants to the Indenture Trustee on behalf of the
Trust on the Closing Date, on behalf of and for the benefit of the Noteholders
and the Insurer, without recourse, all of the Issuer's right, title and interest
in, to and under, (i) the Receivables listed on Schedule A to the Trust
Agreement, (ii) the security interests in the Financed Vehicles or in any other
property granted by Obligors pursuant to the Receivables, (iii) any Liquidation
Proceeds and any proceeds from claims or refunds of premiums on any physical
damage, lender's single interest, credit life, disability and hospitalization
insurance policies covering Financed Vehicles or Obligors relating to the
Receivables, (iv) funds deposited in the Spread Account (and any Eligible
Investments purchased therewith), the Collection Account and the Payahead
Account with respect to the Receivables, (v) the interest of the Issuer in any
proceeds from recourse to Dealers relating to the Receivables, (vi) all
documents contained in the Receivable Files relating to the Receivables, (vii)
all monies paid and all monies due, including Accrued Interest, as of and after
the Cutoff Date (but excluding Accrued Interest paid on or prior to the Closing
Date), (viii) the rights of the Seller pursuant to the Purchase Agreement and
the rights of the Issuer pursuant to the Trust Agreement to require UAC to
repurchase any such Receivables as to which there has been a breach of the
representations and warranties contained therein, (ix) the benefits of the
Policy with respect to the Receivables and (x) all proceeds (including, without
limitation, "proceeds" as defined in the UCC of the jurisdiction the law of
which governs the perfection of the interest in such Receivables so transferred)
of any of the foregoing. Such property described in the preceding sentence,
together with (a) any and all other right, title and interest, including any
beneficial interest the Issuer may have in the Collection Account, the Spread
Account and (b) the funds deposited in and from time to time on deposit in such
accounts, and all Eligible Investments and other securities, instruments and
other investments purchased from such funds, shall hereinafter be referred to as
the "Pledged Assets." The Issuer does not convey to the Indenture Trustee, and
the Pledged Assets do not include, any interest in any contracts with Dealers
related to any "dealer reserve" or any rights to the recapture of any dealer
reserve with respect to such Receivables.
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 (except as
provided herein with respect to the subordination of the Class B Notes), and to
secure compliance with the provisions of this Indenture and the Insurance
Agreement, all as provided in this Indenture and the Insurance Agreement.
The Indenture Trustee, as Indenture Trustee on behalf of the
Noteholders and the Insurer, acknowledges such Grant, accepts the trusts under
this Indenture in accordance with the provisions
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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 AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions.
(a) Except as otherwise specified herein or as the context may
otherwise require, (i) capitalized terms that are used herein that are not
otherwise defined herein shall have the meanings assigned to them in the Trust
Agreement (as defined below) and (ii) the following terms have the respective
meanings set forth below for all purposes of this Indenture.
"Accelerated Principal Amount" means, for any Payment Date after giving
effect to all payments of interest and principal (other than any Accelerated
Principal Amount) to the Noteholders, an amount equal to the lesser of (1) the
Available Excess Funds or (2) the amount necessary to reduce the then aggregate
Note Balances below the Pool Balance as of the end of the related Collection
Period until the aggregate Pool Balance exceeds the aggregate Note Balances by
2.5% of the initial Note Balances or $ .
"Act" shall have the meaning specified in Section 13.03(a).
"Administration Agreement" means the Administration Agreement, dated as
of the date hereof, among the Administrator, the Issuer, the Owner Trustee and
the Indenture Trustee.
"Administrator" means the Servicer, or any successor Administrator
under the Administration Agreement.
"Authorized Officer" means, with respect to the Issuer, any officer of
the Owner Trustee who is authorized to act for the Owner Trustee in matters
relating to the Issuer and who is identified on the list of Authorized Officers
delivered by the Owner Trustee or to the Indenture Trustee on the Closing Date
(as such list may be modified or supplemented from time to time thereafter) and,
so long as the Administration Agreement is in effect, any Vice President or more
senior officer of the Administrator who is authorized to act for the
Administrator in matters relating to the Issuer and to be acted upon by the
Administrator pursuant to the Administration Agreement and who is identified on
a list of Authorized Officers delivered by the Administrator to the Indenture
Trustee on the Closing Date (as such list may be modified or supplemented from
time to time thereafter).
"Available Excess Funds" for any Payment Date means the amount of
Available Funds remaining from such Payment Date after paying the Servicer, the
Noteholders and the Insurer the amounts they are entitled to receive, without
considering the amount of the Monthly Principal payment in respect of the
Accelerated Principal Amount.
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"Available Funds" has the meaning provided in the Trust Agreement.
"Basic Documents" means the Certificate of Trust, the Trust Agreement,
the Administration Agreement, the Depository Agreement, the Insurance Agreement,
the Policy and this Indenture.
"Book-Entry Notes" means a beneficial interest in the Notes, ownership
and transfers of which shall be made through book entries by a Clearing Agency
as described in Section 2.09.
"Certificateholders" mean the owners or holders of the Certificates
pursuant to the Trust Agreement.
"Class" means all Notes whose form is identical except for variation in
denomination, principal amount or owner.
"Class A Monthly Interest" means the sum of Class A-1 Monthly Interest,
Class A-2 Monthly Interest, Class A-3 Monthly Interest and Class A-4 Monthly
Interest.
"Class A Monthly Principal" means the sum of Class A-1 Monthly
Principal, Class A-2 Monthly Principal, Class A-3 Monthly Principal and Class
A-4 Monthly Principal.
"Class A Note" means a Class A-1 Note, a Class A-2 Note, a Class A-3
Note or a Class A-4 Note.
"Class A-1 Interest Rate" means ____% per annum.
"Class A-1 Monthly Interest" means, (i) for the first Payment Date, the
product of one-three hundred sixtieth (1/360th) of the Class A-1 Interest Rate,
the actual number of days from the Closing Date through the day before the first
Payment Date and the Class A-1 Note Balance at the Closing Date and (ii) for any
subsequent Payment Date, the product of one-three hundred sixtieth (1/360th) of
the Class A-1 Interest Rate, the actual number of days from the previous Payment
Date through the day before the related Payment Date and the Class A-1 Note
Balance as of the immediately preceding Payment Date (after giving effect to any
distribution of Monthly Principal made on such immediately preceding Payment
Date).
"Class A-1 Monthly Principal" means that portion of Monthly Principal
to be paid to Class A-1 Noteholders on each Payment Date in accordance with
Section 9.04.
"Class A-1 Note" means a promissory note executed on behalf of the
Trust and authenticated by the Indenture Trustee substantially in the form
attached hereto as Exhibit A-1.
"Class A-1 Note Balance" means, at any time, the Initial Class A-1 Note
Balance minus all payments of Monthly Principal to Class A-1 Noteholders made up
to such time.
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"Class A-1 Noteholder" means the Person in whose name the respective
Class A-1 Note shall be registered in the Note Register, except that, solely for
the purposes of giving any consent, waiver, request, or demand pursuant to this
Indenture, the interest evidenced by any Class A-1 Note registered in the name
of the Issuer, the Seller, the Servicer or UAC, or any Person controlling,
controlled by, or under common control with the Issuer, the Seller or the
Servicer, shall not be taken into account in determining whether the requisite
percentage necessary to effect any such consent, waiver, request, or demand
shall have been obtained.
"Class A-2 Interest Rate" means ____% per annum.
"Class A-2 Monthly Interest" means, (i) for the first Payment Date, the
product of one twelfth of the Class A-2 Interest Rate, the number of days from
the Closing Date (assuming the month of the Closing Date has 30 days) through
the day before the first Payment Date divided by 30 and the Class A-2 Note
Balance at the Closing Date and (ii) for any subsequent Payment Date, the
product of one-twelfth of the Class A-2 Interest Rate and the Class A-2 Note
Balance as of the immediately preceding Payment Date (after giving effect to any
distribution of Monthly Principal made on such immediately preceding Payment
Date).
"Class A-2 Monthly Principal" means that portion of Monthly Principal
to be paid to Class A-2 Noteholders on each Payment Date in accordance with
Section 9.04.
"Class A-2 Note" means a promissory note executed on behalf of the
Trust and authenticated by the Indenture Trustee substantially in the form
attached hereto as Exhibit A-2.
"Class A-2 Note Balance" means, at any time, the Initial Class A-2 Note
Balance minus all payments of Monthly Principal to Class A-2 Noteholders made up
to such time.
"Class A-2 Noteholder" means the Person in whose name the respective
Class A-2 Note shall be registered in the Note Register, except that, solely for
the purposes of giving any consent, waiver, request, or demand pursuant to this
Indenture, the interest evidenced by any Class A-2 Note registered in the name
of the Issuer, the Seller, the Servicer or UAC, or any Person controlling,
controlled by, or under common control with the Issuer, the Seller or the
Servicer, shall not be taken into account in determining whether the requisite
percentage necessary to effect any such consent, waiver, request, or demand
shall have been obtained.
"Class A-3 Interest Rate" means ____% per annum.
"Class A-3 Monthly Interest" means, (i) for the first Payment Date, the
product of one twelfth of the Class A-3 Interest Rate, the number of days from
the Closing Date (assuming the month of the Closing Date has 30 days) through
the day before the first Payment Date divided by 30 and the Class A-3 Note
Balance at the Closing Date and (ii) for any subsequent Payment Date, the
product of one-twelfth of the Class A-3 Interest Rate and the Class A-3 Note
Balance as of the immediately
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<PAGE>
preceding Payment Date (after giving effect to any distribution of Monthly
Principal made on such immediately preceding Payment Date).
"Class A-3 Monthly Principal" means that portion of Monthly Principal
to be paid to Class A-3 Noteholders on each Payment Date in accordance with
Section 9.04.
"Class A-3 Note" means a promissory note executed on behalf of the
Trust and authenticated by the Indenture Trustee substantially in the form
attached hereto as Exhibit A-3.
"Class A-3 Note Balance" means, at any time, the Initial Class A-3 Note
Balance minus all payments of Monthly Principal to Class A-3 Noteholders made up
to such time.
"Class A-3 Noteholder" means the Person in whose name the respective
Class A-3 Note shall be registered in the Note Register, except that, solely for
the purposes of giving any consent, waiver, request, or demand pursuant to this
Indenture, the interest evidenced by any Class A-3 Note registered in the name
of the Issuer, the Seller, the Servicer or UAC, or any Person controlling,
controlled by, or under common control with the Issuer, the Seller or the
Servicer, shall not be taken into account in determining whether the requisite
percentage necessary to effect any such consent, waiver, request, or demand
shall have been obtained.
"Class A-4 Interest Rate" means ____% per annum; provided, however, the
per annum rate shall be increased by 0.50% beginning on the first Payment Date
following the end of any Collection Period on which the Pool Balance is equal to
or less than 10% of the Original Pool Balance if the Class A-4 Notes will not be
redeemed on such Payment Date.
"Class A-4 Monthly Interest" means, (i) for the first Payment Date, the
product of one twelfth of the Class A-4 Interest Rate, the number of days from
the Closing Date (assuming the month of the Closing Date has 30 days) through
the day before the first Payment Date divided by 30 and the Class A-4 Note
Balance at the Closing Date and (ii) for any subsequent Payment Date, the
product of one-twelfth of the Class A-4 Interest Rate and the Class A-4 Note
Balance as of the immediately preceding Payment Date (after giving effect to any
distribution of Monthly Principal made on such immediately preceding Payment
Date).
"Class A-4 Monthly Principal" means that portion of Monthly Principal
to be paid to Class A-4 Noteholders on each Payment Date in accordance with
Section 9.04.
"Class A-4 Note" means a promissory note executed on behalf of the
Trust and authenticated by the Indenture Trustee substantially in the form
attached hereto as Exhibit A-4.
"Class A-4 Note Balance" means, at any time, the Initial Class A-4 Note
Balance minus all payments of Monthly Principal to Class A-4 Noteholders made up
to such time.
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<PAGE>
"Class A-4 Noteholder" means the Person in whose name the respective
Class A-4 Note shall be registered in the Note Register, except that, solely for
the purposes of giving any consent, waiver, request, or demand pursuant to this
Indenture, the interest evidenced by any Class A-4 Note registered in the name
of the Issuer, the Seller, the Servicer or UAC, or any Person controlling,
controlled by, or under common control with the Issuer, the Seller or the
Servicer, shall not be taken into account in determining whether the requisite
percentage necessary to effect any such consent, waiver, request, or demand
shall have been obtained.
"Class B Interest Rate" means ____% per annum; provided, however, the
per annum rate shall be increased by 0.50% beginning on the first Payment Date
following the end of any Collection Period on which the Pool Balance is equal to
or less than 10% of the Original Pool Balance if the Class B Notes will not be
redeemed on such Payment Date.
"Class B Monthly Interest" means, (i) for the first Payment Date, the
product of one twelfth of the Class B Interest Rate, the number of days from the
Closing Date (assuming the month of the Closing Date has 30 days) through the
day before the first Payment Date divided by 30 and the Class B Note Balance at
the Closing Date and (ii) for any subsequent Payment Date, the product of
one-twelfth of the Class B Interest Rate and the Class B Note Balance as of the
immediately preceding Payment Date (after giving effect to any distribution of
Monthly Principal made on such immediately preceding Payment Date).
"Class B Monthly Principal" means that portion of Monthly Principal to
be paid to Class B Noteholders on each Payment Date in accordance with Section
9.04.
"Class B Note" means a promissory note executed on behalf of the Trust
and authenticated by the Indenture Trustee substantially in the form attached
hereto as Exhibit B.
"Class B Note Balance" means, at any time, the Initial Class B Note
Balance minus all payments of Monthly Principal to Class B Noteholders made up
to such time.
"Class B Noteholder" means the Person in whose name the respective
Class B Note shall be registered in the Note Register, except that, solely for
the purposes of giving any consent, waiver, request, or demand pursuant to this
Indenture, the interest evidenced by any Class B Note registered in the name of
the Issuer, the Seller, the Servicer or UAC, or any Person controlling,
controlled by, or under common control with the Issuer, the Seller or the
Servicer, shall not be taken into account in determining whether the requisite
percentage necessary to effect any such consent, waiver, request, or demand
shall have been obtained.
"Code" means the Internal Revenue Code of 1986, as amended.
"Controlling Party" means the Insurer, so long as no Insurer Default
shall have occurred and be continuing, and the Indenture Trustee, for so long as
an Insurer Default shall have occurred and be continuing.
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<PAGE>
"Default" means any occurrence that is, or with notice or the lapse of
time or both would become, an Event of Default.
"Definitive Notes" shall have the meaning specified in Section 2.09.
"Depository Agreement" means the agreement dated ___________, ____,
among the Issuer, the Indenture Trustee and DTC, as the initial Clearing Agency,
relating to the Notes, substantially in the form of Schedule A hereto.
"Event of Default" shall have the meaning specified in Section 5.01.
"Excess Yield Requirement" has the meaning specified in Section 1.01 of
the Insurance Agreement.
"Executive Officer" means, with respect to any corporation or bank, the
Chief Executive Officer, Chief Operating Officer, Chief Financial Officer,
President, Executive Vice President, any Vice President, the Secretary or the
Treasurer of such corporation or bank; and with respect to any partnership, any
general partner thereof.
"Final Maturity Date" means ______________ with respect to the Class
A-1 Notes, ______________ with respect to the Class A-2 Notes, ______________
with respect to the Class A-3 Notes, ______________ with respect to the Class
A-4 Notes and ______________ with respect to the Class B Notes.
"Grant" means mortgage, pledge, bargain, sell, warrant, alienate,
remise, release, convey, assign, transfer, create and grant a lien upon and a
security interest in and right of set-off against, deposit, set over and confirm
pursuant to this Indenture. A Grant of the Pledged Assets or of any other
agreement or instrument shall include all rights, powers and options (but none
of the obligations) of the granting party thereunder, including the immediate
and continuing right to claim for, collect, receive and give receipt for
principal and interest payments in respect of the Pledged Assets and all other
monies payable thereunder, to give and receive notices and other communications,
to make waivers or other agreements, to exercise all rights and options, to
bring Proceedings in the name of the granting party or otherwise and generally
to do and receive anything that the granting party is or may be entitled to do
or receive thereunder or with respect thereto.
"Issuer" means UACSC _____-_____ Owner Trust as the issuer of the Notes
under this Indenture and its permitted successors and assigns.
"Indebtedness" means, with respect to any Person at any time, (i)
indebtedness or liability of such Person for borrowed money whether or not
evidenced by bonds, debentures, notes or other instruments, or for the deferred
purchase price of property or services (including trade obligations); (ii)
obligations of such Person as lessee under leases which should have been or
should be, in accordance with generally accepted accounting principles, recorded
as capital leases; (iii) current
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<PAGE>
liabilities of such Person in respect of unfunded vested benefits under plans
covered by Title IV of ERISA; (iv) obligations issued for or liabilities
incurred on the account of such Person; (v) obligations or liabilities of such
Person arising under acceptance facilities; (vi) obligations of such Person
under any guaranties, endorsements (other than for collection or deposit in the
ordinary course of business) and other contingent obligations to purchase, to
provide funds for payment, to supply funds to invest in any Person or otherwise
to assure a creditor against loss; (vii) obligations of such Person secured by
any lien on property or assets of such Person, whether or not the obligations
have been assumed by such Person; or (viii) obligations of such Person under any
interest rate or currency exchange agreement.
"Indenture" means this Indenture, as amended or supplemented from time
to time.
"Indenture Trustee" means ____________________, a _______________
banking corporation as the Indenture Trustee under this Indenture and its
permitted successors and assigns.
"Independent" when used with respect to any specified Person, means
such a Person who (i) is in fact independent of the Issuer, the Seller and any
of their respective Affiliates, (ii) is not a director, officer or employee of
the Issuer, the Seller or any of their respective Affiliates, (iii) is not a
person related to any officer or director of the Issuer, the Seller or any of
their respective Affiliates, (iv) is not a holder (directly or indirectly) of
more than 10% of any voting securities of the Issuer, the Seller or any of their
respective Affiliates, and (v) is not connected with the Issuer, the Seller or
any of their respective Affiliates as an officer, employee, promoter,
underwriter, trustee, partner, director or person performing similar functions.
"Independent Certificate" means a certificate or opinion to be
delivered to the Indenture Trustee under the circumstances described in, and
otherwise complying with, the applicable requirements of Section 13.01, made by
an Independent appraiser or other expert appointed by an Issuer Order and
approved by the Indenture Trustee in the exercise of reasonable care, and such
opinion or certificate shall state that the signer has read the definition of
"Independent" in this Indenture and that the signer is Independent within the
meaning thereof.
"Initial Class A-1 Note Balance" means $_____________________.
"Initial Class A-2 Note Balance" means $_____________________.
"Initial Class A-3 Note Balance" means $_____________________.
"Initial Class A-4 Note Balance" means $_____________________.
"Initial Class B Note Balance" means $_____________________.
"Initial Note Balances" means $_____________________.
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<PAGE>
"Insurance Premium" means for any Payment Date, an amount equal to the
product of (i) [__%] per annum calculated for the actual number of days elapsed
during the Collection Period on the basis of a 360- day year and (ii) the Note
Balances as of the Payment Date to which such Payment Date relates, payable
monthly in arrears.
"Insurer Default" means the Insurer is in default under the Policy or
the Insurance Agreement after the expiration of any applicable cure period.
"Issuer Order" and "Issuer Request" means a written order or request
signed in the name of the Issuer by an Authorized Officer and delivered to the
Indenture Trustee.
"Monthly Interest" means the sum of Class A Monthly Interest and Class
B Monthly Interest.
"Monthly Principal" for any Payment Date will equal the sum of the
following:
(i) the amount by which the Pool Balance declined during the
related Collection Period;
(ii) the amount, if any, which is necessary to reduce the Note
Balance of a class of Notes to zero on its Final Maturity
Date; and
(iii) the Available Excess Funds or, if less, the portion thereof,
that will cause the Pool Balance to exceed the Note Balances
by the Accelerated Principal Amount.
For the purpose of determining Monthly Principal, the unpaid principal balance
of a Defaulted Receivable or a Purchased Receivable is deemed to be zero on and
after the last day of the Collection Period in which such Receivable became a
Defaulted Receivable or a Purchased Receivable.
"Net Principal Policy Amount" means the Initial Note Balances as of the
first Payment Date minus all amounts previously drawn on the Policy or from the
Spread Account with respect to Monthly Principal.
"Note" means a Class A-1 Note, a Class A-2 Note, a Class A-3 Note, a
Class A-4 Note or a Class B Note.
"Note Balances" means, at any time the Initial Note Balances minus all
payments of Monthly Principal made to the Noteholders up to such time. The term
"Note Balance" means the Outstanding principal balance of a particular Class of
Notes, depending upon the context. When the term "Note Balances" is used herein
with respect to an issue relating to the consent of or voting of Noteholders,
such term shall refer only to the classes of Notes then Outstanding such that
the Notes will vote as a single class.
"Noteholder" means the owner of a note.
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"Note Owner" means, with respect to a Book-Entry Note, the Person who
is the owner of such Book-Entry Note, as reflected on the books of the Clearing
Agency, or on the books of a Person maintaining an account with such Clearing
Agency (directly as a Clearing Agency participant or as an indirect participant,
in each case in accordance with the rules of such Clearing Agency).
"Note Register" and "Note Registrar" have the respective meanings
specified in Section 2.04.
"UAC" means Union Acceptance Corporation, an Indiana corporation, and
its successors.
"Officer's Certificate" means a certificate signed by an Authorized
Officer of the Issuer, under the circumstances described in, and otherwise
complying with, the applicable requirements of Section 13.01, and delivered to,
the Indenture Trustee.
"Opinion of Counsel" means one or more written opinions of counsel who
may, except as otherwise expressly provided in this Indenture, be employees of
or counsel to the Depositor or the Issuer and who shall be satisfactory to the
Indenture Trustee and, if addressed to the Insurer, satisfactory to the Insurer,
and which shall comply with any applicable requirements of Section 13.01, and
shall be in form and substance satisfactory to the Indenture Trustee, and if
addressed to the Insurer, satisfactory to the Insurer.
"Original Pool Balance" means $_____________________.
"Outstanding" or "Outstanding Notes" means, as of the date of
determination, all Notes theretofore authenticated and delivered under this
Indenture except:
(i) Notes theretofore canceled by the Note Registrar or
delivered to the Note Registrar for cancellation;
(ii) Notes or portions thereof the payment for which money in
the necessary amount has been theretofore deposited with the Indenture
Trustee or any Paying Agent in trust for the Holders of such Notes
(provided, however, that if such Notes are to be redeemed, notice of
such redemption has been duly given pursuant to this Indenture or
provision for such notice has been made, satisfactory to the Indenture
Trustee, has been made); and
(iii) Notes in exchange for or in lieu of other Notes which
have been authenticated and delivered pursuant to this Indenture unless
proof satisfactory to the Indenture Trustee is presented that any such
Notes are held by a bona fide purchaser; provided, however, that in
determining whether the Holders of the requisite Outstanding Note
Balances have given any request, demand, authorization, direction,
notice, consent or waiver hereunder or under any other Basic Document,
Notes owned by the Issuer, the Seller or any of their respective
Affiliates shall be disregarded and deemed not to be Outstanding,
except that, in determining whether the Indenture Trustee shall be
protected in relying upon any such request, demand,
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authorization, direction, notice, consent or waiver, only Notes that
the Indenture Trustee knows to be so owned shall be so disregarded.
Notes so owned that have been pledged in good faith may be regarded as
Outstanding if the pledgee establishes to the satisfaction of the
Indenture Trustee the pledgee's right so to act with respect to such
Notes and that the pledgee is not the Issuer, the Seller or any of
their respective Affiliates.
"Paying Agent" means the Indenture Trustee or any other Person that
meets the eligibility standards for the Indenture Trustee specified in Section
6.11 and is authorized by the Issuer to make the distributions from the
Collection Account, including payment of principal of or interest on the Notes
on behalf of the Issuer.
"Pledged Assets" has the meaning provided in the Granting Clause of
this Indenture.
"Policy" means the irrevocable financial guaranty insurance policy
dated as of ______, ____, issued by the Insurer to the Indenture Trustee for the
benefit of the Noteholders and having a maximum amount available to be drawn in
respect of Monthly Interest and Monthly Principal equal to the Policy Amount.
"Policy Amount" means with respect to any Payment Date:
(x) the sum of (A) the lesser of (i) the Note Balances (after
giving effect to any distribution of Available Funds and any funds
withdrawn from the Spread Account to pay Monthly Principal on such
Payment Date) and (ii) the Net Principal Policy Amount, plus (B)
Monthly Interest, plus (C) the Monthly Servicing Fee; less
(y) all amounts on deposit in the Spread Account on such
Payment Date (after giving effect to any amounts withdrawn from the
Spread Account to pay Monthly Principal on such Payment Date).
"Predecessor Note" means, with respect to any particular Note, every
previous Note evidencing all or a portion of the same debt as that evidenced by
such particular Note; and, for the purpose of this definition, any Note
authenticated and delivered under Section 2.05 in lieu of a mutilated, lost,
destroyed or stolen Note shall be deemed to evidence the same debt as the
mutilated, lost, destroyed or stolen Note.
"Principal Payment Sequence" means the order in which Monthly Principal
shall be distributed among the Noteholders. The order of distribution of Monthly
Principal is:
(1) to the Class A-1 Noteholders until the Class A-1 Note Balance
has been reduced to zero;
(2) to the Class A-2 Noteholders until the Class A-2 Note Balance
has been reduced to zero;
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(3) to the Class A-3 Noteholders until the Class A-3 Note Balance
has been reduced to zero;
(4) to the Class A-4 Noteholders until the Class A-4 Note Balance
has been reduced to zero; and
(5) to the Class B Noteholders until the Class B Note Balance has
been reduced to zero.
However, if the amount of Available Funds (together with amounts withdrawn from
the Spread Account and/or the Policy) are not sufficient on any Payment Date to
pay the required payment of Class A Monthly Principal to Class A Noteholders in
full, the amount of such funds available to pay Class A Monthly Principal to
Class A Noteholders will be distributed pro rata to the Class A Noteholders
based upon the relative Note Balance of each class of Class A Notes.
"Proceeding" means any suit in equity, action at law or other judicial
or administrative proceeding.
"Rating Agency Condition" means, with respect to any action, that (i)
Standard & Poor's shall have been given ten Business Days (or such shorter
period as is acceptable to Standard & Poor's) prior notice thereof and that
Standard & Poor's shall have notified the Seller, the Servicer, the Insurer and
the Issuer in writing that such action will not result in a qualification,
reduction or withdrawal of its then-current rating of any Class of Notes, (ii)
Moody's shall have been given ten Business Days (or such shorter period as is
acceptable to Moody's) prior notice thereof and copies of all documentation
relating to the event requiring such Rating Agency Condition and (iii) each
Rating Agency shall have confirmed to the Insurer that the shadow risk of the
Insurer with respect to the Notes is investment grade.
"Rating Event" means the qualification, reduction or withdrawal by
either Rating Agency of its then-current rating of any Class of Notes.
"Record Date" means, with respect to a Payment Date or Redemption Date,
the close of business on the Business Day immediately preceding such Payment
Date or Redemption Date, or, in the event that Definitive Notes are issued, the
close of business on the last day of the related Collection Period.
"Redemption Date" means the Payment Date specified by the Servicer or
the Issuer pursuant to Section 12.01.
"Redemption Price" means an amount equal to the unpaid principal amount
of the Notes redeemed plus accrued and unpaid interest thereon at the respective
interest rates of each Class of Notes being so redeemed to but excluding the
Redemption Date.
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"Holder" means the Person in whose name a Note is registered on the
Note Register on the applicable Record Date
"Required Spread Amount" means on each Payment Date, the lesser of (x)
__% of the Initial Note Balances and (y) the Note Balances as of the previous
Distribution Date (after giving effect to any payment of Monthly Principal on
such Payment Date); provided, that on any Payment Date on which (or after the
first Payment Date on which) the Excess Yield Requirement is not met, the
Required Spread Amount shall be increased, if greater than the amounts provided
above, to __% of the Note Balances (after giving effect to any payment of
Monthly Principal on such Payment Date). On any Payment Date following such
first Payment Date on which the Excess Yield Requirement is not met, the
Required Spread Amount shall be reduced below __% of the Note Balances (if such
amount is the applicable Required Spread Amount) beginning on the [eighteenth
(18th)] Payment Date, as follows:
(i) on and after the [eighteenth (18th)] Payment Date, if the
Net Cumulative Loss Percentage is less than or equal to __% on the
[eighteenth (18th)] Payment Date, then the Required Spread Amount shall
be __% of the Note Balances; and
(ii) on and after the [thirty-sixth (36th)] Payment Date, if
the Net Cumulative Loss Percentage is less than or equal to __% on the
[thirty-sixth (36th)] Payment Date, then the Required Spread Amount
shall be __% of the Note Balances.
Notwithstanding any of the foregoing, upon and during the continuance of an
Indenture Default or a Trigger Event, the Required Spread Amount shall be equal
to the Policy Amount as of such Payment Date, without giving effect to amounts
on deposit in the related Spread Account, after giving effect to any draws on
the Policy, draws on the related Spread Account and other distributions pursuant
to Section 9.04 on such Payment Date. Once such Indenture Default or Trigger
Event has been cured or discontinued, the Required Spread Amount shall be
determined as set forth above.
"Servicer Default" means an Event of Servicer Default under the Trust
Agreement.
"State" means any one of the 50 states of the United States or the
District of Columbia.
"Successor Servicer" shall have the meaning specified in Section
3.07(e).
"Termination Date" means the latest of (i) the expiration of the Policy
and the return of the Policy to the Insurer for cancellation, (ii) the date on
which the Insurer shall have received payment and performance of all amounts and
obligations which the Issuer may owe to or on behalf of the Insurer under this
Indenture and (iii) the date on which the Indenture Trustee shall have received
payment and performance of all amounts and obligations which the Issuer may owe
to or on behalf of the Indenture Trustee for the benefit of the Noteholders
under this Indenture or the Notes.
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"Trust Agreement" means the Trust and Servicing Agreement, dated as of
the date hereof, between the Seller, the Servicer and the Owner Trustee.
"Trust Indenture Act" or "TIA" means the Trust Indenture Act of 1939,
as amended, as in force on the date hereof, unless otherwise specifically
provided.
"United States" means the United States of America.
SECTION 1.02. 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:
"Commission" means the Securities and Exchange Commission.
"Indenture Securities" means the Notes.
"Indenture Security Holder" means a Noteholder.
"Indenture to be Qualified" means this Indenture.
"Indenture Trustee" or "Institutional Trustee" means the Indenture
Trustee.
"Obligor" on the indenture securities means the Issuer and any other
obligor on the indenture securities.
All other TIA terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by Commission rule have
the meaning assigned to them by such definitions.
SECTION 1.03. Rules of Construction. Unless the context otherwise
requires:
(i) a term has the meaning assigned to it;
(ii) an accounting term not otherwise defined has the meaning
assigned to it in accordance with generally accepted accounting
principles as in effect from time to time;
(iii) "or" is not exclusive;
(iv) "including" means including without limitation;
(v) words in the singular include the plural and words in the
plural include the singular;
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(vi) any agreement, instrument or statute defined or referred
to herein or in any instrument or certificate delivered in connection
herewith means such agreement, instrument or statute as from time to
time amended, modified or supplemented and includes (in the case of
agreements or instruments) references to all attachments thereto and
instruments incorporated therein; references to a Person are also to
its permitted successors and assigns; and
(vii) the words "hereof," "herein" and "hereunder" and words
of similar import when used in this Indenture shall refer to this
Indenture as a whole and not to any particular provision of this
Indenture; Section, subsection and Schedule references contained in
this Indenture are references to Sections, subsections and Schedules in
or to this Indenture unless otherwise specified.
ARTICLE II
THE NOTES
SECTION 2.01. Form. The Class A-1 Notes, Class A-2 Notes, Class A-3
Notes, Class A-4 Notes and Class B Notes, in each case together with the
Indenture Trustee's certificate of authentication, shall be in substantially the
forms set forth as Exhibits A-1, A-2, A-3, A-4 and B to this Indenture 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 of the Notes. 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.
Each Note shall be dated the date of its authentication. The terms of
the Notes set forth in the exhibits hereto are part of the terms of this
Indenture.
SECTION 2.02. Execution, Authentication and Delivery. The Notes shall
be executed on behalf of the Issuer by the Owner Trustee, as provided in the
Trust Agreement. The signature of any such Authorized Officer on the Notes may
be manual or facsimile. 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.
The Indenture Trustee shall, upon receipt of an Issuer Order,
authenticate and deliver for original issue Notes in the amount of the Initial
Class A-1 Note Balance, the Initial Class A-2 Note Balance, the Initial Class
A-3 Note Balance, the Initial Class A-4 Note Balance and the Initial Class B
Note Balance. The aggregate principal amount of the Notes outstanding at any
time may not exceed such respective amounts, except as otherwise provided in
Section 2.05. Each Note shall be
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dated the date of its authentication. The Notes shall be issuable as registered
Notes in the minimum denomination of $1,000 and in integral multiples of $1,000
in excess thereof, except that one Note of each Class may be issued in a
different denomination.
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 in the
forms of Notes attached as exhibits to this Indenture 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 2.03. Temporary Notes. 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, 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 such
Notes may determine, as evidenced by their execution of such Notes.
If temporary Notes are issued, the Issuer will 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 3.02, without charge to the Holder. 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 tenor and 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 2.04. Registration; Registration of Transfer and Exchange. 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 shall be "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, the Issuer will 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, and the Indenture Trustee shall
have the right to inspect the Note Register at all reasonable times and to
obtain copies thereof, and 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.
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Upon surrender for registration of transfer of any Note at the office
or agency of the Issuer to be maintained as provided in Section 3.02, 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 denominations, of a like aggregate principal amount.
At the option of the Holder, 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, the Issuer shall execute,
and the Indenture Trustee shall authenticate and the Noteholder shall obtain
from the Indenture Trustee, the Notes which the Noteholder making the exchange
is entitled to receive.
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.
Every Note presented or surrendered for registration of transfer or
exchange shall be duly endorsed by, or be accompanied by a written instrument of
transfer in form satisfactory to the Indenture Trustee duly executed by, the
Holder thereof or such Holder's attorney duly authorized in writing, with such
signature guaranteed by a commercial bank or trust company located, or having a
correspondent located, in the city of New York or the city in which the
Corporate Trust Office is located, or by a member firm of a national securities
exchange, and such other documents as the Indenture Trustee may require.
No service charge shall be made to a Holder for any registration of
transfer or exchange of Notes, but the Issuer or the Indenture Trustee 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 2.03 or 11.06 not
involving any transfer.
The preceding provisions of this Section 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 15
days preceding the due date for any payment with respect to the Note.
SECTION 2.05. Mutilated, Destroyed, Lost or Stolen Notes. If (i) any
mutilated Note is surrendered to the Indenture Trustee, 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 and the Insurer
(unless an Insurer Default shall have occurred and be continuing) such security
or indemnity as may be required by them to hold the Issuer, the Indenture
Trustee and the Insurer 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 bona fide purchaser, the Issuer shall execute and upon its request the
Indenture Trustee shall authenticate and deliver, in exchange for or in lieu of
any such mutilated,
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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 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 Redemption 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 bona fide purchaser of the original
Note in lieu of which such replacement Note was issued presents for payment such
original Note, the Issuer, the Insurer 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 bona fide 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, the Insurer or the Indenture Trustee in
connection therewith.
Upon the issuance of any replacement Note under this Section, the
Issuer or the Indenture Trustee may require the payment by the Holder 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 or the Note Registrar) connected
therewith.
Every replacement Note issued pursuant to this Section 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.
The provisions of this Section 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. In the case of the
registration of transfer of any Note, the Issuer, the Indenture Trustee, the
Insurer and any of their respective agents 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 Insurer, the Indenture Trustee nor any of
their respective agents shall be affected by notice to the contrary.
SECTION 2.06. Intentionally Blank.
SECTION 2.07. Payment of Principal and Interest; Defaulted Interest.
(a) Each Class of Notes shall accrue interest as provided in the
Indenture at the related interest rate for such Class, and such interest shall
be payable on each Payment Date as specified therein, subject to Section 3.01.
Interest accrued on any Note but not paid on any Payment Date will be due on the
immediately succeeding Payment Date, together with, to the extent permitted by
applicable law, interest on such shortfall at the related interest rate. Any
installment of interest or
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principal, if any, payable on any Note which 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, by check mailed first-class, postage prepaid to such Person's
address as it appears on the Note Register on such Record Date, except that,
unless Definitive Notes have been issued pursuant to Section 2.11, 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 will 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, a Redemption Date or on the related
Final Maturity Date, as the case may be (and except for the Redemption Price for
any Note called for redemption pursuant to Section 12.01), which shall be
payable as provided below. The funds represented by any such checks returned
undelivered shall be held in accordance with Section 3.03.
(b) The principal of each Note shall be payable on each Payment Date to
the extent provided in the form of the related Note set forth as an Exhibit
hereto. Notwithstanding the foregoing, the entire unpaid principal amount of the
Notes of a Class of Notes shall be due and payable, if not previously paid, on
the earlier of:
(i) the Final Maturity Date of such Class;
(ii) the Redemption Date;
(iii) if an Event of Default shall have occurred and be
continuing, so long as an Insurer Default shall not have occurred and
be continuing, the date on which the Insurer shall have declared the
Notes to be immediately due and payable in the manner provided in
Section 5.02; or
(iv) if an Event of Default shall have occurred and be
continuing and an Insurer Default has occurred and is continuing, the
date on which the Noteholders representing not less than 66 2/3% of the
Note Balances have declared the Notes to be immediately due and payable
in the manner provided in Section 5.02.
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 will be paid. Such
notice shall be mailed within five Business Days of such Payment Date (or, in
the case of Notes registered in the name of Cede & Co., as nominee of DTC, such
notice shall be provided within one Business Day of such Payment Date) or
receipt of notice of termination of the Trust pursuant to Section ________ of
the Trust Agreement and shall specify that such final installment will 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 redemptions of Notes shall be mailed to
Noteholders as provided in Section 12.02. In addition, the Administrator
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shall notify the Insurer and the Rating Agencies upon the final payment of
interest and principal of each Class of Notes, and upon the termination of the
Trust, in each case pursuant to the Administration Agreement.
SECTION 2.08. Cancellation. All Notes surrendered for payment,
registration of transfer, exchange or redemption 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, 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; provided that such Issuer Order is timely
and the Notes have not been previously disposed of by the Indenture Trustee.
SECTION 2.09. Book-Entry Notes. The Notes, upon original issuance, will
be issued in the form of a typewritten Note or Notes representing the Book-Entry
Notes, to be delivered to DTC, the initial Depository, by, or on behalf of, the
Issuer (except for any fractional units which cannot be accepted by DTC). Such
Notes shall initially be registered on the Note Register in the name of Cede &
Co., the nominee of the initial Clearing Agency, and no Note Owner will receive
a Definitive Note representing such Note Owner's interest in such Note, except
as provided in Section 2.11. Unless and until definitive, fully registered Notes
(the "DEFINITIVE NOTES") have been issued to Note Owners pursuant to Section
2.11:
(i) the provisions of this Section 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
Notes and the giving of instructions or directions hereunder) as the
sole holder of the Notes, and shall have no obligation to the Note
Owners;
(iii) to the extent that the provisions of this Section
conflict with any other provisions of this Indenture, the provisions of
this Section 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 Depository Agreement,
unless and until Definitive Notes are issued pursuant to Section 2.11,
the Clearing Agency will make book-entry transfers among the Clearing
Agency Participants and receive and transmit payments of principal of
and interest on the Notes to such Clearing Agency Participants; and
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(v) whenever this Indenture requires or permits actions to be
taken based upon instructions or directions of Noteholders evidencing a
specified percentage of the Note Balances, 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 in the Notes and has delivered
such instructions to the Indenture Trustee.
SECTION 2.10. Notices to Clearing Agency. Whenever a notice or other
communication to the Noteholders is required under this Indenture, unless and
until Definitive Notes shall have been issued to Note Owners pursuant to Section
2.11, the Indenture Trustee shall give all such notices and communications
specified herein to be given to Noteholders to the Clearing Agency, and shall
have no obligation to the Note Owners.
SECTION 2.11. Definitive 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 as described in the Depository
Agreement, and the Administrator or the Indenture Trustee is unable to locate a
qualified successor, or (ii) after the occurrence of an Event of Default or a
Servicer Default, Note Owners representing in the aggregate more than 50% of the
Note Balances of all Classes of Notes advise the Indenture Trustee through the
Clearing Agency Participants in writing that the continuation of a book-entry
system through the Clearing Agency is no longer in the best interests of the
related Note Owners, then the Indenture Trustee shall notify all Note Owners,
through the Clearing Agency, of the availability of Definitive Notes to Note
Owners requesting the same. Upon surrender to the Indenture Trustee of the Note
or Notes evidencing the Book Entry Notes by the Clearing Agency, accompanied by
registration instructions from the Clearing Agency, the Issuer shall execute and
the Indenture Trustee shall authenticate the Definitive Notes and deliver such
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 of a Class, the Indenture Trustee shall recognize the Holders
of the Definitive Notes as Noteholders hereunder.
The Indenture Trustee shall not be liable if the Indenture Trustee or
the Administrator is unable to locate a qualified successor Clearing Agency. 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.
SECTION 2.12. Release of Pledged Assets. Subject to Section 13.01 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 Sections 314(c) and 314(d)(l) of the TIA or an
Opinion of Counsel in lieu of such Independent Certificates to the effect that
the TIA does not require any such Independent Certificates.
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SECTION 2.13. Tax Treatment. The Issuer has entered into this
Indenture, and the Notes will be issued, with the intention that, for federal,
state and local income, single business and franchise tax purposes, the Notes
will qualify as indebtedness of the Issuer secured by the Pledged Assets. The
Issuer, by entering into this Indenture, and each Noteholder, by its acceptance
of its 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, single business and franchise tax purposes as indebtedness of the
Issuer.
SECTION 2.14. ERISA. Each purchaser or transferee of a Note that is a
Benefit Plan shall be deemed to have represented that the relevant conditions
for exemptive relief under Prohibited Transaction Class Exemption ("PTCE")
84-14, PTCE 90-1, PTCE 91-38, PTCE 95-60 or PTCE 96-23 or other applicable
exemption providing substantially similar relief have been satisfied.
ARTICLE III
COVENANTS
SECTION 3.01. Payment of Principal and Interest. The Issuer will duly
and punctually pay Monthly Interest and Monthly Principal on the Notes in
accordance with the terms of the Notes and this Indenture. Without limiting the
foregoing, subject to Section 9.04(a), the Issuer will cause to be distributed
the amount of Available Funds on a Payment Date. The Issuer will cause the
deposits received on Receivables to be deposited into the Collection Account
pursuant to the Trust Agreement for the benefit of the Noteholders. 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 3.02. Maintenance of Office or Agency. The Issuer will or will
cause the Administrator or the Indenture Trustee to maintain in 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 will 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 3.03. Money for Payments to be Held in Trust.
(a) As provided in Section 9.02 of the Trust Agreement, all payments of
amounts due and payable with respect to any Notes that are to be made from
amounts withdrawn from the Collection Account, the Spread Account and the
Payahead Account shall be made on behalf of the Issuer by the
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Indenture Trustee or by another Paying Agent, and no amounts so withdrawn from
the Collection Account, the Spread Account and the Payahead Account for payments
of Notes shall be paid over to the Issuer except as provided in this Section.
The Notes shall be non-recourse obligations of the Issuer and shall be
limited in right of payment to amounts available from the Pledged Assets and the
Policy as provided in this Indenture and the Issuer shall not otherwise be
liable for payments on the Notes. No Person shall be personally liable for any
amounts payable under the Notes. If any other provision of this Indenture
conflicts or is deemed to conflict with the provisions of this paragraph, the
provisions of this paragraph shall control.
The Issuer will cause each Paying Agent other than the Indenture
Trustee to execute and deliver to the Indenture Trustee and the Insurer an
instrument in which such Paying Agent shall agree with the Indenture Trustee
(and if the Indenture Trustee acts as Paying Agent, it hereby so agrees),
subject to the provisions of this Section, that such Paying Agent will:
(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) 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 Paying Agent;
(iv) immediately resign as 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 Paying Agent at the time of its appointment; and
(v) comply with all requirements of the Code 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.
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 Paying Agent to pay to the Indenture Trustee all sums held in
trust by such 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 Paying Agent; and
upon such payment by any Paying Agent to the Indenture Trustee, such Paying
Agent shall be released from all further liability with respect to such money.
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Subject to applicable laws with respect to escheat of funds, any money
held by the Indenture Trustee or any Paying Agent in trust for the payment of
any amount due with respect to any Note and remaining unclaimed for two years
after such amount has become due and payable shall be discharged from such trust
and be paid to the Issuer upon receipt of an Issuer Request; and the Holder of
such Note shall thereafter, as an unsecured general creditor, look only to the
Issuer for payment thereof, and all liability of the Indenture Trustee or such
Paying Agent with respect to such trust money shall thereupon cease; provided,
however, that the Indenture Trustee or such 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 30 days from the date of
such publication, any unclaimed balance of such money then remaining will be
repaid to or for the account of the Issuer. The Indenture Trustee may also adopt
and employ, at the expense of the Issuer, any other reasonable means of
notification of such repayment (including, but not limited to, mailing notice of
such repayment to Holders 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 Paying Agent, at the last address of record for each such
Holder).
SECTION 3.04. Existence. The Issuer will 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, in which
case the Issuer will keep in full effect its existence, rights and franchises
under the laws of such other jurisdiction) and will 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, and the Pledged Assets.
SECTION 3.05. Protection of Trust Estate. The Issuer intends the
security interest Granted pursuant to this Indenture in favor of the Indenture
Trustee on behalf of the Noteholders to be prior to all other liens in respect
of the Pledged Assets, and the Issuer shall take all actions necessary to obtain
and maintain, for the benefit of the Indenture Trustee on behalf of the
Noteholders, a first lien on and a first priority, perfected security interest
in the Pledged Assets. The Issuer will 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,
all as prepared by the Servicer and delivered to the Issuer, and will take such
other action necessary or advisable to:
(i) Grant more effectively all or any portion of the Pledged
Assets;
(ii) maintain or preserve the lien and security interest (and
the priority thereof) created by this Indenture or carry out more
effectively the purposes hereof;
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(iii) perfect, publish notice of or protect the validity of
any Grant made or to be made by this Indenture;
(iv) enforce any of the Pledged Assets;
(v) preserve and defend title to the Pledged Assets and the
rights of the Indenture Trustee and the Noteholders in such Pledged
Assets against the claims of all persons and parties; or
(vi) pay all taxes or assessments levied or assessed upon the
Pledged Assets when due.
The Issuer hereby designates the Indenture Trustee its agent and
attorney-in-fact to execute all financing statements, continuation statements or
other instruments required to be executed pursuant to this Section.
SECTION 3.06. Opinions as to Pledged Assets.
(a) Promptly after the execution and delivery of this Indenture, the
Issuer shall furnish to the Indenture Trustee and the Insurer an Opinion of
Counsel to the effect that, in the opinion of such counsel, either (i) all
financing statements and continuation statements have been executed and filed
that are necessary to create and continue the Indenture Trustee's first priority
perfected security interest in the Pledged Assets (subject to the rights of the
Insurer under the Insurance Agreement) for the benefit of the Noteholders, and
reciting the details of such filings or referring to prior Opinions of Counsel
in which such details are given, or (ii) no such action shall be necessary to
perfect such security interest.
(b) Within 90 days after the beginning of each calendar year beginning
with the first calendar year beginning more than three months after the Cutoff
Date, the Issuer shall furnish to the Indenture Trustee and the Insurer an
Opinion of Counsel, dated as of a date during such 90-day period, to the effect
that, in the opinion of such counsel, either (i) all financing statements and
continuation statements have been executed and filed that are necessary to
create and continue the Indenture Trustee's first priority perfected security
interest in the Pledged Assets (subject to the rights of the Insurer under the
Insurance Agreement) for the benefit of the Noteholders, and reciting the
details of such filings or referring to prior Opinions of Counsel in which such
details are given, or (ii) no such action shall be necessary to perfect such
security interest.
SECTION 3.07. Performance of Obligations; Servicing of Receivables.
(a) The Issuer will not take any action and will 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 Pledged Assets or that would result in the
amendment, hypothecation, subordination, termination or discharge of, or impair
the validity
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or effectiveness of, any such instrument or agreement, except as expressly
provided in the Basic Documents or such other instrument or agreement.
(b) The Issuer may contract with or otherwise obtain the assistance of
other Persons (including, without limitation, the Administrator under the
Administration Agreement) to assist it in performing its duties and obligations
under this Indenture, and any performance of such duties by a Person identified
to the Indenture Trustee and the Insurer in an Officer's Certificate shall be
deemed to be action taken by the Issuer. The Indenture Trustee shall not be
responsible for the action or inaction of the Servicer or the Administrator.
Initially, the Issuer has contracted with the Servicer as the Administrator to
assist the Issuer in performing its duties under this Indenture.
(c) The Issuer will 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 Pledged Assets,
including but not limited to filing or causing to be filed all UCC financing
statements and continuation statements required to be filed by the terms of this
Indenture and the Trust 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,
the Insurer (unless an Insurer Default has occurred and is continuing) and the
Holders of at least a majority of the Note Balances of the Notes.
(d) If the Issuer shall have actual knowledge of the occurrence of a
Servicer Default, the Issuer shall promptly notify the Indenture Trustee, the
Insurer and each Rating Agency thereof, and shall specify in such notice the
action, if any, the Issuer is taking with respect of such default. If a Servicer
Default shall arise from the failure of the Servicer to perform any of its
duties or obligations under the Trust Agreement with respect to the Receivables,
the Issuer shall take all reasonable steps available to it to remedy such
failure.
(e) Upon the resignation or termination of the Servicer pursuant to
Sections 13.05 or 14.01 of the Trust Agreement, the Indenture Trustee shall
appoint a successor servicer ("Successor Servicer") acceptable to the Insurer.
If the Indenture Trustee shall succeed to the Servicer's duties as servicer of
the Receivables as provided in 14.02 of the Trust Agreement, it shall do so in
its individual capacity and not in its capacity as Indenture Trustee and,
accordingly, the provisions of Article Six 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 Trust Agreement, the Indenture Trustee shall
be entitled to appoint as Servicer one of its Affiliates, provided that it shall
not be liable for the actions and omissions of any such Affiliate in such
capacity as successor Servicer appointed with due care.
(f) Upon any termination of the Servicer's rights and powers pursuant
to the Trust Agreement, the Issuer shall promptly notify the Indenture Trustee
and the Insurer. As soon as a Successor Servicer is appointed, the Issuer shall
notify the Indenture Trustee and the Insurer of such appointment, specifying in
such notice the name and address of such Successor Servicer.
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(g) The Issuer agrees that it will not waive timely performance or
observance by the Servicer or the Seller of their respective duties under the
Basic Documents: (i) without the prior consent of the Insurer (unless an Insurer
Default shall have occurred and be continuing) or (ii) if the effect thereof
would adversely affect the Noteholders.
SECTION 3.08. Negative Covenants. Until the Termination Date, the
Issuer shall not:
(i) except as expressly permitted by the Basic Documents,
sell, transfer, exchange or otherwise dispose of any of the properties
or assets of the Issuer, including those included in the Pledged
Assets, unless directed to do so by the Indenture Trustee with the
prior written consent of the Insurer (unless an Insurer Default has
occurred and is continuing);
(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
applicable state law) or assert any claim against any present or former
Noteholder by reason of the payment of the taxes levied or assessed
upon any part of the Pledged Assets;
(iii) (A) permit the validity or effectiveness of this
Indenture to be impaired, or permit the lien created by 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 Pledged Assets 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 a Financed
Vehicle and arising solely as a result of an action or omission of the
related Obligor), (C) permit the lien created by 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 Pledged Assets;
or
(iv) dissolve or liquidate in whole or in part.
SECTION 3.09. Annual Statement as to Compliance. The Issuer will
deliver to the Indenture Trustee and the Insurer, on or before April 30 of each
year, beginning on the first April 30 that is at least six months after the
Closing Date, an Officer's Certificate dated as of December 31 of the preceding
year 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 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 with all conditions and
covenants under this Indenture throughout such
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year, or, if there has been a default in the compliance of 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 Conditions.
(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 or any State and shall
expressly assume, by an indenture supplemental hereto, executed and
delivered to the Indenture Trustee and the Insurer, in form and
substance satisfactory to the Indenture Trustee and the Insurer (so
long as no Insurer Default has occurred and is continuing), 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 and each other Basic Document on the part of the Issuer to be
performed or observed, all as provided herein;
(ii) immediately after giving effect to such consolidation or
merger, 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 consolidation or merger;
(iv) the Issuer shall have received an Opinion of Counsel
which shall be delivered to and shall be satisfactory to the Indenture
Trustee and the Insurer to the effect that such consolidation or merger
will not have any material adverse tax consequence to the Trust, the
Insurer, any Noteholder or any Certificateholder;
(v) any action as is necessary to maintain the lien and
security interest created by this Indenture shall have been taken;
(vi) the Issuer shall have delivered to the Indenture Trustee
and the Insurer an Officer's Certificate and an Opinion of Counsel
(which shall describe the actions taken as required by clause (v) above
or that no such actions will be taken) 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 compiled with (including any
filings required by the Exchange Act); and
(vii) so long as no Insurer Default shall have occurred and be
continuing, the Issuer shall have given the Insurer written notice of
such consolidation or merger at least 20 Business Days prior to the
consummation of such action and shall have received the prior written
approval of the Insurer of such consolidation or merger and the Issuer
or the Person (if other than the Issuer) formed by or surviving such
consolidation or merger has a net worth, immediately after such
consolidation or merger, that is (A) greater than zero and (B) not less
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than the net worth of the Issuer immediately prior to giving effect to
such consolidation or merger.
(b) The Issuer shall not convey or transfer all or substantially all of
its properties or assets, including those included in the Pledged Assets, to any
Person (except as expressly permitted by the Basic Documents), unless:
(i) the Person that acquires by conveyance or transfer the
properties and assets of the Issuer shall (A) be a United States
citizen or a Person organized and existing under the laws of the United
States or any State, (B) expressly assume, by an indenture supplemental
hereto, executed and delivered to the Indenture Trustee and the
Insurer, in form and substance satisfactory to the Indenture Trustee
and the Insurer (so long as no Insurer Default has occurred and is
continuing), 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 and each other Basic Document
on the part of the Issuer to be performed or observed, all as provided
herein, (C) expressly agree 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 agree 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 agree by means of such supplemental
indenture that such Person (or if a group of Persons, then one
specified Person) shall make all filings 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 conveyance or
transference, 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 conveyance or transference;
(iv) the Issuer shall have received an Opinion of Counsel
which shall be delivered to and shall be satisfactory to the Indenture
Trustee and the Insurer (so long as no Insurer Default shall have
occurred and be continuing) to the effect that such conveyance or
transference will not have any material adverse tax consequence to the
Trust, the Insurer, any Noteholder or any Certificateholder;
(v) any action as is necessary to maintain the lien and
security interest created by this Indenture shall have been taken;
(vi) the Issuer shall have delivered to the Indenture Trustee
and the Insurer an Officer's Certificate and an Opinion of Counsel
(which shall describe the actions taken as required by clause (v) above
or that no such actions will be taken) each stating that such
conveyance or transference and such supplemental indenture comply with
this Article Three
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and that all conditions precedent herein provided for relating to such
transaction have been complied with (including any filings required by
the Exchange Act); and
(vii) so long as no Insurer Default shall have occurred and be
continuing, the Issuer shall have given the Insurer written notice of
such conveyance or transfer of properties or assets at least 20
Business Days prior to the consummation of such action and shall have
received the prior written approval of the Insurer of such conveyance
or transfer and the Person acquiring by conveyance or transference the
properties or assets of the Issuer has a net worth, immediately after
such conveyance or transfer, that is (A) greater than zero and (B) not
less than the net worth of the Issuer immediately prior to giving
effect to such conveyance or transfer.
SECTION 3.11. Successor 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 or substantially all the
assets or properties of the Issuer pursuant to Section 3.10(b), the Issuer will
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 and the Insurer
stating that the Issuer is to be so released.
SECTION 3.12. No Other Business. The Issuer shall not engage in (i) any
business other than financing, purchasing, owning, selling and managing the
Receivables in the manner contemplated by this Indenture and the other Basic
Documents and activities incidental thereto or (ii) any other business or
activities as contemplated by Section 1.03 of the Trust Agreement.
SECTION 3.13. Servicer's Obligations. The Issuer shall cause the
Servicer to comply with the Servicer's obligations under the Trust Agreement.
SECTION 3.14. Restricted Payments. Except as expressly permitted by the
Basic Documents, the Issuer shall not, directly or indirectly, (i) pay any
dividend or 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, (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, (A) distributions to the Servicer, the
Indenture Trustee, the Owner Trustee, the Insurer, the Noteholders and the
Certificateholders as contemplated by, and to the extent funds are available for
such purpose under, the Trust Agreement and (B) payments to the Indenture
Trustee and the Owner Trustee pursuant to Section 1(a)(ii) of the Administration
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Agreement. The Issuer will not, directly or indirectly, make payments to or
distributions from the Collection Account except in accordance with this
Indenture and the other Basic Documents.
SECTION 3.15. Notice of Events of Default. The Issuer agrees to give
the Indenture Trustee, the Insurer and each Rating Agency prompt written notice
of each Event of Default hereunder and each default on the part of the Servicer
or the Seller of their respective obligations under the Trust Agreement.
SECTION 3.16. Further Instruments and Acts. Upon request of the
Indenture Trustee or the Insurer, the Issuer will 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 3.17. Compliance with Laws. The Issuer shall comply with the
requirements of all applicable laws, the non-compliance with which would,
individually or in the aggregate, materially and adversely affect the ability of
the Issuer to perform its obligations under the Notes, this Indenture or any
other Basic Document.
SECTION 3.18. Amendments of Trust Agreement. The Issuer shall not agree
to any amendment to Section 17.01 of the Trust Agreement to eliminate the
requirements thereunder that the Noteholders consent to amendments thereto as
provided therein.
ARTICLE IV
SATISFACTION AND DISCHARGE
SECTION 4.01. 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 3.03, 3.04, 3.05, 3.07,
3.08, 3.10, 3.11, 3.12, 3.17 and 3.18, (v) the rights, obligations and
immunities of the Indenture Trustee hereunder (including the rights of the
Indenture Trustee under Section 6.07 and the obligations of the Indenture
Trustee under Section 4.02), (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 (vii) the obligation of the Indenture Trustee
to make claims under the Policy, which shall survive the Final Maturity Date of
the Class B Notes and extend through any preference period applicable with
respect to the Notes or any payments made in respect of the Notes, 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 2.05
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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 3.03) have been
delivered to the Indenture Trustee for cancellation and the Policy has expired
and been returned to the Insurer for cancellation; or
(2) all Notes not theretofore delivered to the Indenture
Trustee for cancellation
(i) have become due and payable,
(ii) will become due and payable at the Final Maturity
Date of the Class B Notes within one year, or
(iii) are to be called for redemption within one year
under arrangements satisfactory to the Indenture Trustee for the giving
of notice of redemption by the Indenture Trustee in the name, and at
the expense, of the Issuer,
and the Issuer, in the case of clauses (i), (ii) or (iii) above, has irrevocably
deposited or caused to be irrevocably deposited with the Indenture Trustee cash
or Eligible Investments for such purpose, in an amount sufficient to pay and
discharge the entire indebtedness on such Notes not theretofore delivered to the
Indenture Trustee for cancellation when due to the Final Maturity Date of the
Class A-4 Notes and the Class B Notes or Redemption Date (if Notes shall have
been called for redemption pursuant to Section 12.01), as the case may be;
(B) the Issuer has paid or performed or caused to be paid or performed
all amounts and obligations which the Issuer may owe to or on behalf of (1) the
Indenture Trustee for the benefit of the Noteholders under this Indenture or the
Notes and (2) the Insurer under this Indenture and the Basic Documents; and
(C) the Issuer has delivered to the Indenture Trustee and the Insurer
an Officer's Certificate, an Opinion of Counsel and (if required by the TIA, the
Indenture Trustee) an Independent Certificate from a firm of certified public
accountants, each meeting the applicable requirements of Section 13.01(a) and,
subject to Section 13.02, each stating that all conditions precedent herein
provided for relating to the satisfaction and discharge of this Indenture have
been complied with and the Rating Agency Condition has been satisfied.
SECTION 4.02. Application of Trust Money. All monies deposited with the
Indenture Trustee pursuant to Section 4.01 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 Paying Agent, as the Indenture Trustee
may determine, to the Holders 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 Trust Agreement or required by law.
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SECTION 4.03. Repayment of Monies Held by Paying Agent. In connection
with the satisfaction and discharge of this Indenture with respect to the Notes,
all monies then held by any 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 3.03 and thereupon such Paying Agent shall be released from all
further liability with respect to such monies.
ARTICLE V
EVENTS OF DEFAULT; REMEDIES
SECTION 5.01. Events of Default. "Event of Default," wherever used
herein, means 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):
(a) default in the payment of any interest on any Note when the same
becomes due and payable and such default shall continue for a period of five
days after notice thereof is given to the Issuer, the Insurer and the Servicer;
(b) default in the payment of any principal due and payable on a Class
of Notes on the Final Maturity Date for such Class of Notes and such default
shall continue for a period of five days after notice thereof is given to the
Issuer, the Insurer and the Servicer;
(c) (i) 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 specifically dealt with), and such default shall continue or not be
cured for a period of 90 days after notice thereof shall have been given, by
registered or certified mail, to the Issuer by the Indenture Trustee or the
Insurer or to the Issuer and the Indenture Trustee by the Holders of at least
25% of the Note Balances, acting together as a single class or (ii) any
representation or warranty made by the Issuer in this Indenture or in any
certificate delivered pursuant hereto or in connection herewith having been
incorrect in a material respect as of the time made, and such breach not having
been cured within 30 days after notice thereof is given to the Issuer by the
Indenture Trustee or the Insurer, or to the Issuer and the Indenture Trustee by
the holders of at least 25% of the Note Balances of the Notes acting together as
a single class;
(d) 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 Pledged Assets 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 Pledged
Assets, or ordering the winding-up or liquidation of
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the Issuer's affairs, and such decree or order shall remain unstayed and in
effect for a period of 60 consecutive days; or
(e) 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 Pledged Assets, 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 action by
the Issuer in furtherance of any of the foregoing; provided, however that so
long as no Insurer Default has occurred and is continuing, neither the Indenture
Trustee nor the Noteholders may declare an Event of Default under the Indenture.
So long as an Insurer Default has not occurred and is continuing, an Event of
Default shall occur only upon delivery by the Insurer to the Indenture Trustee
of notice of the occurrence of an Event of Default. The failure to pay principal
on a class of Notes shall not result in the occurrence of an Event of Default
until the Final Maturity Date for such class of Notes.
The Issuer shall deliver to the Indenture Trustee and the Insurer,
within five days after obtaining knowledge of the occurrence thereof, written
notice in the form of an Officer's Certificate of any event which with the
giving of notice or the lapse of time would become an Event of Default, its
status and what action the Issuer is taking or proposes to take with respect
thereto.
SECTION 5.02. Rights Upon Event of Default. (a) So long as no Insurer
Default has occurred and is continuing, if an Event of Default shall have
occurred and is continuing, then the Insurer shall have the right, but not the
obligation, upon prior written notice to each Rating Agency, to declare by
written notice to the Issuer, the Servicer and the Indenture Trustee that the
Notes become immediately due and payable, and upon any such declaration the
unpaid principal amount of the Notes, together with accrued and unpaid interest
thereon, shall become immediately due and payable. The Indenture Trustee will
have no discretion with respect to the acceleration of the Notes under the
foregoing circumstances. In the event of any such acceleration of the Notes, the
Indenture Trustee shall continue to make claims under the Policy with respect to
the Notes.
(b) If an Insurer Default shall have occurred and be continuing and an
Event of Default specified in Section 5.01(a), (b), (c), (d) or (e) shall have
occurred and be continuing, the Indenture Trustee shall, if so requested in
writing by the Noteholders representing at least 66 2/3% of the aggregate Note
Balances of the Notes, upon prior written notice to each Rating Agency, declare
that the Notes become immediately due and payable, and upon any such declaration
the unpaid principal amount of the Notes, together with accrued and unpaid
interest thereon, shall become immediately due and payable.
(c) Following any Event of Default, the Insurer may elect to pay all or
any portion of the outstanding amount of the Notes, plus accrued interest
thereon to the date of payment.
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SECTION 5.03. Collection of Indebtedness and Suits for Enforcement by
Indenture Trustee. (a) The Issuer covenants that, if the Notes are accelerated
following the occurrence of an Event of Default, the Issuer will, 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 interest rates and in addition
thereto such further amount as shall be sufficient to cover the costs and
expenses of collection, including the reasonable compensation, expenses and
disbursements of the Indenture Trustee and its agents and counsel.
(b) If an Event of Default shall have occurred and be continuing, the
Indenture Trustee shall (i) if no Insurer Default has occurred and is
continuing, at the direction of the Insurer, or (ii) if an Insurer Default shall
have occurred and be continuing, at the direction of the Noteholders
representing at least 66 2/3% of the Note Balances of the Notes, as more
particularly provided in Section 5.04, proceed to protect and enforce 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.
(c) 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 Pledged Assets, 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, 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 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;
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(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 distribute 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 by the Indenture Trustee and each predecessor Indenture
Trustee except as a result of negligence or bad faith.
(d) 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 Holder thereof 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.
(e) 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 and attorneys, shall be for the
ratable benefit of the Noteholders.
(f) In any Proceedings brought by the Indenture Trustee (including any
Proceedings involving the interpretation of any provision of this Indenture),
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 5.04. Remedies. (a) If (i) an Event of Default shall have
occurred and be continuing, the Indenture Trustee shall (subject to Section
5.04(b) below and Section 5.05), if no Insurer Default has occurred and is
continuing, at the direction of the Insurer, or (ii) if an Event of
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Default specified in Section 5.01(a), (b), (c), (d) or (e) shall have occurred
and be continuing, the Indenture Trustee shall (subject to Section 5.04(b) below
and Section 5.05), if an Insurer Default has occurred and is continuing, at the
direction of the Noteholders representing at least 66 2/3% of the Note Balances
of the Notes, take one or more of the following actions as so directed:
(i) institute Proceedings in its own name and as or on behalf
of a 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 Pledged
Assets;
(iii) exercise any remedies of a secured party under the UCC
and any other remedy available to the Indenture Trustee and take any
other appropriate action to protect and enforce the rights and remedies
of the Indenture Trustee on behalf of the Noteholders under this
Indenture or the Notes;
(iv) sell or cause the Servicer to otherwise liquidate the
Pledged Assets or any portion thereof or rights or interests therein,
at one or more public or private sales called and conducted in any
manner permitted by law and deliver the proceeds of such sale or
liquidation to the Indenture Trustee for distribution in accordance
with the terms of this Indenture; and
(v) maintain possession of the Pledged Assets.
(b) Notwithstanding the foregoing,
(i) in the event that the Indenture Trustee is acting at the
direction of the Insurer, so long as an Insurer Default has occurred
and is continuing, if an Event of Default specified in Section 5.01(a),
(b) or (c) shall have occurred and be continuing, the Insurer shall not
have the right to cause the Indenture Trustee or the Servicer to, and
neither the Indenture Trustee nor the Servicer shall, liquidate the
Pledged Assets in whole or in part if the proceeds of such sale or
liquidation would not be sufficient to pay all outstanding principal of
and accrued interest on the Notes; and
(ii) in the event that the Indenture Trustee is acting at the
direction of the Noteholders representing at least 66 2/3% of the Note
Balances of the Notes, the Noteholders shall not have the right to
direct the Indenture Trustee or the Servicer to, and neither the
Indenture Trustee nor the Servicer shall, liquidate the Pledged Assets
in whole or in part unless an Event of Default as specified in Section
5.01(d) or (e) shall have occurred and be continuing and in any case
the Insurer shall have failed to make a payment required under the
Policy in accordance with its terms.
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(c) In determining the sufficiency or insufficiency of the proceeds of
a sale or liquidation of the Pledged Assets to pay all amounts required pursuant
to Section 5.04(b)(i) above, the Indenture Trustee may, but need not, at the
sole expense of the Issuer 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 Pledged
Assets for such purpose.
SECTION 5.05. Optional Preservation of the Receivables. If the Notes
have been declared to be due and payable under Section 5.02 following an Event
of Default and such declaration and its consequences have not been rescinded and
annulled, the Indenture Trustee shall, absent direction to the contrary from the
Insurer or the Noteholders pursuant to Section 5.04, maintain possession of the
Pledged Assets.
SECTION 5.06. Priorities. (a) If the Notes have been declared to be due
and payable under Section 5.02 following an Indenture Event of Default and such
declaration and its consequences have not been rescinded and annulled, any money
collected by the Indenture Trustee with respect to the Pledged Assets, the Notes
or the Certificates pursuant to this Article or otherwise and any money that may
then be held or thereafter received by the Indenture Trustee with respect to the
Pledged Assets, the Notes or the Certificates (excluding any payments made under
the Policy), shall be applied pursuant to Section 9.04(a).
(b) The Indenture Trustee may fix a record date and payment date for
any payment to Noteholders pursuant to this Section. At least 15 days before
such record date, the Issuer shall mail to each Noteholder and the Indenture
Trustee a notice that states the record date, the payment date and the amount to
be paid.
SECTION 5.07. Limitation of Suits. No Holder of any Note 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:
(i) such Holder has previously given written notice to the
Indenture Trustee of a continuing Event of Default;
(ii) the Holders of not less than 25% of the Note Balances 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;
(iii) such Holder or Holders have offered to the Indenture
Trustee reasonable indemnity against the costs, expenses and
liabilities to be incurred in complying with such request;
(iv) the Indenture Trustee for 60 days after its receipt of
such notice, request and offer of indemnity has failed to institute
such Proceedings;
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(v) no direction inconsistent with such written request has
been given to the Indenture Trustee during such 60-day period by the
Holders of a majority of the Note Balances of the Notes, voting
together as a single class; and
(vi) an Insurer Default shall have occurred and be continuing.
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 Holders 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
representing less than a majority of the Note Balances of the Notes, the
Indenture Trustee in its sole discretion may determine that action, if any,
shall be taken, notwithstanding any other provisions of this Indenture and any
such action shall be binding on all parties.
SECTION 5.08. Unconditional Rights of Noteholders to Receive Principal
and Interest. Notwithstanding any other provisions in this Indenture, the Holder
of any Note shall have the right, which is absolute and unconditional, to
receive payments of Monthly Interest and Monthly Principal on such Note on or
after the respective due dates thereof expressed in such Note or in this
Indenture (or, in the case of redemption, on or after the Redemption Date) and
to institute suit for the enforcement of any such payment, and such right shall
not be impaired without the consent of such Holder.
SECTION 5.09. Restoration of Rights and Remedies. If the Indenture
Trustee, the Insurer 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, the Insurer or to such Noteholder, then and in every such
case the Issuer, the Indenture Trustee, the Insurer 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 5.10. Rights and Remedies Cumulative. No right or remedy herein
conferred upon or reserved to the Indenture Trustee, the Insurer 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.
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SECTION 5.11. Delay or Omission Not a Waiver. No delay or omission of
the Indenture Trustee, the Insurer or any Holder of any Note 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 an acquiescence therein. Every right and remedy given by this Article
Five or by law to the Indenture Trustee, the Insurer or to the Noteholders may
be exercised from time to time, and as often as may be deemed expedient, by the
Indenture Trustee, the Insurer or by the Noteholders, as the case may be.
SECTION 5.12. Control by Noteholders. The Holders of a majority of the
Note Balances of the Notes shall have the right 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:
(i) such direction shall not be in conflict with any rule of
law or with this Indenture;
(ii) any direction to the Indenture Trustee to sell or
liquidate the Pledged Assets shall be subject to the terms of Section
5.04; and
(iii) 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, subject to
Section 6.01, the Indenture Trustee need not take any action that it determines,
in its sole discretion, might involve it in liability or might materially
adversely affect the rights of any Noteholders not consenting to such action.
SECTION 5.13. Waiver of Past Defaults. Prior to the declaration of the
acceleration of the maturity of the Notes as provided in Section 5.02, the
Insurer or the Noteholders representing not less than a majority of the Note
Balances of the Notes with the consent of the Insurer may waive any past Default
or Event of Default and its consequences except a Default (a) in the payment of
or interest on any of the Notes or (b) in respect of a covenant or provision
hereof that cannot be modified or amended without the consent of the Holder of
each Note, as applicable. In the case of any such waiver, the Issuer, the
Indenture Trustee, the Insurer 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.
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SECTION 5.14. Undertaking for Costs. All parties to this Indenture
agree, and each Holder of any Note by such Holder'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 shall not apply to (i) any suit instituted by the
Indenture Trustee, (ii) any suit instituted by any Noteholder, or group of
Noteholders, in each case holding in the aggregate more than 10% of the Note
Balances of the Notes or (iii) 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 (or, in
the case of redemption, on or after the Redemption Date).
SECTION 5.15. Waiver of Stay or Extension Laws. The Issuer covenants
(to the extent that it may lawfully do so) that it will not at any time insist
upon, or plead or in and 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 advantages of any such law, and covenants that
it will 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 5.16. 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 Pledged Assets
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 5.06.
SECTION 5.17. 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 Trust Agreement in accordance with
the terms thereof, and to exercise any and all rights, remedies, powers and
privileges lawfully available to the Issuer under or in connection with the
Trust 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 Trust Agreement.
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(b) If the Indenture Trustee is the Controlling Party and if an Event
of Default has occurred and is continuing, the Indenture Trustee may, and at the
direction (which direction shall be given in writing and may include a
facsimile) of the Holders of 66 2/3% of the Note Balances 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 Trust
Agreement, including the right or power to take any action to compel or secure
performance or observance by the Seller or the Servicer of each of their
obligations to the Issuer thereunder and to give any consent, request, notice,
direction, approval, extension or waiver under the Trust Agreement, and any
right of the Issuer to take such action shall be suspended.
ARTICLE VI
THE INDENTURE TRUSTEE
SECTION 6.01. Duties of Indenture Trustee. (a) If an Event of Default
has occurred and is continuing, and of which the Indenture Trustee shall have
actual knowledge, the Indenture Trustee shall exercise the rights and powers
vested in it by this Indenture and with 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; provided, however, that if the
Indenture Trustee shall assume the duties of the Servicer pursuant to Section
3.07(e), the Indenture Trustee in performing such duties shall use the degree of
care and skill customarily exercised by a prudent institutional servicer with
respect to automobile retail installment sales contracts that it services for
itself or others.
(b) Except during the continuance of an Event of Default of which a
Responsible Officer of the Indenture Trustee shall have actual knowledge or
written notice:
(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 conforming to the
requirements of this Indenture; however, the Indenture Trustee shall
examine the certificates and opinions to determine whether or not they
conform to the requirements of this Indenture and the other Basic
Documents to which the Indenture Trustee is a party; provided, however,
that the Indenture Trustee shall not be responsible for the accuracy or
content of any of the aforementioned documents and the Indenture
Trustee shall have no obligation to verify, re-compute or recalculate
any numerical information provided to it pursuant to the Basic
Documents.
(c) The Indenture Trustee may not be relieved from liability for its
own negligent action, its own negligent failure to act or its own wilful
misconduct, except that:
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(i) this paragraph does not limit the effect of Section
6.01(b);
(ii) the Indenture Trustee shall not be liable for any error
of judgment made in good faith by a Responsible Officer unless it is
proved that the Indenture Trustee was negligent in ascertaining the
pertinent facts; and
(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 5.12.
(d) Every provision of this Indenture that in any way relates to the
Indenture Trustee is subject to paragraphs (a), (b) and (c) of this Section.
(e) The Indenture Trustee shall not be liable for interest on any money
received by it.
(f) 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 Trust Agreement.
(g) 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 repayments
of such funds or adequate indemnity against such risk or liability is not
reasonably assured to it.
(h) 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 and to the provisions of the
TIA.
(i) The Indenture Trustee shall, and hereby agrees that it will (i)
perform all of the obligations and duties required of it under the Trust
Agreement and (ii) hold the Policy in trust, and will hold any proceeds of any
claim on the Policy in trust solely for application as provided in the Trust
Agreement.
(j) Except as otherwise required or permitted by the TIA, nothing
contained herein shall be deemed to authorize the Indenture Trustee to engage in
any business operations or any activities other than those set forth in this
Indenture. Specifically, the Indenture Trustee shall have no authority to engage
in any business operations, acquire any assets other than those specifically
included in the Pledged Assets under this Indenture or otherwise vary the assets
held by the Trust. Similarly, the Indenture Trustee shall have no discretionary
duties other than performing those ministerial acts set forth above necessary to
accomplish the purpose of this Trust as set forth in this Indenture.
(k) The Indenture Trustee shall not be liable in its individual
capacity with respect to any action taken, suffered or omitted to be taken by it
in good faith in accordance with this Indenture or
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at the direction of a majority of the Note Balances of Notes, relating to the
time, method and place of conducting any proceeding for any remedy available to
the Indenture Trustee, or exercising or omitting to exercise any trust or power
conferred upon the Indenture Trustee, under this Indenture.
(l) The Indenture Trustee shall not be required to take notice or be
deemed to have notice or knowledge of any Default or Event of Default unless a
Responsible Officer of the Indenture Trustee shall have received written notice
thereof. In the absence of receipt of such notice, the Indenture Trustee may
conclusively assume that there is no Default or Event of Default.
(m) Subject to the other provisions of this Indenture, the Indenture
Trustee shall have no duty (i) to see to any recording, filing, or depositing of
this Agreement 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, (ii) to see to any insurance, (iii) 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 Pledged Assets, or (iv) to confirm or verify the
contents of any reports or certificates 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.
(n) Anything in this Agreement to the contrary notwithstanding, in no
event shall the Indenture Trustee be liable for special, indirect or
consequential loss or damage of any kind whatsoever (including but not limited
to lost profits), even if the Indenture Trustee has been advised of the
likelihood of such loss or damage regardless of the form of action.
SECTION 6.02. Rights of Indenture Trustee.
(a) Except as otherwise provided in the second succeeding sentence, the
Indenture Trustee may conclusively rely and shall be protected in acting upon or
refraining from acting upon any resolution, certificate, statement, instrument,
opinion, report, notice, request, consent, order, note, direction, demand,
election 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 matter stated in the document. Notwithstanding the
foregoing, the Indenture Trustee, subject to Section 6.01(b)(ii) upon receipt of
all resolutions, certificates, statements, opinions, reports, documents, orders
or other instruments furnished to the Indenture Trustee that shall be
specifically required to be furnished pursuant to any provision of this
Indenture, shall examine them to determine whether they comply as to form to the
requirements of this Indenture.
(b) Before the Indenture Trustee acts or refrains from acting, it may
require an Officer's Certificate (with respect to factual matters) or an Opinion
of Counsel, as applicable. The Indenture Trustee shall not be liable for any
action it takes or omits to take in good faith in reliance on the Officer's
Certificate or Opinion of Counsel.
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(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 any such
agent, attorney, custodian or nominee appointed by the Indenture Trustee with
due care.
(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 the Indenture Trustee's conduct 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 trusts or powers vested in it by this Indenture or to institute, conduct
or defend any litigation hereunder or in relation hereto at the request, order
or direction of any of the Noteholders, pursuant to the provisions of this
Indenture, unless such Noteholders shall have offered to the Indenture Trustee
reasonable security or indemnity against the costs, expenses and liabilities
which may be incurred therein or thereby; nothing contained herein shall,
however, relieve the Indenture Trustee of the obligation, during the continuance
of an Event of Default of which a Responsible Officer of the Indenture Trustee
shall have actual knowledge, to exercise such of the rights and powers vested in
it by this Indenture, 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 such person's own affairs.
(g) The Indenture 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 a majority of
Noteholders; provided, however, that if the payment within a reasonable time to
the Indenture Trustee of the costs, expenses or liabilities likely to be
incurred by it in the making of such investigation is, in the opinion of the
Indenture Trustee, not reasonably assured to the Indenture Trustee by the
security afforded to it by the terms of this Agreement, the Indenture Trustee
may require reasonable indemnity against such cost, expense or liability as a
condition to taking any such action.
(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 willful misconduct,
negligence or bad faith in the performance of such act.
SECTION 6.03. 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.
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Any Paying Agent, Note Registrar, co-registrar or co-paying agent may do the
same with like rights. However, the Indenture Trustee is required to comply with
Sections 6.11 and 6.12.
SECTION 6.04. Indenture Trustee's Disclaimer. The Indenture Trustee
shall not be responsible for and makes no representation as to the validity or
adequacy of this Indenture, the Pledged Assets or the Notes, it shall not be
accountable for the Issuer's use of the proceeds from the Notes, and it shall
not be 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 other
than the Indenture Trustee's certificate of authentication.
SECTION 6.05. Notice of Defaults. If a Default occurs and is continuing
and a Responsible Officer of the Indenture Trustee has actual knowledge or has
received written notice thereof, the Indenture Trustee shall mail to each
Noteholder and the Insurer notice of the Default within 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 redemption of Notes), the Indenture
Trustee may withhold the notice if and so long as a committee of its Responsible
Officers in good faith determines that withholding the notice is in the
interests of Noteholders.
SECTION 6.06. Reports by Indenture Trustee to Holders. The Indenture
Trustee shall deliver to each Noteholder such information as may be required to
enable such holder to prepare its federal and state income tax returns.
SECTION 6.07. Compensation and Indemnity. The Issuer shall cause the
Servicer 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 Servicer 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 and disbursements and advances of the
Indenture Trustee's agents, counsel, accountants and experts. The Issuer shall,
or shall cause the Administrator to, indemnify the Indenture Trustee 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. 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, or shall cause the Administrator to, defend any such claim, and the
Indenture Trustee may have separate counsel and the Issuer shall, or shall cause
the Administrator to, pay the fees and expenses of such counsel. Neither the
Issuer nor the Administrator need reimburse any expense or indemnify against any
loss, liability or expense incurred by the Indenture Trustee through the
Indenture Trustee's own willful misconduct, negligence or bad faith.
The Issuer's obligations to the Indenture Trustee pursuant to this
Section shall survive the resignation or removal of the Indenture Trustee and
the discharge of this Indenture. When the
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Indenture Trustee incurs expenses after the occurrence of a Default specified in
Section 5.01(e) or (f) 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 6.08. Replacement of Indenture Trustee. The Indenture Trustee
may resign at any time by so notifying the Issuer, the Servicer and the Insurer.
The Issuer, may, with the consent of the Insurer, and, at the request of the
Insurer shall, remove the Indenture Trustee, unless an Insurer Default shall
have occurred and be continuing, if:
(i) the Indenture Trustee fails to comply with Section 6.11;
(ii) a court having jurisdiction in the premises in respect of
the Indenture Trustee in an involuntary case or proceeding under
federal or state banking or bankruptcy laws, as now or hereafter
constituted, or any other applicable federal or state bankruptcy,
insolvency or other similar law, shall have entered a decree or order
granting relief or appointing a receiver, liquidator, assignee,
custodian, trustee, conservator, sequestrator (or similar official) for
the Indenture Trustee or for any substantial part of the Indenture
Trustee's property, or ordering the winding-up or liquidation of the
Indenture Trustee's affairs, provided any such decree or order shall
have continued unstayed and in effect for a period of 30 consecutive
days;
(iii) the Indenture Trustee commences a voluntary case under
any federal or state banking or bankruptcy laws, as now or hereafter
constituted, or any other applicable federal or state bankruptcy,
insolvency or other similar law, or consents to the appointment of or
taking possession by a receiver, liquidator, assignee, custodian,
trustee, conservator, sequestrator or other similar official for the
Indenture Trustee or for any substantial part of the Indenture
Trustee's property, or makes any assignment for the benefit of
creditors or fails generally to pay its debts as such debts become due
or takes any corporate action in furtherance of any of the foregoing;
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 Issuer
shall promptly appoint a successor Indenture Trustee acceptable to the Insurer.
A successor Indenture Trustee shall deliver a written acceptance of
its appointment to the retiring Indenture Trustee and to the Issuer. Thereupon
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 Issuer or the
successor
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Indenture Trustee shall mail a notice of its succession to Noteholders. The
retiring Indenture Trustee shall promptly transfer all property held by it as
Indenture Trustee to the successor Indenture Trustee.
If a successor Indenture Trustee does not take office within 30 days
after the retiring Indenture Trustee resigns or is removed, the retiring
Indenture Trustee, the Issuer or the Holders of a majority of the Note Balances
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 may petition any court of competent jurisdiction for the removal of
the Indenture Trustee and the appointment of a successor Indenture Trustee.
Any resignation or removal of the Indenture Trustee and appointment of
a successor Indenture Trustee pursuant to the provisions of this Section shall
not become effective until acceptance of appointment by the successor Indenture
Trustee pursuant to this Section and payment of all fees and expenses owed to
the outgoing Indenture Trustee. Notwithstanding the replacement of the Indenture
Trustee pursuant to this Section, the retiring Indenture Trustee shall be
entitled to payment or reimbursement of such amounts as such Person is entitled
pursuant to Section 6.07.
SECTION 6.09. Successor Indenture Trustee by Merger. 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
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 Insurer and
each Rating Agency prompt notice of any such transaction.
In case at the time such successor 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; and in all such cases such certificates
shall have the full force and effect of the certificate of the Indenture Trustee
pursuant to the Notes or this Indenture.
SECTION 6.10. Appointment of Co-Indenture Trustee or Separate Indenture
Trustee.
(a) Notwithstanding any other provision of this Indenture, at any time,
for the purpose of meeting any legal requirement of any jurisdiction in which
any part of the Pledged Assets may at the time be located, the Indenture Trustee
shall have the power and may execute and deliver all instruments to appoint one
or more Persons to act as a co-trustee or co-trustees, jointly with the
Indenture Trustee, or separate trustee or separate trustees, of all or any part
of the Trust, and to vest
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in such Person or Persons, in such capacity and for the benefit of the
Noteholders, such title to the Pledged Assets, or any part hereof, and, subject
to the other provisions of this Section, 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 Indenture 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 6.08.
(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 is not 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 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 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. 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 co-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 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 Indenture 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. Notwithstanding
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anything to the contrary in this Indenture, the appointment of any separate
trustee or co-trustee shall not relieve the Indenture Trustee of its obligations
and duties under this Indenture.
SECTION 6.11. Eligibility. The Indenture Trustee shall at all times
satisfy the requirements of TIA Section 310(a). The Indenture Trustee hereunder
shall at all times be a financial institution organized and doing business under
the laws of the United States of America or any state, authorized under such
laws to exercise corporate trust powers, whose long term unsecured debt is rated
at least Baa3 by Moody's and shall have a combined capital and surplus of at
least $50,000,000 or shall be a member of a bank holding system to the aggregate
combined capital and surplus of which is $50,000,000 and subject to supervision
or examination by federal or state authority, provided that the Trustee's
separate capital and surplus shall at all times be at least the amount required
by Section 310(a)(2) of the TIA. If such Person publishes reports of condition
at least annually, pursuant to law or to the requirements of a supervising or
examining authority, then for the purposes of this Section 6.11, the combined
capital and surplus of such Person shall be deemed to be its combined capital
and surplus as set forth in its most recent report of condition so published. In
case at any time the Trustee shall cease to be eligible in accordance with the
provisions of this Section 6.11, the Trustee shall resign immediately in the
manner and with the effect specified in Section 6.08. The Indenture Trustee
shall comply with TIA Section 310(b); provided, however, that there shall be
excluded from the operation of TIA Section 310(b)(1) any indenture or indentures
under which other securities of the Issuer are outstanding if the requirements
for such exclusion set forth in TIA Sections 310(b)(1) are met.
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 Section 311(a) to the extent indicated.
SECTION 6.13. Representations and Warranties of Indenture Trustee. The
Indenture Trustee hereby makes the following representations and warranties on
which the Issuer and Noteholders shall rely:
(a) the Indenture Trustee is a corporation duly organized, validly
existing and in good standing under the laws of its place of incorporation; and
(b) the Indenture Trustee has full power, authority and legal right to
execute, deliver, and perform this Indenture and shall have taken all necessary
action to authorize the execution, delivery and performance by it of this
Indenture.
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ARTICLE VII
NOTEHOLDERS' LISTS AND REPORTS
SECTION 7.01. Issuer to Furnish Indenture Trustee Names and Addresses
of Noteholders. The Issuer will furnish or cause to be furnished to the
Indenture Trustee (i) not more than five days after the earlier of (a) each
Record Date and (b) three months after the last 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 (ii) at such other times as the
Indenture Trustee may request in writing, within 10 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 days prior to the time such list is furnished; provided, however,
that so long as the Indenture Trustee is the Note Registrar, no such list shall
be required to be furnished. The Indenture Trustee or, if the Indenture Trustee
is not the Note Registrar, the Issuer shall furnish to the Insurer in writing at
such times as the Insurer may reasonably request a copy of the list.
SECTION 7.02. 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
7.01 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 7.01 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.
(c) The Issuer, the Indenture Trustee and the Note Registrar shall have
the protection of TIA Section 312(c).
SECTION 7.03. Reports by Issuer. (a) The Issuer shall:
(i) file with the Indenture Trustee, within 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) which 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 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
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Section 7.03(a) as may be required 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 end on June 30 of each year.
SECTION 7.04. Reports by Indenture Trustee. To the extent that any of
the events described in TIA Section 313(a) shall have occurred, the Indenture
Trustee shall, within 60 days after each December 15 beginning with December 15,
1999, mail to the Issuer, the Insurer and 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).
ARTICLE VIII
INTENTIONALLY BLANK
ARTICLE IX
DISTRIBUTIONS; STATEMENTS TO THE NOTEHOLDERS
SECTION 9.01. Collection Account. The Issuer shall cause the Servicer
to establish the Collection Account with the Indenture Trustee or another
Eligible Bank as a segregated trust account in the name of the Indenture Trustee
for the benefit of the Secured Parties. The amounts in the Collection Account
shall be invested in Eligible Investments that mature not later than the
Business Day prior to the next succeeding Payment Date and such Eligible
Investments shall be held to maturity. The Indenture Trustee (or its custodian)
shall (i) maintain possession of any negotiable instruments or securities
evidencing Eligible Investments until the time of sale or maturity and each
certificated security or negotiable instrument evidencing an Eligible Investment
shall be endorsed in blank or to the Indenture Trustee or registered in the name
of the Indenture Trustee and (ii) cause any Eligible Investment represented by
an uncertificated security to be registered in the name of the Indenture
Trustee.
SECTION 9.02. Collections. The Indenture Trustee shall review the
Servicer's Certificate prepared by the Servicer immediately upon receipt thereof
pursuant to Section 9.02 of the Trust Agreement.
For any Payment Date on which there will not be sufficient Available
Funds to make the distributions required pursuant to Sections 9.04(a)(i) through
(vi), the Indenture Trustee shall withdraw or direct the Servicer to withdraw
from the Spread Account, to the extent of the Available Spread Amount, an amount
equal to such deficiency and promptly deposit such amount in the Collection
Account. If such deficiency exceeds the Available Spread Amount, the Indenture
Trustee
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shall notify the Insurer of the amount of such excess deficiency. The Indenture
Trustee shall promptly (and in any event not later than 1:00 p.m., New York City
time, on the Business Day preceding the Payment Date) deliver a Notice for
Payment as defined in the Policy (appropriately completed) to the Fiscal Agent
with respect to the Policy. The Insurer is required pursuant to Section 10.03
and the terms of the Policy to pay the amount of such excess deficiency of
Monthly Interest and Monthly Principal, up to the Policy Amount.
The Indenture Trustee shall, immediately upon receipt, deposit in the
Collection Account any funds received by the Indenture Trustee in respect of
funds drawn under the Policy from the Insurer.
If the Available Funds for a Payment Date are insufficient to pay
current and past due Insurance Premiums on the Policy, or any amounts owing to
the Insurer pursuant to the Insurance Agreement including, without limitation,
reimbursements, indemnities, fees and expenses, plus accrued interest thereon,
to the Insurer, the Servicer shall notify the Indenture Trustee of such
deficiency, and the applicable Available Spread Amount, if any, then on deposit
in the Spread Account(after giving effect to any withdrawal to satisfy a
deficiency in Monthly Interest or Monthly Principal) shall be available to cover
such deficiency.
SECTION 9.03. Purchase Amounts. Pursuant to the Trust Agreement, the
Servicer and the Seller have agreed to remit to the Collection Account not later
than the Determination Date, the aggregate Purchase Amount for such Collection
Period pursuant to Sections 7.02 and 8.07 of the Trust Agreement.
SECTION 9.04. Distributions to Parties. (a) On each Payment Date, the
Indenture Trustee shall apply or cause to be applied the Available Funds in the
Collection Account for the prior Collection Period, (plus any amounts withdrawn
from the Spread Account or drawn on the Policy pursuant to Section 9.02), to
make the following payments in the listed order of priority:
(i) Without duplication, an amount equal to the sum of (y)
Outstanding Advances on all Receivables that became Defaulted
Receivables during the prior Collection Period, plus (z) Outstanding
Advances which the Servicer determines to be unrecoverable pursuant to
Section 9.05 of the Trust Agreement, to the Servicer;
(ii) To the extent not previously distributed to the Servicer,
the Monthly Servicing Fee, including any such overdue Monthly Servicing
Fee, to the Servicer;
(iii) Class A Monthly Interest to the Class A Noteholders;
(iv) Monthly Principal to the Class A Noteholders, in
accordance with the Principal Payment Sequence;
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(v) Class B Monthly Interest to the Class B Noteholders;
(vi) Monthly Principal to the Class B Noteholders in
accordance with the Principal Payment Sequence (only after the
Principal Balances of the Class A Notes have been repaid in full);
(vii) The Insurance Premium, including any overdue Insurance
Premium, plus accrued interest thereon at the rate provided in the
Insurance Agreement, to the Insurer;
(viii) The amount of Recoveries of Advances, to the Servicer
(to the extent not applied pursuant to (i) above on or prior to such
Payment Date);
(ix) The aggregate amount of all unreimbursed draws made on
the Policy in respect of Monthly Interest and Monthly Principal and any
other amounts payable to the Insurer under the Insurance Agreement,
plus accrued interest thereon at the rate provided in the Insurance
Agreement, to the Insurer;
(x) The balance for deposit in the Spread Account. The rights
of the Certificateholders to receive distributions from the Spread
Account are described in Sections 10.02(e) and (f).
(b)(i) If on any Payment Date there are not sufficient Available Funds (together
with amounts withdrawn from the applicable Spread Account and/or the Policy) to
pay the distributions required by Section 9.04(a)(iii) through (vi), the
Available Funds payable under Section 9.04(a)(iii) through (vi) shall be
allocated first to Class A Noteholders pari passu for the payment of Class A
Monthly Interest, and second for Class A Monthly Principal. The amount of
Monthly Interest allocated to Class A Noteholders shall be based upon the amount
of interest due each class of Class A Noteholders and the amount of Monthly
Principal allocated to Class A Noteholders shall be based upon the relative
outstanding Note Balance of each class of Class A Notes then Outstanding.
(ii) Notwithstanding the foregoing, if on any Payment Date,
the Certificateholder exercises its option to cause a disposition of
the remaining corpus of the Trust pursuant to Section 16.02 of the
Trust Agreement: (a) the Available Funds and amounts withdrawn from the
Spread Account or drawn on the Policy in respect only of Monthly
Interest and Monthly Principal with respect to the immediately
preceding Payment Date as determined in accordance with Sections 9.02
and 9.04 shall be distributed to the Noteholders on such Payment Date;
(b) the Policy will not be available to pay any shortfall of Monthly
Interest or Monthly Principal after a prepayment of the Note Balances
pursuant to this Section 9.04(a)(ii); and (c) any remaining Pledged
Assets (including all remaining Available Spread Amounts) shall be paid
to the Noteholders on such Payment Date until the Note Balances
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shall have been reduced to zero. Any amounts in excess thereof shall be
remitted to the Certificateholder pursuant to the Trust Agreement.
(iii) In making such payments the Indenture Trustee shall be
entitled to rely (without investigation, confirmation or recalculation)
upon all information and calculations contained in the Servicer's
Certificate delivered to the Indenture Trustee pursuant to Section 8.09
of the Trust Agreement.
(iv) All monthly payments shall be made by wire transfer of
immediately available funds to the Noteholder of record on the
preceding Record Date. Notwithstanding the foregoing, the final payment
on the Notes shall be made only against presentation and surrender of
the Notes at the office or agency then maintained by the Indenture
Trustee in accordance with Section _____ of this Indenture.
(c) On each Payment Date, if the Servicer has reported to the Indenture
Trustee in the Servicer's Certificate for any Collection Period that an Obligor
or an Obligor's representative or successor successfully shall have asserted a
claim or defense under bankruptcy law or similar laws for the protection of
creditors generally (including the avoidance of a preferential transfer under
bankruptcy law) that results in a liability to such Obligor for monies
previously collected and remitted to the Indenture Trustee and not otherwise
netted against collections pursuant to Section 9.02, the Indenture Trustee shall
make all payments in respect of such claims or defenses out of the amounts on
deposit in the Collection Account with respect to such Collection Period before
making the distributions required by paragraph (a) of this Section 9.04.
(d) If the Servicer has failed to provide the Indenture Trustee with
the notice required pursuant to Section 9.02, the Indenture Trustee may
calculate Monthly Interest and Monthly Principal and apply funds, if any, in the
Collection Account as of the last day of the Collection Period, to make a
distribution of Monthly Interest and Monthly Principal to the Noteholders.
SECTION 9.05. Servicer Advances. The Servicer is required to make
certain Advances pursuant to Section 9.05 of the Trust Agreement. If the
Servicer shall determine that an Outstanding Advance with respect to any
Receivable shall not be recoverable, the Servicer shall be entitled to
reimbursement from any collections made on other Receivables pursuant to Section
9.04(a)(i), and Outstanding Advances with respect to such Receivable shall be
reduced accordingly.
SECTION 9.06. Net Deposits. For so long as UAC is the Servicer, UAC (in
whatever capacity) may make the remittances with respect to any Payment Date
pursuant to Section 9.02 above, net of amounts to be distributed to itself or
its delegee under Section 13.06 (also in whatever capacity) pursuant to Section
9.04, if it determines pursuant to Section 9.02 that there is no deficiency in
Available Funds for such Payment Date. Nonetheless, the Servicer shall account
for all of the above described amounts as if such amounts were deposited and
distributed.
SECTION 9.07. Intentionally Blank.
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SECTION 9.08. Intentionally Blank.
SECTION 9.09. Payahead Account. The Servicer shall establish the
Payahead Account with the Indenture Trustee or another Eligible Bank in the name
of the Indenture Trustee on behalf of the Obligors and the Noteholders as their
interests may appear pursuant to Section 9.09 of the Trust Agreement. Investment
income or interest earned on the Payahead Account shall be remitted to the
Servicer at least monthly, or as frequently as the Servicer may reasonably
request. On or prior to each Payment Date, the Servicer shall transfer or the
Indenture Trustee (as instructed in the Servicer's Certificate) shall transfer
(a) from the Collection Account to the Payahead Account, in immediately
available funds, all Payaheads received by the Servicer and previously deposited
to the Collection Account during the Collection Period as described in Section
8.02(b) of the Trust Agreement; and (b) from the Payahead Account to the
Collection Account, in immediately available funds, the aggregate amount of
previously deposited Payaheads to be applied to the related Scheduled Payments
on Precomputed Receivables for the related Collection Period or prepayments for
the related Collection Period, pursuant to Section 8.02(b) of the Trust
Agreement, each in the amounts set forth in the Servicer's Certificate delivered
on the related Determination Date. A single, net transfer between the Payahead
Account and the Collection Account may be made. Any amount deposited in any
Payahead Account shall not constitute Available Funds under Section 9.02. Any
amount deposited to the Collection Account from a Payahead Account pursuant to
Section 9.09(b) shall be included in Available Funds under Section 9.02.
SECTION 9.10. Release of Pledged Assets. (a) Subject to the payment of
its fees and expenses pursuant to Section ____, 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 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 ____ have
been paid, release any remaining portion of the Pledged Assets 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
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Indenture Trustee shall release property from the lien of this Indenture
pursuant to this Section 9.10(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 13.01.
SECTION 9.11. Opinion of Counsel. The Indenture Trustee shall receive
at least seven days' notice when requested by the Issuer to take any action
pursuant to Section 9.10(a), accompanied by copies of any instruments involved,
and the Indenture Trustee shall also require, as a condition to such action, an
Opinion of Counsel, in form and substance satisfactory to the Indenture Trustee
(and not at the expense of 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 Pledged
Assets. 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 X
CREDIT ENHANCEMENT
SECTION 10.01. Subordination. The payment of Monthly Interest and
Monthly Principal to Class B Noteholders shall be subordinated to the payment of
Class A Monthly Interest and Class A Monthly Principal on any Payment Date.
SECTION 10.02. Spread Account. (a) On or prior to the Closing Date, the
Indenture Trustee shall establish and maintain a segregated trust account with
the Indenture Trustee or in the corporate trust department of another Eligible
Bank referred to herein as the "Spread Account." The Spread Account shall be
maintained in the name of the Indenture Trustee. The Spread Account and any
amounts on deposit therein shall be part of the Pledged Assets and shall be for
the benefit of Secured Parties, as their respective interests may appear herein;
provided, however, that the interest of the Insurer therein shall be
subordinated to the interests of the Noteholders as provided herein.
(b) Funds on deposit in the Spread Account shall be invested in
Eligible Investments in the same manner and subject to the same requirements and
limitations as the investment of funds in the Collection Account pursuant to
Section 9.01, including the limitation that Eligible Investments mature not
later than the Business Day prior to the next succeeding Payment Date; provided,
however, that no such limitation on the maturity of Eligible Investments shall
apply if the Indenture Trustee obtains the benefit of a liquidity facility or
similar arrangement from a commercial bank with
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an Approved Rating or other provider approved in advance in writing by the
Insurer and the Administrative Agent, with respect to funds in the Spread
Account (a "Spread Account Facility") and Standard & Poor's and Moody's confirm
in writing that the rating of the Notes will not be lowered or withdrawn as a
result of eliminating or modifying the limitation on the maturity of Eligible
Investments in respect of the Spread Account. For purposes of determining the
availability of funds or the balance in the Spread Account for any reason under
this Indenture, investment earnings on such funds shall be deemed to be
available or on deposit only to the extent that the aggregate of such amounts,
plus the funds on deposit in such Spread Account, do not exceed the Required
Spread Amount.
(c) If on any Payment Date the amount of Available Funds is
insufficient to make the distributions required by Sections 9.04(a)(i) through
(vi), the Indenture Trustee shall withdraw or cause to be withdrawn from the
Spread Account and deposited in the Collection Account the lesser of (i) the
entire Available Spread Amount and (ii) the amount necessary to make up such
deficiency to pay any deficiency in permitted reimbursements of Outstanding
Advances pursuant to Section 9.04(a)(i), the Monthly Servicing Fee, Monthly
Interest and Monthly Principal (prior to making any draw on the Policy), all as
provided in Sections 9.02 and 9.04 and the Policy.
(d) On each Payment Date, all distributions made pursuant to Section
9.04(a)(x) shall be deposited into the Spread Account; provided, however, that
the Accelerated Principal Amount has been paid in full to the Noteholders.
(e) If the amount on deposit in the Spread Account, after giving effect
to the distributions set forth in Section 9.04 (including, without limitation,
payment of amounts due and owing to the Insurer) is greater than the Required
Spread Amount on such Payment Date (after giving effect to the payment of the
Accelerated Principal Amount in Monthly Principal), the amount of such excess
shall be distributed by the Indenture Trustee to the Owner Trustee, or as the
Owner Trustee shall direct in accordance with the Trust Agreement to the
Certificateholders. Amounts properly distributed to the Owner Trustee or
Certificateholders pursuant to this Section, either directly without deposit in
the Spread Account or from excess amounts in the Spread Account shall be deemed
released from the security interest of the Indenture Trustee on behalf of the
Secured Parties.
(f) The Certificateholders are permitted to purchase the Receivables
from the Issuer when the Pool Balance has been reduced to 10% or less of the
Original Pool Balance pursuant to Section 16.02 of the Trust Agreement. Upon
discharge and satisfaction of this Indenture pursuant to Section 16.01, amounts
remaining in the Spread Account, after payment of any amounts due and owing to
the Noteholders and to the Insurer, shall be distributed by the Indenture
Trustee to the Owner Trustee, or as the Owner Trustee shall direct in accordance
with the Trust Agreement to the Certificateholders and such amounts shall not be
subject to any claims or rights of any Noteholder.
SECTION 10.03. Policy. (a) The Insurer is required under the terms of
the Policy to pay Monthly Interest and Monthly Principal up to the Policy Amount
in the event of any deficiency of Available Funds to pay such amounts (after
permitted reimbursements of related Outstanding
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Advances and payment of the related Monthly Servicing Fee) not covered by
amounts withdrawn from the Spread Account, as determined pursuant to Section
9.02 to the Indenture Trustee for credit to the Collection Account on the later
of (a) 12:00 noon, New York City time, on the Payment Date and (b) 12:00 noon,
New York City time, on the Business Day immediately succeeding presentation to
the Fiscal Agent of the Indenture Trustee's demand therefor. Any demand for
payment pursuant to Section 9.02 to the Fiscal Agent received by the Fiscal
Agent on a Business Day after 1:00 p.m., New York City time, or on any day that
is not a Business Day, will be deemed to be received by the Fiscal Agent at 9:00
a.m., New York City time, on the next Business Day. Notwithstanding the
foregoing, on a Dissolution Payment Date, the obligations of the Insurer under
the Policy shall be limited in accordance with Section 9.04(b)(ii). The
Indenture Trustee hereby agrees on behalf of the Noteholders (and each
Noteholder, by its acceptance of its Notes, hereby agrees) for the benefit of
the Insurer that the Indenture Trustee shall recognize that to the extent the
Insurer makes a payment under the Policy, either directly or indirectly (as by
paying through the Indenture Trustee), to the Noteholders, the Insurer will be
entitled to be subrogated to the rights of the Noteholders to the extent of such
payments under the Policy. Any rights of subrogation acquired by the Insurer as
a result of any payment made under the Policy shall, in all respects, be
subordinate and junior in right of payment to the prior indefeasible payment in
full of all amounts due the Indenture Trustee on account of payments due under
the Notes pursuant to Section 9.04 hereof.
(b) The Insurer shall pay any Preference Amounts, but only after there
shall have been delivered to the Insurer (x) a certified copy of a final order
of the court exercising jurisdiction in the Insolvency Proceeding to the effect
that the Indenture Trustee is required to return any such payment or portion
thereof prior to the Termination Date (as defined in the Policy) of the Policy
because such payment was voided under applicable law, with respect to which
order the appeal period has expired without an appeal having been filed (the
"Final Order"), (y) an assignment, in the form of Exhibit D to the Policy,
irrevocably assigning to the Insurer all rights and claims of such Indenture
Trustee relating to or arising under such Avoided Payment and (z) a Notice for
Payment in the form of Exhibit A to the Policy appropriately completed and
executed by the Indenture Trustee. Such payment shall be disbursed to the
receiver, conservator, debtor-in-possession or trustee in bankruptcy named in
the Final Order and not to the Indenture Trustee directly. In no event shall the
Insurer pay more than one Insured Payment in respect of any Preference Amount.
The Indenture Trustee, for itself and on behalf of the Noteholders,
agrees that the Insurer may at any time during the continuation of any
proceeding relating to a Final Order direct all matters relating to such Final
Order, including, without limitation, the direction of any appeal of any order
relating to such Final Order and the posting of any surety, supersedeas or
performance bond pending any such appeal. In addition and without limitation of
the foregoing, the Insurer shall be subrogated, to the extent of the Insured
Payments, to the rights of UAC, the Servicer, the Seller, the Issuer, the
Indenture Trustee and the Noteholders in the conduct of any preference claim,
including, without limitation, all rights of any party to any adversarial
proceeding or action with respect to any court order issued in connection with
any such preference claim.
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ARTICLE XI
SUPPLEMENTAL INDENTURES
SECTION 11.01. Supplemental Indentures Without Consent of Noteholders.
(a) Without the consent of the Holders of any Notes but with the
consent of the Insurer and with prior notice to each Rating Agency, the Issuer
and the Indenture Trustee, when authorized by an Issuer Order, and the other
parties hereto 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 TIA
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 created by this Indenture, or to
subject to the lien created by 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 which may be
inconsistent with any other provision herein or in any supplemental
indenture or the Basic Documents or to make any other provisions with
respect to matters or questions arising under this Indenture or in any
supplemental indenture; provided that such action shall not 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 Six; or
(vii) to modify, eliminate or add to the provisions of this
Indenture to such extent as shall be necessary to effect 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 he expressly required by the TIA.
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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 the
consent of the Insurer and with prior notice to each Rating Agency, 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 the rights of the Noteholders
under this Indenture; provided, however, that such action shall not, as
evidenced by an Opinion of Counsel, adversely affect in any material respect the
interests of any Noteholder.
SECTION 11.02. Supplemental Indentures With Consent of Noteholders. The
Issuer and the Indenture Trustee, when authorized by an Issuer Order, also may,
with prior notice to each Rating Agency, with the consent of the Insurer and
with the consent of the Holders of not less than a majority of the Note Balances
of the Notes, by Act of such Holders delivered to the Issuer and the Indenture
Trustee, 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 the
rights of the Noteholders under this Indenture; provided, however, that, subject
to the express rights of the Insurer under the Basic Documents, no such
supplemental indenture shall, without the consent of the Holder of each
Outstanding Note affected thereby:
(a) change 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 Redemption Price with respect thereto, or change any place of
payment where, or the coin or currency in which, any Note or the interest
thereon is payable;
(b) 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 Redemption Date);
(c) reduce the percentage of the Note Balances 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 this Indenture or certain defaults hereunder and
their consequences provided for in this Indenture;
(d) modify or alter the provisions of the second proviso to the
definition of the term "Outstanding";
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(e) reduce the percentage of the Note Balances of the Notes, the
consent of the Holders of which is required to direct the Indenture Trustee to
sell or liquidate the Pledged Assets pursuant to Section 5.04;
(f) decrease the percentage of the Note Balances of the Notes required
to amend this Indenture or the other Basic Documents;
(g) permit the creation of any lien ranking prior to or on a parity
with the lien created by this Indenture with respect to any part of the Pledged
Assets or, except as otherwise permitted or contemplated herein, terminate the
lien created by this Indenture on any property at any time subject hereto or
deprive the Holder of any Note of the security provided by the lien created by
this Indenture.
The Indenture Trustee may in its discretion determine whether or not
any Notes would be affected by any supplemental indenture and any such
determination shall be conclusive upon the Holders 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
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 parties hereto of any supplemental
indenture pursuant to this Section, the Indenture Trustee shall mail to the
Noteholders 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 11.03. Execution of Supplemental Indentures. In executing, or
permitting the additional trusts created by, any supplemental indenture
permitted by this Article or the modifications thereby of the trusts created by
this Indenture, the Indenture Trustee shall be entitled to receive, and subject
to Sections 6.01 and 6.02 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. 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 11.04. Effect of Supplemental Indenture. Upon the execution of
any supplemental indenture pursuant to the provisions hereof, this Indenture
shall be and 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 parties hereto and the Noteholders shall thereafter be determined, exercised
and enforced hereunder
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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 11.05. Conformity With Trust Indenture Act. Every amendment of
this Indenture and every supplemental indenture executed pursuant to this
Article 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 11.06. Reference in Notes to Supplemental Indentures. Notes
authenticated and delivered after the execution of any supplemental indenture
pursuant to this Article 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 XII
REDEMPTION OF NOTES
SECTION 12.01. Redemption. In the event that the Certificateholder
pursuant to Section 16.02 of the Trust Agreement purchases the corpus of the
Trust, the Notes are subject to redemption in whole, but not in part, on the
Payment Date on which such repurchase occurs, for a purchase price equal to the
Redemption Price; provided, however, that the Issuer has available funds
sufficient to pay the Redemption Price. The Seller, the Servicer or the Issuer
shall furnish the Insurer and each Rating Agency notice of such redemption. If
the Notes are to be redeemed pursuant to this Section 12.01, the Servicer or the
Issuer shall furnish notice of such election to the Indenture Trustee not later
than 20 days prior to the Redemption Date and the Issuer shall deposit with the
Indenture Trustee in the Collection Account the Redemption Price of the Notes to
be redeemed whereupon all such Notes shall be due and payable on the Redemption
Date upon the furnishing of a notice complying with Section 12.02 to each Holder
of the Notes.
SECTION 12.02. Form of Redemption Notice. Notice of redemption under
Section 12.01 shall be given by the Indenture Trustee by first-class mail,
postage prepaid, mailed not less than five days prior to the applicable
Redemption Date to each Holder of Notes, as of the close of business on the
Record Date preceding the applicable Redemption Date, at such Holder's address
appearing in the Note Register. In addition, the Administrator shall notify the
Insurer and Rating Agencies upon the redemption of any Class of Notes, pursuant
to Section 1(a)(i)(AA) of the Administration Agreement.
All notices of redemption shall state:
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(i) the Redemption Date;
(ii) the Redemption Price; and
(iii) the place where such Notes are to be surrendered for
payment of the Redemption Price (which shall be the office or agency of
the Issuer to be maintained as provided in Section 3.02).
Notice of redemption 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
redemption, or any defect therein, to any Holder of any Note shall not impair or
affect the validity of the redemption of any other Note.
SECTION 12.03. Notes Payable on Redemption Date. The Notes or portions
thereof to be redeemed shall, following notice of redemption (if any) as
required by Section 12.02, on the Redemption Date become due and payable at the
Redemption Price and (unless the Issuer shall default in the payment of the
Redemption Price) no interest shall accrue on the Redemption Price for any
period after the date to which accrued interest is calculated for purposes of
calculating the Redemption Price.
ARTICLE XIII
MISCELLANEOUS
SECTION 13.01. 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 and TIA Sections 314(c) and 314(d)(1). Notwithstanding the
foregoing, 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:
(i) 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;
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(ii) 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;
(iii) 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
(iv) 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 Pledged Assets or other property or
securities with the Indenture Trustee that is to be made the basis for the
release of any property subject to the lien created by this Indenture, the
Issuer shall, in addition to any obligation imposed in Section 13.01(a) or
elsewhere in this Indenture, furnish to the Indenture Trustee and the Insurer an
Officer's Certificate certifying or stating the opinion of the signer thereof as
to the fair value (within 90 days of such deposit) to the Issuer of the Pledged
Assets or other property or securities to be so deposited.
(ii) Whenever the Issuer is required to furnish to the
Indenture Trustee and the Insurer 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 and the Insurer an Independent Certificate as to the
named matters, if the fair value to the Issuer of the property to be so
deposited and of all other such property 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 Officer's Certificates
delivered pursuant to clause (i) above and this clause (ii), is 10% or
more of the Note Balances of the Notes, but such Officer's Certificate
need not be furnished with respect to any property 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 of the Note
Balances of the Notes.
(iii) Whenever any property or securities are to be released
from the lien created by this Indenture, the Issuer shall also furnish
to the Indenture Trustee and the Insurer an Officer's Certificate
certifying or stating the opinion of each person signing such
certificate as to the fair value (within 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 created by this Indenture in contravention of the provisions
hereof.
(iv) Whenever the Issuer is required to furnish to the
Indenture Trustee and the Insurer 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 and the Insurer an Independent Certificate as to the
same matters if the fair value of the property or securities and of all
other property or securities released from the lien created by this
Indenture since the commencement of the then current fiscal year, as
set forth in the
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Officer's Certificate required by clause (iii) above and this clause
(iv), equals 10% or more of the Note Balances of the Notes, but such
Officer's 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 of the then Note Balances of the Notes.
SECTION 13.02. Form of Documents Delivered to Indenture Trustee. 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.
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 his 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 or the Issuer, stating that the information with
respect to such factual matters is in the possession of the Servicer, the Seller
or the Issuer, unless such officer or counsel knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to such matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
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 Six.
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SECTION 13.03. 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 therein
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 6.01) conclusive in
favor of the Indenture Trustee and the Issuer, if made in the manner provided in
this Section.
(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 and the
record date applicable to any solicitation for an Act of the Noteholders shall
comply with Section 3.16(c) of the TIA.
(d) Any request, demand, authorization, direction, notice, consent,
waiver or other action by the Holder of any Notes shall bind the Holder 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 13.04. Notices, etc., to Indenture Trustee, Issuer, Insurer and
Rating Agencies.
(a) 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 or by the Issuer
shall be sufficient for every purpose hereunder if in writing,
personally delivered, sent by facsimile transmission and confirmed or
mailed by overnight service, to or with the Indenture Trustee at its
Corporate Trust Office;
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(ii) the Issuer by the Indenture Trustee or by any Noteholder
shall be sufficient for every purpose hereunder if in writing,
personally delivered, sent by facsimile transmission and confirmed or
mailed by overnight service, to the Issuer addressed to: UACSC ____-_
____-_, in care of ______ _____ (Delaware), as Owner Trustee,
___________________________, ______________, _____________
_______________, Attention: _________________________________________,
or at any other address furnished in writing to the Indenture Trustee
by the Issuer; or
(iii) the Insurer by the Issuer or the Indenture Trustee shall
be sufficient for any purpose hereunder if in writing, personally
delivered, sent by facsimile transmission and confirmed or mailed by
overnight service, to the Insurer addressed to:
-------------------------, ---------------, ----------------------.
(b) 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, sent by facsimile transmission and confirmed or mailed by overnight
service, 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 and (ii) in the case of Standard & Poor's, at the following
address: Standard & Poor's Ratings Services, 26 Broadway (20th Floor), New York,
New York 10004, Attention: Asset Backed Surveillance Department; or as to each
of the foregoing, at such other address as shall be designated by written notice
to the other parties.
SECTION 13.05. Notices to Noteholders; Waiver. 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.
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.
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.
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.
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<PAGE>
SECTION 13.06. 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 Holder of a Note providing for a method of
payment, or notice by the Indenture Trustee or any Paying Agent to such Holder,
that is different from the methods provided for in this Indenture for such
payments or notices. The Issuer will furnish to the Indenture Trustee a copy of
each such agreement and the Indenture Trustee will cause payments to be made and
notices to be given in accordance with such agreements.
SECTION 13.07. Conflict With Trust Indenture Act. If any provision
hereof limits, qualifies or conflicts with another provision hereof that is
required to be included in this indenture by any of the provisions of the Trust
Indenture Act, such required 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 13.08. 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 13.09. 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 13.10. 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 13.11. Benefits of Indenture. The Insurer and its successors
and assigns shall be a third-party beneficiary to the provisions of this
Indenture, and shall be entitled to rely upon and directly to enforce such
provisions of this Indenture so long as no Insurer Default shall have occurred
and be continuing. 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
Pledged Assets, any benefit or any legal or equitable right, remedy or claim
under this Indenture. The Insurer may disclaim any of its rights and powers
under this Indenture, but not its duties and obligations under the Policy, upon
delivery of a written notice to the Indenture Trustee.
SECTION 13.12. 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.
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<PAGE>
SECTION 13.13. Governing Law. This Indenture 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 Indenture shall be determined in
accordance with such laws.
SECTION 13.14. Counterparts. This Indenture may be executed in several
counterparts, each of which shall be an original and all of which shall
constitute but one and the same instrument.
SECTION 13.15. 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 may be counsel to the Indenture Trustee or any other counsel reasonably
acceptable to the Indenture Trustee and the Insurer) 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 13.16. 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 its individual capacity, (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 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 in its
individual capacity, 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 capacity) 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 Articles Six, Seven and Eight of the Trust
Agreement.
SECTION 13.17. No Petition. The parties hereto, by entering into this
Indenture, and each Noteholder, by accepting a Note or a beneficial interest in
a Note, hereby covenant and agree that they 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, 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 13.18. Inspection. The Issuer agrees that, on reasonable prior
notice, it will permit any representative of the Indenture Trustee or of the
Insurer, 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
69
<PAGE>
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 and the Insurer shall and shall cause their
respective 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 or the Insurer may reasonably determine that such disclosure
is consistent with its obligations hereunder.
SECTION 13.19. Limitation of Liability of Owner Trustee.
Notwithstanding anything contained herein to the contrary, this instrument has
been countersigned by the Owner Trustee not in its individual capacity but
solely in its capacity as Owner Trustee of the Issuer and in no event shall the
Owner Trustee 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 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 Articles Eight, Ten, Thirteen and Fifteen of the Trust Agreement.
SECTION 13.20. Certain Matters Regarding the Insurer. So long as an
Insurer Default shall not have occurred and be continuing, the Insurer shall
have the right to exercise all rights, including voting rights, which the
Noteholders or Certificateholders are entitled to exercise pursuant to this
Indenture, without any consent of such Noteholders or Certificateholders;
provided, however, that without the consent of each Noteholder and
Certificateholder affected thereby, the Insurer shall not exercise such rights
to amend this Indenture in any manner that would (i) reduce the amount of, or
delay the timing of, collections of payments on the Receivables or distributions
which are required to be made on any Note or Certificate, (ii) adversely affect
in any material respect the interests of the Holders of any Notes or
Certificates Instruments, or (iii) alter the rights of any such Holder to
consent to such amendment.
Notwithstanding any provision in this Indenture to the contrary, in the
event an Insurer Default shall have occurred and be continuing, the Insurer
shall not have the right to take any action under this Agreement or to control
or direct the actions of the Trust, the Seller, the Indenture Trustee or the
Owner Trustee pursuant to the terms of this Indenture, nor shall the consent of
the Insurer be required with respect to any action (or waiver of a right to take
action) to be taken by the Trust, the Seller, the Indenture Trustee, the Owner
Trustee or the Noteholders or the Certificateholders; provided, that the consent
of the Insurer shall be required at all times with respect to any amendment of
this Indenture.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed and delivered as of the day and year first above written.
UACSC ____-_ OWNER TRUST
By:
not in its individual capacity but
solely on behalf of the Issuer as Owner
Trustee under the Trust Agreement
By:
Name:
Title:
[INDENTURE TRUSTEE]
not in its individual capacity but
solely as Indenture Trustee
By:
Name:
Title:
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<PAGE>
EXHIBIT A-1
[FORM OF CLASS A-1 NOTE]
PRINCIPAL IN RESPECT OF THIS CLASS A-1 NOTE IS DISTRIBUTABLE AS SET FORTH
HEREIN. ACCORDINGLY, THE UNPAID PRINCIPAL AMOUNT OF THE FRACTIONAL INTEREST
EVIDENCED HEREBY AT ANY TIME MAY BE LESS THAN THE ORIGINAL PRINCIPAL AMOUNT SET
FORTH HEREIN.
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 Certificate issued is
registered in the name of Cede & Co. or in such other name as 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 thereof, Cede & Co., has an
interest herein.
PRINCIPAL IN RESPECT OF THIS NOTE IS PAYABLE AS SET FORTH HEREIN.
UACSC ______ OWNER TRUST
_____% CLASS A-1 AUTOMOBILE RECEIVABLE BACKED NOTE
Evidencing the indebtedness of the UACSC ____-___ Owner Trust, a
Delaware business Trust, secured by the Pledged Assets, as defined
below, including a pool of simple and precomputed interest installment
loan and security agreements and installment sales contracts secured by
new and used automobiles, light trucks and vans.
(This Note does not represent an interest in UAC Securitization
Corporation nor an interest in or obligation of any of its affiliates.
Neither this Note nor the underlying Receivables, as defined below, are
insured or guaranteed by any government agency).
NUMBER ____ $_____________
CUSIP ________________
UACSC ____-___ Owner Trust , a Delaware business Trust, for value
received, hereby promises to pay to the order of [____________] ("the
Noteholder") or its registered assigns, the principal sum of
____________________ dollars ($___________), which amount shall be payable in
the amounts and at the times set forth in the Indenture dated as of ______ ____,
____ (the "Indenture"; such term to include any amendment, restatement,
supplement or other modification thereof or thereto) provided, however, that the
entire unpaid amount of this Note shall be due and
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<PAGE>
payable on or before__________, ____. However, principal with respect to the
Notes may be paid earlier or later under certain limited circumstances under the
Indenture. The Issuer will pay interest on this Note at the Class A-1 Interest
Rate. Such interest shall be payable in the manner and at the times set forth in
the Indenture. To the extent not otherwise defined herein, the capitalized terms
used herein have the meanings assigned to them in the Indenture. This Note is
issued under and is subject to the terms, provisions, and conditions of the
Indenture, to which the holder of this Note by virtue of the acceptance hereof
assents and by which such holder is bound.
This Note is secured by the Pledged Assets. The Pledged Assets consist
of a pool of simple and precomputed interest loan and security agreements and
installment sales contracts for new and used automobiles, light trucks, vans and
van conversions (the "Receivables"), all monies paid thereon, and all monies due
thereon, including Accrued Interest (but excluding Accrued Interest paid on or
prior to the Closing Date with respect to such Receivables), security interests
in the vehicles financed thereby, certain bank accounts and the proceeds
thereof, all documents contained in the Receivable Files, any property that
shall have secured a Receivable and that shall have been acquired by the
Indenture Trustee on behalf of the Noteholder, any Liquidation Proceeds, any
rights of the Issuer in proceeds from claims or refunds of premiums on physical
damage, lender's single interest, credit life, disability and hospitalization
insurance policies, if any, covering vehicles financed thereby and the obligors
thereunder, the interest of the Issuer in recourse to dealers relating to
certain of the Receivables, the proceeds of all of the foregoing and amounts on
deposit from time to time in the Spread Account for the benefit of the
Noteholder, and the Policy for the benefit of the Noteholder.
Under the Indenture, the Issuer will pay, on the eighth calendar day of
each month, or if such day is not a Business Day, on the first Business Day
thereafter (the " Payment Date"), commencing ____________, ____, to the person
in whose name this Note is registered on the Record Date, the portion of Monthly
Interest and Monthly Principal to which the Noteholder is entitled pursuant to
the Indenture.
Payments on this Note will be made by the Indenture Trustee by wire
transfer through the facilities of the Depository Trust Company if this note is
held by Cede & Co. and otherwise by check mailed to the Person entitled thereto
without the presentation or surrender of this Note or the making of any notation
hereon. Except as otherwise provided in the Indenture and notwithstanding the
above, the final payment on this Note will be made only upon presentation and
surrender of this Note at the office or agency maintained for that purpose by
the Indenture Trustee.
Unless the certificate of authentication hereon shall have been
executed by a Responsible Officer of the Indenture Trustee, by manual or
facsimile signature, this Note shall not entitle the holder hereof to any
benefit under the Indenture or be valid for any purpose.
The Note does not represent an interest in the Issuer nor an interest
in or obligation of any affiliate of the Issuer, including UAC Securitization
Corporation or Union Acceptance Corporation. The Note is limited in right of
payment to certain collections and recoveries respecting the Receivables, all as
more specifically set forth in the Indenture. In addition to the Class A-1
Notes,
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the Issuer has also issued Class A-2 Notes, Class A-3 Notes, Class A-4 Notes and
Class B Notes. The Class B Notes are subordinated to the Class A Notes as
provided in the Indenture. The Indenture provides for certain amounts to be
deposited into the Spread Account. In the event amounts available for withdrawal
from the Spread Account are insufficient to make payments relating to this Note
and the other notes issued by the Issuer, the Indenture Trustee will draw on the
Policy up to the Policy Amount to pay such deficiency.
The Indenture permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Noteholder under the Indenture at any time by the
Issuer and the Indenture Trustee with the consent of the Noteholder. Any such
consent by the holder of this Note shall be conclusive and binding on the
Noteholder.
This Note is transferrable solely in accordance with Section 2.04 of
the Indenture.
The obligations and responsibilities to the Noteholder created by the
Indenture shall terminate upon the payment to Noteholder of all amounts required
to be paid to it pursuant to the Indenture. The Certificateholder may at its
option cause the Indenture Trustee to sell the Pledged Assets at a price not to
be less than the price specified in the Trust Agreement, and such sale of the
Receivables and other property may effect early retirement of the Note.
Although this Note summarizes certain provisions of the Indenture, this
Note does not purport to summarize the Indenture and reference is made to the
Indenture for information with respect to the interests, rights, benefits,
obligations, proceeds and duties evidenced hereby and the rights, duties and
obligations of the Indenture Trustee. In the event of any inconsistency or
conflict between the terms of this Note and the terms of the Indenture, the
terms of the Indenture shall control.
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.
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<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this Note to be duly
executed.
Dated:
UACSC ____-___ OWNER TRUST
By _____________ Bank as Indenture Trustee
By
Name:
Title:
CERTIFICATE OF AUTHENTICATION
This is the Note
referred to in the within-mentioned
Indenture.
----------------------------------,
solely in its capacity as Indenture Trustee,
By ________________________
Name:
Title:
Dated:
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<PAGE>
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, which requirements include membership or
participation in STAMP or such other "signature guarantee program" as may be
determined by the Note Registrar in addition to, or in substitution for, STAMP,
all in accordance with the Securities Exchange Act of 1934, as amended.
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) ______
HARRIS TRUST AND SAVINGS BANK
(Name of Trustee)
Illinois 36-1194448
(State of Incorporation) (I.R.S. Employer Identification No.)
111 West Monroe Street, Chicago, Illinois 60603
(Address of principal executive offices)
Rory Nowakowski, Harris Trust and Savings Bank,
311 West Monroe Street, Chicago, Illinois, 60606
(312) 461-5180 phone (312) 461-3525 facsimile
(Name, address and telephone number for agent for service)
UACSC Auto Trusts
(Note Issuer)
Delaware 35-1937340
(State of Incorporation) (I.R.S. Employer Identification No.)
UAC Securitization Corporation
9240 Bonita Beach Road
Suite 1109-A
Bonita Springs, FL 34135
(Address of principal executive offices)
Automobile Receivable Backed Notes
(Title of indenture securities)
<PAGE>
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.
Commissioner of Banks and Trust Companies, State of Illinois,
Springfield, Illinois; Chicago Clearing House Association, 164 West
Jackson Boulevard, Chicago, Illinois; Federal Deposit Insurance
Corporation, Washington, D.C.; The Board of Governors of the Federal
Reserve System, Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers.
Harris Trust and Savings Bank is authorized to exercise corporate
trust powers.
2. AFFILIATIONS WITH OBLIGOR. If the Obligor is an affiliate of the Trustee,
describe each such affiliation.
The Obligor is not an affiliate of the Trustee.
3. through 15.
NO RESPONSE NECESSARY
16. LIST OF EXHIBITS.
1. A copy of the articles of association of the Trustee as now in effect
which includes the authority of the trustee to commence business and
to exercise corporate trust powers.
A copy of the Certificate of Merger dated April 1, 1972 between Harris
Trust and Savings Bank, HTS Bank and Harris Bankcorp, Inc. which
constitutes the articles of association of the Trustee as now in
effect and includes the authority of the Trustee to commence business
and to exercise corporate trust powers was filed in connection with
the Registration Statement of Louisville Gas and Electric Company,
File No. 2-44295, and is incorporated herein by reference.
2. A copy of the existing by-laws of the Trustee.
A copy of the existing by-laws of the Trustee was filed in connection
with the Registration Statement of Commercial Federal Corporation,
File No. 333-20711, and is incorporated herein by reference.
3. The consents of the Trustee required by Section 321(b) of the Act.
(included as Exhibit A on page 2 of this statement)
4. A copy of the latest report of condition of the Trustee published
pursuant to law or the requirements of its supervising or examining
authority.
(included as Exhibit B on page 3 of this statement)
1
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the Trustee,
HARRIS TRUST AND SAVINGS BANK, a corporation organized and existing under the
laws of the State of Illinois, has duly caused this statement of eligibility to
be signed on its behalf by the undersigned, thereunto duly authorized, all in
the City of Chicago, and State of Illinois, on the 29th day of April, 1999.
HARRIS TRUST AND SAVINGS BANK
By: /s/ Rory Nowakowski
-------------------------
Rory Nowakowski
Assistant Vice President
EXHIBIT A
The consents of the trustee required by Section 321(b) of the Act.
Harris Trust and Savings Bank, as the Trustee herein named, hereby consents that
reports of examinations of said trustee by Federal and State authorities may be
furnished by such authorities to the Securities and Exchange Commission upon
request therefor.
HARRIS TRUST AND SAVINGS BANK
By: /s/ Rory Nowakowski
-------------------------
Rory Nowakowski
Assistant Vice President
2
<PAGE>
EXHIBIT B
Attached is a true and correct copy of the statement of condition of Harris
Trust and Savings Bank as of December 31, 1998, as published in accordance with
a call made by the State Banking Authority and by the Federal Reserve Bank of
the Seventh Reserve District.
[logo]
Harris Trust and Savings Bank
111 West Monroe Street
Chicago, Illinois 60603
of Chicago, Illinois, And Foreign and Domestic Subsidiaries, at the close of
business on December 31, 1998, a state banking institution organized and
operating under the banking laws of this State and a member of the Federal
Reserve System. Published in accordance with a call made by the Commissioner of
Banks and Trust Companies of the State of Illinois and by the Federal Reserve
Bank of this District.
Bank's Transit Number 71000288
<TABLE>
<CAPTION>
THOUSANDS
ASSETS OF DOLLARS
<S> <C>
Cash and balances due from depository institutions:
Non-interest bearing balances and currency and coin .... $ 1,435,233
Interest bearing balances .............................. $ 98,929
Securities:
a. Held-to-maturity securities ...................................... $ 0
b. Available-for-sale securities .................................... $ 5,295,498
Federal funds sold and securities purchased under agreements to resell $ 151,575
Loans and lease financing receivables:
Loans and leases, net of unearned income .............. $ 9,320,939
LESS: Allowance for loan and lease losses ............. $ 108,280
-----------
Loans and leases, net of unearned income,
allowance, and reserve
(item 4.a minus 4.b) ................................... $ 9,212,659
Assets held in trading accounts ...................................... $ 252,881
Premises and fixed assets (including capitalized leases) ............. $ 271,540
Other real estate owned .............................................. $ 366
Investments in unconsolidated subsidiaries and associated companies .. $ 57
Customer's liability to this bank on acceptances outstanding ......... $ 30,829
Intangible assets .................................................... $ 257,627
Other assets ......................................................... $ 1,093,599
-----------
TOTAL ASSETS ......................................................... $18,100,793
===========
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
LIABILITIES
<S> <C> <C>
Deposits:
In domestic offices ............................................... $10,270,499
Non-interest bearing ..................................... $ 3,410,568
Interest bearing ......................................... $ 6,859,931
In foreign offices, Edge and Agreement subsidiaries, and IBF's .... $ 935,609
Non-interest bearing ..................................... $ 69,215
Interest bearing ......................................... $ 866,394
Federal funds purchased and securities sold under
agreements to repurchase in domestic offices
of the bank and of its Edge and Agreement subsidiaries, and in IBF's:
Federal funds purchased & securities sold under agreements to repurchase $ 3,642,049
Trading Liabilities .................................................... 131,909
Other borrowed money:
a. With remaining maturity of one year or less ........................ $ 1,107,125
b. With remaining maturity of more than one year ...................... $ 0
Bank's liability on acceptances executed and outstanding ............... $ 30,829
Subordinated notes and debentures ...................................... $ 225,000
Other liabilities ...................................................... $ 424,376
===========
TOTAL LIABILITIES ...................................................... $16,767,396
===========
EQUITY CAPITAL
Common stock ........................................................... $ 100,000
Surplus ................................................................ $ 608,116
a. Undivided profits and capital reserves ............................. $ 593,973
b. Net unrealized holding gains (losses) on
available-for-sale securitie ....................................... $ 31,308
-----------
TOTAL EQUITY CAPITAL ................................................... $ 1,333,397
===========
Total liabilities, limited-life preferred stock, and equity capital .... $18,100,793
===========
</TABLE>
I, Pamela Piarowski, Vice President of the above-named bank, do hereby
declare that this Report of Condition has been prepared in conformance with the
instructions issued by the Board of Governors of the Federal Reserve System and
is true to the best of my knowledge and belief.
PAMELA PIAROWSKI
1/27/99
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 instructions
issued by the Board of Governors of the Federal Reserve System and the
Commissioner of Banks and Trust Companies of the State of Illinois and is true
and correct.
EDWARD W. LYMAN,
ALAN G. McNALLY,
RICHARD E. TERRY
Directors
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